House of Commons

Monday 13th June 2011 Commons Chamber

Monday 13 June 2011

The House met at half-past Two o’clock

Prayers

Monday 13th June 2011 Commons Chamber

[Mr Speaker in the Chair]

Business before Questions

Ninetieth Birthday of HRH the Duke of Edinburgh (Answer to Address)

The Vice-Chamberlain of the Household reported to the House, That Her Majesty, having been attended with its Address of 8 June, was pleased to receive the same very graciously and give the following Answer:

I have received your address concerning the ninetieth birthday of His Royal Highness the Duke of Edinburgh. It gives me great pleasure to hear of the loyal affection and regard of the House, the nation and the Commonwealth on this special occasion, and I welcome your intention to send a message to His Royal Highness.

Oral Answers to Questions

Monday 13th June 2011 Commons Chamber

The Secretary of State was asked—

[Stuart Andrew (Pudsey) (Con)]

1. What steps his Department is taking to support young people into work.

[Andrew Stephenson (Pendle) (Con)]

14. What steps his Department is taking to support young people into work.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

Work experience and apprenticeships are central to improving the prospects of young unemployed people. In this year’s Budget the Chancellor announced funding for an additional 80,000 work experience placements, with eligibility widened to cover the 18 to 24 age group. In addition, we have announced tens of thousands of new apprenticeships. We will also be providing early access to the Work programme for young people from the most challenged backgrounds.

[Stuart Andrew]

I am grateful to the Minister for that answer. When the previous Government left office, apart from the record deficit, they left an extra 270,000 young unemployed. How are the Government working with business to ensure that new apprenticeships are what our economy needs to tackle youth unemployment and that we do not repeat the mistakes of the previous Government?

[Chris Grayling]

The Government have a very proactive campaign to engage employers, working with them to identify work experience places for young unemployed people. We have already located many thousands of opportunities for young people to gain their first foothold of experience in the workplace. In addition, my colleagues at the Department for Business, Innovation and Skills are working hard to engage employers in providing apprenticeship opportunities. So far they are being particularly successful in doing so and have met their targets for apprenticeships.

[Andrew Stephenson]

I welcome what my right hon. Friend has said about the importance of apprenticeships. There are 615 unemployed young people in my constituency. What other measures will he put in place to ensure that those young people have the skills they need to compete in the workplace?

[Chris Grayling]

The other policy that we will be introducing later in the summer is work academies, which will provide a mix of a short-term segment of training and a period of work experience, again designed to provide young people with a first foothold in the workplace and to give opportunities to those who do not have previous qualifications with a view to trying to get them into employment and build a lasting career.

[Mr Frank Field (Birkenhead) (Lab)]

May I congratulate the Minister on his statement today and on his announcement that the new Work programme comes into force around now? Does he accept, however, that at a time when there is a shortage of jobs, the new providers might well be placing in jobs those who find it easiest to get jobs anyway, and that we need a back-up scheme to ensure the involvement of those who find it most difficult to get jobs or who do not want to work? Will he keep his mind open about reintroducing at some stage the future jobs fund—not that he will do so under that name, but under a Tory name?

[Chris Grayling]

I am very grateful to the right hon. Gentleman for his comments. I do accept that there is a challenge in placing some people into work, which is why we have created a differential pricing structure to reflect the challenge of getting them into the workplace. The problem with the future jobs fund was the cost relative even to the outcome costs of other programmes run by the previous Government. Of course, in straitened financial times we have to seek not only what works in employment terms but what is affordable.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

Will the Government reinstate Labour’s jobs guarantee to ensure that young people are offered a job or training place after six months out of work?

[Chris Grayling]

What the hon. Lady does not understand is that Governments do not create jobs. Governments have to create an environment in which jobs are created by the private sector. Our job is to ensure that unemployed people are in the best possible position to take advantage of jobs when they are created by employers. It has been encouraging over the past few months to see the private sector creating far more full-time jobs, and I hope that that continues.

[Graham Jones (Hyndburn) (Lab)]

2. Whether his plans for universal credit will ensure that people are better off in work after payment of child care costs.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

We recognise the vital role that child care plays in supporting parents into work. As the hon. Gentleman is aware, we have set out a consultative process with some options for child care within universal credit, as I said we would. Alongside that, we have committed to spend all the money available in the current system for child care. It remains our intention that everyone moving into work will be better off when child care is included. People who transition into work will certainly be better off than under the current system.

[Graham Jones]

Will the Secretary of State ensure that parents who work more than 16 hours a week will continue to get child care support to allow them to continue in work?

[Mr Duncan Smith]

If the hon. Gentleman looks at our consultation, he will see that our plan is to spread the money to ensure that parents who choose to work for any number of hours—not just 16 hours, but across the board—can go into work and get the necessary support. I therefore think that the answer to the question is yes, and we are also keen to support parents who work fewer hours.

[Charlie Elphicke (Dover) (Con)]

Will the Secretary of State tell the House what effect universal credit will have on child poverty and wider forms of poverty?

[Mr Duncan Smith]

We estimate that universal credit as a static system, not even taking into account any dynamic effect, will lift 900,000 people out of poverty, about 350,000 of whom will be children. It is worth remembering that under the present child care systems that people have spoken about, at least 100,000 people do not get the child care for which they are eligible. Under universal credit, the take-up will be higher, so it will have a better effect.

[Stephen Timms (East Ham) (Lab)]

The Secretary of State is right to recognise that support for child care is key to whether parents are better off in work or out of work. However, he promised the Welfare Reform Public Bill Committee that the Government’s proposals on child care support would be available before the Bill left Committee. That promise has been broken; he has simply been able to provide only a discussion of the options. When will he get a grip and come up with a policy?

[Mr Duncan Smith]

I will get a grip the moment the right hon. Gentleman’s team decide whether they are in favour of the Bill or against it. I gather that the Leader of the Opposition has today moved like a wriggly worm and decided that he is both for and against it, which is really not surprising. The point of bringing forward our proposals is that the right hon. Gentleman and everybody else will have a chance to look at them and decide whether they agree with them. After the consultation, we will make it clear what our final proposals are. I think that that is fair. Last time, he complained that we did not consult him—he ought to make his mind up.

[Ian Lavery (Wansbeck) (Lab)]

4. What estimate the Health and Safety Executive has made of the annual cost to the economy of inadequate workplace health and safety.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The Health and Safety Executive estimates that the annual cost to Great Britain of workplace injuries and work-related ill health is currently in the order of £20 billion.

[Ian Lavery]

Last year, there were 152 fatalities and 26,000 major injuries in the workplace and more than 800,000 people suffered a work-related illness. As a consequence of the cuts, the HSE has withdrawn a large number of workplace inspections. How will the Government ensure that those figures do not increase year on year?

[Chris Grayling]

As a former union official, the hon. Gentleman will know that the biggest challenge we face is employers who cut corners and break the rules. I would have thought that he would welcome a change in policy that focuses health and safety inspections not on low-risk, good employer sites, which have taken up so much resource in the past, but on employers who are not playing by the book and who endanger their employees and the public. That is where I want our regulatory effort to focus.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

As my right hon. Friend has said, we all agree that health and safety legislation, when applied correctly, is very useful and important, but does he also agree that when it is applied inappropriately and gold-plated, it can cost jobs and damage the economy?

[Chris Grayling]

I absolutely agree. Let me be clear that I believe it is extremely important to get health and safety right. As the hon. Member for Wansbeck (Ian Lavery) suggested, we need to protect people against real dangers in the workplace. However, we have to understand that if the system is over-bureaucratic, it will lead to the closure of businesses and cost jobs, and that does nobody any favours. The job of Government is to find the right balance, and that is what we seek to do.

[Mr William Bain (Glasgow North East) (Lab)]

5. What arrangements he plans to put in place for transitional payments for those who will be affected by the introduction of universal credit.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

A package of transitional protection is being developed to ensure that there will be no cash losers as a direct result of the move to universal credit where circumstances remain the same.

[Mr Bain]

I note the Secretary of State’s reply, but has he not taken into account the criticisms made of the policy by Family Action? They are, first, that it will not apply to new recipients; secondly, that changes in circumstances leading to the loss of cash protection have not been sufficiently defined; and most importantly, that the failure to give a commitment to uprating cash protection in line with inflation could mean up to 400,000 people losing out in real terms as a result of the policy.

[Mr Duncan Smith]

I hear what the hon. Gentleman says, but I would have thought he would welcome the idea that as we move to the new benefit, we are planning to cash-protect those who are already in receipt of other benefits. I do not think I really need to take too many lessons from his party, because when it scrapped the 10p tax band, it did not cash-protect anybody.

[Matthew Hancock (West Suffolk) (Con)]

Will the Secretary of State accept that in ensuring that the transition means that people are cash-protected, he is managing to introduce the universal benefit, which would otherwise be almost impossible to do? That universal benefit will be of benefit to the work incentives of people up and down the country.

[Mr Duncan Smith]

I am glad that my hon. Friend is more welcoming of the policy than the hon. Member for Glasgow North East (Mr Bain). Cash protection is there to protect those whose circumstances mean that they may have lost out slightly in the change to universal credit. They will not, because we will ensure that they are smoothed into the universal credit system unless there is a significant change in their circumstances. That is a positive gesture from the Government, and as I said, we do not need any lessons from Labour Members, who did not cash-protect people who were damaged when they scrapped the 10p starting rate.

[Margaret Curran (Glasgow East) (Lab)]

Notwithstanding the fact that, as we have heard, the Government intend to provide transitional protection, will the Secretary of State explain why, for new claimants, their plans to abolish the disability element of child tax credit and replace it with a disability addition will mean a cut of 50% for families with disabled children? According not to Labour Members but to Family Action, that means that families with one disabled child, who are people in great need, are in line to lose £1,400 per annum. Why are disabled children bearing the costs of the Government’s welfare reforms?

[Mr Duncan Smith]

I must say to the hon. Lady that they are not. Actually, our adjustments have been welcomed because they mean that more disabled people in difficult family circumstances will find themselves benefiting to a higher degree. Our changes will work well with universal credit. Also, the whole idea of bringing more disabled people into the work force has to be a good thing, or perhaps she disagrees with that.

[Caroline Dinenage (Gosport) (Con)]

6. What steps he is taking to improve the measurement of pensioner poverty.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We recognise that poverty is about more than income and have introduced a new pensioner material deprivation indicator. It takes into consideration both financial and non-financial elements of poverty, such as ill health and social isolation. It offers a more direct measure of living standards and, used alongside low income measurements, will provide a greater understanding of pensioners’ experiences of poverty.

[Caroline Dinenage]

I am very proud that many people choose my constituency to retire to, and I am extremely grateful for all the measures that the Government have taken so far to address the horrific levels of pensioner poverty bequeathed by the previous Government. However, the proposed almost double-digit price rises by energy companies threaten to undermine those measures. What more can be done to address that problem?

[Steve Webb]

My hon. Friend is right that keeping a home adequately warm is an important part of the standard of living of pensioners. That is why it is included in the broader measure of poverty that we will introduce. I echo the words of my right hon. Friend the Energy Secretary, who said at the weekend that faced with double-digit price rises, we would encourage as many people as possible to shop around so that they do not have to pay those prices and can use the market to their advantage.

[Kevin Brennan (Cardiff West) (Lab)]

The previous Government tackled pensioner poverty with great rigour and success. How can we be assured that in changing the measures of pensioner poverty, the current Government are not simply trying to cover up a failure of their own policies? What assurances can the Minister give the House about the changes?

[Steve Webb]

I am grateful to the hon. Gentleman for his question. The idea of measuring pensioner poverty in terms of material deprivation is supplementary to the income measures, and we will continue to publish both. I am sure he would accept that being just a penny or two above an arbitrary income level does not mean that people have a good standard of living if they are isolated or lonely. We aim to address all facets of pensioners’ quality of life.

[Michael Ellis (Northampton North) (Con)]

8. What recent progress he has made on reform of health and safety legislation.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

On 21 March, I announced an immediate review of health and safety regulation with a view to finding ways to simplify the regulatory burden on business. That review is being chaired by Ragnar Löfstedt, the professor of risk management at King’s College, London. He published a call for evidence on 20 May, the closing date for which is 29 July. We hope to publish the findings of the review later this year.

[Michael Ellis]

Some of the most inappropriate and burdensome health and safety recommendations on business come from unqualified, cowboy consultants. My right hon. Friend the Home Secretary is getting rid of cowboy wheel clampers; what are the Government doing to tackle those cowboy health and safety consultants?

[Chris Grayling]

I very much agree with my hon. Friend. At the beginning of April, we launched a new online register of qualified health and safety consultants, precisely with a view to stamping out the cowboys. I want businesses and other bodies that need consultancy advice to work with qualified people who are capable of advising on what the law actually says, rather than working with people who would like to argue that the law does something they claim it says.

[Mr George Howarth (Knowsley) (Lab)]

While the Minister is considering what reform to health and safety legislation might be necessary, I hope he will take into account the problems that the Health and Safety Executive has had at Sonae in my constituency. A major fire incident over the last few days has covered much of the industrial area as well as residential areas in acrid black smoke. Will he assure me that the HSE will work with the local authority, Knowsley council, the fire service and everybody else in the town, because we have reached the conclusion that this place should be closed down?

[Chris Grayling]

I am aware of the very unfortunate incident in the right hon. Gentleman’s constituency. I cannot comment specifically on that investigation, but I can assure him that the HSE is investigating carefully what happened. Clearly, lessons must be learned. However, that underlines my view that the HSE should concentrate its resources on dealing with genuinely serious incidents and problems, and not on trivial matters.

[Kate Green (Stretford and Urmston) (Lab)]

9. What his policy is on the couple penalty in the benefit system.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

The Government are committed to reducing disincentives in the benefit system. The universal credit provides an enhanced earnings disregard for couples which, along with the taper, will help low-income couples to keep more of their earnings in work. Obviously, over time, it is our intention to work further to reduce the penalty.

[Kate Green]

A widow and a widower each with two children who form a new couple relationship and decide to live together could be £9,000 worse off as a result of the proposed benefits cap. Given reports over the weekend of confusion among Ministers on the fate of the benefits cap, will the Secretary of State assure us that such a couple would not face a couple penalty?

[Mr Duncan Smith]

Clearly, we do not, as the hon. Lady makes out, want to make anybody face any further induced couple penalties. Our plan is to ensure—over a period of time, but particularly in this Parliament—that we work to erode the couple penalty. However, it is worth reminding her specifically what happened under the previous Government, because the baseline that we have accepted is important. The OECD pointed out that a couple needed about 75% of the income of two single people, but the previous Government left them only 60% of those earnings. In other words, the previous Government took far more from couples than most other countries did. That is why we are in difficulty. She should reflect on that when she asks such questions.

[Priti Patel (Witham) (Con)]

10. What recent progress he has made on the contracting arrangements for the Work programme.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I am pleased to tell the House that as of today, all bar four of the contract package areas for the Work programme are fully operational; that many thousands of claimants have already been referred to the programme; and that the first two job outcomes have been achieved in one contract package area, where the provider was particularly quick off the ground.

[Priti Patel]

Will my right hon. Friend join me in congratulating the providers that are participating in the Work programme? Does he agree that by involving that diverse range of providers, we can tackle the culture of welfare dependency and worklessness that grew under Labour, and ensure that work pays?

[Chris Grayling]

I absolutely agree with my hon. Friend. One encouraging thing about the Work programme is the vast diversity of organisations taking part—from big international organisations to small businesses; and from some of our bigger more prestigious charities, such as the Prince’s Trust, down to individual charities—even a walled garden project is involved in Yorkshire—and many of our local colleges. Together, they can make a huge difference in what is a revolutionary approach to the problem of long-term unemployment in this country.

[Dame Anne Begg (Aberdeen South) (Lab)]

The Minister will remember an exchange of correspondence that he had with the Select Committee about TUPE cover. Now that the Work programme has gone live, the confusion over which posts will enjoy TUPE protection has continued. Of two contractors in the same area, one says that TUPE does apply and the other says that it does not—in some cases, to the same workers in some of the subcontracting companies. I urge the Minister to clarify this issue and ensure that his Department sets out clear advice about which positions have TUPE protection and the rules regarding people working in the Work programme.

[Chris Grayling]

The hon. Lady needs to remember that in many cases the programmes that we are replacing are very different to the Work programme. Pathways to work, for example, was simply six work-focused interviews. There will be cases in which TUPE does not apply. We have been very clear in saying to the providers that it is a matter between the providers themselves, the individuals and the former employers to resolve when and where it applies. It is not for the Department to offer legal advice to providers.

[James Morris (Halesowen and Rowley Regis) (Con)]

I welcome the speed with which the Work programme’s contracts have been put together, but some small voluntary organisations in my constituency who took an interest in it were not successful. Will the Minister reassure them that there will continue to be opportunities for them to play a role in getting people back into work more informally?

[Chris Grayling]

I can indeed. First, there will be further opportunities to contract to provide support for the Department. In addition, we do not believe that the supply chains to the Work programme providers are fixed in stone in perpetuity. The whole nature of the Work programme makes it desirable for the prime contractors to look for the best in the business at getting people into work. If any organisation is excellent, I am sure that it will find its way into the programme, even if it has not done so yet.

[Michael Dugher (Barnsley East) (Lab)]

11. What recent assessment he has made of future trends in youth unemployment.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The independent Office for Budget Responsibility forecasts that unemployment will fall from its current level of 2.5 million to around 2 million by 2015. There is no separate forecast for youth unemployment, but over the medium term this would be expected to follow a broadly similar trend.

[Michael Dugher]

Fewer than 14% of my constituents are aged between 18 and 24, but this age group accounts for 35% of people looking for work. What is the Minister doing to ensure that private contractors in the new Work programme will not simply cherry-pick those areas of the country where it is easier to get young people into work and ignore areas performing less well economically, such as my constituency?

[Chris Grayling]

I would like to reassure the hon. Gentleman. One of the things that we wondered as we went in to the contracting process was whether we would see a difference in the level of interest between different areas of the country, depending on the nature of the local labour market. That was not the case: the competition was equally intense across all areas. I hope that the presence of the Work programme, offering young people support after nine months—and in some cases after three months—of unemployment, combined with the additional support that we are providing though Jobcentre Plus to provide work experience opportunities for young people, will make a significant difference to their prospects as the months go by.

[Robert Halfon (Harlow) (Con)]

Does my right hon. Friend agree that the best way to deal with youth unemployment is not just through the 250,000 apprenticeships, but the roll-out of the 24 university technical pre-apprenticeship schools around the country?

[Chris Grayling]

I do indeed agree. Those schools, the increased numbers of apprenticeships, the work experience scheme, the support being provided through the Work programme and the additional measures we have announced recently to support 16 to 18-year olds all show that we have a Government who recognise the problem of youth unemployment, understand its severity and are doing something about it.

[Mr Iain Wright (Hartlepool) (Lab)]

Does the Minister think that the record level of youth unemployment has been made worse by the botched ending of the Connexions career service, which was withdrawn with no replacement put in place? No transition plan has yet been put into place.

[Chris Grayling]

The hon. Gentleman talks about the causes of youth unemployment. He should look back to when the current increase started in 2003-04, in the good years under the previous Government. He should ask why their policies failed so badly.

[Harriett Baldwin (West Worcestershire) (Con)]

12. What recent meetings he has had on reform of disability living allowance.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

Throughout the development of the new personal independence payment, which will replace disability living allowance, we have had extensive discussions and consultation with disabled people, their families and organisations representing them. The insight of organisations such as RADAR, Mencap, Scope, the United Kingdom Disabled People’s Council and People First into how disability living allowance can fail to support disabled people is immensely valuable. We will continue to work closely with disabled people and their organisations as the detail of the assessment criteria is developed and tested.

[Harriett Baldwin]

On the recent “Hardest Hit” march, I met constituents who had the impression that disability living allowance was to end altogether and would not be replaced by the personal independence payment. Does the Minister agree that in representing these disabled constituents, organisations have to ensure that they communicate clearly with those who might be affected, who are some of the most vulnerable in our society?

[Maria Miller]

My hon. Friend is absolutely right. It is important that the organisations working with us in the development of the new personal independence payment use that opportunity to ensure that the people whom they represent are well informed. We need a new approach to disability living allowance. The Labour party has already agreed with that, although we are still waiting to hear exactly what the Opposition’s plan would be.

[Fiona Mactaggart (Slough) (Lab)]

The organisations that the hon. Lady read out quite quickly sounded like organisations representing people whose conditions do not vary hugely. There are people on disability living allowance who have conditions, such as multiple sclerosis, that can get hugely better and hugely worse. How much conversation has she had with organisations representing people with fluctuating conditions as well as those with progressive conditions?

[Maria Miller]

The only reason I read the list out quickly was not to incur the wrath of Mr Speaker.

I would like to reassure the hon. Lady that I absolutely understand her point. Indeed, I am meeting organisations representing many people with fluctuating conditions. Importantly, we are also considering the findings of the work capability assessment to see how we can build into the new personal independence payment a way of ensuring that people with fluctuating conditions are well served.

[Lorely Burt (Solihull) (LD)]

13. What assessment he has made of the effects on women born between 6 March and 5 April 1954 of his proposals to increase the state pension age.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Our proposed changes will equalise women’s pension age with men’s more rapidly than previously planned. Under the Government’s proposals, women born on 6 March 1954 will have a pension age of 66 and those born between 7 March and 5 April 1954 will have a pension age of up to a month less.

[Lorely Burt]

I highlight the plight of 33,000 women born in one month in 1954 who will be the worst affected under the pension retirement rules. In total, 500,000 women will be affected by one year or more than expected. When they get their pensions, they will be a lot better off than they would have ever been under the Labour party, but what can we do for women in this particular group, who will have to wait an additional two years for their pension?

[Steve Webb]

My hon. Friend raised this important issue, I think, in last Wednesday’s debate when we were startled when she declared an interest in the question. Were we to address the concerns of that group of 33,000 women, we would find that women born one month before or after—who might be affected by a few months less, but still significantly—would ask for a change as well. The short answer is that to delay the whole thing till 2020, as some have suggested, would require an additional £10 billion to be found. She will understand why that is not possible.

[Rachel Reeves (Leeds West) (Lab)]

The early-day motion calling on the Government to rethink these unfair changes to the pension system has been signed by 180 hon. Members, including 23 Liberal Democrats and three Conservatives. More than 10,000 people have presented a petition to Downing street asking the Government to think again, and the campaign is backed by Age UK and Saga. If the Government can U-turn on forests and, just last week, announce a U-turn on sentencing, surely they can listen and act upon the concerns of women now approaching retirement with fear and trepidation.

[Steve Webb]

To the extent that we know what the hon. Lady’s policy is, it appears to be: to put it off for a decade. Unfortunately, one of the problems with the previous Government’s approach on so many difficult issues was to put them off and assume that somebody else would pay. On pensions, that would require another £10 billion to be paid by tomorrow’s national insurance payers. Does she think that that is a fair burden, given that the people retiring shortly will benefit from the greater longevity?

[Mr Speaker]

I am much obliged to the Minister.

[Sheila Gilmore (Edinburgh East) (Lab)]

15. What estimate he has made of the costs incurred by a disabled person in the three months following diagnosis of their disability.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

No such estimate has been made. Perhaps I should gently remind the hon. Lady that disability living allowance generally, and personal independence payments absolutely, are not related to a medical diagnosis. They are about considering people as individuals and looking at the impact of their disabilities on their ability to live independent lives. Circumstances, needs and costs will vary from individual to individual, and do not necessarily correlate to a diagnosis.

[Sheila Gilmore]

In Committee, the Under-Secretary said that the reason for the proposal was not savings and that she did not expect to make any savings from it. Yet people who fall ill with sudden onset conditions incur additional costs. They are not long-term unemployed or welfare dependent. Why is she making the change if not to make savings?

[Maria Miller]

I think what I said in Committee was that there would be some savings but that they were modest. The principle of a six-month qualifying period was not intended to deny disabled people help in the short term. That help currently comes mainly but not exclusively from means-tested support, with the personal independence payment starting when costs become a burden to people, regardless of their income. That is why it is not means-tested.

[Andrew Bridgen (North West Leicestershire) (Con)]

Will the six-month qualifying period allow for special cases, such as people with a terminal illness, who might not survive six months?

[Maria Miller]

I can absolutely assure my hon. Friend that that will be the case and that we will carry forward that provision from disability living allowance.

[Ms Karen Buck (Westminster North) (Lab)]

I am sure that it is not the Government’s intention in time-limiting employment and support allowance—the other disability-related benefit—to leave nearly 7,000 cancer patients potentially up to £94 a week worse off. Today, Macmillan Cancer Support and others warn that that is exactly the consequence of the Government’s policy. Will the Under-Secretary take the opportunity of the Report stage of the Welfare Reform Bill to modify that damaging policy?

[Maria Miller]

The hon. Lady has asked about employment and support allowance. We will obviously ensure that people in the most difficult circumstances continue to receive the support they require through the support group. For disability living allowance, it is absolutely vital that we do not analyse people on their condition, but examine the problems that they encounter in living independent lives. I think that she would expect us to do that.

[John Pugh (Southport) (LD)]

16. What recent representations he has received on his Department’s use of 0845 numbers; and if he will make a statement.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The Department—and, indeed, I myself—has received several communications from customers and their representatives asking about our policy on the use of 0845 numbers and whether we have considered changing to 0300 and/or geographical numbers. In the wake of those representations, I have asked the Department to undertake an internal review about our use of 0845 numbers and see what other options might be available to us.

[John Pugh]

I thank the Minister for that response, but given that benefit clients normally have no access to a landline, that calls from mobiles can cost as much as 40p and that they could be kept waiting for information on crisis loans and disability, should we not do more and consider talking to the Telephone Helplines Association about that to make faster progress than we are currently achieving with 0300 numbers?

[Chris Grayling]

I agree with the hon. Gentleman. We offer a ring-back service to anybody who is concerned about the cost of the call that they are making. None the less, there is a genuine problem and I have asked the Department to consider it and ascertain whether better options are available, particularly given the number of claimants who use mobile phones.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

17. What recent representations he has received on his policy on the date at which the state pension age for women will start to rise.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Several stakeholder groups, as well as individuals, have expressed concern about the changes we propose, although the majority of commentators agree that we need to increase the state pension age more quickly.

[Cathy Jamieson]

I wonder whether the Minister knows that some 1,200 women in my constituency will lose out. Does he understand that they are angry and feel cheated that pension payments, which they had every reason to believe they had paid for and were due will now not be paid to them? What does he say to those 1,200 women?

[Steve Webb]

Perhaps a generation ago, those very women would have expected to draw a state pension for about six years less—that is a significant change that they have seen in their working life. They will still get the state pension for exactly the same time as someone a generation ago would have expected. We are trying to be fair between the generations and not load all the cost on the next generation.

[Mr Alan Reid (Argyll and Bute) (LD)]

The coalition agreement talks about equalising the state pension in 2020. Bringing forward the date to 2018 will not help to meet the Government’s target of getting the public finances in balance by 2015, but it will adversely impact a large number of women at very short notice. Will the Government think again and revert to the coalition agreement?

[Steve Webb]

My hon. Friend has raised this issue with me before in debate, and although he is correct that the savings do not fall in the comprehensive spending review period, I would draw his attention to one number. Under previous projections, the national debt at the end of this Parliament was £1.4 trillion. If we were to delay the change, we would have to add another £10 billion. Someone has to get a grip on the national debt.

[Nick Smith (Blaenau Gwent) (Lab)]

What notice does the Minister believe is required of changes to the state pension age?

[Steve Webb]

I am grateful to the hon. Gentleman for raising that question; indeed, we asked that very question in our Green Paper. We are looking at future changes to the state pension age, to 67 and 68, which are already legislated for. We believe that that needs to happen sooner. We are currently consulting and reflecting on the right balance between taking account of changes in longevity and giving people fair notice, and we would welcome the hon. Gentleman’s input on that point.

[Mr Adrian Sanders (Torbay) (LD)]

18. If he will assess the potential effect on the level of homelessness of the extension of the shared accommodation rate for housing benefit to single people aged under 35 years.

[Mr David Ward (Bradford East) (LD)]

19. If he will assess the potential effect on the level of homelessness of the extension of the shared accommodation rate for housing benefit to single people aged under 35 years.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

An equality impact assessment on this measure was published on the DWP website on 9 May 2011, but it does not contain a specific estimate of the impact on homelessness, because we cannot anticipate the behaviours of tenants or their landlords.

[Mr Sanders]

One of the big problems across the board for people aged under 35 is that, because of where they live geographically, or because of medical reasons or their lifestyle, they might simply be unable to reduce their housing costs and share, and therefore could face eviction. That would put more pressure on local authority housing departments, which are already under pressure because of the lack of affordable housing. Do the Government have any plan to help those local authorities meet those increased pressures?

[Steve Webb]

We do indeed, and my hon. Friend, who has a strong track record on housing issues in this House, raises an important point. Over the next four years we will add a total of £190 million to the money going to local authorities, around two thirds of which will be discretionary payments to help just the sort of difficult cases that he mentions, plus other funding for local government to assist them.

[Mr Ward]

I welcome that answer, but is it not likely that perhaps a third or more of the discretionary housing payments budget will be required for the disabled alone—and that is without considering other vulnerable groups—if local authorities decide to use it to stop them being forced to share? Is there not a case for simply exempting certain groups from the change altogether?

[Steve Webb]

I can assure my hon. Friend that certain disabled groups have a blanket exemption: those who qualify for the severe disablement premium are automatically exempted from these proposals.

[Hywel Williams (Arfon) (PC)]

There is a particular problem in rural areas, where the housing stock is inflexible and where it is difficult to provide rooms for under-25s, let alone under-35s, as the North Wales Housing Association pointed out to me recently. It fears the drift to HMOs—houses in multiple occupation—particularly in seaside towns and urban areas. Can the Government introduce any flexibility on this issue?

[Steve Webb]

Although HMOs are one response to the problem, young people will have a range of alternatives, which will differ from individual to individual. For example, one third of single people aged 25 to 34 live with their parents. I recognise that this is not an option for some, but it may be an option that others will take up. Some will use the Government’s “Rent a room” scheme—whereby an owner-occupier will rent out a room, from which they can get more than £4,000 tax free—and some may be able to rent a room from a social landlord, which is something that we are looking to explore more.

[Mr Speaker]

I call Tony Lloyd. Not here. I call Mr Gerry Sutcliffe. Not here.

[Mr Philip Hollobone (Kettering) (Con)]

22. How many nationals of other EU member states are in receipt of benefits provided by his Department.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

One of the things that I was surprised to discover in the past few weeks is that the Department does not keep any record—nor, indeed, did it under the previous Government—of the nationality of people who claim benefits. This is something that we are moving to address; indeed, we want to find a way to ensure that we do so.

[Mr Hollobone]

It is indeed a scandal that we do not know how many EU nationals are claiming benefits funded by the British taxpayer. Is it not completely wrong for an eastern European citizen to be working in this country, with his family and children back home in Poland or wherever, and to be claiming and receiving child benefit at the British taxpayer’s expense?

[Chris Grayling]

My hon. Friend puts his finger on one of the anomalies of the European system which is causing concern not just in this country, but in other capitals around Europe. I have had many conversations in the last few months with fellow Employment Ministers in other EU countries, and there is a mounting debate about the need for rule changes that will set out exactly when and where benefits should and should not be paid.

[Mr David Hanson (Delyn) (Lab)]

23. What steps his Department is taking to reduce the level of youth unemployment.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The issue of youth unemployment is one that the right hon. Gentleman would know, if he had listened to my earlier answer, is of great importance to this Government and the nation. We are taking urgent steps to seek to address it.

[Mr Hanson]

Despite excellent apprenticeship schemes such as the one at Airbus near my constituency, which employs about 100 apprentices a year, youth unemployment in Wales is, sadly, still higher than anywhere else in the UK as a whole. Given what the Minister said earlier about potential jobs being created, in the absence of a strong regional policy and with the scrapping of Labour’s job schemes, how can he guarantee that the jobs for young people will go to where the most young people are unemployed?

[Chris Grayling]

We need two things to solve the problem of youth unemployment. We need a strategy for growth, which was at the heart of the Budget put forward by my right hon. Friend the Chancellor of the Exchequer a few weeks ago. We will continue to seek measures that will encourage business to grow, develop and create jobs in this country. Alongside that, we will continue to pursue measures, through work experience, the Work programme and other arrangements to support young people to make sure that they are as well equipped as possible to take advantage of those vacancies wherever in the United Kingdom they arise and wherever in the United Kingdom they live.

[Rosie Cooper (West Lancashire) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

Last week, we launched the Work programme—the biggest single such programme that the UK has ever had. It contrasts with the number of confusing and sometimes prescriptive provisions offered previously. We are adopting a personalised and flexible approach, which the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) spoke about earlier. It will involve paying providers by results, which we have explained, and will give them the freedom to innovate. The Work programme will deliver, we believe, effective and cost-effective support to help claimants into sustainable employment.

[Rosie Cooper]

Rising fuel costs, 20% VAT, high inflation and cuts to the winter fuel allowance and local government budgets will all hit vital front-line services used by pensioners. I should be grateful if the Minister would explain to the pensioners of West Lancashire why the Government need a new material deprivation indicator to tell them what they already know—that the policies of this Conservative-led Government are hitting them over and over again?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The hon. Lady is right that we did not reverse Labour’s planned cut in the winter fuel payment. What we did is reverse Labour’s planned cut to the cold weather payment, which pays £25 a week every time the temperature falls below zero—and we ended up paying more than £400 million to cold, vulnerable pensioners, which is money that the Labour party would not have spent.

[Neil Carmichael (Stroud) (Con)]

T3. In the context of the big society and mindful of the need for a variety of provision, what evidence is there that bidders for the Work programme have come from the voluntary sector and social enterprises?

[Mr Duncan Smith]

There is a huge amount of evidence. Two of the main providers are voluntary sector based, and getting on for half of all the subcontractors in the programme will be from the voluntary sector. This will be the biggest boost to the idea of the big society. Now that we hear Labour Members are rethinking on welfare, we hope that they will have some good things to say about it.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

The cap on overall benefits in the Welfare Reform Bill is an important part of the legislation, but yesterday the noble Lord Freud said on television that there was going to be a significant U-turn, as there were going to be exemptions. Pressed on the detail, he said:

“Well, it’s where we think that, you know, there’s something happening that is undesirable.”

I do not wish to be pedantic, but that is not a clear plan for reform. The Third Reading of the Welfare Reform Bill is on Wednesday. Will the amendments for this new proposal be on the table by then?

[Mr Duncan Smith]

It is good to see the right hon. Gentleman again—long time, no see. I am glad that he has finally made it to the Dispatch Box. He should not believe everything he reads in the media. The reality is that this policy is not changing because it is a good policy. The reality is that nearly half of those of working age who are working earn less than £26,000 a year, and they pay taxes to see some people on benefits earning much more than that amount. As we proceed through Report and Third Reading, I look forward to seeing the right hon. Gentleman support and vote for the Bill because he believes that those on benefits should not earn more than those who are living and working hard.

[Mr Byrne]

The Secretary of State’s Welfare Reform Bill would be easier to support if we knew what difference it would make in the real world. We still do not know what it will mean for child care or for people with disabilities, and now we do not know what it will mean for the benefit cap either.

Since the Secretary of State took office, the Treasury has forecast that the housing benefit bill will rise by £1 billion. If he cannot tell us what his policy on exemptions is, will he tell us what Lord Freud’s current policy will cost taxpayers?

[Mr Duncan Smith]

As I have said, we are not changing the policy. What my noble Friend Lord Freud was referring to was what we are already doing: making discretionary payments to ensure that the policy is eased in properly. [Interruption.] Hang on a second. The right hon. Gentleman cannot have it both ways. He has just said that we are not cutting housing benefit enough. He ought to talk to those on his Front Bench who think that we are cutting it too much. That is the problem with the Opposition at the moment: they want to have it all ways. Today the Leader of the Opposition made a speech in which he said that Labour would be tough on benefit claimants and that those who were not in work would not receive social housing. I simply say to Labour Members that this whole idea of welfare and change is a lot of wriggly-worm U-turns from the Opposition.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I remind the House that if we are to maximise progress, we need pithy questions and, from the Secretary of State and his colleagues, pithy answers.

[Teresa Pearce (Erith and Thamesmead) (Lab)]

T2. Members have already raised the issue of women born in 1954 who must wait an extra two years to receive their pensions, but those who have small occupational pensions paid for and planned for on the basis of the earlier retirement date and who then find themselves out of work before the later date will be adversely affected in terms of jobseeker’s allowance. Will the Minister review the rule and, specifically, the way in which it relates to those disadvantaged women?

[Steve Webb]

The hon. Lady is right: there is often an interaction between the rules governing benefits such as JSA, occupational pensions and state pension ages. However, in cases in which people’s state pension age has risen, the rules governing working-age benefits are exactly as they have always been. Provision will be made, whether through employment support allowance, JSA or, in the example given by the hon. Lady, an occupational pension. We are not talking about leaving people with nothing to live on.

[Alun Cairns (Vale of Glamorgan) (Con)]

T4. The mental health charity Mind has suggested changes in the work capability assessment to capture better the complexity of the conditions of those suffering from mental illness. What reassurance can the Minister give about how the process can be enhanced to reflect those needs better?

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

We have already introduced mental health champions to the network of health care professionals who carry out the assessments, and we believe that the changes introduced at the beginning of April will bring more people with mental health conditions into the support group. However, we now have on our desks a new set of proposals from the charities which we asked them to supply to us. We are considering them carefully, and hope to respond in the very near future.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

One important purpose of crisis loans is to cover emergencies when claimants have no money and payment of their benefits or tax credits is delayed. Because applications are now limited to three per year, families in my constituency already face the blocking of that route to help, not because they have failed but because of failings in the system. Will Ministers look at the system again and establish whether a more flexible approach could be adopted?

[Steve Webb]

We recognise that it is nonsense for one part of the benefits system to lend people money to deal with the fact that they have not received benefits from another part of it on time. The whole business of alignment payments has become completely out of control. Under my right hon. Friend the Secretary of State’s universal credit scheme, the matter will be dealt with through advance payments of the credit. Clearly the idea that people can have multiple crises—up to 10 a year—does not produce a rational system, which is the reason for our reform.

[Tony Baldry (Banbury) (Con)]

T5. Will my right hon. Friend please update the House on the progress of the work clubs initiative?

[Chris Grayling]

Let me start by paying tribute to my hon. Friend for his work in establishing a national network of work clubs. Several hundred are now up and running around the country, some with a degree of help from Jobcentre Plus and others with none at all. I hope that this strong network of organisations will make a real difference to people looking for jobs, and that their number will continue to grow.

[Clive Efford (Eltham) (Lab)]

I opposed changes to Remploy made by my own party in government which resulted in the closure of my local factory in Woolwich. Before the Government implement any further changes under the Sayce report that may result in more closures of Remploy factories, will the Secretary of State contact the former employees of that Woolwich factory, and write to me telling me how many found jobs and are currently employed?

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

I should like to reassure the hon. Gentleman that this Government’s policy is to continue with the modernisation plan, and there have not been further closures of Remploy factories. We will, however, look carefully at the recommendations of the report issued last week, which included recommendations on the future of Remploy. We will fully consult on that before going forward, and I am sure that that could well include what the hon. Gentleman suggested.

[Steve Baker (Wycombe) (Con)]

T6. On behalf of Micklefield job club in my constituency, a strictly voluntary effort to help people back into work, and on behalf of GB Job Clubs, a charity that supports a national network of like clubs, may I ask what the Government will do to ensure that the state does not crush such voluntary provision?

[Chris Grayling]

I should like to reassure my hon. Friend that I have made sure that there are no attempts within Jobcentre Plus and the Department for Work and Pensions to track and monitor and data-manage and performance-manage. This is a grass-roots movement. Our role is to provide a degree of local encouragement, and sometimes some initial funding to clubs to get up and running, but after that it is very much up to them to shape their destiny, and up to us to champion their success, but not to interfere.

[Alison McGovern (Wirral South) (Lab)]

The DWP’s own research on the future jobs fund published last month demonstrated the value of Government subsidy for the employment of young people during an economic crash. Does the Minister agree with his own Department’s research, and will he therefore reconsider the possibility of a work subsidy for young people if their employment levels do not improve in the coming year?

[Mr Duncan Smith]

The whole point of that research was to look at how we can get value for money—how many people we can get back to work, and what we can best do to support them. We inherited a terrible situation from the last Government, with youth unemployment having been rising for a number of years. The programmes we are introducing—such as the Work programme and special provision within that, and the innovation fund—will help them much more than lavishing huge amounts of money for very little return, such as through the future jobs fund.

[Mark Menzies (Fylde) (Con)]

T7. What are the Government doing to reduce conflict between parents in their dealings with the Child Support Agency?

[Maria Miller]

Reducing such conflict by putting in place support for parents to work collaboratively at the time of family breakdown lies at the heart of the reforms that we are looking at. I think Members of all parties can welcome that, and it has certainly been welcomed by organisations in the charitable sector who work with families.

[Mrs Linda Riordan (Halifax) (Lab/Co-op)]

What were the terms of reference that the DWP gave to the Sayce team, what was cost of the report, and was the main beneficiary Radar?

[Maria Miller]

I thank the hon. Lady for her question. I apologise for not quite hearing the end of it, but let me say that we commissioned the report to look generally at how employment programmes were supporting severely disabled people, including all the programmes currently run by the Department. It is a very fragmented bunch of programmes, and Liz Sayce has done an excellent job in pulling that together and recommending a strategy and the way forward. Yes, we did remunerate Radar, because it was required to have additional help to support it in the running of its business while Liz Sayce was helping us.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

T8. I welcome my right hon. Friend the Secretary of State’s proposed reform of the benefit system, but how will universal credit help people who have been out of work take up part-time or flexible work if they are unable to take on a full-time job for any reason?

[Mr Duncan Smith]

I am glad that my hon. Friend has raised this matter. The reality about universal credit is that it is aimed at those who cannot take on full-time work, or those who are transiting back to full-time work having been out of work for a little while. It will help everybody take up work for a number of different hours that suit their own particular conditions. It is particularly good for lone parents, and they will benefit for each hour they take better than they do at present.

[Mr Andy Slaughter (Hammersmith) (Lab)]

The Government’s benefit cap will force many of my constituents to leave their home of many years, uprooting families, jobs, schools and communities. According to the right hon. Gentleman’s colleague, the hon. Member for Chelsea and Fulham (Greg Hands), on LBC just now, such people are making lifestyle choices. Is that the Government’s view?

[Mr Duncan Smith]

The position on the benefit cap is very straightforward and simple: those who are on benefit should not receive more money than those who are working and paying their taxes. There are exemptions, of course, such as for those who are making the right efforts to get back to work—those on working tax credit, for instance—and those who are disabled, as well as for widows and war widows. They are exempted from this, but for the rest of them the following simple principle holds: “If you can, you should be helped into trying to work”, and £26,000 a year seems a reasonable sum of money to me.

[Graham Evans (Weaver Vale) (Con)]

T9. Many people are being tricked out of money by being offered lump sums, which turn out to be woefully inadequate, instead of their pension scheme. What steps are the Government taking on these incentivised transfers out of defined benefit pension schemes?

[Steve Webb]

I am grateful to my hon. Friend for raising that important issue. We are determined to drive out the bad practice whereby, as he says, people are given a bung of cash, sometimes a few weeks before Christmas, and are then given a value for their pension rights which is well below what they are actually worth to them. I met the pensions regulator and other interested groups a few weeks ago, and we are looking very hard at whether regulatory change is needed.

[John Cryer (Leyton and Wanstead) (Lab)]

In the light of earlier questions on the Health and Safety Executive, will there be more workplace inspections next year or fewer?

[Chris Grayling]

We have made it clear that we are seeking to reduce the number of proactive workplace inspections by about a third by removing from proactive inspection low-risk premises that have no record of problems. In that way, the HSE can concentrate its resource on dealing with those employers where there is a problem and fault has been found. Indeed, we are introducing a system of fee for fault to ensure that we recover money from those employers who are breaking the rules.

[Jenny Willott (Cardiff Central) (LD)]

Changing from three to six months the period before which a claimant becomes eligible for the new personal independence payment not only means that people with sudden onset conditions, such as cancer or a stroke, have to wait longer for support, but it may affect their family’s access to carer’s allowance. Will the Minister investigate ways to enable those looking after loved ones who suffer sudden onset conditions early access to carer’s allowance?

[Maria Miller]

It is important that we continue to view the personal independence payment very much as something that relates to an individual and the way in which their condition affects them on an individual basis. We are not intending to look at particular conditions, but we will be carefully examining the way in which the introduction of the personal independence payment affects benefits that are passported, such as carer’s allowance, and we will bear my hon. Friend’s comments in mind.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

The Pensions Minister may recall that he kindly met me, the hon. Member for Chippenham (Duncan Hames) and a representative of the Twins and Multiple Births Association to discuss a modest proposal to amend the Sure Start maternity grant for parents of multiples. He undertook to come back to us on that, so I wonder whether he could update us on when he will be able to do so.

[Steve Webb]

The hon. Gentleman and my hon. Friend the Member for Chippenham rightly raised some specific issues relating to people who have had twins or other multiple births and the interaction between that situation and our changes to maternity grants, and I hope to be in a position to respond shortly.

Petition

Monday 13th June 2011 Commons Chamber

Jonathan Evans (Cardiff North) (Con)

- Hansard - - Excerpts

I beg leave to present to the House a petition signed by Mr Peter Williams, Mr Paul Wiggins and Mr Jason Evans, all of whom are constituents of mine, together with some 6,761 other signatories from throughout the United Kingdom, gathered by the British Insurance Brokers’ Association. They are concerned at the impact of the decision of the Financial Services Authority indefinitely to delay its planned review of the Financial Services Compensation Scheme. The petition states:

The Petition of members of the British Insurance Brokers’ Association (BIBA),

Declares that the petitioners believe that the Financial Services Authority (FSA) should urgently accelerate its consultation on the fundamental review of the Financial Services Compensation Scheme (FSCS), to ensure that new rules are in place for April 2012 so that general insurance brokers do not see further disproportionate levy increases; and further declares that the 3,500 full time ‘insurance brokers’ should have separation from the other ‘secondary sellers’ in the insurance intermediary sub-class.

The Petitioners therefore request that the House of Commons urges HM Treasury to accelerate the FSA’s review of the FSCS consultation with immediate effect.

And the Petitioners remain, etc.

[P000927]

Points of Order

Monday 13th June 2011 Commons Chamber

15:32

[Huw Irranca-Davies (Ogmore) (Lab)]

On a point of order, Mr Speaker. Last Thursday, a written statement on the fast-track solar photovoltaic review was quietly laid before the House. By Thursday evening we had been given the response. Gaynor Hartnell of the Renewable Energy Association said:

“The handling of this whole affair has been poor”.

Dave Sowden said:

“This is bad news for…worthwhile projects—schools, communities, public buildings.”

Friends of the Earth said:

“This consultation—

after which nothing changed—

“has been an utter farce—Ministers have completely ignored warnings from community groups”.

To make things worse, by Saturday there was an announcement in the Daily Mail that “Ministers plan an abrupt change of policy to rescue solar power jobs.” It was reported that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker) had said:

“I am a big fan of solar energy. I believe it can have an important role in breaking the stranglehold of the Big Six energy companies.”

Out of respect to this House, which I know you hold most dear, Mr Speaker, and the necessity for policy announcements to be made in this Chamber, have you had a request for the Minister responsible for solar energy to appear before this House to explain, first, the review that never was, and secondly, the policy review change mooted over the weekend?

[Mr Speaker]

I have not.

[Sir Gerald Kaufman (Manchester, Gorton) (Lab)]

On a point of order, Mr Speaker. You are, of course, aware that there is a major Bill before Parliament proposing huge changes in the national health service. It has been announced in the press today that the Prime Minister and the Deputy Prime Minister are to hold a staged event at 12 noon tomorrow to announce the changes that they intend to make to that Bill. Is it not utterly unacceptable, particularly when a Bill is before the House of Commons, for announcements about what is to be done to that Bill to be made two and a half hours before the House sits? Do you not agree that that statement should be made first to the House of Commons, and that this stunt should be called off?

[Mr Speaker]

I reiterate to the right hon. Gentleman, and to the House, my usual point from the Chair, which is that if Ministers, be they ever so high, have important policy announcements to make, including about any changes in policy, those announcements should be made first to the House of Commons.

[Grahame M. Morris (Easington) (Lab)]

Further to that point of order, Mr Speaker. In the light of the NHS Future Forum report on the listening exercise for the Health and Social Care Bill, have you had any indication from the Secretary of State or the Government business managers when they intend to end the pause in the Bill’s progress, and whether it will be recommitted to a Public Bill Committee of MPs to allow proper scrutiny of the proposed changes and to allow the Labour party, which formed the NHS, to have a say on those important matters?

[Mr Speaker]

Those are important matters, but they are matters for the Government. The point of order raised by the hon. Gentleman, although a matter of great concern to him and to many others, is essentially a business question, and therefore is not a matter for the Chair. Those who are responsible for such matters will have noted, and doubtless taken heed of, the hon. Gentleman’s observations.

[Chris Bryant (Rhondda) (Lab)]

Further to that point of order, Mr Speaker. I am letting your original pronouncement in answer to my right hon. Friend the Member for Manchester, Gorton (Sir Gerald Kaufman) sink in, and I would not want to put any words in your mouth, obviously, but it seemed to me that you might have been suggesting that the Prime Minister and the Deputy Prime Minister would not be right to go ahead with an announcement in another venue before coming to this House.

[Mr Speaker]

If the hon. Gentleman had not made his name as a Member of Parliament, I feel sure that he would have had a very fruitful career at the Bar—

[Chris Bryant]

Downstairs? Behind the bar?

[Mr Speaker]

Not downstairs, but in the law courts.

I simply say to the hon. Gentleman that I am not suggesting anything, and I do not feel the need to add anything to what I have already said in response to the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman). First, I think that what I said was pretty clear, and secondly, the right hon. Gentleman is not in any way slow on the uptake. I hope that is clear.

Royal Assent

[Mr Speaker]

I have to notify the House, in accordance with the Royal Assent Act 1967, that Her Majesty has signified her Royal Assent to the following Act:

Postal Services Act 2011.

Welfare Reform Bill (Programme) (No. 2)

Monday 13th June 2011 Commons Chamber

15:37

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I beg to move,

That the Order of 9 March 2011 (Welfare Reform Bill (Programme)) be varied as follows:

1. Paragraphs 4 and 5 of the Order shall be omitted.

2. Proceedings on Consideration and Third Reading shall be completed in two days.

3. Proceedings on Consideration shall be taken on the days shown in the first column of the following Table and in the order so shown.

4. The proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.

15:40

[Stephen Timms (East Ham) (Lab)]

I take issue somewhat with the Minister. I do not agree that there has been adequate time in Committee to consider the Bill, not least because on more than one occasion Ministers left early, before we had completed our first afternoon discussion. Consequently, a number of key issues, particularly new clauses, were left undebated when the Committee ended, and as a result, some of those are on the Order Paper today.

With that backlog, as well as other key points in the Bill, I am very concerned that the two days now available are likely to be insufficient for the debate that is needed. Given that inadequate time, however, the knife proposed in the Government’s programme motion is in a perfectly sensible place. Because we need to get on with the debate I shall not seek to divide the House on the motion, but I am concerned that, as will become clear during the debate, the House will not have had sufficient time to consider properly the full consequences of the Bill.

Question put and agreed to.

[Mr Speaker]

The Orders of the Day will now be read by the Clerk, Dr Sir Malcolm Jack.

Welfare Reform Bill

Monday 13th June 2011 Commons Chamber

[1st Allocated Day]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 1

Deductions from earnings: other cases

‘(1) In section 71 of the Social Security Administration Act 1992 (overpayments - general), after subsection (9) there is inserted—

“(9A) Regulations may provide for amounts recoverable under the provisions mentioned in subsection (8) above to be recovered by deductions from earnings.

(9B) In subsection (9A) above “earnings” has such meaning as may be prescribed.

(9C) Regulations under subsection (9A) above may include provision—

(a) requiring the person from whom an amount is recoverable (“the beneficiary”) to disclose details of their employer, and any change of employer, to the Secretary of State;

(b) requiring the employer, on being served with a notice by the Secretary of State, to make deductions from the earnings of the beneficiary and to pay corresponding amounts to the Secretary of State;

(c) as to the matters to be contained in such a notice and the period for which a notice is to have effect;

(d) as to how payment is to be made to the Secretary of State;

(e) as to a level of earnings below which earnings must not be reduced;

(f) allowing the employer, where the employer makes deductions, to deduct a prescribed sum from the beneficiary’s earnings in respect of the employer’s administrative costs;

(g) requiring the employer to keep records of deductions;

(h) requiring the employer to notify the Secretary of State if the beneficiary is not, or ceases to be, employed by the employer;

(i) creating a criminal offence for non-compliance with the regulations, punishable on summary conviction by a fine not exceeding level 3 on the standard scale;

(j) with respect to the priority as between a requirement to deduct from earnings under this section and—

(i) any other such requirement;

(ii) an order under any other enactment relating to England and Wales which requires deduction from the beneficiary’s earnings;

(iii) any diligence against earnings.”

(2) In section 71ZA of that Act (overpayments out of social fund), before subsection (3) there is inserted—

“(2A) Subsection (9A) of section 71 above as it so applies shall have effect as if the reference to amounts recoverable under the provisions mentioned in subsection (8) of that section were to amounts recoverable under subsections (1) and (4) of that section by virtue of subsection (1) above.”

(3) In section 75 of that Act (overpayments of housing benefit), at the end there is inserted—

“(8) Regulations may provide for amounts recoverable under this section to be recovered by deductions from earnings.

(9) In subsection (8) above “earnings” has such meaning as may be prescribed.

(10) Regulations under subsection (8) above may include provision—

(a) requiring the person from whom an amount is recoverable (“the beneficiary”) to disclose details of their employer, and any change of employer, to the Secretary of State or the authority which paid the benefit;

(b) requiring the employer, on being served with a notice by the Secretary of State or the authority which paid the benefit, to make deductions from the earnings of the beneficiary and to pay corresponding amounts to the Secretary of State or that authority;

(c) as to the matters to be contained in such a notice and the period for which a notice is to have effect;

(d) as to how payment is to be made to the Secretary of State or the authority which paid the benefit;

(e) as to a level of earnings below which earnings must not be reduced;

(f) allowing the employer, where the employer makes deductions, to deduct a prescribed sum from the beneficiary’s earnings in respect of the employer’s administrative costs;

(g) requiring the employer to keep records of deductions;

(h) requiring the employer to notify the Secretary of State or the authority which paid the benefit if the beneficiary is not, or ceases to be, employed by the employer;

(i) creating a criminal offence for non-compliance with the regulations, punishable on summary conviction by a fine not exceeding level 3 on the standard scale;

(j) with respect to the priority as between a requirement to deduct from earnings under this section and—

(i) any other such requirement;

(ii) an order under any other enactment relating to England and Wales which requires deduction from the beneficiary’s earnings;

(iii) any diligence against earnings.”

(4) In section 78 of that Act (recovery of social fund awards), after subsection (3B) there is inserted—

“(3C) Regulations may provide for amounts recoverable under subsection (1) above from a person specified in subsection (3) above to be recovered by deductions from earnings.

(3D) In subsection (3C) above “earnings” has such meaning as may be prescribed.

(3E) Regulations under subsection (3C) above may include provision referred to in section 71(9C) above.”’—(Chris Grayling.)

Brought up, and read the First time.

15:42

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss Government amendments 1 to 13.

[Chris Grayling]

Mr Speaker, if you would permit me to go off the subject for a moment, I think it would be appropriate to mark, as you did just now, the recent honour received by the Clerk. I am sure that Members in all parts of the House send him our congratulations and best wishes. [Hon. Members: “Hear, hear.”]

Amendments 1 to 13 and new clause 1 introduce the direct earnings attachment, or DEA, as a method of social security debt recovery. An attachment of earnings is a method by which money will be stopped from a customer’s wages to pay a debt. The debt in question could be an overpayment of benefit, any associated penalty, a recovery of hardship payments or a payment on account. The measure will also be available for use by local authorities for the recovery of housing benefit overpayments. In due course it could also be used for the recovery of council tax benefit overpayment, once the localisation of council tax benefit takes place. A DEA would also be available to recover an administrative penalty for a benefit fraud offence or a civil penalty for failing to take proper care of a benefit award.

[Mrs Anne Main (St Albans) (Con)]

Is there some sort of structure in process so that if EU migrants who work in the country and are eligible for benefits move out of country when they no longer wish to work here, any overpayment of benefits could be clawed back, should those migrants move through other EU countries?

[Chris Grayling]

My hon. Friend makes an important point. Although in theory mechanisms do exist to recover payments, the process is much more difficult than one would wish. I take her point, and my ministerial colleagues and I will continue to seek ways of ensuring that in such an eventuality, we can make recoveries.

[Chris Bryant (Rhondda) (Lab)]

While the Minister considers that issue, will he also consider the case of the many hundreds of thousands of British people who live in Spain, who often rely on support, especially from the national health service and many other services that they receive, from the Spanish Government? The same applies elsewhere in Europe.

[Chris Grayling]

The hon. Gentleman is of course correct, but I am sure that he would also agree that if someone comes to live and work in this country, receives benefit payments and then returns overseas, they carry with them an obligation that they should fulfil. That is the sole point that my hon. Friend the Member for St Albans (Mrs Main) was making, and it is one that I think Members on both sides of the House would see as common sense. There is freedom of movement across Europe, but we must make sure that the mechanisms are in place to ensure that our systems are not abused. The primary purpose of DEA is to enforce recovery where the debtor is in pay-as-you-earn employment and will not make other arrangements for debt repayment. I think that that is a sensible approach to take.

I apologise to the Opposition for the fact that we were unable to bring the new clause forward in Committee. It has been very carefully considered and discussed in our regulatory processes. We have brought it forward at this time and hope that they will not find it controversial. One of the reasons why I hope that they will not find it controversial is that there is currently something of an anomaly in the system. If someone incurs a penalty, for whatever reason, and remains in the benefit system, we can recover that money through a deduction from the benefit payments they receive. However, if they move into PAYE employment and basically say, “No way. Go away,” we currently have no mechanism for recovering the debt that is owed. That is the purpose of the measures that we are considering.

The rates of deduction will be determined in the regulations, which will include a safeguard to ensure that deductions do not take the debtor beneath a given level of earnings. That is necessary and common practice in the operation of similar arrangements in other parts of society where deductions are made—for example, with court-related penalties and deductions for child maintenance. It is essential that we do not deduct money at a rate that will tip the person concerned below a given level of earnings. It is, and will be, a basic principle that recovery of overpaid benefits should not cause undue hardship.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Will the Minister clarify whether any judicial process will be applied to attachments in relation to someone’s earnings? The reason I ask is because, as I am sure all hon. Members know, mistakes happen, sometimes because of errors on a claimant’s part but sometimes because of errors by the bureaucracy, and I am concerned that there may not be enough safeguards to ensure that attachments will not be made erroneously.

[Chris Grayling]

The hon. Lady makes an important point, and I will explain in a moment what rights individuals will have. It would of course be inappropriate to have a system in which a DEA could be applied and there was no comeback at all for the individual. A system that allowed no right of challenge or appeal would be wholly inappropriate, and I will explain in a moment why that will not be the case.

[Andrew Percy (Brigg and Goole) (Con)]

On that point, would a debt order have any bearing on the assessable income available for child maintenance payments?

[Chris Grayling]

That would depend on the circumstances. It is obviously important that a deduction of earnings takes into account the potential impact on the individual, so we would need to take into account other payments. Ultimately, it is a basic principle that recovery of overpaid benefits should not cause undue hardship, so all circumstances would need to be taken into account. I should clarify that council tax benefit will be deducted from council tax liability, so it will not be administered in quite the same way.

Imposing a DEA is intended to be an administratively simple process that replaces the current practice of obtaining an attachment of earnings order by application to the court. The ability of the Department for Work and Pensions to make DEAs on its own authority sends out a strong signal to potential fraudsters and will prove a useful tool in the fraud and error strategy. I hope, particularly given the comments made today by the Leader of the Opposition, that the Opposition will welcome this as a sensible measure to take against people who defraud the system.

We think that the measures will also encourage claimants in debt to be more aware of the possibility of deduction at source, reducing any expectation that they will avoid repaying debt. There is always a concern that they will think that they can just pile money up and up, and that there will be no day of reckoning. The proposals make it much simpler for us to ensure that there is indeed a day of reckoning.

The measure will make use of an existing process used by the Child Maintenance and Enforcement Commission, with which businesses are already familiar. It is a matter of routine for an employer to make a child maintenance-related deduction from a person’s salary cheque each month, and this measure will use the same process. The provision also allows for the levy of an administration charge against the debtor by the employer administering the deduction, offsetting any increased administrative costs resulting from the increased use of earnings attachment as a recovery method.

Using a DEA to recover debt does not remove a debtor’s rights to challenge any decision relating to the recovery of benefits or the imposition of a civil penalty. This relates to the point just raised by the hon. Member for Banff and Buchan (Dr Whiteford). For example, when an overpayment occurs in relation to an award, an independent decision maker decides whether a recoverable overpayment exists. As I set out in Committee, there are circumstances in which overpayments will be recovered, and circumstances in which they will not. We will focus on offering discretion to our front-line staff in judging what is right and what is wrong. We accept that there will be times when an overpayment results from an administrative error within the Department, and that we should accept the blame for that and not seek recovery of the overpayment. The general position, however, is that if someone receives money that they should not have received, we will expect them to pay it back. If they refuse and have already started work, this mechanism will enable us to recover the money.

In addition, there will be a right of appeal to an independent appeal tribunal, should the person be unhappy with the original decision. So there is still a full judicial process available, similar to the one available when a sanction is imposed that could lead to the withdrawal of benefits. The claimant has the right first to go to the decision maker and then to a tribunal, and those rights will remain in this situation. However, we will not have to go to court to secure the original order to make a deduction of earnings.

Before taking action to impose a DEA, we will ensure that the debtor is aware that we are taking such action. We are also keen to remain mindful of our welfare obligations. We do not, for instance, want to push the debtor into leaving work in order to avoid a repayment under a DEA. This measure must be applied with common sense and care. In certain instances, it might be determined that another method of recovery should be employed, or that arrangements should be made so that the DEA commences only after other commitments have been cleared. This relates to the point that my hon. Friend the Member for Brigg and Goole (Andrew Percy) raised a moment ago: we will take into account other commitments.

The DEA is designed to recover debt from those who currently seek to avoid repayment—those who hope that they can avoid paying the money back. Those who comply with requests for repayment and who either come to a reasonable arrangement to repay or can show that they are currently unable to repay will not have a DEA imposed. I am sure that hon. Members will agree that when someone refuses to meet their obligations to repay benefit debt, such powers should be available to the relevant authorities to make recovery.

That is all that the new clause and the other amendments are designed to do. They are designed to ensure that we treat people fairly and appropriately within the system. When necessary we can recover benefits directly from people who are still on benefits, but we cannot currently do that easily, without going to court, from people who have moved into PAYE employment. These provisions will allow us to change that. I believe that this is a prudent and sensible step. It is very much in keeping with our anti-fraud strategy, and I hope that it will be in keeping with that of the Opposition as well. I hope that the new clause will command support on both sides of the House.

[Stephen Timms (East Ham) (Lab)]

I welcome this opportunity to respond to this first group of amendments. It is certainly one of the less contentious groups that we shall consider, and the Minister should not imagine that we will be equally amenable throughout the debate today. The new clause aims to amend the Social Security Administration Act 1992 to allow the Government to recover overpayments resulting from mistakes or fraud in out-of-work benefits and housing benefit, as well as in universal credit and the other contributory benefits.

I can well see why the Minister wants to make these changes. In particular, because universal credit will encompass people who are in work as well as those who are out of work, it makes sense for the recovery of overpayments to be extended into earnings received in work, as he has outlined.

However, a number of questions need to be asked about these plans. The Minister has already been pressed about the mechanism for appeals. The changes will certainly require a good deal of co-operation from employers, as those are the organisations on which the Government will be serving notices to deduct from earnings. Employers will bear the burden of the administration of these deductions through having to pay in amounts, keep records of those amounts, and keep the Secretary of State informed if the person concerned leaves their employment.

The Minister has made the perfectly reasonable point that a system already exists for child support payments, but in order to take into account the additional burden that he is imposing, the Government are allowing for the employer to deduct an amount in respect of their administration costs. We need to have some idea of the amount that employers will be permitted to deduct, which should be seen to be fair by the person whose pay is being deducted, while adequately compensating employers. Will the Minister tell us a little more about how that amount will be calculated, and how it relates to the existing arrangements for child support that he touched on?

The amendments allow for a level of earnings below which earnings must not be reduced by the deductions. Again, that seems appropriate, but we need to know how that level of earnings will be prescribed. There could be a significant impact on work incentives, particularly for people who have received overpayments and who may well have been acting entirely innocently, having been confused or having made a mistake—or perhaps the job centre has made a mistake. If the amount is too low, claimants who are out of work could see little gain from moving into work. Additionally, if the deductions are at a flat rate or not a percentage of hourly pay, the work incentives that the universal credit taper mechanism is designed to provide will be compromised. Will the Minister tell us how the minimum level of earnings will be calculated? Will he ensure that people who are repaying overpayments will still be better off if they increase their income through working additional hours?

Subsection (3)(i) of new section 71ZCA of the Social Security Administration Act 1992 creates a criminal offence for non-compliance with the regulations, with a fine of £1,000, which would be a hefty sum for a small business. Small businesses have less time and energy to spend on administration or human resources, so the additional burdens being placed on them could prove a significant disincentive to their recruiting new employees who have overpayments hanging over them. That would result in those people finding it more difficult to get into work. Will the Minister tell us a little more about how he thinks that the new provisions will affect people who are paying back overpayments while trying to find a job? How he will ensure that the provisions do not create a new barrier to those people getting back into work?

The move towards allowing deductions from earnings to repay benefits lost due to error or fraud is sensible, particularly because universal credit will be paid to people in work as well as out of work. The Government are already introducing several penalties for those whom they feel have negligently made incorrect statements. It is important that we do not penalise people who have made mistakes but have done so honestly, by placing new and unnecessary barriers to employment in their way. The minimum level of earnings and the red tape that this will mean for small businesses could have that result if the Government get the judgments wrong. I hope that the Minister will be able to give us some reassurances about how the measures will work in practice.

16:00

[Kate Green (Stretford and Urmston) (Lab)]

It is a pleasure to make my first contribution to this stage of proceedings on the Bill by welcoming an aspect of Government amendment 2. Specifically, it is enormously welcome that the short paragraph (e) will enable regulations to include

“a level of earnings below which earnings must not be reduced”

when overpayments are being recovered. That echoes the practice in Sweden, Germany, the Netherlands, Norway and other nations, which have legally enforceable, attachment-free limits when debts are being enforced, below which claimants must be protected. The limits relate to a national minimum income standard, which is set by a variety of methods. I am grateful to Professor John Veit-Wilson, Professor Elaine Kempson, Damon Gibbons of Debt on our Doorstep and Rev. Paul Nicolson of the Zacchaeus 2000 Trust, who have helped me to prepare for this debate.

I would be pleased to see the principle of irreducible attachment-free minimums extended to all debts and to the unemployed, in particular to safeguard children’s, disability and housing benefits. That would prevent the damage that is done to physical and mental health by the enforcement of debt against poverty incomes, and the damage that that does to the capacity of the poorest adults to find and keep work.

In Sweden, the standards for a reasonable standard of living are uprated for price index changes every year and reset every five years by the National Board for Consumer Affairs. The standards are based on survey data on national household consumption patterns and current prices; statisticians and NBCA policy officials decide what is reasonable in terms of deviations from the averages. For example, for the past four years in the UK, the prices of food and domestic fuel have increased faster than the retail prices index and the consumer prices index. The standards are used by the social service board for setting benefits and by the tax authority for setting the tax threshold. The tax threshold is also used by the court enforcement authority to set its attachment-free sum for debt enforcement. That sum consists of two parts: variable housing costs and a fixed standard normal sum for all other living expenses.

There are clearly other methodologies for setting the minimum acceptable income standard below which incomes should be protected and attachment-free. In Committee, we explored work that is under way in this country at the universities of York and Loughborough, among others, to develop a minimum income standard that can command and be informed by the perceptions of the public. There is a range of options for assessing and setting the minimum standard below which there will not be deductions. There are examples from other nations where such a minimum is enforceable by the courts and related to national minimum income standards. In countries that have legally enforceable limits, the courts, in setting payment plans, can ensure that the debtor is left with a minimum level of income, taking account of family size.

I hope that the small but vital paragraph (e) in Government amendment 2 will begin an era of cross-party support for legally enforceable irreducible and attachment-free minimums when people are repaying debts, which are based on minimum income standards. That would contribute to a reduction in the huge cost of mental illness to the health service and the wider economy, and make a significant contribution to the reduction of poverty in the UK. I hope that we have an ambitious approach to setting that minimum.

[Chris Grayling]

I start by saying that I very much appreciate the comments of the hon. Member for Stretford and Urmston (Kate Green). I listened carefully to her points, a number of which she made in Committee. She has given a great deal of thought to these matters, and although I cannot offer her a guarantee that we will do all the things she wishes, I can say to her that we will take great care, in the regulations attached to the Bill, to ensure that we get the right balance. It has been clear for a long time in this country, and remains absolutely clear under the current Government, that in setting the levels of any deduction we have to be extremely careful not to tip people into hardship. In particular, we must not encourage them to leave work and end up moving them and their families down the poverty scale.

The hon. Lady and the right hon. Member for East Ham (Stephen Timms) asked how we would determine the level of earnings below which deductions for overpayments cannot be made. Of course, there is no one-size-fits-all approach, and the circumstances of different families are very different. There may be a case in which, as my hon. Friend the Member for Brigg and Goole (Andrew Percy) suggested, there is a deduction for child support, or the number of children in a family or a disability may be factors. Great care therefore has to be exercised.

The minimum level that we will pursue will be determined to ensure that the debtor is left with sufficient income to maintain themselves and their family, in line with similar provisions in the Attachment of Earnings Act 1971. We therefore plan to use the same basis that the previous Government used—for example, to determine deductions from benefit payments.

In many cases, however, a direct earnings attachment will be implemented with little negotiation with the debtor. There will be a prescribed minimum level that will not take account of individual circumstances. We will try to create a system whereby we are mindful of the need to reflect the circumstances of the individual, but we cannot go the whole way, and we certainly cannot go quite as far as the hon. Member for Stretford and Urmston would wish.

If a debtor finds that they are unable to cope with the deductions being made from their earnings, they should contact us to discuss an alternative payment rate. Of course, they can avoid being placed in that situation, bearing in mind that we are discussing not people who are struggling to deal with something that they have already agreed but those who have wilfully refused to enter an agreement with us and are basically saying, “I’m not paying the money back”, or who have not even got to the point of saying anything to us at all.

Debtors who are repaying their overpayment by means of a direct earnings attachment will, in line with those repaying by other methods, be able to claim that the repayment rate causes them hardship and ask for it to be reduced. Although we of course have a responsibility to recover overpayments in order to protect public funds, we also take into account an individual’s financial and personal circumstances. The hon. Lady articulated a strong case for her points, but I cannot offer her quite as much as she would wish. However, I can offer her an assurance that we will always take an individual’s circumstances into account, particular where poverty, deprivation and hardship could arise.

The right hon. Member for East Ham made a point about employers. We will, of course, use the same mechanism for the attachment orders in the Bill as is used for child maintenance deductions. That process is well established through the Child Maintenance and Enforcement Commission system, and prior to that through the Child Support Agency, so it should not cause employers to recast their processes and do things very differently. On that basis, I am confident that it should not represent a significant additional burden on employers.

The right hon. Gentleman mentioned the provision for a £1,000 fine. In truth, there is no excuse for a refusal to engage in any part of the process. The orders will arise only because an individual claimant has refused to engage, and there is no real excuse for an employer to refuse to engage either. The matter should not be complicated, and it certainly should not be complex enough to cause an employer to decline an expansion in business or a recruitment to fill a vacancy. The process is established and many employers up and down the country are used to dealing with it, and I do not believe there will be significant extra burden on business.

The right hon. Gentleman asked how much employers could deduct for the administration charge, and the answer is an amount not in excess of £1 for each deduction. He asked for an assurance that the measure will not damage work incentives. The answer to that is that, as with all debt recovery, we must of course be mindful of the Department’s welfare obligations. As I said, recovery of overpaid benefits should not cause undue hardship. In the calculation of a repayment, we certainly would not want to push someone into a position in which they have to leave work to avoid payment under a DEA.

The operation of the DEA does not mean that the debtor will commence the repayment of their debt earlier than they would under another repayment method. The debtor will have had ample opportunity to make other arrangements to pay, or indeed to show that suspension of recovery was applicable in their case. We are not talking about people who have had no chance to engage and discuss.

[Stephen Timms]

Will people who receive pay rises always receive some benefit from it, or could they lose all of that increase in additional repayments required by the Department?

[Chris Grayling]

It is very difficult to give an absolute answer to that question. It is unlikely that we would seek to withdraw an entire pay rise, but clearly, if we had given somebody a lot of slack in making their repayments, and their financial circumstances improved, we would not allow them simply to continue paying at the hardship rate that they had previously paid. We would expect an improvement in the terms based on their improved circumstances.

The right hon. Gentleman, as a former Minister, knows the reality. Well-established hardship considerations are in place. If the customer engages with the Department, their circumstances could suggest that another method of recovery should be employed. Arrangements are made so that the DEA begins only after a period time, but only in exceptional circumstances would we waiver repayment.

Common sense lies at the heart of this measure. It is our job to recover funds that have been overpaid to a claimant when there is not a good reason for waiving the repayment because of departmental error. At the same time, it is not in any of our interests for the system to force people into severe hardship and poverty—the system should reflect the reality of people’s financial situations.

There is a clear obligation to repay. The Leader of the Opposition spoke this morning of responsibility, and he was right to do so. Those who we are talking about have a responsibility to repay the money that is due to us. However, the Department, and indeed the courts, must apply common sense to the process, achieve the right balance and ensure that we recover the money that is due to the taxpayer correctly and sensibly.

I welcome the Opposition spokesman’s positive comments. We are likely to have livelier debates as the hours go by, although I hope, having heard the Leader of the Opposition’s comments this morning, that such debate masks their willingness to support the Bill. It would be disappointing if the Opposition did not support the Bill. If they decline to support it, I will look forward to having a debate in public on who is right and who is wrong, but for now I am delighted that there is cross-party co-operation on this group of amendments and the new clause.

Question put and agreed to.

New clause 1 accordingly read a Second time, and added to the Bill.

Clause 102

Recovery of benefit payments

Amendments made: 1, page 67, line 35, at end insert—

‘() by deduction from earnings (section 71ZCA);’

Amendment 2, page 68, line 17, at end insert—

71ZCA Deduction from earnings

(1) Regulations may provide for amounts recoverable under section 71ZB to be recovered by deductions from earnings.

(2) In this section “earnings” has such meaning as may be prescribed.

(3) Regulations under subsection (1) may include provision—

(a) requiring the person from whom an amount is recoverable (“the beneficiary”) to disclose details of their employer, and any change of employer, to the Secretary of State;

(b) requiring the employer, on being served with a notice by the Secretary of State, to make deductions from the earnings of the beneficiary and to pay corresponding amounts to the Secretary of State;

(c) as to the matters to be contained in such a notice and the period for which a notice is to have effect;

(d) as to how payment is to be made to the Secretary of State;

(e) as to a level of earnings below which earnings must not be reduced;

(f) allowing the employer, where the employer makes deductions, to deduct a prescribed sum from the beneficiary’s earnings in respect of the employer’s administrative costs;

(g) requiring the employer to keep records of deductions;

(h) requiring the employer to notify the Secretary of State if the beneficiary is not, or ceases to be, employed by the employer;

(i) creating a criminal offence for non-compliance with the regulations, punishable on summary conviction by a fine not exceeding level 3 on the standard scale;

(j) with respect to the priority as between a requirement to deduct from earnings under this section and—

(i) any other such requirement;

(ii) an order under any other enactment relating to England and Wales which requires deduction from the beneficiary’s earnings;

(iii) any diligence against earnings.’

Amendment 3, page 69, line 22 , after ‘71ZC’ insert ‘, 71ZCA’

Amendment 4, page 70, line 13 , leave out from ‘etc)’ to end of line 15 and insert—

‘(a) for subsection (4) there is substituted—

(4) If the recipient of a notice under subsection (3) above agrees, in the specified manner, to pay the penalty—

(a) the amount of the penalty shall be recoverable from the recipient by the Secretary of State or authority; and

(b) no criminal proceedings shall be instituted against the recipient in respect of the conduct to which the notice relates.

(4A) Sections 71ZC, 71ZCA and 71ZD above apply in relation to amounts recoverable under subsection (4)(a) above as to amounts recoverable by the Secretary of State under section 71ZB above (and, where the notice is given by an authority administering housing benefit or council tax benefit, those sections so apply as if references to the Secretary of State were to that authority).’

(b) in subsection (9), the definition of “relevant benefit” is repealed.’—(Chris Grayling.)

Clause 112

Civil penalties for incorrect statements and failures to disclose information

Amendments made: 5, page 75, line 29, after ‘71ZC’ insert ‘, 71ZCA’

Amendment 6, page 75, line 31, at end insert—

‘(and, where the appropriate authority is not the Secretary of State, those sections so apply as if references to the Secretary of State were to that authority)’

Amendment 7, page 76, line 24, leave out ‘Secretary of State’ and insert ‘appropriate authority’

Amendment 8, page 76, line 26, leave out from ‘71ZC’ to end of line 27 and insert—

‘71ZCA and 71ZD apply in relation to amounts recoverable by the appropriate authority under subsection (4) as to amounts recoverable by the Secretary of State under section 71ZB (and, where the appropriate authority is not the Secretary of State, those sections so apply as if references to the Secretary of State were to that authority).’—(Chris Grayling.)

Schedule 14

Repeals

Amendments made: 9, page 155, line 37, at end insert—

[Stephen Timms]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 3—School meals

‘(1) The amount in respect of other particular needs or circumstances, under section 12, shall include an amount in respect of school meals for any dependents of the claimant.

(2) The maximum award of the amount under this section shall be 100 per cent. of the cost that the claimant would expect to incur in respect of school meals, up to a prescribed maximum value per child.

(3) Regulations shall specify the circumstances under which a claimant shall be entitled to an amount under this section.

(4) Under no circumstances shall any amount payable under this section be included in the “relevant amount” specified in section 93(5) of this Act.’.

New clause 4—Health costs

‘(1) The amount in respect of other needs or circumstances, under section 12 of this Act, shall include an amount in respect of health costs.

(2) The maximum award of the amount under this section shall be 100 per cent. of the cost that the claimant would expect to incur in respect of prescribed health costs such as prescription, dental and optical charges, up to a prescribed maximum value.

(3) Regulations shall specify the circumstances under which a claimant shall be entitled to an amount under this section.

(4) Under no circumstances shall any amount payable under this section be included in the “relevant amount” specified in section 93(5) of this Act.’.

New clause 5—Universal credit printed statements

‘The Secretary of State will provide a record to the claimant detailing the amount and composition of the award, including amounts in respect of each of the elements specified in sections 9 to 12 of this Act and of any appropriate sub-elements as specified in regulations.’.

New clause 6—Payment of housing costs

‘(1) This Section applies to payments of the housing cost element of the universal credit.

(2) Payment of the housing costs element of the universal credit must be made to a person’s landlord where:

(a) that person has requested or consented to such payment;

(b) where sub-paragraph (a) does not apply and the person is in arrears pursuant to the terms of the tenancy agreement between that person and the landlord of an amount equivalent to two weeks or more of the amount he is liable to pay his landlord as rent if in either case the landlord requests or consents to payment to him.

(3) Regulations made by the Secretary of State may prescribe the circumstances in which subsection (2) does not apply.

(4) Regulations made by the Secretary of State shall prescribe the person who is to be treated as the landlord for the purposes of this section and shall make provision as to the discharge of liability consequent upon the making of any payments to the landlord.’.

Amendment 23, page 3, line 7, in clause 5, after ‘it’, insert

‘excluding any amount in an Individual Savings Account, up to a prescribed maximum of no less than £50,000, where the claimant is in work’.

Amendment 24, page 3, line 13, after ‘it’, insert—

‘excluding any amount in an Individual Savings Account, up to a prescribed maximum of no less than £50,000, where one of the claimants is in work’.

Amendment 30, in clause 10, page 4, line 36, at end insert—

‘subject to these amounts being not less than the additional support for disabled children provided through benefits and tax credits prior to the introduction of Universal Credit.’.

Amendment 27, in schedule 1, page 103, line 1, after ‘income,’, insert—

(ba) a person’s earned income from self-employment,’.

Amendment 28, page 103, line 3, at end insert—

‘(1A) Regulations under sub-paragraph (1)(ba) above may include provision for calculating profits and losses of a trade in accordance with generally accepted accounting practice, subject to any adjustments prescribed by regulations.’.

Amendment 29, page 103, line 20, at end insert—

‘(4A) Sub-paragraph (4) does not apply where a person has earned income from self-employment and the business from which the earned income in question is derived (or any larger undertaking of which the business in question forms part) is being carried on upon a commercial basis and with a view to the realisation of profits in the business or larger undertaking.’.

Amendment 68, page 103, line 20, at end insert

‘; and this will include an additional prescribed minimum level for claimants in receipt of the universal credit additional amount for caring responsibilities, and will be paid in addition to any other prescribed minimum level.’.

Amendment 33, in schedule 2, page 114, leave out lines 34 to 39.

Amendment 26, in schedule 6, page 123, line 10, at end insert—

‘(4) No less than six months before the appointed day the Secretary of State shall publish a report on the access to welfare advice, including advice for those unable to use the internet, that will be available at the appointed day, and shall satisfy himself on the basis of that report that provision is adequate to support migration to Universal Credit.’.

Government amendments 14 to 19.

Amendment 61, in clause 97, page 64, line 29, at end insert—

‘(3C) For the purposes of paragraph (3B), any element or sub-element of the universal credit award that is paid in respect of children, including childcare, shall be paid to the designated carer, except in prescribed circumstances. Regulations may provide further circumstances in which a proportion of universal credit may be payable to a particular individual.’.

Government amendments 20 and 21.

[Stephen Timms]

As this Bill returns to the Chamber on Report, it is astonishing how many policy gaps remain. This group of proposals addresses some of the worst holes in the policy on universal credit, and new clause 2 in particular deals with child care.

This is what has happened. Perhaps understandably, Ministers behaved naively, and with beginners’ enthusiasm they boasted that universal credit would solve all the problems in the benefit system: that it would always pay to be in work; that the system would be simpler; that thousands would be better off and nobody worse off; and that the benefits bill would be cut. In truth, one did not have to be Milton Friedman to work out that that did not all add up. That is now the Government’s problem: they cannot stand up their boasts. When it comes to the detail, they have been unable to deliver. Nowhere is that clearer than on child care support in universal credit.

16:15

Ministers have rightly recognised—as the Secretary of State did earlier—that support for child care is key to whether parents are better off in work or out of work. But the Secretary of State promised, in his evidence to the Committee in March, that the Government’s proposals on child care support would be available before the Bill left Committee. He promised the Committee on 24 March that

“it will certainly be done within the Committee stage.”––[Official Report, Welfare Reform Public Bill Committee, 24 March 2011; c. 161, Q313.]

As I pointed out in Work and Pensions questions, that promise has been broken. No policy was announced before the end of the Committee stage and now the Bill will leave the House of Commons this week and we still do not have a clue what the Government’s policy is, because Ministers have not been able to work a policy out.

At the beginning of the Committee stage, we told the Government that we were worried by the lack of crucial details, and now the Bill has come back to the House and they are still missing. Ministers have failed to make this fly. We are talking not about minor details, but about whether parents really will be better off in work, as they generally are under the current system. Achieving the whole purpose of these changes hangs on the Government’s decision on child care, but Ministers have failed to reach a decision. That is why Oxfam, Barnardo’s, the Child Poverty Action Group and others wrote recently to the Secretary of State saying that for many families on low or middle incomes “the success of universal credit will stand or fall on the level of child care costs covered.” Those groups are right: the success of this policy stands on the Government’s decision, but Ministers have simply failed to come up with a decision.

At least with the NHS reforms the Government paused to work out a policy: on this Bill, they have not managed to work out a policy, but they are pressing on all the same. No proposals were presented in Committee and we have none in front of us today. Instead, we just had an informal seminar on options. We know that the Government want to extend provision for child care support to people working fewer than 16 hours a week, but they want to do that within the existing budget. That does not add up—it is a mess.

[Harriett Baldwin (West Worcestershire) (Con)]

I thank the right hon. Gentleman for giving way on this extremely important issue. Is his solution the same as that of the groups he mentioned earlier—to put more money into child care?

[Stephen Timms]

No: our solution is the one in new clause 2, which we are debating. The priority should be to maintain the support currently being received by people working more than 16 hours a week. I understand why the Government say that they cannot simply find more money for supporting child care, but what will be disastrous is what appears to be the Government’s intention to give a lot more people support from the same cash-limited sum of money. If that proceeds, a very large number of people for whom work pays at the moment will find that work no longer pays.

[Harriett Baldwin]

Does the right hon. Gentleman welcome the proposals that would allow people to move into work of up to 16 hours—the mini jobs?

[Stephen Timms]

If that would mean that people who are currently able to work for more than 16 hours had to give up their jobs altogether, I would not welcome it. That would be a seriously retrograde step. I accept that there is a case for supporting the cost of child care for people in mini jobs as well, but if the additional resources are not available to fund that, it would be a terrible mistake to press ahead and claw that money from people who depend on it to make work pay at the moment.

The Secretary of State set out at the seminar, at which I think the hon. Member for West Worcestershire (Harriett Baldwin) was present, some of the possible options. The Children’s Society has analysed some of the options and concluded that under one of them a family could pay out £1.56p for every additional pound earned. Ministers told us that that problem would be eliminated by universal credit, but it now appears that, if they proceed on the basis of that option, the new system will be a great deal worse than the current one, and will introduce a draconian new penalty for working parents. As I said to her, there is a good case for supporting child care for people in mini jobs, but it must not come at the expense of parents being helped at the moment.

The recent report from the Resolution Foundation and Gingerbread also underlined the point that spreading the same budget among a lot more people will mean families losing money for every additional hour they work. The Government are right to express the aspiration that it should always pay to be in work, but in this case, if they pursue the option set out in the seminar, something will be lost in translation, because families will have to pay out in order to work. The current system does a far better job; the new system that is envisaged will be a severely retrograde step, if it has the effect of taking more than £1.50 off people for each extra pound they earn. The Government appear poised, once they have finally worked out what their policy is in this area, to make work far less attractive than at the moment.

The Government have failed to come up with a policy, so our new clause 2 proposes one: it would retain the percentage of child care costs covered and the cash limits in the current system; it would ensure that work continues to pay for those for whom it pays at the moment; and it would allow the retention of the existing 16 hours’ threshold. The Government say that they cannot afford any extra spending on child care at the moment. My case to the House is that support for child care for those in mini jobs would need to wait until there is funding for it in order to ensure that jobs of 16 hours per week actually pay, as they do at the moment.

[Kate Green]

Does my right hon. Friend agree that it is disingenuous of the Government to make proposals to fund child care for mini jobs, given that the child care market is simply not designed in that way? Finding short episodes of child care for just a few hours a week is extremely difficult for parents, and could make child care provision even more financially unviable and drive providers out of the market?

[Stephen Timms]

My hon. Friend makes an important point and is absolutely right. People are worried about what the Government’s proposed changes will do to the child care market as a whole. It could make some providers uneconomical. If a large number of people currently using child care for more than 16 hours a week are forced, as a result of these changes, to give up their jobs and to withdraw from their child care places, it would put a huge dampener on, and cloud over, the whole child care market in the way she is right to fear. We feel strongly about this matter—the Government simply have not come up with a policy—so I will seek, if I can, to divide the House on new clause 2.

The Government’s failure to produce a policy on child care before the Bill leaves the House is a particularly abject failure. Ministers have not been able to turn their claims into policies. However, although child care might be the most spectacular and significant hole in the Government’s policy, it certainly is not the only one. In this group of amendments, therefore, we have tabled two further new clauses to fill the policy holes on passported benefits, such as free school meals and free prescriptions.

At the moment, people on out-of-work benefits are passported to those additional benefits, but the out-of-work benefits will be abolished, so who will be entitled to free school meals in future? Again, that is not an obscure, but a basic question and the Government have again failed to give us an answer.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

My right hon. Friend is right to point out the importance of free school meals for many of our constituents whose children are sometimes in desperate need of the basic nutrition that they receive in schools. For the Government to have got to this stage in the Bill’s passage with no clarity about what triggers free school meals entitlement is confusing. Will they introduce a new means test? I am very glad that he has raised the matter.

[Stephen Timms]

I am grateful to my hon. Friend, who is absolutely right about the centrality of free school meals entitlement in the system. The Government have simply failed to work out who, under their proposals, will be entitled to free school meals. It is not that I am disagreeing with the Government’s policy: the problem is that they have no policy. We have no idea whom they believe should be entitled to free school meals. As far as we can tell, they have not got a clue, either.

As my hon. Friend points out, free school meals are an important part of the system. They can be worth more than £350 a year to a family with one child in a primary school and easily more than £1,000 a year to a family with three or more children at school. Clearly, that makes an enormous difference.

Families currently receive free school meals until they work for more than 16 hours, at which point they receive working tax credit so that they are not worse off as they move into additional hours of work. The universal credit White Paper suggested that the Government intend to remove entitlement to free school meals at a fixed income threshold. That may partially answer my hon. Friend’s question. However, if they do that, it creates precisely the sort of cliff edge that we were told the Bill would eradicate. I presume that that difficulty has prevented the Government from setting out their policy and is the reason for the Bill’s silence on the matter and the absence of notes on the regulations to explain the Government’s policy.

If a lone parent with three children lost entitlement to free school meals at some level of earnings—say, £150 a week or more—their net household income would fall unless they earned more than £4,000 extra a year. If the new system works like that, it will be a disaster. It is exactly the sort of disincentive that we have been told all along that universal credit is supposed to remove. If the Government introduced such a policy, universal credit would make the problem of work disincentives far worse than it is in the current system.

Our proposal in new clause 3 is that the value of free school meals should be paid through universal credit and then tapered away gradually as household income rises. I recognise that there is concern among many who follow these matters closely that that could mean that the cash is not used for school meals but other expenses. Given the pressure on household budgets, one can well understand how that might happen. I therefore suggest that the solution is for the cash to be paid on to an electronic card, which could be used only to purchase school meals. An arbitrary cut-off in income, whereby all support for free school meals was withdrawn, would be damaging.

[Chris Grayling]

Does the right hon. Gentleman accept that his proposal flies in face of the admirable position at the moment whereby, in the lunchtime school queue, there is no obvious and visible difference between those who receive free school meals and those who do not? A provision that would effectively give some, but not others, a particular card with money on it would surely stigmatise those kids who get free school meals.

[Stephen Timms]

No, the Minister is mistaken. All pupils in the school would pay for their meals with the card. The difference would be how the money got on to the card. Some would pay cash as currently happens and others would have the money placed on the card through universal credit. The Minister is right to raise the matter, which is important, but my solution would solve the problem.

[Chris Grayling]

rose—

[Stephen Timms]

I gladly give way to the Minister again. Perhaps he will tell us how the Government propose that entitlement to free school meals will be determined.

[Chris Grayling]

If the right hon. Gentleman will forgive me, I will try to catch Mr Speaker’s eye in a moment to answer questions, but for now, perhaps the right hon. Gentleman can answer one for me. As different schools today use different systems—some use fingerprinting, some use an electronic card system and some still use cash—does he envisage his proposal requiring schools up and down the country to scrap their current systems and have a new, harmonised system? If so, has he calculated what the cost of that system would be and how long it would take to introduce?

16:30

[Stephen Timms]

I very much hope that the Government are working out the answers to those questions. I would certainly aim to use existing systems, with the addition of payment via universal credit to simplify the transition.

[Harriett Baldwin]

On the important subject of free school meals, is the right hon. Gentleman suggesting that the taper would begin immediately someone went into work, or would it come into play once the earnings disregard had moved out of the way, and if so, what would be the cost of his proposals?

[Stephen Timms]

The point is that it is a zero-cost proposal; I am simply suggesting that the funding would be provided through the mechanism that I have described. It would be tapered away, along with the rest of universal credit, and would sit naturally on top of existing payments, so that there would be just an additional payment in respect of school meals, where appropriate, which would then be tapered away once the disregard had been exhausted. The budgetary cost would be exactly the same.

We have exactly the same issue with free prescriptions. The current system provides them to people on benefits and to some people with low incomes through the HC2 form, but once again, we have heard nothing from the Government about what will happen under universal credit. Our new clause 4 addresses that.

By the way, it is perhaps worth making the point in passing that the number of pupils receiving free school meals is an important indicator for education policy as well. The pupil premium depends on the number of people receiving free school meals. The fact that we have no idea at all who will be entitled to free school meals under the Government’s proposals will create serious problems with that, too.

[Jenny Willott (Cardiff Central) (LD)]

Returning to the right hon. Gentleman’s proposals on prescription charges, is he not concerned about the evidence that we received at the beginning of the Public Bill Committee from a number of witnesses who said that there was a significant difference between school meals and prescription charges? School meals are an ongoing cost every day, whereas prescription charges tend to come in a batch. By tapering the amount of money that somebody received, they still would not be able to afford significant costs—potentially the cost of a number of prescriptions at the same time—because the amount of money concerned would be an ongoing amount, unlike under a system more similar to the current one, where all the prescriptions are paid for when they are needed.

[Stephen Timms]

I agree with the hon. Lady’s point, and to that extent the current system has a lot of attractions. The problem is that we will lose that system with universal credits. The question is: who will be entitled to free prescriptions? I do not imagine that she is arguing—as perhaps the Government will; I do not know—that there should be a cut-off point in income beyond which people suddenly lose all help for prescriptions. If that happens, we will create a serious and damaging cliff edge in the system, which everyone agrees is an undesirable feature. Our new clause 4 therefore proposes to address that problem, although there may be other problems as well. What I would dearly love to extract is a proposal from the Government, so that we can find out exactly what they intend to do, because so far they have been silent on that subject, as on all the others.

We have been told throughout these debates that the main point of the Bill is to ensure that people are always better off in work. Our task in Parliament is to scrutinise whether the Bill lives up to that laudable aim, but without knowing what the Government will do to provide help with child care, school meals or prescription costs, we simply cannot tell.

Frankly, it is an abuse of the parliamentary process not to tell this House what the Government’s policy is before the Bill leaves us. I do not accuse Ministers of withholding information from Parliament; the problem is that they have no more clue about their policy than we do. It is an astonishing and abject failure on their part. They made all these boasts at the beginning—their bragging ran away with them—but now they cannot deliver policies to substantiate those boasts.

[Oliver Heald (North East Hertfordshire) (Con)]

Is it not a bit rich to put the case in that way when under the right hon. Gentleman’s Government, who were in power for many years, these aspects were not covered by a benefit? There was no child care benefit or a school meal benefit as such. They were dealt with outside the benefit system, no doubt in a way that he approves of, as I probably do as well, but why suddenly bring these elements into the benefit system?

[Stephen Timms]

The hon. Gentleman has a good deal more experience in these matters, if I may say so, than some of his Front-Bench colleagues who are dealing with them at the moment. Good provision, particularly for child care support, was of course made through the tax credit system. That strong support for the costs of child care is why there was such a dramatic rise in lone parent employment under the previous Government. I supported that and I suspect from what the hon. Gentleman just hinted at that he supported it and continues to support it today. The problem is that once tax credits are abolished and universal credit takes their place, we have no idea how child care is going to be supported in the future. That is why I am—rather modestly, I think—appealing for the Government to tell us.

[Kate Green]

Does my right hon. Friend also agree that one of the real concerns we face as a result of universal credit forcing us to look at lumping all the different strands of financial support for families into a single payment is that all the eggs are in one basket, so if one thing goes wrong, the whole benefit—the whole structure of financial support for that family—could collapse?

[Stephen Timms]

My hon. Friend is absolutely right. For that very reason, the risks are great indeed. When I come on to speak to amendment 24 in a few moments, I will point out that if people go beyond a prescribed level of savings, they will lose all that help under all those headings.

[Chris Grayling]

Will the right hon. Gentleman clear up one point of confusion for me and, I suspect, for my hon. Friends? Over the past two or three months, he has said that he supports the universal credit in principle. However, his remarks and those of his hon. Friend the Member for Stretford and Urmston (Kate Green) imply some distancing from the proposal. Does he intend to support the Bill on Third Reading or not?

[Stephen Timms]

The right hon. Gentleman will find out the answer to that question in due course. We have been consistent in supporting the principle of universal credit. We think that bringing in-work and out-of-work benefits together is a good idea that has a number of attractions. The problem is that the detailed work to make that policy fly has simply not been done by the Minister and his hon. Friends. There are desperate, gaping gaps in the policy and fundamental questions that he is unable to answer or explain about how the arrangements will work. As a result, the Bill, on departing this House, will leave many households, and many working families in particular, in a very precarious position.

Having talked about a lot of things that we do not know about, let me now deal with some things that we do know about. Clause 5, which I touched on a moment ago, will badly undermine the aspirations of people who are in work on modest incomes. Under the current rules—they have been a long-standing feature of the system—people who are out of work but who have above a prescribed capital sum are expected to use it to support themselves before claiming income-related, out-of-work benefits. If somebody has more than £6,000 in savings, the Government assume an income from them, which is then subtracted from the benefit entitlements; someone with more than £16,000 in savings will not receive means-tested, out-of-work benefits at all. Those two figures were increased from £3,000 and £8,000 by the last Government to help people retain some of their savings when they lost work. For people in work, the story has been very different. There is no savings cap at all on tax credits. Clause 5 will change that fundamentally by extending the rules on savings for those who are out of work to people who are in work.

The Conservative party used to tell us that it wanted to encourage people to save. Clause 5 will not just discourage people from saving; it will make it impossible for them to save. Anyone on a modest income who decides to save for a deposit to buy a house in the future, or for the cost of university education, will suffer an extraordinary punishment under the clause. It is impossible to buy a house today, or to obtain a mortgage for shared ownership, with a deposit of less than £16,000. However, if people have savings of £16,000 towards, say, the deposit for a mortgage—if, as Ministers seem to believe, they start to get ideas above their station—they will lose all their universal credit. Typically, that might be £5,000 a year. In addition, they will lose any support that they receive for the costs of child care, and on top of that they will lose any help that they are given with housing costs.

Those measures will add up to an extraordinary punishment for saving. They will make saving literally impossible, because as soon as people have managed to save £16,000 from their earnings, the Government will drain their savings away. The problem will start as soon as they have saved £6,000. The hon. Member for Redcar (Ian Swales)—who, I am pleased to see, is present—said in Committee that the problem would not last very long because people’s savings would soon be gone, and he was absolutely right. These proposals mean that if anyone attempts to start building up a saving that would be enough for, say, a deposit on a house or a contribution towards higher education costs, the Government will take it away by withdrawing their universal credit. The message being sent to people on low incomes who are doing the right thing and working to support themselves could not be clearer: “This Government will not support you.”

Amendments 23 and 24 would change that. They would allow people to save money in an individual savings account—up to £50,000 if they are in work. Ministers have told us that it would cost just £70 million a year to exclude all working households from the savings cap, and this measure is obviously more modest than that.

Surely we should be encouraging people to save, not punishing them for saving. People work to improve their lives and the lives of their families. They are aiming not for a bit more spending money each month, but for the means to buy a house, to help their children through university, to start a business or to pay for a child’s wedding. If they are to achieve such aspirations, people need to be able to save from their earnings, but clause 5 denies them the chance to do that.

[Paul Uppal (Wolverhampton South West) (Con)]

The right hon. Gentleman has stressed the importance of aspiration. New clause 3, which concerns free school meals, is also relevant to that. Does he not find it interesting that, according to an examination of educational attainment among different ethnic groups, the most successful sub-group are Chinese students, and the second most successful are Chinese students receiving free school meals? The issue is not just money, but how Government can encourage aspiration and ambition, which is the ethos of the Bill.

[Stephen Timms]

Certainly the Bill should encourage aspiration, but if it prevents people from saving in the way that I have described, as clause 5 will, it will undermine aspiration. That is the point: we want to change the Bill so that it will allow people, even those on universal credit, to save. We believe that everyone should be encouraged to save, rather than being punished for having saved.

The Secretary of State used to agree with us. In 2008, he said that

“poverty is not just about how little you earn; it’s also about how little you own.”

If we want people to work their way out of poverty in the way in which the hon. Gentleman suggests—and I agree with him about that—we need to offer them the chance to save. I am afraid that if the Government press ahead with making saving on a low income impossible, the phrase “compassionate conservatism” will be revealed as a sham.

For similar reasons, I hope that Government Members will share my concern about the Bill’s discouragement to self-employment. Schedule 1 provides for a minimum income floor when calculating universal credit for self-employed people. Under that provision, Ministers are making the assumption that self-employed people will be earning at least the minimum wage for every hour they work, but anyone with even a passing knowledge of what is involved in starting up in self-employment will know that that is absurd. While establishing their business, many self-employed people work extraordinarily long hours and earn hardly anything at all, and their income fluctuates hugely month by month. It is absurd to assume that they will earn the minimum wage for every hour they work, and that they should therefore have their universal credit reduced accordingly. That is why the Chartered Institute of Taxation has warned that this new system will be much less supportive of self-employment than the current one.

16:45

Our amendment 27 therefore seeks to align the universal credit definitions of income for self-employed people with those used in the tax system and in tax credits. The Chartered Institute of Taxation’s low incomes tax reform group has pointed out that allowances are made in the tax credit system for investment in business assets and equipment and for trading losses that can be set against other income or the profits on later periods of trading. Those arrangements reflect the reality of being self-employed. The idea that the self-employed are earning at least the minimum wage for every hour they work in self-employment is a complete illusion, and if the Bill is not amended it will destroy the very effective support that the tax credit system currently offers to self-employment.

[Guto Bebb (Aberconwy) (Con)]

The question of the income levels of the self-employed is not as simple as the right hon. Gentleman makes out. Under the current capital allowance system, a self-employed individual can invest £25,000 in a piece of machinery and immediately wipe off their profits, and it causes deep resentment when they are then able to claim family tax credit. The Government are trying to create a system that supports the self-employed but is fair to other taxpayers.

[Stephen Timms]

The problem is that the proposed system does not support the self-employed in the way that the tax credit system supports them, because it treats the self-employed as if they are earning at least the minimum wage for every hour they put into their business. I know that the hon. Gentleman is genuinely interested in the position of the self-employed and I think he is supportive of self-employment, but he will know that it is absurd to suggest that a person who starts up in self-employment will be earning at least the minimum wage from day one. That will not be the case, of course; there may be weeks, or perhaps months, in which they earn nothing at all. The current tax rate system reflects that, but the new system will not.

[Guto Bebb]

Obviously I support the self-employed and want the universal credit system to support them, but we need to recognise that there are situations such as the following: somebody sets up in business to breed angora rabbits for their wool and manages to make £80 in sales in the year. I have not made that up, and it is absurd that that type of business should be supported by the taxpayer.

[Stephen Timms]

I am sorry to hear the hon. Gentleman belittling self-employment. For many people, including people who have lost their jobs, a move into self-employment can be absolutely the right thing to do, and, over time, they might find that they are able to develop a serious business—not breed rabbits—and earn a living from it. We should be valuing, not ridiculing, such contributions to the economy. I am afraid that there are many problems with the Bill, and one of them is that it so badly weakens and undermines the support that is currently available for self-employment.

[Kate Green]

Does my right hon. Friend agree that one of the attractions of supporting self-employment is that it often particularly helps those who find it difficult to access the traditional labour market, such as women, because they need to combine work with caring responsibilities and therefore need more flexible hours, and disabled people, who may not be able to access full-time work in a structured workplace but can do some work on their own at home? We also certainly know that there is a long-standing tradition of some of our ethnic minority communities finding that self-employment is the best way for them to sustain economic independence.

[Stephen Timms]

My hon. Friend is absolutely right to say that self-employment is a crucial element of our economy for many people, including those with caring responsibilities; others who, for other reasons, are not necessarily able to commit to a full-time job; and, indeed, those who simply want the opportunity to build up a business for themselves—it is crucial that the system supports them. Tax credits have done so, but I am afraid that universal credit will not. That is a real worry and the approach being taken flies in the face of Government statements of support for self-employment.

[Guto Bebb]

rose—

[Stephen Timms]

I will gladly give way, and I hope that the hon. Gentleman will support self-employment this time.

[Guto Bebb]

I am surprised to hear those comments. I understand that the right hon. Gentleman is talking about supporting businesses and self-employed people perhaps working a day a week or two days a week. How does that fit in with his proposals on supporting child care in respect of micro-jobs and part-time jobs?

[Stephen Timms]

I have made it clear that the priority should be to maintain child care support for those who are currently receiving it. There is a case, with which perhaps the hon. Gentleman agrees, for extending that support to others. If that is to be done—and I can well see the case for it—the funding needs to be provided for it. What we cannot do is take support away from one group, making work impossible for them, in order to support another group. If we only knew the Government’s policy on child care support, we could have a proper debate about it, but that appears to be where they are heading. They simply have not had the ability to put a policy together and tell us what it is. The hon. Gentleman has suggested that perhaps too many self-employed people are either earning a negligible amount or are under-declaring their profits.

[Guto Bebb]

It is important to correct the record. I did not state that self-employed people were under-declaring their profits; I simply stated that the capital allowance system allows the self-employed, completely legally, to reduce their profits to nothing by purchasing an asset. That was the simple point that I was making.

[Stephen Timms]

That is a long-standing feature of the tax system for businesses generally, and we should be encouraging investment. I see it as a strength of the current system that such necessary investment is supported. The hon. Gentleman is right in the sense that universal credit will remove all that completely. I am afraid that, as the Chartered Institute of Taxation has pointed out, it will be a far less supportive system for self-employment than the current one.

[Guto Bebb]

Again, I need to clarify the record. It is important to understand that the capital allowance system has been changed fundamentally in the past two years as a response to the economic crisis that we are facing. Someone could not previously claim 100% allowances, but they can at this point in time. A 100% allowance on the purchase of an asset worth £25,000 results in the net profits of a small business reducing to nothing and therefore they are supported by the tax credits system. It is important that this Government support the self-employed, but not in a way that encourages them to make investment decisions for the purpose of universal credit rather than for the purpose and benefit of their own business.

[Stephen Timms]

I am not clear whether the hon. Gentleman supports the fact that we have had 100% capital allowances recently, although I hope he does. When the downturn hit, they were introduced for a very good reason, which was to encourage enterprise and investment, particularly on the part of small businesses.

One of the problems with the Bill is that in many cases self-employed people will be strongly pressured to lie about the hours they have worked. They are not going to admit to having worked 18 hours a day, as some are doing, because they will then lose pound for pound from their universal credit, as it will be assumed that for every one of those 18 hours they have earned at least the minimum wage. This is a bad policy and it needs to be changed.

Amendment 33 may cause some puzzlement. Many people will not know that the Government intend to remove pension credit from people over pensionable age who have a spouse under pensionable age. That has not been announced anywhere and the Pensions Minister has not stood up to tell us about it. We find it buried in, of all places, the middle of schedule 2, on page 114 of this Bill. If the older person were living alone, they would receive pension credit. Those people will in future be penalised because they have a younger spouse. This is a new couples penalty, but we have been assured that the Conservative party wanted to stamp out such penalties. Indeed, the Secretary of State said, once again, in DWP questions earlier that he wanted to remove couples penalties from the system—but here he is inventing a new one. That will change the pension entitlements for some couples with very little notice and, in some cases, by a substantial sum. If Ministers want to change the arrangements for pension credit, they should set that out openly, the provisions should be made in the Pensions Bill and there should be full discussion of the change. They should certainly not try to sneak it past us in the second schedule to this Bill.

We have now established that of the 610,000 recipients of pension credit with a partner, almost 100,000 have a partner aged under 60. The difference between the couple rate for jobseeker’s allowance and the pension credit rate is more than £100 a week, so for each year that a couple is in receipt of JSA rather than pension credit, those couples stand to lose more than £5,000.

[Chris Grayling]

The right hon. Gentleman will remember that we debated this matter extensively in Committee, so it is not quite the bolt from the blue that he suggests. Is it his party’s policy that people under retirement age who happen to have a partner who is over retirement age should, through that partner, be able to access means-tested support from the state without any obligation to look for work themselves?

[Stephen Timms]

In government, we set out the arrangements for pension credit as they stand. In our view, those arrangements made sense. If the Government want to make a case for changing those arrangements, I simply suggest that they need to announce that change and to stand up openly and say that they have decided that in future people cannot have pension credit if their spouse is under pensionable age. We could then have a debate. I would have thought that such a measure ought to be in the Pensions Bill. The Minister is right that we were able to spot the change in Committee and to discuss it then, but this is certainly not an example of the Government’s being open—far from it. They seem to have hoped that they could slip this measure through and nobody would notice.

For those couples for whom there is a substantial age gap—in 40% of those cases, the partner will be younger than 55, so the gap will be more than five years—this measure could represent an enormous cumulative loss of £5,000 a year for five years or more.

[Chris Grayling]

May I take the right hon. Gentleman back to the key question? We are talking about people of working age whose households would be in receipt of means-tested benefits from the state without being obliged to look for work. Is it his policy that those people should not have an obligation to look for work and that their households should be able to continue to receive means-tested benefits from the state?

[Stephen Timms]

As far as I can see, the arrangements for pension credit have worked perfectly well up to now, presumably with the feature that the Minister is now deprecating. My case is that if the Government want to change the rules for pension credit to discriminate against people who have a spouse under pensionable age, they should do so openly. They should announce the change: it should have been in the Budget, the welfare reform announcement or the Pensions Bill. We have a Pensions Bill going through Parliament at the moment—why was it not included there? Instead, the change was slipped into a schedule to this Bill and no Minister, until asked, said anything about it.

[Charlie Elphicke (Dover) (Con)]

I am a little unclear about whether the right hon. Gentleman’s position is that this measure is wrong in principle and he disagrees with it, or he agrees with it but thinks it should have been announced with a fanfare. Will he explain which it is?

[Stephen Timms]

I certainly think that the arrangement should have been announced, and our amendment proposes that it be removed. I shall be interested to hear the Government’s response.

[Charlie Elphicke]

Let me understand fully what the right hon. Gentleman is saying. If a retired man, say, of 66 is married to a spouse who is 45, she should be able not to have to work and they should be able to double-claim pension credit—is that correct?

[Stephen Timms]

No, it is not. Any income to the household from a working spouse will be counted in the household income for pension credit purposes. My argument is that if there is a case to be made for a change to pension credit, it should be made openly, and it should have been in the Pensions Bill, which Parliament is currently considering.

[Chris Grayling]

Forgive me for probing. The right hon. Gentleman has rightly set out his case as an amendment, but I wish to press him on the following point. If a household is receiving elements of pension credit that gives them the wherewithal to survive, is he saying that a 45-year-old should have no obligation to work while the household receives means-tested benefits from the state? It would be helpful to understand that. If that is his party’s policy, will he say so clearly and unequivocally?

17:00

[Stephen Timms]

I do not recognise the policy that the Minister describes. We have had a long-standing arrangement for pension credit which appears to work perfectly well. If he has found abuses of pension credit, I shall be eager to hear those examples from him when he responds to the debate. I notice that when asked recently about this by my hon. Friend the Member for Leeds West (Rachel Reeves), the Pensions Minister stated:

“We recognise that it is important not to undermine the stability and outcomes for existing pension credit customers, so there will be no change for couples already in receipt of pension credit at the point of change.—[Official Report, 9 June 2011; Vol. 529, c. 422W.]

That is welcome and helpful. I do not know whether the Minister of State, the right hon. Member for Epsom and Ewell (Chris Grayling) has satisfied himself that the abuse that he has just described is not a problem at present. But even that reassurance from the Pensions Minister is not on the face of the Bill. For many couples who have planned around receiving pension credit and been reasonably able to do so, and who are now approaching retirement, the change will come as a severe shock.

We will support the principle of universal credit, despite the holes in the policy about how it will work and despite the perverse incentives that the Government have added for savers and the self-employed, but this is not, as Ministers have frequently claimed, a panacea for all the problems in the system. It is therefore vital that sufficient welfare advice is available at the point of transition. People will find any transition difficult, even one which, unlike this, is to a simple system. Yet at precisely the moment when the Government are embarking on this massive upheaval to the system, funding for welfare advice is being cut.

A large part of the funding—for example, to Citizens Advice—comes at present through legal aid, and the Government have announced that there will be no legal aid funding for welfare advice at all in future. About a quarter of the current funding for Citizens Advice comes from that source and it is being taken away. Most of the rest of the funding comes from local authorities, and that is also being cut. Demand for welfare advice will rocket and funding will plummet. This is a perfect storm for advice services. Our amendment 26, therefore, requires the Secretary of State to report, before universal credit is introduced, on the availability of welfare advice, and to satisfy himself that it is adequate to support people through the transition that the Government envisage.

New clause 5 aims for clarity about how claimants will be informed about their universal credit. It stipulates that every claimant should be provided with a record of the amount of their award, including details of the separate elements that make it up. I understand that the Government intend to provide each claimant with the equivalent of a payslip. I hope the Minister will be able to confirm that when responding to the debate. Will that payslip be provided on payment, as with payslips for those in work? Will it be provided directly by the Department or through the employer, and will it set out the various elements of the award—child care, housing support, support in respect of children and so on? A full statement would ensure transparency between the Government and claimants and would be a welcome feature.

Amendment 30 addresses support for families with disabled children under universal credit. It amends clause 10 to ensure that the amount that those families receive is not less than under the current tax credit and benefits system. My hon. Friend the Member for Glasgow East (Margaret Curran) raised this important point in Work and Pensions questions earlier this afternoon. Under universal credit, a family receiving the higher rate care element of DLA for a disabled child will receive £74.50 through the severe disability addition. At first glance, that seems broadly in line with the current position, but there are worries, because we are told that the higher level of the disability addition will be uprated in future only as resources allow, so it is very likely that families with severely disabled children will lose out over time.

For families with disabled children not receiving the higher rate care element of DLA the situation looks a great deal worse. The amount available under the universal credit disability addition will be £26.75 a week, compared with the £53.62 available under child tax credit, so support will be halved. The Minister has justified that in terms of aligning the support given to children and adults and easing the transition, but we know that children helped under the disability addition will not automatically be helped under adult universal credit.

Amendment 61 proposes that the elements of universal credit paid in respect of children must be paid to the designated carer of the children, except in prescribed circumstances. That is crucial for safeguarding the interests of children. Let me simply quote from the briefing that Oxfam has sent every Member: “We know from our work on the ground that money in households is often unevenly distributed and that women in poor households can have little or no access to money. As mothers usually take the main responsibility for feeding and clothing children, this affects both women and their children. This sometimes means that women themselves go without eating in order to pay the bills or put a meal on the table for their children. This lack of access to income in their own right leaves women open to the risk of financial abuse and can also reduce their chances of escaping domestic violence. As a crucial first step, the Bill must be amended to allow payments intended for children to be labelled as such and paid to the main carer, who is usually female. This change will make it more likely that this money is spent on children.” That would be the effect of the amendment.

Amendment 68 would provide for a minimum amount to be paid to any claimant who has caring responsibilities. It is vital that people who give up their time and energy to look after the most vulnerable in society, saving the taxpayer considerable sums in the process, are properly supported when they move on to universal credit, in line with the help currently available through carers allowance. I hope that the Minister will make it clear how he will ensure that that happens.

In rehearsing these concerns, I remind the House that the whole project of universal credit will depend on an enormous new IT system, which the Government claim will be ready in an implausibly short period of time. In truth, it will not be ready by October 2013, as claimed, which will give rise to serious problems as that deadline approaches.

[Charlie Elphicke]

I put it to the right hon. Gentleman, as I did in Committee when he made that point, that this Government’s approach to IT is far more thought through and better planned than the approach taken by the previous Government, who spent vast amounts of money without any consideration for the end, route or purpose of the policy. This Government are being far more direct and should get the IT ready on time and on budget.

[Stephen Timms]

I look forward to reminding the hon. Gentleman of that comment in September 2013.

The intention of universal credit is that work should always pay. Without decisions and policies on child care or passported benefits, we cannot know whether work will always pay, and all the indications are that the Government will in due course, when they finally put a policy together, introduce one that will mean that for many work will no longer pay.

On savings, I am afraid that the Government are heading to crush the hopes of many people in work. On the self-employed, the Government will crush the hopes of many who want to set up their own businesses. As Policy Exchange recently argued in its report, universal credit has been oversold by Ministers. I very much hope that the House will support our amendments so that universal credit can support the aspirations of families across the country.

[Chris Grayling]

I should like to start by making the same point that I made in Committee. I have listened to the right hon. Member for East Ham (Stephen Timms) setting out a vast range of measures and details that he wants us to write into the Bill. He is conveniently forgetting the first fundamental element of a Bill, and the lesson that he taught me 10 years ago, when I was first elected to the House, about the nature of primary legislation. I remember, as a new Member of Parliament, debating an education Bill in Committee and asking why there was not more detail in the Bill. I proposed amendments to provide certain details. I remember the right hon. Gentleman, as a Minister, arguing why that should not happen. He explained that it was a piece of enabling legislation to create a framework for the changes that his Government were seeking to put in place, and that my amendments were all unnecessary. Today the roles are reversed, and the right hon. Gentleman has conveniently forgotten everything that he, as a Minister, taught me all those years ago. Instead, he is telling me that I should put all kinds of new details into the Bill that I have introduced. I am sure that hon. Members will therefore forgive me if I take some of his proposals with a pinch of salt.

[Stephen Timms]

Is the Minister seriously saying that how the cost of child care will be supported is a detail?

[Chris Grayling]

I am saying to him precisely what he said to me all those years ago—that many of the details will be dealt with in secondary legislation. The Bill contains a framework that will include, among other things, provision for a child care element in universal credit. That is fundamental, and we all agree that there should be such an element, just as there should be elements relating to disability and to other aspects of the current benefits system that need to be replicated in universal credit.

[Sheila Gilmore (Edinburgh East) (Lab)]

Why does the Minister expect us—and, indeed, the general public—to accept his statements about the impact of this huge reform when so much of the detail in unknown? Is it not reasonable for us to request the details that will tell us whether people are in fact going to be better off?

[Chris Grayling]

I expect it for precisely the same reason that the right hon. Member for East Ham expected me to support his education measures 10 years ago. He asked me to take on trust many of the same kinds of thing that I am asking the House to accept today. We have been completely transparent in setting out the different stages of the formulation of universal credit, and about the consultation processes that we have been through to fill in the details. We have also been clear and transparent in setting out the principles that we are following in trying to fill in those details.

[Dame Anne Begg (Aberdeen South) (Lab)]

I went along to one of the meetings about the Government’s proposals for child care to which the Secretary of State was kind enough to invite people. We were presented with three options containing some very selective figures, and it was therefore impossible to tell exactly what the Government were proposing. I am still none the wiser. It is very difficult to vote on a principle when we do not know what the Government are going to do to implement it.

[Chris Grayling]

The point is that we do not write numbers on the face of a Bill. I will speak in detail about the right hon. Gentleman’s amendments in a moment, but the fact is that primary legislation sets out the framework for such things. We have worked with the hon. Lady and her Select Committee members, with other Members on both sides of the House and with people and representative groups outside the House working in child care and other areas. We started a discussion process to determine which was the best of a number of options to fit into the framework that we are creating.

[Dame Anne Begg]

The Minister is right that often things are not written into a Bill, but usually the regulations have been published before the Bill leaves the House of Commons. I remember Members who are now on the Government Benches criticising regulations for being late—not for not having been published, but merely for being late. Where are the regulations so that there can be parliamentary scrutiny of this important aspect of the Bill?

17:15

[Chris Grayling]

I have had this discussion within the Department. We have already brought forward a number of draft regulations—far more, I am told, than was the case under the previous Government, when, I was told, the instruction of Ministers was very much not to bring forward as many regulations. We have produced as much detail, if not more, about this measure than the previous Government did about their measures. They did introduce some sensible measures—for example, their reforms to introduce employment and support allowance, which was the project of the right hon. Member for East Ham himself—but they wrote a framework into their legislation and filled in the detail with secondary legislation.

[Dr Whiteford]

One of the concerns raised by children’s organisations in Scotland is that not enough consideration has been given to the different statutory framework that pertains to child care in different parts of the UK. In particular, they are concerned that the existing child care infrastructure may not be able to cope with the increased demand that could arise from the introduction of universal credit. I appreciate that the Minister does not want to be drawn on the detail, but can he assure us that parents who are unable to access good-quality affordable child care will not face sanctions if, through no fault of their own, they are unable to find the child care that they need?

[Chris Grayling]

Of course, we already provide child care universally through our schools system. The truth is that no parent with a youngest child under school age can be subject to any job search-related sanctions. Only once their youngest child reaches school age are they subject to a work-search requirement and can face sanctions. Under the rules that are pursued at the moment, and under the provisions that we have clearly said will exist within universal credit, we will expect lone parents of children at primary school to do a part-time job only if that fits in with the hours of that school.

[Dr Whiteford]

I am slightly surprised to hear the Minister describing school as a glorified babysitting service. The real pressure point pertains to older children, and particularly to out-of-school care. That is not covered across the UK by the Childcare Act 2006, which applies only to England and Wales. I urge him to take a closer look at that and to give the House the assurance that parents will not be penalised.

[Chris Grayling]

The point is that we do not penalise parents, particularly lone parents. We do not require them to pursue work; that is out of keeping with the reality of their child care responsibilities. I am not describing school as a giant babysitting service; I am saying that for a goodly part of the year children of school age are at school, and therefore do not need additional child care. The requirements placed on parents by Jobcentre Plus in relation to their job search and whether they take up employment are designed to work around what it is reasonable and what it is not reasonable for them to do. For example, we do not expect lone parents of school-age kids to work night shifts. I can certainly assure the hon. Lady that it is not our intention, nor will it be, to seek to sanction parents in relation to a job requirement that is unreasonable and unrealistic given their child care responsibilities.

[Dame Anne Begg]

On a matter of principle, does the Minister believe that the regulations should be subject to parliamentary scrutiny in the same way as primary legislation?

[Chris Grayling]

Of course.

As the right hon. Member for East Ham will know, I have tabled several Government amendments to address the concerns that he and other Members raised in Committee. I will deal with those before I talk in detail about his amendments.

Government amendments 14 to 21 will make certain regulation-making provisions for universal credit, employment and support allowance, jobseeker’s allowance and pension credit subject to the affirmative resolution procedure when they are first used. I recognise the hon. Lady’s point, and it is a point that was made well by the right hon. Member for East Ham in Committee. I do not think that it would be sensible to make the provisions subject to the affirmative procedure year in, year out, but it is right and proper that the House should be able to debate them fully when they are first introduced.

[Charlie Elphicke]

I thank the Minister for his important announcement on the use of the affirmative procedure the first time the regulations go through. The process that the Government have taken of consulting informally and sharing the consultation document so transparently, so that we could all sit down and discuss the options for child care, is a great and important step forward. I would have thought that the Work and Pensions Committee would have stirred itself to take a proper look at the document before the regulations come in, and make constructive comments to add to the process of reforming our benefits system.

[Chris Grayling]

My hon. Friend makes an important point. Some of my colleagues and I have been in the House for longer than he has—and when the Labour party was in government, I do not recall once being called in to discuss the policy-making process for one part of a piece of primary legislation. I was not asked to go in and discuss education or health options; the decisions were always just made. What is different is that we have extended the hand of involvement to the Opposition and said, “Please come and be part of the decision-making process.”

[Sarah Newton (Truro and Falmouth) (Con)]

As another new Member, I ask my right hon. Friend to cast his mind back and consider whether the right hon. Member for East Ham (Stephen Timms), when he was a Minister, ever consulted quite so extensively as this Government have with third sector organisations, charitable organisations and other organisations to inform their work in developing the benefits system.

[Chris Grayling]

I cannot remember the previous Government doing more than we have to engage people in Westminster, people around Parliament, third sector groups and members of the public. We are making a genuine attempt in a number of complex areas to get things right and to involve everyone in the decision-making process, and that will continue. Notwithstanding this afternoon’s amendments, we will continue to be delighted to seek and involve the input of Opposition parties, including the Labour party and the nationalist parties. As the hon. Member for Banff and Buchan (Dr Whiteford) said, it is right and proper that we have full dialogue with the Administrations in Cardiff, Belfast and Edinburgh, and with the Members of Parliament who represent Wales, Northern Ireland and Scotland.

[Stephen Timms]

It is certainly the case that the previous Government never got to this stage in a Bill’s passage with such an enormous hole in the policy as there is in this Bill.

[Chris Grayling]

The technical response to that is, “You wish!” I remember many occasions on which we came to a debate and asked what the Labour Government were planning to do. Did we ever get an answer? Not at all. The right hon. Gentleman and I have different memories of the way things were.

It is important to remember that this Bill creates a structure for universal credit, and that the details will be set out in regulations. The Opposition amendments relate mainly to issues that will be dealt with in regulations, and which do not affect the structure of universal credit as set out in the Bill.

I have accepted certain recommendations from the Opposition. The Bill as introduced provided that the regulations will be subject to the negative procedure. In Committee it was suggested that that would not provide the right level of parliamentary scrutiny and control. The right hon. Member for East Ham identified a number of provisions that he thought should be subject to the affirmative procedure, and I gave a commitment in Committee on 28 April to consider those provisions carefully.

There are two provisions, in clauses 22 and 25, relating to conditionality, for which we do not think the affirmative procedure is appropriate, because they do not introduce new principles. Although we intend that regulations will be much less prescriptive than the current jobseeker’s allowance regulations, the powers in the Bill will be used to create a regime for jobseekers that is broadly similar to the current one. We have therefore formed the view that there is no necessity to subject those two to the affirmative resolution procedure. Of course, it always remains within the gift of Opposition Members to pray against regulations if they want a matter to be debated. They could, of course, do so anyway, but we are making their life a bit easier by providing for the affirmative procedure.

I have thought long and hard, and apart from those two specific provisions I agree with the right hon. Gentleman’s suggestion that regulations should be made under the affirmative procedure in the first instance. I say “in the first instance” because it does not seem sensible to repeat the process year in, year out when the regulations are regularly renewed.

As set out in amendment 14, that principle covers all the key regulation-making powers relating to the universal credit, including the rules on capital, the calculation of income, the treatment of self-employed people’s cases, and the amounts of the elements within an award, including those for disabled children, housing and child care. Opposition Members might say that that is not enough to allay the concerns that they have raised on specific issues, and I shall deal with some of those specific concerns in a moment. However, I made it clear in Committee that we recognised the importance of getting the details of universal credit right. We are working hard to do so in consultation with key stakeholders, and we are listening to their concerns.

The Opposition amendments would pre-empt our considerations and tie the hands of this and any future Government with regard to areas of policy in which it is important to retain flexibility. I believe that it is perfectly reasonable to say that as we reach a final conclusion on what is right, involving Members of all parties, the Work and Pensions Committee, organisations such as the Social Security Advisory Committee, and third-party groups, we will bring regulations to the House by the affirmative procedure. There can then be a full and proper debate in Committee and a vote on Floor of the House.

[Dame Anne Begg]

Clearly the Minister has moved on this issue, but there is still the problem that the affirmative procedure is “take it or leave it”. The Work and Pensions Committee and other Members have no ability to amend regulations, so it is not the same as the line-by-line scrutiny that primary legislation receives.

[Chris Grayling]

I accept that, but that is precisely why we have extended the hand of involvement to the hon. Lady and her Committee and to Opposition Members, so that they can help us shape the details. This is a big complex project and there are challenging issues to deal with, and we want to work on a bipartisan basis and take views from all parties on how best to shape the system. In the end we will have to take a final decision ourselves, but it is our goal and intention to involve all those who wish to be involved in the thought process.

That brings me on to child care, on which we have been seeking to do precisely that. New clause 2 raises important points about how we intend to support people with formal child care costs within universal credit. Hon. Members will be aware that we recently held two seminars on the topic. Members of both Houses attended, and there were interesting and fruitful discussions. There was a follow-up seminar with a group of key stakeholders. I am aware that Members raised particular queries, and we have undertaken to look into them and provide more information. The seminars were part of an ongoing dialogue about how best to structure child care support under universal credit.

For now, I reiterate the point that I made in Committee. The Bill already allows us to include an additional element for child care within universal credit, under clause 12. We have made a firm commitment to provide such an element, but I make no apology for taking time over the details. We must get them right, and to do so we must listen to those with experience and expertise and consider the options.

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

The Minister will be aware of how important the child care tax credit has been in supporting families’ child care. Will he undertake that people will not be worse off in terms of their child care costs, or is the change really just about saving money?

[Chris Grayling]

As the hon. Lady would have known if she had listened to the debate in Committee, we are putting in place transitional protection for the introduction of universal credit, so that no one will lose out in cash terms as a result of the changes. That is right and appropriate. The problem with new clause 2 is, first, the cost, which the right hon. Member for East Ham did not mention.

Had we introduced new clause 2 with the current 16-hour rule, the cost would be around £200 million to £400 million, which would be additional to current expenditure of around £2 billion. The Opposition have therefore made a clear spending commitment, which appears to be a reversal of their policy—I was under the impression that the Leader of the Opposition and the shadow Chancellor had said, “No spending commitments without official sanction.” Perhaps this spending commitment has official sanction, but, if so, they need to say where the money is coming from.

Two or three Opposition proposals that we will debate today require extra spending. It is incumbent on a party that has just presided over the building of the biggest deficit in our peacetime history to say where the money is coming from if it proposes spending commitments that would take away some of the money that we are trying to reinvest to deal with the deficit. Do Labour Members want to borrow more money? If so, that £200 million to £400 million means extra public borrowing. Alternatively, will they increase taxes? They need to explain where the money is coming from.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Does the Minister understand that many women are frightened by the Bill’s proposals and nervous about their futures—about whether they can continue working and supporting their families? Women who are looking to move into work are not worried about artificial arguments on whether the Labour party has a new spending commitment. They want to know whether the Bill will give them the opportunity to move into work when they are capable of doing so, and whether the Government will give them child care support. In many cases, child care is the only thing stopping them making that step.

[Chris Grayling]

Women and men in this country have realised that the previous Government’s belief that money grows on trees is wrong. They have also realised that the consequence of the previous Government’s policies—they simply threw money at every problem—is that we are faced with the most monumental deficit challenge. If we do not deal with that, we will end up in the same position as a number of other countries. I would not want us to be in that place, because women’s chances of getting back into work would be much diminished by the state of such an economy.

[Mrs Moon]

I appreciate that there is concern about the deficit, but will the Minister assure us that women who are unable to work because the cost of their child care will remove all the benefit of them doing so will not find themselves harassed or pressured by the Department for Work and Pensions to take work that will leave them out of pocket? Will that be taken into account when their capacity to work is reviewed?

[Chris Grayling]

I am not sure whether the hon. Lady was in the Chamber a moment ago when I answered question on child care from the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne), but the former seems to be forgetting the fact that there is no job search obligation for the lone parent of a child who is below school age. A job search requirement is made only when a child is at school, and the requirement is for a willingness to accept a reasonable job offer that fits around school hours. No draconian measure is waiting to hit a lone parent as their child grows older. Our system is pretty supportive, and we have been absolutely clear that child care costs will continue to be paid through universal credit.

The hon. Member for Bridgend (Mrs Moon) must also understand that our nation’s resources are finite. We cannot just turn on the financial taps because we feel like it. We must take pragmatic decisions on what the nation can and cannot afford. We set out very clearly in our announcement last year that there is a £2 billion envelope to fund child care. Parliamentarians now need to agree how best to spend that money.

[John McDonnell (Hayes and Harlington) (Lab)]

As the Minister knows, I have supported the universal credit system for some while, but each of the proposed amendments address vulnerable people—people on free school meals, people living in near poverty or poverty, children with disabilities, and people who are sick and who incur health costs. Those real anxieties about the introduction of the new system need to be assuaged. When the Minister responds on those issues, could he at least give us some sort of time scale on which they will be addressed, so that those people can have more certainty in the run-up to the introduction of the new system?

[Chris Grayling]

The answer is that we will do it as quickly as we possibly can. We are not in the business of delaying these things. We are doing the consultation on child care now, and I hope that we will reach a resolution in a relatively short space of time. However, I want to take the time to get it right. I do not want to rush through under an artificial timetable something that is not necessary right now. We are still two and a half years away from the introduction of new claims for universal credit. We have got time to get these things right and we are trying to work with a fixed envelope of money for child care—we will talk about some of the other issues shortly. We want to take the time to look at the real costs of child care, the requirements and how we can best deploy the £2 billion available.

[John McDonnell]

I am not trying to catch the Minister out—I am trying to secure clarity on each of these issues. What is an indicative time scale for addressing those anxieties, so that people can have some prospect of being able to calculate their futures in those areas?

[Chris Grayling]

I will endeavour to answer that. On the child care issue, we are in consultation at the moment. I would hope that we will get all the responses that we are going to get by the summer and be able to take decisions quickly after that. That would be my first answer to the hon. Gentleman’s question.

[Mrs Main]

Does my right hon. Friend agree that it is unhelpful for the hon. Member for Bridgend (Mrs Moon) to talk about the Department for Work and Pensions “harassing” women who are considering going back to work? All these measures are an attempt to be mindful of the public purse and to encourage people to go back to work and do the best they can for their families—because being in work is good for their families.

[Chris Grayling]

My hon. Friend makes an important point. The whole purpose of universal credit is to provide assistance to people who are trying to get back to work and to ensure that work always pays. I hope that the women of Bridgend will benefit, like those across the country, from the introduction of universal credit and the extra support that it will provide to ensure that they are better off in work.

[Kate Green]

I noted the Minister’s reminder a few moments ago that transitional protection would also be available in respect of child care costs. Can he confirm that one change in circumstances that can be predicted is that child care costs will vary between term time and school holidays and that that will not trigger a change in circumstances that would lead to the cancellation of transitional protection?

[Chris Grayling]

It is not our intention that routine or minor changes in circumstances would lead to the loss of transitional protection. The requirement for child care clearly fluctuates during the course of the year, but follows a set pattern. It is not our intention for a moment to remove transitional protection in that situation, nor is it our intention to remove it in an environment in which there is an annual increase—RPI or CPI—in the rate of child care. We are looking at material changes in circumstances, and I certainly would not envisage the change from term time to holidays as a material change.

The other issue that I have with the Opposition’s proposals is that they would remove the ability for people to take up mini jobs. For women re-entering the workplace after a lengthy time out of it, there is a bigger barrier than needs to be the case. One of the strengths of the universal credit system is the flexibility for people to take on mini jobs. The level of prescription set out in the Opposition’s proposals would set up unnecessary and inappropriate barriers to getting people back to work.

[Sheila Gilmore]

In Committee, we heard a great deal about these mini jobs. We have just heard the Minister say that we should not be worried about the effect on parents of children of school age because a job could be encompassed within school hours. Why is it so necessary to take money away from people who are trying to improve their families’ prospects of getting out of poverty in order to help people in mini jobs—although I do not fully understand the concept—because surely those would be covered by school hours even more?

[Chris Grayling]

The changes we made last year—the reduction from 80% to 70% support—merely returned us to the situation that applied before 2006. On the mini jobs, I want us to spend the money we have on supporting people from deprived backgrounds and in the most deprived situations into the work place so that they can make the most of their lives. The mini job is a perfectly reasonable way of doing that. I also happen to think that for many lone parents, a mini job during schools hours is a perfectly reasonable alternative that might mean that the need for child care is not great. None the less, the option should be there. We should not be writing—this is the key point about some of the Opposition amendments—into primary legislation rules that cannot be undone for two or three years, while we wait for a parliamentary slot. Instead, we need to set out straightforwardly a situation in regulations that can be amended if the situation requires. I could not possibly accept an amendment from the right hon. Member for East Ham that would write into primary legislation actual amounts of benefits that should be paid. The Labour party would never have done that while in government. It would not have happened, and I am not going to tolerate the idea now.

[Charlie Elphicke]

The detailed and comprehensive information that the Minister and the Department for Work and Pensions shared with members of the Bill Committee and the Work and Pensions Committee sets out clearly that joint working is the norm for couples in this country. In most families, mine included, with young children, both spouses or partners work. I, for one, resent the idea among some older people that mothers just sit at home and have primary responsibility for child care. Society has changed, and it is time people moved on from being old-fashioned and out-of-date and accepted that the reality of modern Britain is that both parents play a key role in bringing up children.

[Chris Grayling]

My hon. Friend makes his point in his usual forceful and inimitable way. He highlighted how Labour Members struggle to move on from traditional ways of things. Listening to the right hon. Member for East Ham, I am still not sure on which side of the argument he falls. Does he think that we are doing the right thing, but want to fine-tune it a bit, or is he trying to distance himself from the Bill, so that on Wednesday the Opposition can vote against it and so say to the pressure and lobby groups, “We are on your side”? I am genuinely not sure which is the case, although if they do vote against it, I will love it. I will look forward to arguing up and down the land that this Government have got it right on welfare reform, and that the Opposition have not. I wait with interest and enthusiasm to discover how they vote.

New clauses 3 and 4 provide an amount for school meals and health costs in universal credit. It is absolutely our objective to ensure that people on universal credit will continue to receive appropriate support for school meals and health costs, and that this support is withdrawn gradually to avoid damaging the incentives to work. However, entitlements to passported benefits are the responsibility of other Departments and devolved Administrations. We have been working closely with those responsible to consider the options, and we have commissioned the Social Security Advisory Committee to review passported benefits and how they interact with universal credit. The review was announced in a written statement on 23 May, and a copy of its terms of reference has been placed in the Library. To answer a question put to me earlier, I should say that the Committee will produce its interim report in September and a final report by January. The Committee provides a good way of considering this challenging and important cross-governmental issue. We are certainly well aware of the potential for a large cliff-edge reduction in a person’s income, if support for school meals is withdrawn completely when they reach a certain level of earnings, and we are working closely with other Departments on the matter, as well as on the review.

On health, we aim to ensure that passported benefits are awarded to broadly the same number of people as now. However, passporting is not the only source of help with health costs. Income-related help is also available through the NHS low-income scheme, which can be claimed by anyone on a low income who has capital of less than £16,000. For people on medication, pre-payment options can also significantly reduce the cost of recurring prescription charges. With a 12-month pre-payment certificate, the maximum cost of a prescription is £2 a week, although of course that is an issue only for England; for those with constituencies in Scotland, there are no prescription charges.

[Stephen Timms]

The Minister made an important point a moment ago. He said that he agreed that support for free school meals and prescriptions should be tapered away. That is different from the proposal in the White Paper to have an income threshold and no support. Is that a change in Government thinking?

17:45

[Chris Grayling]

That is precisely what we have asked the Social Security Advisory Committee to examine for us: how best we deal with that cliff edge. We accept that it is there. How do we tackle it to maximise the likelihood of people moving into work?

In most cases, health charges will be one-off or occasional costs that are unlikely to weigh heavily in people’s perception of the financial gains from working. However, for some disabled people in particular, there may be a more significant factor. The current passport from working tax credit together with the separate NHS scheme for people on low incomes should mean that health costs are not, in theory, a disincentive to work, but we know that the reality is often dictated by perceptions and issues about access. We will work to get that right for universal credit. However, we await the Social Security Advisory Committee’s recommendations with interest and we believe that it will be necessary to consider them with other Departments. We need to find a way in which to address the matter that maintains support without creating insuperable barriers to returning to work. It is a complex subject, which falls beyond simply decision making by our Department because we are not responsible for much of it.

New clause 5 would ensure that claimants understand how the amount of universal credit that they receive is calculated. I share that goal, but we do not need primary legislation to achieve it. We are designing universal credit to ensure from the outset that people have the information that they need in an accessible form that is clearly set out. We intend to provide a clear record of any award when it is first made and of subsequent changes, ensuring that claimants are always up to date with the latest position.

Universal credit will be a digital service by default that claimants will predominantly access online. However, we recognise that not all universal credit claimants have access to the internet and we will continue to provide notification through other channels. We are also working with the Government Digital Service—as well as other partners—to help people get and stay online by providing more reliable internet access and training in communities. Of course, we put in place some of the measures to increase digital access when we debated the appropriate regulations last week.

The hon. Member for Stretford and Urmston (Kate Green) was concerned that one part of the benefits system going wrong would bring down the whole deck of cards for a family. She is wrong in thinking that, simply because we have multiple channels, the system somehow works well at the moment and will be much more vulnerable under universal credit. The current system does not often provide that security. Outstanding questions can affect a wide range of existing benefits, particularly at key points of transition, such as moving into work. Many people do not even claim everything to which they are entitled. Rather than a patchwork of provision, with people thinking, “Have I got everything I’m entitled to? If I don’t know a particular answer, everything gets delayed”, a single point of entry, a single point of access and a single system of paying benefits makes it less likely that somebody will get into difficulties and not receive all the money to which they are entitled. I do not therefore believe that the hon. Lady has got that right. We are confident that universal credit will not have the effect that she suggests—it will make it easier to access benefits. Of course, we intend to introduce a system of payment on account, which will allow some payments to be made even if all the details of the claim cannot be sorted out straight away.

Amendment 26 on reporting would make it a legal requirement that we assess and report on access to welfare advice, including advice for those unable to use the internet, before we introduce universal credit. Universal credit will be a simpler system than we have today. It will be easier for potential and existing claimants to find out relevant information online, and easier for advisers to understand and advise.

Welfare advice is already provided by Jobcentre Plus, Her Majesty’s Revenue and Customs and local authorities through a variety of means—over the internet and via other routes.

[Dame Anne Begg]

Even if universal credit fulfils what the Minister describes—he says that it will be simpler, and although it will certainly be simpler superficially, in practice it may be more difficult—with any move from an old system, it takes time for people such as advisers to become familiar with the new system. Advice will be crucial at that pinch point. Will the Minister ensure that the organisations that provide advice are properly funded in that transitional period?

[Chris Grayling]

My view is that our partner organisations, such as Citizens Advice, need to be involved and informed of all the changes. We need to continue to be able to offer the valuable advice that they give to individuals. We provide quite substantial blocks of Government funding to Citizens Advice and similar organisations, and it will be for them to decide how best to use that financial support. In what are straitened financial times, I would hope that those organisations would see their priority as sending as much of that money as possible to front-line advice services, and spending as little as possible on central administration, central marketing activities and other head office functions. I would like those organisations to focus on providing every spare bit of cash that they can for front-line advice services—as well as finding ways of generating more spare cash for that purpose—because after all, that is where the money is most effectively and valuably spent.

We will seek to provide guidance, training and advice for advisers on the universal credit and the implications thereof. There is always a willingness on our part to talk to groups of advisers, including at some of the big conferences that Citizens Advice organises. I have not been able to do so yet—I have offered to do so on other matters—but we are always willing to provide such input to those organisations.

[Yvonne Fovargue (Makerfield) (Lab)]

Does the Minister accept that the money currently given to Citizens Advice is spent centrally on vital services such as training advisers, the information system and support for those agencies? In fact, none of the money goes to local bureaux, which are extremely concerned about the effects of the cuts in 2013.

[Chris Grayling]

Every organisation has to look at how it operates in tougher times financially, and at how best to spend the money that it has available. I am sure that Citizens Advice will be no different in that respect.

Amendments 23 and 24 deal with the capital limit and propose that for claimants who work, the universal credit assessment should ignore savings that they hold in individual savings accounts up to a prescribed maximum of no less than £50,000. We fully understand the importance of saving. Working families should seek to provide for their future needs and larger purchases. However, families with substantial savings should draw on those reserves when their incomes fall, not look to the taxpayer for support. Our analysis suggests that in 2014-15, there will be up to 100,000 households on tax credits with savings over £16,000 who could be affected by the capital rules in universal credit. However, transitional protection will ensure that there are no cash losers at the point of the transition to universal credit where circumstances remain the same.

However, it is important to be fair to the taxpayer. Although nearly one in three pensioner households have savings in excess of £16,000, only 13% of households with a working-age adult in them have that much in savings. A typical working-age household has only £300 in savings. It cannot be right that people with significantly greater savings than the average family can claim universal credit. A maximum limit of at least £50,000 in ISA savings, as proposed by the right hon. Member for East Ham, is a large sum to be excluded from the capital ceiling. We are striking the right balance between protecting people with modest savings and placing responsibility for their own support on those with substantial resources. Once again, we are talking about an uncosted spending commitment. The right hon. Gentleman said that it would cost £70 million a year to uncap totally, but not that many people on universal credit would have savings of more than £50,000, so the majority of that £70 million would be spent on his measure. The reality is that this is a multi-tens-of-millions-of-pounds spending commitment. Once again, we have not heard from the right hon. Gentleman where the money would come from.

Amendment 30 to clause 10 would mean paying at least as much in the additional elements for disabled children as we did in benefits and child tax credit prior to the introduction of universal credit. As we announced in policy briefing note 1, “Additions for longer durations on Universal Credit”, we will retain two levels of payment for disabled children in universal credit. The higher element will be payable to more severely disabled children receiving the highest rate of the care component of disability living allowance. The lower rate will be payable to children receiving the other rates of the disability living allowance care component. The higher rate will be increased by £52 a year, with eligibility extended to children who are severely visually impaired, who currently receive only the lower entitlement.

The key change is that we propose to align the elements for disabled children and disabled adults. That means that the lower rate would be around £26.75 and the upper rate £74.50 a week in current figures. The lower rate for a less severely disabled child in universal credit would be less than now, but we have pledged that where universal credit entitlement is less, transitional protections will be put in place. Our aim is to simplify and align the additional elements for disabled children with those for adults. We do not think it right that when a young person claims benefits in their own right, the extra amounts payable for disability are different. We also want to focus resources on the most severely disabled children and adults. Savings from abolishing the adult disability premiums and changes in the child rate are not going back to the Exchequer. This is not a cutting exercise; it is about recycling that money into higher payments for more severely disabled people.

Amendments 27, 28 and 29 to schedule 1 relate to the regime for self-employment in universal credit. As I told the right hon. Gentleman many times in Committee, we are committed to ensuring that people in self-employment have the financial support that they need. Amendments 27 and 28 would take a power to allow “accruals accounting” of profits and losses from a trade to be used in the reporting of earnings from self-employment. Strictly speaking, that is unnecessary, as the power taken by paragraph 4(1)(b) of schedule 1 already permits such a regulation. Amendment 29 would limit the application of the power taken at paragraph 4(4), which allows for a minimum level of earned income from self-employment to be set. It proposes that the minimum level would not apply where the claimant’s business was conducted on a commercial basis with a view to the realisation of profits.

We recognise that self-employment is a vital element of the economy and will be an important contributor to the sustained recovery from recession that we all want. It is also an important route into work for many people. We are therefore giving careful consideration to the conditions that we set for people claiming universal credit who seek to make their living from self-employment. The enabling framework provided by the Bill allows the treatment of income from self-employment, including the definition of earnings to be taken into account, to be set in regulations. We therefore do not need to decide this question today; we can work to get it right. However, as I have said to the right hon. Gentleman previously, we have to deal with the issue carefully. It is not the intention to make it impossible for people to get into self-employment, particularly in the first few months, when they have difficulties and money does not come easily. However, in the current system, people can report no or very low income from their business activity and continue to receive the bulk of their benefit or tax credits entitlement. We want people to become progressively less reliant on benefits and universal credit. At the end of the day, we cannot have the taxpayer funding someone who is notionally self-employed—and on whom there is no job search requirement—but who generates little or perhaps no income at all from that self-employment. We have to apply a threshold to determine whether someone is credibly in self-employment or whether they are using self-employment as a reason for not looking for other job alternatives. We have to get this right.

[Mrs Main]

My right hon. Friend makes a valid point about people who are considered self-employed. Does he have any view about those who are considered self-employed who sell magazines such as The Big Issue?

[Chris Grayling]

My hon. Friend makes an important point. That is something that we need to address, because the current situation is not right. We need to ensure that the system is fair and justifiable in the eyes of taxpayers and other individuals. I share some of her anxieties, and although it is not in my remit to pursue the issue, I am sure that she will make her representations elsewhere in Government. It is not that we want to do anything that undermines that publication or others in a similar position; rather, we want to ensure that the position is not only fair and equitable, but defensible and justifiable.

[Mr Christopher Chope (Christchurch) (Con)]

My right hon. Friend knows that I have expressed some concerns about this issue in the past. Can he give us an assurance that self-employed income will be based on actual income, rather than deemed income? Linking self-employed income with an assumption that people are earning the minimum wage would effectively put most farmers in this country the wrong side of the line, because probably most of them earn less per annum than they would if they were paid the minimum wage for the hours they work. The same goes for young barristers, lots of people in the carpentry and building trade, and others building up businesses. Surely the system should be based either on actual earnings or on something else. If it is based on something else, that surely needs to be spelt out clearly, because there are rumours circulating that we are effectively imposing a minimum wage by the back door on self-employed people.

18:00

[Chris Grayling]

My hon. Friend makes a good point, underlining the complexity of these issues and why I believe it inappropriate to set hard-and-fast rules in primary legislation. If we find that we have not got it right the first time around, or if things need to be done to remove anomalies, which they might well be, it makes no sense to have written the fine print into the detail of primary legislation, therefore making it more difficult to adjust accordingly. This is one reason why it is important to maintain as much flexibility as possible.

[Stephen Timms]

The hon. Member for Christchurch (Mr Chope) referred to rumour, but the White Paper said that self-employed people would be deemed to have earned at least the minimum wage for each hour of employment. Can we take it from what the Minister is saying that the Government are reconsidering that White Paper decision?

[Chris Grayling]

As I said to the right hon. Gentleman in Committee, we are looking at the best way of doing this. We cannot have a situation in which people who are receiving an entitlement to the universal credit while generating no income at all over long periods of time still say that they are self-employed. We must ensure that that does not happen, and we are looking for the best way of doing it. If we wrote the rules into primary legislation, we would not be able to take decisions and fine-tune on the basis of experience, as we would have to come back to primary legislation every time. That is why I think it inappropriate to accept the right hon. Gentleman’s amendments.

Let me make some further progress. Amendment 33 seeks to remove the restriction on eligibility for pension credit for couples where one member is below and the other is above the pension credit qualifying age. Suffice it to say that although someone over the retirement age should be able to receive benefits for the household under the pension credit system, someone under the retirement age being able to receive the benefits of a means-tested system without having to go out and look for a job is just plain wrong. I am afraid we disagree on that, and I am comfortable with the changes. They are set out in legislation, which is where one would expect them to be set out. I am disappointed at the right hon. Gentleman’s disappointment that we have not issued a press release on the subject, but I do not think that this is the kind of change that would command the front pages of any newspaper. It seems perfectly reasonable to set out proposed changes in legislation, given that it is legislation that is laid before the House with accompanying explanatory notes that Members can read and discuss and into which they have an input.

Amendment 68 would add additional provisions for carers to paragraph 4(4) of schedule 1. It is not necessary to set a minimum level of payments to carers. The risk is that the incentives for carers to get into work are blurred by the automatic payment of an amount that does not relate to their personal circumstances. We all agree that work, not benefits, is the best route out of poverty, and we must ensure that payment levels are not set so high as to undermine that.

Amendment 61 takes us back to an issue that was extensively debated in Committee in respect of the payment of universal credit. Opposition Members suggest that that default position should be that payments made in respect of children are routinely directed to the carer. The amendment would provide powers to specify other circumstances for paying a portion of the universal credit award to a particular individual.

We have published a policy briefing note setting out our intentions for payments. We have already said that couples will be able to choose which of them receives the award and they could direct it to a joint account for both to access. It is a core principle of our approach that individuals are best placed to make choices about what is best for their own circumstances. There will, of course, be some exceptional circumstances and there are powers within the Bill to amend the Social Security Administration Act 1992 to allow the Secretary of State to pay all or part of an award to another individual. We do not need this amendment to ensure that. However, the default position should be that we make payment to the person chosen by the couple, not by anyone else.

Many of the concerns raised in this debate are, of course, about the possibility that universal credit might be less generous to some people than the current system of benefits and tax credits. We propose a radical reform and a simplification of the welfare system. In that situation, it is not possible to replicate exactly every aspect of the current system. That is why we will introduce a system of transitional protection to ensure that there are no cash losers as a result of the move to universal credit.

[Dame Anne Begg]

Will the Minister tell us how much will be available for the transitional protection? The figure of £2 billion was mentioned, but that included all the changes, all the administration and IT as well as the transitional protection. What is the spending envelope? How much will cover the transitional arrangements?

[Chris Grayling]

The £2 billion contains sufficient money for us to be able to deliver the transitional protection and the various changes. I do not have the numbers in front of me, but I will happily write to the hon. Lady to give her the more detailed figures we have published so far. We have given a clear commitment to transitional protection. It costs what it costs, but we have made a sensible projection of what we believe it will cost, which is contained in the budget for the spending review period. It is important to ensure that there are no cash losers as a result of the transition, but it is impossible to make a big change of this kind without finding that people in subsequent years are in a different financial position from their counterparts in previous years. Inevitably, some will move one way; others will move another. The only fair and proper way of dealing with the situation is to ensure that everyone is protected in cash terms.

We think that we have put together a framework in part 1 that will give us the flexibility to introduce the universal credit and to fine-tune the proposals as necessary so that if we do not get everything quite right at the start, we can fine-tune as we go by, and that a future Government will have the flexibility to do that. We have made absolutely sure that we have the appropriate protections in place so that there is an element for child care, for parents, for those with disabilities, and so on and so forth.

We think we have created a sensible framework of the kind that in different areas of policy and in different ways were created through primary legislation by previous Governments, including the last Government. I do not believe for a second that it would be prudent to write into the Bill the sort of amendments that the Opposition have tabled. I have responded to their wish to see more measures brought forward on the affirmative rather than the negative procedure, which I think is right and proves that we will listen and make amendments where it is sensible to do so. I am afraid that the Opposition are seeking to write the sort of detail into the Bill that they would never have put in legislation when they were in government; they would never have followed that approach themselves. That is why I cannot possibly accept their amendments and why I ask the House to accept the Government new clauses and to reject the Opposition amendments.

[Sheila Gilmore]

The debate we have had—in Committee and this evening—shows some of the pitfalls of saying, “We are going to simplify benefits.” The Minister and his colleagues have said to the country generally, “We're going to simplify benefits. This is a simpler system, so it must, by definition, be a good thing.” They expected and, indeed, got from many people the answer, “We agree that benefits should be simplified.” The problem is that when dealing with real people and real situations it all becomes much more complicated, as our debates tonight and on previous occasions have demonstrated quite clearly.

The details of issues such as school meals, health charges and the even bigger matter of child care are extremely important, and will have a real impact on whether the new system works for people, will make them better off, and enables them to get into employment, stay in employment, improve their circumstances and get out of poverty. We all agree that, except for those who suffer from real and deep health problems, employment is the best way out of poverty. If, however, such an important element as child care is left so undefined, we cannot know the answer to that question.

Frankly, we are being asked to buy a pig in a poke. We are told, “If you don’t accept it, don’t vote for it or don't agree with it, you are throwing over the whole issue of welfare reform.” I do not accept that. Nor do I accept the Minister’s view that he was given that sort of response by the previous Government and that there should be simply a framework—an empty bookcase, as he was wont to say in Committee—as there was before. It seems to me that if he thought it was wrong then—and it sounds as if he did—it may still be wrong now. As I said in Committee, people should not be asked to buy that empty bookcase without knowing whether it contains classics or cheap comics.

[Charlie Elphicke]

The Government have gone to great lengths to engage all parliamentarians, including the hon. Lady, in discussions about the nature and design of child care. Is she saying that she would prefer the Government to present a fait accompli, rather than listening to her and giving her a chance to inform, and possibly change, Government policy?

[Sheila Gilmore]

In general, I should prefer legislation not to be pushed through all its stages until more of the details have been dealt with. When the original Bill was presented to the House, some of the consultations with the public were still taking place. An important consultation about disability benefits, with which we shall deal later, had not finished before the Bill was printed, and consultations about child maintenance did not end until April, when proposals were already in writing. There are other ways of doing things, and the fact that they have or have not been done properly by past Governments does not strike me as a reason for not trying to do them properly now.

Child care is particularly important to people who want to improve their position. The hon. Member for Dover (Charlie Elphicke) said that we had been consulted, and indeed we were invited to a briefing at which we were presented with certain scenarios, but I am not sure that I gained a very clear understanding from that session of exactly what the Government were proposing. I subsequently received briefings from other organisations, as no doubt has the hon. Gentleman, expressing the view that the new child care arrangements, such as they were—the proposals had not been finalised—would not leave people better off. It is a question of what we accept and what we believe.

It is difficult for us to form a view, but it is possible that if we do not get the child care arrangements right, many people will decide that work does not pay. They will feel either that they must reduce their hours considerably, or that they cannot afford to continue their work and must give it up altogether. I do not think that that is the outcome that the Government seek.

[Charlie Elphicke]

The hon. Lady clearly supports the fait accompli proposed by the Opposition—including, it seems, the ending of the whole principle of the mini-job, which would imprison people with child care responsibilities in their homes. Does she really think that that is the answer?

[Sheila Gilmore]

I am not convinced that the new clause does away with the entire principle of the mini-job, although I would certainly have liked—preferably before we embarked on the Bill—a debate about what was, for me, a new idea, possibly good and possibly bad. I do not think we have fleshed out exactly what we are doing in this regard.

As I said in an intervention earlier, if the idea is to encourage people to undertake work involving all hours of employment—given that they are able to obtain such work—I am not sure where the so-called mini-jobs will be found or what their quality will be. Are we talking about six or eight hours a week, as some people seem to be? Where will the jobs be, to what extent will they increase earnings, and will the necessary child care be available?

[Guto Bebb]

I am surprised that the hon. Lady refers to micro-jobs as if they were not important. I should have expected a Scottish Member to be delighted by the Government’s attempts to make work pay. Shockingly, the number of people who have never been employed in Scotland increased from 37,000 in 2000 to 40,000 in 2005, and to 45,000 in 2010. I think that, rather than being disparaging about micro-jobs, the hon. Lady should welcome the fact that the Government are serious about showing that work pays and gives people self-respect in our society.

18:15

[Sheila Gilmore]

I hope that those figures for Scotland are not like the figures for the whole United Kingdom, which, according to the Sunday newspaper that I read this week, included students. That was in the small print, but the fact remains that the wrong figure is constantly given.

I am not defending circumstances in which people are unable to work. However, we should examine the whole notion of the mini-job much more carefully than we have been able to do so far. We need to be clear about exactly what it will deliver. We already know that many people who have been able to start work over the past 10 or 15 years as a result of measures introduced by the previous Government, including families with children, are still living in poverty.

The mini-jobs, or micro-jobs, that we are discussing may indeed enable people to work, and being able to work for six, eight or 10 hours may be seen as some great moral advantage. I fear, however, that the jobs will be of such poor quality and so poorly paid that those people will remain in poverty, and the path out of that poverty does not appear to be very well mapped. I think that we should have given the proposal much more consideration before using it as a reason to remove child care provision from other people.

[Mrs Main]

The hon. Lady seems to be digging herself into a hole. She has admitted that the measures taken by the last Government did not work, and that people were left in poverty. Surely she should welcome an innovative approach from the present Government, and surely she should stop trying to filibuster their proposal into the long grass by demanding so much blessed detail that nothing will ever get done. We owe our families more than that after the Labour Government’s failure to get people into work and out of poverty.

[Sheila Gilmore]

I cannot accept the hon. Lady’s premise. People were able to work as a result of the measures introduced by the Labour Government, such as the minimum wage, but we did not manage to take all families out of poverty because of the type of jobs that many of those people were doing and the levels of income that they received. It is wrong to suggest that a system allowing people to work for fewer hours will in itself deliver them from poverty.

[Sarah Newton]

How on earth does the hon. Lady think someone who has not had a job can obtain a better job?

[Sheila Gilmore]

Of course people have to work, and of course they have to be able to work in real, proper jobs. The hon. Members for St Albans (Mrs Main) and for Truro and Falmouth (Sarah Newton) should think, at times, about the type of jobs that they are talking about, and the kind of experiences that people will have. I want to be sure that those who go into work undergo a proper job progression rather than becoming stuck in a sideline meaning that a box can be ticked because they are now working and have some work experience.

[Harriett Baldwin]

Does the hon. Lady not accept that that is exactly what happened when people were stuck in jobs that paid them to work for 16 hours, so that it made no sense for them to work for 15 or 17?

[Sheila Gilmore]

I think that it often made a lot of sense for people to work for 16 hours and more, and issues such as child care were key to that. In many cases, child care costs kick in when hours like that are involved.

We should not try to justify reductions in child care provision simply by saying that they may help another group who need a certain amount of help—and, indeed, they may not do so. We need to examine the model thoroughly, because otherwise we will not know what will happen. Depending on which version of the proposals the Government decide to adopt, help for child care for people working 16-plus hours may be cut and there may not be a call on child care costs for people doing mini-jobs. If that is the case, money would be freed up. I am unsure as to whether there will be a call on it for the following reason.

Some mini-jobs will be at times such as 5 until 8 o’clock in the evening, and those doing them might not have another family member who can undertake child care at that time. Child care costs may therefore be incurred—although I am not sure from what source any child care might be found at such a time of day. When the hours of a mini-job fit in with nursery or school hours, however, child care costs may not be incurred. Therefore, if there is not a call on child care costs for people working fewer than 16 hours, I hope that the available money will be recycled for the people from whom it appears it is to be taken, regardless of whether we know there is a demand for it.

[Charlie Elphicke]

The hon. Lady speaks as though the idea that a woman looking after a child would work for fewer than 16 hours a week is novel and has never happened before. Let us consider the situation for one of the obvious age groups, however: for children aged five to six, some 61% of lone parents who are in work are in part-time work, and 65% of partnered mothers in work are in part-time work. Many of those people will be working for fewer than 16 hours as their children are so very young. Is it right not to help them with child care in those circumstances? Why does the hon. Lady want to persecute people who work fewer than 16 hours a week?

[Sheila Gilmore]

With all due respect, I think the boot is on the other foot. It appears that the people who are to be persecuted are those who work hours for which they require child care and who get assistance at present. Let us consider the proposals that were put before us at the briefing meetings—which I would not necessarily call fully consultative meetings. Under the proposals, it appears that people who currently get child care assistance will have that taken away, and that that will amount to a substantial loss which will lead possibly to their reducing their working hours. If they do that, their ability to move on with their work experience and their lives, and to get out of poverty, will be much reduced. I do not think positing one group against the other is helpful, therefore, and I would much rather we gave assistance wherever we can.

In Committee, Opposition Members were constantly expected to balance our suggestions against the costs that the Government have set up, but we would not start from that point. It is ludicrous to say that the Opposition have no right to make any spending suggestions as we do not support the Government’s model of deficit reduction. If we put more people out of work by cutting our deficit so quickly, as this Government seem intent on doing, benefit bills will rise and tax takes will fall, and we will not resolve the deficit problems in any case. That is one of the major reasons why we have opposed this Government’s stance. If we have a different view on how to tackle the deficit, the speed at which to tackle it, where to reduce spending and the impact of that, it is perfectly legitimate for us not to accept the spending envelope the Government have decided to impose.

I would hope that we would not just think about how we might take a little away from one group that happens to be a bit less poor than another group because we want to help the most needy. I noted in this afternoon’s departmental questions that Ministers were quick to take up one aspect of the Leader of the Opposition’s speech today: the comments he made about people on benefits. They were not so quick to mention his comments about the responsibility of those in our society who are a good deal better off, however. If we do not look at both those issues, we will be making the poor pay the cost of the economic crisis.

[Charlie Elphicke]

The hon. Lady speaks as though everyone is going to be terribly badly off under universal credit, but the figures in table A.2 on page 80 of the Red Book make it very clear that almost everyone is much better off, and that is especially the case in respect of part-time work. Does she not accept that that is positive, and that the Government have made sure that the transition will be managed in such a way that people will do better?

[Sheila Gilmore]

I shall try to unpick that question. First, it has almost been forgotten—I hope not entirely forgotten—that universal credit will be introduced after £18 billion has been cut from this country’s welfare spending, so many people will already be worse off before universal credit comes into effect. Secondly, we do not know when the transitional protection we keep hearing about will end. Will it end and begin only if somebody gets into work or falls out of work, or will there be other circumstances in which that transitional protection will cease, which would mean that many people would be considerably worse off? The third reason that I have concerns about the assertion that people will be better off under universal credit is to do with all the points raised in our discussion of these amendments. Unless we are clear about issues such as the cost of child care and school meals, and how they will be accounted for under universal credit, we cannot know whether the assumptions made, the figures given and the statements made about people being better off will prove to be true.

[Harriett Baldwin]

The hon. Lady has repeated the much-quoted figure of £18 billion being taken out of welfare spending, but does she acknowledge that £3.75 billion of that is coming from higher rate taxpayers such as myself who receive child benefit on a four-weekly basis? Would she like me to get my child benefit back after 2013?

[Sheila Gilmore]

In answer to that, let me give a personal view that I would not want to attribute to all my colleagues, as I am unsure whether they would all accept it. If we feel that we can no longer pay child benefit as it was previously paid and that we must make savings, it would have been much fairer to have made that part of taxable income. For many reasons, that would have avoided some of the anomalies that the Government’s proposal has set up. However, we have frequently rehearsed those reasons, so I shall not spend a lot of time talking about them now. If savings had to be made, we might have ensured that some of that money came back in the way I have suggested. I personally think that, subject to a fair taxation system, that would be a better way of dealing with this issue than having the suggested abrupt cut-off.

I want to talk about savings, and in particular the savings cap being introduced on people who work. It is astonishing that this change should be made by a Government who have so much to say about their wanting to encourage people to get back on their own feet, to be self-reliant and to save for their future. It is very easy just to say that the average amount of savings of a person of working age is only £300—and that is frightening and appalling for our society if it is true. However, for those people who currently—[Interruption.] I do not know what is so funny. Currently, people who have savings and receive tax credit have been able to get assistance without losing that money, but the Government’s view appears to be different for those who fall on hard times, no matter what their circumstances are, and no matter what situation they find themselves in. We will, no doubt, have this debate again on Wednesday when we discuss non-contributory and contributory employment and support allowances. The Government’s view seems to be that the first thing someone should call on in difficult circumstances is any savings that they have previously been able to make. There is a lot that is unacceptable about that.

18:30

People may find themselves with a certain amount of capital in all sorts of circumstances. They may have gone through a recent separation and received their share of a former matrimonial home, which they may then plan to use to put a deposit down on another property so that they can buy a home and no longer be as dependent on the state as they have been previously. That opportunity is being taken away by this provision. It is not at all clear whether the Conservative party thought it was entirely unacceptable that people were able to receive tax credits and still have savings—presumably Conservative Members did think that, but I do not know whether they said so.

We have had a system, which seems to have been working well, whereby people have been able to receive assistance to enable them to stay in employment and improve their circumstances without such loss of savings which they may have worked hard to accrue. They may have been asked to take reduced working hours, as many people have in the past two or three years, and they may have experienced a pay freeze and, thus, fallen, perhaps for the first time, into the position where they become entitled to universal credit. The first thing that will happen to them is that they will be told that they are not eligible until they have reduced their savings below a certain limit. Their prospects of using those savings, perhaps towards their retirement—these people may not be young, and they may be thinking that that money will give them a more comfortable retirement or they may want to buy a house to put themselves in a better position—are being taken from them. There is no good reason for changing the tax credit arrangements, which have been working well in getting people back into employment.

[Charlie Elphicke]

What would the hon. Lady say to a constituent of mine who earns £15,000 a year, has no savings, works really hard and pays their taxes? How would she justify their taxes going to pay benefits to someone who has £50,000 in the bank?

[Sheila Gilmore]

It is important in this debate to get away from the attempt to say that one group of people are hard-working taxpayers and another group do not pay tax and should have their rights diminished. The taxpayer may also be receiving certain benefits, if we feel that it is correct for them to do so. People pay taxes in all sorts of ways. They pay council tax, VAT and often income tax at various points in their life. They may do that while they are receiving benefits or they may have done so just before a change in their circumstances took them below the threshold for paying income tax; they may have had to reduce their hours or they may have been forced to do so. These are not different groups of people.

In our approach to these issues we need to consider the following seriously: we should see our welfare state not only as something into which all of us pay when we can, but as something from which we have an opportunity to take when things happen to us. These two groups of people should not be fighting each other. Someone should not say, “I am hard working; you are not. You should not be getting, because somebody else is working.” At a lot of the income levels that the hon. Gentleman mentions people probably will be entitled to benefits, be that help with their rent or council tax, or some other benefit. I ask the Government to think again about their attitude to people who are doing exactly what they have been asked to do, which is to get into employment, to work hard and to save. I ask the Government not to keep this savings provision in the Bill.

[Harriett Baldwin]

I welcome the opportunity to discuss the child care element of the universal credit. We did not have the chance to talk about it at length in Committee, but we all got invited to a discussion with the Secretary of State on the various different options for child care. This is an essential part of the equation that any parent considers when deciding the best way for them to approach the workplace.

I wish to talk about a slightly different approach from the one in new clause 2. I disagree with new clause 2, because I do not think that it takes the right approach, and I want to say exactly why. First, it retains the characteristic whereby someone has to work for a minimum of 16 hours to qualify for support with their child care. That fails to take into account an entire psychological barrier and frame of reference that a parent can have when they move into work. It is very hard to take the first steps into work, particularly when someone makes that choice—which, as we have heard, is optional, with smaller children. Those are large steps to take, so allowing parents to move into work by doing fewer hours—perhaps two days a week in the office or at work—is an extremely important part not only of encouraging a parent to move into the workplace, but, importantly, encouraging parents to maintain contact with the workplace when their children are small. That is a really important benefit of the approach that the Secretary of State has been discussing with us.

[Bob Stewart (Beckenham) (Con)]

I agree with what my hon. Friend has to say, but does she think it is also very important for a mother to keep contact with her children? When a mother goes into work for three hours a day, she will know that she does not have to do more than that and that she can get back to her children. I think that that is terribly important. I wonder whether my hon. Friend agrees.

[Harriett Baldwin]

Yes. We were reassured earlier by the Minister that any kind of sanction regime would apply only once children joined school at the age of five.

This linear move into work is an important aspect here—it is probably even more important for parents than for any other group in society—so I am pleased to see that it would be possible under the Secretary of State’s proposals. I am also pleased that the £2 billion which has been mentioned will still be in place to provide support for families making that transition into work.

[Ms Karen Buck (Westminster North) (Lab)]

The hon. Lady is making a powerful argument. Will she confirm that Labour Members are not arguing that child care assistance should not be available to people working less than 16 hours? Of course if the financial envelope is large enough it is right that that assistance should be available, for all the reasons she is outlining. What would she say to people who live in high-cost areas, such as my constituency, to parents of larger families, and to parents who have no choice but to work longer hours? Their child care is going to be reduced or lost, because their child care is going to be capped to pay for the things that she is talking about.

[Harriett Baldwin]

I shall deal with some of those other points in my later remarks, because they are all important subjects for debate. Indeed, the proposals in new clause 2 suggest a figure of £300 a week for this element. I was genuinely surprised that there were people who were getting as much as that. I do acknowledge the cost of child care in central London: I have paid it for many years, so I recognise what we are talking about. However, £300 a week is a lot of money—it works out as £15,600 a year. It is indeed a generous cap.

I propose that we turn the child care element on its head. The initial move in what we might call the slide into work should be reimbursed at 100%. When people make the difficult first choice to go into work, the first few hours of child care, perhaps up to the earnings disregard—I ask the Minister to ask the Department to consider some of the maths involved—should be reimbursed at 100% as they make that important transition. When they reach the level of annual earnings represented by the disregards that we are talking about, the tapering of the contribution that the person in work would make to their child care would begin.

[Kate Green]

The hon. Lady has obviously given this matter very careful thought, and I have great respect for the way in which she is approaching it. Does she not see a risk that the mini-job would become a trap, and it would be impossible for people to be incentivised financially to increase either their earnings or their hours of work, because they would start to lose child care support?

[Harriett Baldwin]

The hon. Lady underestimates the extent to which the 16-hour job has already become a trap. I think we all know people who have been trapped in one. I am proposing that when people move on to that slide and have greater support in those initial steps into work, they will become much more familiar with the world of work. When they move into taking on more hours and so on—let us not forget that once somebody has moved into the workplace they often find themselves eligible for a promotion or for the next move up the employment ladder, which might coincide with their children rising five and going to primary school—the fact that they are on more of a slide will mean that because they have extra work they will be able to share more of the cost of their child care. I would like to see some experimentation with the formula so that the child care support for the first steps into work is more generous, and the tapering begins further down the line.

[Charlie Elphicke]

Does my hon. Friend recall going to the seminar where we were consulted about the child care costs, and does she recall, as I do, that the idea that people lose out when they work more hours is a fiction? The Government are funding substantially more money for the system, which means that people will be far better off than under the current system even if they are working all hours, as well as benefiting when they are in 16-hour jobs.

[Harriett Baldwin]

My hon. Friend highlights the complexity of this area, not just because of the formulae and the mathematics but because of the financial behaviours of individuals who are making the choice between working and not working. This is an important behavioural area for people who are not in the benefits system. We all know people who have left work, had a baby and taken time out of the workplace. They make the trade-off and ask whether it makes sense for them to go back to work and pay for child care or not. That happens outside universal credit, in the world of people who are not touched by the benefit system in any way. This is a complex area.

[Sarah Newton]

My hon. Friend is making an excellent case. In addition to the financial considerations for women who are returning to work, there are great psychological concerns. Women ask whether the necessary quality of child care will be available, whether their family will adapt and whether they will cope with the separation from their child. Enabling people to be supported to take those first steps into work, even for a few hours, would help families overcome that barrier and, I hope, go on to increase their hours and ultimately go back into work full-time.

[Harriett Baldwin]

I vividly remember going back into full-time work after maternity leave—and on that first day back, frankly, one is amazed that one’s child is still alive at the end of the day for which they have been left with someone else. The psychological transition is very important, and taking it in smaller incremental steps—perhaps with more generous support—is extremely important, because it builds up trust in the alternative child care while also allowing the child to get used to it in small steps. I urge the Minister to suggest that the Department consider some other iterations along those lines.

My other point concerns the review of the consultation put forward by the Secretary of State.

[Sheila Gilmore]

rose—

[Harriett Baldwin]

I shall give way to the hon. Lady, who was so generous in giving way to me.

[Sheila Gilmore]

Will the hon. Lady consider whether, in this debate, we have got ourselves into the situation of being forced to contrast one group of people who are trying to work against another? Perhaps she would care to join me—I am not sure whether my Front Benchers would agree with me, and perhaps her Front Benchers would not, either—in saying that it would be better to give child care assistance to people who work all hours. Perhaps we should join forces to argue for that.

18:45

[Harriett Baldwin]

My point is that we should try to concentrate the support that the taxpayer gives into the early hours of going back into work. I would like the taper, and what can be afforded, to be announced annually by the Chancellor at the Dispatch Box, just like the overall taper in universal credit. The country’s potential to support people in those choices would go along those lines.

My second point about the alternatives to new clause 2 that the Department might consider concerns the need to recognise that the cost of child care varies greatly with the age of the child—although I acknowledge this goes somewhat against the simplicity of universal credit. Of course when children go to school the cost of child care out of hours drops dramatically from the cost of providing child care for an 18-month-old child. I suggest some form of annual review of child care support that takes into account the age of the child or children. We should also consider this in terms of the annual envelope, because that would address the issue raised by the hon. Member for Stretford and Urmston (Kate Green) about the predictable fact that holiday cover is an annual challenge for working parents, and reflect the fact that there is that fluctuation for parents of children at school.

I wanted to outline why I do not agree with new clause 2 and why I welcome the fact that the Government are having an open dialogue about the £2 billion that they are putting into child care support, and to emphasise that all families, whether they are on universal credit or not in the benefit system at all, have to make behavioural and financial choices about the world of work. I would like the support that the state gives to encourage people into work to be concentrated on those first few hours of child care.

[Kate Green]

I want to comment first on the proposed child care amendments. Owing to the funding envelope within which we work we face a difficult financial choice about which group of parents to assist with child care costs. I warmly welcome the implication in the comments of the hon. Member for West Worcestershire (Harriett Baldwin). Obviously, one would want to support funding for child care as far as possible, and in making an early selection about which group of parents should benefit we do not want to shut off the possibility of financial support for child care for more parents being an aspiration over time.

In saying that we wish to protect the child care support available for parents who work more than 16 hours, we are certainly not saying that we might not aspire in due course to see child care supported beyond that. The loss of financial support for child care will make working completely unviable and will be a dangerous and retrograde step that I do not believe Ministers have fully analysed.

It is important that we do not see child care provision simply as instrumentalising the return of parents to paid employment. Nowhere in the debate today have we said much about the welfare of the child. We do not know what short hours child care, if any, will be available in the child care market. It certainly seems to be a complicated and unlikely form of child care for parents to be able to access and it does not reflect the way in which child care provision is currently organised. Of course, child care providers might respond if more parents were seeking to buy shorter hours of child care, but the question that arises is whether it is a financially viable model for providers. I am not aware of Ministers investigating that, and I would feel more reassured about the validity of their proposals if they had been able to say a little more about what they meant for the market, its resilience and its potential for growth.

I would also have felt more reassured if Ministers had analysed the extent to which very short episodes of child care are or are not good for children. I genuinely do not know the answer, but I have a sense that putting a child in child care for two or three hours on two or three days a week presents an unstable stop-go approach. We certainly know that, for younger children, one-on-one care with a single main carer with whom the child can form a stable relationship is very important. Although I do not rule out the possibility that shorter episodes of child care could be good for children, I have not seen any sign that Ministers have investigated whether that is the case. It is extremely difficult for us to support a measure that has given no attention to the well-being of children.

On the proposals—or lack of proposals—in relation to free school meals, I do not blame Ministers for seeking to pass the problem to the Social Security Advisory Committee because it is an extremely difficult one to solve. The previous Government had been concerned about the cliff edge that exists as parents move off benefits and into employment and free school meals are removed wholesale. Parents have repeatedly told us as politicians that that is an incredible financial shock to low-income families as parents move into work. We have no idea what Ministers will propose in due course.

We have been struggling to find the model that will work. Models have been bandied around that could leave parents able to afford school meals on Monday, Tuesday and Wednesday, but not on Thursday or Friday, or that might mean that they can afford school meals for some children in the family, but not for others. There is a real concern that what Ministers propose will still lead us to a cliff edge.

We need to be clear about the principles that we seek to achieve. I would like absolute clarity from Ministers that when they receive the recommendations and advice of SSAC, they will ensure that support is available for all children who need free school meals; that the system that is put in place will be simple for families, simple for schools to administer and simple for the Government, too; that child health will not be compromised because children currently eligible for free school meals and therefore accessing a healthier diet are in future shut out of such provision; and that the design of the system will not create work disincentives.

I have not yet seen any evidence that all those circles can easily be squared, unless Ministers are prepared to look again at the direction of travel that the Labour Government were following, which was, over time, to move towards extending the reach of free school meals. I accept that in the present financial climate it will be difficult to get all the way there, but Ministers need to think now about how they design the cliff edges and the tapers, because that is the foundation on which a future extension of free school meals to more children would be built.

The most comprehensive option would be to include a per child school meal element in the universal credit, which crucially would be paid directly to schools to provide meals, so that parents were not—by force, in many cases—obliged to use the money to meet other bills. I would like us to consider how a model could be designed that, when funding allows, would allow the money to be paid in full until the family reached their earnings disregard level, at which stage it would be withdrawn from universal credit at the taper rate, which we would like to have been maintained at 65%. That would mean that both DWP and families were contributing to the cost of school meal expansion. Entitlement could end when universal credit payments end, preferably when the imputed value of the school meal had been fully tapered out.

Achieving that vision immediately would undoubtedly create additional cost, which I recognise that Ministers want to avoid. Nevertheless, it is important that they give us assurances that they will seek at the outset to design a system that could be developed in that direction over time and as funding allows.

Amendment 68 relates to carers. A small group of carers seems to have slipped the notice of Ministers when considering the impact of the design of universal credit, specifically in relation to earnings disregards. We know that many carers can work only a very small number of hours because they are seeking to balance paid employment with substantial caring responsibilities. We also know that those few hours of work are very precious to them. They enable them to maintain contact with the labour market, they widen their social and external circles, and they provide a bit of a respite for the carers from the stress and strain of caring.

Where those carers are in receipt of income support, they can at present earn up to £20 a week from doing a few hours of paid employment without it affecting their benefit. In their proposals for universal credit, Ministers have provided for disregards for carers in a number of situations, but there seem to be some groups who will lose the benefit of that disregard as a result of the proposals before us. For example, some carers are caring for someone who does not live in the same home as the carer. Those carers may no longer enjoy the benefit of the earnings disregard. That seems completely at odds with the aspiration that Ministers have expressed for the universal credit, which is that every additional hour of work will pay.

I hope that Ministers will give careful attention to amendment 68 and consider what can be done to ensure that all carers are incentivised to take on even a few hours of work. What assessment have Ministers made of the number of carers who are left outside the ambit of the current disregard for carers, and of the cost of extending such support to all carers?

Finally, we cannot stress often enough how important it is that we ensure that payments for children go to the main carer of the child. Ministers seem to think it is good enough that couples have the option to make that decision, but very many families will, by default, allow all payments of universal credit to go to one member of a couple in a couple household, and we know from the evidence of the way in which the pension credit has been received in couple households that that is most likely to be the man.

[Charlie Elphicke]

Will the hon. Lady give way?

[Kate Green]

I will, but the hon. Gentleman will tell me that life is different now and that families share child-caring responsibilities more equally. I am sorry to tell him that although I would love that to be the case, all the research evidence says that it still is not. This is not in any event a gender point, although it would mean more money for women, because women are the main carers of children. Therefore, if we want to ensure that money is spent on children, we need to route it to the main carers, and that primarily means that we need to route it to women in couples.

I am surprised that the Conservative party has been so reluctant to accept that. The last time we had such an attack on the principle of money being paid to mothers for the care of children, it was Conservative ladies who were the best defenders of the interests of mothers and families, and I do not think the picture has changed that much. I know that the hon. Gentleman has an idealistic and ambitious view on the issue, and it would be good to hear it.

[Charlie Elphicke]

I thank the hon. Lady for her generous introduction to my intervention. I take issue with her argument not in relation to who has primary responsibility for child care, but in relation to culture. In times gone by there was a much more divided culture, which is why older people see life very much in the way she puts it, but the reality is that joint working has changed that. My issue is not about economic power and management, but about sharing in the family unit as a whole, and that is backed up by the figures, which show that 76% of partnered mothers are working. Life has changed, and she should understand that the economics are much more shared these days than they used to be.

19:00

[Kate Green]

I am prepared to accept that life is changing, albeit rather more slowly than the hon. Gentleman suggests, but let us not forget that the partnered mothers who work do so largely in part-time jobs and that their incomes usually make the smaller contribution to family budgets. Let us not forget the extensive evidence that continues to show that women fulfil the bulk of child care responsibilities. Let us not take the risk that by removing money from the main carers of children, whether that is the fundamental intention or not, children become the losers in the drive to achieve the glowing future that the hon. Gentleman seeks to describe. All the evidence suggests that money is most likely to be spent on children when it is paid to their main carers, so I am concerned that that should be built into our system as a default to ensure that that is where the money goes.

Other colleagues wish to contribute to the debate and we have had a full discussion on a number of issues raised by the proposed amendments, so I do not need to go into further detail on many of those points, other than to offer my strong support for amendment 26. As we move towards this fundamental change to our social security system, which Ministers themselves have described as the most far reaching since the introduction of the welfare state after the second world war, it is absolutely imperative that, if anything, more welfare advice is available, at least during the transitional period, as my hon. Friend the Member for Aberdeen South (Dame Anne Begg) has pointed out, because it will surely be needed. Today’s debate is reaffirming the fact that this will not be a simple benefit to administer in practice. If we are to maximise take-up and ensure that people receive their entitlements, which I know from our discussions in Committee is the goal of Ministers, it is vital that proper advice is in place to support people as they navigate their way through the introduction of the new system under the Bill.

[Guto Bebb]

It is a great privilege to be called to speak in the debate. Having been here all afternoon, I feel as though I am back in the Bill Committee. My hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) must again send my apologies to Downing street, because I have decided not to attend a party there in order to be here this evening.

I wish to speak about four specific issues and to new clauses 3 and 4 and amendments 23, 24, 27, 28 and 29. Before doing so, it is important to set today’s good and wide-ranging discussions in context. It is a privilege to follow the hon. Member for Stretford and Urmston (Kate Green), who spoke with great knowledge and understanding on these matters in Committee and in her contribution to the House today, but an important point that we must bear in mind is this: the reason we need to look at changing the current welfare system is that it has not worked.

I challenged the hon. Member for Edinburgh East (Sheila Gilmore) on the figures for the number of people in the United Kingdom who have never worked, which worsened from 2000 to 2010, and the figures I quoted for Scotland were supplied by the Office for National Statistics. The figures for the United Kingdom are absolutely deplorable. The number of people who have never worked increased from 572,000 in 2000 to 841,000 in 2010, when the previous Government left office. As a Member who represents a Welsh constituency, it is disappointing to state that the figures in Wales also show a deterioration. The context for the welfare reform package, therefore, is the fact that the current system is not working.

[Sarah Newton]

Does my hon. Friend share my utter frustration that over the past 10 years, under the Labour Administration, so many of the new jobs that were created in the economy went to people immigrating into this country, rather than to those who were abandoned by Labour in long-term unemployment without the skills and support to get back into work?

[Guto Bebb]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I say to the hon. Lady, and remind all hon. Members, that any interventions or contributions in the Chamber are supposed to address the whole House and that she should keep an eye on the Chair. Otherwise, she will not know when I am trying to get her to sit down.

[Guto Bebb]

My hon. Friend makes an important point. It is something that was reflected in the comments of the hon. Member for Edinburgh East, who, in relation to the aim of our welfare proposals to support people into micro-jobs, was quite disparaging of that type of job. Indeed, she stated on more than one occasion that we should consider the “type” of job that people will be able to take up as part of our reforms. I think that that is a symptom of the problem.

In my constituency of Aberconwy we have worked extremely hard to try to turn the tourism industry from something that is seasonal to something that is year-round. We have put a lot of emphasis on trying to ensure that the seaside resort of Llandudno is no longer somewhere that attracts people only for three months in the summer. By investing in conference facilities and so forth, we have tried to ensure that the hotel and service industries supporting tourism in the town work throughout the year. We have seen a huge growth in employment in the tourism sector in Llandudno over the past 10 years, yet that growth has been filled largely by people from eastern Europe who are willing to work hard.

From my point of view, the incredible sadness is that those individuals who have gone into what some Opposition Members would call “poor jobs” have ended up working themselves into positions of responsibility and management. I despair when I go out knocking on doors during election campaigns and meet people in the town who have lived there all their lives but have not grasped those opportunities. They live in a system that has allowed Opposition Members to forget their consciences because they have been able to say that they are providing money. There is more to the welfare state than providing money: we have to provide aspiration and a concept of self-reliance. We have to send out a message not just as a Government, but as a society, that work not only has to pay, but that it is the route to better oneself and one’s family. That seems to have been missing from the Opposition’s contributions to the whole debate.

Finally, it is also worth making quick reference to the comments made by the hon. Member for Bridgend (Mrs Moon), who is no longer in her place. She said that she was sincerely of the view that the Department for Work and Pensions should make no effort to hassle and harass people who are unable to take up opportunities to work because of child care issues and so forth. I was intrigued by the use of the word “harass” in relation to trying to support people back into employment. One aspect of the Bill that we must understand is that it is not happening in isolation, but hand in hand with investment in the Work programme, which will try to ensure that people are not left to fester on benefits or have an existence on welfare. The Government are trying to reform the welfare state, but we are doing so in a way that tries to support people back into employment, and that aspiration should be shared by all Members of the House.

New clause 3 makes an important point. I disagree with it as it has been tabled, but I think that we will need to look very carefully at how we deal with free school meals in the system, because it is an issue of real concern to parents. Yes, of course they want to take the opportunity to have a job, and of course they are reassured by the fact that the reforms we are putting in place will make work pay, but as part of that, if they have three or four children, how we deal with free school meals is clearly appropriate and does not work against the proposals to ensure that work pays.

I fail to understand why the Government are being castigated for not providing enough detail in the legislation. The reason that we have not yet done so is that this is an incredibly difficult proposition to get right, as Members on both sides of the House have agreed. I see nothing wrong with saying that we will endeavour to get it right and that we are going to ask the experts to look at the issue on our behalf. I am reassured by the Minister’s comments in Committee, when he stated categorically that our aim was not to make any family currently in receipt of free school meals worse off.

[Ms Buck]

The hon. Gentleman is arguing that the Bill will make work pay and that we should accept it without these crucial details. Does he accept that key child care charities, when making their submissions to the Government following the seminar, pointed out that 250,000 families would see their entitlements cut by £30 to £35 a week, that some would face a marginal rate of deduction of 100%, and that a lone parent on the minimum wage working for more than 24 hours a week would have a marginal rate of deduction of 94%? If we are being asked to believe that the Bill will always make work pay, we should be able to understand what its impact will be and have a chance to interrogate the Government properly.

[Guto Bebb]

That is an interesting contribution, but in truth I fail to see how those charities can make those calculations when we have not yet brought any proposals to the table. It is difficult to understand how those calculations were made, unless they were based on hearsay or assumptions.

Asking the experts to look at this on our behalf will enable us to introduce a set of proposals that will work. Also, hon. Members should be reassured by the fact that we will allow Parliament to look again at the proposals before they are enacted. That will allow scrutiny once they have been developed in detail. I agree with Opposition Members who have stated that the free school meals policy needs to work. Ultimately, there is no point in creating a reform to the welfare state to make work pay if it does not take into account the impact of the free school meals entitlement.

We need to be careful about new clause 4, because it fails to take into account the complexities that I have discussed with colleagues in the Department for Work and Pensions relating to the different arrangements for prescription charges in the various parts of the United Kingdom. Of course universal credit must take into account the need for some kind of support for prescription charges in England, but the situation is different in Wales and Scotland, where, for reasons best known to the Governments in Cardiff and Edinburgh, people do not need to pay for their prescriptions. I find that policy very odd. I can walk into a chemist in Llandudno and get a free prescription, whereas I would have to pay for it in London. Personally, I would be happy to pay a small contribution rather than getting support in that way.

The issue of passported benefits relating to prescriptions is an important one that needs to be looked at. We cannot end up with a system that builds compensation for prescriptions into a universal benefit for the whole United Kingdom without taking into account the complexity that I have just described. I applaud the fact that we are looking at this in detail and trying to introduce a policy that will be fair to all. I am surprised that the Opposition see the fact that we are giving these matters a great deal of care and attention as something to belittle, rather than something to celebrate.

As a Conservative Member, I would find it difficult to argue against the presumption of people saving for a rainy day. I find surprising some Opposition Members’ arguments that people who fall on hard times should not use their savings. If that had always been the argument in relation to every possible hard time, there might be some merit to it. However, we heard the bizarre argument from the hon. Member for Edinburgh East against someone who had had their working hours reduced having to use their savings rather than rely on universal credit, even though I suspect that she would be willing to continue with the current situation, in which someone who becomes unemployed, which is much worse, is expected to use their savings before being able to claim anything from the state.

19:15

Our proposals for universal credit are trying to be fair across the board, and I do not think that we can have a rule that someone will have to use their savings if they are unlucky enough to become unemployed, but that the state will support someone whose hours are reduced, even if they have £50,000 saved in an ISA. I cannot see the logic of that proposal. Never mind the cost of the £70 million that Opposition Members have talked about, I simply do not understand someone who becomes unemployed having to use their savings while someone whose hours have been reduced is able to call on the support of the state.

I sincerely hope that, in better times, as we see a transformation in the public finances, we will be able to increase the limits on savings. I want people to be self-reliant. I want them to save for a deposit on a house, for their children’s weddings or for their retirement. We must bear in mind, however, that we need to be fair to all taxpayers. There is nothing acceptable in amendments 23 and 24. I see nothing logical in a proposal that the state should step in to support someone with £50,000 in an ISA whose working hours are reduced, yet if that same person were made unemployed they would be expected to use those savings to pay their way until the savings were exhausted. The Government’s welfare reform proposals are much more logical, in that they try to ensure that people have an understanding of the importance of self-reliance.

Amendments 27, 28 and 29 deal with the situation for the self-employed. The right hon. Member for East Ham (Stephen Timms) noted from my contributions in Committee that I was supportive of small businesses, and he was astounded to hear me supporting the Government’s proposals on how universal credit will relate to the self-employed. I want to state categorically that the universal credit system must support self-employment. My constituency is highly dependent on small businesses and, indeed, micro-businesses. The definition of a micro-business is one that has between one and nine members of staff. Most small businesses in my constituency do not even have five.

I fully appreciate the importance of self-employment to the economy of Aberconwy and to Wales. I would not be standing here supporting a proposal that attacked the ability of the self-employed to benefit from the universal credit system. However, the system has to be fair and reasonable. The Department for Work and Pensions is trying to re-establish the enterprise allowance scheme, which is an indication of its commitment to encourage people to consider self-employment as a route out of worklessness. I do not for a second believe that the Government would encourage people into self-employment with one policy while penalising them for so doing with another.

I support the Department’s attempts to find a way of avoiding self-employment being used as a means of claiming universal credit payments when they are not actually justified. My example, which drew a degree of scorn from the right hon. Gentleman, is not made up; it is one that I came across in my previous life before being elected as a Member of Parliament. Someone set up a small business and, in an entire year of being self-employed, managed to generate sales of less than £80. It would be completely unacceptable for someone in that situation to get universal credit payments based on their being self-employed. Most people in small businesses work extremely hard, and they would not recognise £80-worth of sales in a year as running a small business. The key issue is that the Department must recognise the hours put into small businesses by their proprietors. It would be unfair to the self-employed if we ended up saying that somebody who ticked a box on a form saying that he or she had worked a 70-hour week in their business should have that calculated on the basis of the minimum wage. Having had discussions with the Minister, I do not think that that is the intention; rather, it is to have a clear level at which the self-employed are expected to perform before they can benefit from universal credit. That is reasonable and acceptable. I encourage the Department to continue to consult the small business community, who will be able to add a lot to the debate in ensuring that we get this right. The system must support small businesses, but it is not unreasonable to expect it to do so sustainably and fairly.

As a Government, we have to think carefully about what is deemed to be the income level of the self-employed and about the potential burdens that we might place on small businesses with a reporting system that is too demanding in terms of regular responses. I think the Minister alluded to the possibility of quarterly returns, and that is not unreasonable. Many small businesses in my constituency will not thank me for saying this, but they are quite happy to deal with their VAT returns on a quarterly basis. They would love to be without that requirement, I must admit, but they deal with it on that basis and are used to doing the same with their pay-as-you-earn returns. They would not necessarily find too unreasonable the burden of having to report their earnings in relation to universal credit on a quarterly basis. We need to take that into account.

Although using net profit as a means of calculating the income of the self-employed is equivalent to how the self-employed are dealt with for tax purposes, it might not necessarily result in a fair outcome in creating a system that provides support from the taxpayer for their living needs. An annual investment allowance of £100,000 for capital allowances does not sound like a huge amount of money for large concerns, but for many small businesses it means that they could invest in one piece of capital and immediately wipe out their profit. The frustration for other taxpayers when that type of thing happens is that they see somebody running a successful small company, investing in brand-new capital and getting a 100% tax allowance in one instalment, which means that they are reporting a zero income for tax purposes. I question whether that is an appropriate basis on which to calculate universal credit entitlement, because it is a means by which the self-employed have the capacity to reduce their earnings for universal credit purposes that is not open to those who are in paid employment. I believe myself to be a champion of the self-employed, but the Department is right to think carefully about how to ensure that we have a reporting system for the self-employed that is not only fair to them and encourages self-employment but fair to the general taxpayer and to other universal credit recipients.

Many of the amendments and new clauses are interesting, but when one considers the Bill in full, it is difficult to support any of them.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

I listened with interest to the hon. Member for Aberconwy (Guto Bebb), who said that this debate reminded him of the Committee stage of the Bill. I feel a bit like an intruder, because I did not serve on that Committee. I am not sure whether he meant that he was enjoying the experience or enduring it.

I want to make a few remarks about new clause 6. I am not sure whether it comes into the category of superfluous detail to which the Minister referred—or blessed detail, as one of his hon. Friends described it—or deals with something that was considered in Committee. Last week, I had a discussion with people at Rutherglen and Cambuslang housing association in my constituency, who are concerned about the payment of the housing element of universal credit and the changes that are being made to the current arrangements on direct payments. As someone who is not an expert in these matters, the new clause seems to me to draw a good balance between the desire to try to ensure that universal credit gives people responsibility for the money that they receive and protecting the interests of tenants of social landlords and the effectiveness of social landlords such as the housing association I mentioned and, I am sure, many others around the country. The new clause would allow the housing element of universal credit to be paid directly to the landlord if the person in receipt of universal credit requests it or if the tenant is in considerable arrears.

Social landlords are worried that income streams might be significantly reduced because households facing financial constraints as a result of rising food and fuel prices and other calls on their budgets which may be greater in future choose to spend the money received from universal credit on items other than rent, for which the housing component of universal credit is primarily designed.

[Sarah Newton]

The hon. Gentleman is making a good point. Is he assured, as I am, by what the Minister has said—that the vulnerable types of household that the hon. Gentleman is so well describing can make those payments directly to landlords at the moment, and that because the Government do not want to disadvantage anyone in the transition to universal credit, that mechanism will be allowed to continue?

[Tom Greatrex]

I am seeking an assurance from the Government that that system will be able to continue.

The proposed change has potential difficulties for the social landlord as well as for the tenant. On several occasions over the past year, I have heard the Government express determination to try to ensure that organisations in receipt of public money are as efficient and effective as possible. That is also important for social landlords and housing associations. If we move to a new arrangement whereby direct payment is not possible, there is a risk that they will end up spending a disproportionate amount of their time, resources and effort on attempting to get arrears from tenants instead of trying to be as effective and efficient as possible in prioritising and concentrating on improving their stock and dealing with the other issues that they face. That could constrain their ability to repay private finance that they have borrowed to finance new building. If housing associations are seen as higher risks, they may face even stricter conditions on their borrowing, which would affect their ongoing business.

There is also the question of whether tenants may resort to doorstep lenders or other loan sharks. I am sure that I am not the only Member present who has seen examples in their constituency of people being driven into that sector. I know that Members on both sides of the House have addressed that issue in debates on other measures. In seeking to ensure that people are responsible for the benefit that they receive, we must not put ourselves in a worse position by removing that direct payment.

As I said at the start of my remarks, I am new to this area of debate. I was not on the Committee and have not dealt with it in the same detail as others. However, it is important to protect a system of direct payments, particularly for social landlords. I hope that the Minister reflects on that, even if he thinks that the new clause is superfluous.

19:30

[Paul Uppal]

I will modify my speech to highlight some of the concerns expressed by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) on new clause 6. That will be the beef of what I will say. We spoke about this issue at great length in Committee and I spoke about it personally. Like my hon. Friend the Member for Aberconwy (Guto Bebb), I feel like we are back in Committee. I assure the hon. Member for Rutherglen and Hamilton West that it was always a pleasure to sit on that Committee, and I am sure that Opposition Members will concur.

We received representations from various groups on the merits of paying housing benefit directly to landlords, principally from Citizens Advice, Crisis, the National Landlords Association, the Residential Landlords Association, Shelter and the British Property Federation. As the hon. Member for Rutherglen and Hamilton West said, and as was said in Committee, there are persuasive arguments about paying housing benefit directly to landlords. It is perhaps ironic that it was the last Labour Government who changed the system in 2008. Before that, rental payments did go directly to landlords.

As was rightly said in an earlier exchange, the Minister has highlighted that there is provision in the Bill for paying housing benefit directly:

“We recognise that in some circumstances, direct payments to landlords may be necessary, and the Bill makes provision for that.”––[Official Report, Welfare Reform Public Bill Committee, 5 April 2011; c. 363.]

I hope that that gives the hon. Member for Rutherglen and Hamilton West some comfort on his specific concerns. I hope the Minister will forgive me if I am pre-empting his response, but we discussed this matter at length in Committee.

I think that there is a deeper point on the issue of responsibility. The Leader of the Opposition raised this issue this morning as the cornerstone of his speech. I do not want to go over what has been said too much. The essence of my point is that it is easy to talk about responsibility, but the Government are actually delivering on it. I have my concerns about the payment of housing benefit, but having sat on the Committee, looked at the findings of the reports and considered the evidence, I have come to the conclusion that if we are sincere about the aim of this Bill of getting people off benefit and into work, the first step is not only getting people into work, but individuals taking responsibility. The concerns underlying new clause 6 are addressed by the Minister’s remark that the whole essence of the Bill is to tackle the issue of responsibility.

I am sure, Madam Deputy Speaker, that you were as enthralled as I was by the exchange involving the hon. Member for Edinburgh East (Sheila Gilmore) and my hon. Friends the Members for Aberconwy, for Dover (Charlie Elphicke) and for West Worcestershire (Harriett Baldwin) about the number of people who have not worked in the past 10 years—a time of plenty compared with the situation that we face now. The point that was missed in that exchange was the pernicious nature and corrosive effect of what we have seen over the past few years; this is not just about getting people into work. We have arrived at a situation in which not only are there people who have never worked, but there are whole families who have never worked. The exchange missed that point, but it was eloquently covered by my hon. Friend the Member for Aberconwy.

[Ms Buck]

The hon. Gentleman is right that addressing worklessness that has crossed generations should be a concern on both sides of the House, and it is. However, does he agree that the number of people growing up in households where nobody has ever worked through two generations is 20,000 at the most, which is 0.1% of people on working-age benefits? That is far too many, but it is only 20,000 people.

[Paul Uppal]

I accept the hon. Lady’s point, but I go back to the corrosive effect that that is having on society. There are people living cheek by jowl with the 20,000 families that she has mentioned, who are aware of the situation.

A constituent spoke to me who comes from one of the handful of families on her road who actually work. The rest of the families on her street have made a conscious life choice to live off benefits. [Interruption.] The hon. Member for Westminster North (Ms Buck) may nod, sigh and take a deep breath, but I am faced in my weekly surgeries by people who live in the real world—people who have to deal with the hard reality of life. My constituent had to face ridicule for going to work. That is the situation that we have.

As I have said before in this House, I have experienced poverty in my life. I have not read about it in a book or dealt with it at arm’s length from behind a desk; I have seen it with my own eyes and experienced it in my family. That is why I am passionate about it and why I was proud to sit on the Committee. Too often, the issues that we talk about are detached from the reality of life. This legislation is not about appealing to red-top newspapers or making grand-standing statements, as was said in Committee, but about tackling the issue head-on. Hon. Members have talked about the number of jobs created over the past decade that were taken by foreigners who came to these shores with an ethos of working. My hon. Friend the Member for Aberconwy mentioned eastern Europeans. My family have gone through that experience. We came to this country with an ethos of working; that was our aspiration. The idea that we could claim benefits and use the system to support us was anathema to us. That idea is what this Bill tackles.

[Matthew Hancock (West Suffolk) (Con)]

I have been listening carefully to my hon. Friend’s powerful speech. Does he agree that 20,000 families who have never worked is simply 20,000 too many?

[Paul Uppal]

Absolutely; the intervention from the hon. Member for Westminster North was very telling. It missed the point about the message that Governments send out. Let me make it absolutely clear that I am not criticising individuals and families; it is the system that is corrosive. If the system is corrosive and, to quote my constituent, rewards idleness, what do we expect of human beings? I have faith in the British public. We have budding entrepreneurs and young people who have aspirations to achieve the best that they can. However, through unintended consequences, aspiration has been undermined, particularly over the past 10 years. I have seen that so often when I meet young people. They have a choice between work and a life on benefits. They have looked me in the eye and said that a life on benefits is not such a bad option.

[Andrea Leadsom (South Northamptonshire) (Con)]

I recently met a lady in my constituency who is a health visitor, and she told me of a trip that she had paid to a family living in Northamptonshire. The mother had just had her fourth child, and her eldest child was 15 years old. As the health visitor left, the older daughter chased her out and said that her mother was trying to persuade her to have a baby to improve their income, but she did not have a boyfriend and did not really want one. She asked what the health visitor would advise that she do. That is symptomatic of some of the problems that we have in this country as a result of our welfare system.

[Paul Uppal]

I thank my hon. Friend. Sometimes we in the House have to face uncomfortable truths. We may not like them, but they are the reality that we have to face. I believe that the Bill, in its entirety, goes some way to addressing such problems. I have said before, and will say again, that it is very easy to talk the talk in opposition, but the Government are walking the walk. We are delivering something that is popular not just with Conservative voters but with Labour voters. There is consensus across the board on the issue, and it unites most voters whom I have met, whichever party they vote for. They have seen the reality of what we have done to introduce an ethos of work, aspiration and ambition.

I am glad that I am part of a Government who are taking the difficult decisions and doing the important things. This is a seminal Bill, and people will look back on it as one that changed this country for ever. I know that I may have veered away from my original comments on new clause 6, and I am sorry about that, but sometimes we have to say it as we see it. I, for one, am glad that we have introduced the Bill, and I think it will make this country a better place.

[Yvonne Fovargue]

I agree with one thing that the hon. Member for Wolverhampton South West (Paul Uppal) said, which was about taking responsibility. I therefore hope that he can support amendment 26, because it will mean that agencies can ensure that people know their rights and responsibilities following what has been described as the most fundamental change to the benefit system.

One of the first witnesses to appear before the Public Bill Committee said that although universal credit is a simplified benefit, the application for it will not be simple, because of all the different benefits that are rolled up together into it. I am old enough to remember when supplementary benefit changed to income support, and I saw the rise in demand for advice among people worried about what would happen to their income. For people who are on benefit, a small change in income means a lot.

That problem will be exacerbated in the current case, particularly given the fear of a civil penalty for a mistake or omission. People who go to advice bureaux do not want to know how to defraud the system; they want to know how to fill their form in correctly. An online application process will also worry people—particularly older people, but also some younger ones—who are concerned about filling a form out online and not seeing it until three, four or five days later. Support is needed to smooth the transition.

Universal credit will start in 2013—exactly the same time when the proposed changes to legal aid will remove help for the most complex welfare benefit cases. As my right hon. Friend the Member for East Ham (Stephen Timms) said, that is the perfect storm. Local authorities are examining every non-statutory service that they provide, and in some cases local advice agencies are losing funding. In fact, in a survey, 54% of local bureaux said that they were worried that they were unlikely to be around in 2013.

Let us scotch one myth. Local bureaux and advice agencies do not get any funding from central Government. The money goes to the central Citizens Advice, which provides a vital service in support of local bureaux. It provides information, training, support and IT services. Putting more money into local bureaux would mean that more would have to be charged for those services. It would be self-defeating. Local face-to-face advice is vital, along with the advisory telephone service. Many claimants are vulnerable, and such advice, provided locally, is of particular importance to them.

[Richard Graham (Gloucester) (Con)]

Does the hon. Lady agree that local citizens advice bureaux are probably one of the most important and good causes to whose funding local government can contribute? Will she therefore join me in applauding my city council in Gloucester for the valuable increase in funding that it has given to our local CAB, and recommend that action to other councils?

19:45

[Yvonne Fovargue]

I will, but to say that local government is the main funder of CABs is to oversimplify the matter. I know of one bureau that had at least five different funding streams—the primary care trust, legal aid, the local authority, housing associations and a hospital. CABs rely on a mixture of funding streams, many of which are being reduced at the moment. Local authorities cannot take up all the slack, much though they should be continuing advice services.

Investing in early advice saves money. Avoiding costly tribunals and appeals is vital, and people who do not have access to advice are more likely to pursue their case to the appeal stage, costing them money and stress. Public confidence in any new system is vital. Advice on welfare benefits is crucial, and I urge the Government to accept amendment 26.

[Mr Nigel Dodds (Belfast North) (DUP)]

The hon. Lady is making a powerful point. The CAB in my constituency—in the Rathcoole area, which is very needy—does excellent work along the lines that she has described. Does she agree that whatever one’s views about the other amendments or the Bill, everybody should support amendment 26? Clear advice to constituents and clients is what it is all about, whatever one’s views.

[Yvonne Fovargue]

I thank the right hon. Gentleman, and I agree totally. The amendment would simply give people the opportunity to receive advice about their rights and responsibilities. That is crucial at any stage, but particularly when a new welfare benefit system is brought in. I urge all Members to support the amendment.

[Charlie Elphicke]

I rise to speak against new clause 2. One of the major achievements of the reform of introducing universal credit is enabling people to have greater flexibility in taking on part-time jobs—so-called mini-jobs. I have made the point several times in interventions that it is critical that we enable people with child care responsibilities to have the maximum flexibility in how they organise their child care and for how long they wish to work, so that they are reintroduced to the world of work.

I praise the Government particularly for making the effort to consult all parties in their recent seminar. It was not just members of the Public Bill Committee who were there, but members of the Work and Pensions Committee. Such engagement is important, because it enables us to get everything right. The Government have introduced a Bill that is a bookcase into which the books will later be slotted, and they are making an effort to ensure that the books read well and effectively.

One of the most telling parts of the briefing that we were given in the seminar was about what parents had told the DWP that they wanted. It informs the decision on whether new clause 2 is right. The DWP publication—“briefing” is probably a better description—is entitled “Childcare support in Universal Credit” and dated May 2011. It states:

“Recent findings from a survey of lone parents on Income support and with a child aged 5-6 found a strong preference for working part-time.”

Among those looking for work or expecting to do so in future, the majority stated a preference for 16 to 29 hours’ work a week, with 45% giving a preference of exactly 16 hours. Why exactly 16 hours? It has been drummed into everyone that they have to go out and work for 16 hours, not a moment less, or they will not get any help with child care. Subsection (5) of new clause 2 makes it clear that the Opposition want that prescribed minimum number of hours a week to remain. In other words, they do not want the mini-job, and yet we know that lone parents show a strong preference for working part-time, which should be respected. People are not here to dance to the Government’s tune: Governments should dance to the tune of the people, and be as flexible, helpful and enabling as people wish.

[Ms Buck]

While the hon. Gentleman is on the subject of the survey of parents’ opinions, does he know how many of the 250,000 parents who are expected to lose between £30 and £35 a week under both options in the Government’s proposals said that they wanted less support with their child care?

[Charlie Elphicke]

I have not conducted a detailed survey on that. I am also unsure what the 400,000 or 430,000 who will win approximately £50 say. There will always be winners and losers, but what I like about this policy programme is that there are almost twice as many winners as losers, and they will win an awful lot more money, which helps the transition to the policy.

Let me return to the evidence of parents. The Government document states:

“Many out of work mothers, both lone and partnered, are looking for jobs that will fit in with their children’s schooling—i.e. jobs that are part-time and preferably within school hours.”

That is obvious and self-evident—any parent knows that—but it is important to have survey evidence so that the argument has an element of objectivity. The document goes on to say that out-of-work mothers

“tend to look for work that is local and flexible, so that they can be available if, for example, their child is taken ill.”

All of us parents have been there—have we not?—when our children get sick and we send them off in the morning, tying their scarves up tight and hoping that no one notices. When they do notice, we get a call. I have had to make that run—even though, as I am told, as a man I have no rights in respect of child care responsibilities. Some of us in the younger generation are new men, although I hesitate to apply that description to myself.

The document also states that those factors—locality and flexibility—

“are often seen as being more important than the type of job they move into.”

It is all about flexibility, which we need. All of us parents have been there and understand that. Child care is quite often a nightmare, and always a juggle. Half the time parents are terrified that they will get a call just when they have an important meeting to go to.

The document also states:

“A study of lone parents who had recently moved into work had overwhelmingly chosen jobs where their hours fitted with looking after their children. It was common for interviewees to be working between 16 and 29 hours per week.”

Again, there was almost certainly not the flexibility to have a mini-job. Mini-jobs are important in enabling such flexibility. It is not right for parents, particularly parents of little children, to be forced into endless hours of work, or to work for more than 16 hours. New clause 2(5) is therefore extraordinarily unhelpful, and a retrograde step.

On parental employment, what happens when children are five and six is telling. This is about the youngest tots. When children are that age, parents are just going out into work, having previously perhaps been full-time parents. Employment of lone parents of children that age is about 55%, but the employment of partnered mothers is 75%, which is the parental employment rate. We can see, therefore, that there has been a massive societal shift into joint working among couples. There has been a move away from the traditional old-style model, whereby the bloke goes off to work and the woman stays at home to mind the kid and the kitchen sink, to more economic sharing and greater equality, which is a positive thing.

[Richard Graham]

My hon. Friend is developing a powerful case for greater flexibility, which is precisely what the Bill proposes, and which the new clause would not reflect. Does he agree that there is perhaps not enough understanding in the wider world of the flexibilities in the Bill that will help single mothers to take jobs on a flexible basis?

[Charlie Elphicke]

My hon. Friend makes an extraordinarily powerful point. Part of the reason for that is that a lot of scaremongering is going on. The scaremongers deny that the Bill provides that flexibility and say that people will lose out, but we know, from the detailed figures in the Budget and the briefing document to which I have referred, that most people will be far better off under the reforms, that they will have more money, and that work will always pay.

[Ms Buck]

On the subject of scaremongering, is the hon. Gentleman aware that in their letter to the Secretary of State on this issue, the organisations that could fairly be said to have a good grasp of the issue—from the Daycare Trust to Gingerbread, Family Action, the Child Poverty Action Group, Working Families, the Children’s Society, Save the Children and the Resolution Foundation—said that they were concerned that the proposals could effectively end the prospect of full-time work for single parents and second earners, and for couples on low and middle incomes who need support with child care costs, and that that will have the result of hampering their ability to find work, and making it more difficult for them to lift their families out of poverty?

The hon. Member for Dover (Charlie Elphicke) supports the flexibility for people to work fewer hours—in principle, we all agree with that—but he wants to restrict the flexibility for people who want and need to work longer hours.

[Charlie Elphicke]

I do not make my money out of campaigning, and I never have. Anyone who has done that will know that maximum fear is the way to get the most subscriptions, the largest membership and the highest amount in grants. I make my money out of my only job, which is serving my 71,000 or so constituents and trying to do what is best.

Perhaps I am old-fashioned, but I occasionally open the Budget Red Book and look at the detailed figures. Table A2 on page 80 makes it clear that a lone parent with one child working 35 hours a week would have £105 without universal credit, and more or less the same with it. However, when parents work 10 hours, things change. A lone parent working 10 hours rises receives £20 without universal credit, and £53 with it. If we move to universal credit, those people will end up, broadly, with more money. That mini-job is massively incentivised by universal credit, which makes part-time working much easier.

Why does part-time working matter, and why should we give greater incentives for it? To answer that, we must look at the proportion of parents with child care responsibilities who are in work. Some 61% of lone parents who have children aged between five and six, who would find things difficult under new clause 2(5), work part-time, as do 64% of partnered mothers of children of that age: 64% of all mothers work part-time. The statistics are pretty clear that we have had a joint working revolution: there is much more sharing of economic power in couples, and more pooling of income. To a great extent, universal credit recognises that in the system.

There has also been a revolution involving women in the workplace. Often they work part-time, because even now there is a bias towards women having primary responsibility for child care. Finances might be shared, but the responsibility for child care tends to fall to women. That is what comes out pretty clearly from the figures. For that reason, we should allow women maximum flexibility. Why have a 16-hour cut-off, as new clause 2(5) proposes? I, for one, cannot agree with that. It is not the right way to go; it is a retrograde step.

[Sarah Newton]

My hon. Friend makes an extremely good case. Does he agree that the letter referred to by the hon. Member for Westminster North (Ms Buck) was a response to a consultation, the whole point of which was to receive critical feedback to help the Government to develop appropriate policy?

[Charlie Elphicke]

I completely agree. That is the whole idea of consultations. The Government have reached out to all those groups. I am disappointed that the Opposition have used this opportunity just to throw rocks, when the Government have reached out to all parties in the House in designing the fine detail of the Bill, and truly sought to engage.

20:00

[Richard Graham]

It seems extraordinary that the hon. Member for Westminster North (Ms Buck), with whom I sat on the Work and Pensions Committee, does not recall the stream of anecdotal evidence from our constituents about how many women are at home on benefits because they have worked out that under the current system it is impossible to take a job and be better off. The whole concept of work paying, which drives this Bill, must surely unite Members on both sides of the House.

[Charlie Elphicke]

I would hope so. New clause 2(1) mentions

“a childcare element for claimants who are in work, except in prescribed circumstances.”

One of the problems with the current system is that 52,000 families already in receipt of tax credits are entitled to, but did not claim, the child care element in 2008-09, whereas 55,000 families were entitled to the child care element but did not claim tax credits in the same period. We need to ensure that real help is available for children. Universal credit will ensure that we do not have thousands of families who do not receive their full entitlement. That is a really important aspect of the Bill.

I am not sure that new clause 2 is the right way forward. I am concerned that it would cost the vast extra sum of £400 million in Government spending. It would be expensive, but retrograde, and it would make life harder for those who want to be in part-time work.

My other concern about the new clause is that the maximum award for the child care element is far higher than was set out in the consultation document. I can only assume that in drafting it the Opposition thought, “What high figure can we come up with that will be a substantial number so we can appear to our constituents to be much more generous in spending other people’s money?” That is not a sensible approach. The right approach is to have the consultation that the Government are having so that the book, when it is written, is slotted into the bookcase and is as effective as possible.

The Government have made a real effort to make strides on this issue and they have come up with a really great plan. They have also gone to considerable lengths to put up various options for discussion. Nowhere in new clause 2 does it canvass the possibility of a different rate for children under five, although the Government have canvassed that possibility. Nowhere does the new clause mention the differences between what people would get with 70% child care costs and with 80% child care costs: it just assumes that the figure should be 80% or 90%—figures that, on the face of it, appear to have been plucked out of the air. Nowhere does the new clause discuss the working of the hours rules, which would create great problems especially for lone parents and the parents of the youngest children who are just starting to find their way back into work. We must support them in going back into the workplace. That is the sort of discussion that we should be having, and I would hope that the Opposition would work positively with the Government to try to achieve a system that works for everyone.

These reforms are important because we need to reduce child poverty. In recent years, the figures have not been pointing in the right direction, if one includes after-housing costs. I will be challenged and told that that is the wrong figure to use and that I should use before-housing costs, but as I said in Committee people have to live somewhere. We cannot expect them to live in a garden shed or on a remote Hebridean island at very low expense where perhaps they could find shelter and the odd sheep. Indeed, the hon. Member for Stretford and Urmston (Kate Green), who is no longer in her place, nodded in Committee when I said that this was the right measure.

In 2004-05, some 3.6 million children were below the 60% median for after-housing costs and now it is 3.8 million. I regard that figure as worrying in terms of the mischief that the universal credit and new clause 2 are aimed at combating. The Government’s plans would substantially reduce child poverty. New clause 2 and the Government’s plans are presumably aimed in the same direction, but the latter would reduce child poverty by at least 50,000 in 2011-12. I see that as a positive move. I asked the Secretary of State today about the effect of universal credit on poverty and he said that 90,000 fewer people would be in poverty. That is the right direction.

The Opposition have tabled amendments 23 and 24, which propose that the prescribed maximum should be £50,000. In other words, if someone has £50,000 in the bank but their earnings are very low, they will be able to claim under universal credit. Earlier, I put an example to the hon. Member for Edinburgh East (Sheila Gilmore). If a person earns £50,000, has no savings—probably a young person—and pays tax, they will be subsidising an older person on lower earnings but with £50,000 in the bank. If we asked people in the street whether that was really justifiable, they would say no. The reason we save is to have a rainy day fund. The whole idea of such a fund is that when it rains, we should spend it—because we believe in taking responsibility for ourselves.

Today, the Leader of the Opposition gave a little speech about responsibility. He said:

“Labour—a party founded by hard working people for hard working people—was seen, however unfairly, as the party of those ripping off our society. My party must change.”

But I looked at the amendments and saw that Labour wants to give benefits to people who have £50,000 in the bank. Are we being ripped off? Is that a party that believes that hard work brings rewards and that believes in responsibility, in a messianic conversion, or is it a party that simply wants to hand out other people’s money like confetti?

I read on in the speech and I realised that the amendments had been tabled for the sake of a sound bite. The Leader of the Opposition said:

“Just take their current welfare reform bill.

It punishes people in work who save, denying them the help they currently get through tax credits.”

Well, there is saving and there is saving, and if we polled people I am sure that we would find conclusively that someone with £50,000 in the bank should not get any out-of-work benefits. They should take responsibility and seek to get back into work as quickly as possible.

[Paul Uppal]

As usual, my hon. Friend is making an excellent speech. Does he not highlight the fact that this is a moment for the Opposition to decide on which side of the fence they stand? They talk about reform, but it will be interesting to note how they vote today and on Wednesday.

[Charlie Elphicke]

I agree. In fact, let me use the words of the Leader of the Opposition, who said:

“Finally we will never encourage a sense of responsibility if society is becoming more and more unfair, and more and more divided.”

We know that Labour divided our country more between the rich and the poor when it was in office, and we know that giving people who have £50,000 in the bank out-of-work benefits would be deeply unfair to the ordinary working person in the street.

[Sheila Gilmore]

I apologise for missing so much of the hon. Gentleman’s speech. I am sure I would have been greatly entertained. However, I was not aware that the amendment before the House would give out-of-work benefits to people with savings. This is about people who are working and trying to get themselves back on their feet, which he said he wanted.

[Charlie Elphicke]

If we asked the person in the street, “Do you think that benefits, even universal credit benefits, should be paid to someone who has got £50,000 in the bank?”, they would give us a pretty robust response. I represent a constituency with a lot of deprivation. Average earnings are about £20,000 a year—£50,000 is a king’s ransom to the people whom I serve. Most people could never dream of having so much money in cash. They might have it locked up in their house, but they could never dream of having that kind of money in ready cash. It would be an astonishing position to be in. If I went down Dover high street and said, “Do you think that people should get universal credit if they have £50,000 in the bank?”, the response would be demonstrative, pretty conclusive and probably pretty rude—it would be expletive-laden.

In my constituency, when I knock on a door, like my hon. Friend the Member for Wolverhampton South West (Paul Uppal), and say, “What are your concerns?”, after expressing vehement concerns about the number of overseas visitors, 1 million of whom have taken jobs in recent years, and about the 5 million people who could work but do not, people move on and say, “And that person down the street has a plasma TV and so on, and they have not worked a day in their lives.” We have discussed this important and serious issue. We need to encourage people to take responsibility and to work, and not encourage them through amendments such as amendments 23 and 24, which would allow people to claim benefits despite having £50,000 in the bank.

This whole strand of thinking is symptomatic of a way of thinking that has caused the number of working-age people in relative poverty, after housing costs, to rise from 6.5 million in 2001-02 to 7.9 million in 2009-10. That is a staggering rise. We have to bear it in mind that in those years this country enjoyed the most massive boom, yet a whole load of our countrymen slipped further into relative poverty. It is not just a question of intergenerational poverty or of households that have not worked for ever and ever; it is a question of going into relative poverty. The message sent by amendments 23 and 24 is not one of responsibility. It is not a message that says, “Look, we are on your side. You’re hard-working. We will support you.” The message sent by the philosophy of universal credit is one of responsibility: “If you work hard, you will be better off, and you will not be subjected to the dependency culture.” That has to be one of the most important and essential messages that the Government can send, and it is why the Bill will, in my view, be the most important Bill in this Parliament.

I hope that the House will indulge me on one more amendment—amendment 33, which deals with pensions. If a man aged 66 is married to a woman aged 45, how can it be fine for that woman not to be incentivised to work? I am deeply troubled by this. I put this issue to the right hon. Member for East Ham, and the Minister asked him whether he supported the principle, and thrice the cock crowed, yet he would not deny it—or, indeed, not deny it. It was wrong to table an amendment defending that principle, and to say, when an argument was made saying, “How can it be right?”, “Ah well, isn’t it bad of the Government to sneak it into a schedule.”

The House deserves a better argument than that for why previously people were not incentivised to work, and why the Government are wrong to take action on it. The Government are right to take action, and they are right to send the message that work should always pay, and that, if someone is of working age, they really should work. We have a massive mountain to climb: there are 5 million people in this country who could work but do not, who have been encouraged to live in a dependency culture, and who would be worse off if they went into work. There is much evidence that that sucked in 1 million people from abroad and overseas to fill the 1 million or so jobs created during the recent boom, while we cast 5 million people on to the slagheap of welfare dependency.

20:15

I suspect strongly that encouraging the 5 million people who could work but do not, and making work pay for them, will solve the problem of people being sucked into the UK from overseas. The problem might well solve itself, however, through a demand for employment from our countrymen. When that day comes, and if universal credit achieves it, it will be a great day for this country. It is fundamentally wrong that we should sell the pass on the hopes and aspirations of millions of people in this country who could be working, achieving and fulfilling their potential, but who for too many years have been thrown on the slagheap of hopelessness, dependency and failure. I am a Tory because I like people to succeed; I like people to do well; I want people to make money; I want them to be rich; I want them to be captains of industry; and I want the economy to grow even quicker, and I think that universal credit is the way to help more people to achieve and succeed in their hopes and aspirations, to get into work and to do really well.

[Stephen Timms]

We have had an interesting debate, and I welcome the Minister’s concession on the affirmative procedure for the initial version of some of the key regulations that will be introduced under the Bill. I would have liked him to go further, but I welcome the extent to which he has changed the Government’s position and welcome the amendments he has tabled to effect that change.

Unfortunately, the Minister gave us nothing else that I can welcome. It is an extraordinary failure on the part of Ministers that we do not yet have Government proposals on child care, free school meals or concessions on prescriptions. The Minister said that it did not matter, because there were still two and a half years to go before universal credit was introduced, but actually it is only two and a quarter years now—it was two and a half years three months ago, but they failed to come up with their policy proposals and three months have passed. It is not simply an academic issue, because even if all the policies had been clear two and a half years in advance, it would have been a stretch to get the IT in place by October 2013. As it is, the Government have not decided on those key parts of the policy, and I suggest that there is now no chance that it will be ready. However, that is a discussion for another day.

The hon. Member for Dover (Charlie Elphicke) accused the children’s charities of throwing rocks at the Government. It is out of order to make that criticism of Barnardo’s, Citizens Advice and the Children’s Society. Let me quote their letter:

“We welcome the removal of the hours rule”—

they welcome the provision that the hon. Gentleman supports—

“but the evidence shows it is not possible to do this. . . within the current budget without a significant negative impact on work incentives for those working longer hours.”

That is not throwing rocks but simply setting out obvious home truths, of which the Government need to take account.

[Charlie Elphicke]

Will the right hon. Gentleman give way?

[Stephen Timms]

No, I will not. Our position is that the Government need to listen to what people are saying to them and that new clause 2 provides protection. We do not want the work incentives worsened in the way in which charities point out.

It sounds as though the Government have abandoned the idea of a payslip for every universal credit instalment. I am disappointed—that was a good idea. Sadly, the Minister reaffirmed the Bill’s extraordinary penalties on saving. He gave no firm assurances on self-employment income, even though the hon. Member for Aberconwy (Guto Bebb) recognised the importance of that. The Minister appeared to acknowledge that there was a problem, which, I suppose is progress from his previous position.

The Minister gave us no assurances on adequate welfare advice. My hon. Friend the Member for Makerfield (Yvonne Fovargue) made a telling case about that. Many will be dismayed by his dismissal of the case for retaining support for disabled children. There is genuine worry about the impact of his refusal to ensure that benefit for children is paid to their main carer.

I wish to divide the House on new clause 2 on child care, on amendment 23 on the saving cap and amendment 27 on support for self-employed people in universal credit.

Question put, That the clause be read a Second time.

20:20

Division 288

Ayes: 215

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Labour: 205
Scottish National Party: 5
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Democratic Unionist Party: 1
Alliance: 1

Noes: 293

---

Conservative: 244
Liberal Democrat: 48

Clause 5

Financial conditions

Amendment proposed: 23, page 3, line 7, after ‘it’, insert

‘excluding any amount in an Individual Savings Account, up to a prescribed maximum of no less than £50,000, where the claimant is in work’.—(Stephen Timms.)

Question put, That the amendment be made.

20:36

Division 289

Ayes: 217

---

Labour: 204
Scottish National Party: 5
Democratic Unionist Party: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1

Noes: 299

---

Conservative: 250
Liberal Democrat: 48

Clause 11

Housing costs

[Ms Buck]

I beg to move amendment 31, page 5, line 29, at end add—

‘(6) Regulations are to provide for the Secretary of State for Work and Pensions and the Secretary of State for Communities and Local Government to review not less than annually the relationship between housing costs in the private rented sector and the level of the housing component of Universal Credit.

(7) Regulations are to provide that the Secretary of State for Work and Pensions must amend the calculation of housing costs where this is necessary to ensure that at least the 30th percentile of the list of private rented properties in each locality remains affordable to claimants, in light of the review under subsection (6).’.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following: Amendment 32, in clause 68, page 52, line 19, at end add—

‘(4) After subsection (7) insert—

“(7A) In relation to a dwelling of which the landlord is a local housing authority or a registered provider of social housing, regulations under this section shall not permit the AMHB to be less than the actual amount of the liability in a case where a person has provided the relevant authority with such certificates, documents, information or evidence as are sufficient to satisfy the authority that the person is disabled and is living in a property specially adapted or particularly suited to meet the needs of that person.”’.

Amendment 72, page 52, line 19, at end insert—

‘(4) The Secretary of State must lay before Parliament a report on the impact of subsection (3) within 12 months of the coming into force of that subsection.’.

[Ms Buck]

These amendments draw out two strands from the wide-ranging set of debates that we had in Committee on the treatment of housing costs before and going into the universal credit. In today’s DWP questions, the Secretary of State, who is in his place, told my right hon. Friend the shadow Secretary of State that I wanted to spend more on housing benefit whereas the shadow Secretary of State wanted to spend less. I want to put it clearly on the record that nothing could be further from the truth. I do not want housing benefit expenditure to rise and never have done. Nothing would give me more pleasure than seeing lower unemployment, rising incomes and low rents in both the private and social sectors that bring down the total housing benefit bill. I believe that Governments of both persuasions have been in error over the past 30-plus years in letting housing benefit take the strain of rising housing costs, especially given the deregulation of the private rented sector in the late 1980s, rather than investing in affordable housing supply over those three decades in a way that would have helped significantly in bringing down that total cost.

What I do not want to see, and what I fear may arise from the Government’s policy, is a set of arbitrary and ill-thought-out cuts to housing benefit and, indeed, local housing allowance that create homelessness and distress for vulnerable people and cause damage to the 400,000-plus working households in private rented accommodation whose housing support is going to be cut. It is worth noting that the homelessness statistics that the Department for Communities and Local Government produced on its website last week send out a warning message. For the first time in years there has been a significant increase in the number of households declaring themselves as homeless. There was a rise of 23% in the number of people approaching local councils for housing help—26,400 people approached their local authority for help in the first three months of 2011, and 11,350 applicants were accepted as being owed a main homelessness duty in the first quarter to March 2011, which is an increase of 18% on the figure for the same quarter last year and the first rise for seven years.

[Sarah Newton]

Surely the hon. Lady is going to acknowledge that all this is because of a very important step that this new Government have taken. We are honestly collecting the data on the number of homeless people. It was shameful that under the previous Government the whole system of counting homeless people was so rigged. It is no wonder we have seen this rapid rise, because we now have an honest appraisal of the situation and we can start to tackle the appalling legacy that we have inherited.

[Ms Buck]

I will be very interested to see the evidence for the hon. Lady’s assertion. Although I know that our two parties have differed in the past on their interpretation of “rough sleeping”—on street homelessness—and that there is a genuine debate to be had about how that is measured, I was not aware, and I stand to be corrected, that there has been a shift in the data set for the measurement of the number of people approaching local authorities as homeless and being accepted as such. Nothing on the DCLG website indicates that, so I dispute her definition and it seems to me that we are facing a genuine problem.

Even more worryingly, rent arrears and mortgage default were to blame for a growing share of the number of people who were approaching local authorities as homeless; although not the main cause, that is a growing cause of those applications. It gives me no satisfaction to see that; I do not want people to be made homeless. As we discussed in Committee, homelessness is one of the greatest traumas that any household can possibly face. The hon. Member for Truro and Falmouth (Sarah Newton) and other Government Members must face up to the fact that the statistics show a growing trend just as the cuts in housing benefit begin to be flagged up and as people react to the changes in the incoming benefits.

The second set of data to come out in the past week of which we need to be cognisant was a survey released on Friday by the National Landlords Association. It found that 58% of all private residential landlords plan to reduce the number of properties they let to tenants on local housing allowance. Some 80% of landlords expressed concern about the reduction in local housing allowance rates from the average market rents of the bottom 30% and the same number were worried, as I shall discuss in the context of the relevant amendment, about the future local housing allowance increases being linked to the consumer prices index rather than true market rents. The survey also found that 90% of landlords stated they cannot afford to reduce their rents to absorb changes to the local housing allowance as the large majority are faced with mortgage repayments and rising running costs.

The worrying picture is that our discussions are put in context by the cuts in housing benefit that have already been through the House and were opposed by the Opposition, which are feeding through into the concerns of landlords. One point of concern is that when the Government assert that 30% of properties will remain available to tenants on local housing allowance, they ignore the fact that not all the properties in that threshold will be available to tenants because it will not necessarily be the landlords within that cohort who are prepared to let in the first place.

We will have to wait and see, but it is entirely reasonable for alarm bells to ring on the impact on homelessness when we look at those two sets of statistics. If we find either that households are in an affordability crisis or that landlords simply pull out of the housing benefit sector, particularly in those areas where the demand for private rented accommodation is greatest—that is, London, the south-east and some of our cities—we will have a severe problem and many the assumptions being made by the Government about savings are unlikely to be realised. Homelessness is an expensive process and places considerable pressure on local government.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

Is there not a third warning bell, also, in the evidence that is being produced almost weekly that the inability of first-time buyers to obtain a reasonable mortgage means that they are forgoing the possibility of ever becoming homeowners and are renting? That is increasing not only in cities but across the country, apparently.

[Ms Buck]

My hon. Friend is absolutely right. Without any question, we are seeing a growth in the private rented sector for all those reasons, including the affordability crisis and the lending pressures in the home ownership sector. That means that the private rented sector, which we all applaud and support—we want a healthy private rented sector—can draw from an increased pool of potential tenants who are not on housing allowance. There will be competition for those properties between tenants who do not require housing allowance and those who do and are on the transitional protection path through the caps and reductions in the 30th percentile on which we have already agreed—I shall turn in a second to the further ratcheting down that is intrinsic to the future use of the consumer prices index rather than a local housing allowance determination—and that pressure will mean that a larger pool of people are frozen out of such accommodation.

21:00

As we have frequently said, that will not affect every area of the country evenly. There are areas, as we know, where 80% of all private rented accommodation is underpinned by a local housing allowance, but almost all the authorities in that situation are in the north of England, in relatively low-cost areas, in places such as Blackpool. Fine-tuning local housing allowance levels potentially has a market lever effect, as Ministers have argued. Of course, the difference between a local housing allowance and actual rents is relatively small, so the cash saving in such situations is not likely to be great.

However, in areas where the share of the private rented sector that is made up of housing allowance claimants is small—the case in London and the south-east, for example—that market pressure will not have the same impact. In most cases, it is unlikely to have any meaningful impact at all in bringing down rents. That is when a very difficult situation is likely to arise, with the potential for increased homelessness and increased costs.

We discussed all these issues at length in Committee. Amendment 31 would create a statutory requirement for annual reviews to be conducted to assess how far housing support payments are keeping track of rents in the private rented sector in the future, to ensure that adjustment is made accordingly. There is deep concern in the housing sector that uprating future local housing allowance by the CPI will break the link with actual rent costs, a long-standing link which has ensured that a reasonable supply of private rented accommodation is available to low-income households. We know that although the cost of rent is included in the CPI, it accounts for only 5.4% of the basket of goods used to measure inflation, and that historically CPI has not increased at the same rate as average rents.

Between 1997-98 and 2007-08, average rents increased by 70%, whereas over the same period the CPI increased by only 20%. The Government’s own impact assessment indicates that the pattern is expected to continue into the future, with CPI expected to rise by around 2% and rental costs by 4%. What that means, and the reason that the housing sector is so concerned about it, is that it is a relatively fast process for large areas of the country to become completely unaffordable to tenants on housing benefit.

Cambridge university research that was commissioned by Shelter takes a longer perspective and is particularly dramatic over a period of 10 or 15 years, but even over the course of the current spending review, it is marked how large parts of London and the south-east in particular, but also Cambridge, Oxford, Manchester and other cities, become unaffordable to people on local housing allowance. Why does that matter? One reason is the proportion of people on local housing allowance who are in work. The Opposition keep stressing that, and I worry that we do not get enough recognition from Ministers of this point. During the recession years, an increasing number of those people turned to the local housing allowance to keep a roof over their head while they were in work and while their wages were frozen or perhaps their hours were cut. The local housing allowance fulfilled its function extremely well as an in-work benefit.

The one thing that we do not want to do, which I am sure the Government do not want to do either, is to create a crisis of affordability when someone hits hard times—if their income dips or is frozen, or even if they have a temporary period of unemployment—that tips them into homelessness, which is expensive and catastrophic, while we push a larger and larger proportion of them further and further away from the labour market.

The disparity is at its most striking between the north and the south, but it can even be within cities such as London and Manchester. The affordability of private rented accommodation can take people so far out that, once they factor in travel costs, they are simply unable to work, particularly given the Government’s belief in the mini-job as the means of bringing people out of unemployment, which we have just heard expressed passionately from their Front Bench. People will be unable to take up mini-jobs of 10 or 12 hours a week because as their homes become increasingly unaffordable, their travel costs will make it impossible to take a job and they will be pushed further from the labour market. Somewhere along the line, we have to find a way of squaring that circle.

We all agree about the importance of the private rented sector in our menu of housing options, but it should be a way of cushioning the impact of unemployment or a drop in wages, and, in parallel, be a means of ensuring that we do not return to the nightmare years of the early 1990s, when the level of homelessness went through the roof. The soaring level of homelessness in those years resulted in the large-scale placement by London local authorities of their homeless households from central London to Birmingham, Coventry and Liverpool, an experience from which many of those households did not recover.

[Mr Aidan Burley (Cannock Chase) (Con)]

I am following the hon. Lady’s arguments closely. I represent a Birmingham constituency where the average salary of a working family in the private sector is £22,450 a year. Even under the Government’s reforms, such a family could still claim £26,000 a year in benefits, which is more than they would receive by going out and working in a proper job. Does she accept that there is a problem that people in low-paid jobs who want to work see other people getting more and having a better quality of life by choosing not to work and to live on benefits?

[Ms Buck]

The hon. Gentleman makes an interesting point but is mixing lots of different arguments, if he does not mind my saying so. The whole point of local housing allowance, as I was obviously explaining imperfectly, is that it is an in-work benefit. If a household’s income dips and they are in the private rented sector, they are entitled to the allowance, so we cannot compare an out-of-work household and an in-work household in the way he is trying to do. It is intended as a cushion for that household. Similarly—I know that you, Mr Deputy Speaker, would not wish me to be diverted—the overall benefit cap needs to be considered, among other things, in terms of an equivalent household size, and we will no doubt return to that debate because it is much less clear whether the Government’s core argument holds any water at all.

The argument about whether the maximum percentile that a household can claim in the private rented sector should be 50% or 30% of the local market has been and gone, so let us not return to it. All the amendment is arguing is that we must have a statutory mechanism for review to make absolutely sure that, as the CPI uprating bites further into the private rented sector, which it will, 30% of all private rented accommodation in a broad market rental area remains available. That is the Government’s commitment, and without such a mechanism that accommodation simply will not remain available.

We have to be very careful about monitoring that. The rate is to come down from 50% to 30%, but even 30% might not be achieved, because the CPI will further undermine what is available in the sector and landlords will withdraw from it because of the insecurity of the income stream; we are already seeing significant warnings of that. Property will not only be unavailable at 30%, but sometimes it will not be available at all. The projections for 2016 show that in parts of London it will go down to 19% or 16%, and in my borough it could go down to almost nothing—but let us not worry too much about that now. The anxiety is that we must ensure that at least that 30% remains available to people in the private rented sector, because if it does not, when they lose their income or their job they will be cast away from the labour market, from the work they were doing and, on top of that, from the networks of family, friends and connections that the Secretary of State, with great passion—I am absolutely convinced of his sincerity—believes is so important.

We simply cannot argue that we believe in stable communities, in family networks and in connecting people with the workplace if we then take away the very mechanisms that make all that possible. The argument has been developed, with convincing statistical underpinning, by academic experts that there is a real danger of that happening unless we have an adequate review mechanism. No proposal for such a mechanism exists at the moment, although there is a willingness to understand that there could be a problem. In Committee, the Under-Secretary of State for Work and Pensions, the hon. Member for Basingstoke (Maria Miller) said:

“The Secretary of State will be able to adjust rates to ensure that the housing support available does not become completely out of kilter or out of touch with local rental markets. We will monitor the impact of these measures and make further adjustments if it is right to do so”.––[Official Report, Welfare Reform Public Bill Committee, 3 May 2011; c. 711.]

That willingness to recognise a problem has therefore already been expressed by the Minister.

Also, I think that all three Ministers who are on the Front Bench have told us that the CPI rating will not last for ever, and that the arrangements could be reviewed at the end of the spending review period. However, the wording of the Bill is so wide that CPI or other measures could be used as a basis for setting rents under universal credit, and I think that Ministers are attracted to a permanent shift away from the idea of linking private sector rents to a market-based formula. That would be very dangerous and risky. We want the Government to offer clearer guarantees on how they will prevent an affordability and access crisis, which could in a very short time become even greater than the one that could be created by reducing the maximum percentile for local housing allowance claimants to 30%. We need a statutory assurance that monitoring will take place, and that it will lead to a proper review.

When we discussed child care and other elements of universal credit earlier, my right hon. Friend the Member for East Ham (Stephen Timms) said that the success of universal credit would rest heavily on child care costs. I hope he does not think that I am disagreeing with him when I say that the treatment of child care and passporting costs will not be the only critical test for millions of people; the treatment of housing costs will be, as well. I am genuinely concerned that an underestimate of the real cost of housing is already feeding through into universal credit, which will lead to a lot of people being disappointed when universal credit fails to deliver on its promises in the way that we want it to.

Amendment 32 deals with under-occupation and adapted properties. The Government are planning to reduce housing benefit payments for 670,000 social housing tenants: one third of all working-age housing benefit claimants living in social housing can expect to see their benefits reduced in 2013. Under the new restricted size criteria, any household deemed to be under-occupying its home by one bedroom would lose 13% of its total housing benefit, while those under-occupying by two or more bedrooms would lose 23% of the total. The average cut across all households would be £676 a year.

We know that only a tiny minority of those affected will be able to downsize to avoid the penalty, due to the shortage of smaller properties and the striking regional imbalance between the level of housing need and under-occupation. That is because of the competing pressures that social landlords are under when it comes to meeting their statutory obligations to house homeless households and other people in priority need. Alarmingly, the Government do not want those affected to move, because if they did move, the Government would not be able to meet their savings targets. We have not so much an incentive scheme as a straightforward cut in income for poor households. When we discussed this in Committee, the Minister was unable to give us any assurance on exactly the true purpose of the benefit cut, as explicitly spelled out in the impact assessment.

I want to concentrate for a moment on disability and adapted properties. Of the 670,000 claimants—

21:15

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The hon. Lady was present at oral questions this afternoon, when I tried to link the situation of 25 to 34-year-old single people who will be looking for shared accommodation with that of social tenants who have a spare room. Is she interested in the idea of social tenants, be they local authority or housing association, renting out spare rooms, thereby covering a shortfall in housing benefit and helping young single people at the same time?

[Ms Buck]

That is a reasonable option to allow people to take, but I seriously doubt whether it is an answer to the problem, for a whole host of reasons. In particular, there is a striking imbalance between where the social housing occupation is and where the demand for private rented accommodation is.

Many things worry me about what the Minister has just said, because here we are on Report, months after an impact assessment set out what the proposals are likely to mean, and suddenly an option as to how the Government think that the penalty might be avoided is thrown in. Let us sit down and have a proper impact assessment—a proper review. Let us see, for example, how any income from rental would be treated in the benefits system, because that could become subject to the same rules as non-dependant deduction, which would not leave people better off at all. Before the Minister asks me to regard it as a serious option, let us see exactly how it would be workable as regards the match between demand and supply and how it would be treated for the purposes of tax and other benefits.

[Kate Green]

Does my hon. Friend accept that there is a likelihood that from time to time, at least, if not constantly, disabled people may need extra space to accommodate overnight care? Therefore, the prospect of a tenant—a stranger, possibly—moving into their home would be completely impractical as well as potentially rather alarming.

[Ms Buck]

That is absolutely right; my hon. Friend makes a valid point. I am not going to say that just because someone is in a social tenancy they would not be able to have somebody else living in their home. People make that decision in the private sector; morally, it is not a completely absurd thing to do. However, I do not know whether it deals with the problem in any meaningful sense or what all the implications will be.

People with disabilities are, by definition, much more likely to have formal or informal care or to want the capacity to have friends and relatives coming in to provide them with care. Yet we know from the Government’s impact assessment that 66% of all those affected by the cut in benefit in the social housing sector are categorised as disabled—not all severely disabled; I understand that—and that between 101,000 and 108,000 of those properties, depending on which definition one accepts, are specifically adapted for their needs. In Committee, the Minister made some reassuring noises about the problem. She told us that the Government were prepared to

“look in detail at how we can ensure that there are exemptions for individuals who are disabled, where their homes may have been subject to extensive adaptations to accommodate that."

However, earlier in the debate she had told us:

“Providing an exemption for all adapted accommodation would not be the right approach”

and that exemptions should be applied only where making a fresh adaptation would cost more than

“allowing someone to stay where they are.”––[Official Report, Welfare Reform Public Bill Committee, 3 May 2011; c. 685-716.]

That prompts several important questions about the sheer level of bureaucracy that will be necessary to send somebody into every single one of those 108,000 adapted properties to carry out an official survey to establish the extent of those adaptations and come up with a cost-benefit analysis to see whether a move to alternative property will produce a cost benefit, and if it does not to assess the margin of error. If an adaptation would cost £10,000, but it was deemed that the cost saving would be £9,500, would the person with the disability be expected to move from their flat? Would the difference be £1 or £20? This is one of those counter-arguments that sounds seductively simple until one starts picking away at it and finds that it does not sound very good at all.

[Dame Anne Begg]

Does my hon. Friend agree that the problem is not just the cost, but the upheaval and the incredible time it takes to adapt a house? I know about this because I have done it three times myself. It takes at least six months, and all that time, the person might not be able to get into their own home.

[Ms Buck]

My hon. Friend is absolutely right. I have been drawn into arguing with the Government on their own terms, which is a clinical, cash-led way of debating such things: if it will cost £5, someone may have to lose their home; that is the only measure. However, my hon. Friend is right, and we expressed such anxieties about the whole under-occupation policy in Committee. We could be talking about somebody in an adapted property, somebody who has been in their family home for 30 years, or somebody who has been in their home for 30 years but has recently been widowed or lost a child and is suddenly deemed to be under-occupying.

[Glenda Jackson]

Is there not another bureaucratic hurdle for people who are in adapted homes or, as is often the case in my constituency, elderly people who have lived in a place for a long period whose families have moved? Both categories could be defined as vulnerable. I am not saying that all young people in this country are necessarily hell-raisers, but would there not be a justifiable cause for an additional tenant to go through a Criminal Records Bureau check?

[Ms Buck]

I am not going to be drawn into debating the advantages and disadvantages of an argument that has just been thrown into the air by the Minister. In some circumstances, the idea may work. Some individuals of working age will actively want to downsize and will say, “We are in a three-bedroom property and it is too big for us. We have been waiting for years to get into a one-bedroom property.” In the real world, we all deal as constituency MPs with people with a huge number of different needs. There are people in all different circumstances, and these different options will work for some people.

The point, surely, in discussing this amendment is that there are 101,000 to 108,000 households in properties that are specifically adapted for their needs who, despite the slightly more sympathetic noises coming from the Minister, in just over 18 months will lose up to 23% of their housing benefit. I am not sure that the vague and general ideas being thrown out by the ministerial team are doing anything to help us deal with that reality.

[Sarah Newton]

Does the hon. Lady agree that what we are talking about is treating people like people? All people have their individual circumstances and the decision makers are best placed to use their discretion to tackle these issues. Within housing benefit, there is discretionary funding so that people can be treated like humans. Finally, to reassure the hon. Member for Hampstead and Kilburn (Glenda Jackson), pensioners are of course excluded from the concerns that she raised.

[Ms Buck]

Pensioners are excluded. As I have argued, the attempt to move people of working age in order to avoid the disability penalty is likely to stop registered social landlords from moving pensioners who want to downsize voluntarily, because there simply is not enough flexibility in the social rented sector to allow that to happen. The hon. Lady is making my point for me: there is no discretion. The 670,000 social housing tenants who will be subject to the housing benefit cut, and the 101,000 to 108,000 people in specifically adapted properties, will be subject to a benefit cap. There will not be any discretion. All that the Government can say, apart from mentioning the possibility of people taking in a lodger or moving to an alternative property in a few cases, is that the discretionary housing payment will sort it all out.

[Dame Anne Begg]

Grampian Housing Association, one of the social landlords in my area, has written to me and said:

“If this goes ahead it will increase demand for property sizes that we simply cannot supply and lead to a great deal of stress for the families involved.”

It knows its housing stock, and it knows that it does not have houses of the size required.

[Ms Buck]

My hon. Friend is absolutely right. We know from all the evidence that has been given to us by the experts who are running housing associations that they do not have flexibility in their stock. The one and two-bedroom properties that are needed for people downsizing from three and four-bedroom houses are not available. They simply do not exist. There is not a supply that will enable anything other than a tiny minority of people to avoid this punitive benefit cap, because people will not be able to move. The property is not there for them to move to.

Nor is the property there for people who need adapted properties. I think it was my hon. Friend who made the point that when the cost-benefit analysis tips in favour of someone being required to move because of the value of their adaptations, they then have to make adaptations to another property. I had someone in my surgery last week who had an occupational therapist from Westminster council visit them in November about adapting their property, and they had not heard another word. That person, a wheelchair user who is unable to use their own bathroom, has been waiting eight months for the process of adaptations to be even started. We can multiply that situation by 108,000.

[Sheila Gilmore]

Has my hon. Friend noticed yet another anomaly that will arise? If somebody moves from an adapted home to another home that then has to be adapted, what guarantee is there that the first house will get a tenant who needs the adaptations that have already been done? There is therefore a waste of resources, not the best possible use of property that housing associations and councils attempt to achieve.

[Ms Buck]

There is the remotest chance of the property that such a person is leaving being occupied by someone who requires the same level of adaptation. It is like playing three-dimensional chess—it will be almost impossible to fit all the people into the properties that exist. At the moment there is supposed to be a flood of people who will leave under-occupied properties in the north-west of England and swap with people in London and the south-east. Then when all the individuals who need adapted properties are considered, it becomes a literal impossibility to ensure that properties match people’s needs properly.

[Sarah Newton]

The hon. Lady is being very generous in giving way to me.

I imagine that there are a great number of vulnerable people who are sitting at home listening to this debate, or who will read Hansard. For the sake of clarity, I think it is incredibly important to go back to something that was said earlier and remind the whole House that people who are disabled are not subject to the benefits cap.

[Ms Buck]

To be absolutely clear to the hon. Lady, I am not talking about the overall benefit cap. [Interruption.] No, it is a benefit cap. It is a benefit cut.

[Steve Webb]

You are confusing people.

[Ms Buck]

I am not confusing anybody. It is a cut in housing benefit of up to 23% for 670,000 households, of which, according to the Government’s own impact assessment, 400,000 include a disabled person and 108,000 are in adapted properties. Most of those people will have no means of avoiding the cut in their housing benefit, because there is nowhere for them to go. Even if there were, the Government do not want some of them to go there, because then they would not meet their own savings targets.

[Jenny Willott]

The hon. Lady said that she thought that there was no earthly chance of somebody with a similar level of disability needing a property that had become available. I am sure that, like me, she must have an awful lot of people coming to her constituency surgery who have disabilities and have been waiting a very long time for adapted homes. [Interruption.] Disregarding the rest of the debate, and the Labour Members who are hollering at me, the chances are that there will be somebody who wants those properties. That is not a reason to go ahead with moving people, but it is not true to say that there will not be people waiting who need those properties.

21:30

[Ms Buck]

The point that the hon. Lady misses is this: when people come to my advice surgery and say that they need an adapted property, they do not mean that they need one in Merseyside. That is the fundamental problem. Not only is there a regional imbalance in the supply of accommodation, but each individual has individual needs. If they do not, why does my local authority employ Dependability Ltd to send occupational therapists to assess individual needs? I am sure that my hon. Friend the Member for Aberdeen South (Dame Anne Begg) would support me on this, but every individual with a disability is likely to have personalised requirements. That is my central argument. Not everybody has wheelchair access adaptations or larger bathrooms or lower counters. Adaptations are highly tailored to the individual’s circumstances, as they should be.

In some cases, the Government’s proposals will work like a dream. Nobody is arguing that in no instance will a perfect match be found and people will be satisfied. My central point is that that will involve a minority of the 108,000 who will be affected. I cannot see—housing associations support my analysis—how the result could be anything different. The measure is likely to result in a phenomenal waste of money on adapted properties and/or to trap people with disabilities who are by definition on low and fixed incomes with a cut in their living standards, which is exactly what the Government told us they wish to avoid.

Last year, the Secretary of State claimed that disabled people had “nothing to fear” from his welfare plans, adding:

“It is a proud duty to provide financial security to the most vulnerable members of our society and this will not change.”

If disabled people are in an adapted property with an extra bedroom, they have every reason, as things stand, to worry.

To return to the intervention from the hon. Member for Cardiff Central (Jenny Willott), the discretionary housing payment, which the Government repeatedly say is a panacea, is the philosopher’s stone, as I described in Committee. Somehow, the £40 million a year fund will stretch to cover overall cuts in housing benefit of £1.5 billion. There is no earthly way in which it can stretch sufficiently to cover the protection of vulnerable younger people who are affected by the single-room cuts, of people in accommodation that has been adapted for disabled use, and of all those whom we want to keep in their homes because we want them to keep their jobs when their property becomes unaffordable owing to overall housing benefit cuts and the downrating from CPI.

[Glenda Jackson]

As my hon. Friend the Member for Hayes and Harlington (John McDonnell) mutters from a sedentary position, the scheme is not voluntary. That is surely the antithesis of what Government Members have argued—they say that their plans treat everybody as individuals. The scheme is an imposition.

[Ms Buck]

My hon. Friend is absolutely right. The scheme is not voluntary. Voluntary downsizing has a proud history. Good local authorities and housing associations provide voluntary downsizing, which is sensible. The Government’s measure requires 108,000 households whose properties have been adapted for disabled purposes to take, within the next 18 months, a significant cut in their housing benefit, or to move, regardless of the value of that adaptation. The Minister implies a mammoth bureaucratic exercise to evaluate every one of those adaptations, and to establish individual cost-benefit analyses in every case, in the hope, which I suspect will be a forlorn one, that an appropriate property will be available for people to move into when they fall foul of such analyses. That appropriate property does not have to be within the local authority area or even the region where those people have family, friends, support and, in some cases, employment.

Those two concerns, of the many that the Opposition have on housing costs, are the subject of the amendments that we have tabled. I hope that the Minister, who has made sympathetic noises on both issues in Committee, goes a little further tonight, and gives us solid and binding reassurances that there is a way of resolving the benefit trap that will catch so many people, in order, as Ministers have frequently stated in the media, to deal with a very small number of high-value claimants who dominate the media agenda. It is not fair to capture 108,000 disabled people and 750,000 claimants of local housing allowance, all of whom will be affected by the housing benefit cuts, in order to deal with a small number of extreme cases, on which we could otherwise have had a sensible debate about attempting to resolve.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

I thank the hon. Member for Westminster North (Ms Buck)for taking the time to talk to us about her amendments today. When I heard some of the reports on the radio this morning I thought that today would be a big day, when we would really be able to understand the Opposition’s approach to welfare reform—but on the basis both of Question Time and of the debates on the Bill, many of us feel that there is a lot more work to be done.

Today was an important opportunity for Opposition Front Benchers to set out their amendments and how they would change the Bill, to show how they would deal with housing benefit. I have listened hard, but there is still no clarity. In fact, what we have heard is more and more contradictions from the hon. Lady. In her opening remarks she said that she did not want the housing benefit bill to rise, and she did not agree with housing benefit taking the strain. However, the amendments run completely contrary to those objectives. Amendment 31 would significantly erode the savings that the Government propose, and amendment 32 would draw the exemption so wide that it would be far broader than anything recommended by the specialist organisations. That is a concern.

Nor are we any wiser as a result of the Opposition Leader’s speech today, which did more to create further confusion in this area. He talked about supporting people into housing as a result of their volunteering or working. That may sound familiar, but if the Opposition seek to link volunteering and work with housing, we hope that they do not intend to undermine eligibility for lone parents when it comes to their housing needs. It is difficult to comprehend how the hon. Lady will achieve her objectives with her amendments.

[Sheila Gilmore]

I am fascinated by the Minister’s suggestion that people who volunteer cannot be lone parents, as she has just contrasted one group with the other.

In relation to housing, it could be suggested that amendment 31 would not achieve the results that the Government want. Having made one change—reducing the local housing allowance to the 30th percentile—are the Government really suggesting that they would be happy to see it move far beneath that if a gap appeared between that percentile and rent, if uprating were only in line with the CPI? Rents were previously uprated according to the movement of the market.

[Maria Miller]

If the hon. Lady recalls our debates in Committee, she will know that I have already made this very clear. The Government will keep such matters under review. Of course we want to ensure that things work as they should. What is important to me is that the Opposition have not set out in these amendments the principles that they would follow in this area. Do they want to continue to see spiralling rents in the private rented sector? Would they leave that unchecked? Do they want to see people on housing benefit being able to afford rents that those in work could never afford? Are the Opposition content to leave 250,000 social housing sector tenants in overcrowded accommodation when we have 1 million spare rooms paid for by housing benefit? The Opposition have failed to address those issues in their amendments today. In fact, they have gone further—

[Sheila Gilmore]

Will the hon. Lady give way?

[Maria Miller]

Will the hon. Lady forgive me for making a little progress? Many other hon. Members want to come in on this debate, and I want to set out my response to the amendments before we run out of time.

Before I turn to the specific amendments, I want to pick up on what the hon. Member for Westminster North said about rising homelessness. I am sure that she believed in the effectiveness of the previous Government, but she cannot expect the sort of impacts on homelessness that she implied after just one month of a policy being in place. I do not accept that the policies we are advocating will have the impacts on homelessness that she talked about. She has to get real: these policies have only been in place since April, and could not be driving the sorts of changes that she mentioned by this stage.

The hon. Lady said that her premise was affordability and access to housing. May I remind her that, given that 40%—and in some areas, including coastal towns, 70%—of those in the private rental market are in receipt of housing benefit, it is critical that we keep control of the amount of money going out in housing benefit? That way we can help the very first-time buyers whom she purports to want to help, who are finding it so difficult to get into the purchase market at the moment, and who need to go into the rental market. The previous Government let those people down by not keeping control of housing benefit rents during their tenure.

[Ms Buck]

The statistic that 40% of the market is subsidised by the local housing allowance is central to the Government’s argument. Will the hon. Lady finally, helpfully source that figure? Figures released in the English housing survey last month confirmed that only 24% of those in the total private rented sector in England were on LHA. Although there are regional variations, it would be helpful if we could finally and definitively have the source for that 40% claim.

[Maria Miller]

I thank the hon. Lady for her question. I shall be happy to write to her with the full details, and to remind her that the proportion is only 40% on average; as I said, it is 70% in some coastal areas. That is a significant issue that helps to determine the rental rates that many people—[Interruption.] I think I just said that I would write to the hon. Lady with the details. I do not have them to hand now.

The important matter to which I now turn is my response to the two amendments tabled by the hon. Member for Westminster North and the one tabled by my hon. Friend the Member for Cardiff Central (Jenny Willott) for us to consider today. We said in the universal credit White Paper that an appropriate amount would be added to the universal credit award to meet the costs of rent for claimants. We also said that levels of support for rent would be broadly similar to the support provided through housing benefit at the time that claimants began to move on to universal credit. In the private rented sector, we will build on the local housing allowance approach, incorporating the reforms that we are making over the coming year. This will give private rental tenants access to about 30% of the rental market in their areas, including most of London.

We also need, however, to do more to constrain the growth in rents, which is why increases will be limited in line with the consumer prices index. This will ensure that we continue to put the sort of downward pressure on rents that is so important to keeping control of our budgets and to affordability for those not in the housing benefit market.

[Mr John Leech (Manchester, Withington) (LD)]

May I offer an alternative solution for keeping rents low? How about building more council houses and housing association houses, and getting the construction markets on the go as well?

[Maria Miller]

I would not want to incur the wrath of Mr Speaker by going into such issues, which are more to do with my colleagues in the Department for Communities and Local Government. Certainly, however, my Department has a responsibility to ensure that we apply that downward pressure on rents in order to ensure affordability for people across the board.

[Dame Anne Begg]

The housing associations in my area are saying that because they are likely to have people defaulting on their rents, such housing will no longer be a good investment, and for that very reason further building programmes are likely to be curtailed. That is the result of the Government’s policies.

[Maria Miller]

I know that that issue has been brought up, and we will work on it with the landlords concerned. Obviously, we do not want that to be the position: we want to ensure that there is no problem with the money that flows to landlords. We will work hard to address that.

[Mrs Louise Mensch (Corby) (Con)]

Does my hon. Friend share my amazement, and that of hard-working people in my deprived constituency of Corby, that the Opposition—the Labour party—are trying to prevent us from maintaining downward pressure on rents?

21:45

[Maria Miller]

My hon. Friend is right to be incredulous about the Labour party’s position. She should also express incredulity at the fact that the Labour Members do not seem to have a policy—apart from opposition to the proposals.

I remind hon. Members that the restriction will apply only in areas where local market rent increases at the 30th percentile exceed the annual rate of increase in the CPI. We have said that we are committed to making savings from that measure, but if it becomes apparent that the LHA rates and rents are out of step, that can be reconsidered, as I said in Committee.

Let me briefly consider amendment 72, which raises an important issue for us all. We want to ensure proper and accurate monitoring of the impact of the introduction of our policies. Indeed, we have put that in place for the work capability assessment and our reform of DLA. My hon. Friends the Members for Cardiff Central and for Redcar (Ian Swales) are right to highlight the importance of having an accurate method of assessing the impact of our policies. That is an important and prudent part of Government policy. I hope that my hon. Friends will be reassured that we have already commissioned independent external research to evaluate the impact of the housing benefit reforms that we announced in June 2010 in the Budget and in the spending review. The review will be comprehensive and thorough and presented to both Houses, together with a ministerial statement. We intend to make final findings available in 2013, with initial findings available in 2012.

[Jenny Willott]

There is a huge range of issues that we clearly cannot cover this evening in the time available to us. However, I would be grateful if the Under-Secretary ascertained whether one matter in particular could be included in the review: how foster children are covered. As I understand it, foster children are not counted in the allocation of bedrooms. The way in which the measure is implemented could have a significant impact on local authorities’ ability to recruit foster carers, and on the care that can be provided for foster children. That has not been covered in the debate so far.

[Maria Miller]

My hon. Friend makes an important point, which has been raised with me on a couple of occasions. I remind her that currently there is no additional allocation of housing for families with foster children. There is an accrual within the payments that are made to cover additional housing costs. However, she makes the important point that, whatever our housing policies, we should not disincentivise or put unnecessary barriers in the way of foster carers who do so much to give children who cannot live with their own families the sort of start in life that they need.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Does the review—or any of the reviews—include the further point about which the Secretary of State said he wanted to be helpful—ensuring that there is a possibility that broad market rental areas become more coterminous with local authorities? Will the review cover where people might move to, so that they are not obliged to move out of their natural communities, which in most cases in London would be the local authority area where they currently live?

[Maria Miller]

I thank my right hon. Friend for that comment. I am not aware that the research will cover that at this time, but perhaps I could consider that in more detail. He has raised that point in the past.

[Mr Alan Reid (Argyll and Bute) (LD)]

Will the Under-Secretary give way?

[Maria Miller]

Would my hon. Friend mind if I made a tiny bit more progress on the amendment, and tried to deal with some of the others?

In that spirit, we are considering the most effective way of monitoring and evaluating the housing support measures. That will enable us to understand the effectiveness of the measures in the same way as we will understand the 2011 measures. However, reviewing the operation of the changes in the first year will be too soon—something that I have also considered in relation to other measures in the Bill. We need to ensure that the measures have time to mature and bed in, so that their effectiveness can be properly evaluated. I am not sure that I agree with my hon. Friends that conducting such a review after the first year would be the best way to assess the effectiveness of our policies. Therefore, I cannot commit to the timetable that they propose, even if we are attracted to the idea of conducting comprehensive research. However, I can reassure them that we are looking at ways of funding an external review—this time on the measures in the Bill—and that we will consider that in some detail in the coming months.

Amendment 32 was also tabled by the Opposition. I am sure that Members are aware of the pressures that we face in social housing; indeed, there are some facts that we have to consider before we can look at the amendment in any detail. We know that less than 5% of social tenants in England move each year in the social housing sector. That is not helpful, given the 250,000 overcrowded households waiting for a suitable property to meet their needs. There is also limited social housing stock, with waiting lists of 5 million people, 250,000 tenants in overcrowded housing and almost 1 million spare bedrooms being paid for through housing benefit. There is a mismatch in the market. I am quite astonished that the hon. Member for Westminster North spent no time talking about that or showing her support for the action that we are taking to put it right.

[Sheila Gilmore]

It is important that the Minister establishes whether the Government’s proposal is intended to solve the problems of under-occupancy and over- occupancy or simply to save money. Even if the changes that she wants are achieved, there will be no saving in the housing benefit budget, on the assumption that many of the people moving into the houses thereby vacated will also be on housing benefit.

[Maria Miller]

It is absolutely not fair that we have 1 million spare bedrooms being paid for by housing benefit. It is not right—many taxpayers would never be able to afford a spare bedroom in their properties—nor is it fair for those living in overcrowded or poor housing conditions, waiting for long periods for the opportunity to live in a home that is decent or that actually reflects the size of their family. I would ask the hon. Lady to consider that.

Amendment 32 would provide an exemption from the social sector size criteria measure for disabled people living in adapted accommodation. The intention is to ensure that where people have significant or extensive adaptations, they do not have to move and have a new property adapted, which would result in additional costs. I assure the House that I fully understand those arguments. I agree that it might not make sense to move someone from their home if they have already had significant adaptations. Replicating such changes would impose unnecessary costs. We are not interested in shifting costs from one budget to another. However, as we previously set out, we cannot take the broad-brush approach that amendment 32 would allow for. The amendment talks about a property that is

“specially adapted or particularly suited to…the needs of that person.”

This means that the provision would be drawn very widely drawn indeed, covering any adaptations.

Some adaptations, such as a handrail in a bath, may be so minor that exempting the tenant on the basis of that adaptation alone would simply not be justifiable. The provision would also cover a property that had been adapted for someone’s past needs, and would require local authorities to exempt those whose accommodation was particularly suited to meet their needs—perhaps those in a ground-floor flat or a property with a limited number of stairs to climb. We do not have the data on how many such cases there are, but it seems likely that many would fall into such a broad category. Again, that would prove very expensive—something that the hon. Member for Westminster North seemed to ignore. It is not clear what evidence would be required or who would be responsible for the decision. The amendment refers to the provision of

“certificates, documents, information or evidence”,

which, as the hon. Member for Westminster North said, also suggests a degree of administrative intervention. She made a valid point in Committee, but I am surprised that she is pushing it even further. I think that many stakeholders would rightly be concerned about the potential cost of her proposals and about the additional burdens such bureaucracy could load on to landlords and others.

The National Housing Federation estimates that about 108,000 tenants in adapted accommodation are likely to be affected by the introduction of the size criteria to restrict housing benefit. The NHF has kindly shared its data with us and I understand that our officials have met the federation since Committee and are continuing to explore the data in some detail. However, as well as looking at the available data, we want to talk to housing providers, but that will take some more time.

Funding for adaptations can come from a number of sources, one of which is the disabled facilities grant. Some 44,000 awards were made in 2009-10 in England and the average award was some £7,000. However, many of these are paid to owner-occupiers, not to those living in social rented houses. Research published by the Office of the Deputy Prime Minister in 2005 showed that about 70% of all adaptations were for less than £1,000 and that only 19% were wholly funded from the disabled facilities grant. In England, the maximum grant is £30,000, but there are discretionary powers to enable local authorities to meet costs in excess of that. Adaptations of this magnitude would be substantial, potentially involving the construction of a single-storey or double-bedroom extension, together perhaps with the installation of a toilet or en-suite shower. Figures from the same source indicate an average cost of about £2,000 for the installation of a stairlift. We will consider the evidence further, but it is important for the House to look at the facts and realise that many of these adaptations are at a much lower level than the hon. Lady indicated in her comments.

As I said in Committee,

“it is not our intention to put something in place that would have a disproportionate impact on disabled people. If someone has had their property adapted because of their disability, it makes no sense to move them to a different property and spend more money on costly adaptations.”

I concluded that a “blanket exemption” was not the best approach and that we would need to consider

“how we can best target the help at people, while keeping in mind the practical difficulties of identifying…where accommodation has been adapted”.––[Official Report, Welfare Reform Public Bill Committee, 3 May 2011; c. 687.]

We acknowledge the concerns that have been highlighted, but this amendment goes much further than was suggested even by the sector itself. I hope that, in the light of my comments, hon. Members will look again at the amendments and agree to withdraw them.

[Mr Reid]

I shall have to be brief. Much of the Bill will be implemented through regulations. Much of the debate has been about London and big cities, but I want to draw the Government’s attention to another part of the country—the highlands and islands of Scotland, where communities live large distances apart. My right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) referred to community, and if people live on an island, the island is the community, yet it often has limited housing stock.

As a result of this Bill—either because of the 30th percentile provision or because they are under-occupying—some people might have to move house. When the regulations are being drawn up, I urge the Government to take the sparsely populated parts of the country into account. If people are going to have to move, they should be able to do so within their community. If they live in mainland villages, the next village might be 10 or 20 miles up the road; if they live on an island, the community is the island.

The regulations are to be subject to a negative resolution, but I urge the Government to use the affirmative resolution so that they can be properly scrutinised here. I urge the Government please to take into account the needs of the sparsely populated parts of the country as well as the cities.

22:00

Debate interrupted (Programme Order, this day).

The Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the amendment be made.

Question negatived.

Schedule 1

Universal credit: supplementary regulation-making powers

Amendment proposed: 27, page 103, line 1, after ‘income,’, insert—

(ba) a person’s earned income from self-employment,’.—(Stephen Timms.)

22:01

Division 290

Ayes: 213

---

Labour: 199
Scottish National Party: 5
Democratic Unionist Party: 3
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Alliance: 1

Noes: 304

---

Conservative: 254
Liberal Democrat: 48

The Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Clause 43

Regulations: procedure

Amendments made: 14, page 20, line 6, at end insert—

‘( ) A statutory instrument containing the first regulations made by the Secretary of State under any of the following, alone or with other regulations, is subject to the affirmative resolution procedure—

(a) section 5(1)(a) and (2)(a) (capital limits);

(b) section 8(3) (income to be deducted in award calculation);

(c) section 9(2) (amount to be included in award calculation for standard allowance element);

(d) section 10(3) (amount to be included in award calculation for children and young persons element);

(e) section 11 (housing costs element);

(f) section 12 (other needs and circumstances element);

(g) section 19(2)(d) (claimants subject to no work-related requirements);

(h) sections 26 and 27 (sanctions);

(i) section 28 (hardship payments);

(j) paragraph 4 of Schedule1 (calculation of capital and income);

(k) paragraph 1(1) of Schedule6 (migration), where making provision under paragraphs 4, 5 and 6 of that Schedule.’

Amendment 15, page 20, line 9, leave out ‘under this Part’—(Chris Grayling.)

Clause 46

Sanctions

Amendment made: 16, page 27, line 22, at end insert—

‘(1A) In section 37 of that Act (parliamentary control), in subsection (1), before paragraph (b) there is inserted—

“(ab) the first regulations to be made under sections 19 to 19C;”.’—(Chris Grayling.)

Clause 49

Claimant responsibilities for jobseeker’s allowance

Amendment made: 17, page 35, line 13, at end insert—

‘( ) In section 37 (parliamentary control), in subsection (1), after paragraph (a) there is inserted—

“(aa) the first regulations to be made under section 6J or 6K;”.’—(Chris Grayling.)

Clause 56

Claimant responsibilities for employment and support allowance

Amendment made: 18, page 44, line 48, at end insert—

‘( ) In section 26 (parliamentary control), in subsection (1), after paragraph (a) there is inserted—

“(aa) the first regulations under section 11D(2)(d) or 11J,”.’—(Chris Grayling.)

Bill to be further considered tomorrow.

Business without Debate

Monday 13th June 2011 Commons Chamber

Delegated Legislation

Monday 13th June 2011 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Social Security

That the draft Social Security (Electronic Communications) Order 2011, which was laid before this House on 14 March, be approved.—(Miss Chloe Smith.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Capital Gains Tax

That the draft Taxation of Equitable Life (Payments) Order 2011, which was laid before this House on 21 March, be approved.—(Miss Chloe Smith.)

Question agreed to.

Financial Services Compensation Scheme

Monday 13th June 2011 Commons Chamber

22:15

[Jonathan Evans (Cardiff North) (Con)]

I beg leave to present to the House a petition signed by Mr Peter Williams, Mr Paul Wiggins and Mr Jason Evans, all of whom are constituents of mine, together with some 6,761 other signatories from throughout the United Kingdom, gathered by the British Insurance Brokers’ Association. They are concerned at the impact of the decision of the Financial Services Authority indefinitely to delay its planned review of the Financial Services Compensation Scheme. The petition states:

The Petition of members of the British Insurance Brokers’ Association (BIBA),

Declares that the petitioners believe that the Financial Services Authority (FSA) should urgently accelerate its consultation on the fundamental review of the Financial Services Compensation Scheme (FSCS), to ensure that new rules are in place for April 2012 so that general insurance brokers do not see further disproportionate levy increases; and further declares that the 3,500 full time ‘insurance brokers’ should have separation from the other ‘secondary sellers’ in the insurance intermediary sub-class.

The Petitioners therefore request that the House of Commons urges HM Treasury to accelerate the FSA’s review of the FSCS consultation with immediate effect.

And the Petitioners remain, etc.

[P000927]

Workplace Drug Testing

Monday 13th June 2011 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Angela Watkinson.)

22:17

[Jackie Doyle-Price (Thurrock) (Con)]

I am pleased to have the opportunity to address the House on workplace drug testing. As the emphasis on health and safety in the workplace is heightening, the incidence of drug and alcohol testing in the workplace is increasing, too. Such testing is welcomed and supported by both employers and employees, for very good reasons, as it is in everyone’s interest that the workplace is a safe environment.

Trade unions recognise that any one employee working unsafely poses a risk to other employees and they have been happy and willing to agree drug and alcohol policies with their employers. That means that workplace drug and alcohol testing is becoming increasingly prevalent, which is great from a health and safety point of view and, through deterrence alone, could be anticipated to lead to fewer industrial accidents. I have concerns, however, from a human rights perspective. These tests can act as judge and jury and, as a consequence, we need to ensure that the regulatory regime governing such tests and practices is adequate and that both employers and employees understand their rights and responsibilities with regard to such tests, so that employees are not treated unfairly.

I want to illustrate the issues with reference to my constituent, Mr Joe Kelly, who faced dismissal from his post following 31 years of employment with the same employer after he received a positive test for heroin. My constituent knew that the test was erroneous and mounted a successful challenge that saw him reinstated. As he says, however, he was prepared to take the risk and engage legal representation, but many other employees facing similar circumstances might not have that luxury. It is to protect the rights of employees that I am bringing these issues to the attention of the House.

I want to highlight to the Minister the key areas that I think pose a risk and to ask for his reflections on what the Government can do to strengthen understanding on the part of employers and employees through their trade unions. I am not sure this matter necessarily needs more regulation, but in drawing up an appropriate drug and alcohol policy, the employer and the trade union will need to satisfy themselves that they and their contractors have appropriate processes to deal with collecting and testing samples.

There are essentially three areas of risk that we need to get right. The first is the integrity of the collection process. This is the fundamental aspect that should be tightened. There must be a clear and documented chain of custody, so that samples are correctly identified and handled to prevent them from being mixed up, contaminated or tampered with. Without a chain of custody, there is no proof that the sample belongs to the subject.

In the case of Mr Kelly, the chain of custody could not be proved and the collection process was poor. He had been more than happy to comply with the demands for a random drug test, but in supplying his sample, he was very unhappy with the procedure. The process was not explained, consents were not properly sought, his samples were not sealed in his presence, and he had concerns about the cleanliness of the process. Overall, he felt that the collectors were more concerned with speed than with accuracy and that there was serious risk of cross-contamination.

In this case the sample was saliva and, as is customary, two samples were collected so that in the event of a challenge, a repeat test could be run. Given that the samples were not sealed in the presence of my constituent, he could not be satisfied that the sample which had tested positive belonged to him, nor could he sure that the B sample belonged to him. In the event the B sample did clear Mr Kelly, but given his understandable lack of confidence in the process, he took his own measures and paid to have a hair test, which again cleared him.

Firms engaged in testing sign up to standards overseen by the United Kingdom Accreditation Service. In this example, the firm was signed up to UKAS standards only for the lab. I venture to suggest that employers should engage only with firms that are signed up to appropriate standards throughout the collection and testing processes.

The second area of risk is the testing process. In Mr Kelly’s case the sample tested which read positive for heroin was very small. The testing company’s own methodology stated that an insufficient sample would represent a failure in the chain of custody, but testing took place in any case. It is also suggested that the testing instrument was not properly calibrated to analyse such a small sample. Moreover, a multiplier was applied to the reading, which meant that the results were not reliable. In the absence of the multiplier, the test was in fact negative.

So when Mr Kelly obtained the lab report, it illustrated that the company had not complied with its own standards. I am very surprised that the company delivering the testing service met UKAS standards, in view of these deficiencies. That is why employers and their trade unions may not wish to leave it just to UKAS to establish quality and integrity of processes. I advise that they take steps to satisfy themselves that processes are sufficiently robust.

Finally, the human resources policies of the employer should be appropriate. Joe Kelly was confident that he was innocent, but his employer was adamant that the test was cast-iron evidence of guilt. I have no doubt that the employer acted in good faith, but alarm bells should have sounded. This was a 59-year-old man in a management position, with 31 years service. The test indicated serious heroin abuse over a prolonged period. One does not have to be a rocket scientist to appreciate that if this man had been a regular heroin abuser, it would not have taken a random drug test to highlight the fact. Physical and behavioural symptoms would have highlighted abuse. There needs to be some sensitivity on the part of employers about how positive tests are handled, with an appropriate appeal process if the employee or his line management feels that the test is not accurate.

Employers should be sensitive to the impact on people’s reputations. That this episode happened to my constituent at the end of a long career as a respected member of staff has left a bitter taste. I am sure no employer would want to accuse long-serving members of staff unfairly and, if alerted to the risks, that they would wish to take steps to ensure that their processes were sufficiently robust. I suggest, therefore, that in the event of a contested sample, the employer must be satisfied that they can make available the chain of custody records to validate drug tests, the lab report for the screening test, the full report of the medical officer and a method statement for sample collection. If any of these is unsatisfactory, the test should be deemed invalid. In this case the lab failed to provide chain of custody documentation, failed to calibrate the instrument effectively, and failed to explain the lack of volume in the sample or justify the use of a multiplier. If the company doing the testing understood that it would have to supply this information to employers as a matter of routine in the event of a contested claim, I venture to suggest that this would act as a discipline to ensure that appropriate standards are maintained.

Ultimately, this case has been a learning experience for the employer and the union. They will happily concede that it took this unhappy incident for them to understand the risks that they were asking their employees to take with this policy. They have strengthened their procedures accordingly. However, the lessons of this case need to be understood more widely so that employers and unions do not sign up to procedures that are deficient. Otherwise, we may find other employees dismissed on the basis of samples that are not theirs or because they have been improperly tested. Such an event would also blight the employee’s employment prospects, and in the interests of natural justice, we as law-makers should satisfy ourselves that we have done what we can to defend the rights of employees.

Does the Minister consider that there should be more guidance in this area, particularly given that drug and alcohol testing is becoming increasingly common? I do not believe that we need more regulation, but we need more understanding of the risks and more dissemination of best practice. Therefore, what might the Government do to highlight best practice and foster dialogue with employers and trade unions to heighten awareness so that the rights of employees are protected?

22:25

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

I thank my hon. Friend the Member for Thurrock (Jackie Doyle-Price) for raising the matter and for the way she has done so. I hope that I will be able to give her some satisfaction on the points she wants the Government to address. Before doing so, it is important that I state for the record the legislative background to drug testing in the workplace.

Employers have a general duty under the Health and Safety at Work etc. Act 1974 to ensure, as far as is reasonably practicable, the health, safety and welfare at work of their employees. They also have a duty under the Management of Health and Safety at Work Regulations 1999 to assess risks to the health and safety of their employees. If they knowingly allow an employee under the influence of drugs to continue working and his or her behaviour places themselves or others at risk, the employers could be prosecuted. Their employees are also required to take reasonable care of themselves and others who could be affected by what they do at work.

The Transport and Works Act 1992 made it a criminal offence for certain workers to be unfit through drugs and/or drink while working on railways, tramways and other guided transport systems. The operators of those transport systems would also be guilty of an offence unless they had shown all due diligence in trying to prevent such an offence from being committed. The Road Traffic Act 1988 states that any person who, when driving or attempting to drive a motor vehicle on a road or other public place, is unfit to drive through drink or drugs shall be guilty of an offence. The principal legislation for controlling the misuse of drugs is, of course, the Misuse of Drugs Act 1971. Nearly all drugs with misuse and/or dependence liability are covered by it.

Therefore, there is a legislative framework that makes it clear that employers have a duty to ensure that they look after the health and safety of their workers. There are several codes of practice to assist employers in this, most notably a free booklet published by the Health and Safety Executive, “Drug Misuse at Work”, which mentions a number of related matters, including drug screening, which is what concerns my hon. Friend.

My hon. Friend will know that I cannot comment on the individual case, but the main thrust of her speech related to how drug testing is carried out. My Department is responsible for the sole Government-recognised UK national accreditation body, the United Kingdom Accreditation Service. UKAS operates accreditation as a public authority activity, as required by European legislation. It has a strong international reputation for the quality and rigour of its accreditation assessments and is itself regularly assessed by its peers.

UKAS accredits laboratories when required to do so by legislation or when voluntarily requested to do so by a laboratory. Accreditation is an assessment and attestation that a laboratory is competent to undertake specified conformity assessments. International standards exist to cover the collection of samples, and UKAS is happy to accredit against those standards. My Department works closely with UKAS and has full confidence in its work.

My hon. Friend raised the specific case of her constituent, as well as making a wider point. I am happy to ask UKAS to work alongside the Health and Safety Executive to improve the HSE’s guidance on drug misuse at work and to expand the guidance coverage to include the complete drugs testing life cycle from the collection of a sample to its testing. I think that that was the point that she was seeking to make, particularly when she talked about the integrity of the collection process and the chain of custody. I hope that my officials will talk to UKAS and the HSE to ensure that the guidance can be improved in the way she mentioned. I agree that this is not an area in which new regulation is needed. Having listened to the case of my hon. Friend’s constituent, I believe that we can deal with the concerns, which she rightly raised, through Government guidance. I hope that she will be satisfied with this response, but if, on reflection, she has any further questions, I would be very happy to deal with them personally if she writes to me.

Question put and agreed to.

22:31

House adjourned.

Written Ministerial Statements

Monday 13th June 2011 Written Statements

Monday 13 June 2011

Financial Services Authority (Annual Report)

Monday 13th June 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The annual report 2010-11 of the Financial Services Authority (FSA) has today been laid before Parliament.

The report forms a key part of the accountability mechanism for the Financial Services Authority under the Financial Services and Markets Act 2000 (FSMA), and assesses the performance of the Financial Services Authority over the past 12 months against its statutory objectives.

Employment, Social Policy, Health and Consumer Affairs Council

Monday 13th June 2011 Written Statements

[The Parliamentary Under-Secretary of State for Health (Anne Milton)]

The Health Council met on 6 June in Luxembourg. Andy Lebrecht, deputy permanent representative to the EU, represented the UK.

Council conclusions were adopted on:

The European pact for mental health and well-being: results and future action;

Successes and challenges of European childhood immunisation and the way forward;

Towards modern, responsive and sustainable health systems; and innovation in the medical device sector.

The Commission provided an update on:

Progress of the proposals on information to the general public on medicinal products;

The active and healthy ageing partnership; and

The forthcoming evaluation of the EU health programme and the EU health strategy.

The Commission provided an update on the recent E. coli outbreak and the actions being taken to control it. There was also a discussion on the public health dimension of migration from the middle east and north Africa.

Animals in Scientific Procedures (Consultation on European Directive)

Monday 13th June 2011 Written Statements

[The Parliamentary Under-Secretary of State for the Home Department (Lynne Featherstone)]

The Home Office is today publishing a consultation paper seeking views on the options for transposing European Directive 2010/63/EU on the protection of animals used for scientific purposes. Directive 2010/63/EU will replace Directive 86/609/EEC on which current United Kingdom legislation—the Animals (Scientific Procedures) Act 1986—is based. In common with other member states, the UK must transpose the provisions of the new directive into legislation by 10 November 2012. The consultation paper invites views on the options for transposing the new directive and on the accompanying impact assessment.

The Government welcome the new directive which strengthens the protection of animals used in scientific procedures and promotes the development, validation, acceptance and implementation of methods and strategies that replace, reduce and refine the scientific use of animals (the three R’s). It also sets down detailed rules to ensure harmonisation and the proper functioning of the internal market. These are intended to rectify variations in the implementation of Directive 86/609/EEC which have tended to create barriers to trade in products and substances developed using animals in research and testing.

The consultation paper seeks views on the detailed provisions of the directive with a view to informing the preparation of transposing legislation. The consultation closes on 5 September 2011. A copy of the consultation paper and related impact assessment will be placed in the House Library.

Changes to the Immigration Rules

Monday 13th June 2011 Written Statements

[The Minister for Immigration (Damian Green)]

My right hon. Friend the Home Secretary is today laying before the House a statement of changes in the immigration rules that will bring about the second of the changes to the student visa system, which the Home Secretary announced on 22 March, and were set out in detail in the statement of intent published on 31 March.

The changes will take effect on 4 July and will tighten the rules on the entitlements of students to work and bring dependants, will tighten the requirements around maintenance funds and require students to show academic progression to get a further visa. The new rules also introduce a streamlined application process for low-risk students.

I can also confirm that we are publishing the impact assessment for the changes to tier 4 on the UK Border Agency website, and I will arrange for a copy to be placed in the House Library.

The Home Secretary has previously announced that from the end of 2012 all tier 4 sponsors will need to have had a satisfactory inspection or audit by one of a number of specified bodies who are involved in the regulatory framework for educational standards in the UK. I am pleased to be able to inform the House that the Quality Assurance Agency (QAA) and the Independent Schools Inspectorate (ISI) have agreed in principle to extend their remits to carry out additional inspections to cover privately funded providers. Further information is available on the UK Border Agency website.

This statement of changes also includes changes to the tier 4 rules to extend the list of courses where an academic technology approval scheme (ATAS) clearance certificate is required from the counter-proliferation department of the Foreign and Commonwealth Office.

We are also making some minor amendments to rules laid on 16 March on intra-company transfers and maintenance funds so they achieve the intended policy intention.

There are also minor changes to the immigration rules laid on 1 October 2010 in respect of the English language requirement for spouses and partners of British citizens and persons settled in the UK.

Lastly, the Government are also making new provisions in part 8 of the immigration rules to allow other dependent family members of refugees with limited leave in the United Kingdom to join them from abroad. Currently, only those who have indefinite leave to remain in the United Kingdom are able to sponsor their other dependent relatives from abroad and those refugees with limited leave must make their applications outside of the rules and these are considered at the Secretary of State’s discretion. We want to ensure that refugees with limited leave have the same opportunity to sponsor their other dependent family members as those coming through the normal route and this will also include a requirement that they be able to maintain and accommodate them.

Scotland Bill

Monday 13th June 2011 Written Statements

[The Secretary of State for Scotland (Michael Moore)]

The Chancellor and I are today announcing changes to the Scotland Bill and accompanying package that will further strengthen Scottish devolution and provide greater financial responsibility to the Scottish Parliament.

The coalition Government’s “programme for government” set out that the Government would implement the proposals of the Calman commission. The Scotland Bill currently progressing through Parliament delivers this key coalition commitment.

The Scotland Bill will introduce a new Scottish rate of income tax, fully devolve stamp duty land tax and landfill tax, introduce a new capital borrowing power and extend current borrowing powers.

When combined with the existing tax-raising powers of the Scottish Parliament, the Bill will provide Scottish Ministers with a total of £12 billion-worth of financial powers and it represents the largest ever transfer of financial power from Westminster to Scotland. Through taking on responsibility for raising the taxes required to fund the spending decisions they make, the Scottish Parliament will be more accountable to the Scottish people. Once the measures are fully implemented the Scottish Parliament and Scottish Ministers will have more powers, will be more accountable, and will be better equipped to respond to Scotland’s needs within the United Kingdom.

Since the introduction of the Scotland Bill in November 2010, the Bill has been subject to detailed consideration in both the UK Parliament and the Scottish Parliament. The Bill has successfully passed through Committee stage in the House of Commons and in March 2011 the Scottish Parliament voted overwhelmingly in support of a legislative consent motion agreeing to the measures set out in the Bill, by a margin of 121 to 3.

The UK Government have considered carefully the recommendations made by the Scottish Affairs Committee in the UK Parliament, and the Scotland Bill Committee in the Scottish Parliament. They have also committed to listen carefully to any detailed proposals put forward by the Scottish Government.

Based on the evidence received so far, the Government continue to believe that the package set out in the Scotland Bill, and the supporting Command Paper, meets the objectives of strengthening Scottish devolution within the United Kingdom and in particular providing strong financial accountability to the Scottish Parliament. However, the UK Government have decided to make some amendments to the Bill and supporting package that ensure that Scottish Ministers have greater flexibility to exercise their new powers effectively.

Therefore, the Chancellor and I propose the following changes to the Scotland Bill and accompanying package:

Bringing forward to 2011 pre-payments, a form of “cash advance”, to allow work on the Forth replacement crossing to begin;

Removing the requirement for Scottish Ministers to absorb the first £125 million of tax forecasting variation within their budget, giving Scottish Ministers more flexibility to decide how best to respond to any variations in tax receipts compared to forecasts;

Allowing Scottish Ministers to make discretionary payments into the Scottish cash reserve for the next five years, up to an overall total of £125 million, to help manage any variation in Scottish income tax receipts compared to forecasts in the initial phase of the new system;

Introducing a power in the Scotland Bill which will enable the Government to amend, in future, the way in which Scottish Ministers can borrow to include bond issuance, without the need for further primary legislation. The Government will conduct a review of the costs and benefits of bond issuance over other forms of borrowing, and will consider extending Scottish Ministers’ powers where this does not undermine the overall UK fiscal position or have a negative impact on total UK borrowing.

In addition, a number of changes will be made to the non-financial sections of the package:

Enabling Scottish Ministers to approve the appointments of MG Alba board members;

Providing for reciprocal consultation between UK Ministers and Scottish Ministers when either makes changes to electoral administration that impact on their respective responsibilities;

Devolving the power to make an order disqualifying persons from membership of the Scottish Parliament;

Implementing the findings of the expert group appointed by the Advocate General to consider the working of the Scotland Act in relation to devolution issues concerning the Lord Advocate as head of the system of criminal prosecution in Scotland;



Strengthening inter-governmental dialogue in areas of mutual interest in welfare.

The Government believe the Scotland Bill provides the right balance of additional powers for Scotland. But we will study any further proposals by the Scottish Government based on robust evidence on how these proposals would benefit both Scotland and the rest of the UK.

Second Reading Committee

Monday 13th June 2011 Grand Committee

Monday, 13 June 2011.

Arrangement of Business

Monday 13th June 2011 Grand Committee

Announcement

15:30

[The Deputy Chairman of Committees (Baroness Harris of Richmond)]

My Lords, before the Minister moves that the Bill be considered, I remind noble Lords that the Motion before the Committee is that the Committee do consider the Bill. I should perhaps make it clear that the Motion to give the Bill a Second Reading will be moved in the Chamber in the usual way. If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and it will resume after 10 minutes.

Consumer Insurance (Disclosure and Representations) Bill [HL]

Monday 13th June 2011 Grand Committee

Considered in Committee

15:31

Moved By

[Lord Sassoon]

That the Committee do consider the Bill.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, this Bill implements the recommendations of the Law Commission and the Scottish Law Commission in their 2009 joint report on the law governing pre-contract disclosure and misrepresentation in consumer insurance contracts. This report highlighted an area where a complex and confusing array of rules and regulation has emerged to compensate for outdated legislation.

This is a limited and targeted Bill, which applies only to consumer insurance contracts; it does not apply to insurance contracts solely or mainly covering business, including micro-businesses. There has been extensive consultation, the results of which have been reflected in the Bill where possible and relevant. The recommendations enjoy a broad consensus of support from the industry, consumer groups and regulators. It has therefore been deemed suitable for this Bill to be considered by your Lordships under the procedure for Law Commission Bills.

On 2 October 2010, a letter with a range of signatories was sent to the Times in support of this Bill. It described the current law as designed to,

“govern face-to-face commercial insurance deals in the coffee houses of Georgian London”.

It should not come as a surprise that this existing law, passed in 1906 to govern marine insurance, is no longer an appropriate basis for the law on all consumer insurance contracts. The insurance industry itself has recognised that requiring consumers to provide all information that might,

“influence the judgement of a prudent insurer”,

is no longer a sensible approach.

It does not seem a reasonable expectation of consumers that they should understand the underwriting process to the extent necessary to know precisely which facts they should disclose. For example, under current law a consumer may find that his or her critical illness policy no longer provides cover because he or she has not mentioned a visit to the doctor for a cold. Even if he or she reasonably thought this irrelevant to the cover that he or she had purchased, was not asked specifically to give details of all visits to the doctor or had simply forgotten the visit, the insurer may use the non-disclosure to refuse to pay. When facing a critical illness and any consequent financial disruption, finding that you have lost the safety net that you thought you had might, understandably, be highly distressing and disruptive.

This Bill will address these problems by changing the law through two central provisions. First, there is the change at Clause 2 from a requirement that consumers volunteer information to one that the insurer ask clear and specific questions. Secondly, provision is made in Schedule 1 for a proportionate set of remedies for the insurer when a misrepresentation has been made.

Let me start with the change at Clause 2. By replacing the existing requirement on the consumer with a duty to take reasonable care to answer questions fully and honestly, this Bill brings the law up to date with industry best practice. It reflects current regulation by the Financial Services Authority and the approach taken by the Financial Ombudsman Service. It will no longer be possible, as it currently is, for an insurer to refuse to pay a claim and have this refusal upheld by the courts but be ruled against by the ombudsman and be fined by the FSA. The current law and layers of regulation are complex and confusing for both industry and consumers.

We anticipate that providing clarity to the requirements on each party will lead to a reduced number of complaints to insurers and the FOS. At present the FOS receives around 1,000 complaints a year about non-disclosure and misrepresentation. Around half of the insurers’ decisions are upheld. We would expect the uphold rate to be much higher if there were sufficient clarity around the rules, which indicates that insurers find it difficult to locate and interpret the rules.

In future, this law should be taken into account by the ombudsman when deciding cases, as required by FSA rules. Complaints about claims that were above the FOS’s limit for consideration, or otherwise not resolved by the ombudsman, could be addressed in the courts. However, the Bill will not lead to consumers being driven to the courts earlier than at present.

We believe that the Bill will shift the balance of the law in favour of the consumer. The Marine Insurance Act is, in some parts, heavily biased in favour of insurers. This Bill attempts to rectify that bias. It removes a sometimes unreasonable level of duty on the consumer so that responsibility for accurate disclosure lies somewhere between consumer and insurer. Our replacement has received support from a range of consumer groups, including Which?, the British Heart Foundation, Consumer Focus, Macmillan and Age UK.

Of course, there is also a balance to strike between the effort required of the consumer to provide relevant information and the role of the insurer in prompting this. I know from discussions with noble Lords that there are concerns around this. The Bill does not attempt to guide what questions insurers should ask beyond a requirement that they are clear and specific. However, this is covered in industry guidance elsewhere. Under principle 6 of the FSA Principles for Businesses, a firm,

“must pay due regard to the interests of its customers and treat them fairly”.

More specifically, firms have an obligation, under this principle and under the Insurance: Conduct of Business Sourcebook, to ensure that customers know what they must disclose. The FSA has also indicated that it does not think that the entire burden around disclosure should fall on the consumer.

Once information has been provided, Clause 4 sets out which circumstances then entitle the insurer to a remedy. The insurer must establish that, had it known the true facts, it would not have entered into the contract, or would have agreed different terms, before it can reject or reduce a claim. For example, a remedy would not be permitted if the insurer could not demonstrate that failure to disclose the visit to the doctor with a cold would have affected the motor insurance policy that it offered.

This takes me to Schedule 1, which looks at remedies available to the insurer when there has been a misrepresentation. The current penalties for failing to disclose information to insurers are harsh. A failure to disclose any information that a prudent insurer would consider when writing the policy means that it becomes void. This Bill will mean that an insurer can only apply a penalty proportionate to the nature of the misrepresentation. If the misrepresentation was honest and reasonable, the insurer must pay. If the misrepresentation was careless, the insurer has a remedy based on what it would have done had the consumer answered the question accurately. If the insurer would, for example, have excluded a certain illness, the insurer need not pay claims that would fall within the exclusion but must pay other claims. If the insurer would have charged a higher premium, it must pay a pro rata proportion of the claim. This means that only if the information carelessly misrepresented or not disclosed would have affected the terms of the policy would the insurer have a remedy. Finally, if the misrepresentation was deliberate or reckless, the insurer may treat the policy as if it never existed and may decline all claims. It is also entitled to retain the premiums paid.

I should also outline some of the further contents of the Bill. It establishes a statutory code to determine for whom an intermediary acts when arranging insurance. The ombudsman has often seen consumers allege that their broker was responsible for the provision of inaccurate or misleading information. Schedule 2 therefore lists factors that tend to show whether the agent acts for the insurer or consumer and therefore who should bear the consequences. This code is based largely on existing law, as supplemented by FOS practice and industry understanding.

Clause 7 also contains special provisions for group schemes where one party, typically an employer, arranges insurance to benefit members of the group. The Bill provides that, where one group member makes a misrepresentation, that has consequences only for that individual and not for others within the group. Again, this is in line with current accepted good practice.

The Bill that I have been detailing has a broad consensus of support. Discussions with interested parties have been extensive. The consultation carried out by the Law Commission ahead of its report received over 100 responses. HM Treasury has since carried out targeted consultation to ensure that support for the Bill remained. A summary of these responses has been placed in the Libraries of both Houses. The consensus obtained by the Law Commission has remained intact throughout the process. I have mentioned support from consumer groups, but the industry and regulators are also positive about a Bill that will ensure that the law reflects their existing approaches and best practice. We believe that this Bill will clarify the standing of consumers and reduce costs for the industry. I am pleased that it has been so widely supported and I commend it to the Committee.

15:41

[Baroness Kramer]

My Lords, I am delighted to have an opportunity to speak in what I assume is the Second Reading of this Bill and to congratulate the Government on a piece of legislation that has long been needed.

I became aware of the issues that this Bill attempts to redress when I was a Member in the other place. A constituent came to my office. She was a redoubtable lady—and thank goodness that she was. She and her husband had purchased a house, taken out a mortgage and purchased from the mortgage provider an insurance policy so that if the husband died—he was the breadwinner in the family—the insurance policy would pay the remaining payments due on the mortgage, to provide security for the widow and children.

Her husband very sadly died of a heart attack. Obviously, it was devastating for the family. She had to consider how she would go back to work and the children had to adjust to not having the presence of their father. It was a traumatic time, but the thought that comforted them was that they could remain in their house because the insurance would take care of the mortgage. However, it turned out on examination by the insurance company that in disclosing his medical history her husband had not said that, something like two years before the insurance was taken out, he had visited his doctor. He had been somewhat under stress and the doctor suggested that he was rather depressed and gave him a prescription. I believe that it was for Valium. The depression did not continue and never became a serious issue. There was no continuing medication. However, in the doctor’s notes on that one occasion, this discussion of his depression was duly and properly recorded.

On those grounds, the insurance company refused to pay out under the policy. This lady would have lost her home. She fought the issue for over two and a half years. I ended up in many a conversation with the ombudsman, there were letters to the FSA, the courts became involved and, eventually, she won her case, but it was a two-and-a-half-year struggle. In that time, she would have lost her house had her parents not been able to help her to make the ongoing mortgage payments. The loss of the house would have added to the trauma that the children and family were facing. Even if eventually the financial solution was appropriate, it would never have dealt with the emotional damage to that family.

It seems to me that this legislation will address a situation like that—I hope that the Minister can confirm that that is so. That is critical because, although in the past many people were eventually able to get redress either through the ombudsman, a long-term court battle or in other ways, the suffering because of the struggle and its consequences took an enormous toll on families. I use this example because sometimes such issues, particularly insurance, become much more real when seen in the context of what an individual experiences. I am delighted that, as I read it, the legislation seems to address all counts for such issues.

I have one further question, which perhaps the Minister can answer. He will know that relevance in insurance policies has always been significant. In a sense, relevance is somewhat captured by this legislation as it presents itself on paper. In the claim that I discussed just now, if the insurance company were to understand that the homeowner had failed to disclose this issue, it could have decided perhaps to exclude certain conditions in the policy or to charge a higher premium, but it would not have been able to use that factor to void any responsibility to pay. The sliding scale, in effect, becomes an interesting mechanism to make sure that irrelevant conditions do not intrude on the payment obligation of the insurer. That is a big step forward.

It is good to know that the Bill has been welcomed on all sides, including by the insurance industry, as it is in the industry’s interests to restore its reputation. We know that, on the street, there is very much an attitude that an insurance company will use any mechanism that it can find to avoid paying. In the long run, that does the industry no good, so its support for this legislation is a win-win all round and I am delighted to welcome it.

15:46

[Baroness Noakes]

My Lords, I shall try to be brief in my contribution to this Second Reading debate. Until late last week, I had not intended to take part in the debate so I did not attend the briefing meeting that I understand my noble friend the Minister arranged. I also apologise to him for not giving notice of the points that I will be making, which arose only late last week. Indeed, some of my briefing arrived only late this morning. I should say at the outset that I fully support the Bill and endorse what my noble friend the Minister and the noble Baroness, Lady Kramer, said about its importance.

While the Bill is about consumer insurance, its impact will not be confined to consumers or insurance companies. Insurance is often sold through people other than insurance companies, which is where the BBA’s members come on to the scene, because banks typically sell insurance products alongside other financial products. It is important, therefore, that the banks can implement the new requirements effectively. Implementation is the topic that I want to address.

Clause 12 deals with the timetable for implementation and provides in broad terms that the legislation will not come into effect until an order is laid, which cannot be for a year after Royal Assent. Implementation could be from some time after next summer. The Minister will be aware that when banks and, indeed, others sell financial products, they have to ensure that their documentation is compliant with legal and regulation rules. Importantly, they have to train their staff and support them with such things as standard scripts to ensure that the rules are complied with.

As the briefing provided by the Financial Ombudsman Service today makes plain, the emphasis of the sales process for insurance products will, as a result of the Bill, shift much more towards asking relevant questions and obtaining specific information. Banks will need to ensure that their staff ask the right questions and then probe the answers to those questions in the appropriate way. More importantly, they will have to assemble the right evidence in all this so that, if necessary, they can determine and prove whether a customer has taken care in providing relevant information.

Many banks sell face to face and do not have the ready evidence provided by telephone or internet sales, so the evidence aspect to this is important. In addition to addressing the sales process, banks obviously have to review and perhaps modify compliance systems. Inevitably, there will also be changes to and investment in information systems. I should stress that the BBA, in briefing me, has no problem with that at all. The issue is not any changes that might be necessary but timing.

As the Minister will be aware, the FSA is in the process of requiring implementation of its retail distribution review, with an implementation date of December 2012—some 18 months away. The changes that will come about through this Bill will involve to some degree the same systems, processes and people to be trained as the RDR; they will not be exactly the same, but they will be in the same area. In addition, the industry will look to the impact of the new simplified advice area, which could well have an impact on insurance sales. The industry is still awaiting FSA guidance on simplified advice and hence does not know what implications that will have for the sales process. If it does have implications, it will be in exactly the same area.

The banks and doubtless others affected by the RDR and simplified advice want to be in a position, if possible, to implement all the changes in one go. It does not make business sense to carry out one set of modifications to systems, processes, training and so on and then to follow it a matter of months later with another similar set in the same area. In theory, it can be done in sequential implementations, but that is not the most efficient way in which to proceed. It adds cost to the system and probably increases implementation risk. How do the Government see the implementation timetable of the Bill? Will it be harmonised with that for the RDR and simplified advice?

The BBA has also raised the issue of the interaction between the Bill and IMD 2—that is, the proposed revision to the insurance mediation directive. The Commission is currently conducting an impact assessment of the changes and expects to produce a revision to the existing directive by the end of the year. This could well also produce changes in the same sorts of areas, raising the same sorts of issues. Have the Government considered the impact of the Bill in relation to IMD2? I hope that my noble friend can reassure me that the Government will be mindful of the burdens on those who need to implement changes in the interface with consumers when they determine when to bring the Bill into effect.

15:52

[Lord Higgins]

My Lords, I begin by raising one or two questions of a procedural nature. I am not clear whether I am speaking in the gap. My understanding is that there is virtually no precedent for the procedure that we have adopted today other than for one previous Law Commission Bill. It is not the least bit clear whether this is a Second Reading. My understanding is that it is not. We are considering a Second Reading in Committee. If it is in Committee, any noble Lord is entitled to speak without being on a speakers list, but I understand that there is a speakers list. Perhaps at a later stage either the Lord Chairman or my noble friend, if he has advice from the Clerk, could make the position clear.

Further, in relation to the statement made by the Lord Chairman at the beginning, as I understand it a Second Reading will be moved in the Chamber in the normal way. I am not clear whether that will be debateable. Perhaps we can have some clarification on that. Presumably, there will then be Committee and Report stages later on. At the moment, there seems little precedent to clarify the position on any of this. However, on the assumption—it may be an heroic assumption—that I am speaking in the gap, perhaps I might raise one or two points.

I first congratulate my noble friend on the helpful way in which he has had private discussions ahead of this meeting. I also congratulate those who prepared the documentation for the Bill, particularly the Explanatory Notes, with the excellent and helpful diagram. There is confusion, as my noble friend Lady Noakes implied, between the situation with the Bill and European legislation. Of course, we do not have a single market in insurance in the European Community. Consequently, some parts seem to be dealt with by directives and some parts by national legislation. That takes me a little wide of the remarks that I want to make, but I congratulate my noble friend and, indeed, the Treasury on arranging to get this Bill into the programme. It certainly would not normally get in, given the pressure on parliamentary time.

The Bill is clearly very useful. It clarifies the position considerably, except in one respect. I discovered only this afternoon the massive tome that is the Law Commission and Scottish Law Commission report. At paragraph 10.29, it raises the question of whether courts should follow industry guidance and it says at paragraph 10.30 that there is confusion as to whether the courts follow industry guidance or not. Parliamentary counsel has drafted a provision saying:

“The insurer may not take advantage of any remedy provided for under this Schedule if, or to the extent that, it would be unreasonable to do so according to written guidance generally recognised by insurers providing the type of insurance in question”.

That seeks to reconcile the position between codes of practice and legislation, which in many ways this seeks to avoid. Anyway, when I look at Schedule 1, I cannot find that particular clause, which appears to have been drafted but not included. If it is not included, this point seems still to be left in some confusion.

I will be imposing on the tolerance of the Committee if I go on much longer. However, if this is going to be done in future—and there is a strong case for using this procedure on Bills of this kind—we need to be clear on what the procedure is.

15:57

[Lord Eatwell]

My Lords, I express my gratitude to the Minister and his team and to Mr David Hertzell of the Law Commission for their briefing on the Bill, which was very helpful indeed.

In debates on measures brought before Parliament, the claim is often made—and perhaps even sometimes believed—that the consequences will be wide-ranging. In the case of this Bill, it is likely that the claim will indeed be true—and perhaps not only in the United Kingdom. For the Bill proposes a fundamental change in the structure of the insurance contract from a requirement that the purchaser discloses everything that will be material to the insurer’s decision to insure to a requirement in Clause 2(2) that the purchaser,

“take reasonable care not to make a misrepresentation to the insurer”.

In effect, the purchaser must answer carefully the question posed by the insurer. That is a dramatic shift of responsibility. Even though it is claimed that the Bill essentially clarifies what is accepted practice under the FSA’s insurance regulation and the various provisions of the Financial Ombudsman’s scheme, it seems that the Bill goes further than mere clarification.

One of the fundamental principles of insurance is that which is referred to as “uberrimae fidei”, or “utmost good faith”. That principle is fundamental to insurance law throughout common-law jurisdictions. A quick internet search revealed exactly the same principle as cited in the UK also cited in India, Ireland, Australia and the United States. Yet the Bill makes it clear in Clause 2(5)(a) that,

“any rule of law to the effect that a consumer insurance contract is one of utmost good faith is modified to the extent required by the provisions of this Act”.

Given that this legislation makes such a fundamental change to the principle if not to the practice of consumer insurance, it would be helpful if the Minister would clarify a number of points. First, have I interpreted correctly the shift in the onus of good faith? Is it indeed the case that the Bill characterises the information on which an insurance contract is based as deriving from the responsibility of the insurer to ask the questions and from the requirement that the consumer answer the questions with “reasonable care”, as under Clause 3? Also, is it indeed the case that there is no onus on the consumer to provide information that is not asked for—that is, there is no requirement to answer questions that are not asked, however relevant the information may be to the insurer?

As a supplementary point, what is the position if the consumer thinks that unasked-for information might be relevant to the contract but, not being asked, either concludes that the insurer believes the information to be not relevant or believes that it is not his or her responsibility to supply the information? In other words, will Clause 3(1) result in the addition of catch-all questions to insurance contracts, such as, “Is there any other information that might be relevant?”, hence substantially negating the declared intention of this Bill? Would that question be “clear and specific”? Is such a question permissible?

As a further supplementary, what questions are not permissible? As the noble Lord will be aware, the European Union seems likely to rule questions associated with gender as being out of order in motor insurance. Is this likely to become a general rule? Are questions about race permissible when they are relevant, as in the health issues associated with, say, sickle cell anaemia?

Secondly, why is there no responsibility on the insurer not merely to be clear and specific in questioning but also to demonstrate the relevance of questions asked? If questions that are indeed relevant when embodied in the insurer’s statistical analysis do not appear relevant to the consumer and their relevance is not demonstrated, the consumer may be led into treating the exercise more casually than is appropriate. This may be particularly true in medical insurance, in which the relevance of important issues may be very obscure to the consumer.

As I understand it, Clause 4(1)(b) establishes appropriate materiality in legal terms, but to the lay man, and indeed to the consumer, that clause is completely obscure. I imagine that if I asked any non-lawyer in this Room to explain how that clause established materiality, they would be hard pressed to do so. Since this is consumer legislation, should not the wording be clear and specific and not as obscure as Clause 4(1)(b)? I believe that the clause needs to be rewritten.

Thirdly, given that the insurers are now no longer protected by the catch-all requirement that the consumer must provide everything that would be material to the insurer’s decision to insure, it might be expected that the questions asked in proposal forms would become far more wide-ranging and comprehensive than has previously been the case. The very complexity of questions required to cover every eventuality might well create problems in and of itself. Are there to be guidelines to insurance companies defining the character and range of questions to be asked? Will the ABI, for example, provide such guidelines?

Fourthly, it is a familiar problem in credit analysis that a consumer’s credit rating is inappropriate because information has been logged wrongly or analysis has been faulty, or for a number of other reasons. In these circumstances, consumers have access to their credit ratings and a right of appeal. Is a similar facility available to consumers of insurance products and, if it exists, will the availability of this facility and its importance be widely publicised subsequent to the passage of this Bill? Will the facility be available, or is it available on the internet? In this context, are consumers deemed to know to what they have access? I know that this is a common outcome of business law, but it would be entirely inappropriate in consumer law.

Fifthly, how are all these matters to be played out in the process of renewal of an insurance contract referred to in Clause 2(3)? What if the request “to confirm or amend”, based on the original questions asked, does not in fact cover relevant changed circumstances? Is the consumer required to volunteer such information and how, under the terms of the Bill, is he or she to determine what is relevant? Would the insurer be allowed to ask the catch-all question, “Provide all other information that might be relevant at this stage”? If so, once again the Bill is otiose. It is particularly unclear in Clause 2(3), which therefore requires redrafting. It says that an insurance contract renewal is in fact a new contract. Renewal is not a concept known to insurance law. Should not the clause be redrafted to make that clear? What estimate has the Treasury made of the increase in the cost of insurance consequent on this legislation?

Before ending, I shall turn to the questions raised by paragraph (a) of Clause l, which seeks to define “consumer”, and by Clause 6, which is on warranties and representations. It may be—I have been unable to find out—that the concept of the consumer is defined in other relevant legislation, but as drafted in this Bill the definition is unreasonably vague. For example, taking out insurance against debilitating illness is typically motivated by the economic well-being of the sufferer and could not be said to be unrelated to the individual’s trade, business or profession. That would be especially the case if the physical or mental capacity that is insured is a necessary component of the performance of the profession. For example, for a ballet dancer, the body is the tool of his or her profession; it is the instrument of his or her art. Would any general health insurance taken out by a ballet dancer be insurance contracted by a consumer or not? Another, less exotic, example of the ambiguity of this definition of a consumer comes to mind. If I insure my BlackBerry, am I a consumer or not? The expression “wholly or mainly” is far too vague for me to know and, by the way, is unknown to insurance law.

On a related point, why was the legislation not extended to cover small businesses or even the micro-businesses to which the noble Lord, Lord Sassoon, referred, which at present suffer the same disadvantage as consumers? Indeed, the boundary between a consumer and a small business is often very vague—take my BlackBerry example. The clause requires further attention. It is not satisfactory as it stands.

On the question of insurance warrants, Clause 6(2) makes a valuable amendment to the law on misrepresentation, but this does not eliminate the generally destructive power of a warrant related to a condition of insurance. Given the drafting of Clause 3, which refers to “reasonable care”, and the remedies outlined in Schedule 1, would it not be appropriate to eliminate the role of warrants entirely from consumer insurance?

This is an important Bill, which is designed to pursue a worthy purpose. It is entirely supported by this side. However, it is not clear that the present drafting is sufficient to bear the weight of the major philosophical and practical change that is embedded within it. We will have the opportunity to pursue these matters at a later stage. In the mean time, answers to the questions that I have posed will greatly facilitate preparation of any necessary amendments.

I nearly forgot: as far as the Committee stage is concerned, I understand that under the rules governing Law Commission Bills it is possible to take evidence in Committee. Given that and given the defects in the drafting of the Bill as presently tabled, are the Government intending to call expert witnesses in Committee?

16:10

[Lord Sassoon]

My Lords, I start my response to what has been a helpful discussion by thanking the noble Lords who have taken the trouble to contribute this afternoon. The points have been wide-ranging and constructive. I am grateful to the noble Lord, Lord Eatwell, for his faith that I can respond so quickly to the huge number of very detailed points that he raised in his constructive intervention. He may forgive me in advance if I do not manage to cover all the details. Of course, I will write to the noble Lord and copy that to others who have taken part in the debate this afternoon.

[Lord Eatwell]

My Lords, I entirely understand the noble Lord’s position and am quite happy to receive written answers to my questions.

[Lord Sassoon]

I am grateful for that, because some of this has been a touch technical and some rather fundamental. I will talk about the process in a moment, as my noble friend Lord Higgins asked about the procedure for Law Commission Bills. The fact that it is a Law Commission Bill and has, as my noble friend pointed out, been the subject of a big report subsequently consulted on by the commission means that we can be fairly confident that all the fundamentals of the law have been considered in great detail. Otherwise, this Bill would not be going through this procedure. This is the first Bill to go through the Law Commission procedure since the procedure was made permanent last year. I am pleased that, as my noble friend Lord Higgins recognised, this innovation has allowed for parliamentary time to be found for this legislation, which would clearly otherwise have been difficult.

On what happens next, the important thing is that this is not in any sense a fast-track procedure, because the Bill will follow the usual parliamentary process but for two exceptions. First, the substantive Second Reading debate is held in Committee—that is what we are doing this afternoon—rather than on the Floor of the House. Secondly, the Committee stage will be, as the noble Lord, Lord Eatwell, said, taken by a Special Public Bill Committee, which is indeed empowered to take evidence from witnesses as well as to conduct the usual clause-by-clause examination of the Bill. I have no present intention to suggest from the Government’s side that we should call witnesses, but that is allowed for in the procedures. For the benefit of my noble friend, I draw the Committee’s attention to paragraph 8.44 of the Companion to Standing Orders, which says:

“The House agreed in 2008, on a trial basis, that second reading debates on certain Law Commission bills should be held in the Moses Room … The Committee debates the bill, and reports to the House that it has considered the bill. The second reading motion is then normally taken without debate in the House, though it remains possible, in the event of opposition, for amendments to be tabled or a vote to take place on the motion. Law Commission bills are normally committed to a special public bill committee”.

I hope that that is as clear as it can be. I do not know whether that allows for speakers lists, gaps and things this afternoon, but I am grateful that my noble friend got to his feet and contributed to the discussions in his usual lively way.

As I said in opening, we believe that this Bill is necessary in order for the law to catch up with best practice. It will also ensure that the legal duty of consumers is reasonable and clear. In answer to the questions asked by the noble Lord, Lord Eatwell, in this area, I am not sure whether it is right to look on it in the context of shifting the onus of good faith. It is clear that it is up to the insurer to ask the questions and to the consumer to answer them, with the potential consequences of misrepresentation in the way that I outlined in opening. The effect of this is to shift the burden between the insurer and the consumer in the consumer’s favour as against the law as it stands in the 1906 Act. That is entirely appropriate.

It is worth reiterating in this context—I think that this is the point on which my noble friend Lady Kramer asked for confirmation—that any information that the consumer misrepresented or failed to disclose must be proven to have been relevant to the content and/or the price of a policy before the insurer is entitled to a remedy. There is a shift in the legal position, but it is a shift towards a position that is in line with industry best practice and the standards that are currently imposed by the Financial Ombudsman Service.

I am particularly grateful to my noble friend Lady Kramer for drawing attention to a shocking but classic case of the sort that this Bill is intended to obviate and to ensure does not happen in future. The case that she put forward was interesting because it was a question not of unreasonable loss to the consumer—as I understand it, after a two-and-a-half-year struggle, the FOS found in favour of the insurer—but, as was explained to us, of the very real distress and the time and effort that had to go into getting to the right answer. That should be eliminated in similar situations as a result of this legislation.

As I said in opening, the industry will benefit, as we anticipate a reduction in the costs of handing complaints internally and with the ombudsman. In that context, I can confirm to my noble friend Lady Noakes that we will be mindful of the burdens of implementation on the industry. She rightly and helpfully pointed out the various other initiatives that will bite on training, information and standards of scripts, whether in relation to the retail distribution review or simplified advice. Her points are well taken.

My noble friend Lord Higgins referred to paragraph 10.30 of the Law Commission’s report, which discusses the pros and cons of giving legal effect to industry guidance. My noble friend quoted from paragraph 10.30, but the report discusses the issue at some length in paragraphs 10.32 to 10.43. The Law Commission decided not to include such a provision for the reasons set out in paragraph 10.38, principally because the role of guidance is different from that of legislation. I think that the discussion is extensive in the Law Commission’s report.

[Lord Higgins]

I am most grateful to the noble Lord. The trouble on these occasions is that the Hansard reporters tend to remove the relevant documents. I am most grateful for his clarification.

[Lord Sassoon]

Good. I, too, am grateful that we have nailed that one.

On the other questions raised by the noble Lord, Lord Eatwell, there is first this difficult issue about permissible questions and specifically questions of gender and race. They are made particularly difficult by the recent judgment of the court in relation to motor insurance. This issue is dealt with elsewhere and not in the Bill, which is solely focused on the transmission of information in the context of underwriting risk. It is not part of the scope of the Bill to discuss questions of discrimination or equalities legislation—nor should it be.

On the definition of consumers and micro-businesses, we discussed informally last week what would happen with respect to the insurance of the foot of a ballet dancer or a footballer. Maybe we could call this the “David Beckham’s foot” question. The Explanatory Notes on Clause 1 define a consumer as,

“an ‘individual’ who is acting wholly or mainly for non-business purposes. Thus the consumer must be a natural person, rather than a legal person (such as a company or corporation). The definition expressly provides for mixed use contracts”—

for example, the insurance for a personal car that is sometimes used for business travel to be defined as a consumer insurance contract. It means that the Bill will not apply to individuals purchasing insurance that is mainly for purposes related to their trade, business or profession, which would clearly be the case in some of the examples that have been discussed.

Lastly, on the cost of insurance, HM Treasury has not made an estimate of the impact of the Bill on insurance premiums. However, we have estimated that the net impact will be savings for the industry—that is, when we take account of the initial training costs and the savings as a result of fewer FOS complaints among other factors. On the basis that the industry should have net savings from this Bill being enacted, there is absolutely no reason to believe that there should be any additional cost passed on to consumers. In relation to the overall cost of insurance, these are relatively small marginal costs but ones that would impact favourably—that is, downwards—on insurance costs.

[Lord Eatwell]

I should perhaps explain the point about cost. Given that the catch-all clause from the Marine Insurance Act 1906 is removed, necessarily the range of risks to which the insurance company is exposed will be greater. Given that, it is likely that the premium charge will be greater. That was the point that I was making.

[Lord Sassoon]

My Lords, I do not believe that the range of risk will be any greater. Under this Bill, the range of risk to which the insurers are exposed will be brought in line with the current industry best practice and the standards to which insurers are held under FSA rules and by the FOS. There is no extension of the range of liabilities; there is merely—this is an important “merely”—an alignment, a clarification and an important legal codification of where the duties lie at the point at which the insurance contract is taken out. There is also clarification of the remedies—the remedies that are already applied by the FOS—should a misrepresentation occur. So, yes, the position under the law will change from that of the 1906 Act, but in substance the Bill will put insurers in a position that they are already in under current practice. Therefore, I would not accept that there is a greater range of liabilities and costs to which the insurer is liable; if anything, as I have said, there will be a modest saving because of the clarity that the new architecture will bring.

I have gone on at some length in response to the important questions that have been raised. I will sweep up anything else that I have not had the chance to cover and get back to noble Lords in good time ahead of the Special Public Bill Committee. I hope that I have, nevertheless, responded to as many points as I can this afternoon. I look forward to further discussion in the Special Public Bill Committee in due course.

Motion agreed.

Committee adjourned at 4.26 pm.

House of Lords

Monday 13th June 2011 Lords Chamber

Monday, 13 June 2011.

14:30

Prayers—read by the Lord Bishop of Chichester.

Message from the Queen

Monday 13th June 2011 Lords Chamber

14:36

[The Lord Chamberlain (Earl Peel)]

My Lords, I have the honour to present to your Lordships a message from Her Majesty the Queen, signed by her own hand. The message is as follows:

“I have received your address about His Royal Highness the Duke of Edinburgh on the occasion of his ninetieth birthday. It gives me great pleasure to convey to the Duke of Edinburgh the loyal and affectionate sentiments you express on behalf of My Lords”.

Royal Assent

Monday 13th June 2011 Lords Chamber

14:36

The following Act was given Royal Assent:

Postal Services Act.

Census

Monday 13th June 2011 Lords Chamber

Question

14:37

Asked By

[Baroness Kramer]

To ask Her Majesty’s Government what proportion of postcodes in England and Wales will be covered by the 2011 Census Coverage Survey, and what are the anticipated benefits and costs of the Survey.

[Lord Taylor of Holbeach]

My Lords, the current Office for National Statistics census coverage survey is a validation exercise that will greatly enhance the statistical authority and value of the census. It will cover some 17,000 postcodes across England and Wales. This represents a sample of 1.3 per cent of all postcodes in England and Wales, and will cover some 330,000 addresses. The cost of the field operation of the survey is estimated to be £6.5 million, representing around 1.3 per cent of the total census costs. The cost for the processing of the information collected in the survey is included in the overall cost of the processing operation.

[Baroness Kramer]

My Lords, I thank the Minister for that very full Answer. However, he will be aware that this is a survey of people who have filled out the census form and about whom no questions have been raised as to accuracy. They are required to stand on a doorstep for 10 minutes, answering personal questions from a complete stranger. If someone refuses to answer, surveyors are instructed to return as many as 10 times to wear them down into answering this survey. As someone said to me, it is fascinating to watch an exercise that not only wastes public money but manages to alienate the public. Will the Minister give us a guarantee that future evaluations of the census will be proportionate, targeted and designed—please—with a dose of common sense?

[Lord Taylor of Holbeach]

I am sorry that my noble friend takes that view of this exercise, which is a valuable part of the census. I understand her concern about intrusiveness; these things are not taken in hand lightly. However, the survey is a vital element of the whole of the 2011 census operation. It is necessary in order to assess the extent of any undercount, and to provide information on those persons missed in the census to adjust the final estimates so as to enable all the resulting statistics to relate to the whole population.

[Lord Desai]

If one has to hold an objective survey, is it not necessary to get complete strangers to ask questions? If somebody I knew asked me questions I might not give the right answers, because he might misuse them. The noble Baroness asks why complete strangers ask the questions. Of course strangers have to ask the questions; if they did not, it would not be an objective survey.

[Lord Taylor of Holbeach]

A short interview on the doorstep is available and a form can be filled in if people prefer to do that. People may well wonder why they are doing this when they have already completed a census form, but we seek to ensure statistically that the figures which the census is delivering are an accurate representation of the household. This is a valid statistical exercise which complies with quality assurance as defined by the United Nations and is international practice. It is worth investing a little extra effort to ensure that the census really does achieve its objectives.

[Baroness Gardner of Parkes]

Will the Minister clarify this for me? I had thought that it was an either/or situation and that if you completed the form you did not have to be interviewed on the doorstep. However, from what he has just said, it sounds as if a certain number of people are still to be interviewed even if they have completed a form. Is that correct? How is it assessed which people who have completed a form should be interviewed?

[Lord Taylor of Holbeach]

This is done on the basis of postcodes. The measure is designed specifically to include those postcodes where information has been difficult to obtain and to ensure that the information returned is valid. I thank my noble friend for pointing this out: the actual households may or may not have completed a form in the first place. This measure is designed to ensure that the information that is available is correct.

[Lord Dholakia]

My Lords, the information in a census is required by law in this country. Does this survey have a penalty attached to it if one refuses to answer any questions?

[Lord Taylor of Holbeach]

No, it is entirely voluntary, but I would hope that people would realise why it is important to complete the survey.

[Baroness McIntosh of Hudnall]

My Lords, if it is the purpose of this survey to ensure that the information on the census forms is, broadly speaking, accurate, is it possible to ensure that Members of this House are included in that survey? I wonder whether the Minister is aware that the way that the census form was designed made it extremely difficult for people who are Members of this House to give accurate information about how they spend their working days.

[Lord Taylor of Holbeach]

I thank the noble Baroness for that question. I struggled a little to complete my own form and was rather embarrassed by that considering that I have occasionally to answer questions on the subject. So I understand exactly what she is saying. However, I can reassure her that were she part of the postcode lottery—that is, the postcode selected for this interview process—she might indeed find that somebody wanted to interview her about her census form. If so, it would be a very much abbreviated questionnaire compared with the one that she was asked to fill in in the first place.

[Lord Brooke of Sutton Mandeville]

My Lords, I declare an interest as a former canvasser in an inner London seat. Can my noble friend tell me what happens if the only method of communication with the person being interviewed is through an entry phone?

[Lord Taylor of Holbeach]

This is a familiar experience for most noble Lords. It relates in some ways to the difficulties experienced in some inner urban areas in this regard. Noble Lords may remember that I was asked a question on this some time ago and that Kensington and Chelsea had only a 64 per cent return of census forms in 2001. We are on track for a much better return this time, aiming at a 94 per cent return. The early indications are that it is on target, and that is very satisfying. As my noble friend has pointed out, communication is often difficult in these hard-to-reach areas. In the case of non face-to-face communication, it is possible, as I say, for a form to be filled in by the respondee.

[Baroness Farrington of Ribbleton]

My Lords, will the Government have regard to the assessment of population as a result of the census when considering parliamentary boundaries? It is my recollection that the Government closed that issue at the end of last year, and that therefore the new parliamentary boundaries could be drawn up on fallacious figures.

[Lord Taylor of Holbeach]

I think that we have discussed this previously, if I may say so, but I thank the noble Baroness for bringing it up. The truth of the matter is that registration for the electoral register is entirely voluntary in this country and not everyone is registered. On the other hand the census is mandatory and designed to make sure that government resources go to where they should. Therefore the two are not compatible; they are drawn up under separate legislation and conducted by totally separate organisations. The Office for National Statistics has nothing to do with local electoral registration.

Health: Transmissible Spongiform Encephalopathies

Monday 13th June 2011 Lords Chamber

Question

14:46

Asked By

[The Countess of Mar]

To ask Her Majesty’s Government what are their proposals for continuing research into human and animal transmissible spongiform encephalopathies.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, the Government continue to invest considerable funds in this research. I am pleased to note that the risk from BSE has declined significantly, and that cases of variant CJD peaked in 1999 and have declined ever since. The Government intend to continue to fund this research in order to ensure that policies are based on the best possible science and that there is evidence of efficacy, safety and cost-benefit for any measures implemented.

[The Countess of Mar]

My Lords, I am grateful to the noble Earl for that encouraging reply, because there have been rumours that the TSE research by the Health Protection Agency at Porton Down was to be “downsized”, as they say. Does the noble Earl agree that it is very important that we retain our knowledge acquired since the 1950s, when researchers were looking at scrapie, and that it is rather dangerous to put all our eggs in one basket? We ought to encourage lots of researchers to keep up to date, because these little prions seem to have naughty ways. What is happening to the archives for TSE conditions, which really ought to be called neurodegenerative diseases?

[Earl Howe]

My Lords, the Government are committed to continuing research in TSEs. Many fundamental questions remain unanswered and the research is, by its nature, long term. Considerable funding is provided by a number of bodies—not only the Department of Health, but the Medical Research Council, the Biotechnology and Biological Sciences Research Council, Defra and the Food Standards Agency. The total funding last year was in excess of £20 million, and I should add that the DoH funding is ring-fenced. That funding to key institutions ensures that expertise is maintained and continued in the UK.

As for the archive of research data, I agree with the noble Countess. The Government are committed to this research, as I have mentioned, and to surveillance, so our data and resources will remain accessible through peer-review publication systems for sharing material and through continuing liaison with the research community.

[Baroness Finlay of Llandaff]

In making decisions about funding, do the Government recognise that the research into prions and TSEs may be only the tip of the iceberg, and that prions may be implicated in a whole range of other protein-folding abnormalities, including Alzheimer’s and amyloid disease? In asking that question, I must declare an interest, because research in the field is carried out in my own university, Cardiff University.

[Earl Howe]

My Lords, I am aware of emerging findings in that sense. We welcome, of course, any significant findings from research, and my department has indeed part-funded some of the studies that the noble Baroness may have been referring to. Future funding applications for new studies will be considered, as they always are, on a case-by-case basis. These decisions are dependent on, among other things, existing research in progress and the availability of funding. However, this is an interesting area.

[Lord Greaves]

My Lords, does the Minister agree that this country is a world leader in research into spongiform encephalopathies and the role of prions generally? Nevertheless, what we know about this area remains a great deal less than what we do not know. In those circumstances, will he answer what I think was behind the noble Countess’s original Question? Is the amount of money devoted to funding this research continuing at the same level, or is it actually being reduced?

[Earl Howe]

My noble friend asks a very good question. Over 20-odd years, we in this country have invested almost £0.5 billion in research into TSEs. That is a significant amount of money. The total amount is declining, but that is because in the early days it was important to invest in research to ascertain the pathogenesis of this condition in cattle in particular. We are much further forward in understanding how this disease develops in cattle. Nevertheless, as I indicated to the noble Countess, important questions remain unanswered, and I think we will continue to see this research funded well into the future.

[Baroness Masham of Ilton]

My Lords, what is happening about the P-Capt filter for prions? Are we not lagging behind Ireland and China in this research?

[Earl Howe]

My Lords, the noble Baroness will know that the independent Advisory Committee on the Safety of Blood, Tissues and Organs—SaBTO—has advised that there is evidence that a particular filter can reduce potential infectivity in a unit of red blood cells. It has recommended the introduction of filtered blood to those born since 1 January 1996, subject to a satisfactory clinical trial to assess safety. We are undertaking an evaluation of the costs, benefits and impacts to inform a decision on whether to implement that recommendation, and we are awaiting the results of clinical trials, which are expected in early 2012.

[Baroness Thornton]

My Lords, following on from the noble Countess’s Question and linked to the need for continuing research, can the Minister assure the House that the scientific teams at the HPA and elsewhere will be kept together when the HPA has been broken up, and that during the period of establishing the independent health research agency the work will not be interrupted?

[Earl Howe]

My Lords, we are keen to see a smooth transition in the creation of Public Health England, which will include the current HPA. The expertise in prion research in this country is largely independent of the HPA. There is expertise particularly in Edinburgh and in the national prion unit in London, but her point is well made.

Banking: Government Shares

Monday 13th June 2011 Lords Chamber

Question

14:53

Asked By

[Baroness McDonagh]

To ask Her Majesty’s Government when they intend to sell their shares in publicly owned banks; how the proceeds will be accounted for; and how the proceeds will be used.

[Baroness McDonagh]

I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as non-executive director of Standard Life.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, in line with its framework document and investment mandate, UK Financial Investments will advise the Government on the timing of the disposal of these assets, in light of market conditions at the time. The Office for National Statistics will decide how to account for the proceeds in the public finances of any share sale, taking into account the precise nature of the transaction. How any proceeds will be used will be determined as part of the normal annual Budget process.

[Baroness McDonagh]

I thank the Minister for that reply. The Government have been able to tell us little about their future banking policy. Perhaps we could be enlightened more about the here and now. I do appreciate that it is difficult for the Minister, given the abject failure of Project Merlin, but how have we got ourselves into a situation where under the Government’s own enterprise finance guarantee scheme we are lending to SMEs less and less each month to the degree where we are now lending half in the first quarter of this year of what we were lending in the first quarter of last year? The Government are threatening banks to lend more and more. When are they going to get banks to lend to small and medium-sized enterprises at rates they can afford?

[Lord Sassoon]

My Lords, I could be churlish or be fair to other noble Lords who might want to ask about the subject of this Question, which is the Government’s plans to sell shares in the publicly owned banks. We seem to be straying rather far from it. Project Merlin, agreed between the Government and the banks, means that the banks have put aside considerably more lending capacity this year for SMEs than last year. We have transparent reporting and a range of other initiatives to which the banks have committed to ensure that lending flows. We have also put money into a new equity fund for smaller businesses. These were things that the previous Government did not do but which have only peripheral relevance to the subject of this Question, which is about the sale of shares in the banks.

[Lord Peston]

My Lords—

[Lord Newby]

My Lords—

[Noble Lords]

This side!

[Lord Peston]

No.

[Baroness Anelay of St Johns]

My Lords, it is a courtesy. The Question was posed from the Labour Benches. It might be helpful to hear from a different Bench, just for the moment.

[Lord Newby]

My Lords, given that all UK citizens have, to a greater or lesser extent, had to bear some of the costs of the Government bailing out the banks, can the Minister confirm that the Treasury is giving serious consideration to the distribution of the state-owned shares in RBS and Lloyds Banking Group to the UK population as a whole?

[Lord Sassoon]

My Lords, I can confirm to my noble friend that UK Financial Investments will be considering retail participation in the distribution of the shares. That does not, of course, necessarily mean quite what he said, which is some form of distribution but, yes, mass participation in some form is very much to be considered. Value for money is also one of the considerations that UKFI is required to take into account.

[Lord Peston]

My Lords, particularly as the Minister used the phrase value for money, is not the Government’s prime duty in determining when to sell making sure that the taxpayer gets the maximum proceeds from the sale of the shares? Is that not clear-cut? Is it not also clear-cut that the one group that should not be allowed to bid for the shares is the bankers who got us into this financial mess in the first place?

[Lord Sassoon]

My Lords, the obligation on UK Financial Investments is to provide advice to the Government on the time and form of sale. Value for money, as widely defined, is very much a consideration. The Government do not intend to be a permanent investor in the banks, but the timing of any disposals will take account of many considerations, including market conditions at the time.

[Baroness Wheatcroft]

My Lords, one of the answers to getting more lending to our small firms, who are clearly not yet being well served by Project Merlin, must be to encourage more competition. Can the Minister assure me that he sees no conflict between the desire to get the maximum price for the Government's investments in banks and ensuring more competition?

[Lord Sassoon]

My Lords, I am grateful to my noble friend as she enables me to point to the mandate which UK Financial Investments was given by the previous Government. It was that in creating and protecting value for the taxpayer it must have due regard to both financial stability and competition. At all stages, whether it is the involvement of the Independent Commission on Banking or the mandate of UKFI, competition is at the centre.

[Lord Eatwell]

My Lords, the noble Lord has mentioned Project Merlin on a number of occasions. Will he explain to the House why the lending targets set for the banks under Project Merlin and announced to this House have now been reduced by a good 10 per cent? Why are the Government fiddling the figures?

[Lord Sassoon]

Number one, this is a Question about the disposal of bank shares; number two, I would not believe everything that you read on the front page of the Financial Times every day.

[Lord Lawson of Blaby]

My Lords, in saying that financial stability should be one of the considerations in the disposal, which I warmly welcome, does my noble friend agree that an element of that financial stability must be ensuring the greatest possible separation between retail banking and investment banking?

[Lord Sassoon]

My Lords, I will wait with interest to see what the final report of the independent commission led by Sir John Vickers says on that point but, as indicated in its interim report, it is at the heart of its deliberations. The Government await with interest its final report.

[Lord Touhig]

Is the Government’s holding in the banks listed in the National Asset Register, and, if not, why not? If it is listed, can the Minister tell us where it is, because I cannot find it?

[Lord Sassoon]

My Lords, I shall have a look at the National Asset Register myself when I get back to the Treasury and, if it is not there, I shall write to the noble Lord to explain why.

Groceries Code Adjudicator Bill

Monday 13th June 2011 Lords Chamber

Question

15:00

Asked By

[The Lord Bishop of Wakefield]

To ask Her Majesty’s Government whether they will outline the schedule for the future consideration of the Groceries Code Adjudicator Bill once pre-legislative scrutiny is complete

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the Government published the draft Groceries Code Adjudicator Bill on 24 May—that is, they have published draft legislation during the first Session, as they set out to do. The objective is to introduce a final Bill in the second Session, although it could be earlier if we have the opportunity. Of course, the timetable for introducing the final Bill will also be subject to the outcome of the pre-legislative scrutiny.

[The Lord Bishop of Wakefield]

My Lords, I am most grateful to the Minister for her encouraging reply. One of my main concerns is the speed of implementing this legislation because of further haemorrhaging in our dairy industry, in particular. However, I am also concerned that the adjudicator should have teeth. In relation to the implementation of the Groceries Supply Code of Practice, can the Minister explain why financial penalties will not be available to the adjudicator in the early stages of operation but will be made available only by order of the Secretary of State?

[Baroness Wilcox]

I know that the right reverend Prelate the Bishop of Wakefield is most anxious to see the groceries code adjudicator established, as the pastoral care of farmers in his diocese is important to him. The Government believe that the most effective way to handle this matter in a highly competitive market is to name and shame retailers who breach the code. However, if experience shows that negative publicity is insufficient, the Secretary of State will have reserve powers to allow the adjudicator to impose financial penalties. I know that the Commission recommended that we should have such financial penalties, but the Government believe that the most effective method of control is to go through the naming and shaming process and to see whether that works before resorting to fining.

[Lord Avebury]

My Lords, is my noble friend aware that many Members in another place who represent agricultural constituencies—primarily my honourable friend the Member for Ceredigion—have campaigned for some years for legislation along these lines to afford protection to agricultural producers against the abuse of monopoly power by large retailers? Would it not be wise therefore to take these interests into account and to press on with the Bill as rapidly as possible?

[Baroness Wilcox]

My Lords, we all agree that we wish to get this legislation through as quickly as we can. We have widespread cross-party support, and one retailer, Waitrose, already supports it, as do bodies representing suppliers, including farmers and third-world producers. However, as my noble friend knows, we have to go through the legislative process. If we can bring the Bill forward any earlier than we are aiming to do at the moment, then we certainly will, but there is a very full legislative programme and everyone thinks that what they have to do is extremely important. However, I fully agree with my noble friend and I, too, should like to see the legislation brought forward earlier.

[Lord Kennedy of Southwark]

My Lords, I think we would all support the groceries code and adjudicator who will ensure that British farmers and growers get a good price for their quality produce. However, can the noble Baroness tell us whether other producers will get a fair price for their produce? I am thinking, in particular, of the banana industry in the Caribbean.

[Baroness Wilcox]

I am delighted to answer this question because I know that third-world producers are very keen for the adjudicator to be in place. I agree that suppliers to the large supermarket groups come in all shapes and sizes. I was once one myself, so I know exactly how this process works and exactly where the worries lie on either side. However, it is worth remembering—I used to have to remind myself of this—that these are huge contracts and people go for them because they are a wonderful way of increasing employment and expanding one’s business. Therefore, a balance has to be found.

[Baroness Byford]

My Lords, does the Minister accept that there is extreme pressure from all sides of agriculture to have the adjudicator in place as soon as possible? The right reverend Prelate mentioned dairy, but the situation for pig farmers is extremely acute, and a lot of supermarket offers promote imported products rather than our own, which seems grossly unfair. Everybody is hoping for a fair deal for all those who have to deal with the few major players who control prices.

[Baroness Wilcox]

The whole reason for bringing in the adjudicator will be to arbitrate in disputes between the large retailers and their direct suppliers, and to investigate possible breaches of the grocery code, which has been in place for a year now. Of course, when there is a group of very big supermarkets together, that is a worry. That is the whole reason for putting this in place and I am sure that the noble Baroness would want this to go through as quickly as possible.

[Lord Young of Norwood Green]

My Lords, we welcome the Bill and the assurances received. The Minister said that only direct applications from suppliers can be made to the adjudicator. Why will the Government not consider trade associations? The Government have allowed anonymity in terms of representations, but allowing trade associations to make a direct representation on behalf of suppliers would be a valuable source of evidence for the adjudicator to consider.

[Baroness Wilcox]

I have no doubt that as the Bill goes through, the noble Lord will stand up and put these points to me. I am absolutely sure that everything will be considered. At the moment that is exactly what we are doing: looking at every possible way of getting this right for our country.

[Baroness O'Cathain]

My Lords, the noble Lord, Lord Kennedy, made a point about bananas. Almost all the major supermarkets now have Fairtrade bananas. Is there anything we could learn from the organisation of Fairtrade bananas in this country that we could copy for dairy, pork, sausages or anything else?

[Baroness Wilcox]

My noble friend makes a very good point. I am quite sure that other areas will be looking at the way in which Fairtrade and other such organisations have chosen to supply.

Export Control (Amendment) (No. 3) Order 2011

Monday 13th June 2011 Lords Chamber

Motion to Approve

15:07

Moved By

[Baroness Wilcox]

That the order laid before the House on 15 April be approved.

Relevant document: 21st Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 7 June.

Motion agreed.

Taxation of Equitable Life (Payments) Order 2011

Monday 13th June 2011 Lords Chamber

Motion to Approve

15:08

Moved By

[Lord Sassoon]

That the draft order laid before the House on 21 March be approved.

Relevant document: 19th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 7 June.

Motion agreed.

European Union Bill

Monday 13th June 2011 Lords Chamber

Report (2nd Day)

15:08

Clause 4 : Cases where treaty or Article 48(6) decision attracts a referendum

Amendments 11 to 12A not moved.

Clause 6 : Decisions requiring approval by Act and by referendum

Amendment 13 not moved.

Amendment 14

Moved by

[Lord Hannay of Chiswick]

14: Clause 6, page 4, line 34, leave out from “Parliament” to end of line 35

[Lord Hannay of Chiswick]

My Lords, I will speak to the long list of the amendments in this group. Because some amendments in the group have been changed since they were debated in Committee, I hope that I will be forgiven if I say a little about them. The broad case for this group of amendments remains that which was referred to by many noble Lords at Second Reading and in our debates in Committee: it is the belief that the long list of potential referendums is excessive and disproportionate, that it does real damage to the structure of representative parliamentary democracy and that it needs to be shortened. I do not know how on earth the Government arrived at a list as long as 56. Some earnest people have discovered even more in this legislation. Indeed, why stop one short of where Mr Heinz got to? The amount is quite excessive and would have a disproportionate effect on our constitutional practice. What it amounts to is massively increasing the number of potential referendums in one area of policy while not doing so in any other area of policy. It is completely unbalanced in its approach.

The amendments that I and other noble Lords have tabled today reduce the number of areas that would be subject to a referendum mandatorily if they were pursued separately, one by one. I will come back to the point about what happens if they are pursued collectively later on. In these amendments we have tried to take account of the debate in Committee. The noble Lord, Lord Howell, who was the Minister on that occasion, spoke about the big five and attached a lot of importance to their being the subject of a referendum. I and other noble Lords listened carefully to that speech and have taken considerable account of it in the way in which these amendments are cast. When we discussed it in Committee, we only suggested that there should be an explicit referendum requirement for a decision by Britain to join the euro and that other matters referred to in Clause 6 should not be so treated. However, we listened to what the noble Lord said in the debate, in particular the great importance that he attached both to the question of any move towards military co-operation and to the question of any move on border controls—that is the Schengen treaty, which, of course, does not apply to this country at the moment. Therefore, we have recast these amendments in such a way that, if they were passed, while there would be a considerable reduction in the number of referendums that potentially would need to be held, there would still be a referendum requirement if we were to decide not only to join the euro but to move decisively in the direction of military co-operation. Here the amendment is more precise than the extremely woolly wording of the Government’s own Bill, and makes it clear that what the Government and their supporters were talking about was the circumstances in which defence co-operation moved to an area that involved the setting-up of a European Union force or structure. That is the way in which it is now cast and it suggests that this would definitely require a referendum. The addition of the Schengen provisions requires less explanation; it is fairly straightforward. Britain has had an opt-out since, I believe, the Amsterdam treaty, and it is not suggested that that could be shifted other than after a referendum.

These changes show that those of us seeking to amend the Bill are listening carefully to the debate, in Committee and indeed on Report, and are taking full account of points that have been made from the government Bench on this matter. I hope that on their side they will reciprocate that spirit of compromise.

15:15

It is quite important to emphasise one or two negative points about the amendments: things they do not do. First, the removal of a mandatory referendum requirement for a whole long list of things in Clause 6 but not for the euro, Schengen or military co-operation does not mean that they would not under any circumstance be caught by a referendum requirement. The noble Lords, Lord Howell of Guildford and Lord Wallace of Saltaire, have told us on a number of occasions that, in their view, most of these issues will come up not separately but in a group. As has been the case in the European Union in the past—at the time of the Single European Act, of Maastricht, of Amsterdam, of Nice and of Lisbon—they will come up as a wide range of amendments on different and disparate issues which will be brought together in a single new treaty. By definition, the British Government will be willing to agree to it because, otherwise, none of this would happen at all. If they objected to such a package, there would not be such a package.

In the circumstances where a package was taking shape and being supported in principle by a British Government, and where one or other of these issues which we are suggesting should not be the subject of a separate referendum requirement were part of that package, it would be caught by Clause 2, which we are not suggesting should be changed. If one of these issues, such as the question of the public prosecutor or all the other list of issues which it is suggested should be dropped from being dealt with individually as a referendum, were to become part of a package, that would not then mean that it was exempt from a referendum—quite the contrary. Because it was part of a package being taken forward under the normal treaty revision process, as it is called, it would be caught by Clause 2. The exemption from a referendum is merely if it is dealt with individually.

I do not want to get into a guessing game with noble Lords on the government Bench as to which of the two is more likely. They have said on quite a number of occasions that they believe that the overall-package approach is the more likely if the European Union were to move to change its treaty again, in which case they have nothing to worry about. Nothing will differ from what they wish to see, because, if any of these issues which we are suggesting should not individually be dealt with by a referendum were incorporated in such a package, there would be a referendum and they would be dealt with in it. That is a fairly important negative point to note. The amendments are a great deal less far reaching than noble Lords might think when looking at them on the paper before them.

The second negative point is that those proposing the amendments, as we explained when we discussed them in Committee, are not seeking to move back from the referendum requirement in the Bill to the simple situation that existed on the basis of the legislation which this House and another place adopted at the time of Lisbon; that is, where such changes would require merely a positive resolution in both Houses. We have accepted the Government’s wish to ensure primary legislation—that is, the full works in both Houses—if any of the changes were to be approved by Britain following a decision by the British Government that they were in Britain’s interest in the first place. Again, I emphasise that none of these matters will come before any House unless that condition has been fulfilled. Far from weakening Parliament’s powers, in proposing the amendments we are strengthening them, because Parliament will now have the role of passing primary legislation or rejecting it, depending on which way it goes, and there will not be a return to the Lisbon arrangements.

I think that is pretty important. Those who move these amendments argue that we are strengthening Parliament’s powers over the handling of changes to the treaty, not weakening Parliament’s powers—as the Government would—by giving referendums the possibility of overruling a view reached not only by the British Government but by both Houses of Parliament. Frankly, that is a pretty radical constitutional innovation. The amendments move in the opposite direction, towards a strengthening not a weakening of the powers of both Houses.

The third negative point is that nothing in these amendments cuts across or undermines any commitments by any of the major parties in the last election or those contained in the coalition agreement. None of those texts envisages the “Heinz minus one” number of referendums; they all envisage a broad statement that when the treaty is going to be changed, there will be a referendum. That is preserved by these amendments because if there is the normal treaty reform process, that is what will happen. For all those reasons, we are trying to introduce a bit of the proportionality which noble Lords on various Benches have called for in the last few weeks of debate on the Bill. We have done something to limit the damage to the system of representative parliamentary democracy—which all of us, not only those who tabled these amendments, hold dear—if this Bill passed unamended. I hope that, after debate, the House will support the amendments. I beg to move.

[Baroness Nicholson of Winterbourne]

My Lords, I shall comment briefly on the important set of amendments which the noble Lord, Lord Hannay of Chiswick, has put forward, and focus on two important points. The first concerns Amendment 15, in which the noble Lord, Lord Hannay, recommends that after “defence” we insert the words,

“that permits a single, integrated military force”.

As I understand the amendment, this would trigger a referendum. The second point concerns Amendment 16, in which the noble Lord recommends that decisions on common defence and security policy be referred back for an Act of Parliament.

It is immediately of interest that the supporters of this amendment, led by the noble Lord, Lord Hannay of Chiswick, have, in a sense, given a concession: they have agreed that if Amendment 15 is incorporated, there should be a referendum on a single, integrated military force. However, in their second amendment, Amendment 16, the noble Lord has ceded that although the issue of common defence and security policy is very important, it should be referred back to Parliament, in contrast to the purpose of the Bill, which is to seek the approval of the British people.

I should like to comment first on this welcome opening-up as regards the potential for a referendum on the single, integrated military force. My problem, however, is that I cannot really understand what that phrase means. I do not find “a single, integrated military force” a phrase that is commonly—or ever—used in treaties or Acts of this nature. In fact, I have not been able to recall it at any time during my decade or the decade previously in the other place. I cannot help but wonder precisely what it means. Does it mean, for example, the single, integrated military force that I saw and worked alongside in the south of Iraq in 2003 to 2007, when we had a number of military forces that co-ordinated themselves under UK command? We had the Poles, who were superb; we had the Italians—a little bit more questionably perhaps; we had the Romanians, who were very fierce fighters; the Bulgarians, over whom hung a little bit of a question mark; the Danes, who were superlative; and one or two others. On top of that, of course, we had Australia and the US.

What does a single, integrated military force mean? Does it mean a command under one structure, leader and nation state? Does it mean all 27 member states? Well, I think that that is unlikely. Mercifully, the ones that do not belong to NATO are now very few, but they are very unlikely to offer troops for a single, integrated military command. Does it mean, say, the Franco-British military command, which is getting stronger and whose strength I and others most warmly welcome? I may be correct in saying that at least until recently we had had at least 32 different actions going on with the French on the ground somewhere, some of which were training. We are strengthening that duality in military terms all the time.

Although the referendum proposed here for a single, integrated military force is a welcome admission that a referendum for the British people on common defence and security policy matters, at least in this perspective, is of high value—high enough for the proposers of the amendment to accept that a referendum would be required—none the less, the phraseology is with great respect too loose, too weak, too open and too imprecise to allow this amendment to be adopted.

In Amendment 16, on the other hand, the common defence and security policy is important enough to the proposers of the amendment to bring it back for an Act of Parliament. But how does that differ from now? Parliament has primacy in any event; if we wish to have an Act of Parliament on anything to do with EU legislation or policy, we can do that now. We have the primacy; it has been restated in Clause 18 and it has been there since 1972. The purpose of this Bill, which I support, is to put it to the people, which is why I cannot accept Amendment 16, which brings it solely back to an Act of Parliament. That is no different, in essence, from the situation that we have today.

Another amendment that the proposers have put forward, led by the noble Lord, Lord Hannay, and the last on which I will comment, contains the proposal that we should lose our potential veto for the multiannual budget. Is that truly sensible? I draw noble Lords’ attention to a highly possible situation, whereby in Brussels there could easily be today a time, not far distant, when the discussion on the multiannual budget was about the 40 per cent of the common agricultural policy expenditure. Noble Lords will know how difficult it is to get reform; it is almost possible—it has so far proved impossible to grasp the common agricultural policy by the tail and pull it into the reform network. It is rather like The Hunting of the Snark; it just has not been possible.

It is easy to imagine that reforming the common agricultural policy would be an expensive business. How might that be paid for? Suppose that it would be paid for by the British rebate. It would be very hard indeed to obtain a majority against that for the United Kingdom. We might not be in a minority of one: others who are net contributors and who also wish the reform of the common agricultural policy, such as the Netherlands and Poland, would perhaps be with us; I am not sure. But as sure as eggs is eggs we would lose France. In fact, we would have lost France before the argument began because France—great ally as it is, net contributor as it is—would have been arguing for just that. The loss of the British rebate as a payment for a partial reform of the common agricultural policy would be enormously attractive.

15:30

Of course, as noble Lords know well, particularly those who have served such excellent times in Brussels, the key strength of Brussels—of the system and the mechanisms that have been built up over the decades; the game which everyone now plays all the time, some more successfully than others—is to find ways of isolating those members of the blocking minority. How do you do that? We know how to do that very successfully indeed: by playing the game long, by building up a whole handful of debts and by calling in those debts at the one moment when it matters to your nation or to your grouping. It would not be difficult at all to have used that technique to place Britain in the dunce’s corner in such an argument.

In principle I also believe that a veto is a negative way of behaving. None the less, the European Union is not such a stable body. In fact, with Croatia, the incorporation of Kosovo as a sort of colonial item and other more difficult—by which I mean corrupt—member states coming in, Brussels is not going to be strong, stable and balanced or provide fair treatment for every single member for a very considerable time to come, if ever. I believe that the veto for the multiannual budget is an essential prerequisite, for the sake of the United Kingdom and other member states, and therefore I support the Bill rather than this amendment.

Of course the imperative must be to help Brussels and the EU in general to be clear and transparent and to fight corruption much more effectively. Brussels is not well co-ordinated—none of us would suggest that it is—with other enormously important global players with whom it has to link, such as the World Bank or the United Nations. Through this Bill, we must tackle the waste that Brussels represents in the eyes of the British public and is in fact true in many instances. Our job must be to force Brussels, in a positive way, to tackle its waste management, both financial and administrative. Perhaps the best way of doing that is by transparency. We should ask Brussels to focus on project delivery and proper budget management, through the means of openness, transparency and as full as possible an involvement of the people of the United Kingdom. Our objective must be to reassure the British public that money spent in the European Union goes further and is better spent because of British involvement than would otherwise be the case.

I thank the noble Lord, Lord Hannay, immensely for putting forward such interesting amendments. Unfortunately I cannot give him and his fellow supporters my support.

[Lord Rowlands]

My Lords, over the whole of my parliamentary lifetime I have always had a Eurosceptic disposition. Indeed, looking back at or listening to the deliberations in Committee, and now on Report, brings back floods of memories of the debates in 1972 and the various devices that were then thought up to try to make the system more accountable. I recall, for example, an amendment that there should be a general election before we entered the European Union, while there were of course numerous debates on referendums both in 1972 and particularly at Maastricht. I would therefore have had a natural sense of empathy for this Bill.

I have supported referendums and greater accountability on European decision-making right throughout my parliamentary lifetime. Having listened to much of the Committee and read as much as I can of our deliberations, I must say that this is now becoming a hugely overcomplicated process of accountability. Just look at Clause 6(5) and the list of issues that will, through its paragraphs (a) to (k), be subject to a referendum. It is not unreasonable for anyone reading this clause to believe that, as a result, there will be a potential plethora of referendums.

I support the objective, the principle, and the idea behind the Bill, but the Government have overcomplicated the issue. Reflecting on my own experience, I now rather regret that we did not in an earlier time invest greater interest and press the business of ensuring greater parliamentary accountability—a much tougher regime of accountability. That is why I find parts of the Bill, particularly Clause 6, if it were shorn of the referendum provisions as these amendments suggest, very important and attractive.

I was on the Constitution Committee in the previous Parliament when it brought forward an amendment during debate on the Lisbon treaty that all opt-ins should be the subject of particular parliamentary processes, approval and accountability, and the House subsequently devised the procedures to do just that. That is now the best route that we can take to make these European decisions more accountable. Some fundamental issues should be the subject of a referendum, and the three listed in the amendment clearly qualify. Indeed, our own Constitution Committee suggested in its report on referendums that they are best confined to the big, fundamental issues. Those should be subject to a referendum, but not the plethora of some of those listed in Clause 6. Given one’s own experience, and having listened to the debate, I certainly support these amendments, because they would reinforce the role of parliamentary accountability and do not go down the confusing route to the possibility of a plethora of referendums.

[Lord Waddington]

My Lords, the noble Lord, Lord Rowlands, was very eloquent, and I can well understand how he has reached the position that he has. Looking at just one of the amendments that we are considering, I must say that I find the wording of Amendment 15 really rather odd. It seems that, taken at its face value, all sorts of decisions could be made on a common European defence and no referendum would be required unless the intention was to permit a single, integrated military force. We could integrate our Navy with every other country’s navy and still be well short of creating a single, integrated military force, so there would not have to be a referendum. That seems very odd if you are going down the route of having referendums at all.

The noble Lord, Lord Hannay, was again rather beguiling. At one stage he said that he was putting forward these amendments in a spirit of compromise. It might look like an exercise in compromise to some people, but to others it might well look like part of a general strategy to whittle down the protection that the Bill is designed to afford. That is what I find so terribly depressing: that having gone all through Committee, and now on Report, not a word is spoken by the opponents of the Bill to suggest that they have a clue as to how disillusioned people feel and how necessary it is to give them some reassurance, or how necessary it is to show them that their views are not going to continue to be overridden and that we are not going to go on continually conceding powers so that eventually we finish up being no longer a sovereign, independent state. Never a word comes from opponents of the Bill to show that they have any realisation of the difficulties that we face at the present time.

In these debates we are constantly told that the right to a referendum can be safely whittled down here, there and everywhere. We are constantly told that referendums are an affront to parliamentary democracy, but I am bound to say that people are asking me what Parliament has done so far to guarantee our independence and to protect our fundamental freedoms. They point to what happened over the Lisbon and all the rest of it, and, as I say, they are thoroughly disillusioned. I think that they, like me, will not be at all impressed by the suggestion that somehow or other we can meet most of these problems by making sure that Parliament does its work properly.

I remind my noble friends and noble Lords of some of the history. The noble Baroness, Lady Quin, said in a speech the other day that it was made clear in the 1975 referendum that we were joining not just a common market but an EEC. Let us leave aside for a moment the fact that the question on the ballot paper was:

“Do you think the UK should stay in the European Community (Common Market)?”.

Let us leave aside for a moment the fact that there was no mention of the EEC at all. In fact, Harold Wilson, as he then was, made a great speech in which he recommended a yes vote because the threat of monetary union had gone away. I distinctly remember him saying that. That is all part of the dismal history. “Stop worrying, it is not going to happen”. Then it happens. “Well, it is not so important after all and it certainly will not happen again. This is the end of the road”.

I came back from Bermuda in 1997 having looked somewhat askance at some of the developments during the years when I was away. The first thing that happened to me was that I was invited to a rather grand dinner party at which every other guest was a Whitehall mandarin. There were three ambassadors and one or two permanent officials from the Foreign Office, and they said, “Oh, what are you banging on about, David? Stop worrying”. These are the exact words that were used to me that night: “The high-water mark of European integration has been reached”. That is what they told me. Well, the next day the tide continued to come in and it has been coming in ever since.

We are constantly told that it is safe to leave all these matters in the hands of our elected politicians. We might not have much to thank Mr Gordon Brown for, but let us give credit when credit is due; but for Brown, Tony Blair might well have used his vast majority to take us into the euro at the end of the 1990s, and a fine mess we would be in now. Remember, he dreamt up the idea of a referendum only to get him through the 2001 election. There was no question of the need for a referendum on the euro prior to that.

[Lord Liddle]

If I am correct, Mr Blair made his referendum commitment in 1996.

[Lord Waddington]

I am sorry, will you please repeat that?

[Lord Liddle]

Mr Blair made a commitment to have a referendum on the euro well in advance of the 1997 general election, in 1996. Some of us thought that that was a mistake at the time, I hasten to add.

[Lord Waddington]

That had escaped my notice. By the end of the 1990s, he was certainly sending out messages that he thought the time might well be right to think about going into the euro. If Mr Blair were in office now—this would have been relevant on one of the amendments that was not moved—he would no doubt be advocating the need to have elections for a European president, which he would urge upon us as a not very significant matter that would only increase the powers of the people and was a thoroughly good idea, when we all know perfectly well that if a European president were elected that would be a dramatic step towards a United States of Europe. In fact, from the moment of such an election, the international community, whatever the constitutional niceties of the matter, would consider that Britain had turned itself into a United States of Europe.

[Lord Radice]

My noble friend is right. In fact, the Labour Party committed itself in 1994 to a referendum on the euro. That pushed the Conservative Party in that direction as well, and the Liberal Democrats were also in favour. Before the 1997 election, all three main parties were in favour of a referendum on the euro. I do not know where the noble Lord was at the time—was he out of the country? That is what actually happened.

[Lord Waddington]

Perhaps we could have a sweepstake and people could put in their bids; we have had 1996, 1994 and 2001, and we could have a few other dates thrown in. The fact remains that in 2000 and 2001 the papers were full of the possibility of a joint platform to take us into the euro. We were going to have the leader of the Liberal Party, Kenneth Clarke and Blair all on the same platform advocating our entry into the euro, so it is a bit rich to tell us now that there was no danger at that time of our going in. We know perfectly well that there was a very real danger of that, and, as I say, we were rather saved from it by Mr Brown. That at least can be said for him.

No one has answered the other point that I have made—I would have raised this on the third amendment if it had been moved—about the issue that has now arisen: what do we think Mr Blair would have done if he had been in office now and the possibility had been dangled before him of the direct election of the European president? He would have said, “Marvellous idea. It certainly doesn’t affect the rights of the British people. In fact, it extends their rights. It gives them the right to vote for the person they want”, without any regard whatever for the appalling constitutional consequences, which, from his press statements of the past few days, he clearly does not recognise. European matters safe in the hands of Parliament? History shows many things but certainly not that. This is not a very creditable performance.

It is no wonder that present-day people think that it is about time that there was more protection for them so that we can be sure that at some stage, if the European train goes tearing along towards the ultimate destination of a united Europe, we will get off before all British sovereignty is lost and we cease to be an independent nation. I am not attracted at all by this piecemeal approach of, “Don’t worry, this will all be done in a spirit of compromise. We can just take away the right to have a referendum here and another right there; it does not really matter”. That is just like the language that we have had for the past 25 years, and I do not find it attractive.

[Lord Goodhart]

My Lords, my noble friend Lord Waddington said early in his speech that some Members of your Lordships’ House are opponents of this Bill, and no doubt he includes me among the opponents. I am not an opponent of the Bill and nor are others of any significance in the House. What we want to do is make sure that matters which until now have not had to be decided by Parliament will be decided by Act of Parliament, and we are entirely in favour of giving the right to a referendum in matters of importance, which the noble Lord, Lord Hannay, has already described. We are looking for a different Bill, but we have no wish to destroy this one.

Referendums to be voted on by an entire country involve a lot of work on the part of those arranging them and cost a great deal of money. I understand that the referendum voted on a couple of months ago cost something in the order of £120 million. That is why referendums should be used only for matters of real national importance. Another reason, which is perhaps even more important, is that we must recognise that people will vote in a referendum only on issues of real interest to them. So far, the principle of the way referendums should be used has been recognised and observed. Only one referendum, of course, has been voted on across the whole of the United Kingdom; the 1975 referendum on our continued membership of the European Union. Since then, there have been referendums in Scotland, Wales and Northern Ireland on the important subject of devolution.

Those of us who support Amendments 14 to 21 accept that three of those issues, as the noble Lord, Lord Hannay, has said, are now covered by Clause 6. In all probability, they would justify a referendum. They are the creation of a single integrated military force in Amendment 15, making the euro the currency of the United Kingdom in Amendment 18, and bringing the United Kingdom into the Schengen protocol in Amendment 19. But extending referendums to other matters now covered by Clause 6 and its subsidiary, Schedule 1, wastes time and money and is completely unjustified.

In Committee, I spent some time demonstrating this, particularly in relation to matters affecting the legal system. I take, for example, the possibility that the United Kingdom Government might wish to participate in the European public prosecutor’s office. This is an organisation that does not now and may well never exist, and it is perhaps unlikely that the United Kingdom would participate in it if it did, although it is a possibility. But the point about this is that the EPPO, to shorten the name, is far from being a potentially serious change to the United Kingdom legal system. If your Lordships look at the terms of the TEU or the TFEU that deal with this issue, it becomes obvious that the EPPO would apply only to offences against the EU’s financial interests or to serious crime that has a cross-border dimension. Those would represent a tiny proportion of prosecutions in the United Kingdom and would affect hardly any of the ordinary citizens of this country. So if an EPPO is created and the British Government want to join it, what will happen? Most citizens will surely say, “This does not affect me so I am not going to waste my time by going out to vote on it”. Of course, the dinosaurs of UKIP will thunder down to the polling station to cast their votes. No doubt they would win in those circumstances, but that does not represent the real view of the people of this country.

There are also several cases in the Bill where the existing provisions of treaties require unanimity, but there is a possibility that member states might get together in the future to agree to QMV. Since the United Kingdom Parliament would have to give its consent to that change, it is likely that it would occur only if moving to QMV was of benefit to the United Kingdom, which it often is. It is more often than not to our benefit because it avoids the blocking of QMV, and therefore of legislation, by small member states that have a limited interest.

Matters made subject to QMV may be important or relatively trivial. It is totally inappropriate to insist on the referendum when we do not know how important or controversial the issue for that referendum will be. It is unlikely that ordinary citizens would take an interest unless it was clear to them that the referendum was a matter of importance, and one that would affect them personally.

We have never seen anything like this piece of draft legislation before. In cases where legislation has called for a referendum, that referendum comes first. It comes before any talk of an Act of Parliament. If the result is negative, there is no Act of Parliament to give effect to it. What we have here is an Act of Parliament first, followed by a referendum that might overrule it. If Parliament makes a decision, surely that decision should be binding. If Parliament wants to leave it to a referendum, so be it. What we have here is a ridiculous system that is contrary to the constitutional practice of this country.

[Lord Flight]

My Lords, the noble Lords proposing these amendments seem not to understand yet, notwithstanding the amount of time we spent in Committee, the whole point of the Bill. Put very simply, the point is that, whether by intent or by being beguiled, over the past 20 years British Governments have continued to give away sovereignty to the EU, notwithstanding that they have frequently pledged not to do so. Agreeing to the Lisbon treaty, clearly in opposition to the majority view of this country, was a huge example of just that.

This rather strange Bill and the arrangements for referenda are, I concede, a constitutional novelty. How it will work, assuming it becomes law, we shall have to see. However, it is clear that the referendum locks are there as a deterrent to prevent Governments repeating the behaviour of the past. It is fine to talk about letting the decision be made by Parliament, but we all know perfectly well that if one party has a substantial majority, Parliament is, alas, in practice an elected tyranny. There is absolutely no guarantee that even the wisest heads of this noble House will vote against the Government of the day if that Government have a substantial majority of Members in both Houses.

The issues that these amendments cover are among those that have been red line issues for Governments of both sides for some time. They are not issues that have been plucked out of the air. As was apparent from debates in Committee, there are several other issues that could have been picked up in both Schedule 1 and Clause 6, where there are clearly some aspects of transferring of power but where, for better or worse, the Government have decided not to make them subject to a referendum. It is not a case of issues being protected by the referendum lock—this is not something new that has been pulled out of the air—but about issues which have been seen as important red lines that should not be crossed by, I repeat, Governments of both persuasions.

16:00

The issues covered in these amendments are very straightforward to my mind. The European public prosecutor is a sensitive issue and in Committee we debated precisely why that is so. Looking at the matter from the perspective of not wanting Governments to lead us further down the path of giving away power, I suggest that it warrants a referendum lock. The vetoes are similarly extremely sensitive issues and need to be caught under the passerelle provisions. Otherwise, they could lead to treaty change via the back door.

The common defence is vital to UK interests—the noble Lord, Lord Waddington, made that point extremely clearly. To me, at least, it is absolutely unthinkable that we should move towards an integrated European army by stealth without the confirmed decision of the British people, and wake up one morning to find that although we had been promised that that would not happen, it had happened.

I am afraid that these amendments to me amount to little more than the tactic deployed by certain noble Lords throughout our debates on the Bill; that is, endeavouring in all possible ways to weaken the principle of the Bill, which is to make absolutely sure that even if Governments are unwise enough to propose giving away power, there will be the check of the British people being able to say no. Some say that we cannot be swamped with referenda, but it is clear that they are there as a deterrent. Although the prospect of referenda occurring at all is pretty small, I cannot think of a more effective check. In an age when we are likely to be going into very new territory as the drop-out of the weak financial positions of certain European states is felt, we are likely to enter an era in which it will be only too easy for Governments to be persuaded or dropped into giving away further major powers. The Bill is there to stop that. I can understand why a keen Europhile might not like that very much, but the whole point of the Bill is to protect the British people.

[Lord Davies of Stamford]

My Lords, I rise to do two things. One is to address the contention made by the noble Lord, Lord Waddington, that I have heard before from him and other noble Lords during our debates on the Bill. His contention is wrong—that the British people have been systematically deceived about the nature or purposes of the European Union, or the European Community as it previously was, and that therefore they were unable to take informed decisions at election time or, indeed, at the time of the 1975 referendum.

It was always clear from the beginning that the European Union, or the European Community, was not a dead institution that was fixed once and for all. It was a dynamic institution, even a teleological institution which had a final purpose or end; all that was stated in the preamble of the treaty of Rome. The phrase about the ever closer union of peoples was always there. Right at the beginning, even when Macmillan first suggested that we might join the Common Market, or the European Community, I remember that speeches were made by members of my own party. I was a schoolboy at the time but I was already taking an interest in these matters. I remember Hugh Gaitskell’s famous speech. My noble friend Lord Radice, who has written books on this subject, will correct me if I have the date wrong. I think that it was in 1962 that Hugh Gaitskell made a famous speech saying that the effect of our joining the European Community ,or the Common Market, would be that we would become like Texas in the United States. If I am right and that speech was made in 1962, that means that literally for the past half century this discussion about the constitutional significance, and the significance for national sovereignty, of our being members of this institution have been clearly, expressly, openly, overtly and thoroughly transparently discussed in public.

[Lord Flight]

I thank the noble Lord for giving way. It may be that he was more involved at the time than I was, although we are roughly the same age. However, I remember being organised by the Conservative Party at the time to go out and preach on voting in the referendum for the Common Market—indeed, I voted for it—specifically on the grounds that it would be a good economic prospect for this country. We had lost an empire and we needed to belong to something where we could trade. I was not even aware of the idea that I was trying to market something about political unification—fool though I may have been at the time.

[Lord Lea of Crondall]

I am sorry—I do not know who is speaking and who is intervening here.

[Lord Davies of Stamford]

Perhaps I may resume my remarks and then of course I will give way to my noble friend Lord Lea. Given that the noble Lord, Lord Flight, brings up his personal reminiscences of the 1975 campaign, I can respond only by saying that I did indeed take part in it. I actually became chairman of the City in Europe committee—I had been working in the City only for a year or two at that time—that organised the campaign in the City, and I chaired a meeting attended by 600 or 700 people at which Edward Heath spoke effectively. I remember that very well. I say with great sincerity that then, as now, I was committed to the long-term agenda explicitly set out in the treaty of Rome, which I had taken the trouble to read—even in those days. I believe that I knew what I was doing and that those who campaigned with me knew what we were doing. We made it absolutely clear to the British public what was intended and what we had in mind. I am very proud of that campaign.

Those are my personal reminiscences, and I am delighted that at the time the noble Lord had the right views on the subject. Perhaps he will come around to the right views again one day. Both of us took part in an interesting campaign. I give way to my noble friend Lord Lea.

[Lord Lea of Crondall]

I am most grateful to my noble friend. Perhaps I may give an even more telling example that gives the lie to the other contention. I recommend to the noble Lord, Lord Flight, that he looks at the 1971 White Paper. Mr Heath was Prime Minister, although he was not necessarily the favourite Conservative Prime Minister of the noble Lord. The first page refers to going towards ever-closer union. That is not a phrase that I particularly like, but I invite the noble Lord, Lord Flight, to read that White Paper, which is in the Library, and see whether he wants to keep reiterating this falsehood—I am sorry, I withdraw that—or, rather, this error.

[Lord Davies of Stamford]

My Lords, the second point to which I wanted to draw attention is a theme that has come through in all these debates. All I shall say in a few sentences is to try to make explicit in Hansard what should be implicit for anyone who reads our proceedings with any degree of attention. A clear difference is emerging between those of us who are in favour of the Bill and those of us who are against it as regards the role of Parliament and our view of Parliament’s constitutional importance, functioning, efficacy and efficiency. It is clear that the coalition Government and those who support them in this Bill do not really believe in Parliament in the same way that those of us on the other side of the argument do. That is a sobering thought, because until now, for hundreds of years, there has been no distinction between the parties about Parliament and the fact that it is the best way of taking complex decisions on behalf of the country. That is why most of us came into politics and public life in the first place. It was because we wanted to be part of that process and to influence it in one way or another. All parties in this country and all of us who have stood for public elected office have always believed that Parliament was the best possible mechanism for achieving good governance and for making sure that complex arguments had been viewed from their different perspectives and debated, and that we came to a mature and considered conclusion on difficult issues. I am very proud of being here in the mother of Parliaments.

Now half our Members in this House this afternoon—perhaps more than half; I do not know, but we will see what happens in the vote—are sceptical about Parliament. They pay lip service to it and, no doubt, see some role for it, but they are clearly very sceptical indeed about Parliament. They do not think that Parliament is mature enough or sufficient for the purpose of deciding complex questions in the future. They want to go back to this Napoleonic concept of the plebiscite or referendum as a mechanism that is superior to that of parliamentary government. That is a sobering thought. I will not go further into the constitutional implications or the historical significance of that because it would take me well outside the amendment we are debating. However, it has been a theme which, unambiguously, has emerged from the debates we have been having on this Bill. It is something that we should all reflect on carefully because the long-term consequences of such a split in what has always been a constitutional consensus in this country are to my mind very sobering indeed.

[Lord Kerr of Kinlochard]

I support the final point made the noble Lord, Lord Davies, and the final point made by the noble Lord, Lord Goodhart. My point is a Burke point. I hope that the noble Lord, Lord Waddington, is listening: I am addressing it to the rising hope of the stern, unbending Tories. It seems to me really important that we should try not to undercut Parliament. As the noble Lord, Lord Goodhart, said at Second Reading, as he has said again today, what we are doing with these referenda, the ones talked about in this clause and in this Bill, is asking the simple question: do you wish to overrule Parliament; do you wish to disallow an Act of Parliament? In every case, the Act will be on the statute book and the question for the electorate will be: do you want overrule Parliament? What, I ask the noble Lord, Lord Waddington, would Burke have said?

[Lord Waddington]

As the noble Lord has been kind enough to bring me into this debate, is there not a difference between this situation and the situation which has normally appertained in the past? Is it not right to say that in the eyes of the public people are elected to Parliament to exercise the powers which are going to be bestowed upon them? The difference which has taken place over the past years is that people who have been elected to Parliament to exercise specific powers have thought that they are entitled to give away those powers in perpetuity to others. That is the great change which has come about and must be acknowledged when we are talking about Burke. Burke never envisaged that representatives in Parliament would give away the powers which they have been given—quite the contrary.

[Lord Kerr of Kinlochard]

I could repeat my Burke quotation with which I thought I had skewered the noble Lord, Lord Waddington, in an earlier debate but I will not. It is of the essence of Burke’s theory of parliamentary democracy, in which the Conservative Party used to believe strongly, that the people were consulted about who should sit in Parliament. The decisions of Parliament reflected the judgment of the people whom they had chosen. That seems to me to be quite a good rule and the point made by the noble Lord, Lord Goodhart, is a strong one. I support these amendments with the exception of the wording of the amendment on the euro, on which I have a separate amendment to which we will come later.

[Lord Flight]

I thank the noble Lord for giving way. I spent eight or nine years as a Member of the House of Commons when one particular side had a large majority. I felt that I was simply going through the motions and that there was no prospect of the Opposition members being able to stop that which the Government of the day wished to do. It was an elected tyranny by a large majority.

[Lord Kerr of Kinlochard]

I look forward to hearing the noble Lord express that view in the debate on the reform of the House of Lords.

[Lord Faulks]

My Lords, the amendment seeks to remove the referendum lock from all potential transfers of powers and competences, with the exception of the euro, Schengen and defence, in the sense that it is defined in the proposed amendment. Noble Lords might have thought, after the amendment proposed by the noble Lord, Lord Williamson, and its 40 per cent threshold, that the principle of a referendum lock had received acceptance, albeit without much enthusiasm except for those who are constitutionally opposed to referenda as a whole. This amendment goes much further. It takes outside the lock all potential transfers included in the big five, as they have been identified by my noble friend Lord Howell, with the exceptions that I have already described. I shall mention just one, referred to by my noble friend Lord Goodhart, the European Public Prosecutor's Office.

16:15

[Lord Hannay of Chiswick]

I am most grateful to the noble Lord for giving way, but he has managed in about three sentences to say three incorrect things. He said that in moving the amendment, we paid no attention to what he referred to as the big five. If he had listened to my introductory statement, he would have heard that, exactly to the contrary, we have amended the text that we had on the table in Committee by including Schengen and the international military force. If I may say so, it is clearly not sensible in our debate to pay no attention whatever to the person who introduces the amendment. I covered all that quite thoroughly.

[Lord Faulks]

I am grateful to the noble Lord for his intervention. I listened carefully to what he said and took on board the fact that the suggestion was that some other matters might also be the subject of a referendum if they were joined with those explicitly dealt with by the amendment. I also listened to what he said about the fact that there had been a change since Lisbon because now there was to be parliamentary approval, which was not the case before. I hope that the noble Lord accepts that I had listened to what he said, but, time being as it was, I was trying to truncate my remarks to make them digestible.

I return to the European public prosecutor, which is a matter which I suggest would not be in our national interest for the reasons I gave in Committee. It would involve us adopting the corpus juris, as it has been called; it might well involve us having national prosecutors representing the European public prosecutor; and it might involve an attempt at harmonisation of legal systems, so that we would have to take on board, for example, rules in relation to evidence; hearsay—

[Lord Goodhart]

My noble friend may be right on those particular points, but that would surely be a good reason for Parliament rejecting British participation in the EPPO, not for saying that that is an appropriate matter for members of the public to decide in a referendum.

[Lord Faulks]

I am grateful to the noble Lord and I accept his point. I am not quite sure what is the position of the party opposite in general terms on the European prosecutor. In Committee, the noble Lord, Lord Triesman, said, “Just say no”—as he said in respect of several proposals—from which I understood him to mean that Parliament would not put forward the possibility of a European public prosecutor and that there would therefore be no need for the referendum lock. However, from observations made by the noble Lord, Lord Liddle, I was not at all sure where he stood on the European public prosecutor.

I am, however, in no doubt about the view of the noble Lord, Lord Davies of Stamford, because he described the matter as being, to use his words, a no-brainer. Were somebody with his views to be the Minister for Europe in some Government to come, it would no doubt be said that the establishment of a European public prosecutor was generally to be the policy of the Government. The matter would then go through Parliament without the British people having been consulted and we would then have a European public prosecutor, with all the disadvantages which I have attempted to identify.

I am not in any way lacking in enthusiasm for the European project but, as a lawyer, I am aware that whereas sometimes I would like to conclude a negotiation without consulting my client—often I think I do much better without consulting my client—it is sometimes necessary to do so and to seek their instructions. It seems to be accepted on all sides of the House that enthusiasm for the European Union is, sadly, not as great as it might be. It is therefore, I suggest, incumbent on us as parliamentarians to consult and inform the people by means of a referendum, so that we can reconnect with those who are the source of our power.

Although I accept the qualifications made by the noble Lord, Lord Hannay, the amendment would take away that reassurance which has been identified by the coalition Government. I suggest that they have identified the zeitgeist. The Bill reflects what the country would like. To remove the referendum lock in the way proposed by the amendment would undermine that.

[Lord Risby]

My Lords, perhaps we could return to the Laeken declaration, which signified a very important moment in the history of the European Union. We all recognise the problem of disconnect. The Laeken declaration was intended to inform the individuals who were considering the whole future of the European Union what should be done about that problem. It is a fair summary to say that out of the Laeken declaration we saw the emergence of the constitutional treaty, which became the Lisbon treaty. Anyone, by any objective standards, would have to conclude that the spirit of Laeken, which was meant to inform the constitutional treaty, and later the Lisbon treaty, was not successful. Right across Europe we have seen an increase in Euroscepticism and in the disconnect between the peoples of Europe and the institutions of the European Union. The treaty, which was meant substantively to deal with that problem, has failed, not only in this country but right across the European Union. I suppose that one of the definingly difficult moments in the history of our relationship with the European Union was when Tony Blair substantially gave up the rebate in return for some structural reforms particularly linked to the common agricultural policy.

At the heart of this Bill must be the veto for the very firm purpose of restoring a sense of ownership of the processes of the European Union and our relationship with them. I think we all agree that the rebate is a most sensitive issue. Therefore, I just pose this question: would we wish to delete the requirement for a referendum if a future Government agreed to remove unanimity from the EU multiannual budget? This is a very contentious issue—it covers the whole envelope of European Union spending. The annual budget veto has already gone, and I suggest that nothing, particularly at a time of austerity, would be more damaging. It is precisely the threat of that happening that the Bill attempts to deal with.

I come back to the point that right across the European Union we have failed dismally to give people a sense of ownership or to secure the feeling that they have some sort of control. Therefore, comprehensive but clear processes, with a significant range of vetoes, are crucial in this country if we are to restore a sense of confidence and connection between the people and the European Union.

[Lord Stoddart of Swindon]

My Lords, I think that I have taken part in virtually all our Committee days. We are beginning to get to the end of our labours, although there are still a few amendments to go. This is a very important amendment and it has been discussed at great length. However, I want to get back to the reason why we have the Bill at all. It is because the people of this country have felt let down by the Government, and indeed by Parliament, for not involving them in very important decisions which affect their lives and the future of our country. I think that the Lisbon treaty brought that to a head and persuaded the Conservative Party that it had to do something about it. Together with its Liberal Democrat colleagues, it has now brought forward a Bill which, frankly, I believe has to stand virtually as it is or not at all. For that reason alone, if there is a vote, I shall vote against the amendment.

During our debates, we have heard a lot about parliamentary democracy, and so we should. Of course everyone agrees with real parliamentary democracy, if that is what we are talking about, but are we really talking about proper parliamentary democracy or do we have a “whipocracy”, in which great issues are not decided following proper debate in Parliament and relatively free votes on important constitutional matters but are voted on at the behest of government with strong whipping? Under those circumstances we cannot say that Parliament alone should be responsible for the great issues of who governs Britain—which is what it is all about.

[Lord Richard]

I have listened to the noble Lord for 20 years. He has been a passionate supporter of parliamentary democracy and British sovereignty, and has passionately opposed any kind of Eurofication or steps towards greater union with the countries of Europe. How on earth does he square the position that he has held for donkey’s years that Parliament is sovereign, and that it is what Parliament does that matters, with the idea that now Parliament has been doing things that he does not like it can no longer be trusted—even though Governments with majorities have been elected in general elections—so we have to move to a different form of public consultation? It is inconsistent with everything that he has said for 20 years.

[Lord Stoddart of Swindon]

Of course, I have listened to the noble Lord, Lord Richard, for longer than 20 years, and I know that he is an absolutely committed Europhile. He is right to say that I am very much in favour of parliamentary democracy, but I am trying to explain that in relation to the European Union we do not have a proper parliamentary democracy. All the amendments made to the European Communities Act 1972 were made by treaty. Under those circumstances, the Government agree to the treaty and sign it. One former Secretary of State for Foreign and Commonwealth Affairs said, “Now that I've signed the treaty, perhaps I'd better read it”. Therefore, we cannot be sure that even those who sign the treaties know what they are about. Nevertheless, the treaty then comes before Parliament and Ministers come to the Dispatch Box and say, “You must pass this treaty because we have agreed to it. If you do not, the country's standing in the world will be damaged and we will never be trusted again”. Governments put Parliament in an almost impossible position. If Parliament rejects the treaty out of hand, the Government will say, “My God, we have no further influence in the world because Parliament has declared that it does not agree with the treaty”.

[Baroness Symons of Vernham Dean]

I was the lead Minister on the Amsterdam and Nice treaties. I stood at the Dispatch Box and argued for them. I do not recall ever saying to the noble Lord, Lord Stoddart of Swindon, that we would not be trusted again. We argued on the merits of the treaty. It is important that we stick to the merits of the treaty in this argument today. I would not like the noble Lord's arguments about what was said from the Dispatch Box to stand on the record without being challenged by the person who stood at the Dispatch Box.

16:30

[Lord Stoddart of Swindon]

Of course the noble Baroness is entitled to challenge what I have said. I accept that she did not say that from the Dispatch Box, but various Prime Ministers did so. I am sorry if I offended her, but I did not accuse her of any such thing. However, we do have this problem; and there is a further problem that treaties cannot be amended. Parliament, which is here to scrutinise and amend, is told that it is not allowed to amend a treaty. Treaty amendments are simply not allowed, so Parliament has to accept everything in the treaty or nothing. That is Parliament’s situation in relation to the European Union. It is not democratic and it is not demonstrative of parliamentary democracy; when we talk about parliamentary democracy, let us realise that in respect of EU treaties. It has been the case with every single treaty that I have taken part in—and that is all of them. As the noble Lord, Lord Richard, pointed out, I was never in favour of joining the Common Market in the first place, and I believe that it would be in the best interests of this country to leave it at present. That is my view on this Bill. It is the best that we are going to get, quite frankly, at this stage.

Out in the country there is disquiet about our membership of the European Union—where it was, where it is now and where it is going in the future. My view, which I expressed in Committee, is that there should be a referendum as to whether we remain in the European Union or come out. I know that is difficult, but some way, some time, that is going to have to happen. I do not think the people of this country will be satisfied until it happens. I am sorry that I cannot support the amendments before us. As I have said, I think this Bill is about the best that we are going to get.

[Lord Dobbs]

My Lords, the noble Lord, Lord Davies, has tested our memories, and I ask noble Lords to test theirs. I did not intervene in Committee because to do so might have delayed the Whitsun Recess. Never have I received such a warm reception for a speech that I did not make.

I have been reluctant to intervene on this Bill because it has so much detail. I have been prompted to change my mind by two things. First of all, sitting here last week listening to proceedings for many hours, I heard language that I did not think did the argument justice. I heard Members of another place called “rather nerdy people” simply for being persistent and consistent. I do not know whether it is my job as one of the newest Members here to say that that sort of language in a debate helps neither the debate nor the reputation of this House.

I also thought that I should not intervene because, frankly, there are so many big beasts of the European jungle here—some very big beasts. Looking around this Chamber I can see that many of them are waiting to pounce, although where they were last week when the noble Lord, Lord Faulks, and I defended the honour of this place in the Commons versus Lords tug of war, I do not know. I wish they had been there. For those who do not know, we came a very close second.

Listening to this debate, I often feel as though I have dropped into the scene of that wonderful film, “Casablanca”, right at the very end when the wicked deed has been done, the fog is swirling, the body is lying on the ground and the police captain instructs his men:

“Round up the usual suspects”.

Having sat through this Bill for so many hours, I am beginning to recognise some of those usual suspects. If they will forgive me, I think it is not I who have missed the point but they. We have heard the blandishments of compromise that the noble Lord, Lord Hannay, has put forward so eloquently today, and we have heard the noble Lord, Lord Goodhart. Apparently we cannot afford a referendum on these issues. We have just had a referendum on AV, which no one seemed to want, so why can we not afford referendums on matters that people so clearly want?

This debate has tried to bury the point in details rather than address the fundamental purpose. This amendment, like so many of the others that we shall deal with today, is yet another excellent example of that. The details are of course important, but the fundamental purpose of making the EU responsive to the people is far more so.

Europe is unpopular and is growing ever more so. No institution that claims to be democratic can sustain itself in the face of continued popular hostility. That is the huge challenge that this Bill aims to meet. We have heard it called a process of reconnection, but that language is insufficient. This Bill is much more than that; it is an attempt to save the European Union from itself.

It is my firm proposition, and, I believe, that of the Bill, that the people know best. To suggest, as so many of the amendments do, that there is nothing wrong with an institution that asks to be taken on trust yet embraces accounting practices that would have any company director thrown in jail is hopeless. Some might even argue that it is pretty shameful. Ministers have been accused constantly of not listening. Well, your Lordships will forgive me if I say that it is the usual suspects who have not been listening; they seem even afraid to listen. If they had listened more, perhaps we would not need this Bill. The Bill is a mark of their failure, a failure to recognise the need for change.

There is nothing inherently wrong or evil in the European dream. What so many ordinary men and women object to is the way in which that dream has been put into practice, imposed from the top down rather than built from the bottom up, so that it has now become so top-heavy it is in danger of toppling.

The face of Europe has changed over these past 40 years, whether the people accepted it or not. Often, little has changed perhaps from day to day; just a small change here, a little adjustment, a nip or a tuck there—a bit of bureaucratic Botox for which the EU is so well known. However, as with any ageing process, the face has ultimately changed beyond all recognition. It needs rejuvenation, and the only way to do that is by re-establishing the pre-eminence of the people in its deliberations. That will not harm the European dream; it will save it. The great irony of this amendment and all the amendments that we will discuss today is that, if they are pushed to a vote by their proposers, it is a vote that they will deny the people whom we were sent here to serve.

[Lord Empey]

My Lords, the noble Lord, Lord Davies of Stamford, referred to the argument about Parliament and said that the party positions had changed. However, I said at the beginning of my remarks on the Bill last week that we are nothing if not consistent in our consistencies. This House voted so that people such as me in Northern Ireland would have a referendum on our constitutional future and that we would decide. As recently as on a visit to Northern Ireland last week, the Prime Minister said that the decision about its future lay with the people there; he did not say that it lay with Parliament. If we want to take the argument to its logical conclusion, that Parliament decides everything, why did Parliament provide for referenda in the first place? If you are going to be consistent in saying that such matters are a decision for Parliament, you do not have referenda. However, we do have referenda. We had one in 1975, and we have had a number since. Therefore, the argument that Parliament always takes the decisions is simply not true.

Edmund Burke was quoted again. He is very popular in this debate, but we are talking about the 18th century and things have moved on. Life has changed. We have a totally different world in which people are, thank God, educated and able to participate in a meaningful way and no longer require people who can read and write to interpret things for them. As a new Member, it has struck me from the very beginning of our debates on the Bill that it is hard to construct an argument that we support the Bill in broad terms, inelegant though it might be, without automatically being deemed to be someone who does not want to have anything to do with Europe. I refute that. There are positive things about Europe, but, as the noble Lord, Lord Dobbs, said, in the view of the British people Europe has been systematically salami-sliced.

I think I understand why that is. There is a small group of people at the heart of Europe who, for perfectly legitimate reasons, believe ultimately in a large superstate to rival the United States. We saw an example of that last week when one former Prime Minister said that we now need a leader. I am not speculating on who he thought that person might be, but the implication is that the nation state is not held by some people to be the fundamental building block of the European Union. Indeed, the nation state is merely in transition towards something else.

[Baroness Nicholson of Winterbourne]

I apologise for interrupting the noble Lord, Lord Empey, but the facts are very firmly against him. I ask him to accept that the very architecture of the European Union is one of the most decentralised architectures of a large bloc of countries coming together that the world has witnessed in modern times. It is a highly decentralised, very diffuse organisational structure, and I beg him to recognise that point despite his excellent oratory.

[Lord Empey]

I thank the noble Baroness for her comments. I understand the argument for subsidiarity. I was part of a European institution that practised it in the days of bringing decisions ostensibly down to the lowest level at which they can be taken. However, the practice is somewhat different. It is all very well to push things down, but setting the envelope within which those bodies can take decisions and determining the size and shape of that envelope centrally, which is what happens, goes against the argument.

The point I am trying to develop is that I believe in the nation state and in nation states coming together in common cause where that is in their national interests. However, I do not believe in a push by some people to transform those nation states into a collective within a larger body that in effect has all the characteristics of a state: its own President, its own Foreign Secretary, its own system of justice, possibly even its own army. The people of this country are not ready for that argument. Those who for economic, political or security reasons push that argument are pushing against the tide and undermining the people of this country’s view of Europe. They are therefore undermining their own argument.

I hope as we go forward with this that we will recognise that confidence in the principle of a European Union in this country will be re-established only if people feel that they are in charge. Indeed, its standing, with pages filled with people claiming for Kit Kats and all sorts of things, has been undermined and has suffered colossal damage. It may take a generation to repair it, but in the mean time this Bill, with all its downsides, can at least begin the process of saying to people, “You are now in charge”. Yes, Ministers and Members of Parliament will play their role, but in a modern democracy with modern communications and an educated electorate, who says that it is incompatible to have parliamentary democracy on the one hand and on the other hand, for certain defined purposes, a referendum in which the people can be specific? When they vote for a Member of Parliament, they vote for myriad policies covering everything from defence to social services—the whole gamut of government. Constitutional matters are much more precise, and, with an educated electorate, why should the people on occasions not be able to tick the box that they feel is appropriate?

16:45

[Lord Richard]

My Lords, to follow the argument advanced by the noble Lord, Lord Empey, on referenda, the last few sentences of his speech seemed to indicate more than anything else a decision or a desire to support the amendment tabled by the noble Lord, Lord Hannay, and not to vote against it. Referenda are scattered throughout the clauses in the Bill on almost any given issue on which it is quite absurd that there should have to be a referendum.

Will the noble Lord consider again the provisions of Schedule 1 and apply them to Northern Ireland? Is he seriously suggesting that in Northern Ireland there should be a referendum on,

“provisions concerning passports, identity cards, residence permits … minimum rules on criminal procedure”,

or a

“decision identifying other areas of crime”,

or on the, “European Public Prosecutor’s Office”? Is he suggesting that there should be one on,

“police co-operation … cross-border operation by competent authorities … harmonisation of indirect taxes”,

in Northern Ireland, or on the,

“approximation of national laws affecting internal market”?

I could go on and on about this.

The point about the Bill is that if it was enacted you would have to have referenda on those issues. The noble Lord is saying that once we have crossed the bridge and accepted referenda in Northern Ireland, Scotland and Wales, why do we not accept them in this Bill? One does not accept them in this Bill because these are not proper and fit matters to be put to a referendum. They are matters for a Government to decide.

I cannot believe that the noble Lord would advocate having referenda on the issues set out on Schedule 1 if they were to apply only to Northern Ireland. It is absurd; it could not be done. It is exactly what Parliament is there to do. You do not to consult people on issues of that sort; you govern. The amendment in the name of the noble Lord, Lord Hannay, specifically confined the issue of referenda, which he accepts—and we accept—to certain major constitutional issues. I totally accept that. If the Bill confined it to those issues, no doubt there would be much less difficulty in getting it through. When it is as absurdly worrying as it is here, it does not make a great deal of sense.

[Lord Empey]

The noble Lord, Lord Richard, caught me as I was sitting down. I think he has misunderstood the point that I made at the beginning of my remarks about what the noble Lord, Lord Davies of Stamford, said—that the argument was that Parliament should effectively decide. I made the point to him that we had been required to have a referendum whereby the people in that referendum were taking a decision outwith Parliament. I was not suggesting for one moment that referenda would be held in Northern Ireland alone—in fact, the issues that the noble Lord, Lord Richard, listed are United Kingdom-wide. Tax harmonisation and the rest are very important matters but they are United Kingdom-wide not Northern Ireland-specific.

[Lord Hamilton of Epsom]

My Lords, I have been on a steepish learning curve for the duration of this Bill and one of the more amazing things I have learned this evening is that my noble friend Lord Goodhart is actually a supporter of the Bill. For some reason I got the impression that he did not really like this Bill at all. I am very encouraged to hear that he supports it, but I find it rather extraordinary that someone who is trying to support the Bill puts their name to an amendment which will mean that a whole lot of things that were going to be subjected to referenda will not be subjected to referenda any more.

As we know, the way in which the EU has operated for a very long time is that it never does anything in a great big bang: it is always “grandmother’s footsteps”, it is always one bit after another. It is very unlikely that at any stage the EU would introduce something saying that there should be a single, integrated military force. That would be much too large and dramatic a step. They would do it incrementally, bit by bit, until we ended up with a single, integrated military force.

[Lord Radice]

Is the noble Lord, Lord Hamilton, actually arguing that it is not legitimate to amend this Bill? He is coming very close to that. This amendment is trying to accept the principle of referendum but confine it to the major issues, as our own Constitution Committee suggested was the best way forward. It is trying to escape from the fact that this Bill has referenda for 56 separate issues, which brings the whole idea of referendum into disrepute.

[Lord Hamilton of Epsom]

I am very glad that the noble Lord, Lord Radice, has mentioned that point. This Bill covers a large number of issues concerning where there should be referenda. Of course, they are all wired back into the red lines laid down by a Labour Government. This is why they are in the Bill: they are not just dreamt up at random, they are related back to the red lines laid out by a Labour Government, and those are the issues that will now be subject to referenda.

The noble Lord’s accusation that I say people should not have the ability to amend this Bill is absurd—that is what we are here for—but some amendments have a much more wrecking impact on a Bill than others, and I would suggest that these amendments go a long way to removing most of the point of this Bill altogether. That is why I will not be supporting this amendment, but it will be up to the House to decide whether this amendment should go through.

My noble friend Lord Goodhart said that when these referenda come to be debated in the country the dinosaurs of UKIP will be the ones out there campaigning and winning the argument. I would suggest to him that if there is any rationale for UKIP, its primary purpose seems to be to have a referendum to decide whether we should stay in the EU. However, another reason people join UKIP is the feeling that not only are we in the EU but we are getting sucked further in. That is one reason there has been this pretty modest growth in the membership of UKIP, the feeling that not only are we in the EU but we are getting dragged further into a federal Europe, which people do not want to be part of. I think that UKIP is going to be very seriously damaged when this Bill becomes an Act of Parliament because it will be reassuring to people to know that we are not going to be taken any further into the EU and end up in a federal Europe for which nobody voted.

[Lord Grenfell]

Before the noble Lord sits down, he appeared to suggest that there were a large number of red lines which the Labour Government had introduced and that these were now under threat. The fact is that there were, I think, six red lines in the Lisbon treaty. Every one of them is now enshrined in the two treaties as amended by the Lisbon treaty, so one should not cry wolf where that is not appropriate.

[Lord Hamilton of Epsom]

I think that the noble Lord would accept that, enshrined or otherwise, the red lines have until now never been subjected to a referendum. If this Bill goes through, there will have to be referenda on all the red lines originally laid down by the Labour Government. That seems eminently sensible, so I will not be supporting these amendments.

[Lord Lamont of Lerwick]

My Lords, the noble Lord, Lord Dobbs, said in a very amusing and eloquent speech that the face of the European Union has changed out of all recognition. He added that all faces change unrecognisably as they get older, but he did not add “except to those who are behind the face”. Some of the enthusiasts for European integration should look in the mirror when they say that the European Union has not changed at all.

Earlier, we had an argument, which bordered on being disagreeable or a little ill tempered, about whether misleading things had been said about the future development of the European Union. I have to confess— I do not intend to pursue this point very long—that I am rather on the side of those who think that there was some misleading about its future development. I seem to remember that, in 1975, Harold Wilson told us that there was no question whatever of monetary union ever arising in the future. As for the phrase “ever closer union”, of course there will be ever closer co-operation in coming together, travelling and meeting across European boundaries—that is the nature of the modern world and of commerce and travel in Europe today. However, I never interpreted the phrase “ever closer union of the European peoples” as meaning the involvement of a supranational authority to such an extent, but perhaps I was wrong in my assumptions and failed to understand.

I remember standing in Trafalgar Square and sharing a platform with my noble friend Lord Deben. He and I have entirely different views on the European Union as it has evolved, but at that time we stood on the same platform advocating membership of the Common Market, as it was then. However, because, in a sense, the point is not of such great importance, I am quite prepared to concede that perhaps I failed to understand. Yet if I failed to understand, so did millions of other people in this country. Regardless of whether they should be criticised or told that they are fools for not understanding, the fact is that there is considerable disillusionment with the European Union, not just in this country but throughout Europe. I acknowledge that the noble Lords, Lord Hannay and Lord Kerr, have both admitted that extremely important fact during these debates.

As I have said before, it is not because of the Daily Express that the True Finns party has suddenly burst upon our consciousness. There are other reasons for it. First, there is a real problem with governance and democracy within the European Union which relates to the type of indirect democracy that we really operate. Deals are done between Governments; Ministers come back to the House of Commons and announce decisions; decisions can then hardly be modified because they are dependent on other decisions and concessions that have been made and on the horse-trading that has taken place. Secondly, as came out in the exchange with the noble Lord, Lord Stoddart, treaties cannot be amended. Treaties are treaties. So the role of Parliament and the great discussion which we have had about Burkean democracy is a bit irrelevant when you have the results of horse-trading in that indirect democracy and when you have the presentation of treaties. Those are two reasons why there is a real problem of governance in the EU. I am pleased to see the noble Lord, Lord Kerr, returning to his seat at this point.

The third and most important point is the irreversible nature of the decisions that are made in the EU—not just decisions about competence, but so many decisions about policy as well. They are very difficult to reverse simply because they are arrived at by a process of compromise, a process of agglomerating, of aggregating the decisions and interests of different countries together. If three, four or five years later one country has now got a different view of that issue, it is extremely difficult for the Parliament to reverse that decision because, unless public opinion has changed throughout the European Union, one Parliament alone cannot then change the decision that has been made, because one Government will require either a qualified majority or unanimity in order to reverse the decision.

17:00

That means that democracy in the European Union—legislation—is often a one-way street. It is very difficult to reverse things. That is the problem with arguments that it might be in our interest to give that qualified majority. It may be in our interest at one time to have qualified majority voting on one issue, but it does not follow that it will be in our interest for all time. That is why the Bill is long overdue. I regard it as almost a constitutional Bill, giving us part of a written constitution. It is actually saying, “Here are certain areas and we are not going to let them go to Europe. Some of them are more important than others, but they are all important up to a point and we are not going to go beyond these red lines. A future Parliament can change these decisions if it wants to do so, but we are not going to move beyond those red lines at this moment”.

The difficulty in reversing European legislation and in making it more flexible needs to be addressed. We are going to have an argument about a sunset clause later, but when did we ever have a sunset clause in any European Union legislation? It is so difficult to bring the rights of the House of Commons to bear on European Union legislation that we have to be very careful about all these areas where power can move away from our country. Once it is gone, it is gone beyond recall.

[Baroness Symons of Vernham Dean]

My Lords, the noble Lord, Lord Lamont, has gone to the heart of the issue in many ways and I applaud him for what he has said. I do not agree with a lot of what he said, but at least he was dealing with the issues and not with the bland assertion that has come from some on the Benches opposite that this side, or those who are putting forward this amendment, the noble Lord, Lord Hannay, and his supporters, have somehow not got the point of the Bill, either out of deliberate perversity or just plain ignorance. The fact is that we simply disagree. We have to argue through that disagreement and Parliament is the right place to have the argument. In so far as that was the point that the noble Lord, Lord Lamont, was making, I agree with him wholeheartedly.

I say to the noble Lord, Lord Flight, that putting forward amendments in this way is not a tactic. It is part of a reasoned argument. Much of it has come not from the political side of these Benches, but from noble Lords on the Cross Benches, who have put forward well-reasoned amendments, although, of course, he may disagree with them. The noble Lord, Lord Flight, says that he sat through what he called “an elected tyranny” in the other House. Well, that “tyranny” was elected in 1997 and the British people, in whom he places so much faith over referendums, re-elected that “tyranny” in 2001 and again in 2005, so perhaps not so jolly tyrannical after all.

[Lord Flight]

Does the noble Baroness agree that there is a difference between how people vote at elections and what happens in the House of Commons? I was simply making the point that when any party has a large majority in the House of Commons, under the British system since it was changed by Walpole from the originally intended system in the Act of Rights, I am afraid that when there is a large majority it does function as an elected tyranny on either side.

[Baroness Symons of Vernham Dean]

The fact that there is a difference in Parliament from what happens at elections is precisely what we are discussing. The fact is that after the passing of the Amsterdam treaty the British people re-elected a Labour Government and after the passing of the Nice treaty the British people re-elected a Labour Government. They had the opportunity to get rid of the Government on those occasions and they chose not to do so.

The noble Lord, Lord Dobbs, made a very interesting argument. He said, with passionate conviction, that the British people know best. Do we therefore extend that argument to a referendum on the current health proposals that are dominating our headlines and are probably far closer to the hearts of the British people than a lot of what we are discussing here? Did it occur to the Benches opposite to have a referendum on the increases in university fees?

[Lord Dobbs]

Does the noble Baroness accept that I was trying to make the point that there should be moderation and a sense of balance in all this? That is what so many parts of this argument lack. It is not a matter to be taken to extremes; it is a matter of balance and common sense. Had we pursued that with the British people, they would be far more onside than they are.

[Baroness Symons of Vernham Dean]

My Lords, of course it is a question of balance and common sense. Where do we find arguments about balance and common sense but in another place and, especially, here? It is here where we have those arguments and can argue out what is in a Bill.

The noble Lord said that the British people know best—he did not qualify the sentence that he uttered—in making his argument about how important referendums could be. I merely suggest to him that the British people would perhaps have liked to have had a referendum on the increases in university fees.

[Lord Stoddart of Swindon]

Will the noble Baroness give way?

[Baroness Symons of Vernham Dean]

I will give way in a moment. Perhaps it would be pertinent to suggest that there should be a referendum on the future of the nuclear deterrent.

[Lord Stoddart of Swindon]

I am most obliged to the noble Baroness for giving way. Would it not have been more pertinent if the Labour Government who introduced university tuition fees had had a referendum? That would have saved them from betraying everything that the Labour Party ever stood for.

[Baroness Symons of Vernham Dean]

No, my Lords, of course that is not the case. The point about what has happened in the very recent past is that not only did one of the parties in the referendum say in its manifesto that it would not raise fees but its members signed individual pledges to their electorates to say that they would not increase them, let alone put them up by three times. I do not take the noble Lord’s point on that; it was rather a weak one.

I return to the noble Lord, Lord Waddington. We understand that he has very robust views, as do many of his noble colleagues, but I hope that the Conservative Benches have listened to what I thought was the generous support from the noble Lord, Lord Goodhart. There can be no doubt where he stands on the European Union and yet he and the noble Lord, Lord Hannay, are willing to compromise on this issue. They are willing to acknowledge some of the points that have been raised on the Conservative Benches—and I make the point that it is very much the Conservative Benches, with one or two exceptions on the Liberal Democrat Benches. The noble Lords, Lord Goodhart and Lord Hannay, and others are willing to support referendums on the really important issues. That is the point. We are not saying no; we are saying, “Let’s listen to what our own Constitution Committee, with its representatives from the Conservative Benches, has said unanimously on this issue”, and it has said that referendums must be kept for the really important constitutional issues. If we do not concentrate on what is important, where we should be concentrating the British public’s attention, then indeed we do have a big argument about the role of Parliament and we do start to get into the fundamental constitutional issue of what Parliament is here to do.

It has been said that people will really want to have these referendums. I put it to your Lordships that we all know that is not true; of course they will not want them. They would want them on the euro; if we decided that we were going to leave the European Union; on Schengen issues, because immigration is such a major issue; and on whether or not there should be a European army. Those are the fundamental issues that have been at the centre of most of the arguments in this House in the whole time that I have been here, listening as we went through them over and over again. I suggest to your Lordships that going through the long list in front of us will do nothing to make the British public more confident in what we are doing here. Frankly, it will make them think that we have been dealing with trivia instead of with the important issues that face us.

[Lord Maclennan of Rogart]

My Lords, perhaps I may intervene briefly at the end of a fascinating debate. Those who are opposed to Amendment 14, which I strongly support, and the other amendments in the group have been at pains to suggest that what the British people really want is to stop the European Union taking decisions. My noble friend Lord Lamont made the point forcefully that one of the reasons for the unhappiness about the European Union is that it makes decisions in a cumbersome and not very transparent way. It does not actually always intervene to deal with the problems that occupy the British public most closely. It seems that the matters on which the Bill suggests that there should be referenda before decisions are finally taken would in fact make that doubt about the effectiveness of the European Union much stronger. It would make it more difficult for the Union to be able to answer the problems of banking, which are uppermost in many people’s minds at this time. It would make it more difficult for the Union to deal with problems of cross-border immigration and it would make it more difficult for the Union to take action on the environment, which many regard as the top priority today.

The noble Lord, Lord Lamont, talked about the indirect democracy of the European Union. Yes, I agree with him that that is a suitable characterisation. Of course all democracy is indirect in a sense, and the kind of cutting of agreements between interest groups within a Cabinet is comparable with what he described when decisions are taken at the European level. However, it is not altogether true that treaties are unamendable. We have had many treaties since we entered the Common Market which have endeavoured to make the decision- making process more democratic, open and expeditious, and I think that most of those treaties have gone through without any hostile reaction from the public. This Bill seems to have been designed to put a drag anchor on the process of improving decision making within the European Union. I do not accept the view expressed by the noble Lord, Lord Lamont, that decisions taken in the Union are irreversible. Even among those who are full members of Schengen, discussions are going on about the need to look at immigration in the light of the probable influx from Arabian countries. It is not impossible that steps will be taken to respond to that.

If we want the European Union to be more appreciated for what it does, we should not be putting rocks in the road that make it more difficult for its institutions, including the European Parliament, the Council and the Commission, to come up with legislative proposals to tackle the perceived difficulties that we all share within Europe. Most of our interests are common interests in the areas for which the European Union has responsibility. Certainly, ideologies will divide people in all countries, but because of the fact that so many of our interests are common, we do want to improve the democratic processes. Requiring referenda to be held on some of these matters by one out of 27 or 28 countries would be seen as a block on progress, democratisation and modernisation not only by other countries, but also by many people in this country who are conscious of the value of the work that the European Union has done over the 60 years of its existence.

17:15

[Lord Liddle]

My Lords, we have had a long debate on this set of amendments. We on the opposition Front Bench strongly support this group of amendments, spoken to by the noble Lord, Lord Hannay. I shall focus our debate on Report on the essence of these amendments, which is to reduce the 56 varieties of referendum lock that the Bill contains to referenda on new treaties and three major issues: joining the euro, joining Schengen and the setting up of a single European army or force, as my noble friend Lady Symons mentioned.

What people who accuse us of proposing a set of wrecking amendments have to take into account is that the Bill as amended would be a substantial step forward in public accountability as far as the European Union is concerned. There could be no major new treaties containing the kind of proposal that former Prime Minister Tony Blair floated last week—for an elected president of the European Union—without a referendum. We could not join the euro, which clearly might now mean significant steps towards a fiscal union, under the amendments in this group. We could not join Schengen, which would certainly mean abolishing our own border controls and replacing them with border controls at the EU frontier, a common set of asylum rules, burden sharing and so on. Under the amendments that we are proposing, that would be subject to a referendum, as would a major step towards common defence.

Therefore, these amendments do not wreck this Bill; they just make it more sensible and get rid of the huge number of referenda in it. That is wholly in line with the spirit of your Lordships’ Constitution Committee’s recommendation that referenda should be confined to matters of major constitutional significance. One of the curiosities of the many days of debate that we have had is that we have never heard why the Government think they can set aside in this way the recommendations of your Lordships’ committee on these specific matters when it comes to the European Union. On all these other matters—on which, if this amendment were passed, there would be no need for a referendum—there would still be a need for an Act of Parliament. That is an enormous change from the position that we are in now. We are not wrecking this Bill; we are trying to improve it. I hope that on that basis the Government might be prepared to show a flexibility that they have so far lacked in these debates.

One of the very wise contributions to this discussion was made by my noble friend Lord Rowlands. In a distinguished career in another place, he was a sceptic in the proper sense of the word and had to be convinced about the case for Britain’s membership of the European Union and the pooling of sovereignty that it involved. However, as he said, we are setting up a far too overcomplicated process of accountability with the plethora of referendums proposed. What I find difficult about this is why the presumed lack of legitimacy of the European Union is seen as being so peculiar and special compared with the huge problems that our democracy as a whole faces in today’s world.

I looked at the Eurobarometer opinion poll for October 2010—that poll asks people questions about trust on a regular basis—and found that a very depressing 64 per cent of the British people do not trust the European Union. That is why we accept that there is a legitimacy problem. However, it seems that 66 per cent do not trust the British Parliament, 67 per cent do not trust the UK Government and 82 per cent do not trust political parties in Britain, so what is so peculiar about the lack of legitimacy of the European Union compared with the rest of our democracy?

It is argued either that confidence in Europe has been destroyed by so-called competence creep or that we face lots of threats to our sovereignty in future. As my noble friend Lord Triesman has said many times, if you are in government and do not want to do something, you just say no. The noble Lord, Lord Lamont, made a very interesting speech in which he pointed out that there is a very distinctive issue about the irreversible nature of the surrenders of sovereignty that take place in the European Union and the problems of a Union that moves by a process of intergovernmental compromise. Many of us who are pro-Europeans have been worried about this issue for many years and have wanted to think of ways of closing that democratic deficit. Certainly, we should have a debate about the role of the European Parliament, which plays a much bigger role now than it did 15 years ago, largely because of the treaties that the noble Baroness, Lady Symons, when she was leading for the Government, put through this House. However, I presume that the noble Lord, Lord Lamont, would not regard those treaties or the strengthening of the European Parliament as being good things. I agree with him that we have to think of ways of addressing that democratic deficit, but I suspect that he is not prepared to accept these kinds of remedies.

There is a problem of legitimacy vis-à-vis Europe that is particular to Britain, because over decades we have failed to establish a cross-party consensus about our membership of the European Union and failed to argue the case for British membership with a united voice. Amendment 31—which we shall discuss later; the noble Lord, Lord Radice, moved it in Committee—will try to address that problem in part. However, there is another explanation of why the EU has run into problems. The explanation is, as I said at Second Reading, that there are two ways of looking at legitimacy. One is to think about it in terms of how decisions are approved, but the other is to think about whether the institution is effective at doing the job that it is supposed to do. One of the problems with Europe is that it is not as effective as it could be, and this causes public disillusion.

I looked at a poll carried out last November about attitudes to the European Union. If you ask a general question—do people think that we should co-operate more or do they want us to loosen the links with the European Union?—only 21 per cent want us to co-operate more, but 49 per cent would have us loosen the links. However, when you ask people questions about specific areas such as climate change, attacking terrorism and crime, regulating banks, minimum rights for workers, or minimum levels of tax on business, a strong majority in Britain want the European Union to do more. I therefore argue that it is not a question just of how decisions are taken, but of how we make Europe effective. That is what we ought to focus on in our debate.

Finally, in support of the amendment, perhaps I may say that we have had a good and long debate, but one of the depressing things about it is a tendency to be historical, to look back to the past, to take trips down memory lane, and to look at the debates in the 1950s, 1960s and 1970s. I am very prone to that tendency, and this is therefore a self-criticism. When we think about Europe, we really should remember that the world of which the European Union is part is transforming itself at enormous speed. Since the Maastricht treaty, communism has fallen and that aspect of the world has changed enormously, the Arab world is in revolution, China has risen enormously as a power, and the weight of the European Union in the world is decreasing at a rapid rate. Our weight in the world as the United Kingdom is decreasing at an even more rapid rate.

Yet, in response to these extraordinary developments of the past 20 years, this Government have come forward with a policy on Europe that is essentially, “Thus far and no further”. In other words, “We have no imagination about how the European Union might develop. We are saying there should be no change without a referendum”. This is a depressing attitude that destroys the flexibility that a British Government should have to respond to an unpredictable and unknowable future. I urge the House to support these amendments because they confine referendums to the really big issues on which the people ought to decide.

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, we have had a rather amazing debate in which I found all kinds of echoes of agreement that did not seem to be there in the darker days of May when your Lordships first went into Committee to examine the details of the Bill. We have come a long way since then and there seems to be a greater appreciation—not necessarily combined with agreement—about some of the issues that the Bill seeks to address.

We have of course been down memory lane with the various comments by noble Lords who have been extremely experienced in European affairs over almost half a century. Edmund Burke featured again, although I must say that the more I think about that great man, the more I hear in my mind his remark, “Show me the man; show me the things”. In other words, he was interested in the situation as it actually was, rather than in the high theory of how it ought to be. I did not agree with the final remarks of the noble Lord, Lord Liddle. He should not be depressed because the possibilities for our leading in European reform are much greater than he accepts, although he is an expert in these matters. He is entirely right to say that the landscape has changed and that we are dealing with an entirely new situation.

17:33

I agree with the noble Lord, Lord Rowlands, who put his finger on the matter when he said that this is all incredibly complex. It is complex. I was venturing the view only this morning that having taken through the other place and this House somewhere in the region of 35 Bills, I have to say that this is one of the most complex measures I have had the privilege of laying before a House of Parliament. The complexity is there because the EU legislative landscape is complex. Some of its 1,001 aspects are understood and some are not. Many, because of their unintelligibility and obscurity, create the atmosphere of mistrust and reinforce the devastating figures, just given to us by the noble Lord, Lord Liddle, about the decline of trust in the political process generally and the administration of power in places where power is held, including the European Commission and European institutions.

As we tried to wade through the complexities, we had a splendid reminder from my noble friend Lord Dobbs of the overarching purpose of this Bill and of how some of us are trying to persuade your Lordships of the validity of what is proposed in detail in the Bill, which is, in a sense, to rescue the European Union from a trend of declining confidence and a growing dismay that the European Union is about to lose its way and to underline the important part the European Union is playing and can play, contrary to the views of some noble Lords, in repositioning this nation in the totally new international situation that is emerging very fast.

Finally, on the general points, my noble friend Lord Risby reminded us very importantly of the spirit of Laaken, which was, if I may put it in the vernacular, “For heaven’s sake, let us bring the workings of the Union closer to the people”—a task that was totally failed by the consequent European constitution, which we debated for long hours in this House, and to some extent the Lisbon treaty, which I am afraid also failed to meet that particular objective.

I will address, with your Lordships, the precise issues that came up in the amendments, not necessarily in the order in which they were put forward. I would like to deal with my noble friend Lord Goodhart’s profound and learned comments on the European public prosecutor and associated issues. I would certainly like to address the comments of the noble Lord, Lord Hannay. I would also like to deal with the common defence aspects.

The noble Lord, Lord Hannay, led the first amendment in a very persuasive and even seductive way. I welcome his concession that there should be a referendum before the UK gives up its border controls and for certain aspects of common defence. I also welcome the acknowledgment that some other matters in Clause 6 might merit a referendum in certain circumstances. This is what I mean by us all travelling up the learning curve.

I hope now to persuade and explain to your Lordships why all the elements of Clause 6—which, contrary to this constant reference to trivia, are directly wired into and relate back to the major red-line issues that concern the public and the nation—should be under the referendum lock, so that there is no inconsistency and no uncertainty.

Let me first make some general comments on the whole group of amendments. The Bill and Clause 6 —and Schedule 1, which the clause activates—set out to give the British people their say on future transfers of further competence of power from the UK to the European Union. With great respect to the noble Baroness, Lady Symons, who gave a splendidly eloquent speech, this has absolutely nothing—thank goodness—to do with university fees or reform of the National Health Service. Those are very important issues that we will debate with great intensity. What we are debating here is the transfer of competences and powers away from this Parliament and this nation to the European Union, and not the internal domestic reforms that we all argue about and which are controversial, I realise, and a matter of heated debate. To exempt specific areas of competence or power in the way these amendments propose would in my view, and in that of many who want to see our role in Europe repositioned as a leading and positive one, a thoroughly retrograde step. It would serve to undermine the direct, frank and honest commitment that we wish to make to the British people.

It has been implied that the Government might on occasion be better placed than the people to assess the national interest—this is the thought underlying many of the contributions that have been made—and that the representatives of the people in Parliament should be left to decide. I can only reiterate, to add to the figures given by the noble Lord, Lord Liddle, that in the 2009 European Parliament survey over 80 per cent of those polled agreed that all treaty changes should be determined by referendum. I really would suggest that the public can be trusted to determine what is in their own interest on issues on which they wish to express their view. They are not trivial issues at all. It should be for Government and Parliament to commend with confidence a further transfer of competence or power to the electorate and make the case on its merits. I do not see why there is such fear about that. Listening to the debate in the other place, I am not sure that there was all that much fear. Even the Front Bench of Her Majesty’s Opposition in the other place seemed to be fairly aware of that. The more I listen to the Front Bench in this House, the more it seems that it is getting a little out of step with its party’s views and with the general, overwhelming public view that this legislation must be devoted to achieving some reconnection between people, Parliament and the European Union.

I would mention, in brackets really, the constant reiteration that this is weakening Parliament. Parliament is involved at every stage. Parliament has to legislate as to whether there should be a referendum. Our Parliament remains at the centre of this entire process. It spreads the validity of the authorisation to the electorate in a way that is thoroughly consistent with modern trends. This may sound a little avant garde to those who are thinking about the European Union of 20, 30, 40 years ago and a different kind of politics that existed then, but the world has changed. That has to be accepted, and I am not sure that it has been by everyone in the general debate about this Bill.

I turn to the specific amendments in the order in which I said I would and, first, to the European public prosecutor. Clause 6 reflects issues of great sensitivity for successive UK Governments, as well as those of many of our European partners. The debate is too often conducted as though we were striking out alone on these issues, with our concern for reconnection. Not so; it is the same in very many other European Union countries. I repeat that these are not trivial issues, as some noble Lords insist. The evidence from the European convention, which was gathered together, as noble Lords will remember, to devise the constitution, shows us how divisive the creation of the office of European public prosecutor proved to be with a number of member states, which registered,

“strong objections on both practical and accountability grounds”.

The treaties provide for the possibility of a European public prosecutor, but there is no consensus whatever among member states that it should be set up because of the sensitivity of the proposal. It cannot be pushed aside that that sensitivity is very great.

It is only right that if we agree to participate in such a measure, which would result in the possibility of British citizens being prosecuted in British courts by prosecutors working for the European public prosecutor and not our legal authorities—that would be quite revolutionary—we should first seek the consent of the British people. That remains our view. That is why I have to say to my noble friend that I fear that I cannot accept his amendment.

[Lord Goodhart]

I accept that other countries in the European Union have been very reluctant, as have our Government, to join up to the EPPO and I think it is unlikely that there will ever be an EPPO, but that is mostly because of the inadequacies of the legal system in a number of those countries. For this country, under Article 86 of TFEU:

“The European Public Prosecutor's Office shall be responsible for investigating, prosecuting and bringing to judgment … the perpetrators of, and accomplices in, offences against the Union's financial interests, as determined by … regulation”.

That makes it perfectly clear that those who would suffer would not be ordinary citizens in this country. If the EPPO was brought into this country, those who would be subject to it would be international criminals and some major commercial companies. It would not affect the ordinary people in this country in the slightest.

[Lord Howell of Guildford]

I respect what my noble friend is saying, but one has only to pause for a moment and think about the phrase, the European Union's financial interests. Who will interpret that? How widely or narrowly will that be interpreted? Will offences be generated by the misuse of structural funds or other arrangements to do with the EU's finances? We do not know. We do not know who will define these things, but we can see clearly that they may well lead to a prosecution authority outside the UK, when we have our own prosecution authorities which are perfectly adequate in most—indeed, in all—cases to deal with those matters. We will have a prosecution authority from outside the United Kingdom for the first time charging and prosecuting British citizens. That is one reason why a huge uncertainty hangs over that.

Furthermore, once set up, although it is confined to EU financial interests now, the range can spread. Who is to say that it may not? We do not know. All those matters are reasons why many European countries—possibly the majority—are reluctant to see a development of that kind and why, if a Government in this country decided to change their mind, flatly against what the previous Labour Government wanted and flatly against what the present Government want, that should certainly be one item that should be put to a referendum.

I turn now to some of the comments made by the noble Lord, Lord Hannay, which were very reasonably put. I know that he felt that he was in a consensual and concessionary mood and looked for some reciprocity from the Government. In that, I fear that he will be disappointed. The passerelles allowing for a move to QMV, which are listed in Clause 6(5), have been included simply because they are covered by Schedule 1. That is obvious to most of your Lordships. It would be wildly illogical to provide for a referendum on an amending treaty which abolished those vetoes without also providing for a referendum on any decision to use the passerelles attached to the specific articles listed in Clause 6(5), which would achieve exactly the same result. That would be tantamount to locking the front and back doors of the house—not closing them, locking them; and not throwing away the key either, but giving the key to the British people—but leaving the kitchen window open.

17:45

I have made clear before our firm belief that the Bill will not lead to the litany of referendums that some noble Lords keep suggesting—although I think there has been a learning curve on that. History tells us that individual vetoes do not get abolished on an individual, ad hoc basis, just as treaty changes tend not to be piecemeal and ad hoc without good reason: namely, that they are important and urgent. I take the example of the Czech and Irish protocols agreed during the ratification of the Lisbon treaty. They are a very good example. They have been held back until the next accession treaty. Why? Because of the arduousness and length of going through a round of treaty change just to agree to append those protocols.

Just because Schedule 1 and Clause 6 are detailed does not mean that there will have at some point to be a separate referendum on each of the provisions listed. Although that point is to me self-evident, I am not sure that it is accepted or understood by all noble Lords who have spoken. All the items in Schedule 1 are wired into the major issues, the six red lines to which the noble Lord, Lord Grenfell, rightly referred. I have in front of me and could share it with the House, although that would be very tiring and boring, the way in which every one of the articles in Schedule 1 relates to one of the six red lines which successive Governments have stood by and which are of great interest to ordinary citizens. One is left asking: what are the extra powers or extra veto surrenders which the Opposition and others of your Lordships seem to want and are too nervous to put to the people? We have given up past vetoes on the annual budget, with disastrous results. We gave up a veto on Article 122, which made us liable for the European financial stability mechanism, with disastrous results. What are these new vetoes that are required to be given up to make the European Union work? We have never had a clear answer to that question.

[Lord Hannay of Chiswick]

On one small point of fact, the noble Lord, Lord Howell, said that we have just given up the veto on the annual budget. The annual budget has been adopted by a majority vote by a provision of the Treaty of Rome which was negotiated before we joined, which we have applied. Therefore, it has been taken by a majority vote throughout the period of our membership. It really is not wise to adduce changes which have not taken place during the period of our membership.

[Lord Howell of Guildford]

I totally disagree; I think that it is pertinent and a healthy reminder of what happens. We can contribute all we wish to in all these vital areas. The surrender of the veto can lead to consequences which can be extremely dangerous.

Finally, I should like to say a word on common defence, because that has come up and it is important. Amendments 15 and 16 suggest that the only controversial element of a decision to move to common defence would be a decision to develop a single integrated military force—in other words, that it is only that particular interpretation of common defence which is of real concern.

Successive Governments and successive Ministers, including noble Lords sitting here now in the Chamber, have rightly said that we do not support the introduction of a common defence. A Minister said:

“We oppose the introduction of common defence either at 25”—

there were 25 members when this was said—

“or through enhanced co-operation. We think it is divisive and a duplication of NATO”.

We do not support,

“anything such as the creation of standing inner groups or an inner core on ESDP,

which,

“would undermine the inclusive, flexible model of ESDP that the EU and NATO”—[Official Report, 11/5/04; col. 242]—

have agreed. That comes from a Minister in a previous Government. It is extremely telling and sums up the case very well. However, there would be confusion about any decision that resulted in the establishment of a single integrated military force. For example, would the establishment of an integrated command structure or integrated units or the achievement of integrated budgets count? It is just that lack of clarity that allows for the sort of competence-creep which caused so much distrust and which we are trying to overcome in the Bill.

In addition, we have concerns about a move to a common defence that goes beyond the establishment of a common force. A decision to move to a common defence could lead to the loss by the British Parliament of final decisions over whether to send our troops into harm’s way. Like the previous Government, we think it is vital that the UK is able to maintain an independent defence policy. Indeed, it was one of the red lines during negotiation of the Lisbon treaty, and I cannot understand the Labour Opposition wanting to move away from that today. I accept that a common defence is ill defined but that problem would not be solved with this amendment, which could apply only to the UK. Instead, our promise is that any decision to move to a common defence should be subject to the full scrutiny of the British public.

I have gone on for a long time but this has been a huge debate. There are many vital issues to address and it would be wrong to ignore them. I am pleased that noble Lords recognise the utility of the referendum lock in its application to any proposal to abolish our border controls or adopt the euro. However, I ask your Lordships also to consider the sheer inconsistency of seeking to remove from Clause 6 other measures that would transfer further competence and power from the UK to the EU. They are directly related to the crucial six issues on which successive Governments have insisted they want to protect Britain while being forward and active in encouraging the European Union within their full competences. This is a good European policy and the Bill reinforces it. It should be supported and the amendment should be withdrawn.

[Lord Hannay of Chiswick]

My Lords, I am most grateful to all noble Lords who have contributed to this lengthy and interesting debate. I hope that I may be forgiven for saying that there were moments during the afternoon when I thought we were moving back to the future—namely, heading rapidly towards a Second Reading debate. A fair number of contributions bore little relation to the amendments on the Marshalled List but a great deal to the discussions that we had during Second Reading. However, I shall not follow that road now, when we need to focus on the amendments in a much more controlled way.

I thank the noble Lord, Lord Howell of Guildford, for his very thoughtful response and for being so frank about the fact that, although those in whose names the amendments stand were introducing an element of compromise, he did not intend to do so. That was made extremely clear and I hope that all those who listened to the debate will draw the appropriate conclusions from the lack of flexibility on the part of the Government.

There are not many detailed points that need to be referred to. A certain amount of a meal was made by those who spoke against the wording of the amendment relating to an integrated military force. What we are talking about is fairly obvious. We are talking about our old friend—much beloved of the Daily Mail—the European army. We are talking about, for example, our treaty commitment in NATO under which we are part of an integrated military force. I only say to the noble Lord, Lord Waddington, that he will know very well that the NATO obligations apply in exactly the same way to the Navy and the Air Force as they do to the Army. The use of the word “military” is not exclusive to the Army. Therefore, it is obvious what the amendment tries to do: it tries to ensure that, if we were ever to have a British Government who wanted to move in that direction, they would have to submit the matter to a referendum. That is a recognition by those in whose names the amendments stand that the Government are right to have identified that issue as one of fundamental constitutional significance. However, I am afraid that issues such as whom we fought alongside in Iraq are totally irrelevant. We did not fight in Iraq on the basis of any treaty whatever; we fought on the basis of a coalition of the willing without a legal base. Therefore, we should not get muddled up with that issue. There seems to be less trouble about the euro and Schengen. Then, ultimately we come back to the question of whether we should be trying to reduce the number of potential individual referendums. The arguments for that are very strong.

I have been a little saddened by the way in which so many of the protagonists of the Bill and the opponents of the amendments have denigrated the parliamentary process. They have, in fact, thrown up their hands and said that it is completely useless. They seem to have discovered the whipping system, which I think has been in effect since the 18th century or perhaps even earlier, as being at the root of all this evil. That is pretty sad. There are quite a lot of former Whips sitting here and I do not see them covering their heads in sackcloth and ashes and saying that they made terrible mistakes by doing so. It has been part of our constitutional practice for a very long time and we have managed to achieve greater constitutional stability than a lot of countries that do not have it. It is a bit sad that we should be heading off in the direction of plebiscitary democracy-a-go-go instead of thinking about how to make our parliamentary institutions work more effectively. That is why one of the most important points made by the proponents of the amendments is the fact that you need primary legislation for every single change in the Bill. That is really important. It is the way to make parliamentary scrutiny more effective and that is what is needed—not a dash towards plebiscites, which is a very revolutionary approach. I have to say that it comes from a rather unlikely band of revolutionaries from a party whose name suggests that they are counter-revolutionaries. Nevertheless, I think that it is a move in the wrong direction and I should therefore like to test the opinion of the House.

17:56

Division 1

Ayes: 213

---

Labour: 163
Crossbench: 32
Liberal Democrat: 6
Conservative: 3
Independent: 2
Bishops: 1

Noes: 209

---

Conservative: 125
Liberal Democrat: 58
Crossbench: 19
Ulster Unionist Party: 2
Independent: 1

18:10

[The Deputy Speaker (Lord Geddes)]

Amendments 15 to 21 moved formally en bloc, Lord Hannay?

[Baroness Anelay of St Johns]

My Lords, it is my understanding that these amendments are not consequential on Amendment 14, on which the Government have just suffered a defeat. I understand that the Public Bill Office did not notify these amendments as being consequential. They were not put forward as being consequential by the noble Lord, Lord Hannay, in opening, and they were certainly not accepted by the Minister in winding as being consequential. I can understand that the noble Lord, Lord Hannay, might consider it desirable to insert Amendments 15 and 16 as a policy objective, but they are not consequential on the amendment that has just been decided.

[Lord Hannay of Chiswick]

My Lords, if I may, I will respond to some extremely mysterious words from the Government Chief Whip that I am afraid I do not altogether understand. I was perfectly clear when I introduced this set of amendments—which were grouped together by the Government Whips in a way with which I had no trouble at all—that I was introducing the whole body of the amendments, and nobody gainsaid that at all.

[Baroness Anelay of St Johns]

My Lords, the procedure when seeking any agreement on consequential amendments is, first of all, that they should be clearly consequential; these are not.

Secondly, grouping of course is for the convenience of the House. It does not indicate that all the amendments in a group are consequential. Indeed, if that were the case, there could be an invidious position whereby a noble Lord might have an amendment in a group led by a government amendment, and they would not be able to vote on later amendments in that group. Grouping is not of itself an indication of consequentiality. I remind the noble Lord, Lord Hannay, that the Minister did not accept the other amendments as being consequential. I am advised that the Public Bill Office did not give prior indication that these amendments were to be considered consequential.

Indeed, there are matters that are consequential in later groups. It is for the Government to consider whether they wish to bring different policy objectives to bear in another place as a result of Amendment 14. Amendments 15 and 16 may indeed be seen by the noble Lord, Lord Hannay, as desirable in policy terms, but those two amendments are not consequential on the Government’s defeat regarding Amendment 14. The noble Lord may wish to consider whether to take the matter further. There will, of course, be the opportunity to deal with the matter in another place and it may return here on another occasion.

[Lord Triesman]

My Lords, in almost all other circumstances I would not have dreamt of getting to my feet to argue this point, but I genuinely do not believe that a single Member of your Lordships’ House did not think that that was a debate on one set of matters that were plainly related. The speeches all dealt with issue after issue and the total consequence of them. The noble Lord, Lord Hannay, introduced the group by saying that attention had been given to questions described by the noble Lord, Lord Howell, as the big issues—I am not trying to argue that he said that what some of us described as smaller issues are not important. I cannot believe, in all conscience, that anybody in this House was under any misapprehension about the character of the last debate. It would be tragic if we got into a position where game-playing took over from the decencies of proper politics.

[Baroness Anelay of St Johns]

My Lords, in 13 years of opposition, we never thought to press an amendment that was not consequential when it had not formally been agreed to as being consequential by the Bill team and by the Minister, who always checked in advance. The noble Lord, Lord Triesman, talks about matters being related. Of course matters are related in debates on groups of amendments. That is why amendments are grouped. It is part of the constructive way in which this House works.

The Government cannot accept that Amendments 15 and 16 are consequential simply because they are not. They may be the policy objective that the noble Lord, Lord Hannay, feels is sensible and advisable, but it may not be what the Government accept as sensible and advisable. The Government may wish to take a different view. It is not a matter of the Government being recalcitrant. If something is not consequential and has not been accepted by the Government as being consequential, it is not. It is procedural, and it is something to be considered in the future if the Opposition wish to have amendments accepted as consequential when they are not. It is a matter of negotiation beforehand; not for announcement on the Floor of the House.

18:15

[Baroness Williams of Crosby]

My Lords, from these Benches I support the view that most of us believed that these amendments were taken together for the convenience of the House. We had a very long debate, which ranged over the whole group of amendments. I have to say to the Chief Whip, for whom I have great admiration—she is a person of great ability—that most of us took that vote to be about the whole group of amendments taken together. I find it difficult to see how we can explain to the world outside that this group of amendments has now somehow got lost when it seemed clear that, admittedly by a relatively small majority, the House chose to support these amendments.

[Lord Elton]

My Lords—

[Lord Hannay of Chiswick]

My Lords, I wish to protest, frankly, at what I can only describe as an extremely underhand manoeuvre. I cannot believe that, if it were the intention of the Government to argue as they are now doing, it was not the right, proper and fair thing to do to warn the House before this debate started, on the basis of a grouping of amendments that the Government had made themselves and that were agreed to, that whatever we decided on Amendment 14 would not apply to the rest. We would then have had a completely different sort of debate. No warning was given of that sort at the time. No indication was given. If the noble Lord, Lord Howell of Guildford, seriously intended to do that, he could have said that, but he did not. He did not say one word of that. He in fact addressed all the amendments in this grouping in the debate, and when I asked to test the opinion of the House, there was no indication by any Member of the House that we were not testing the opinion on the whole group. I hope that, on calm reflection, the Government Chief Whip will consider that this is an unwise course to go down and one that is likely to lead to bad blood and accusations of something less than fair play. I will sit down now. We can have one more round at this, and afterwards I will speak.

[Baroness Anelay of St Johns]

My Lords, it may be helpful if I just point out at this stage that it is for each individual Peer to make their own view about how they present amendments. When a debate is held, it is not for the Government to warn the House as to whether any amendments may be consequential if the Government lose a Division. That is not how this House has been run. It has been a matter for those in charge of an amendment to be able to determine its fate and then to give advice to the House as to whether it considers other matters consequential. I have made it clear that the Government do not consider Amendments 15 and 16 to be consequential on Amendment 14. That is exactly the procedure that the noble Lord, Lord Bassam, would have carried out when he was the Government Chief Whip, because it is the way that this House works. It is not for the Government at the beginning of each debate to say that a number of amendments are grouped together and, if the House decides on the first of the amendments, we will not consider the rest consequential. It is for the person bringing the debate to make that statement.

However, I can feel the strength of feeling on some Benches that noble Lords wish, in a sense, to change the way in which this House works on the hoof, which is what the request is today. I am going to listen to that. The House has heard the argument. It is a matter that will need to be considered by the usual channels and perhaps the Procedure Committee. If the House is to change the way that it groups amendments and then deals with consequential amendments, it should be done after calm consideration; it cannot be done here and now.

The Government will not object to the noble Lord, Lord Hannay, moving his next two amendments, although I state again that I do not accept the policy that he proposes within them. That should not be taken as proof that the Government consider them consequential or in any way acceptable. On that basis, the House can proceed knowing the Government’s view that the remainder of the amendments in this group are not acceptable. We will not resist them, because the House has already been tested in its patience almost beyond endurance by the length of this debate on Report.

[Lord Bassam of Brighton]

My Lords, I have great respect for the noble Baroness, Lady Anelay, in these matters. While it is clear that she disagrees with the views being expressed around the House, she has acknowledged that, on this occasion, it would perhaps be wise to draw a line under where we are so that we can move on. It would also be wise for this matter to be one of those issues to which both the usual channels and the Procedure Committee should give further consideration. I can see that there is cause for question and dispute, although I take the view which has been expressed on this side of the House. However, I thank the Minister for clarifying issues for the House in the way in which she latterly has.

[Lord Hannay of Chiswick]

My Lords, I thank the Chief Whip for having come to a very statesmanlike conclusion on this matter. I shall certainly not say anything to exacerbate matters—quite the contrary. I have always found the Chief Whip to be a very good person who has helped the House in its deliberations. In this last decision that she has taken, she has once again done that. Since we are talking about the European Union, perhaps it might be the moment to bring out that most time-honoured of phrases used in all European Union agreements: this agreement creates no precedent.

Amendments 15 to 21

Moved by

[Lord Hannay of Chiswick]

15: Clause 6, page 4, line 38, after “defence” insert “that permits a single, integrated military force”

16: Clause 6, page 4, line 41, at end insert—
“( ) Where the European Council has recommended to the member States the adoption of a decision under Article 42(2) of TEU in relation to a common EU defence which is not covered by subsection (2), a Minister of the Crown may not notify the European Council that the decision is adopted by the United Kingdom unless the decision is approved by Act of Parliament.”

17: Clause 6, page 5, line 4, leave out from “Parliament” to end of line 5

18: Clause 6, page 5, line 5, at end insert—
“( ) A Minister of the Crown may not vote in favour of or otherwise permit a decision under Article 140(3) of TFEU which would make the euro the currency of the United Kingdom unless—
(a) the draft decision is approved by Act of Parliament, and(b) the referendum condition is met.”

19: Clause 6, page 5, line 5, at end insert—
“(3A) A Minister of the Crown may not vote in favour of or otherwise permit a decision under Article 4 of the Schengen Protocol that removes any border control of the United Kingdom unless—
(a) the draft decision is approved by Act of Parliament, and(b) the referendum condition is met.(3B) In subsection (3A) “the Schengen Protocol” means the Protocol (No. 19) on the Schengen acquis integrated into the framework of the European Union, annexed to TEU and TFEU.”

20: Clause 6, page 5, line 22, leave out paragraph (e)

21: Clause 6, page 5, leave out lines 45 to 49

Amendments 15 to 21 agreed.

Amendment 22

Moved by

[Lord Kerr of Kinlochard]

22: After Clause 6, insert the following new Clause—
“Decision to join the euro
(1) No notification shall be given to the Council of the European Communities that the United Kingdom intends to move to the third stage of economic and monetary union (in accordance with the Protocol on certain provisions relating to the United Kingdom adopted at Maastricht on 7th February 1992) unless—
(a) the notification is approved by Act of Parliament, and(b) the referendum condition is met.(2) The referendum condition is that set out in section 3(2), with references to a decision being read for the purposes of subsection (1) as references to a notification.”

[Lord Kerr of Kinlochard]

This is a slightly different order of amendment from those that we have just considered. I fear that it is Osric or Malvolio, but it is not much ado. It does not address any of the great questions that we have been debating. I promise your Lordships that I shall not mention Burke versus Rousseau. I promise you that it has nothing to do with the underlying debate about flexibility versus dealing with the disconnect; it has nothing to do with whether there should be a referendum should the Government wish us to join the euro—that is agreed—it is merely about the timing of the referendum in relation to the process of our joining the euro.

The Bill ties the referendum to a decision under Article 140(3) of the TFEU, which irrevocably fixes the rate at which the euro shall be substituted for sterling and takes the other measures necessary for the introduction of the euro as the single currency of the United Kingdom. It explains that this will be a proposal from the Commission which will be the subject of consultation with the European Central Bank and then decided by a unanimous decision of the existing eurozone member states and, of course, the UK.

The Government say that the referendum on our joining the union should be taken on that draft decision about the modalities and the rate. My contention has been—I spoke on this matter at Second Reading and on our fifth day in Committee—that to wait until there is a negotiated draft decision on the modalities of joining the euro and the rate at which we join would be a mistake. I argue that the decision that is appropriate to a referendum is on whether the pound is to be replaced by the euro, not the decision, as in the EU text drafted by the Commission, on the detailed arrangements for the transition, the timetable or the rate. My contention is that the referendum should be earlier in the process and not the last stage.

I was grateful to the Minister for a letter which he sent me and copied to a number of other noble Lords this morning dealing with my arguments at Second Reading. His contention is—and I hope that I in no way misinterpret his letter—that it would be possible for the Government of the day to prepare a draft decision on the modalities before making the initial notification to the Council and Commission in Brussels and make that text available during the referendum campaign. He states in the letter that the “detail of the decisions” could be prepared,

“prior to the UK’s initial notification to the EU of its intention to adopt the euro. The question of the UK’s notification would then be subject to a referendum, by the time of which a draft decision … would be available for public discussion”,

and,

“form part of the public’s consideration”.

I do not want to exaggerate the difference between us; my point is rather small. I accept that the sequence that the Minister has set out might work; I am not saying that it is unworkable. What I am saying is that it is a little unwise.

The process in Brussels starts with a notification by the member state that wishes to suppress its currency and join the euro. When that is received, it is the task of the Commission to make the proposal, the ECB in Frankfurt to express a view on it and the Council to reach a decision. On the Minister’s scenario, we would draft it here. I confess that I can think of several precedents where it has been possible to get the Commission to put forward a text precisely in the language which the British Government wanted it to do—I happened to glance at the noble Lord, Lord Lamont of Lerwick, as I said that. I can think of no precedent for us publicising such a text in advance, passing it by Act of Parliament, as we would do, making it subject to a referendum and still hoping to persuade the Commission to present it as its own. Nor can I think of anything more likely to risk some discussion among the existing eurozone member states than our announcing the rate at which our currency was going to join theirs and giving it to them to buy—giving them the text, the decision, the modalities, the transition, the timetable. One would expect to go through some process of negotiation. It would be easier for everyone to save face if the text had not been published in advance from the start.

18:30

Moreover, subject to the views of three distinguished former Chancellors, with all of whom I have worked, I argue that it would be rash to set the rate before you produce a text in Brussels on which you are going to ask Parliament to pass an Act and you are going to ask the country to approve by referendum. “Events, dear boy”—things happen in the currency markets. It would be wiser to set the rate at the end of the process when you are ready to have sterling join the euro rather than some months before the end.

I urge the House to consider the law of the land now, the 1993 post-Maastricht Act. The wording of my amendment replicates the wording of the post-Maastricht Act with the addition of the referendum requirement. We are talking about the European Communities (Amendment) Act 1993, this bit of which was drafted in Her Majesty’s Treasury—nothing to do with me; I was in Brussels. The wording of the Act is:

“No notification shall be given to the Council of the European Communities that the United Kingdom intends to move to the third stage of economic and monetary union (in accordance with the Protocol”,

and so on, which is the same language we have now,

“unless a draft of the notification has first been approved by Act of Parliament”—

a draft of the notification, not of the decision. Article 140 was there in the Maastricht treaty, under a different number. Article 143 was there but the Government of the day chose to make the issue for Parliament not the Act, the modalities, the transition details and the rate, but the question of whether we should join the euro. It was the notification that would trigger the parliamentary procedure. Therefore my amendment is in line with the precedent and the statute book.

I also think it is the honourable course. To try to force our partners to negotiate on a UK draft on the modalities of our adopting their currency, before this Parliament and this country have decided that we want to join the euro, seems quite difficult. I would not like to be the negotiator who had to attempt that task. Some of them might be inclined to say, “Go away and decide whether you want to join. We will focus on your draft text once you are clear whether you wish to join the euro”. To seek to drive through the Brussels process the text that we want with the modalities and rate that we want because it had been approved by referendum is equally unwise.

I am not arguing that the course dictated by the Bill and the specific reference to Article 143 is an impossible course. It is even possible that the rate you chose months before might still be right on the night, but why risk it? My amendment would not preclude the Government doing what the Minister said in his letter to me—which I tried to summarise a moment ago—would be the Government’s preferred course. It would be possible to negotiate and draft your decision in Brussels or publish your decision to the country during the referendum campaign, though were I still in some of my old jobs I would advise against it. However, given that this is merely about the modalities and not the principle, it would be much wiser to ask the country to take the decision of principle first.

The question for a referendum must surely be, “Do we want to join the euro?”. The Government lose nothing by adopting my amendment because they could still let events follow the sequence described in the Minister’s letter to me if that is what they prefer. I therefore believe that precedent, honour, prudence and common sense point to the language of Amendment 22. I beg to move.

[Lord Garel-Jones]

As the noble Lord, Lord Kerr, has already said—he has more experience than me—there are three very distinguished ex-Chancellors sitting below me. Would not the rate at which we enter—such a delicate matter as far as markets are concerned—normally be decided after markets had closed, say on a Friday, and revealed before markets opened on Monday? The risk of doing it any other way would be substantial. Perhaps former Chancellors have something to say on the matter.

[Lord Kerr of Kinlochard]

I agree with the noble Lord, Lord Garel-Jones. I was Private Secretary to the noble and learned Lord, Lord Howe of Aberavon, when he used to chair EMS realignment conferences as Chancellor of the Exchequer when we were not a member of the EMS. The standard form is exactly as the noble Lord, Lord Garel-Jones, lays down. One tries to avoid a market rumour on a Friday—that would be quite difficult if we had held a referendum on the Thursday—ECOFIN would meet on the Saturday, and one would have a decision on the rate very early on Monday morning or late Sunday night as the Japanese markets open. In this case it would be highly desirable to move fast after our referendum because there would be a lot of movement in the market. However, if you have decided that the rate is to be a matter for an Act of Parliament and a referendum, you are stuck with several months of volatile movement.

[Lord Lea of Crondall]

I wonder if there is a special case in this. Some of us approach this question from the hypothetical case that in a few years we might join the euro when it has parity with the pound. It might be relevant to the referendum that people might think, “If you can’t beat them, join them. It’s been around a long time—you might as well join”. Frankly, that is the way referendum decisions are probably made—in the pub. We are talking about making something quite technical into a demotic sort of fact.

Might the discussion in the press get a debate going? Something like the new clause proposed by the noble Lord, Lord Kerr, might be relevant, maybe with some adjustment, to the idea that we need to have the proposition about parity with the euro as part of the question. Could somebody enlighten me as to how that scenario—it is probable rather than possible; it has some common sense about it—would fit with this Bill and with the amendment?

[Lord Howe of Aberavon]

Since my name stands on the Marshalled List below that of the noble Lord, Lord Kerr, it is right that I should intervene at this point. There is a certain diffidence about my approach, because I am in the presence of two propositions with which I have been closely familiar for a very long time indeed. I refer personally to the noble Lord. As he has already hinted, our relationship with each other is antique. I first came across him as a bright young man in my early days as Chancellor of the Exchequer; he did not necessarily appear to know a great deal about the Treasury or economics at that stage. I learnt that he was on secondment from the Foreign and Commonwealth Office. He was already serving me very well in the more sophisticated Treasury environment and therefore in due course became my principal private secretary in that department. He continued in that job to serve my noble friend Lord Lawson. I do not think that he lasted in that humble job for long enough to be with my noble friend Lord Lamont. Certainly, we came to establish a respect for each other and a familiarity.

The noble Lord is a young creature in my memory, who has already made a lucid and compact presentation to this debate, which is frankly not a hugely politically controversial one. It is a debate directed to the ostensible, practical way of approaching this particular proposition —our accession to what used to be called the European monetary system. That also is a symbol of my antiquity. My two noble friends Lord Lamont and Lord Lawson, who are alongside me, will not need much prompting to remember that our manifesto for the European 1979 election, preceding our own manifesto for the general election later on, had this quotation:

“We regret the Labour Government’s decision—alone amongst the Nine—not to become a full member of the new European Monetary System. We support the objectives of the new system, which are currency stability in Europe and closer co-ordination of national economic policies, and we shall look for ways in which Britain can take her rightful place within it”.

I am still looking, with an enthusiasm that has fluctuated over the years, as the stability of the currency has fluctuated as well.

In this context, I support the amendment. Although my relationship with the ERM, as it was then called, has been insecure, it was the cause of the less than friendly relationships between my noble friend Lord Lawson and myself and our noble friend Lady Thatcher before the Madrid summit, where our paths certainly divided. Remarkably, not many months after I had been subsequently moved on from the Foreign Office to become Leader of the House of Commons, a decision was taken for us to enter the European monetary system—

18:45

[Lord Lawson of Blaby]

Will my—

[Lord Howe of Aberavon]

Not at this point, in the middle of a sentence, although I have often given way to my noble friend in circumstances like this.

The news that we were joining the system reached me in rather a remarkable way. In my role as Leader of the Commons, on that day it was my job to go to Balmoral with a number of ministerial colleagues for a formal meeting for which I was Lord President of the Council. When I arrived in the presence of Her Majesty, before having a chance to talk to anybody else, her first question to me was, “What do you think of the news today, Sir Geoffrey?” I said, “What news, your Majesty?” She said, “Haven’t you heard?” I had not, indeed, but we had joined the European monetary system on that day. Although my private office in London had tried to get the message to me before I met Her Majesty, that had failed. So I found the whole thing embarrassing—but I was in a way a pioneer, because I first commended it to the other place as long ago as when I was Shadow Chancellor, on 29 November 1978. So I am quite impatient to see it fulfilled, as long as it is fulfilled on the right terms at the right time, but fortunately that is not for me to decide.

I see my noble friend is looking anxious. I have said all I need to say—

[Lord Lawson of Blaby]

I am sure that the whole House is fascinated by my noble friend’s trip down memory lane. I share a number of those memories with him, including sharing the noble Lord, Lord Kerr, as principal private secretary when I was Chancellor of the Exchequer. He was the first of a number of principal private secretaries whom I had as Chancellor, because I was there for quite a time. They were all good in different ways, but none of them was anything like as Machiavellian as the noble Lord, Lord Kerr. That makes one wonder what he is really up to with this amendment.

This trip down memory lane, fascinating as it was, is about the exchange rate mechanism of the European monetary system, which is a currency arrangement. This debate is about abandoning your own currency. There is absolutely no similarity whatever. So although I say with great respect and affection for my noble friend that what he said was of interest, it has absolutely no relevance to the amendment that we are discussing.

[Lord Howe of Aberavon]

With great respect to my noble friend, who always has a more ruthless and intellectual analysis of these questions than I do, it is broadly speaking the same thing. It was important, while that was the question, whether or not we joined the monetary exchange system; it is even more important whether we join the euro. Either way, we have reached the point where there has been a general acceptance of the need for a referendum on our accession to that currency. That arises not within the context of this Bill or this debate alone but has been on the agenda for a long time. The only question that we are actually debating now is the rather technical one of when precisely it should be required in the context.

I see my noble friend Lord Howell looking at me. When I reflect on his wisdom over many years, I am sure when he comes to wind up that he will recognise that is the flavour of the decision. Perhaps he is not winding up—he may be too nervous to handle this issue.

I am more than content to follow the wisdom and enlightenment of that splendid retired principal private secretary sitting over there. It was quite fun when we were together and I was presiding over the realignment of the European monetary system. It was quite nerve-wracking. We had one marvellously exciting day when it was agreed between the Germans and the French that there should be a 9 per cent realignment between those two currencies—2 per cent up and 7 down, or 3 per cent and 6 per cent down. That question, unhappily, for the first and only time, ran into a time when the currency markets were open on a Monday morning. That was our only failure. Apart from that, I am confident to give my backing to the noble Lord, Lord Kerr of—I can never remember the other half.

[Baroness Williams of Crosby]

My Lords, I am reluctant to intervene, even briefly, in this marvellous ballet of Chancellors, which has taught us all a very great deal. I apologise for having stepped in before the noble Lord, Lord Lamont, because I am sure he too will have a major contribution to make.

I want to raise one other issue before we move on to what one hopes will be the final remarkable occasion of this ballet, which we will all appreciate much. I want to talk for a moment, if I may, about being straightforward about the implications of this amendment. The noble Lord, Lord Kerr, talked with a degree of technicality I am incapable of following, and I am sure that he is probably right. It looks as if his former Chancellors, all of whom he managed to be a mentor to, will give him the full support that he needs on this amendment.

My point reflects more on our debate up to this point. We are showing an inclination to look more at the ways in which we can escape from some of the consequences of the growing interdependency of the world economy of which we are part. Quite simply, we all know that it is highly unlikely that there will be movement under this Government towards the eurozone or the euro. It will be important to take account in the future of the amendment of the noble Lord, Lord Kerr.

We will not be able to escape the presence and the problems of the euro by not joining it. I recognise that most people in this Parliament and probably most people in the country at the moment would not wish to join the euro. However, I also recognise that the euro’s future and its strength are of crucial importance to this country whether we join or not. We now do something like half our trade with the eurozone. The positions taken by the eurozone are of major influence in global financial meetings. Therefore, although we may not belong to it we do not escape all the consequences of it. We should make it quite clear as we continue to discuss this part of the Bill that time and again we will be caught in the gradually increasing interdependency of the economic world whether or not we happen to already belong to some of its institutions.

Why did we help to support the Irish in the desperate situation that they encountered last year? Quite simply because there were so many British interests—banking interests, shareholder interests—affected by what happened to the banks of the Republic of Ireland that we felt it irresponsible and unwise to stay out of the discussions about it. In just the same way, we will find it irresponsible and unwise to regard the possibility of a major crack in the eurozone between its richer and poorer nations as if it did not in any way affect us.

We know already how close this is. Already there is much closer investigation of the European stability pact, with the possibility of mounting greater surveillance on those who are within it as well as the possibility of moving towards some degree of control over the group of countries within the eurozone. I will not go into all that now because there is not time and it is not appropriate, except to say very directly that this is bound to have implications for Britain as well. We simply cannot stay wholly outside these things.

When my noble friend Lord Goodhart was talking earlier about the European prosecutor’s office, one of the things he might well have pointed out, though he was too nice to do so, was that already we in this country had been caught up in the OECD’s Financial Action Task Force very directly on the issue of when we moved and finally passed the bribery convention. We cannot escape from some of the massive international institutions—the G20, the OECD and many more—which are bound to affect our sovereign right to do as we will. To pretend that we do not live in such a world, that it is not becoming more and more that kind of world, is to live in a world of illusion which we cannot possibly afford to. I simply make the point on this discussion on the euro that we have to look all the way through at how the United Kingdom will survive, strengthen and prosper in a world which, like it or not, is becoming increasingly global, increasingly interdependent and increasingly without room for people taking pure sovereign attitudes because those are no longer possible, whether you live in China, the United States or anywhere else.

[Lord Martin of Springburn]

I thank the noble Baroness. I have listened to her not only here but in the other place and I have always had great respect for what she has to say.

I recall when we spoke here about the help that we would give Ireland, a country of which I am very fond, and everyone in this House, to their credit, supported that move. However, there is a big difference between helping out a friend and neighbour and taking on the same currency as that neighbour. The men and women, particularly in the west of Scotland, which I know well and which is so near Ireland, hear the stories of how difficult things became for Ireland when they entered the euro and gave up their punt. Those stories will have a big impact on any decision. I do not think that anyone, any Member of Parliament in the House of Commons, would want to join the euro at this particular stage.

[Baroness Williams of Crosby]

I agree with the noble Lord, Lord Martin, but I think he misunderstood my point. I was not advocating that we join the euro—indeed, I went so far as to say that I saw no possibility in the near future of our doing so or even wishing to do so. My point was that we cannot walk away from the plight of Ireland because we do not happen to belong to the euro. We have to address those issues whether or not we belong to the euro, and that is an issue on which I would have thought the noble Lord and I would find ourselves sharing a very strong sense of agreement.

[Lord Lamont of Lerwick]

My Lords, I hope the noble Baroness, Lady Williams, will forgive me if I do not entirely follow her down the road of her argument and her thoughts. Of course I agree that what happens to the euro has a profound impact on us and I certainly want to see the crisis resolved in as orderly a manner as possible.

I shall be extremely brief. I am not intervening in this debate simply because two other Chancellors have spoken, although I did feel under a certain obligation, like both of them, to speak when the noble Lord, Lord Kerr, had tabled this amendment—not only tabled this amendment but talked to me, dare I say it, incessantly in the bars about it and written me a letter about it. I have the greatest respect for the noble Lord, Lord Kerr. In fact, he, I and, above all, the Prime Minister, John Major, all worked hard over the piece of paper that we are debating now: Protocol 15 of the Maastricht treaty. Although I spent a large part of my life poring over this, I have spent what seems an eternity this afternoon poring over it again trying to work out what on earth it means and trying to work out how some parts that seem to contradict it actually come together. Of course I owe it to the noble Lord to consider very seriously what he said, because he gave me great support when I was Chancellor, although when I knew that the noble Lord was putting forward this amendment, the story of Talleyrand came to mind—having been told that someone had died, he asked whatever had he done that for.

I confess that even having thought about this a little, I am not entirely convinced that there is a massive difference between the way that the noble Lord, Lord Kerr, wants to tackle it and the way that my noble and learned friend Lord Howe wants to tackle it. My noble and learned friend said that he was quite sure that I and my noble friend Lord Lawson needed no reminding that joining the ERM was in our manifesto in 1979. I confess that it was only when I became Chancellor that I expressed exasperation about the whole thing and the Permanent Secretary at the Treasury reminded me that it had been in our manifesto. It did not come quite so easily to my memory as to that of my noble and learned friend Lord Howe.

I turn to the subject of the debate. An extremely important point is that the referendum should not be about the exchange rate. Anxiety has been caused by whether Article 143 would give rise to a situation in which the actual exchange rate at which we joined the euro—perish the thought that we ever did—would be on the ballot. It is my understanding, and I hope that the noble Lord will be able to confirm this, that it does not follow that it will have to be on the ballot paper. It is an option but not essential. As I understand it, the Government are proposing a package approach. They are intending that the negotiation of the draft content of the Article 143 decision should take place before the Government formally notify the Council that it intends to adopt the euro; that is, that the negotiations should take place first. I do not see that as a great problem and I think it can be done that way. This is something which, as I understand it, has happened before.

19:00

In all honesty I do not really see the exchange rate and market uncertainty as an issue, given that we have a floating rate and that we would be proposing, if this ever happened, to move from a floating rate to a fixed rate. Even if it were known what the terms were, it could be within a range. I always listen to the noble Lord, Lord Kerr, but this could be done either way around. However, as I have said, the one thing that should not be on the ballot paper in the referendum, if there were ever to be one, is the actual exchange rate.

[Lord Liddle]

My Lords, from the Opposition’s point of view, exotic as it may seem that we should at this moment be debating the circumstances in which we might join the euro, this Bill is intended to bind future Parliaments for a long time. Indeed, that is one of our major difficulties with it, which is why we will be moving the sunset amendments on Wednesday. However, given that it is a Bill that is intended to bind Parliaments for the future, it is important to get this right. We have listened to our colleague the noble Lord, Lord Kerr, at great length on this subject and are persuaded that he is right. The Opposition will therefore be supporting his amendment.

[Lord Wallace of Saltaire]

My Lords, no Parliament can bind its successors. That is one of the principles of parliamentary sovereignty. I am grateful to the noble Lord, Lord Kerr of Kinlochard, for following up the previous Committee discussion with his letter of 19 May, in which he outlined his concerns in more detail: namely, that Clause 6(5)(e) of the Bill might be legally defective. We have therefore taken careful legal advice. The Government have now been able to reply to that letter and a copy has been sent to those of your Lordships who participated in the Committee debates. A copy of the letter has also been deposited in the Library of the House. On the basis of that legal advice, I hope to reassure your Lordships that we do not judge there to be a risk of more than one referendum on the euro being required and that the provision does what we and noble Lords on all sides of your Lordships’ House intend it to do.

Unlike other member states, the UK is not under an obligation to adopt the euro. Protocol 15 of the consolidated treaty begins with the clear statement that the United Kingdom,

“shall not be obliged or committed to adopt the euro without a separate decision to do so by its government and Parliament”.

That protocol, which needs to be read alongside Article 140 in the British case, sets out in detail the steps that must be satisfied before the UK could adopt the euro. Paragraph 9 of the protocol states that after the UK has notified,

“the Council … of its intention to adopt the euro”,

as its currency,

“decisions in accordance with the procedure laid down in Article 140(1) and (2)”,

of the TFEU must first be taken, to which protocol 13 is also relevant.

The process starts in practice by examining convergence criteria as set out in Article 140(2). That is bound to happen before the UK formally notifies, even if it is not part of the formal procedure. It might be helpful to consider what needs to be done following notification of our intention to join the euro. It is not a matter of negotiating terms of entry but of economic criteria being satisfied in terms of the treaty. The final step of the process is to take a decision in accordance with the procedure laid down in Article 140(3) of the TFEU. Paragraph 9(c) of Protocol 15 commits the Council,

“in accordance with the procedure laid down in Article 140(3)”,

to “take all other necessary” measures to enable the UK “to adopt the euro”.

Clause 6(5)(e) is designed to catch this final step in the process, thus ensuring that as much of the complex detail as possible is available to Parliament and the public in deciding whether to join, while giving the Government of the day the flexibility to set the timetable for when to seek approval from Parliament and the British people. If I may say so, the noble Lord, Lord Kerr, might almost be old enough to remember the first applications for Britain to join what was then the European Economic Community. Before formal application was made, a number of informal negotiations established the terms for potential negotiation. We envisage something of that in this situation. It will allow the Government to seek a referendum when sufficient detail is known about the circumstances and conditions of entry, but will allow the UK to seek approval from the people before the exact point at which the exchange rate between the euro and the pound would be set. We all recognise that the exact exchange rate will have to be set at the end of the process to avoid market turmoil and speculation against the rates declared.

In contrast, the amendment proposed by the noble Lord would require the referendum to be held and approval given before the UK could notify the EU that it intended to adopt the euro. The Bill nevertheless allows for matters to be arranged in this way if the Government so wished, again providing the degree of flexibility which noble Lords, including the noble Lord, Lord Kerr, have so often called for on this Bill. It would be open to the Government of the day to undertake negotiations with the EU in line with paragraph 9 of the protocol before the UK issued its notification. This would allow draft decisions under Article 140(3) on the rate at which the euro would be substituted for sterling and other measures necessary for its introduction to be prepared—with perhaps a range of rates being negotiated—before notifying our final intention to join the euro.

On that basis, I do not consider that the Bill would lead to what we all view as an unwelcome situation in which two referendums would have to be held on the euro: the first on the UK notifying that it wished to join; the second in a rushed weekend on determining the specific question of the exact rate at which the euro is to be exchanged for the pound. Instead, it is possible under the Bill for the Government to submit the question of adopting the euro to a single referendum.

[Lord Lawson of Blaby]

My noble friend mentioned the lawyers early on and I am quite sure that the lawyers worked this out. To me, this is too redolent of lawyers. The practicalities might in fact tell the other way. The noble Lord, Lord Kerr, for whom I have a high regard as I indicated earlier, has raised a point that at least merits further thought and discussion. Quite apart from the problems that might or might not occur on the currency markets, it would be very confusing to the British people if there were no referendum on the principle of joining the euro at the first stage, when the Government of the day had decided that.

My noble friend the Minister said that this can be played either way, early or late, but we cannot know what a future Government might do. They might decide to play it late, which would not be desirable. It would be most undesirable for, and, as I say, very confusing to, the people, who would not quite understand why it was happening in that way. It might therefore be sensible if the noble Lord, Lord Kerr, could be persuaded to withdraw his amendment on an undertaking by the Government that they will give this matter further thought. That would be the right way forward.

[Lord Wallace of Saltaire]

I am very happy to give an assurance that the Government will look at this further, but we have consulted—we are dealing with legislation, so it is entirely appropriate to consult—lawyers on the implications of that legislation. The process is long by which what necessarily begins with informal exploration becomes formal notification, then, under the terms of Article 140(2), as the noble Lord, Lord Kerr, will know, entails a degree of negotiation on how far the UK meets the convergence criteria and then moves towards the final negotiation in Article 43. What we provide for under the existing arrangement is a degree of flexibility over at what stage in that process the Government put the—

[Lord Hamilton of Epsom]

Is not the other side of my noble friend Lord Lawson’s argument that if we take the decision in principle, we are put in a much weaker position in all subsequent negotiations because, in practice, the country has already voted in principle to go into the single currency and therefore we have to give way on many of the negotiations that follow?

[Lord Wallace of Saltaire]

That, of course, is partly why, in all three British applications to join the European Economic Community there were informal conversations before Britain made a formal application—we needed to know what potential terms were available before we formally declared our hand. For the reasons I have outlined, we conclude that Clause 6(5)(c) is not legally deficient and that there is no risk of the Bill requiring more than one referendum on the issue, the second referendum being on the rate at which the UK would join the single currency. I therefore urge the noble Lords to withdraw their amendment.

[Lord Kerr of Kinlochard]

I always listen very carefully to what my former bosses say and I take very seriously the advice of the noble Lord, Lord Lawson, but I did not hear from the Minister any suggestion of thinking further or looking again. I agree with the noble Lord, Lord Lamont, that there is not a great deal between the Minister and me. My language, which is the language of the existing Act plus the referendum requirement, would permit the Government to do everything that the noble Lord, Lord Wallace, has said they would wish to do. It is perfectly permissive; they could do that because the notification could be done informally and the formalisation of the notification could be saved up till the end. They could do absolutely as the noble Lord, Lord Wallace, says.

[Lord Wallace of Saltaire]

I was using the language of the consolidated treaty. The noble Lord was using the language of the Maastricht treaty, and I suggest that the current consolidated treaty might provide the more appropriate language.

[Lord Kerr of Kinlochard]

I was using the language of our Act, the Act in force in this country now. I am talking the 1993 Act language, which is replicated precisely in my amendment. I am very glad to hear the Minister agree that we must avoid a second referendum and that we must avoid the crisis weekend drama, but in a plain reading the Bill says that what should be put to Parliament and the people is the draft of the decision under Article 140(3), which sets out the rate. That is the decision that we are going to take over a weekend, and it is going to be a busy weekend if ECOFIN starts on Friday, Parliament sits on Saturday and the referendum is on Sunday. It is not going to be fun.

I agree that under my language the Government could do exactly as they want. Under their language, I believe that the country would think it very odd if they did not see the draft decision including the rate, because that is what Article 140(3) of the consolidated treaty says. It uses the rate; the rate is there in the treaty. So although I regret that I have taxed your Lordships’ patience long enough, I think that I really have to test the views of the House.

19:15

Division 2

Ayes: 187

---

Labour: 145
Crossbench: 26
Liberal Democrat: 5
Conservative: 4
Ulster Unionist Party: 1
Independent: 1

Noes: 188

---

Conservative: 116
Liberal Democrat: 58
Crossbench: 7
Ulster Unionist Party: 2
Independent: 1

19:28

[The Deputy Speaker (Baroness Fookes)]

My Lords, I have to announce a correction in the voting figures in Division No. 1. The correct figures are: Contents, 214, not 213 as announced; Not-Contents 209.

Consideration on Report adjourned until not before 8.30 pm.

Contracting Out (Local Authorities Social Services Functions) (England) Order 2011

Monday 13th June 2011 Lords Chamber

Motion to Approve

19:29

Moved By

[Earl Howe]

That the draft order laid before the House on 10 May be approved.

Relevant document: 22nd Report from the Joint Committee on Statutory Instruments.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, the purpose of the order is to allow local authorities taking part in two pilot programmes to contract to outside organisations certain adult social services functions conferred on them by a variety of legal provisions. The pilots are, first, adult social work practices pilots and, secondly, right to control pilots. In short, the SWP pilots will test various models of social worker-led organisations undertaking adult social care functions for which local authorities are currently statutorily responsible. The right to control pilots will test the exercise of disabled people’s right to manage the state support they receive to live their daily lives. I will explain each pilot programme in greater detail as I go along.

The Government’s vision for adult social care set out a new agenda for adult social care based on a shift of power away from the state to the citizen by putting people, personalised services and outcomes centre stage. We are committed to the devolution of decision-making close to those who are responsible for the service delivered and, wherever possible, into the hands of those who are the service beneficiaries. This is an integral component of our wider personalisation agenda. We also want to ensure that individuals, carers, families and communities work together with local services, balancing family and community action with state support. Again, this is an integral component of our big society vision.

Since 2008, the Department for Education has funded SWP pilots to deliver services for children and young people in care. The pilots have seen the creation of independent, social worker-led organisations, including social workers moving out of public sector employment to form their own employee-owned social enterprises. The pilots also co-ordinate and monitor services provided to the children and young people in the SWP. They are independent of the local authority, but work closely with it and in partnership with other providers. The local authority pays the SWPs for the services provided.

Last November, my right honourable friend the Secretary of State announced that the Government wanted to test this concept in the adult social care sector, with pilots running for two years starting this summer. The emerging evidence from the Department for Education pilots strongly suggests that both clients and staff will benefit from service delivery by SWPs. That is why we are giving local authorities this opportunity to test the potential benefits of the SWP model and adopt a completely innovative approach to delivering services for adults and their carers.

We want not only to improve the experiences and outcomes for people in vulnerable circumstances, but also to empower social workers to do their jobs effectively, and we want to reduce the unnecessary bureaucracy that so often gets in the way. The programme will bring people who need health and care support closer to those who provide the services they need by reducing bureaucracy and encouraging innovation and personalised services. It will also give social workers the freedom to run their own organisations in the way they want within the constraints of their contract with the local authority. Evidence shows that staff working in employee-owned organisations have greater job satisfaction, leading to lower staff turnover and capacity for greater innovation.

SWPs will discharge the functions of the local authority in providing adult social care services and be responsible for providing the support to people receiving services from the SWP to achieve better experiences and better outcomes. They will also be responsible for undertaking delegated social work functions, managing day-to-day support, co-ordinating and monitoring service provision, and of course this will differ between the pilot sites. The local authority will keep its strategic and corporate responsibilities and will manage the contract and partnership with the SWP. I will speak a little later about concerns that noble Lords may have about possible risks associated with the delegation of these functions.

The SWP pilots will give local authorities a unique opportunity to test the potential benefits of various models and to adopt innovative approaches to delivering services for adults and their carers. The Department of Health is providing funding in the region of £1 million to help the pilots get up and running and to provide initial support. The pilots are an opportunity to test different models to see what works well and what does not, and they will be evaluated fully both during and at the end of the two-year period.

Primary legislation specifically allowed councils taking part in the Department for Education pilot programme to delegate their statutory functions in relation to looked-after children to SWPs. There is no equivalent legislation to allow the delegation of adult social care functions. However, the Deregulation and Contracting Out Act 1994 allows the making of orders allowing such delegation, and that is why we are seeking to introduce the order under discussion today.

The right to control, introduced by the previous Government in the Welfare Reform Act 2009, gives disabled adults greater choice and control over certain state support they receive to go about their daily lives. The right is based on the principle that disabled people are the experts in their own lives and they can decide what support they need and how it should be delivered. It is essentially a variant relating solely to disabled people within the general concept of personalisation.

The right is being tested in eight local authorities in England. These trailblazers, funded by the Office for Disability Issues, will evaluate the best ways to implement the right and will be used to inform decisions about whether and how to roll out the right more widely. Disabled people accessing the right to control will have a right to be told how much money they are eligible to receive for their support. They will be able to choose, in consultation with the public authority delivering the funding stream, how that money is used to meet agreed outcomes. They will be able to choose different degrees of control over their support.

One local authority has asked us whether it could test the delegation of its statutory duty to review social care assessments to third parties such as user-led organisations. As part of their vision for adult social care, the Government have stated their expectation that by April 2013 councils will provide personal budgets for everyone eligible for ongoing social care, preferably as a direct payment. Evidence shows that people who have their circumstances reviewed by fellow service users under appropriate supervision are far more likely to have their care and support needs met to their satisfaction and to request direct payment of their personal budgets to enable them to make their own support arrangements. We were therefore happy to agree to the request and the order allows delegation of the assessment functions under Section 47 of the NHS and Community Care Act 1990, which is also available to the councils piloting SWPs.

I said earlier that I would address concerns that noble Lords might have about the powers provided by the order. I fully understand how the delegation of council functions to outside bodies might raise concerns about potential risks to service users. It is always a balancing act when people are given the freedom to try new ways of doing things with the aim of improving other people’s quality of life. On the one hand, might service users be exposed to unnecessary risks, while on the other, might they not benefit from being able to make more decisions for themselves? Functions in social work practices have to be carried out by or under the supervision of a registered social worker or, in the case of right to control, by a person with requisite competencies or qualifications. I should like to assure noble Lords that accountability for the care delivered to vulnerable people will not change. Each local authority will retain overall responsibility for the services delivered by the SWP it contracts to, just as it does in relation to other local services. In this respect, the contract between the local authority and the SWP will be critical. We expect councils to monitor closely the outcomes of the practices, identifying issues early and providing support, while allowing them the scope to innovate and make decisions about the best packages of support and services for their population. Any potential risks will, of course, be reflected in any recommendations coming out of the separate evaluations.

In conclusion, we see this order as an important marker of progress in the developing world of personalisation. On the back of persistent requests from within the sector for greater freedom of choice and control for both staff and service users, this order has the support of councils and their representatives, as well as service users and their carers. It will enable the release of new partnerships and new ways of working to the benefit of individuals and their communities as a whole. I commend the order to the House.

[Baroness Thornton]

My Lords, I thank the Minister for introducing the order and explaining its purpose so well. It is one of those orders the name of which belies its importance and its comprehensibility. As the Minister explained, the order is similar to one concerning children’s services from some years ago. Its purpose is designed to pilot flexibility at local authority level and test innovative approaches to delivering services to adults and their carers. As it is designed to foster new ways of delivering care on the ground with the caring and cared-for—in other words, user-led services—we would all agree that it is a good thing.

The meat of the order is in Article 3(2). Most of my questions centre on the practical details of delivery and how to ensure the safety of the adults concerned. The Minister has addressed some of those already. The noble Earl said that one local authority in the pilot involved the right to control. I wonder which authority that is, which seven authorities have been chosen and how they were chosen.

I am interested in the right to control. I should be grateful if the Minister could explain in more detail what the interface between the trailblazers funded by the ODI is. What benefits could there be to using those powers with the right to control, which is being explained in this order? I am not quite clear on how those would work. How will continued support and resources for co-production with disabled service users—an essential component of successful delivery of right to control—be maintained if there is a marriage between the two regimes?

How will the local authority authorise the third party to undertake social services functions? What criteria will they use, given that no guidance is to be made available with this order? Perhaps the Minister could paint us a picture or give us an example of that.

I should be grateful if the Minister could untangle the approved provider and independent mental capacity advocate by explaining who will be doing what under this proposed regime. Given that social work is regulated, as the Minister explained, can he confirm that that same framework will apply under this order? Can he confirm who—I assume it will be the local authority—will approve the individuals, businesses, charities and social enterprises that participate to ensure that their practice is of the highest standard when they deal with this most vulnerable sector of the community? If things are not working out properly for the person in receipt of care under this order, who would they go to and how would they do that?

Finally, if the person who is undertaking the functions under this order is not a registered social worker, what check will there be on their qualifications to carry out the functions required? I should be grateful if the Minister could explain who is undertaking the monitoring and reporting, and how long it will take. What does the Minister envisage the next steps would then be?

19:45

[Lord Beecham]

My Lords, in 51 years in active politics, I have never before spoken in support of the SWP. This, however, is a different SWP, and I am happy to support the initiative, which, as the Minister has rightly said, follows an equivalent process in children’s services. However, there are one or two questions that I should like to ask.

First, I assume that it will be open to council health and adult services scrutiny committees, if they wish, to look into the operation of the scheme in their individual authorities. That would be a helpful addition to the process. Secondly, it would also be helpful to be assured that the terms and conditions of those to whom this work will be contracted in adult care services will be comparable to those in current adult services departments. One does not want to see—as has sometimes happened, for example, in my own authority—the contracting out of domiciliary care services even to voluntary sector organisations that pay barely above the minimum wage. That is compared to somewhat above it, although not vastly above it, at the moment.

Thirdly, in respect of the possible formation of new bodies by local authority employees, a matter on which the Minister touched, there might be problems with the European Union procurement and competition laws. We have touched on this from time to time, and will no doubt revert to it in the event that a Bill dealing with the National Health Service comes to this House in due course. I assume that, for the purposes of these experiments, it is perhaps unnecessary to worry too much about that, but is it a factor that might have to be taken into account later?

In relation to the right to control, again, this is a sensible way to proceed. This is a matter not only for the individual and the organisation that helps him but also, I suspect, for the local authority in helping people navigate the various providers and alternative courses of action. For that matter, they must also ensure that sufficient information is available to provide value for money for the applicant. Would it be intended to extend this experiment to provision by the health service for disabled people, either from GP practices or trusts? Presumably at the moment some functions are provided by such statutory organisations as well as by the local authority. If it is not intended to bring that in at this stage, is it something that could be looked at, maybe within the trailblazers working with their local health partners, to see whether this right to control might be extended?

I am reassured to hear that monitoring will take place for individual projects but the document says:

“The Trailblazers … will evaluate the best ways to implement the Right”.

I am not sure whether that means a collective view will be taken by the trailblazers or individual trailblazers will report. In either event, who will decide, and with whom, how matters are taken forward? For example, is it the department’s intention to consult patient groups or groups representing the people affected? I assume that that is probably the case but it would be as well to have it spelt out.

Finally, we should bear in mind what currently worries so many people about Southern Cross and reflect on the difficulties that arose as a result of local authorities effectively being driven out of the provision of residential care for the elderly in the 1980s and 1990s when they became heavily dependent on largely private sector providers. I emphasise the need, whatever happens, in a mixed economy of care, which most of us support, for a local authority role to remain in provision. It is worrying that there is now little direct provision of residential care by local authorities. That leaves not just the system but, of more concern, the individuals who are in care and being looked after vulnerable to the pressures of the market. I am sure that the Minister would not wish to see problems of that kind arising so it would be helpful to be given encouragement that local authorities, in conjunction with other providers, will be able to remain on the field, as it were. As I understand it, at the moment it is not possible for people to use direct payments to procure services from their local authority. Perhaps that could be looked at in the context of these experiments as matters go forward.

[Lord Lee of Trafford]

My Lords, these Benches are happy to support this pilot. However, I wish to ask my noble friend one or two questions. First, will the resources currently spent by local authorities in assessing social care needs and arranging care be passed on in their entirety to the organisations to which this duty is being contracted out? If so, for how long will this contractual arrangement last? Who is conducting the independent review of the pilots and will the findings be made available to the House?

[Baroness Wall of New Barnet]

My Lords, I wish to pursue a matter that has already been discussed and emphasise a couple of concerns that have been raised, which I share. My noble friend referred to the treatment offered by a private consortium being threatened by the financial situation, as has just occurred. If we allow the contracting out to occur—I do not disagree with that—how can we ensure that that does not happen and that the treatment is safeguarded? A couple of noble Lords have asked how the assessment and monitoring will take place. As my noble friend Lord Beecham said, it seems that the trailblazers will also monitor the provision. That might be a bit dubious as their judgment will obviously be biased by their experiences. My noble friend Lady Thornton asked who these trailblazing local authorities are. I should be interested to know that, too.

[Earl Howe]

My Lords, I am very grateful to noble Lords who have spoken, particularly to the noble Baroness, Lady Thornton, for her broad welcome of the order. A great number of questions have been asked. I shall probably not be able to answer them all but I shall be happy to write to noble Lords with the detailed answers. However, I will attempt to cover as much ground as I can.

The right to control trailblazer that has requested this facility is Essex County Council. The social work practice sites are Birmingham City Council, the London Borough of Lambeth, Stoke-on-Trent City Council, North East Lincolnshire Care Trust, Shropshire County Council, Suffolk County Council and Surrey County Council.

I was asked how the SWP pilots would be put in place. The local authority will support the set-up of the SWP and the transition of people to the SWP. Once in place, the SWP will use its income under the contract with the local authority to provide services and improve the experience and outcomes of people in the SWP. As I said, the local authority will then manage the contract, monitor performance and manage the relationship as a whole. The local authority will review the contract with the SWP periodically to set new outcome targets and adjust payments. The Department of Health would expect these reviews to occur annually. In answer to my noble friend Lord Lee as to who will conduct the eventual evaluation, the workforce unit at King’s College, London, will do that. The final report will be an independent evaluation and will be published after the two-year period.

Although the local authority will remain liable for the performance of functions undertaken by the SWP, the authority will be able to sue for any breach of contract. It will work closely with the local authority and each local authority should decide what decisions it wishes the SWP to refer to it for agreement, so everything hinges on the contract. How will the outcomes of the SWP be managed? The local authority needs to maintain a close relationship with the SWP, as I have said, but it also needs to allow the SWP scope to innovate and make decisions about the best packages of support and services for the people involved—the service users—and how to provide these, so there is a delicate balance to be struck here. The department would expect the local authority to monitor outcomes, identify issues early and provide support, while allowing the SWP sufficient autonomy to decide how best to meet the needs of the people with whom it works.

The transfer process will be managed between each local authority and SWP. Where transfers take place, it is for the local authority and SWP to agree as part of their contract clear and transparent criteria for deciding who should transfer. It would be for local authorities to decide where social workers could be most effectively deployed. Ideally, SWPs will provide out-of-hours support directly to ensure continuity of services, but if the SWP is small, and particularly while it is getting started, it could choose to purchase out-of-hours support from the local authority.

The noble Baroness, Lady Thornton, asked how these contracts will operate if there is no guidance. I hope that what I have already said about the importance of the contract has answered that. The contract that each local authority has with an SWP will specify the scope and feasibility of operation of each SWP.

My noble friend Lord Lee asked whether the terms and conditions being contracted out are comparable to current conditions. That would depend on the individual SWP and the individual local authority. There will be flexibility here. We are encouraging diversity so that we can find out from different models what works best.

The noble Baroness, Lady Thornton, asked how the SWP would link with the approved provider for independent mental capacity advocates. The SWP would have access to whatever independent mental capacity advocate services exist locally. I think that there will be no bar to that. She also referred to the very important issue of safeguarding and how that would be ensured. Any body that is carrying out regulated activities in adult social care must be registered with the CQC. We are working with the seven councils to establish which sites are carrying out regulated activities. It is likely that most will need to be registered with the CQC, but the pilots vary greatly. They may therefore be subject to different registration requirements. Ultimately, it is the responsibility of councils to ensure that SWPs, if applicable, are registered individually with the CQC. Organisations registered with the CQC are required by regulations to carry out CRB checks on staff who have contact with patients or service users. Keeping patients and service users safe involves providing training, regular supervision and development and feedback from patients, service users and relatives. It will be for the councils and the SWPs to ensure that CRB checks are carried out as appropriate. The noble Lord, Lord Beecham, asked whether the overview and scrutiny committees would have a role here. I see every reason why they should take an interest in what is happening. No doubt the message will go out that they should be encouraged to pay particular attention to these pilots.

The noble Baroness, Lady Wall, asked how we can ensure that SWPs do not go down the same path as providers such as Southern Cross. We do not, of course, yet know the final models of the SWP pilots and whether there is likely to be much, if any, private sector involvement. Local authorities can decide what they put in their contracts with the SWP pilots to ensure that those risks are mitigated.

Disabled people taking part in the right to control trailblazers will have a legal right to be told how much support they are eligible to receive, and to decide and agree with the public body the outcomes they want to achieve, based on the objectives of the funding streams they access. They will have a right to choice and control over the support they receive, and be able to choose how they receive the support.

Some aspects of the right to control process, such as the extent to which administrative processes are aligned, will be subject to some flexibility and may be different in each trailblazer. However, the broad framework of how the right to control will be tested is already agreed. Disabled people accessing the right to control will be told how much money they are eligible to receive for their support. They will be able to choose, in consultation with the public authority delivering the funding stream, how that money is used to meet agreed outcomes. I should say for the information of noble Lords that the seven trailblazing local authorities are Barnsley Metropolitan Borough Council, Sheffield City Council, Essex County Council, Greater Manchester, Leicester City Council, the London Borough of Barnet, the London Borough of Newham and Surrey County Council.

I was asked whether the trailblazers will be consulting with service users. The answer is yes—the evaluation will include consultation with service users.

A number of other issues were raised in the debate and I shall cover just one before I conclude. The noble Lord, Lord Beecham, asked whether direct payments were prohibited from buying council services in this context. There are no plans to change current arrangements and, indeed, the Law Commission, in its recent report on social care, did not recommend a change in this respect.

Once again, I am grateful to noble Lords for their pertinent questions and comments. As I mentioned at the beginning, I shall endeavour to respond to those questions that I have not covered in my reply.

Motion agreed.

20:03

Sitting suspended.

European Union Bill

Monday 13th June 2011 Lords Chamber

Report (2nd day) (Continued)

20:30

Schedule 1 : Treaty provisions where amendment removing need for unanimity, consensus or common accord would attract referendum

Amendment 22A

Moved by

[Lord Davies of Stamford]

22A: Schedule 1, page 14, leave out lines 32 and 33

[Lord Davies of Stamford]

My Lords, it would be possible to make a well founded and persuasive argument to get rid of all the provisions of Schedule 1. At this point, however, I will focus on one provision where there is an absolutely demonstrable, concrete, national, economic and industrial issue at stake. I hope I shall persuade the House, and indeed the Government, that there is more than good reason to think again about this element of Schedule 1. The House will be well aware that military equipment is one of the rare exceptions and exemptions from the single market. That is achieved by Article 346(1)(b) of the treaty, which states:

“any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes”.

That is an explicitly protectionist measure that allows individual member states to protect their own markets, as in generations gone by before the single market, or Common Market, were ever conceived of. It is an anomaly in what is otherwise a free market, and it is very difficult for some member states to give this up because they are protecting industries with considerable lobbying potential in their own countries.

I have no financial interest to declare in the British defence industry. When I became Defence Procurement Minister, I made sure that I had no shares in defence industries and that has remained the case. I have not developed any relationships with the defence industry since I left government. Indeed, it would have been impossible under the rules for me to have done so in the last year. I acknowledge an admiration for the British defence industry, which I was able in the course of my job to get to know extremely well. The technologies that it has developed over the years, many of which you cannot even talk about the existence of let alone describe the nature of, are extraordinary. We really are at the front line in this area of technology. It is not surprising, and a demonstrable fact, that the British defence industry is by far and away the largest in turnover in the European Union. In other words, we are the losers through this protectionism.

The EU market for defence procurement is roughly €70 billion, say £55 billion, or something of that order. Our own element in that is about £15 billion—say €18 billion—so we are talking about a potential market of some €50 billion to €55 billion. The French, who are very protectionist and make considerable use of Article 346, have about the same spend. The Germans and the Italians have rather less and are also very protectionist. Everyone else in the EU adds up to that sum. There is at stake a market for something like €55 billion, or £45 billion to £50 billion. Of its own nature and operating against the largest most productive sector in the EU, this protectionism deprives us of the opportunities for sales and therefore for employment and for investment, not least for sharing the considerable overheads of R&D with the Ministry of Defence, which is very much in the interests of this country—the interests of defence, the taxpayer and industry.

It might be thought—indeed, I hope it would be—that any rational Government, and I am sure that the coalition Government are in no sense irrational, would want to seize any opportunity that could be identified to deal with that anomaly in the single market. We have been pioneers in, first, opening the single market initiative under Margaret Thatcher and Lord Cockfield and, subsequently, in pushing through the opening of financial services, intellectual property and many other areas in which there was hesitation on the part of our partners in moving forward to implement the principles of the single market.

One would assume that it would be common ground between all the major political parties, in addressing the electorate in our own ways and in addressing the economic interests of the nation, to want to get rid of the protectionist barriers that face that particularly important industry. I think it would also be common ground to agree that the defence industry, perhaps after pharmaceuticals and biochemistry, is the area of manufacturing in which we have the greatest competitive technological advantages in the world market. It is very important, and we ought to be able to come, more or less, to a consensus on what should be done about it.

How do you generate an opportunity to get rid of a form of protectionism when certain member states find themselves subject to considerable pressures and lobbies and find it difficult to move? It is difficult for some of them to vote openly, clearly and decisively for the abolition of Article 346. As I said in Committee, and as all of us with experience of negotiations in any context will know, often the best way to solve a substantive problem or make progress on a substantive issue, especially in a complex negotiation where people have strong and differing interests at the outset, is by a procedural route. I gave the example of setting up a committee to solve the problem rather than taking a decision around the board table, the Council of Ministers, or whatever. The qualified majority voting system is undoubtedly a very useful weapon that has proved its worth over the past generation in achieving substantive progress through procedural routes.

I can see one or two noble Lords looking for the text of the provision in Schedule 1, so let me say that it is on page 14, the penultimate element in Schedule 1, and states:

“Article 346(2) (changes to list of military products exempt from internal market provisions)”.

The provision does exactly the opposite of what I suggest is the obvious thing to be done in the national interest. It makes it impossible for us to agree to, let alone to propose, QMV to decide the future of that derogation from the single market without a referendum. We are putting a ball around our own necks, we are shooting ourselves in the foot, with that provision. It makes no sense at all. Where we have an interest in liberalising trade—I think I would carry a number of people on the opposite side with me in saying that we surely do—and where that means might be the only way to make progress in the area, as has proved to be the case in other similarly difficult areas in the past, we are preventing ourselves from doing so.

We all know that if a British Minister is not allowed to agree and says, “Well, we've got to have a referendum beforehand”, that in effect denies us the chance to seize the opportunity rapidly. It might need to be seized there and then, because if it is not you have lost it. You have your interlocutors in a favourable frame of mind in a particular situation when they agree to resolve the question through QMV. That element in Schedule 1 is entirely perverse. It goes in exactly the opposite direction from that in which any responsible Government would want to go. It is contrary to rationality and good sense; it is directly contrary to the national interest.

The Government have been very statesmanlike in saying in the course of our debates that they will listen to new arguments, that their minds are not closed. Both noble Lords, Lord Wallace and Lord Howell, have said that in answer to me and to other noble Lords. I am sure that that is true, because they are both sophisticated men of the world who know that one always needs to look carefully at these things. When you have a schedule of 56 items, it is almost certain that something somewhere will have crept through when it should not really be there, and it needs to be looked at again.

I claim no monopoly of wisdom in this matter, but I raise it because, as I said, I have a background in this subject and I was struck very forcibly on reading the text of the Bill. I hope that on the basis of the considerations that I have just set out there will be scope to reconsider this important matter. It is important for a major British industry which I think we all wish to support in every way we can. I beg to move.

[Baroness Nicholson of Winterbourne]

In moving his amendment, the noble Lord has not explained to my satisfaction, or perhaps to the satisfaction of others, why the removal of these two lines from the text of the Bill, which would result in QMV rather than a veto on the protectionism of military products, would assist the development of the free market, as he and I wish to see. From my experience in Brussels, sometimes sitting in the chair on common security and defence policy debates, it was very clear that some member states—particularly some of the smaller and newer ones—wished to pursue protectionism to an extent that would have been extraordinarily unhelpful both to the defence of the European Union and to the wider defence policies of countries such as the United Kingdom. In other words, we need the veto and I cannot understand why the noble Lord wishes to remove it.

[Lord Davies of Stamford]

Perhaps I may try to help the noble Baroness. Of course I did not suggest that adopting QMV in this case would guarantee that we would solve the problem. I said that the problem had not been solved until now but an opportunity might arise to solve it via QMV. Many problems that were solved by QMV did not prove to be solvable when each individual member state was put on the spot with a requirement that it make an explicit and public declaration and hold a public vote in favour of a change, particularly when the change was to remove protectionist support for a domestic industry. I am saying simply that it would be quite perverse to deny ourselves the opportunity of using QMV as an instrument. Of course, there is no guarantee that it would work, but that is no reason for not trying it or keeping it open as an instrument that we might need.

[Baroness Nicholson of Winterbourne]

My point was purely that from my experience and that of others in Brussels, a number of member states wish to keep protectionism. As the noble Lord has already clearly indicated, it is in Britain’s interests to have an open system, and in the case of the defence of the European Union and beyond it is in all our interests to have an open system. I cannot see how QMV will assist an open system when Britain may need a veto.

Since the noble Lord was involved in the defence industry at an earlier stage in his political career, the European Union has widened immensely. Some of the newest member states have had a significant interest in keeping protectionism moving in the defence industry, with some of them having very large interests in it. The contracts are massive; the potential for dealings that are less than transparent is huge, as some of the biggest contracts on the globe are before individual member states; and one of the great strengths of the potential of the EU common security and defence policy is an open system of military equipment, which would stop the protectionism to which the noble Lord rightly refers. I have failed to be convinced so far by what the noble Lord has said about the loss of the veto and the introduction of QMV.

[Lord Hannay of Chiswick]

I think that the noble Baroness has the wrong end of the stick. I do not see how on earth Britain keeping a veto on a matter where there is no liberalisation will help us to achieve liberalisation. What are we going to veto—protectionist moves by other member states? This is absurd; it is another world. To do what the noble Lord, Lord Davies, suggests does not involve a decision to move to QMV. The noble Baroness implies that if we took the two lines out of the Bill, we would automatically and at that moment accept QMV. We are not doing that; we are simply making it possible, at a putative future moment and if we felt that it was to our advantage, to do so by means of simple legislation in Parliament without a referendum.

20:45

[Baroness Nicholson of Winterbourne]

I accept that the noble Lord, Lord Hannay, wishes to exemplify the argument that the noble Lord, Lord Davies of Stamford, has already put forward—in which case it must be rather weak. I cannot see why bringing in QMV is a better option than the veto, which I prefer. I cannot see how the proposal will strengthen the hand of the United Kingdom. Although I have a long and personal friendship—and indeed a good neighbourliness—with the noble Lord, Lord Davies of Stamford, and a high regard for his massive intellect and his knowledge of the defence industry, none the less he has failed to convince me.

[Lord Hamilton of Epsom]

Does my noble friend not feel that if the argument of the noble Lord, Lord Davies of Stamford, is so compelling, he would probably win it in a referendum?

[Baroness Nicholson of Winterbourne]

I must admit that this is a very compelling argument from this side of the House. I am sure that the noble Lords, Lord Davies and Lord Hannay, will attempt to knock it down, but I suspect that they will not succeed.

[Lord Triesman]

My Lords, it may dismay the House, but I will pick up from the point where this argument has arrived. Like the noble Lord, Lord Hannay, when I looked at the proposal put forward by my noble friend Lord Davies of Stamford, it did not seem to me that the consequence of it was that there would be an immediate move without any further ado to qualified majority voting. Instead, there would be a very substantial process before anybody got there, even if they had the desire to get there. It seemed that whatever difficulties and barriers were raised by those who thought it best to have a closed-market system rather than an open-market system in the defence industry, it would be harder in the middle and long term for them to sustain the restriction on free markets were they to be deprived of the veto as the automatic response. In short, over a period of time—I am sure that it would be over a period of time if it happened at all—it might be possible through a different mechanism to change from this restriction to a free-market solution.

It may be thought curious that from this opposition Bench I argue trenchantly for free markets in Europe. However, it does not seem odd to me; I have held this view consistently for a very long time. Like my noble friend Lord Davies, it appears to me that when we take a serious and hard view of the areas in our manufacturing industry where we might be very successful, among them are the products of our defence industries. They are very fine industries; they are hallmarked by exceptional research and development; they are among the industries that co-operate most successfully and most frequently with the best of our university departments that are working in the same areas of research and development; they manage to do it on a large scale; and they manage to create extremely valuable intellectual properties of a kind that we cannot always achieve in many other parts of our manufacturing life.

As a former Minister responsible for intellectual property, I frequently came at this from a different ministerial portfolio from that of my noble friend Lord Davies, but none the less I was frequently full of admiration for the high quality of patents that were created in that industry and very well aware of the value that they could inject into free-market circumstances. It is very easy to see why, even when there is a concrete commercial rationale for this country, there will be others who will seek protectionism because they are fearful that their industries cannot compete in industries of this kind, particularly where those industries are so driven by outstanding research and development and by their links with the university research world. It is a tough environment to compete in—that is for sure—but that does not seem to me to be a reason to protect those kinds of industries in other countries any more than somebody could argue that we should simply protect them in our country from any difficult winds and buffeting of international competition in a fully commercial sense.

I can also understand the argument that some of those countries will be looking at industries—as we have in defence in the past—as being of considerable strategic importance and we have been cautious about whether that strategic importance should be so lightly set aside. Westland helicopters and so on have been examples of it. However, broadly speaking, we have been at our best as a country when we have been prepared in free markets to compete where we can and to achieve results on the basis of the excellence of what some of our manufacturing industries can do with freedom to operate properly in markets.

In summary, I return to the point that the noble Lord, Lord Davies, has made, that the noble Lord, Lord Hannay, was making and that I made at the beginning of my remarks. Nothing in this proposal moves us with any suddenness onto a different trajectory. I am loath to believe that the House and the general sentiment in this House would be against the possibility of the full operation of free markets and the benefit to United Kingdom industry of competition in a free market, especially where we believe that we can succeed way beyond many of our competitors in that market. It is a very strong argument and I hope that it will appeal to any free marketer looking at the benefits of the European Union in free market terms, which, many noble Lords have urged, were among the founding reasons that they could see for the rationale of the EU in the first place. I support this amendment and I believe that, on free market arguments alone, it should succeed.

[Lord Howell of Guildford]

My Lords, this amendment seeks to remove Article 346(2) of the Treaty on the Functioning of the European Union from Schedule 1 to the Bill. The article has appeared verbatim in every European treaty since 1957, so it is not new on the scene. At present, unanimity is required for changes made to the list of military products for which single market provisions do not apply. Under the Bill, a proposal to move to QMV would require approval by Act and by referendum. The noble Lord, Lord Hannay, and others are correct that it does not immediately mean that the veto is removed. It merely means that the move would require approval by Act and by referendum. The amendment of the noble Lord, Lord Davies, would remove that requirement.

The noble Lord, Lord Davies, spoke at length on this issue during day six in Committee, and he has spoken again now. Of course, he has considerable experience as Minister for Defence Equipment and Support, and in my view he has made the case extremely well that there could be some benefits to the UK from a move to QMV in this area. Having conceded that point, I hope that he and other noble Lords will excuse me if I now at least set out the other side of the argument, particularly as the noble Lord, Lord Davies, has just said that there is no guarantee that his proposal would work. Why is that so? It is because a move to QMV would also come at considerable cost to the UK, which a responsible Government have to consider. We must remember that this article is sensitive, as it applies to national security and defence. It is one of the wires that feeds directly into the red lines that all parties in the United Kingdom and other member states have always maintained during treaty change negotiations. Obviously that applies to previous Governments as well as this one.

The noble Lord, Lord Davies, said with some passion that Article 346 of the TFEU is a protectionist measure and he portrayed the Government as,

“using a referendum to block the removal of a derogation from the single market legislation”.—[Official Report, 17/5/11; col. 1364.]

The noble Lord, Lord Triesman, has spoken in the same vein just now. I have to point out that the UK’s veto could be used also to block any proposals to extend the protectionist measures with which the noble Lord understandably takes issue. A qualified majority could push through decisions which would favour greater national discretion and protection. The list, which has been unchanged—

[Lord Kerr of Kinlochard]

I thank the Minister for letting me intervene. The point that he is making is absolutely right—it could work either way—but the trouble is that the list is very long now. The UK interest is to have the list reduced. The list is very long because particular countries have particular little defence industries which they are keen to protect. The chances of it being possible to reduce the list are therefore low but would be enhanced if there were qualified majority voting on the composition of the list. We are starting from a bad place. It is unlikely to get worse; it is difficult to get it better; but you cannot get it better without qualified majority voting.

[Lord Howell of Guildford]

It is unlikely to be shortened, but I do not think that any of us can be sure. Protectionist pressures operate all the time, particularly in the defence industries. as the noble Lord, Lord Davies, knows better than all of us, and will continue to do so. The noble Lord said that the position is unlikely to get worse, but I think that we have to guard against that. A qualified majority could push through decisions which favoured greater national discretion and those pressures exist. The list has been unchanged since 1958 and can be expanded as well as contracted. I have before me the list as it is at present; it is a long list. It could certainly be expanded, so keeping the veto is as much, if not more than, a guard against protectionism as a barrier to liberalism, much as one believes, as I believe very strongly, in liberal free markets. The noble Lord’s zest for liberalism, which is certainly equalled by mine, could end up the opposite way round.

[Lord Kerr of Kinlochard]

The Minister is now making a general argument against the Single European Act and against having qualified majority voting on any area of the single market because it might go the wrong way and in a protectionist direction. All history suggests that the Single European Act was a good bargain. On the whole, it got us a more open market. It was a good, Conservative, market-driven measure which worked pretty well. The exception of defence goods is there because it was there before we joined the European Union. We have to my knowledge always argued against applying single market disciplines, which we believe in, to all sectors of the economy. That is the argument for the amendment.

[Lord Howell of Guildford]

I am not a Latin scholar, but I have a feeling that there is a Latin phrase to describe what the noble Lord is doing, which is projecting from a particular area which has its particular features and qualities, with which we are all quite familiar, on to the general case for free markets and expansion of trade, which we all seek, as we have done throughout the history of our membership of the European Union and will continue to do. I suppose that the noble Lord’s proposition is that the interweaving of political pressures and the defence and security industries operates just the same as everything else. I do not believe that it does; I just have to disagree with him. In this case, we are dealing with different pressures which are evident to those who examine these patterns. There are dangers as well as gains.

Retaining unanimity does not prevent product list changes, but it ensures that we can oppose any decisions that seek to install greater, inappropriate levels of protectionism for products—weapons, equipment, trucks, APVs and all the rest—that we feel should not be exempt from single market provisions. This allows us to take decisions on the basis of what would be best for the effectiveness of the single market and our own defence industry. Unanimity enables us to oppose removal of any products in the list where that would have unwelcome consequences for the UK and might prevent us from acting quickly to secure the right equipment for our troops in times of urgent need. I reassure noble Lords that, despite the doubts that have been expressed, the Government fully support the goal of better value for money through collective arrangements for identifying gaps and procuring equipment, pooling our multinational capabilities and forces wherever we can.

21:00

However, in the support of our Armed Forces and their capabilities, any initiative that had the potential to reduce our ability to protect our operational advantages and freedom of action in protecting the essential interests of security will be a matter for serious concern. We must ensure we can sustain our defence industrial capacity in sectors deemed essential to our national security interests, such as military equipment for counterterrorism or cryptographic equipment. Retention of the veto provides this safeguard.

I am not arguing that the noble Lord, Lord Davies of Stamford, who speaks with passion on these matters, is wrong in the general point he has made so eloquently. I am saying that there are arguments on both sides and that the potential consequences could have a serious impact. Given the national security implications, it is right that any move to qualified majority voting be subjected to the highest level of scrutiny. That is not to say that it will not be achieved in part but it must be subjected to the highest level of scrutiny. If there were ever a proposal to remove a veto in this area and if a future Government felt inclined to agree, it should have the support of Parliament and the people before being allowed to proceed.

The chance of a future Government agreeing to give up this veto in practice is vanishingly small. The chances of this being proposed as a separate one-off move are zero. A remote possibility is that it could be put forward as part of a package of transfers of competence and powers to the EU, however undesirable it seems to us at present that it should be so. That would be the sort of event where people rightly want and expect their say. If denied their say people would feel that, once again, powers were being transferred without adequate public accountability. For those reasons, although I salute the feeling and validity of half of the noble Lord’s argument, I hope that he respects my half of the argument and I ask him to consider what he has said and withdraw his amendment.

[Lord Davies of Stamford]

My Lords, I am deeply grateful for the consideration which the House has given to my amendment and for the warm and supportive words of the noble Lords, Lord Hannay and Lord Triesman, and the noble Lord, Lord Kerr, who seized on an argument that I was about to deploy myself in response to the noble Lord, Lord Howell. I will address the points of the noble Lord, Lord Howell, in a moment and bring my remarks to a conclusion by addressing the Government’s response. I am grateful too for the contribution of the noble Baroness, Lady Nicholson. Frankly, I did not understand her argument that somehow possession of veto was going to help us in any circumstance in advancing the cause of reform of Article 346. I shall correct her on a practical point: she says that since I was involved with defence there have been a lot of changes in the world, including the end of the Cold War. I think she is going back to the time when I was a defence spokesman in the Conservative Party. My experience of defence in government ended 13 months ago, in May last year.

I always enjoy the contribution of the noble Lord, Lord Hamilton, to these debates. He deployed an argument today which I have heard him deploy in other contexts. It is, “If it is such a good idea, why not have a referendum and you will win it? The public will support you”. I am not sitting close enough to see whether he has a twinkle in his eye when he says it but I think he has. He knows as well as I do that there is no prospect of having a referendum on a subject as esoteric as Article 346. If we have a serious opportunity to change it, it is no use saying to our partners, “For once we have got the chemistry right—there is an opportunity to go for QMV on this, and then maybe there will be a consensus and we’ll get some reform. But sorry, chaps, you’ve got to wait for two, three, four, five or six years, when it is particularly convenient for us to have a referendum with a whole package of measures”. Even then, as I have said before in these debates, it would be quite unsatisfactory for the British electorate to do their homework on a whole series of rather technical matters. It is just not practical politics. The noble Lord, Lord Hamilton, knows more about politics than I do; he has been involved in politics longer than I have, and I am quite certain that he had his tongue in his cheek when he said those things.

I move to the points made by the noble Lord, Lord Howell, on behalf of the Government. He started off by saying that Article 346 had been in the treaties in one form or another—of course, it had different numbers—since 1957. What is new is the idea of having a referendum on a change. That is brand new. It has not come in yet—it is in the Bill before us. That is what I want to change. It is not an argument against changing this new measure that the instrument that we might want to use to reform Article 346 is now under threat from a new provision in this Bill, so it would be sensible for us to remove that threat. I do not think that there is a logical argument there against my proposal.

Like the noble Lord, Lord Kerr, I really wondered how serious the noble Lord, Lord Howell, was when he said that it may be in our interests to prevent protectionism to have a veto, because then we could stop our partners from being even worse protectionists than they were before. As the noble Lord, Lord Kerr, pointed out, in that case the noble Lord, Lord Howell, would have logically opposed the whole single market programme. It would not have made any sense at all. So the noble Baroness, Lady Thatcher, and Lord Cockfield were actually doing something very dangerous in threatening greater protectionism by agreeing to have qualified majority voting in the Single European Act.

The noble Lord, Lord Howell, tried to justify that approach with the distinctly implausible suggestion that different rules applied to defence. I do not think that different rules applied to defence; I think that the argument is rather different from that. That is why, for two reasons, I think there might be an opportunity to achieve QMV, if only the British Government have not deprived us of that opportunity in advance, ab initio. First, there is a positive incentive on Governments to reduce the costs of their defence procurement—and protectionism, as we know, is extremely expensive. If they opened their markets they would be able to purchase more cheaply, given a measure of defence capability. When I was the Defence Procurement Minister—and I was very proud of this, because I did it for the first time—I introduced a unilateral open market in the EU. I said, “Sorry, we’re going to buy the cheapest and the best, wherever it is. We’re not going to be protectionist”. It is only when there is inequality of quality and price between the British supplier and non-British supplier that I will favour the British supplier. I made that absolutely public, and it was what I operated on. For example, I bought the 42-millimetre cannon for the Scout vehicle and potentially for the Warrior upgrade from France. Why? Because it was the best. The French were obviously delighted. There was no quid pro quo. I said to my French colleague, Laurent Collet-Billon, “You know, you and I must do something”. He said, “Of course, mon cher collègue, we will see what we can do”. But of course nothing has come through. Unless we do something about this protectionism, it will probably not.

[Lord Hamilton of Epsom]

As the noble Lord was responsible for the posting of the aircraft carrier orders, why were they not submitted to bids from all round Europe? Why were the bids all placed with British shipyards in this country?

[Lord Davies of Stamford]

As a matter of fact, I would be very proud to take credit for those particular contracts, but that contract was let before I came into my job in the MoD. However, I did manage to save that project when it was under very severe threat, in similar circumstances as last year. But unfortunately the new Government decided to throw in the project and deny us carrier strike capabilities for at least the next 10 years—disastrously so. Let me answer the question hypothetically, therefore, and say what I would have done had I been there at the time. Undoubtedly, I would have been delighted to have had those carriers procured on the best bid from within the European Union basis, as long as it was reciprocal and we had some chance of getting an order for a French frigate from a British shipyard. It has to be reciprocal. That was a particularly big order, and the protectionism the French afford to their shipyard, the Chantiers de l’Atlantique, is particularly great, so there would have been a situation in which competition would have been completely false.

I would have been delighted to have had the opportunity to procure on a common EU basis because that would have enabled us to bring the costs down further and it would have meant that our yards, over time, would have done very well. If you just look at two—the Type 45 destroyer and our submarine-building capability in Barrow—I am convinced that they are the best in the world, including the United States, when it comes to building very sophisticated warships. We would have done very well with that solution.

As I said, there are two reasons why there is a chance of Article 346 being reformed. It is particularly unfortunate, therefore, that we should be about to make it much more difficult for that to be achieved through QMV, if that seems the most likely way forward, which I think it is. The second argument is that, unlike us, our continental partners always have a sense of guilt in acting in a non-communautaire fashion. They are signed up to the principle of the single market. They find it very difficult and embarrassing to argue for derogations, though of course they do so when they are under great political pressure. Therefore, it is the sort of situation when agreeing to the intermediate stage of going to a QMV decision-making process has some hope—I do not put it more strongly than that—of achieving the substantive change that we all want.

I put to the Government, in my last comment on the subject, that when you have some realistic hope of something—it does not matter whether it is 20 per cent or 50 per cent or 70 per cent or even 10 per cent—but there is no downside, logically you do it. In this case there is a real hope of moving forward. There is no possibility whatsoever of extending the list under Article 346. The list is already far too great, as somebody has already said in the debate. Nothing that could conceivably be argued to be military materiel is not currently included, and this clause has been used to cover things like trucks, notably in the case of the Italians—I do not mind embarrassing them by mentioning this now—who claimed that because they were military trucks they were military materiel. There is no chance; I am quite convinced that the European Court of Justice would rule out any further use of Article 346 because such a use would no longer be consistent with the description in the article itself.

There is no downside. I ask the Government to look at that point again. There is a potential upside through using QMV, and the stake is important. This is a major national industrial interest for one of the major British industries in which we have a worldwide capability. There is a direct benefit to us—the taxpayer—as well, because if we can expand the sales which carry the overheads, including R&D, of the British defence industry, it will mean that we can achieve given levels of military capability from that industry when we procure from them at lower cost. It will be a win-win situation if we can break through here and we would be very foolish to deny ourselves any opportunity or instrument which made it even slightly more likely that we would achieve that.

On the basis of that, you would expect me to put my amendment to a vote. However, I am conscious that we are after dinner and that the Whip has been withdrawn, so there may be an uncharacteristic result from any particular vote, and I am also anxious not to take up too much time. We have already had a very good debate. I think I have said enough and colleagues have said enough. I trust to persuade the Government to look at this again. The noble Lord, Lord Howell—I am very grateful for this—was kind in his remarks about my intervention and he said that there were strong arguments on my side, though he said there were strong arguments on the other side as well. I understand that. That indicates to me that despite what is in the Bill the Government are a little bit more open-minded, perhaps, than one might have thought at the beginning of this debate. On that basis, I beg leave to withdraw my amendment.

Amendment 22A withdrawn.

Clause 7 : Decisions requiring approval by Act

Amendment 23 not moved.

Clause 8 : Decisions under Article 352 of TFEU

Amendments 24 and 25 not moved.

Clause 9 : Approval required in connection with Title V of Part 3 of TFEU

Amendment 26 not moved.

Clause 10 : Parliamentary control of certain decisions not requiring approval by Act

Amendments 27 to 29 not moved.

Amendment 30

Moved by

[Lord Willoughby de Broke]

30: After Clause 12, insert the following new Clause—
“Repeat referendums
Where a referendum has been held in pursuance of any of section 2, 3 or 6, a further referendum on the same treaty or decision, or treaties or decisions, cannot be held until a period of three years has expired.”

21:15

[Lord Willoughby de Broke]

My Lords, I brought a similar amendment to this in Committee which did not find favour with the Government. That was in the name of the noble Lord, Lord Stoddart of Swindon, and my noble friend Lord Pearson of Rannoch. I listened to the arguments then that the five-year gap that we proposed was perhaps too long, so this amendment proposes simply a mandatory three-year gap between referendums. When he replied to that similar amendment on 23 May, the noble Lord, Lord Wallace, went off on a rather bizarre tangent about the European Gendarmerie Force, which I had not even mentioned in my speech. I do not know quite what that was all about. However, in reply to my amendment he went on to say:

“If the Government were defeated in a referendum, it would be tantamount to a defeat of the Government”,

and they would have to reconsider the matter. He went on to say:

“It would be unusual for the Government then to consider asking the public the same question in short order, having failed to convince them”—[Official Report, 23/5/11; col. 1623-24—]

at the time to change their minds the second time around.

The point of my amendment is that this is what has happened in the EU in the past. It is exactly what happened on the Maastricht treaty and in Ireland with the Nice treaty. It happened on the constitutional treaty. When the French and the Dutch voted that down, it was brought back under the cloak of the Lisbon treaty with a rather unsavoury démarche which allowed the then Government to pretend that it was not the same thing at all as the constitutional treaty. Yet a stinkweed by any other name still smells as foul. This constant backsliding, weaving, dodging and bobbing and ducking are what have given the European Union a bad name. Several speakers made the same point on the amendments that we discussed this afternoon: that there is a very prevalent distrust of the EU in this country, and not only in this country but throughout the European Union now.

In many of his remarks during both Committee and Report, the noble Lord, Lord Howell, has repeatedly underlined that the purpose of this Bill is to reduce the distrust of the British people in the institutions of the EU and in the way that the Government deal with EU matters and directives which have, so far, gone through without any influence by the people of this country. The amendment really should be there to reassure those people that if they vote in a referendum under this Bill, it will not be interfered with again by a Government, who may be more manipulative than this one, for at least three years. That is helpful to the Government and I hope that they will take it in that spirit. I beg to move.

[Lord Deben]

My Lords, I find this a fascinating amendment because those of us who are opposed to referenda in any case are now presented with somebody who is in favour of a referendum but does not want to have it when it is inconvenient. This is a most peculiar amendment. I think that referenda are always wrong in a parliamentary democracy and I have always stood by that. I have never changed my view from that and I am not changing it now, but if we are to have a referendum, the concept that we must not have one except in three years’ time, irrespective of what the public think, seems a most peculiar argument. To complain about the fact that in a second referendum people made a different choice seems an odd thing. After all, that was the choice the people made. I think that this is proof of why referenda are not an acceptable way forward, because the truth is that a referendum analyses what people think at a particular moment.

I became opposed to referenda at my father’s knee. I remember just after the war he was explaining to his infant son about politics. He said that he remembered the peace pledge. Eleven million people signed the peace pledge and two years later one could not find any of them. Once we got near to the war, they all disappeared. That is the problem with a referendum, because it is an irresponsible act—one is not responsible for the vote that one makes because it is secret and private. Surprisingly enough, I found a number of my constituents who voted one way in the referendum we had about remaining in the European Union and who within two or three years decided they had really voted the other way. I gave them the benefit of the doubt and felt that they had mistaken themselves, but if one is going to have a referendum, one has to have it without strings.

The noble Lord is presenting something that gives the lie to the whole referendum argument. People who want referenda want referenda because they want a particular response. That is why they want them. They want it because they think it will produce a particular answer of which they approve. When they find that there is a possibility that it might not produce that, they want rules to make sure that the public cannot have another go. I beg your Lordships’ House to accept that if we are going to have referenda, we had better have them on a fair deal and not on the basis that we restrict them in case the public possibly take a different view the second time.

[Baroness Brinton]

My Lords, I cannot really follow the points of the noble Lord, Lord Deben, on referenda. I disagree with his initial argument, but I support the principle about the people having their say, whether one agrees with it or not. I find it understandable that the noble Lord, Lord Willoughby de Broke, proposed the amendment, given the frustrations that he and his colleagues clearly feel about both the Irish and Danish referendums on treaties in the past, but it seems to me that there are two reasons to oppose the amendment.

In Committee, the Minister made the valid point that it would be very unlikely that two successive referendums would be called, not least for the important political reason that it would be likely to cost the Government of the day dear—assuming that it were the same Government—with a cynical public punishing them for so doing. Secondly, the Bill is not a crystal ball attempting to predict the future, no matter how much the noble Lord would wish it so. The Bill must allow for flexibility for a future Government and this amendment would tie their hands.

There are checks and balances within the Bill: a second referendum would require a second Act of Parliament with the detailed and appropriate scrutiny that comes with that—and that is before the Government of the day would have to start convincing the public of the need for that second referendum. There might be rare circumstances in which a second referendum were relevant—the checks and balances that I have outlined will force politicians and the public to think carefully about returning down the road of another referendum. To ban it completely for three years, or even five, as we looked at in Committee, removes that option for those circumstances which, though rare, are not impossible. There might be changes to the treaty that significantly benefited our country and other member states, which it might therefore be appropriate to consider. Or there might be a financial crisis in the eurozone—as there has been recently—in which the circumstances have so substantially changed that it might be appropriate to go back for a second referendum.

To conclude, the amendment seeks to remove the flexibility and the voice of Parliament and the people should there be a rare but necessary need to consider a second referendum.

[Lord Hamilton of Epsom]

My Lords, I very much sympathise with my noble friend Lady Brinton because it is unlikely that any Government would be brave enough to hold another referendum on the same subject when the country had made it quite clear that it did not want the measure put forward originally. However, to turn to the distaste of referenda generally expressed by my noble friend Lord Deben, presumably that distaste is slightly tempered by the referendum confirming our membership of the European Union. Let us face it, this referendum was put forward by Harold Wilson to solve a problem that he had within his own Labour party and settle the issue for good. Many people—I am one of them—voted in favour of our remaining in the European Union and it seemed to settle the issue for some time after that.

[Lord Deben]

I was opposed to that referendum, as I have always been opposed to referenda. I am absolutely consistent on that matter, whether they were favourable or unfavourable.

[Lord Hamilton of Epsom]

My noble friend prides himself on his consistency, but that decision put the issue to bed at the time. That would seem to have certain advantages that he does not acknowledge in any way.

[Lord Stoddart of Swindon]

My Lords, I supported this amendment in Committee and we had quite a good debate about it. I am not going to repeat everything that I said at that stage but I want to say a couple of things. First, I regret that the noble Lord, Lord Willoughby de Broke, has reduced the amount of time from five years to three.

Secondly, second referendums have been quite common in Europe. When Governments do not like an outcome, they are quite prepared to hold a second referendum in order to get it changed. Second referendums per se are perfectly logical and legitimate in the European Union. Surely we should not arrive at the decision that once a referendum has been held on anything there should be no second referendum. That would be quite absurd. It would bring Governments in particular into disrepute, because it is usually they who call for second referendums, if they said to the electorate, “You have voted but I’m afraid we don’t like what you have told us. We must therefore ask you to vote again, and indeed again, until you provide the right answer for the Government”.

[Lord Liddle]

My Lords, the Opposition cannot support the amendment. The reasons why many have spoken against it are very true. I agree with what the noble Baroness, Lady Brinton, had to say. I agree with the noble Lord, Lord Hamilton, that in our political culture a precise repeat referendum would be extremely unlikely. However, we should not tie our hands. As the noble Lord, Lord Deben, said, you vote under a particular set of circumstances but circumstances can change at remarkable speed. We do not need these kinds of constraints on our politics.

[Lord Wallace of Saltaire]

My Lords, this is the second time that we have examined an amendment of this nature. It did not find much sympathy around the Chamber in Committee and it has not found much more now. The amendment stipulates a lesser period of three years rather than the original five but the principle remains the same.

In Committee I set out some of the Government’s objections to an amendment of this nature and I will recapitulate some of those now. First, were the British electorate to vote no in a referendum, it is clear that the Government would have to consider their future action carefully. It would be difficult to view the result as anything other than a firm rejection of a proposal for treaty change. If the Government wanted to hold another referendum for whatever reason, under the terms of this legislation, as my noble friend Lady Brinton said, they would first need to secure parliamentary approval to do so by Act. Primary legislation would be necessary to enable the referendum, so Parliament would have to consider that request very carefully and itself be persuaded to agree, which is not necessarily a given.

Secondly, the amendment reduces flexibility, a quality that has attracted a lot of support from all Benches. We do not know what will happen in the future, and as the noble Lord, Lord Liddle, has suggested, sometimes we do know what will happen in the short term future. As noble Lords have argued on a number of occasions, and in this case following the rejection of a proposal by the British people in a referendum, circumstances could change. There are “events, dear boy” and unexpected crises whether they be security crises, financial collapse, economic recession or even crises of energy supply or surges in immigration. All might conceivably transform the situation. So there could be previously unanticipated grounds for the Government and Parliament to believe that the treaty change on the table was in the national interest of this country. As a consequence, if both the Government and Parliament were to decide that there were good reasons for putting a question to the British people in a further referendum, Parliament should be able to do so without having to disapply an inflexible provision.

I have to say to the noble Lord that I would be surprised if any Government in the future would wish to hold a referendum in the hope that the people would be somehow persuaded to change their minds merely by the Government cajoling them rather than in response to a substantial change in circumstances. I agree with what the noble Lord, Lord Triesman, said in Committee. He pointed out that the people of Denmark, Ireland, France and the Netherlands,

“were perfectly capable of settling the first propositions put in front of them and they were perfectly capable of assessing the changes”.—[Official Report, 23/5/11; col. 1621.]

Those changes were any changes that had taken place or had been made to the treaty before them between the holding of the first and second referendums. People are clear in their own mind and will not easily be browbeaten into giving a different answer just because the Government—any Government—would like one. As the Minister for Europe made clear in the other place, it is a recipe not only for the public to say no again, just as firmly if not even more so, but also an invitation to be voted out of government at the next election for treating the public with contempt. But I reiterate that there might be circumstances where a repeat referendum may be in order before the three years suggested by the noble Lord had elapsed.

We were running through a most wonderful boom at the end of 2007. The recession hit us rapidly and sharply thereafter, with the financial collapse of a number of banks. We face a potential crisis in energy supply. At the moment there is a range of possibilities where crises might erupt that would affect us and our European partners. Therefore I see no reason for reducing flexibility, as this amendment would, and I urge the noble Lord to withdraw it.

21:30

[Lord Willoughby de Broke]

My Lords, I am grateful to all noble Lords who have spoken in the debate. The noble Lord, Lord Deben, made his position on referendums perfectly clear, so I do not think there is any point in pursuing that. I am grateful to the noble Lord, Lord Stoddart, for his support. The noble Baroness, Lady Brinton, said that a new treaty might possibly have some advantages for Britain and therefore the Government should not have their hands tied on another referendum. But the whole reason for the Bill—I hope that the noble Lord, Lord Howell, will concede this—is that, so far, all the new treaties have given power away from Parliament and the British people to the European Union. That is the nature of treaties and it is what has happened. That is also why we have the Bill in front of us right now. It is to stop this constant, undemocratic transfer of power from Parliament and the British people to the European Union. It has been one-way traffic all the way, and while this Bill is not perfect, at least it is a step in the right direction.

I am sorry that the Government do not feel that the amendment is helpful. I think it would be helpful because it would persuade the British people that in spite of the protestations of Ministers—no one believes any longer what they have to say—they will not be double dealt yet again. But, having heard the opinion of all those who have spoken and from the Government, I beg leave to withdraw the amendment.

Amendment 30 withdrawn.

Amendment 31

Moved by

[Lord Triesman]

31: After Clause 13, insert the following new Clause—
“Promotion of United Kingdom’s membership of EU
In participating in a campaign for any referendum held in pursuance of section 2, 3 or 6, or in taking other steps required by this Act, Ministers of the Crown must have regard to the desirability of promoting the United Kingdom’s membership of the EU.”

[Lord Triesman]

My Lords, this is very close to an amendment that my noble friend Lord Radice moved in Committee. For that reason—aside from that of plagiarism, having reproduced the amendment so closely—I shall be very brief.

It appears that the circumstances in which the referendum on whatever subject—an omnibus referendum on a treaty or a more limited one—would be held would be those in which the Government had concluded that it was right to take matters to both Houses. They would have secured a majority in both Houses, including —critically, because of the confidence issues—the House of Commons. Legislation would have been approved by Parliament and would therefore have become the position that Parliament had adopted. That is the decision that would then be put to a referendum—put before the people of the country to overturn it, should they choose to do so. Throughout that process there can be little doubt that it would be incumbent on the Government, and anybody who supported them, to pursue as vigorously as they could the case for the change that they advocated. It would be pointless—indeed, frivolous—if a Government did not, by the time they had reached that point, argue fiercely for the substantive issue.

It is particularly true that that would be the case because, so often when we were dealing with matters to do with Europe, the previous Government did not argue effectively or convincingly. The case was never put with the level of conviction that, on reflection, I should have liked to see. In those days, the Opposition—now the Government—never pursued an argument for Europe with any great vigour that I could detect. There was in general no great desire to do so. However, it will become very important that it should be done—that the argument should be pursued, and that there should be some proper presentation that will enable people to understand why any kind of decision is being put in front of them at all.

I say that in the briefest terms for this reason. I have no doubt that if and when any referendum takes place, whatever the substantive issue being put before the people of the United Kingdom, there will be those who regard the occasion as an ideal opportunity to argue against membership of the European Union per se. It will come up and it will begin to look like the opportunity—for which some people outside this Chamber and some within it have urged—for another decision to be taken on Europe. We shall find that that is how the argument will be displayed in much of our media. It will not necessarily be about the issues; it will be about whether people really want to be in Europe. The media will campaign vigorously around that. Of course, the decision will be on the substantive issue in the referendum, but I have little doubt that the campaign will be disfigured by the argument over whether we should be in Europe at all. That is why there is a great deal of merit in asking the Government to have regard—not a very high hurdle to climb over—to,

“the desirability of promoting the United Kingdom’s membership of the European Union”.

My noble friend Lord Radice put that point in very convincing terms in Committee. There are extremely good reasons for it, not least that we have all failed so abjectly to argue the case for Europe with great effect in the past. I beg to move.

[Lord Risby]

My Lords, I very much agree with some of the underlying sentiments of the noble Lord, Lord Triesman. There are powerful reasons for us to be part of the European Union and to have a positive view of it. Of course that is the case. Sometimes that is completely lost in the wash, which is regrettable and unfortunate. However, on promoting the desirability of our membership, I just point out that we have to take great care over what we do in this respect. One of the most extraordinary episodes under the previous Government was their attempt to explain the euro. We had the exceptional sight of the then Europe Minister, Mr Keith Vaz, going round in a white van to various market towns, handing out literature explaining why the euro was a very desirable thing. The net effect of this risible campaign was to cause support for the euro to diminish, so we have to undertake these things with great care.

The amendment implicitly reflects concern about the lack of popularity—

[Lord Dykes]

I am most grateful to my noble friend for giving way, but has he not left out the vital fact that a lot of support for Europe grew out of Mr Keith Vaz having learnt the trick of taking Mr Eddie Izzard round with him on the campaign?

[Lord Risby]

I discussed this episode with Mr Keith Vaz and I am not sure that he felt it was one of the high points of his political career, but we can leave it at that.

The amendment implicitly reflects our concern about the EU’s lack of popularity, but I fail to see the point of it. It is completely unnecessary. To have a referendum the Government need to have agreed the relevant treaty in Brussels in the first place, and Parliament will have enacted an Act of Parliament, having debated and scrutinised it. I entirely agree that a referendum campaign should educate the public in the fullest sense of the word. Presumably, having decided on a referendum, the Government would like to win it. The notion that they would somehow be against the EU, implicitly or explicitly, makes a nonsense of the whole situation. Why waste money on such an exercise? The case for membership is explicit in the whole referendum process. The way to change the view of the desirability—

[Lord Lea of Crondall]

I am most grateful to the noble Lord for giving way, but I am rather intrigued by his clear statement that the Government will want to win a referendum. Is he absolutely sure that they will not do a Pontius Pilate in some cases in a referendum?

[Lord Risby]

If a Government have got that far and want to test public opinion, it is very unlikely that they would behave as the noble Lord suggests. It is not likely that a Government would embark on a referendum if they thought that they were going to lose it. That is not the natural course of political events, but perhaps the noble Lord—

[Lord Hamilton of Epsom]

Surely it goes somewhat further than that; if the Government put forward a referendum that they are trying to win and they lose it, that damages their credibility.

[Lord Risby]

That would certainly be the case; I entirely agree with my noble friend. The way to change people’s view of the desirability of EU membership is simply to prevent them believing that we have been on a conveyor belt to greater integration without their assent. That is the real point; it is better than any publicity campaign. The real reason for negative attitudes is because over the years when there have been European Council meetings or discussions over treaties such as at Nice, Amsterdam or Lisbon, we have had the whole “Grand Old Duke of York” activity on the part of successive Governments. Statements have been issued by Downing Street, particularly more latterly, that indicated that great victories had been won for Britain, which no other European nation would recognise as being the truth at all. The good thing about the coalition Government is that all the spinning and posturing that characterised our relationship with the European Union has stopped. Where has anyone seen it in the past year? That is an admirable change for us all. The Bill will give us a better chance of restarting our relationship with the EU by addressing public attitudes than any publicity campaign could possibly do.

[Lord Radice]

My Lords, I support the amendment in the names of the noble Lords, Lord Triesman and Lord Liddle. I could hardly do otherwise as it is an exact replica of the amendment that I moved in Committee. I thought it was a good thing then and I that it is a good thing now. In Committee, I made a general case for Ministers—the amendment refers to the general case—making a positive case for the European Union.

21:45

We have been members of the European Union for 40 years, but government Ministers have consistently been hesitant about putting the case for the European Union. Unfortunately, that includes members of my own party. For example, Tony Blair, when he was Prime Minister, was far better at making speeches about the EU and British membership when he was on the continent than when he was in the United Kingdom. One of the main reasons for that was that he was frightened of the Eurosceptic press. He was frightened of the reaction in the Murdoch press. Any time he said anything positive about the European Union, he was almost always in trouble. I still remember the headline in the Sun, asking,

“Is this the most dangerous man in Britain?”,

when he said that there might be a good case for Britain joining the euro. It was not surprising that he was a bit more cautious afterwards about making that kind of speech.

One reason for the disconnect that the noble Lord, Lord Risby, has just talked about is that successive generations of British Ministers have failed to make the case for British membership of the European Union. Of course I agree with the noble Lord that there must not be foolish propaganda that can easily be knocked down. However, that is no excuse for Ministers not making a positive case based on the facts. Such a case should also admit some of the weaknesses. It does not have to be propaganda; it has to be a genuine case.

I congratulated David Lidington, the Minister for Europe, who explained very well in a Written Answer why he believed that European Union membership was in our national interest. The noble Lord, Lord Sassoon, from that Dispatch Box, said in very positive terms following a Eurosceptic attack from somewhere behind me that the United Kingdom got more out of the EU than it put in. It is good to hear Ministers with the courage to say that. I was delighted that the noble Lord, Lord Howell, in answer to my speech, stressed the need for the Government,

“to be a more vocal and effective advocate of the European Union”.—[Official Report, 23/5/11; col. 1646.]

That is absolutely right, and I hope that he and his colleague next to him will continue to do that, because it is their responsibility.

However, this is not just their responsibility but the responsibility of those much higher up—the Prime Minister, the Deputy Prime Minister, the Chancellor and the Foreign Secretary. I want to hear them all make constructive speeches about the EU—not spinning speeches and saying “game, set and match”, as John Major was reputed to have said when he came back from Maastricht. We need to hear the case for why membership of the EU is in Britain’s interests, because if you ask the British people whether they are aware of some of the benefits, they are not because they are never told about those benefits, which certainly never appear in most of the newspapers, and Ministers are frightened to mention them.

That was the purpose of my amendment, and I want the coalition to live up to the constructive part of its agreement on Europe. We know what the negative part is; we have heard it time and time again in our debates. The case is that you will have a lot of referendums that will re-establish the connect between the British people and the European Union. However, there is another responsibility on Ministers: to put the constructive case for the European Union. That was the purpose of my amendment and is partly the purpose of the amendment moved by my noble friend.

[Baroness Falkner of Margravine]

My Lords, I have considerable sympathy with this amendment. In the course of the last three months we have heard from all sides of the House the collective failure of politicians to articulate a vision of why Britain needs to co-operate with members in her region to advance her interests. Putting an obligation on Ministers to spell out positively a vision for the EU seems eminently sensible, given the context of the Bill. This is, as the noble Lord, Lord Risby, said, that once the Government have passed an Act, they would presumably like to win an amendment. It seems odd to resist an amendment such as this when we are clear that the Government would have passed an Act proposing the policy solutions that there would be and, as the noble Lord, Lord Hamilton, said, would wish to maintain their credibility by seeking actively to campaign in a referendum. I cannot see why there is such resistance to this amendment.

I remind noble Lords of some of the things that have been said about the media. Even if the Government of the day were determined to win a referendum, it is entirely conceivable that a sceptical media would choose to ask questions about why the Government were spending money. We have known from the several months of debate over referendums in this House in relation to other matters that large amounts of money have been set at the door of the practicalities of holding a referendum. It would be entirely possible for our media, which did not wish us to promote that measure that was meant to be discussed in the referendum, to say that this was a huge waste of money. The fact that a requirement for promoting that measure would be enshrined in the Bill would allow the Government to say that they were carrying out what statute and legislation required them to. We have had arguments for months on the lack education and the lack of information about the European Union. This would be an opportunity for the Government of the day to move beyond those technical measures to use that process to educate the public about their vision.

I turn to the final point in the amendment that I do not think the noble Lord, Lord Triesman, in moving it, quite brought out to the extent that I would wish to do. It states,

“in participating in a campaign for any referendum held in pursuance of Sections 2, 3 or 6 or in taking other steps required by this Act.”

The discussion we have had so far pertains only to the holding of referendums. There are other measures in this Bill that do not call for the holding of referendums. Sometimes they call simply for an Act of Parliament, or for a Statement to be made to Parliament. In doing these things, an obligation would be put on the Ministers of the day to have regard for the desirability of promoting the United Kingdom’s membership of the EU. This amendment says to us as politicians that we have to step up to the mark and that if we believe that the legislation that we are passing is good legislation, we have to go out and explain why we think that it is good legislation. While I would love to say that I wholeheartedly support the amendment, I will only go so far as to say that I can see a lot of merit in it and I look forward to hearing from the Minister why he does not think that it is extremely useful and long overdue.

[Viscount Trenchard]

My Lords, I am afraid that, although I listened with great interest to my noble friend Lady Falkner, I cannot agree with her that the amendment makes much sense. I listened carefully to the noble Lords, Lord Triesman and Lord Radice, in putting forward the amendment. It is an odd amendment. What does it actually mean? Any referendum that might be held under the Act is not going to be a referendum as to whether our membership of the EU is or is not a good thing. By definition, if the Government want to put a referendum event to the people, it follows that they must already have decided that it is a good thing, so to get the result they want in the referendum, they will obviously explain the benefits as energetically and positively as they can.

There is something strange about the language of the amendment, because the desirability of promoting the United Kingdom's membership of the EU sounds rather as though we are not a member but perhaps should be. We are a member, so obviously Ministers must explain what being a member of the EU means and must honour the obligations of being a member. I fear that that is rather subjective.

Furthermore, under the Bill, a referendum other than one which the Government wanted to win might be triggered. There are many ways in which a referendum can be triggered under the Bill, as noble Lords have said. Ministers of the Crown might be obliged to put a certain point to the country but they might not necessarily want the result to be yes. The noble Lord, Lord Radice, said that Ministers have not positively made the case in public for membership of the EU on a continuing basis. I suggest that that is because many Ministers of the Crown have felt that our membership of the EU is no longer so clearly wholly beneficial as they had thought it was, or as people thought it would be 10 years ago, or longer ago than that.

The amendment does not add anything to the Bill. It is somewhat subjective and I cannot support it.

[Lord Dykes]

My Lords, I agree very much with the earlier utterances and express regret that I cannot agree with what the noble Viscount, Lord Trenchard, said. I do not think that there is any evidence that Ministers have become less enthusiastic about our membership of the European Union. That is irrespective of the colour of the Government. That applies to both parties in power in recent times and, as far as I can detect, definitely applies to the coalition—very positively so in respect of the first part of the coalition statement about their aspirations on Europe.

I am sure that it is because of what the noble Lord, Lord Radice, mentioned and what the noble Lord, Lord Triesman, hinted at less directly: because of what the British press say. It is mainly the tabloids—the comics that masquerade as newspapers in Britain. They are more and more like magazines rather than newspapers. That is affecting the broadsheets as well, particularly those with owners living in tax havens overseas, not normally living in the UK and not paying UK direct taxes themselves, mainly the Murdoch press, but all of them anti-European and attacking our membership of the European Union in a most extraordinary and vicious way, which has not been seen in any other member state that I can think of.

I have to declare an interest as I also live regularly in France at weekends whenever possible. The French press are not at all like that. My colleagues in politics in Paris express astonishment that we allow the overseas-based owners of the press here who do not pay UK direct taxes themselves to attack our fundamental membership of the European Union in such a way. That has been the reason.

The most astonishing contrast that I noticed was just at the moment of the IMAX launch by the new Prime Minister Blair, with his new Government, still very, very popular, not quite walking on water but pretty close to it in those early days and causing a lot of inspiration and enthusiasm among the British public for the new Labour Government. That launch was the beginning of the decline in the new Labour Government's support for Europe in atmospheric and psychological terms. That was tragic. Britain in Europe was destroyed by it. So was the European Movement—although it still exists, it is struggling along as a very truncated body doing noble work but very much at the fringes of British life.

It is a tragedy for this country that we have had this nonsense for so long: politicians refusing to stand up bravely and correctly for the benefits of our membership of the European Union. Therefore, I very much welcome the proposed new clause. It was debated in Committee and therefore we need not go into all the arguments now. We particularly thank the noble Lord, Lord Howell, for repeating that the purpose of the Bill is to oblige Ministers to promote the cause of our membership of Europe in what he would describe as a more correctly balanced sense because the public would have much greater participation through the referendum mechanism. Like the noble Lord, Lord Deben, I do not agree with that because I am against referendumitis and the populism that comes from it, but I can see his arguments. The proposed new clause would be a good thing, as we would return to promoting our membership—not in a propagandistic sense but in the practical sense of reassuring the public, explaining in detail many of the complicated matters and getting away from the dreadful xenophobia that is being allowed to develop because of the insouciance, nervousness, recalcitrance and hesitation of British politicians. There is a danger that that will start to affect the coalition if it continues, and I hope very much that it does not.

I do not want to take up too much of the House’s time but I conclude with an issue that may seem small, although it is very important. I refer to the display of flags—one of my favourite subjects. There is only one European flag within the vicinity of Westminster. It is on the Slovenian embassy building and we thank the Slovenians for their courage in daring to show it. It is the only one, apart from the one displayed on Europe Day in Parliament Square each year. All other major countries, together with some of the new ones, routinely proudly display the European flag alongside their patriotic national flag. Our national flag should be alongside the European flag on government buildings, as is routinely the case in France. When President Sarkozy makes a television broadcast, he always has the European flag alongside the tricolor. Why have all parties in this country been so hesitant and pathetic about this in the past? It is now time for the matter to be corrected. I have been encouraged by the words of the noble Lord, Lord Howell, on previous occasions in these debates and believe that the Government should accept this imaginative new clause.

[Lord Hamilton of Epsom]

My Lords, I have heard my noble friend Lord Dykes say on previous occasions that the only cause of Euroscepticism in this country is the Murdoch press, but I find that very difficult to go along with. I always reckon that to some degree the press has to reflect the national mood and, if it does not, it does not sell any newspapers. I also have a slight problem with the fact that Euroscepticism is growing at a pace in Germany, where I am not aware of the Murdoch press owning any newspapers. Therefore, I think that it is a little too simple to blame the whole thing on the Murdoch press.

However, let us get to the basis of the amendment and, for the sake of argument, start at the beginning, which seems to be a useful place to start. The Government will bring forward a measure to be put to a referendum of the people of this country only if they think they will win it. I do not accept the view of my noble friend Lord Trenchard that the Government might put something forward to be addressed by the country in a referendum if they want to lose, as I think that they can only possibly want to win it. If they do want to win it and if, as I think the noble Lord, Lord Triesman, said, this is an opportunity for UKIP to say, “Ah, we don’t want anything to do with the European Union at all. We must pull out”, then of course the Government will be compelled to argue the virtues of remaining in the European Union, and all his problems will be answered by the referendum. For that reason, the amendment is completely otiose and I shall not support it.

[Lord Willoughby de Broke]

My Lords, I think that this is rather a sad amendment. It demonstrates the Europhiles’ lack of confidence in their case in trying to put into the Bill a requirement for Ministers, frankly, to propagandise. I know that the noble Lord, Lord Radice, says that it is not propaganda but let us look at the words of the amendment. It says,

“must have regard to the desirability of promoting the United Kingdom’s membership of the EU”.

That sounds exactly like a recipe for propaganda to me. There is no balance there whatever—it requires Ministers to promote our membership of the EU. Like the noble Lord, Lord Hamilton, I find it extraordinary that the noble Lord, Lord Dykes, should keep saying that the only reason for Euroscepticism is the Murdoch press or the Barclay press or whatever. They have absolutely nothing to do with the rise of the new Finn party, for example, or of Euroscepticism in France, Germany or Hungary. I am afraid that there is a growing realisation that Europe is going the wrong way and that the desire for more and more integration is not what people in member states want. To put this amendment in the Bill would be absolutely contrary to what people in this country think is right.

The noble Lord, Lord Dykes, said that the noble Lord, Lord Howell, had encouraged him in some of the things that he had said. I have listened to many speeches by the noble Lord, Lord Howell. He is extremely balanced in his view of the EU. He takes a critical but on the whole positive approach, which is right; Ministers in the Government will always do that. There is absolutely no need to put this sort of demand for propaganda in the Bill, and I hope that the Government will reject the amendment.

[Baroness Williams of Crosby]

The noble Lord, Lord Willoughby de Broke, has perhaps underestimated some of the forces out there that make it difficult to explain what the European Union is doing. I shall speak briefly. Despite the fact that we have been, as my noble friend Lord Trenchard said, citizens of the European Union for 50 years, we have never spoken about it or taught it in our schools in any adequate way. We are almost unique in Europe in the fact that our syllabuses carry very little information about the common market and very little understanding of this additional citizenship, which is part of the law of the land.

This is an issue now with a new Education Bill that is considering what should be in the syllabus for English children. Ministers should encourage the idea that if we are part of the European Union—and we still are—there should be at least a limited level of education about Europe in our schools so that our children know what we are talking about and are capable of making critical judgments about statements made in the press and deciding whether or not they agree with them.

I will give a second example. There was a good deal of discussion in the House today and on previous occasions about the level of distrust in the European Union. The noble Lord, Lord Liddle, made powerful points about the level of distrust in Parliament and in the whole democratic process. The distrust is part of the atmosphere of the present time; it is not specific to the European Union but much wider and in many ways more disturbing.

My final point is that we have some of the responsibility in this Parliament for the level of distrust. I will give just one example; I will not go into the expenditure crisis and so on. We heard much earlier in the debate about the number of occasions on which the scrutiny reserve imposed by Members of this House in the European Scrutiny Committee on the mandate given to Ministers in the European institutions has simply been brushed aside and disregarded. That has not been the act of the Commission or even of the Council of Ministers; it has been the act of our own Government in our own Parliament, despite the efforts of Parliament to persuade them to show caution or not to go ahead with a particular measure in Brussels.

We have to accept that our own Governments—I am not pointing at any particular one—have been part of the level of distrust created by a consistent disregard of Parliament expressing doubts and concerns about pieces of European policy pursued by those Governments. We have many times disregarded Parliament's doubts. That is not a way to build trust or to build a sense that Parliament has real power over what happens in Brussels, because often we have let that power disappear by failing to recognise what Parliament has urged us to take very seriously.

This is an important amendment. I do not terribly like some of its drafting; it should be much wider and, rather than referring simply to a referendum campaign, should concern the whole attitude of British citizens toward Europe. However, I commend the noble Lord for moving it.

[Lord Radice]

I would prefer the amendment to be much wider, but it would then be out of order.

[Baroness Williams of Crosby]

I will always take instructions from my former colleague, the noble Lord on the other Benches. I commend him on the pressure that he has brought to bear on the issue, which is of immense importance.

[Lord Howell of Guildford]

My Lords, when my noble friend Lady Williams speaks about the need for strengthening the teaching in schools and in citizenship classes of Britain's role in, and relationship with, Europe—and dare I say in the Commonwealth generally and in the new landscape that is building around us—it strikes a chord with me. She is absolutely right that the quality of teaching needs a considerable uplift in this area.

I will begin with a tiny bit of propaganda for the Foreign and Commonwealth Office. We have supported the Hansard Society in producing a new booklet to help citizenship teachers teach secondary school pupils about the European Union and our role—our very effective role, despite some minor criticism in the European Union and in Europe generally. We are taking action to improve the resources available, as citizenship teachers asked us to do. That is the kind of way forward that we should all work towards instead of spending a lot of time sitting around talking down our nation and its extraordinary talents and abilities to adjust to the new world situation.

I wish I could say such enthusiastic things about this amendment. It strikes me as a bit curious because it seeks to place a statutory requirement on the new Bill that, during a referendum held under the provisions of the Clauses 2, 3 and 6, or in implementing any of the other provisions of this legislation, the Government of the day should have regard to the benefits of the UK’s continued membership of the European Union. This sounds as though there is a desire to switch on a light at this particular moment rather than concentrate on the broader issues reflected in the observations of the noble Baroness, Lady Williams, and of the noble Lord, Lord Radice, that these matters cannot just be switched on and off but require sustained and effective narrative—not propaganda but an effective story to show how we fit into, how we contribute to and how we are able to draw strength from associations in the European Union and elsewhere.

As the noble Lord, Lord Triesman, candidly admitted, the past record has not been too brilliant, to put it mildly. If one just looks at those who have been in government over the last decade—which happens to be one party—one can see that they have not achieved a dazzling success in uplifting public support for, or even public awareness of, the role that this country has played, is playing and is capable of playing in the future in the European Union. When we discussed this amendment in Committee, the noble Lord, Lord Radice, said that the EU Bill was,

“based on the wrong premise about our membership",

and that instead,

“we should recognise that the sharing of responsibilities with our partners has been good for Britain and good for Europe”.

We have no difficulty with that. As I tried to make clear in Committee, we fully recognise the benefits of EU membership and the flow both ways of advantage of our being a key member of the European Union. This Bill does nothing whatever to alter our current commitments within the European Union, nor our current active engagement within the existing powers and competences of the EU, which are very extensive, nor indeed our positioning to reform and equip the EU for the 21st-century challenges that lie ahead, because, just as we are trying to adjust the position of this country to the new landscape, so everyone recognises that the European Union as a whole needs to do the same.

The noble Lord, Lord Radice, also said,

“according to public opinion polls, the British remain reluctant Europeans and fairly ill informed about the EU”.—[Official Report, 23/6/11; cols. 1626-27.]

That just about sums up the key concern that this Bill has been crafted to focus on. It is that reluctance that the Bill seeks to address by making clear to the public that they will have their say over any future transfers of power and competence and that a future Government will have to make the case as to why such changes are in the national interest. That is the aspiration of this Government for the future. It is nonsense to say that it binds future Parliaments, which we cannot do, but that is our aspiration. This is a construction, an architecture that will be sustained and built to help the EU in the future.

Let me remind noble Lords that for a referendum to be held under the terms of this Bill, both the Government and Parliament have to be in favour of the proposed treaty, as many of my noble friends and indeed almost every speaker have recognised. That is the starting point for any referendum activity. Otherwise, if the Government did not like the measure, they could block it at the European Council, or Parliament could simply legislate against it. Parliament would be fully in control. Therefore, the change in question would have to be considered by the Government to be in the national interest before it could be put to Parliament. That would be the necessity, the sine qua non. While the referenda provisions will help address the reluctance that exists in Britain and that must be faced, no one is claiming that they are sufficient to address the general lack of information on, understanding of and enthusiasm for the European Union. Clearly, that cannot be done just when action under the Bill is needed. The oddity of the amendment is that it so inadvertently implies that action is switched on only when there is activity under the Bill, not least because the EU Bill focuses on future changes to the treaties and does not call into question our membership of the European Union.

22:16

We all recognise that it is essential to promote with vigour and depth and without shallow propaganda the positioning of Britain in the Union, our contribution to it and the benefits that we draw from our alliances. That is why we give such high priority to our positive agenda, ensuring that the Government work to make positive progress on the things that really matter to the people of this country and to give them pride, purpose and a sense of belonging. That is the best way to show people the benefits of European Union membership. That is why my right honourable friend the Prime Minister has been leading an initiative on jobs and growth within the European Union. This approach has been exemplified by the UK’s leadership in the EU during the recent stormy events in north Africa and the Middle East. I am advised that when the Croatian Prime Minister visited London on Friday, our own Prime Minister made it clear that Croatia belongs in the European Union and that it is very exciting for Croatia and for Europe that this day is getting ever closer.

As I said in Committee, the sentiments behind the amendment can be agreed with, but the idea that one can somehow carry this cause forward, make the case or build up the narrative with vision by popping this kind of amendment into the Bill is unfounded. While I applaud the intention, I think that the action is wrong. For those reasons, I ask the noble Lord to withdraw his amendment.

[Lord Triesman]

My Lords, I thank all noble Lords who have taken part in the debate, particularly the noble Baronesses, Lady Williams and Lady Falkner, the noble Lord, Lord Dykes, and my noble friend Lord Radice. My noble friend was quite right to point out that it would have been ideal to have a much more widely constructed objective, but I doubt that we could have got it into the Long Title, although it would have been well worth it for all the reasons that have been argued. Perhaps I may express a word of appreciation to the noble Baroness, Lady Falkner, for pointing out the phrase in the middle of the proposed new clause that was intended to broaden the scope of what is intended beyond a referendum. I had not made that point, so I greatly appreciate that it was.

I am quite sure that the noble Lord, Lord Radice, did not intend last time around, as I did not this evening, to advocate some system of propaganda of a narrow and fruitless kind or publicity stunts. I can promise the noble Lord, Lord Risby, that if anyone approaches me in a white van, they will see me heading rapidly in another direction. I have no intention of engaging in a serious matter with anyone in a white van. I have nothing against white vans in general, but if there is anything emblazoned on the side that tells me that they are part of a propaganda campaign, I shall head off—on a bicycle, of course—in another direction.

I accept the point made by the noble Lord, Lord Hamilton, that it is not only the media who criticise the EU, but they do play a dynamic role in these things, as they do in Germany and elsewhere.

I was reflecting on the difficulty of dealing with the media. Not all that long ago, I remember reading a detailed account—albeit in relatively short paragraphs and sentences—in one of the newspapers of the European Union’s desire to insist that in future we should have only straight sausages in the United Kingdom. Such was the level of debate. I would have taken that seriously but for the fact that I turned over a couple more pages and found that it also reported that Elvis was alive and well and driving a bus in Stalybridge.

My point is that you do not always get a fair crack in the media. I do not attribute all the difficulties that I have described to the media but the balance in the media has not been the balance which we have sometimes achieved in debates in your Lordships’ House. The point is to try to seek further rebalancing. The noble Lord, Lord Howell, was fair enough in mentioning one decade and pointing to the fact that we were the Government. However, he might have been a bit more generous and gone back a couple of decades to the impromptu words that the Prime Minister of the day was caught saying on television about some of his colleagues and their attitude to Europe.

In the recent past, we have not had a glorious history of a balanced debate. Indeed, on occasions we have not had any debate. In seeking to withdraw the amendment, as I now do, I hope that it if has done nothing else, the initiative of the noble Lord, Lord Radice, which we followed up this evening, will make us reflect on the fact that we are unlikely, whether in the context of anything in this legislation including referenda, to have an intelligent discussion about Europe if we continue to pillory it without any serious attempt to tell the other side of the story.

Amendment 31 withdrawn.

Consideration on Report adjourned.

House adjourned at 10.23 pm.