House of Lords

Thursday 27th October 2011 Lords Chamber

Thursday, 27 October 2011.

11:00

Prayers—read by the Lord Bishop of Ripon and Leeds.

Euro

Thursday 27th October 2011 Lords Chamber

Question

11:06

Asked By

[Lord Howarth of Newport]

To ask Her Majesty’s Government how they are seeking to safeguard the United Kingdom’s interests in discussions with European Union partners on the future of the euro.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, a stable euro area is in the UK’s interests and the Government are actively engaged in seeking to achieve this. While acknowledging the need for greater euro area fiscal integration, the Government are working to ensure that the UK is not part of that integration and that our influence on and interests in the single market, competition policy and financial services are safeguarded. We have ensured that the UK will not participate in the European stability mechanism.

[Lord Howarth of Newport]

My Lords, which would be more dangerous for Britain—financial and fiscal integration of the eurozone, with Britain marginalised in a minority bloc and outgunned in EU decision-taking; or disintegration of the eurozone, with its attendant chaos; or, most likely, a combination of the two? With eurozone countries objecting to Britain’s interference, and with both the coalition and the Conservative Party riven by internal disagreement, how can the Prime Minister hope to exercise useful influence or, indeed, to save his Government from being destroyed by Europe?

[Lord Sassoon]

I really do think that the noble Lord, Lord Howarth of Newport, puts up completely false choices and alternatives here. The fact is that significant progress has been made overnight to stabilise the eurozone. A lot more work needs to be done to fill in the detail but that is a first major step. I see that the noble Lord is nodding his head. That is point number one. Secondly, the idea that the UK is going to be marginalised in the “euro-outs” is simply not true. On Sunday, the Prime Minister established the key principle that we would be there, as we were yesterday, with a voice at the table on all matters involving all 27 EU member states. The idea behind the Question is that somehow it is just the UK versus the rest. We must be reminded that the other euro-outs include Poland, Sweden, Hungary, the Czech Republic and four others. We will play a critical part in driving forward the single market, and that is very important to the euro area.

[Lord Lawson of Blaby]

My Lords, does my noble friend not agree that it is a fundamental fact that monetary union in the eurozone is not viable short of a fiscal union, and that a fiscal union cannot come into being without full political union, which fortunately is as improbable as it is undesirable?

[Lord Sassoon]

My noble friend Lord Lawson of Blaby cuts to the chase with singular directness. I think that this is an onion with many layers to it and we need to go stage by stage. Having established the immediate priority of the stabilisation of the eurozone, of course the strengthening of the fiscal arrangements within the eurozone is the second priority. The Government signed up to that during the summer and the implementation of that needs to be taken forward. It is in the UK’s interest that that happens. It may lead, as the overnight statement said, to treaty changes and, as a consequence of that, the UK Government will seek to ensure that they take advantage of any opportunity to advance the UK’s interest. I think we need to regard this as a step-by-step process.

[Lord Liddle]

My Lords, will the noble Lord pass on our best wishes to the Prime Minister for many more enjoyable dinners with the Swedes and Poles, having enjoyed one yesterday evening? Does the Minister agree that in the new two-tier Europe, which this Government are bringing on, it is essential to defend Britain’s vital national interest in the single market and financial regulation by keeping Britain as close as possible to the eurozone? In the light of that, will they be reconsidering their decision not to join the euro-plus pact, which was offered? Does he not also agree that it is totally contradictory and counterproductive to talk at the same time about repatriation of powers for which, if the coalition can agree on what they mean, our partners are bound to demand a higher a price?

[Noble Lords]

Too long!

[Lord Liddle]

How do the Government propose to resolve this looming conflict between defence of the national interest and their own party unity?

[Lord Sassoon]

My Lords, it really is not helpful for the party opposite to try to paint this completely false picture of a two-speed Europe. As I have already explained, the euro-out countries are integral to the single market—the eurozone understands that—and we will be part of the centrality of what needs to be done to drive forward structural reform of the single market, and so on. The other thing that is completely wrong is to paint Europe now as two-speed. There is a variable geometry EU, as we have it. Remember that other important areas such as justice and home affairs, as the noble Lord, Lord Liddle, recognises, also run in different ways. Therefore the idea that there will be some fundamentally changed, two-speed Europe is again ridiculously simplistic.

[Baroness Kramer]

My Lords—

[Lord Hannay of Chiswick]

My Lords—

[Lord Pearson of Rannoch]

My Lords—

[Lord Dykes]

My Lords—

[Lord Strathclyde]

My Lords, let us have the noble Lord, Lord Pearson, and then, if there is time, the noble Lord, Lord Hannay.

[Lord Pearson of Rannoch]

My Lords, is it not obvious that last night’s measures are merely yet more sticking plaster on a wound that will therefore continue to poison the world economy? Is not the only answer to abandon the whole ill-fated project of European integration, get rid of the euro and go back to the democracies of Europe freely trading together and with the rest of the world in their own currencies?

[Lord Sassoon]

No, my Lords, that is not the situation. Forty per cent of our trade goes to the eurozone, 50 per cent goes to the EU, and we have to work to preserve the structure.

[Baroness Kramer]

My Lords—

[Lord Davies of Stamford]

My Lords—

[Lord Hannay of Chiswick]

My Lords—

[Lord Strathclyde]

My Lords, we have not heard from the Cross Benches.

[Lord Hannay of Chiswick]

My Lords, would the Minister be so good as to give the noble Lord, Lord Liddle, a reply to the question about the euro-plus pact? It may be that the name of this pact is unfortunate, but it is supported by a number of countries which are not in the eurozone, and its objectives relate very closely to our most important objective, which is to further the single market. Would he not agree that the priority now is not drawing up long wish lists for repatriation but working out how we are going to keep our position and keep the integrity of the single market?

[Lord Sassoon]

As the noble Lord, Lord Hannay, says, there are many things up for consideration and we need to consider the future architecture in the round and decide where it is in the best interests of the UK to move forward on all those issues. It would be too early to pick out one item this morning.

House of Lords: Reform

Thursday 27th October 2011 Lords Chamber

Question

11:15

Asked By

[Lord Grocott]

To ask Her Majesty’s Government, in the light of their proposals for a reformed House of Lords of 300 Members, what they regard as an appropriate size for the House of Lords in the interim.

[The Chancellor of the Duchy of Lancaster (Lord Strathclyde)]

My Lords, the Government’s policy is to work towards securing in the House of Lords a better reflection of the share of the vote secured by the political parties in the previous general election, as proposed in the coalition agreement.

[Lord Grocott]

My Lords, I really am sorry that the Leader of the House is unable to give a more specific Answer to the Question, because I am sure he acknowledges and understands, as I do, that there is a very widespread view right across this House, in all parties and in all parts of the House, that the present total membership of 826 and record daily attendances are getting us close to the point where the House is unsustainable. I appeal to him, given that he has frequently told us, in opposition and in government, that his job as Leader is not just to speak, as he quite rightly does, for the Government, but also to speak on behalf of the whole House. I therefore put it to him that he should say to his colleagues in government that until such time as there is an agreed process for reducing the numbers of people in this House, there should be no further wholesale intake of Peers.

[Lord Strathclyde]

My Lords, I am not at all surprised that the noble Lord, Lord Grocott, should come up with that. After all, the Labour Party is the largest party in the House of Lords, and I quite understand the political imperative to preserve that position. Since May 2010, 119 new Peers have been made up to this House, and nearly half of them were Labour Peers. The Government reserve the right, as the previous Government did, from time to time to refresh the Benches in the House of Lords. On the question of size, we now have a system of permanent retirement, and if any Peers are so discombobulated by the size of the House, they should immediately go to the Library, write their resignation and send it to the Clerk of the Parliaments.

[Lord Palmer]

Is the Leader of the House aware that there are currently roughly more than 450 committee slots? If we are to continue to revise legislation, how on earth can we do it with only 300 Members of the House?

[Lord Strathclyde]

My Lords, a Joint Committee of both Houses is looking at the proposal laid out in the draft Bill, including the numbers in the House. No doubt that committee will look carefully at the kind of question that the noble Lord has raised. But if the House was to be elected, it would clearly wish to use its resources in a very different way from the way in which we do currently.

[Lord Forsyth of Drumlean]

My Lords, if the Government’s policy is that the composition of the House should reflect the result at the previous general election and that were a long-standing policy, surely the House would grow exponentially after every election. Is it not a ridiculous proposition? Given the appointments which have been made so far, are they not at variance with that declared policy?

[Lord Strathclyde]

My Lords, no is the answer to the last part of my noble friend’s question, but he is right that, if we do not fundamentally change this House, at the start of every new Parliament where there is a change in the Government the House would continue to increase. The Constitution Unit at UCL has done a useful piece of work examining this. On the current general election figures, if we were to put the policy into effect immediately, it would mean an increase of 82 Conservative Peers. I can tell the House that we are not about to announce 82 Conservative Peers.

[Lord Hunt of Kings Heath]

My Lords, given the uncertainties as to whether the Government will achieve substantive reform in this Parliament, why do they not say that they will take over the Steel Bill?

[Lord Strathclyde]

My Lords, the pre-legislative scrutiny in a committee of both Houses includes all of what is in the Steel Bill. I would have thought that the best thing to do would be to wait for the results of the Joint Committee before progressing on any further legislation.

[Lord Pearson of Rannoch]

My Lords, do the Government really intend that the composition of this House should reflect the votes cast at the previous election? If the Government mean that, will the noble Lord care to meet with me afterwards, because I have a little list in my pocket for the 24 Peers which should go to UKIP, whereas at the moment there are only two of us?

[Lord Strathclyde]

My Lords, those clever people at the Constitution Unit have suggested that, if there were no further change to the House and if the policy were to include the minor parties, UKIP would be entitled to 24 Members of this House. I can also tell the House that that is unlikely to happen any time soon either.

[Lord Marks of Henley-on-Thames]

My Lords, does my noble friend the Leader of the House agree that one reason why the present House needs to be larger than a reformed House is to ensure at least a modicum of regional representation, given that in the present House roughly 40 per cent of Peers are from London and the south-east, which has only 25 per cent of the population, whereas only about 20 per cent of Peers are from the Midlands and north, which have 40 per cent of the population?

[Lord Strathclyde]

My Lords, I have no reason to distrust the figures of my noble friend. Indeed, it is true that under an appointed system there are some parts of the United Kingdom that are less well represented than others. The other reason why we need a larger House at the moment is that this is a part-time, unpaid House. If it were elected, it would be full-time and paid.

[Lord Cormack]

My Lords, does not the vote that we had last Friday in this House indicate that there is a broad consensus across the House in favour of the provisions of the Steel Bill? Would it not be far better, therefore, to put this House in order, notwithstanding what might happen in the future? And did not the question of my noble friend Lord Marks help to illustrate the folly of the line down which my noble friend and the Government appear to be going?

[Lord Strathclyde]

I can assure my noble friend that I am in no doubt whatever as to this House’s views and its desire to be fully appointed, but that is not the policy of any of the major parties that stood at the last general election. We are continually urged to have pre-legislative scrutiny, and we have pre-legislative scrutiny which includes all the parts of the Steel Bill. Surely we should wait for the work of the Joint Committee to be completed before continuing on legislation.

Wales: Council Tax

Thursday 27th October 2011 Lords Chamber

Question

11:21

Asked By

[Lord Roberts of Conwy]

To ask Her Majesty’s Government what steps they will take to ensure that funds allocated to the Welsh Government to enable them to freeze council tax rates are used solely for that purpose.

[The Advocate-General for Scotland (Lord Wallace of Tankerness)]

My Lords, the Welsh Government have received a £38.9 million increase to their departmental expenditure limit in 2011-12. As is usual practice, it will be for the Welsh Government to decide how to use this additional funding.

[Lord Roberts of Conwy]

But does my noble and learned friend think that it is right that nearly £40 million allocated by our right honourable friend the Chancellor of the Exchequer to the Welsh Assembly’s Labour Government specifically to enable them to freeze council tax should deliberately not be applied to that nationwide purpose for the second year running, with the result that over a million Welsh households are to be deprived of a substantial sum when they are facing the fastest rise in living costs for 20 years?

[Lord Wallace of Tankerness]

My Lords, I can readily understand where my noble friend is coming from in asking that question. The consequentials were made available because of the funding made available in England to freeze the council tax to help hard-pressed families. Indeed, many Welsh families might wonder why they are the only households in Great Britain that will not be having their council tax frozen. But the essence of devolution in the Acts that were passed by this Parliament in devolving power to Wales, including power over local government finance, means that it must be a matter for the Welsh Ministers and for the Welsh Assembly to determine what their priorities are. Importantly, Welsh Ministers will be accountable to the Welsh Assembly for their spending decisions and through the Assembly to the people of Wales. That is where the proper accountability should lie.

[Lord Wigley]

My Lords, does the Minister not agree that while the Barnett formula may have been fairly generous to Scotland, it has been shown to be some £300 million light in Wales in meeting the level of expenditure to keep services up to the same standard as in other parts of these islands? Given that, is it not totally reasonable that the Welsh Government should use these resources to spend on health and education, which are very much in need of further resources in Wales?

[Lord Wallace of Tankerness]

My Lords, as I made clear in answer to my noble friend on the consequentials and the block grant given to the Welsh Government, it is a matter for the Government there to determine their priorities and to be accountable for these priorities. If they choose to spend it on health and education, they will clearly be accountable for that expenditure. Separate bilateral discussions are continuing between the UK Government and the Welsh Government on all proposals arising from the Holtham commission, including the idea of a funding floor and the commission’s wider proposals for reform.

[Lord Morgan]

My Lords, at a time when we are debating the Scotland Bill, which gives greater autonomy and freedom to the Scottish legislature to decide its own spending priorities, would it not be paradoxical for us to be restrictive and prescriptive in the case of Wales?

[Lord Wallace of Tankerness]

My Lords, I indicate to the noble Lord that the Government are not being prescriptive. They recognise that the consequentials that were made available are for the Welsh Government and the Welsh Assembly to determine. While additional powers are being conferred on the Scottish Parliament as a result of the Scotland Bill, the noble Lord will be aware that there has been recent agreement to set up the Silk Commission, which will look initially at the financial accountability of the Assembly and, having reported on that, move to looking at its powers.

[Baroness Randerson]

My Lords, does the Minister agree that, as the years go on, the strains imposed by the Barnett formula are beginning to show in the Welsh financial settlement? As a result, for example, education in Wales receives £600 less funding per pupil per year than in England. Would that not be a good way in which the money concerned could be spent?

[Lord Wallace of Tankerness]

My Lords, I am sure that the Welsh Government are getting plenty of helpful suggestions as to how that money might be spent. I sat in on the debate on the Barnett formula initiated earlier in the year by the noble Lord, Lord Barnett, and listened carefully to it. The Government have made it clear that their priority is to reduce the deficit and get our public finances in order. Therefore, any change to the system of devolution funding must await stabilisation of public finances. However, as I have already indicated, separate bilateral discussions are continuing between the Government and the Welsh Government on the proposals arising from the Holtham Commission.

[Lord Trimble]

I presume that there was a Barnett consequential for Northern Ireland as well. Can my noble and learned friend the Minister tell me how much that payment was and what it has been used for?

[Lord Wallace of Tankerness]

My Lords, I can tell my noble friend that the amount was £22.6 million. I regret that I do not know how the Northern Ireland Assembly chooses to use it, but the same principle would apply: it must determine its own priorities and be accountable to the people of Northern Ireland for them.

[Baroness Hollis of Heigham]

My Lords, to return to the council tax freeze, why is it acceptable to freeze council tax in England and Scotland—and in Wales, if it chooses to spend it that way—to the tune of £800 million, so that every Member of this House has their council tax frozen, while, outside this House, the poorest will see their council tax benefit cut by 10 per cent?

[Lord Wallace of Tankerness]

My Lords, the Government indicated that this was an area of UK Government underspend which we were able to use to help support hard-working families with their council tax. I think that it has been widely welcomed that the council tax has been frozen in England; indeed, the Scottish Government had already decided to freeze it in Scotland. With the resources that are available, I think that it will be of benefit to a considerable number of households throughout Scotland and England. It is up to the Government of Wales to determine whether they will wish to follow that. Interestingly enough, in announcing the local government settlement, a Welsh Minister, Mr Carl Sargeant, indicated that local authorities in Wales would have to consider the balance between the need to sustain key services for their citizens’ benefit and the need to limit any financial pressure on hard-pressed households. Even devolution of local responsibility within Wales might lead to some places there getting a council tax freeze.

Economy: Inflation and Unemployment

Thursday 27th October 2011 Lords Chamber

Question

11:28

Asked By

[Lord Barnett]

To ask Her Majesty’s Government, in the light of the most recently published figures, what plans HM Treasury has to reduce inflation and unemployment.

[Lord Barnett]

My Lords, I beg leave to ask the Question standing in my name—rather than the previous Question—on the Order Paper.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Government’s economic policy objective is to achieve strong, sustainable and balanced growth. Budget 2011 reaffirmed the independent Monetary Policy Committee’s remit to target 2 per cent inflation, as defined by the 12-month increase in the consumer prices index. The Government have introduced a range of measures to reduce unemployment and support the unemployed into work, including get Britain working, the work programme and modernisation of Jobcentre Plus.

[Lord Barnett]

My Lords, I hope that the modest attempts that the Treasury is making to help the unemployment situation are successful. However, does not the Minister accept, if he wants to be honest with the House, the plain fact that the deficit reduction plan overshadows all those minor measures, and unemployment continues to rise? I do not expect him to be able to announce what the Chancellor is going to do in the near future. However, given the change of circumstances around the economy, will he at least tell us that the Chancellor is considering, without changing the plan, at the very least putting off some of those measures to later years and bringing forward some of the infrastructure and capital expenditure plans, which would help to reduce the terrible unemployment that is blighting so much of the country?

[Lord Sassoon]

My Lords, the first clear objective of the Government is to stick to the fiscal reduction plan that we have set to make sure that the UK’s interest rates remain low, so that we are not in the position in which countries like Italy find themselves today. It is absolutely fundamental to growth that we keep interest rates low and stick to our fiscal discipline. Secondly, we must have monetary activism and credit easing, a combination of measures that the Bank of England has taken by extending the asset purchase scheme by £75 billion. The Chancellor has said that we will come forward with further credit easing measures in the autumn Statement. The third issue, which will further be addressed in the November Statement, is, critically, to press on with supply-side reforms that will underpin medium-term balanced growth. Those are the three clear strands of the Government’s policy to which we will stick.

[Lord Ryder of Wensum]

My Lords, if my noble friend is in favour of keeping an inflation target, why does the Governor of the Bank of England fail to match it year after year? If my noble friend is in favour of keeping that target—which there is no purpose in having if it is never matched—what are the advantages of inflation?

[Lord Sassoon]

My Lords, the critical point is that, as my noble friend knows, the target for the Bank of England is a medium-term target. The Bank of England is wholly transparent about the situation in its quarterly inflation reports. In the latest reports, it has set out what the pressures have been on inflation in recent quarters and where they will be in the immediate future. Some of those pressures naturally come out of the figures over the next six months. It is quite right that the Governor and the MPC have and are committed to that target. It is important to realise that it is a medium-term target, and their judgment is that it is more likely that inflation will undershoot rather than exceed 2 per cent in the medium term. Indeed, that judgment is supported by the great majority of independent forecasts that I have seen.

[Lord Myners]

My Lords, the Question related to RPI and unemployment. I remind the Minister that RPI is at its highest level since June 1991 and unemployment is at its highest level since October 1994. The Governor of the Bank of England clearly feels that he has reached the end of the line in terms of monetary policy and inflation risk. What are the Government going to do to bring forward a credible, coherent and sustainable strategy for economic growth?

[Lord Sassoon]

First of all, as the noble Lord, Lord Myners, knows, the Governor of the Bank of England has set out very clearly his and the MPC’s analysis of the inflation situation and of their reasons for increasing by £75 billion the asset purchase scheme, so I am not going to answer for them. On unemployment, I would point out that in the second quarter of 2011 the internationally comparable employment rate for the UK was 69.4 per cent. That was the fourth highest employment rate in the G7, behind Canada, Germany and Japan and ahead of, among others, the US. We also had the seventh highest employment rate in the European Union in the second quarter. Of course we would wish to see growth increased, but we have to have sustainable growth. We should not put ourselves in the position of thinking that, on unemployment, we are out of line with our peer group. We are coming out of the deepest recession that we have known for many decades—and who caused that?

[Lord Martin of Springburn]

My Lords, I must tell the Minister that I welcome the fact that the Government are keen to see as many apprenticeships as possible. In that case, will he urge the authorities of this House and the other place to take on more apprentices and trainees? We have a fine building and many highly skilled people, and it would be good if we showed a good example by employing more apprentices and trainees in this very building.

[Lord Sassoon]

I am sure that the authorities of both Houses have heard what the noble Lord, Lord Martin of Springburn, has said. Of course, skills will be part of the supply-side reforms that we continue to work on going forward.

[Lord Eatwell]

Does the Minister agree that the very high rate of inflation in this country is one of the key factors leading to a significant reduction in the living standards of ordinary households and is therefore contributing to lower expenditure and lower employment? Will he explain to the House why, at over 5 per cent, the inflation rate in this country is almost double that of all other European countries and that of the United States?

[Lord Sassoon]

My Lords, the noble Lord, Lord Eatwell, seeks to get me to commentate on matters that we have given to the independent Monetary Policy Committee of the Bank of England. It was the party opposite in government who took the right step of giving the Bank of England independence. Therefore, as I have already explained twice in my answers today, it is for the Bank to explain, as it does very transparently, the track of inflation. The Government are ensuring that we relieve wherever we can the pressures on household bills because I accept that inflation puts a high burden on our households. That is why we cut fuel duty by 1p per litre in the Budget and why we announced in recent weeks a further £805 million to enable council tax to be frozen for a further year. The Government are concerned to make sure that our hard-pressed households are relieved of pressures. That is why we need to keep interest rates low, which have contributed to £10 billion of lower mortgage payments than there would otherwise have been.

Business of the House

Thursday 27th October 2011 Lords Chamber

Timing of Debates

23:37

Moved By

[Lord Strathclyde]

That the debate on the Motion in the name of Baroness Prosser set down for today shall be limited to three and a half hours and that in the name of Lord Knight of Weymouth to one and a half hours.

Motion agreed.

Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) (No. 2) Order 2011

Thursday 27th October 2011 Lords Chamber

Al-Qaida (Asset-Freezing) Regulations 2011

Statistics and Registration Service Act 2007 (Disclosure of Pupil Information by Welsh Ministers) Regulations 2011

Local Authorities (Contracting Out of Community Infrastructure Levy Functions) Order 2011

Legal Services Act 2007 (Appeals from Licensing Authority Decisions) (No. 2) Order 2011

Statistics and Registration Service Act 2007 (Disclosure of Value Added Tax Information) Regulations 2011

West Northamptonshire Development Corporation (Area and Constitution) (Amendment) Order 2011

London Olympic Games and Paralympic Games (Advertising and Trading) (England) Regulations 2011

Motion to Refer to Grand Committee

23:37

Moved By

[Lord Strathclyde]

To move that the draft orders and regulations be referred to a Grand Committee.

Employment

Thursday 27th October 2011 Lords Chamber

Debate

11:38

Moved By

[Baroness Prosser]

To call attention to the changing world of employment; and to move for papers.

[Baroness Prosser]

My Lords, I am privileged and pleased to be able to introduce this debate—

[Baroness Anelay of St Johns]

My Lords, I suggest that we observe the usual courtesies of this House, which are that first we leave quietly and secondly that we do not walk in front of the person trying to speak.

[Noble Lords]

Hear, hear!

[Baroness Prosser]

Whatever happened to the gentlemen?

I am privileged and pleased to be able to introduce this Labour debate on the changing world of employment. The subject is wide and encompasses issues to do with the economy, education, welfare and services as well, of course, as employment policy. My contribution will range across these areas, ending with some proposals for action.

Most noble Lords will recall the days when, educated or otherwise, qualified or not, a person could walk into a job at any time and, if they did not like it, they could walk out and into another one. The need for hands was very great. Factories employed people in their thousands. Rural areas employed miners in hundreds of communities and the supply chain of pit props, clothing, safety equipment et cetera kept the money going round in villages and towns throughout the land.

Opportunities did not, of course, abound for everyone. Very limited childcare facilities and opportunities for part-time work meant that most women had the choice of staying at home or finding jobs that could fit around their husband’s employment—evening and morning shifts, in the main. Flexibility of attendance was unheard of, and opportunities for people with disabilities were even more limited than they are today. Newcomers to the country faced hostility, and were herded into jobs that no one else wanted.

Then came the 1980s and the Thatcher Administration— the second industrial revolution, as it was called. Things which were going to change anyway suddenly changed very rapidly. Globalisation was making itself felt, and manufacturing took flight, commencing its round-the-world quest for the cheapest dollar. Mines closed in their hundreds, leaving communities bereft and groundless, and new technology took hold, introducing easier and faster methods of production than could be matched by the human hand.

I had some interesting conversations about that time with international trade union colleagues. One man at a metalworkers’ conference complained that a French company—which, by the way, had been a big employer in the United Kingdom—had left his country, Malaysia, and was now setting up in cheaper Vietnam. Ironic, I thought.

In the 30 years since this shift started we have seen a profound change in the labour market. After a sharp fall in the numbers employed in the 1980s, and apart from a blip downwards in around 1991-92, employment figures have risen steadily, with an extra 4 million people in employment between 1993 and 2008. Of course, during that time the structure of the labour market has changed.

According to figures contained in the excellent IPPR report, “Jobs for the future”, the agriculture and fishing sector is down by 27 per cent, manufacturing down by 31 per cent, and electricity and gas down by almost half. Increases came in real estate, up by a whopping 103 per cent, and information and communications, up by 59 per cent, with health and social work, education, arts, entertainment and recreation all also significantly higher. So there has been a major shift from blue collar manual work—or “full-time, proper jobs”, as some in the trade union movement used to rather patronisingly say—to jobs requiring different skills and certainly a more formally educated workforce. There are more jobs for women, too. Clearly, this major change in the nature of the workforce called for a shift in trade union activity and emphasis. My own union—the T&G, as was—supported by the TUC, ran a major campaign led by the noble Lord, Lord Morris of Handsworth, with the slogan “Full-time rights for part-time workers and permanent rights for temporary workers”. These aims have been achieved, although it has taken almost until now to settle the agency workers directive.

In a spirit of meanness, the Government of 1993 removed many low-paid and largely non-union workers from the protection of the wages boards. One woman member of the T&G executive council, who worked as a bartender in the north-east, did not get a pay rise until six years later, when Labour introduced the national minimum wage in 1999. Many workers in unorganised workplaces received paid holidays for the first time, via the introduction of the working time directive.

The right to request flexibility was introduced by the Labour Government, and despite the musings of some policy wonks—most of whom have never set foot in a workplace outside of Westminster—I believe it is recognised by most employers as both helpful and essential. Also courtesy of the previous Government, the real needs of working parents were recognised by fiscal initiatives which provided meaningful help towards childcare costs, making it economically viable to participate in the labour market.

The national minimum wage mentioned above was introduced amid an exaggerated furore of likely job losses. Four million jobs later, that was shown up for the myth that it was. Since then there has been the emphasis on education, and improving standards for all. I do not, of course, disagree with that intention. I do, however, question what I would describe as a bias towards academia at the expense of vocational training.

Not everyone is cut out for academic work; anyway, the country also needs people with practical skills. During this period, we have seen too many young people convinced that a university education is the only or best option and taking degree courses in subjects not remotely linked to the needs of the labour market.

All of this was very well while everything else in the garden was rosy. The shift from making things to a service-based economy goes back many years and the growth of the finance sector has its roots pre-1997. Very neatly, of course, the taxes paid by extremely well paid financial workers paid the bills for the growth of public services, which I must say were in need of investment following the funding blight of the 1980s, but now we come full circle. The banking bubble has burst and a new Administration rule the Westminster agenda. The financial situation is of course very difficult—it would be crass to pretend otherwise—but simply cutting away all the advances that have been made in the past 15 or so years does not fill me or, I suggest, the great British public with confidence.

The idea mooted by the Chancellor of the Exchequer, and repeated this week by Michael Gove, that reducing workers’ employment rights is going to boost jobs would be hilariously funny if it were not so tragic and frankly ridiculous. Taking away education maintenance allowances, collapsing the Future Jobs Fund, cancelling the right to work experience and increasing fees to attend university are taking this debate in completely the wrong direction. This week’s report by the IFS states that education spending is being slashed by 14 per cent, the largest cut since the 1950s. How mad is that? We need a strategy that recognises the global nature of the dilemma in which we find ourselves. PwC's recent report, The World in 2050, says in its summary:

“Rapid growth in consumer markets in the major emerging economies, associated with a fast-growing middle class, will provide great new opportunities for western companies that can establish themselves in these markets”.

It goes on to say that,

“Western companies will increasingly be playing in the slow lane of history if they continue to focus on markets in North America and Western Europe”.

According to this report, the UK currently sells around 7 per cent of its exports to the BRIC countries, about the same as we export to Ireland.

So what do we need to do? First, I suggest we need to get a long-term strategy which encompasses the recognition that we are a global player in a world which is fast overtaking us. Long-termism is not of course a familiar political concept, with most politicians operating on the maxim of jam today and heaven tomorrow. However, none of us will be thanked in the future if we do not work towards the United Kingdom taking a leading role in the world’s economic development.

Secondly, we need to invest as much as possible in the education and training of the population, with better support for school pupils making choices about their studies, opportunities for them to experience work and for employers to build relationships with schools. We need more money going into vocational training, including opportunities for young people to retrain or to take up apprenticeships at a more mature stage in their lives. Lots of youngsters do not do well at school; then, when they are 25 or 30, they realise that they could have done better. We waste talent and lose spending power by not giving second chances to such folk. Equally, we need second chances for women post having children. The Women and Work Commission report produced in 2006 estimated that increasing women’s participation in the labour market could be worth between £15 billion and £23 billion each year to the Exchequer.

Thirdly, we need to invest in research—not an area where we have in the past covered ourselves in glory. General manufacture in large volume is not likely to return to this country. Wages and general costs prohibit that—all the more reason, therefore, to invest in innovation and new ideas.

Fourthly, we need to wake up to the fact that society has changed. Expectations among groups which have long been left behind or marginalised have shifted over the years and remaining at the bottom of the heap will not be quietly tolerated for ever. Positive action programmes to help employers understand the value of diversity in the workplace would go a long way towards breaking down myths and barriers. We cannot afford to leave great swathes of the population on the unemployment shelf just because we are not used to coping with disability, for example, or difference. These are just a few ideas which are essential to aid the UK’s recovery and to launch us back into the global marketplace. Failure to act will not only see the UK limping along, looking like a second-class has-been, but exacerbate the already unacceptable wealth gap and lead to an unhappy and divided society.

There are, of course, a number of immediate initiatives which the Government should take to deal with the current high rate of unemployment. I am sure that other noble Lords will address some of these issues in their contributions.

11:50

[Baroness Brinton]

My Lords, I thank the noble Baroness, Lady Prosser, for instigating this important debate on the changing world of employment. In the enormous breadth of the subject, I want to focus on vocational routes to employment.

For those of us coming to the last few years of our working life span, compared to those struggling at the moment to find their first job, our prospects, career progression and expectations, both good and bad, were often clearly signposted and, frankly, there was not much opportunity to deviate from the pre-ordained route. In the late 1990s, as the senior bursar of Selwyn College, Cambridge, I saw for myself how drastically the changing needs of the employment market were affecting jobs within the college. Our loyal and devoted maintenance manager took retirement at 65. He had left school at 14, been an apprentice to a carpenter, and when he became a carpenter in his own right—no formal qualifications in those days, just serving his time and learning from his apprentice master—had joined the college’s maintenance team in his 20s. He was always the first to admit that his key skills were low. His successor, by contrast, had a higher national diploma, equivalent to a vocational degree, and, frankly, he needed it. The health and safety requirements of the post, as well as the functional skills needed to specify building contracts, monitor and deliver them to budget, deal with personnel issues relating to his staff as well as provide customer service to other staff and students in the college meant that the job had become very different.

Other speakers may want to focus on the knowledge-intensive industries, but I want to spend a little time looking at the vocational needs of employers and employees. The coalition Government have rightly focused on ensuring that apprenticeships are made more easily available, building on the work of the previous Government, and the 100,000 new apprenticeships are very welcome. However, I am sorry to say that I still hear frequent comments from further education colleges, young applicants and many others that employers are often reluctant to come forward and offer apprenticeships. I have spent much of the past 20 years in a number of roles working with key business stakeholders and with businesses, small and large, trying to understand how we can resolve the eternal conundrum whereby businesses say that they cannot recruit youngsters with the right qualifications and skills, but they will not take responsibility for training them in apprenticeships.

There are, of course, many notable exceptions. I shall highlight just one. Marshall Aerospace of Cambridge has led the way in developing apprenticeships and advanced apprenticeships with clear career progression on to higher education. It is expected that many of the 16 year-olds it takes on will, during their time with the company, earn while they learn and, as important, make a serious contribution to the company and its bottom line. Many will end up with a master’s degree or PhD and this is not just in the obvious area of aerospace engineering: it has them in IT design, business skills and a range of other areas as well. So popular are the apprenticeships that the company now runs taster days for local schools and offers advice and guidance to young people about whether this is the right route for them.

I know this from personal experience. My foster son attended such a taster day, and he was grateful that at the end of it he felt, and indeed Marshall advised him, that it was not the right route for him—very helpful for someone at 14 or 15 to have that advice. Marshall believes that it is in its best interests as a company to take this course of action where other businesses might say that it is too expensive. I say that Marshall’s results speak for themselves.

If employers say that our young people are not work-ready, we must continue to look at the core functional skills that they have mastered as they come to leave school, especially those not following the more academic route. It is absolutely vital that every young person continues to get support in functional skills, formerly known as key skills, until they have mastered them. My illustration of the maintenance manager for the 21st century shows that. However, even fast food jobs these days require IT and literacy skills. Gone are the days when a lad in a sandwich bar just needed his manual skills. Often people will e-mail in their lunch orders or, in larger chains, an order will be taken down on a computer and another staff member will download it, read it and deliver it. There are many other examples. There are very few jobs these days that need no skills.

I want to return to the issue of technicians and vocational training. The UK Skills Commission has recently published its report on technicians and progression, and I support much of its findings. It is absolutely right to say that technicians are the unsung heroes of the UK’s leading industries. If we are to provide an effective workforce to reinvigorate our major industries, including manufacturing—I agree with the comment made by the noble Baroness, Lady Prosser, that we are unlikely to become a major manufacturing nation again, but I am confident that we can significantly improve manufacturing in this country—we must change our approach and our culture to encourage young people as early as possible to see engineering and other technical roles as attractive as the current fashionable but for the vast majority, frankly, unattainable status of footballers and celebrities.

The report states:

“For the first time, we have the opportunity to develop a technical pathway in schools, through further education and universities and into the professions. University Technical Colleges, specialist academies and some free schools are beginning to establish employer-led, technical 14-19 provision. This should be expanded further and fully integrated into post-compulsory education”.

My only additional comment is that I would welcome it being mainstreamed into community schools as well; it should not just be the preserve of specialist schools.

I take further issue with the report in that I think that starting at 14 is too late. Many universities currently run schemes such as the Cambridge University STIMULUS scheme where students reading maths, science and engineering go into primary schools to work alongside teachers to engender some enthusiasm for those subjects among nine, 10 and 11 year-olds. I have seen this as chair of the governors of a primary school in Cambridge where young people, who had decided that maths was probably a bit too difficult, really thought that it was something that they would want to continue with at secondary school—particularly girls. We definitely need to see more girls taking science at secondary school because otherwise, frankly, they have locked themselves out of engineering as a future route.

I also welcome the Skills Commission report on a new professionalism and registration proposal for technicians, but is it new? Traditional vocational skills are perhaps returning to the pre-1960s craft skills routes but, I hope, better documented and run with a higher functional and specialist skills route. The report also talks about a learner-driven system, but I have two caveats. First, we must ensure that young people have access to information, advice and guidance, especially those not following the academic route. I am grateful to the Government for allowing statutory advice and guidance in the Education Bill that is going through this House at the moment, which will ensure professionalism among careers staff and face-to-face advice for young people who come from the most disadvantaged backgrounds and who will not be following an obvious academic route. Secondly, we must encourage small and medium-sized enterprises, which, frankly, are the key driver of our economy—13 million individuals, creating 65 per cent of new jobs in the country—to invest in training, particularly technician training. With the Government’s offer on apprenticeships, it should be available to them. We must do everything that we can to encourage them to take it up.

I want to end on an upbeat note. Anyone who attended WorldSkills, hosted by the UK this summer and brilliantly run by UK Skills, would have seen an absolutely impressive demonstration and showcase of our best talent in all 46 skill areas. Anybody going around the extensive exhibition would have noted not just those doing the demonstrations but the enthusiasm, energy and excitement of the schoolchildren attending and watching our entrants and those from 47 other countries showing what they can contribute to their professions. If UK Skills can demonstrate the absolute strength of this country in the technical and vocational area, let us use that to harness it and make sure that in the future our technicians are the sung, not the unsung, heroes of our economy.

12:01

[Lord Kestenbaum]

My Lords, I congratulate my noble friend Lady Prosser on securing this vital debate. Its urgency seems driven very much by two different influences, one external and the other much closer to home. Externally, the days of economic power being concentrated in the hands of a few predictable nations—we were fortunate enough to be one of them—seem very long gone, as the noble Baroness mentioned. Consider the shift. In 1980 only 6 per cent of United States research and development was conducted overseas, yet 25 years later there are 750 foreign research and development centres in China. India produces 1.4 million engineers as graduates and 6,000 science PhDs. These are economic revolutions. China and India in particular, as we have seen, are the most profound threats to our own competitive advantage, not least because they have aggressive national strategies to prepare them for our very subject today—the changing world of employment.

The second influence is surely internal, namely the scale of job creation needed in the coming years as a consequence of deficit reduction—two words that have a huge impact on human misery. The Office for Budget Responsibility forecast is that between now and 2016, 610,000 public sector jobs will be lost. In addition, PWC’s estimate is that 500,000 private sector jobs that are dependent on public contracts will go, too. That will be 1.1 million jobs lost over the next five years, which makes our concerns today very real and very human. Therefore, I will focus my comments on two particular elements of this challenge: first, how growth will be at the heart of new employment; and, secondly, following on from the noble Baroness, whether our new workforce is being equipped with the right skills for this new economy.

In one sense, as the blight of worklessness increases, we know broadly where the new jobs will be. We increasingly talk of three things: a focus on core areas of strength—advanced manufacturing, aerospace and pharma; growing advantage in highly competitive smaller areas such as video games, visual effects, design and the creative industries; and the potential golden eggs of our economic future, namely graphene and biotech. Stian Westlake’s work at NESTA—where I used to be CEO—which he neatly calls Rebalancing Act, captures this rather well. Once we look deeper, not just at sectors but at which types of firms are really creating jobs, an interesting picture emerges. All the evidence shows, again and again, as my noble friend Lady Prosser said, that innovative, high-growth firms will produce the jobs of the future. NESTA’s research into high-growth is cited often in this House. It shows that 7 per cent of businesses in the UK, classified as high-growth, have been responsible for half the new jobs in the past decade. Seven per cent of our firms are producing half the new jobs.

What do the firms who are most likely to create new jobs have in common? Again, the evidence seems clear. They are not concentrated in particular sectors. Pleasingly, they are not found predominantly in one part of the country. That is good news. Rather, one factor links them all, and that is that they are disproportionately likely to innovate. These pockets of the innovation economy, from semiconductor clusters in the south-west of England to the creative industries hubs of eastern Scotland, could very well be the heartbeat of new employment.

My second point is that this changing world of employment will increasingly rest on skills. This innovation economy, as we know, needs the right economic infrastructure, access to capital and intelligent public policy, but above all it needs a very new and imaginative approach to skills. In my current role as chief executive of Lord Rothschild’s family investment business we come face to face daily with the opportunity to back new industries, and this new economy seems to require a new set of skills from the workforce that we meet. Not only does this involve the combination of technological, scientific and mathematical aptitude which one would expect but, increasingly, creative skills—particularly design—are coming to the fore. Most recent surveys show that employers also want the “softer” skills from their workforce: teamwork, collaboration, communication, problem-solving. I am sorry for that word because it does not capture it adequately, but for “softer” do not read “trivial”. It would be very helpful to know the Government’s approach to the crucial challenge of a new set of skills for a new economy, particularly—following on from the noble Baroness—learning these job-relevant skills at university. This is definitely a vital area for imaginative public policy.

My comments have focused on these two preconditions for employment in a changing world—high-growth firms and appropriate skills—but perhaps I may make one final observation. If we want new jobs, we cannot ignore innovative firms. There is, however, a human cost. For high-growth firms to flourish, poorly performing businesses must, as we know, shed staff and go under. Amidst all our talk of a new economy, we cannot be blasé about its effects on human beings. The noble Lord, Lord Layard, has written powerfully of the misery that worklessness creates. We need a system that allows our best businesses to thrive and create jobs, but we also need one that creates chances for those who fear unemployment or find themselves out of work, victims of what Schumpeter would have called “creative destruction”. It would be helpful to know what such a system is. Perhaps the German short-time compensation scheme the Kurzarbeit might be a useful model, and there are no doubt others which are imaginative partnerships between government, labour and business.

I make these concluding remarks on the social safety net not just because without it the human cost of this new economy is simply unacceptable, but, more broadly, because this debate is as much about the society we wish to build as it is about the economy which will help build it.

12:08

[Baroness Gould of Potternewton]

My Lords, I also thank my noble friend Lady Prosser for initiating this very timely debate, which is about changing the world of employment. I thought a lot about this and about the ideal that I would really like. At the end of the day, I decided that I could not talk about the ideal without talking about the present. It is a very sad, negative story about employment at present. On 12 October, at the Prime Minister’s Question Time, he accepted responsibility for everything that happens in the economy. That must include responsibility for the highest level of unemployment in 17 years, with over 2.5 million people without jobs and 1,200 extra people each and every single day becoming unemployed. One in five young people is out of work, with over 800 extra young people each day. Youth unemployment is near the 1 million mark, the highest number since corporate records began in 1992.

One of the first acts of the coalition was to scrap Labour’s Future Jobs Fund, which helped young people into work; and to introduce the work programme, which gives no guarantee of jobs for the future. The abolition of the Future Jobs Fund was all the more surprising because on 10 March 2010, just before the general election, the current Prime Minister referred to it as a “good scheme”. Why abolish it? A further advantage of the scheme was that it enabled partnerships with apprenticeship programmes, providing additional work placements for apprentices, and could have created up to 200,000 full-time paid jobs for young people up and down the country.

The noble Baroness, Lady Brinton, referred to the reluctance of some employers to train young people at work. I am a great believer in training on the job. We really must encourage more activity by employers to do that. Not satisfied with abandoning the fund, the Government have cancelled a number of schemes to help young people get on in life—starting with the very young and the abandonment of child trust funds, the ill thought-through plans to scrap the education maintenance allowance and the tripling of tuition fees.

Putting young people on the dole is not just a waste of talent but a waste of money. It does not make economic sense—not only in the short term but in the long term. There is strong evidence that if a young person cannot establish themselves in work early in their careers, they will find it much more difficult to do so later on. The lost generation of the 1980s—a whole generation of young people—grew up in Britain with little or no hope of a job. We must not let that happen to this generation of young people.

There are now more women unemployed than at any time since 1988. Redundancies in the public sector are dominated by women. To make it worse, the Government's welfare reforms actually penalise families in work by cutting support for childcare for parents who want to work; and by the end of this Parliament, it is estimated that the Government will have slashed the support for families with children by nearly £7 billion.

There is a pattern. All this has not happened by accident, but by design—and I say that with the greatest respect to Members opposite. It is a political choice, not a necessity. For instance, the Government have now accepted that women are being the hardest hit, whether it is because of the cuts in services, benefits or unemployment. I do not believe for one moment that the Government were previously unaware of the consequences for women and their families when those actions were taken. What is happening today takes me back to the 1980s, when women again bore a disproportionate share of the increased rate of unemployment. Women were then, as now, vulnerable to the actions of a Conservative Government. Also at that time, unemployment topped 3 million twice and less than one-fifth of 16 year-olds had a job. We cannot go back.

One accepts that like in every other country it was necessary to reduce the deficit, but for me there is something illogical in the Government’s philosophy. I am not an economist but I try to use my common sense: rather than generating jobs and making work pay, if you have more people on the dole who are not in work paying taxes but claiming benefits instead, it means that the Government have to borrow more, costing Britain an extra £500 million from the Treasury for every 100,000 people out of work. That surely cannot be sense. We were told by the Government not to worry about the loss of public sector jobs because the private sector would make up the shortfall. Those were fine words that have proved completely false. The Treasury is now forecasting that 700,000 jobs will be lost in the private sector.

The consequences of the Health and Social Care Bill will further exacerbate the problem. The reforms raise all the questions about workforce planning, education and training. Staff in the NHS are already in the midst of a pay freeze and their pensions are threatened with the triple whammy of paying more, working longer and receiving less in retirement. On top of this, despite revising down the figures used in their latest impact assessment, the Government still anticipate nearly 13,000 redundancies as a result of their planned reorganisation. This represents a personal tragedy for those affected and a colossal waste of talent, skills and resources at a time when the NHS can ill afford it. Even with the revised figures, the Government still predict redundancy costs alone running to £810 million.

The Government have failed to acknowledge the need to retain national workforce structures for terms and conditions, pay and bargaining—in breach of staff rights set out in the NHS constitution, which the Government said they would honour. The Bill will allow new commissioning groups greater leeway to break away from the Agenda for Change pay system. Not only does this rob health staff of certainty about their pay and conditions, but the potential for local pay negotiations also creates a massive extra administrative burden for local negotiators. Undermining the Agenda for Change may lead to an increase in equal pay litigation for the NHS—something which the existing system was designed to avoid.

The “any qualified provider” policy will make it extremely difficult to plan staffing and training placement, as providers will not have any guarantees of the volume of work they can expect. How is it to be ensured that there will be sufficient workforce to meet the needs, as the needs are not yet known?

The reforms, as if not a large enough upheaval for NHS staff on their own, are taking place alongside the expected efficiency savings of £20 billion over the next four years, which is already having an increasingly negative effect on services and staff. For example, the RCN’s Frontline First campaign has found that over 40,000 posts have been earmarked for removal from the NHS by employers looking to save money. This causes the RCN serious concerns that the dual reform of efficiency savings within the NHS is adversely affecting the quality of care and the safety of patients. Somehow the Government fail to understand the consequences of reducing the number of front-line staff. The right way to get a better health service is to get the best out of people. This requires a well trained, supported and rewarded workforce.

There are those who believe that the rising employment of older workers leads to the creation of youth unemployment—a position completely refuted by the TUC, which points out that they tend to do the jobs that the young unemployed might not expect to do. The main reason for the job crisis among young people is that not enough jobs have been created. Many older people choose to work, but many do so out of necessity. Low wages and poor pension provision—particularly in the private sector—coupled with rising inflation have made work a necessity, and we should all respect that, instead of trying to use it as an excuse for youth unemployment.

A statement from the Department for Business, Innovation and Skills says that a successful UK economy will depend on the skills and contribution of the older people in the workforce, but it relies on much more than that. It relies on a faster growing economy and on the Government actually looking again at their plans. We heard in Question Time the Government’s determination to stick to their three-point plan; but without change—without a real plan for growth—we are going to see unemployment continue to rise and the welfare bill continue to go up.

12:17

[Baroness Randerson]

My Lords, this is such a wide topic for debate, with so many facets, that it is obviously possible to touch on only one or two in the time available. I therefore intend to concentrate on the growth of so-called flexibility in the world of employment. Job descriptions are constantly changing. I remember that back in the 1970s, we frequently heard of the workforce working to rule. We do not seem to hear that phrase often these days: I suspect that is because the rules are always changing, and it is difficult to justify sticking to any particular rules. People entering the job market these days can frequently expect short-term contracts, even in the most skilled and highly paid professions. Agency working is very common, and the nine-to-five day and formal overtime pay—double at the weekends—have largely gone, with employees expected to be flexible in their working hours. Part-time working is increasingly common, and it is this I want to focus on, because the growth of part-time working is at one and the same time a bonus and a problem.

For the employee looking for a long-term career, the abundance of part-time jobs can be a frustration. It is often the case that people assemble a whole suite of part-time jobs in order to earn enough to live. Clearly, those people would far rather have a single job in full-time paid employment. However, it is the growth of part-time employment which has enabled so many women to combine employment with caring responsibilities. Although increasingly men undertake parenting responsibilities, women are still the predominant carers of children and of relatives, whether they are older or disabled.

The increase in part-time working is of course not unique to Britain. On average, it has increased steadily across all OECD countries since the mid-1990s, although there are very wide variations in the rate. One should not take that pattern of part-time working for granted. One country differs considerably from another, and there are some notable exceptions to the general trend. In Japan and the US, the amount of part-time working has decreased over the past 15 years. In some countries—the Slovak Republic, for example—part-time working is very rare, and one can understand why that might be the case, whereas in the Netherlands 60 per cent of women work part time. The UK is towards the top end, with about 40 per cent of women and 10 per cent of men in the workforce now working part-time.

To appreciate the complexity of the picture of part-time working, we just have to look at one profession. Let us take medicine as an example. More than half of all medical school graduates are now female; 38 per cent of GPs are female; and, of those, 35 per cent are GP principals. However, of those female GP principals, only 53 per cent work full time. Therefore, 47 per cent of female GP principals—now a very common set-up—work part time.

Having spoken to female GPs, it is absolutely clear to me that they are tremendously attracted by part-time working. It has enabled them to pursue a career, to have ambition and, at the same time, to look after families. That is key for them. Yet from time to time the medical profession complains that the number of part-time GPs is a problem in the development and management of local practices. Therefore, one can see the problem that we face.

However, there are worrying signs relating to the growth of part-time working, and that is something to which I want to draw noble Lords’ attention. In my own area in Wales, recent statistics show that within the past year there has been a reduction in full-time workers of 1.3 per cent, but there has been a 3.7 per cent growth over the same period in the number of part-time workers. There has also been a 9.2 per cent increase in the past year in the number of temporary employees. One can understand entirely that this is a response to the hard economic times in which we live. It is important that we also bear in mind that the pattern of employment in Wales has been predominantly, or very commonly, in the public sector and that part-time working has been more common in the private sector, which is creating some of the jobs that are needed in place of those in the public sector employment. However, if that pattern of increasing temporary and part-time employment goes on for too long, it will have implications for the stability of the workforce and the polarisation of income. I am sure that all noble Lords are aware that some part-time jobs, although by no means all, can be badly paid.

I have referred to part-time jobs fitting the lifestyles and needs of women but I also need to refer to the recent growth in the number of older workers, which has come about as a result of our ageing population. The Government have recently removed the compulsory retirement age. They are to be sincerely congratulated on that because it will free up many people who wish or need to work beyond retirement age. Many of those who wish to work beyond retirement age also wish to wind down; they want to work, but they do not want to work as hard or as long as they have in the past and part-time work suits them. The fastest growing group of workers between 2007 and 2009 was those aged over 65 and the second fastest growing group was those aged between 60 and 65. The Government’s recent decision on older people and the compulsory retirement age will add impetus to that.

I briefly want to mention a third group who particularly look to part-time work. That is young people who are still in education. For many decades students have traditionally taken jobs in the vacation, but since the introduction of tuition fees under the previous Government, it is now the norm for students at college and at university, studying on full-time courses, to have employment in the evenings and at weekends, which can have an impact on their ability, in some cases, to cope with their studies. For that reason, I am very pleased that, in the future, the repayment terms for tuition fees for young people will enable them to wait until they have graduated before they repay them.

In conclusion, we are walking a tightrope on part-time working. It suits an increasing number of groups of people and, therefore, is to be welcomed. However, there is a downside: in some cases, there is an association with low pay and fewer career opportunities. The difficult task facing any Government will be to foster the positive while controlling the negative aspects of this. I believe that although we now have a firm legislative basis for part-time working we still need to raise awareness among employers of the treasure trove of experience that part-time workers have to give to the work force.

12:27

[Lord Collins of Highbury]

My Lords, I am very pleased to be able to speak in this debate and I am very grateful to my noble friend Lady Prosser for initiating it. The world of work has certainly changed significantly in recent decades and must continue to do so, not only to ensure that Britain is as competitive as it can be, but also to ensure that it is as fair as it can be.

As I said in my first contribution to this House, the early death of my father meant that my mother was faced with the loss of her husband, her home and her livelihood in short succession. She was determined to provide for her children, and her hard work and resolve secured our future. Yet my mother would have been the first to acknowledge that things might have turned out very differently had it not been for the progress achieved through politics. It was the Equal Pay Act that transformed my family’s income and provided a level playing field for women like my mother. It was changes in the law that gave my mother protection from exploitation and it was changes in the law that enabled her to become an economically active individual rather than dependent on the state. I am very concerned that, amidst all the talk of rolling back red tape or ridding ourselves of EU regulation, we must be very careful that we do not also roll back those 30 years of progress. My mother’s struggle then is the struggle of thousands of working women now. They support their families and they grow the economy. If we make it harder for them to work and drive down the economy, we will only make it harder for ourselves.

In recent times, I cannot think of an area where the world of employment has changed as much as for the estimated 3.7 million lesbian, gay and bisexual people in our country. I think it is important to remember that, until the previous Government took action less than 10 years ago, it was entirely lawful for gay people to be refused a job or a promotion or to be sacked in this country simply because of the way they were born. Thankfully, this is no longer the case, in no small part also due to the campaigning work of many trades unions and organisations such as Stonewall.

Unusually, perhaps, it was the armed services that changed their treatment of gay personnel first, from 2000. The fact that, until then, the RAF was summarily dismissing fighter pilots for being gay, in spite of the £1.5 million cost of their training to the public purse, is a stark reminder that prejudice in the workplace is not only a human tragedy for those involved but also hugely costly to employers.

Changing the law was merely the first step in the process of changing the day-to-day working lives of gay people. I welcome the fact that they have demonstrably changed. Over 600 employers, for example, are now members of Stonewall's diversity champions programme. Those employers, including the Royal Navy, MI5, many police services and many major public companies, have all made a commitment to create workplaces where gay people can be themselves. Collectively those employers employ over 5.1 million people, and that is a real sign, perhaps, of the way that the world beyond Parliament is changing in the early years of the 21st century.

Furthermore, those employers are clear that doing this is not just the right thing to do, but makes sound business sense. Research has clearly demonstrated that gay people who feel able to be themselves at work are more productive, more creative, better team members and more loyal to the enterprise. As my noble friend Lord Kestenbaum said, it is these skills that we need to value.

Let us be clear, however. Thousands of people still experience discrimination at work simply because of their sexual orientation. Recent research from the Equality and Human Rights Commission revealed that almost a third of gay people go to work every day and feel unable to be open about their sexual orientation, unable to talk about their partners and their children in the way that heterosexual people may take for granted, simply because they fear how their colleagues may react. YouGov polling commissioned by Stonewall has shown that one in five gay people have experienced homophobic bullying at work from their colleagues.

We also need only to consider the near invisibility of openly gay people on the boards of FTSE 100 companies to see the impact that has. Gay people face their own pink plateau at work similar to that of women, disabled people and people from different ethnic groups. This is bad for people, but it is also bad for business. A company that does not allow its brightest and best to rise to the top will, in the end, damage its bottom line, a sentiment expressed so elegantly by my noble friend Lady Prosser and one that we all know is shared firmly by my noble friend Lord Davies of Abersoch.

Creating workplaces where all employees can be themselves need not be excessively expensive or complicated. If it were costly, would the many successful businesses that work in this area, such as IBM and Google, be so demonstrably in favour of making their workplaces better for gay employees? The answer is no. However, you do not have to be a large company to make a difference. Simple and practical steps can be taken by all employers, large and small, to create workplaces where everyone can contribute fully without fear of discrimination. I hope that we will see all employers creating those workplaces within our lifetimes.

12:35

[Lord Monks]

My Lords, I, too, start by expressing my appreciation to my noble friend Lady Prosser for initiating this timely and important debate. It is timely because the whole House must share the worries about rapidly rising unemployment, and it is important because the availability and quality of work is a good test of the health of a society.

By that test, our society has not been doing very well, especially on quality. It is not just the crisis. As a former trade union official, I have to report that wages in the UK grew by 56 per cent between 1978 and 2008. Not bad, you might think, until you know that GDP rose at twice that over the same period and that the share of profits rose very strongly, making a potent recipe for a widening gap between rich and poor.

As my noble friend Lady Prosser explained, there have been more managerial and professional jobs, a decline in middle and skilled jobs and a rise in routine, low-paid jobs. Why has this happened? Clearly, technological change and the rise of a global labour market have had an effect, but the roots of the problem lie in our underlying economic and political philosophy and the shift of power to a new global elite centred in financial service companies, especially, but not only, American ones. They enforced a new business model: the aggressive pursuit of shareholder value based on maximising short-term results. The outcome was successive waves of cost-cutting and retrenchment, designed, so it was said, to lift Britain out of its tepid entrepreneurial culture and to generate renewed dynamism.

It has not worked out like that. Instead, taking the long view, it has brought a slump in productive investment, lower productivity growth than in the 1950s and 1960s, a worsening balance of payments, an increase in debt, a rise in inequality and a capitalism in which the predator dealer has thrived. Now it has brought the mother and father of an economic crisis, termed the worst since the 1930s by the Governor of the Bank of England. The Government hope, indeed we all do, that a surge in growth and job creation in the private sector will absorb the people being displaced in the public sector. It is hard to be optimistic as the cuts curb demand for the products and services of the private sector, and I share the view of those on this side of the House that the cuts are too much, too fast.

One thing is crystal clear: our current economic model, predicated on the view that we are a post-industrial society with an inexorably shrinking manufacturing base, is bust. Reliance on services, financial and retail in particular, and on property and construction has been shown to be extremely vulnerable to instability, as well as promoting a widening gap between rich and poor. There is much talk about the need to rebalance our economy, but less idea about how to do it. Once you have lost leading-edge technology and export markets, it is not easy to make a recovery.

Cheap foreign competition has something to do with it, but how can we explain the relative success of the economies on the other side of the North Sea in keeping strong manufacturing sectors, developing new sectors and running positive balances of payments?

The facts are uncomfortable. The bonanzas of North Sea oil and the explosion of financial services are over. To prosper, we have to compete with the best in the real economy, which are our neighbours on the other side of the North Sea—social market economies, incidentally, with effective collective bargaining and influential worker involvement. Many in the UK might characterise this as a return to the 1970s, but it certainly is not. Unless the UK pulls together and innovates, our prospects are gloomy. That pulling together necessitates a commitment to greater equality. If we are all in it together, as the Prime Minister has said, we cannot have surging riches for a few while the lot of the majority worsens.

We need a better, more long-termist capitalism in which all the main stakeholders have influence, including the workers. We need financial services as servants of the economy, not masters of the universe. As the noble Lord, Lord Skidelsky, and others have argued, we need a national investment bank to support entrepreneurs, especially small and medium ones. We need investment in the green economy, in high grade manufacturing and in the arts, and we need a stronger vocational training system for all our people. We need more real engineering and less financial engineering.

We do not need cuts in employment protection, nor attempts to escape from the modest social obligations of the European single market. Perhaps I may ask the Minister what precisely the Prime Minister means when he talks about repatriating social policy from the EU to the UK. Does he mean repealing the entitlements that derive from the EU, such as the right to four weeks’ basic holiday, the right of workers to be informed and consulted about change, or the rights of part-time and temporary workers to equal treatment, of which we have heard something in this debate? Does he mean EU equality and health and safety standards, many of which are based on UK practice, which is among the very best in the EU and helps to raise standards in the new member states and in southern Europe? Or does the Prime Minister mean that he will block any new EU social measures applying in the UK, in which case I can report that there are very few such measures in the EU pipeline? What do the Government mean?

In conclusion, there must be no false contradiction between more jobs and better jobs. There must not be an approach which sells Britain as a place where exploitation is easy and workers are cheap. That might appeal to Mr Beecroft and any other venture capitalists working for the Prime Minister, but selling Britain in that way should not be the British answer to the jobs crisis. Raising our game must be the way forward.

12:43

[Lord Young of Norwood Green]

My Lords, I, too, congratulate my noble friend Lady Prosser on giving us the opportunity to debate what I believe to be one of the biggest challenges faced by all countries. The economy and employment will be the litmus test of the Government’s success and how they will be judged at the next general election. The coalition will not be able to continue the fiction that it was all the fault of the previous Government. When we left power, we had rescued the banks, introduced a number of successful measures to stimulate growth—for example, the car scrappage schemes and a cut in VAT—and a plan to reduce the deficit by half by 2015. No one on this side pretends that it would have been plain sailing but getting growth back into the economy would have been at the top of our agenda.

I congratulate the Library research department on the excellent briefing pack that it has provided; on many occasions, it is the unsung hero. On growth, the briefing pack states:

“UK GDP grew by a meagre 0.5% in 2008 and fell by 4.9% in 2009”.

After analysing that, it states that growth in the OECD and the UK,

“remained below that average in 2010. In the UK, the rescue measures implemented by the government during the recession, including emergency loans to recapitalise large banks, came at a time of sharply reduced tax revenue and so were funded by a large increase in the budget deficit. The Conservative-Liberal Democrat coalition has since announced cuts in government spending and increases in taxation to eliminate the structural deficit before 2015”.

I love the next couple of lines, which state:

“The extent to which this will act as a drag on growth during the recovery is a matter of debate among economists”.

You can say that again; it certainly is a matter of debate among economists. We still believe that the Government’s current policy is too far and too fast.

For the purposes of this debate, I want to focus on youth unemployment, which I believe is one of the biggest challenges, if not the biggest, that we face. Looking across to the Benches opposite, it is unfortunate that there is no one on the Conservative Back Benches here today speaking in this debate. Whatever their views, no one utters the terrible words “unemployment is a price worth paying” any longer, so we have progressed a bit. But, as my noble friend Lady Gould has reminded us, we have the highest youth unemployment since records began. As regards the impact of this, recently, on Radio 4 I heard a programme with young offenders. They were asked, “What’s the most important thing that would impact on your life that would stop you reoffending?”. The answer was, “Getting a job”. There were no ifs, buts or anything else, just the desire to get a job, which indicates the importance of this debate.

I shall now have to tread carefully or my noble friend Lady Gould might become my noble friend no longer. The Library briefing pack states:

“The fastest-growing group of workers between 2007 and 2009 was those aged 65 or over, followed by those aged between 60 and 65. These changes reflect an aging population, coupled with increasing life expectancies. These trends have led to rising activity rates and declining unemployment rates among older sections of the population. The age group in the working age population with the lowest activity and employments rates is those between 16 and 24. This is also the group with the highest unemployment rate. Conversely, the age group with the highest activity and employment rate is those aged between 35 and 49”.

I do not want this to be a battle but if you were a young person you could not help thinking, “Wait a minute, where are we going?”. It is not any good to lay blame. We have to look at the way in which we manage this change in the world of work. We still have what I have described in another debate as cliff-edge retirement. We have not got around to working out that we need to encourage people to depart from the world of work in a more phased and staged process, which would make some contribution.

I was interested in the point made by the noble Baroness, Lady Randerson, in relation to part-time working. I would suggest that flexible working overall has impacted on the world of work, which has changed dramatically. Looking at the whole scope of working life, the Government need to do much more to address this issue if we are to solve the problem of youth unemployment. It should be intergenerational. Of course it was a good thing to remove the retirement age of 65. I was in favour of doing that but we cannot leave it at that.

Young people face a number of challenges, as has already been said. The Future Jobs Fund has gone, as have education maintenance allowance and tuition fees. Let us look at this issue from their perspective. We are not generating too much hope. The loss of public sector jobs, without the consequent increases that we were told would happen in the private sector, will inevitably have an impact on youth unemployment, because of the impact on apprenticeships, to which I will come later.

I want to reflect on the question of skills. I agree with the noble Baroness, Lady Brinton, when she talked about the importance of key skills. They are vital. It is not just literacy and numeracy, although they are there. I would say you cannot do much, as we have described in this debate today, without IT skills as well. In the 21st century the key skills of literacy, numeracy and IT have to be there if we are talking about equipping young people for the world of work. My noble friend Lord Kestenbaum, who is unfortunately not here, uttered what I regard as the dreaded phrase: “soft skills”. Can we do away with that? They are not soft skills; they are essential skills for young people. You hear employers talk about soft skills, but turning up for work on time and being able to work as part of a team are not soft skills. The noble Baroness, Lady Brinton, referred to pre-apprenticeship schemes. There are a number of great schemes for getting young people ready for the world of work.

I want to praise the Government for what they are doing on apprenticeships because they are continuing the good work that we did. The previous Government rescued apprenticeships from near oblivion. We gave you a great foundation to build on. But I have a worry. Yes, this Government are spending more and getting more starts in apprenticeships, but a lot of them are adult apprenticeships. I do not knock adult apprenticeships because they are an important means of re-skilling, but we cannot take our eye off the ball for apprenticeships for young people aged 16 to 19. Every one that is created is a beacon of hope for a young person. We know that to be the case. As a young person at the age of 17 I was able to walk down the road and get an apprenticeship with what was then British Telecom. I do not think I would be able to do that any more. BT has 300 apprenticeships a year and 25,000 applications. So what can the Government do? The Leitch report has fallen out of fashion these days. We do not hear much about it but I think it was a very far-sighted report. My noble friend Lord Leitch said that there should be about 500,000 apprenticeships in learning by 2020 and that we ought to ensure that an apprenticeship place is available for all qualified young people by 2013, with significant growth in apprenticeships for older learners as well. We put that entitlement into the Apprenticeships, Skills, Children and Learning Act 2009. It was an ambitious entitlement but I believe it was the right thing to do. We tabled an amendment to this Education Bill, providing a bit more latitude given the difficulties, saying that entitlement should be there by 2015.

The problem we have with apprenticeships is not the number of starts, which is okay. There is a much more worrying statistic if you scratch beneath the surface and that is the number of employers who take on apprentices. It is still pathetically low with something between 4 per cent and 8 per cent overall. Even in the FTSE 100 companies it is only a third. I continually meet employers who, when I talk to them about apprenticeships, seem to know little or nothing about them. So what can be done? The Government have to lead by example. I cannot understand why this Government are still refusing to accept that a requirement to employ apprenticeships as part of a public procurement contract should be mandatory. We did it; we got over 300 apprentices for the Olympics and a promise of 400 for Crossrail. Why on earth are this Government taking that requirement away? What sort of signal is that giving to employers? More could be done on the small and medium-sized employer front as well with group training associations. The number of apprenticeships starts is okay but we need to get every employer in this country to understand that apprenticeships are not a burden but a great stimulus to any company and vital. If we do not solve this problem we know that, in terms of young offenders and disenchantment generally in young people, we will pay a much higher price in the future.

12:54

[Lord Desai]

My Lords, I thank my noble friend Lady Prosser for introducing this debate and for the very skilled way in which she did it. She started by saying that once upon a time there was an economy in the UK and that manufacturing was a major part of it. It used to be said that 48 years, 48 weeks per year and 48 hours per week was the way that traditional working-class employment was carried on. For various reasons, but mainly because of globalisation and a massive shift in jobs away from the western world as a whole to Asia and other parts where labour was cheaper, we had a fundamental transformation— not only us but also the US and various other economies. We managed for a while by shifting to a variety of service industries and what we might call abstract goods—design, fashion, music, banking and others. There were some highly paid jobs in the service sector and lots of low-paid jobs in retail and things like that. What has now happened is that we have come to the end of that revolution. That transformation has occurred and the news is much worse than most people think.

We have fundamentally to rethink where the competitive areas in which we will create sustainable, long-term jobs are going to be. As my noble friend Lady Prosser said, it is not conceivable that we will get back to manufacturing on anything like the scale that we were at. Perhaps my noble friend Lord Monks is right; we may be able to do something more like the economies across the North Sea. But that requires a level of savings and investment which we have not been able to achieve for a long time. One of the peculiar things that happened during the long boom of 1992 to 2007 was that households steadily lost the habit of saving. We convinced ourselves that there was no need to save as long as you could buy a house. If you bought a house, appreciation in the value of that house was enough to compensate for any savings you did not have. Lately savings rates have gone up but we fell to a practically negative savings rate in the household sector. The same thing happened in the government sector. Our problem is going to be that we will have to recover some of the jobs we have lost and create new jobs. The question will be where those jobs are going to come from.

An additional factor, to which some noble Lords have already referred, is that as our dependency ratio gets very high with fewer active working-aged people compared to retired people, those who are going to retire will have to work longer hours for more years and those who are of an active working age—say, 15 to 55 or 20 to 55—will have to save more in order to finance their retirement as well as the various other demands which are going to be made on us for care of the elderly and so on. We face a profound crisis of undersaving and if we do not tackle that crisis, it will be difficult for us to create the kind of jobs that will sustain our economy. As many noble Lords have already said, the key to recreating those jobs will be investment, whatever the short-term considerations and the seriousness of the recession, which I do not deny. I do not think it will be easy to get out of the recession any faster, but getting out of it is crucially dependent on us being able to find new innovative sectors where investment can take place now, regardless of the state of current demand, and then employing people in those sectors. Obviously green technologies are going to be a major factor, but things like healthcare technologies are also going to be crucial. We will have to adapt our lifestyle to be able to deal with people who not only live longer but want to have a quality of life that is much better than that which their parents had. These are opportunities for us to be able to create jobs. They will be jobs that are skilled in terms of numeracy, literacy and IT; they will also be skilled in terms of training oneself in nursing or personal care. On the one hand, we will need a lot of green technological jobs; on the other, we will need lots of personal care-type, one-to-one jobs. To finance them, we will have to have an economy that is different from that which we have had so far. It will be much more severely restrictive of consumption growth, more discouraging of the wild house-buying business that we have got ourselves strapped into and more encouraging of savings.

This is not an occasion to discuss economic issues—the noble Baroness on the government Front Bench cannot do anything even if I do suggest tax changes. However, I shall say one thing: the time has now come to examine whether national insurance contributions are a good idea. They are a tax on employment. I have never understood why we have a tax on earned income which is paid twice: you pay it once as income tax and a second time as an NIC. I know that the Chancellor is doing something about merging income tax and national insurance contributions, but he should much more seriously examine whether we should relieve taxation on employment. Either the employer or the employee, or both, should be relieved of that kind of tax as we need to encourage employment in the sector. At the same time, we should have policies designed to encourage people to shift away from asset-buying in housing. This is not a debate on housing, but we need an economy where people are much more attuned to renting or making other kinds of housing purchase rather than be caught with assets which are not guaranteed to be wealth-creating.

We need more saving, more investment and more innovation. We have also to find a way of making our workforce think about work differently. I shall make one suggestion about the way in which we measure employment. We measure employment in terms of bodies of people—how many people are in work—but, as we have already found out from our discussion, work is not really how many people are working but how many hours they work. We should take a lifetime perspective on how many years people work, because future generations will have to work for more years and more hours over their lifetime than the previous lucky generation, of which I am a proud member. The good days are gone and I do not know when they are going to come back. One of the burdens that the new working generation will have to face is that of catching up with a lack of savings during the past 25 years as well as financing their own retirement. The question of employment is therefore tied in as much with long-term economic policies and growth strategies as with institutional employment in the labour market.

I join many noble friends in saying that the Government should not be seduced by the idea that making it easier to fire people will somehow solve the problem. Just as nobody fixes the roof when the sun is shining, everybody starts talking about how to sack people when unemployment is high. I never see the logic of that. Everybody has to calm down and realise that there are much more serious issues than a sudden need to make sacking people much easier. I hope that the Government listen and start to think about a long-term strategy of investment and growth.

13:04

[Baroness Donaghy]

I add my thanks to those offered to the noble Baroness, Lady Prosser, for the giving us the opportunity to talk about this extremely important topic. Too often when the world of work is mentioned, it is in terms only of employment law and conflict or of unemployment, rather than employment relations. Yet work is often where people spend most of their waking hours, make friendships and help build dignity and self-sufficiency. That is not to claim that everything is rosy, but to emphasise that the world of work is a vital part of our lives.

I should like to raise the issue of social media and their impact on workplace relations. I am grateful to ACAS for its research and advice on this. Noble Lords will know that I had the privilege to be chair of ACAS for seven years. Social media in this context are mobile phones, e-mails, Twitter, YouTube, Facebook and websites with chatrooms, discussion groups or even avatars. Their impact on employment relations has been and will continue to be phenomenal. They raise legal and ethical questions about acceptable norms of behaviour in a new social space at an individual level. They have the potential to offer new ways of both sharing information and consulting employees. They support a stronger collective voice for employees and change the conduct of collective disputes and collective bargaining.

The key features of social media are their reach, which can be zero or global; their accessibility—they are available at little or no cost; their usability—as little or no training is required; their immediacy—they are virtually instantaneous and can be edited at a stroke; and their permanency, as they are extremely difficult to remove. As millions of digital copies can be made and transmitted instantaneously, they are hard to delete. Twitter, for example, has its archive preserved in the United States Library of Congress.

Phase 1 of the web’s development, from the early 1990s onwards, led to the rise of corporate websites, intranets and the adoption of e-mail and workplace policies to deal with it, together with the growth of e-commerce and websites for campaigning purposes. Phase 2, from 2002 onwards, saw the development of corporate pages on platforms such as YouTube, Twitter, Facebook and Linkedin, interaction with customers through social media channels, including direct sales, and stages in supply chains bypassed. Whoever would have forecast the huge rise in parcel deliveries due to direct online sales? It led also to the adoption of read/write campaigns, location-based awareness campaigns and recruitment campaigns. When we get to phase 3, from approximately 2010 onwards, you have to hold your breath. We will see the development of multiplatform communications, engagements and approaches, real-time management decision-making, rapid business model innovation and, perhaps most importantly, the further loosening of the ties of professionals as knowledge brokers—everyone is a lawyer and doctor now. It will be interesting to see whether this will lead to a looser, less regulated model of workplace relations, relying on professional ethics rather than rules.

Let us look at the scale of social media. Twitter reported in March 2011 500,000 new accounts created each day and 1 billion Tweets written each week. The Google+ social networking platform is gaining 800,000 new users per day. Facebook has over 500 million users, and 250 million of them access the site through mobile devices. In a straw poll of human resources professionals, 50 per cent said that social media had featured in recent disciplinary or tribunal proceedings.

For both employers and trade unions, this new space offers opportunities and challenges to the way in which they engage with their constituents. ACAS is already offering advice—online, of course—to managers and employees about social networking and the importance of mutually agreed guidelines that cover the posting of workplace grievances or being perceived to attack the company brand. We have all read about cases of the dismissal of an employee for commenting on their job on social networking sites. One woman was dismissed for calling her job “boring” online, not to the world at large but privately to a friend. This was then spread around and people put two and two together to identify the workplace. So there needs to be an understanding about when and in what circumstances punitive measures should be taken. They should be proportionate and ethical. A report by the Institute of Employment Studies on this topic concluded that norms of behaviour had not yet been defined, and there was a blurring of private and public areas.

Noble Lords may have read about the virtual strike in 2007 used by IBM workers in Italy. They were protesting against potential pay cuts. The 9,000 workers were joined by 1,800 supporters from 30 countries in a virtual picket line. IBM had signed up to the virtual world website Second Life, and avatars representing users could be seen carrying banners in support of the strikers. IBM was caught off guard by the strike, the first of its kind. It eventually led to renewed dialogue and the workers getting a better deal. While there has not been a huge increase in this activity, it is an example of the potential for different kinds of communication and activism that faces the world of work.

In Germany, some trade unions have adopted the technique of flash-mobbing as an organisational tool. Flash mobs have been defined as,

“a public gathering of complete strangers, organised via the internet or mobile phone, who perform a pointless act and then disperse again”.

The German trade union Ver.di organised a flash mob of 150 people at a shopping centre following disagreements over pay and work conditions between Ver.di and retail employers across the three central German states. The group filled shopping trolleys with a range of products, but when it came to paying for the goods, they handed over cards inscribed with the slogan “fair wages” instead of credit or debit cards.

Lest anyone thinks that I am planting ideas in people’s heads, I will not use any of the many examples deployed in UK disputes. Nevertheless, some employers see only the downside of these developments. If I were a German supermarket owner, I could well see why. However, some employers use the social media tool as a means of engaging with the workforce, not always as an anti-trade union device. Some are setting aside established corporate intranets in favour of what are called “enterprise wikis”—I hope someone comes up with a better name one day. These enterprise wikis become the main means of capturing and disseminating corporate information and knowledge.

Allowing employees to discuss work-related issues on social media can bring real business benefits. Some firms have accepted that they can fully benefit from social media in this way only if employees are given as much freedom as possible in their use of the technology. BT is already removing some of the blocking barriers that it has in place, so it will have less of an overview of what its employees are doing on the internet. There are two main reasons for this. First, it feels confident in this approach as it has a great deal of trust in its employees. Secondly, it will improve both the cost and the efficiency of the organisation and enable its workforce to have global access. Some organisations struggle to come to terms with social media and focus only on the threats. An organisational response to block corporate access to, for example, Facebook, becomes untenable when the most active of its account holders use smart phones to access and update the site.

Some trade unions are suspicious of using public social networking sites, as they are commercial sites with their own agenda. The TUC has referred to Facebook as,

“3.5 million HR accidents waiting to happen”.

However, some unions are adapting social media portals, single-issue campaigning and digital activism. The traditional conduct of employment relations may well change, given the ease of availability of information. Knowledge can be used as leverage in negotiations.

Employers and unions are failing to recruit the very people who are most adept at social networking: the young. According to David Blanchflower, the economics editor of the New Statesman:

“Since May 2010, unemployment among 16-to-24-year-olds has risen … to 991,000”.

We can debate for ever whether these developments represent the tools of capitalism or revolt, but we must be aware that it will change the world of work and we must look to the younger generation, who are much more skilled—let us face it—than we are to be useful in that future world of work.

13:16

[Lord Haskel]

My Lords, in her excellent opening remarks, my noble friend spoke of the past. Most of us in this Chamber are old enough to remember what happened when information and communications technology first arrived on the scene. It was going to change the world of employment. We were all going to work from home and we were all going to have a lot more leisure time. Well, it did not quite work out that way.

Some people's jobs do allow them to work from home—for instance, representatives or currency speculators—but, for the rest of us, we can work from home perhaps one day a week if we are lucky. Indeed, for many of us, working from home is just catching up, because it is the pace of work that has changed, with a corresponding increase in stress. This is thanks to the huge expansion and reliability of mobile ICT, which has transformed business. McKinsey estimates that 25 per cent of UK growth in the past five years has come from online business. Indeed, as my noble friend Lady Donaghy described, in many companies people now work in networks, and they use the social networks to advertise and to contact colleagues, customers and suppliers, as well as to contact family and friends. So the line between home and work is becoming much more blurred in this changing world of employment.

In many companies and organisations, this independence has led to far less rigid management. Employees are trusted more, with a reliance on professional ethics, as the noble Baroness said. This has led to much innovation in the way in which businesses work. You see this attitude celebrated in some of our most successful companies. Many employers now say that they hire for attitude and train for skills. This is an essential attitude, as my noble friend Lord Young put it. Indeed, employers complain about the absence of this attitude in potential recruits. A lot of public money is spent on preparing people for work. I hope that the Minister can assure us that her department is also fostering this attitude, which business wants and needs.

Of course, modern ICT also enables people to set up in business themselves. The web is now a marketplace where people can buy and sell goods and services at very little cost. In these ways ICT has already changed the world of work and employment and it is going to do so even more. Cloud computing means that now you do not have to buy servers and expensive software any more. You just use the storage and bandwidth you need on the cloud. This turns computing from a capital expense into an operating expense. This means that ICT will have an even greater impact on the changing world of employment. I hope that the Minister's department will encourage the internet economy, in both the private and the public sector, especially as this can only help the current financial crisis—it will benefit business, as my noble friend Lady Donaghy said. Indeed, the financial crisis is changing the world of employment as well as destroying jobs, as my noble friend Lord Kestenbaum explained.

The cuts in employment resulting from this financial crisis are falling heavily on public services, particularly those services delivered by local authorities. What is this to do with the nature of employment? The answer is that there was a time when we worked in either the public sector or the private sector. Now we are seeing the emergence of a social sector—half way between the two—which is largely occupied by charities and by social enterprises. But the existing charities and social enterprises working in this sector have had their finances devastated by the tight government financial settlement. So we have to run our welfare state with less money and greater commercial pressure, which makes the nature of employment in this sector confusing. Is the altruism of working in the charitable sector being taken over by the economics of working in the commercial sector? Are public service values being replaced by the values of the market?

What is the nature of employment in this emerging social sector? The big society idea is too fuzzy to answer this. Yet the Government are encouraging social enterprises to rescue the welfare services that we can no longer afford. Indeed, if this is not clarified soon, these enterprises will become a new form of quango and there will be a big political price to pay for that. The real answer is the concept of shared value. According to Michael Porter, this is the key to the next wave of innovation and growth, and I have always found that he is worth listening to. Yet the Government's growth strategies have been silent on this—it would have been nice to hear from some other noble Lords on the Conservative Benches who have experience in business. Thanks to the Companies Act 2006, the recent stewardship code and less rigid attitudes, companies are starting to share the values of their employees, customers, local communities and suppliers. That is having an impact on the world of employment. The environment, fair trade and human rights as well as safety and employment rights have all become issues which employees now have to consider.

This is not “social responsibility”, which is usually on the periphery of a business. It is something central, something that is shared. For instance, if a firm invests in the health of its employees, they and their families benefit and the firm minimises absence and lost productivity. If a firm invests in employee skills, everybody benefits, as the noble Baroness, Lady Brinton, told us when she spoke of Marshall Aerospace. Taking on the apprentices that other noble Lords have spoken about is all part of this.

At one time it was thought that efforts to minimise pollution increased costs and occurred because of regulation. Today, I think that the consensus is that major environmental improvements can be achieved with better technology that pays for itself and produces better resource utilisation and a better environment at work.

The new generation of young people is asking business to create this kind of world of employment, not only because it creates the kind of business culture that they want to work in but because it legitimises business by getting away from the old narrow views. It acknowledges the legitimacy of many of the things that the demonstrators in London, New York, Berlin, Tel Aviv and elsewhere are calling for. Indeed, on 17 October, the Financial Times ran a leading article saying that it would be foolhardy to ignore their anger and frustration. Sadly, in London, the protestors are losing this support by their mistaken action at St Paul’s.

Many leading companies are finding that this concept works for them. Those of us who visited Google this week saw this in action. These changes in technology and the changes in society are changing the world of employment. What the Government have to learn is how to regulate so that these concepts of shared values and technology are encouraged. I agree with my noble friend Lady Prosser that the Prime Minister could start by replacing his backward-looking adviser with somebody more forward-looking. Get this regulation right and regulation regarding red tape and employment falls into place and becomes secondary. I hope the Minister is listening. It would be foolhardy to dismiss the message.

13:26

[Lord Lea of Crondall]

My Lords, my noble friend Lady Prosser has given us a highly opportune moment for debating this issue, as “employment crisis” is a pretty fair description. It will unfortunately intensify this winter. I do not want to be a Cassandra, but there is growing disaffection in many parts of the country, which is not just the result of the economic crisis per se but of the way that this Government have responded to it.

We now have the apotheosis of the Victorian employer’s philosophy being epitomised in a report, we understand, from Mr Adrian Beachcroft, who is described as a venture capitalist. That rather reminds me of the imperial adventurers who ran the East India Company, particularly in the years leading up to the Indian mutiny in 1857. In Britain, the corresponding philosophy is that satirised by my noble friend Lord Sugar with, “You’re fired!”.

What is the status of this Beachcroft report? Was its commissioning a decision just made by No. 10 Downing Street or was BIS involved? Specifically, was Mr Vince Cable involved? Or perhaps BIS knew nothing about it, like it knew nothing about the Chancellor's pre-emptive statement at the Conservative Party conference in Manchester on employment tribunals. Maybe BIS still does not know anything about it. If you read the newspapers, you might find that this report has now been received by No 10. Downing Street. Has it been received in BIS? Perhaps BIS could make a request to No. 10.

What we have now is two examples. One is that of No. 10 doing its own thing, well outside what its normal responsibilities might be, although you would think that there would be consultation in government. The other good example recently is that of the Chancellor of the Exchequer, at Manchester, speaking on employment tribunals. Obviously, we have got to the point where we have two Governments: the Bullingdon Club Government and Her Majesty’s Government. No doubt Mr Vince Cable has already made that point, but I imagine in more colourful language.

The trouble is that the Conservative Party has now brought 100 clones of Mr Beechcroft into the parliamentary party. They seem to have been cloned along with a set of myths on employment rights, which they peddle around the country on all the media outlets, brooking no contradiction by reference to any facts—which of course get in the way—and resting on belief in their own propaganda.

In a sense, we on this side of the House—including many on the trade union side of the House, if I may declare a collective interest on behalf of the trade union movement—must be grateful that as the penny is beginning to drop, pretty sharpish, it will be abundantly clear that this doctrine of “devil take the hindmost” has passed its sell-by date so far as the people of middle Britain are concerned.

One specific example of the myths of employment rights and the effect on employment is maternity rights. On Monday this week, the Prime Minister, in his Statement on the European Council, which was repeated in this House, said, somewhat to my surprise, that he had been advocating maximising the amount of women’s employment in the European Union. I recall that when I was covering that patch for the TUC some 12 or 15 years ago, that was the strong lead taken by the European Commission at Amsterdam. The Commission was then led on social rights and social policy by a most distinguished Swedish former finance Minister, and a distinguished director of social policy, Mr Allan Larsson.

The need to have a far wider and extensive framework of rights for women at work was driven not only by the inherent arguments but by the fact that if we wanted to increase our living standards and output in total, we needed to have more women in the labour market. It has grown in the past 10 years, and I believe that now 70 or 80 per cent of women have some involvement in the labour market. Someone is nodding, which may mean that two of us are wrong, but I think that it has been significant.

Who is to say that this growth would have happened faster if we had not had maternity rights? We need to look at it from the point of view of the 90 per cent of people who are workers or employees, rather than employers or company directors, and hear their view, rather than the myths peddled by the backwoods variety of employers. I agree with my noble friend Lord Haskel that there are many distinguished exceptions to that, but I have to say that the propaganda coming out at the moment is from this myth-creating group, who would look at the downside of employing women—because, gosh, they all go off and have babies.

To state the obvious, it is absolutely vital that we have what used to be called Scandinavian rights for maternity and paternity. I take that as one example of this mythology.

Moreover, all of these rights under the social chapter are thanks to Jacques Delors and the agreement on the social chapter. This was subject to an opt-out by the Conservative Government, but within two or three months of May 1997 Robin Cook went off to Brussels and signed it. I predict that these will be taken as read by the British people, and none of them will be repealed. The Conservative Party will soon wake up and realise what a bad idea that was.

I want to say one other positive thing about the European Union and employment. I was once a member of a “high-level group” on benchmarking. Although it is a candidate for derision in the Sunday Telegraph, best practice in Europe is surely highly desirable as a way of looking at where the British economy ought to be going.

The National Economic Development Council used to be heavily into benchmarking, before the word came into popular usage, and it is rather obvious that we need to create a body of that type in Britain today. I understand why the noble Lord, Lord Lamont—he was the Chancellor who scrapped Neddy—and others believe that this is corporatism gone mad. But you do not need to sit outside St Paul’s cathedral today to say that there is something strange about the modern British model of capitalism, as my noble friend Lord Monks has said. “Us and them” is now, as in the Victorian era, the name of the game on employment. However, I must say that as regards St Paul’s, God and Mammon have got a bit mixed up in the target.

Our own multinationals are quite different in their operations from multinationals in many countries, such as Germany. They have a much higher share of their value added overseas than German companies. I am in conversation with some officials in BIS to produce some more robust numbers on this, as it is a vital question for the economy, but we seem unable to produce those statistics.

In conclusion, I would say that these are the countries which have the greatest social cohesion and have been the least badly affected by the crisis of the past four years. Going forward, we need to emulate them, not ridicule them.

13:39

[Lord Morris of Handsworth]

My Lords, I, too, commend my noble friend Lady Prosser on securing this timely and important debate. Debating alongside my noble friend ignites many happy memories for me but today I am somewhat handicapped, as I no longer have the casting vote—and I never had a block vote. I see this debate as extremely timely, as I sense that the economies of Europe have reached a critical fork in the road, which will significantly impact on the world of employment here, and indeed abroad.

Throughout the ages, the pattern of employment in Britain has been through many phases of change, principally the British industrial revolution of the 1800s, which spread to the United States and other European countries in the 19th century. As I reflect on the history of changing employment patterns, buttressed by a recent visit to my old place of employment—the factory where I worked for 18 years—I was reminded of the first sentence in LP Hartley's famous 1950s novel, The Go-Between:

“The past is a foreign country; they do things differently there”.

The question implicit in the Motion before the House today is: how can we manage the technological revolution for social and economic benefit by doing things differently here?

In his groundbreaking book, The End of Work, Jeremy Rifkin, the president of the Foundation on Economic Trends in Washington, argues strongly that as the industrial age ended slave labour, the information age will end mass wage labour. Faced with that proposition, he goes on to argue that Governments need to promote alternatives, such as shorter working time, more voluntary work—I think that is the big society here—and greater leisure in response to the replacement of jobs by technology. From this economic and social analysis, it is clear that the three forces driving modern economies and employment are finance, knowledge and social capital. Yet whatever the prevailing view is, there is common ground that we must have the skills to meet the challenge in the changing world of employment.

Indeed, the best summary of the response needed is to be found in the foreword to the final report, Prosperity for All in the Global Economy - World Class Skills, by the noble Lord, Lord Leitch, which says:

“In the 21st Century, our natural resource is our people—and their potential is both untapped and vast. Skills will unlock that potential. The prize for our country will be enormous—higher productivity, the creation of wealth and social justice”.

Sadly, we have not followed the positive signposts which the noble Lord, Lord Leitch, left us. The truth is that we are running out of options, and indeed out of time. That is what the debate in Europe in the past week or so has really been about. How else do we have over 2 million people out of work, with the Office for National Statistics reporting unemployment at 8.1 per cent?

On the evidence we see, the Government place almost no value on workers. Indeed, it could be said that the Government have raised the flag of hostility against workers unless they happen to be bankers. Public sector workers are facing attacks on their pensions by being required to work longer, pay more and get less. As we debate today, it is reasonable that we should ask: what is the Government’s response to those gallant groups of Remploy workers who are facing a bleak and uncertain future, and the possible closure of their factories? Where have they fallen down or fallen short of contributing positively to the economy?

As a nation, we have a capacity to destroy what workers in our economy have actually built. Family-friendly policies have been a hallmark of the past 10 years or so. They have been liberating policies which enable people to learn new skills, broaden their horizons and expand their social network. They are about flexibility and the opportunity of choice. But in the last day or so I have read the magazine from the IoD, Big Picture, where we see a concerted campaign emerging to persuade the Government to make no further change or concession in the opportunity for workers to request flexible working. It has set out an argument and a campaign is now in train.

I believe that the attack on workers’ rights has now moved to a very negative and dangerous position. For example, the barriers for access to justice at industrial tribunals are being raised higher and higher. I am somewhat old-fashioned in my views about fairness: I take the view that an unfair dismissal is unfair whether it is on day one or day 100. Why are industrial tribunals the only facet of the British justice system where workers will be asked to pay an entrance fee of £250 just to go through the door to lodge a claim for an unfair dismissal? That is one proposal coming out of the consultation document from the Department for Business, Innovation and Skills, and that £250 only gets you through the door to determine whether you have an arguable case. If the tribunal finds at the preliminary stage that you do, you need to pay £1,000 for that case to go forward to a hearing. I do not know many single-parent female part-time workers who can afford to lay out £1,250 just to test the flexibility and therefore the ability of justice.

The reason why workers are being treated in such an unjust manner is quite simple: we now have a Government, supported by the cloak of a coalition, which believe in the culture of hire and fire. The Prime Minister says that industrial tribunals should no longer be seen as a barrier to growth, but the reality is that the Government’s proposals will be a barrier to justice.

13:48

[Baroness Turner of Camden]

My Lords, I, too, thank my noble friend Lady Prosser for initiating this debate and for the manner in which she has done so. It is very necessary for us to debate employment at a time when so many people are being deprived of it. There is indeed an international economic crisis, but the policies of the present Government are, in my view, making that a great deal worse. It was a Conservative Government, that of the noble Baroness, Lady Thatcher, who first undermined manufacturing industry in the belief that our future lay in concentrating on financial services. I believe that that was all part of the antiunion stance of the Thatcher Administration, but it has been disastrous and everyone now says that it is necessary to rebalance our economy.

The present Government's decision to embark upon the most drastic austerity programme of any major economy has resulted in almost no growth and increasing unemployment. We are now facing youth unemployment approaching 1 million. Unemployment in the public sector has not been compensated for by the growth of employment in the private sector and it is women who are most adversely affected. This is because the majority of low-paid public sector jobs are held by women and these are being reduced as a result of government cuts. At the same time, the Government are introducing their Welfare Reform Bill, currently being debated in Committee in this House. This is designed to “ease the transition from welfare into work”. The media depiction of people on benefits as scroungers seems to have been taken seriously by DWP—but what if jobs are scarce, as they are at present? The pressure will be on for claimants to take anything, otherwise benefits will be lost.

It is in this situation that the Government are currently consulting on their new proposals on employment rights, as has just been referred to by my noble friend Lord Morris. This policy seems designed to make it easier for employers to get rid of people. In future, it is proposed that an employee would have to be in a job for at least two years before being able to claim unfair dismissal, and then, before going before a tribunal, a fee of £1,000 might have to be paid. Even then, the unfair dismissal case would not be heard, as now, by a tribunal consisting of one representative of the employer and one representative of the employee, with a legally qualified chair and lay representatives, who are highly respected because they bring a knowledge of working and industrial practice to bear upon cases. No, these lay representatives would not be there on dismissal cases. A dismissed employee would come before a judge sitting alone and, of course, there would be no legal aid supplied. There is no doubt that the proposed changes are intended to reduce the number of arbitration dismissal cases, but not, of course, of dismissals themselves. The Government admitted as much when challenged in this House at Questions. A recent report commissioned by the Prime Minister would scrap employment rights altogether.

It is quite clear that the Conservatives in government expect workers to “put up and shut up”. Is this what the big society is all about? It looks more like a serf society to me. I do not believe that the trade union movement, which in the previous century achieved so much for working people, will be prepared to put up with that. We can expect strong opposition, despite laws intended to make it as difficult as possible for organised collective action to take place.

When challenged, Government spokespersons are inclined to say that weakening employment protection encourages employers to take on staff. However, in this country there is an economy which, in the private sector, has a low-paid workforce. Small employers have benefited from that and the benefits system supports it through tax credits, housing and other benefits. In other words, the taxpayers support low-paying employers. There is no reason at all why basic employment rights for workers should be weakened—on the contrary. Moreover, the Government’s basic economic policies should be designed to ensure that employment increases, rather than diminishes, in both the public and private sectors. Alternative policies do exist and we have heard some of them in the debate today, particularly from the noble Baroness, Lady Prosser, in introducing the debate. The present policies are not working, but leading over the cliff edge.

13:53

[Baroness Wheeler]

My Lords, I, too, thank my noble friend Lady Prosser for securing this debate. With her considerable experience of industrial relations across the private, manufacturing and public sectors, there are few in the House better able to provide us with the broad-sweep perspective that we need in trying to address and tackle these vital issues.

I want to focus my comments today on the importance of leadership and management across industry, the private, public and voluntary sector, if we are to navigate our way through the enormous changes that have taken place and continue to take place. As recent research from Cranfield School of Management found, improving management capability plays a major role in helping employers improve organisational and financial performance. Developing managerial capabilities is a key step for companies and organisations to achieve growth and manage business transformation and change in tough economic times. In this regard, I draw the attention of the House to the record of the Investors in People management standard in helping large and small organisations to build managerial skills and capabilities and improve employee engagement. IiP has a 20-year track record in driving improvements in workforce behaviour and performance. During that time it has changed and adapted, demonstrating its ability to evolve to reflect the changing and differing priorities of employers and their staff. Increasing evidence shows that IiP can help employers to survive, thrive and grow in the wake of huge change and recession.

Since I have been privileged to be a Member of your Lordships’ House, my contributions in the Chamber have been on the voluntary and charitable sector, or on health and social care in my supporting Front-Bench role. However, my working life, before I retired last year, was in organisation development and human resources, as the national director of the public services union, UNISON. UNISON was the first UK union to achieve the IiP standard, practising for our own staff what we want to see for our members in the workplace. UNISON was formed out of a merger in the early 1990s between three very separate independent unions. We faced all the problems of merged organisations, with all our structures and services in triplicate and the challenge to downsize quickly, while maintaining and improving our services to members and providing the better value for their subscriptions that we promised them would result from merger. Of course, we had to do all this in the increasingly competitive and changing world of public service delivery and trade unionism. We needed to develop our leadership capability, upskill our managers at all levels of the organisation and involve and enthuse our staff in our vision for the future. IiP was for us the key tool that helped us journey down a rocky and challenging road.

IiP is currently undergoing a major review under the auspices of the UK Commission for Employment and Skills. I declare a non-financial interest as a member of the IiP advisory board which has been appointed by the commission to spearhead the review. Currently, over 25 per cent of the UK workforce uses Investors in People in organisations totalling more than 6 million employees. The Cranfield research on IiP analysed financial performance information from Companies House, case studies and a survey of over 400 employers. It showed four key outcomes from using the IiP framework for business development and managing change. First, IiP supports the development of a learning culture in the workplace. Secondly, it enhances the effectiveness of management development and continuous improvement programmes. Thirdly, it creates an environment where there is more focus on performance and employees better understand their contribution to the organisation and the achievement of its goals. Fourthly, it allows managers greater freedom and discretion to achieve priorities and objectives.

There has always been cross-party support for IiP. My own Labour Government strongly supported IiP through its partnership and learning and skills agendas. I welcome the present Government’s support for IiP and their identification of the standard as being critical in helping to deliver economic growth and improved business results. The advisory board has been given the task of repositioning IiP as an improvement tool for helping businesses to grow and to manage change. With this goal in mind, the IiP advisory board has been refocusing the emphasis of the standard from an essentially assessment tool to a model which works with organisations and businesses to achieve their specific needs and provides a model for managing change, managing growth or improvement, or simply survival. I ask the Minister, how do the Government intend to actively support the IiP transformation programme? What role will Ministers play in promoting IiP to private and public business leaders?

Last year the board led the relicensing of the IiP delivery network. IiP regional centres in the UK work closely with clients in large and small businesses, public services and the voluntary and independent sector. The London IiP centre has, for example, been working with Sainsbury’s, which recently became the biggest employer to use IiP. In the north, the centre has focused on small businesses and in the south, it is achieving good and positive results from work with local authorities and voluntary organisations.

To compete effectively, the UK still needs to address the organisational development of our businesses and invest in the potential and capabilities of our business leaders and managers. The UK lags behind our global competitors in terms of investment in leadership and management skills. For example, Germany’s average public investment in training is €4,438 per annum per manager compared with the UK’s €1,625. Several competitor countries, such as Spain, France, Norway and Denmark, all spend more on manager training than the UK.

Born out of the last recession in the 1980s, Investors in People is a key tool that can help small businesses grow. It provides support to enable leaders to be more ambitious. It can act as the bridge between leaders and their employees, building engagement, acting as a catalyst for new ideas and involving people throughout the organisation.

The targeting of small to medium-sized private and public organisations under the new IiP business model encourages them to focus their work with IiP on achieving business growth. Over 42 per cent of Investors in People’s customers are small businesses, and thousands of these find it an invaluable tool for taking the step changes required to achieve growth—for example, when they expand from 30 to 50 employees. Independent research by MORI showed that 80 per cent of employers using Investors in People agree that it helps all types of organisations adapt to change and growth. How will the Government encourage SMEs to use IiP to help grow their businesses?

In conclusion, the message to employers is to take the time to rediscover IiP. They will find that it has kept pace with the changing world of employment; is highly relevant to the needs of employers today and remains at the cutting edge of best management and staff engagement practice.

14:01

[Lord Campbell of Alloway]

My Lords, I apologise to the House for having sought to speak for a couple of minutes at this stage of the debate. What has been said is of great importance to the whole country. The problem with the trades unions is not what it was, nor has it ever been exactly what it was said to be. Surely we must seek recovery, though; if we do not, where are we? I only ask this, with respect, having listened to the speech of my opponent, the noble Baroness, Lady Turner. She and I have always been on opposite sides since the days of Maggie Thatcher. I ask that the Government reconsider the situation. It is not for me to say what they should do but I know that it should be reconsidered.

14:03

[Lord Stevenson of Balmacara]

My Lords, I thank my noble friend Lady Prosser for the broad sweep across the issues that she gave us and for her recommendations. She managed to encourage a large number of noble Lords to join in, and it is a measure of the interest in the topic and the quality of the debate that we have had that we have been able to attract the noble Lord, Lord Campbell of Alloway, to speak. We are grateful for that, as he rarely does so.

Along with many noble Lords, I found this topic very difficult to get into and could not decide where to focus my remarks. In search of inspiration, and perhaps in anticipation of the adjuration from my noble friend Lady Donaghy about the need to consider social media, I turned instinctively to Google and put in the words, “the changing world of employment”. Unfortunately, that did not provide much food for thought; it mainly threw up expensive job retraining opportunities, which I passed up, although many of them were very clever and masqueraded as editorials, which I read. There were also a few rather odd blogs, which I certainly would not recommend.

The top-rated entry, which I shall read for the enjoyment of the House, contained the following insightful if barely literate gem:

“Today’s world of work is changing day by day. Employees and employers are moving towards revolutionary communication advances. The introduction of flexible work arrangement is moving towards the outsourcing and off-shoring different activities of business. This outsourcing and off shoring not only save lot of money but it also saves time”.

I have the reference if anyone wishes to follow it up. There is not much inspiration there, although I think it contains a grain of truth within its rather odd phraseology.

To try to get a handle on something to get started on, I rushed to a poetry book. Do they not say that the Greeks have a word for everything, even in these benighted times? So perhaps that was the place I should go to. I looked at Aristotle, who said in 300 BC that, “All paid jobs absorb and degrade the mind”. Clearly working conditions in Athens in that period left something to be desired. Perhaps this quotation from Voltaire's Candide will redress the balance: “Employment saves us from three great evils: boredom, vice and need”. It probably sounds better in French, but think about it.

The title of this debate is “The Changing World of Employment”, and we have had many excellent speeches. The range of perspectives that we have drawn from include employers and a full array of those with experience as employee representatives, and we must not forget the incisive contribution and recommendations from my noble friend Lord Desai. Once again the House has shown itself to have a depth of experience and knowledge that are able to inform us about the issues of the day.

The key issues that seemed to come up included safeguarding employment rights—several noble Lords spoke on that point; the changing structure of the employment market, including the blurring of the line between the public and private sectors; the scarring effects of unemployment, particularly on the young; the growth in women’s employment, which is welcomed, but also the disgraceful fact that unemployment among women is now at the highest level ever; the growth in part-time working and the problems that that can bring; the fact that many people now work at home, which brings problems but also opportunities; the complexity of modern employment and the stress that that can bring; and the changes in rights and responsibilities in employment, which the law must keep pace with.

We have heard about diversity, talked about pensions and looked at discrimination and prejudice, which are still all too prevalent. We have touched on apprenticeships and the importance of vocational training. It has been a wide-ranging debate and will repay reading in Hansard when it comes out.

Many noble Lords spoke about the wider economic and social challenges facing our country. One of the main themes that have emerged today is the need for an economy that looks and feels very different from what we see today, with more opportunities for more people to get better jobs in good companies. That is the topic I want to focus on.

A recent report from the Resolution Foundation has shown how real-term median earnings flat-lined between 2003 and 2008. The Governor of the Bank of England, no less, has warned that we might be facing six years of falling living standards. Even more worrying, our economy is simply not making the best use of the skills and talents of our people. In 1986, around 30 per cent of workers said they had qualifications at a higher level than were needed to get and do their job. By 2006 this figure was 40 per cent, and by 2009 over half of employees said their skills were underused. The most recent available evidence suggests that at least one-fifth of graduates do not work in graduate-level jobs for several years after they graduate.

In short, we have developed an economy that is dangerously dependent on too many low-skilled jobs. Our growth among employers demanding more qualified and skilled staff is among the lowest in the OECD. We have an economy that is betraying the hopes of the young generation. It is failing to create the skilled well paid jobs that make the most of, and properly reward, their skills and abilities. And let us be very clear about one thing: the growth we need, the jobs we need, will be in the private sector. We will have the modern economy that we need only if we support good private companies that win market share and thus make profits in tough global markets. Equally, though, as my noble friend Lord Monks highlighted, we will not create strong and fair communities unless the workplace is provided by good companies where you are valued and respected and have opportunities to develop your own abilities to the full, and which give you a fair chance to provide for a secure future and live your life to the full.

These are deep-seated issues about the nature of our economy. I hope that the Minister will focus on where the coalition Government think that these good companies, good jobs and better opportunities will come from. There seems to be very little government action that will help us to adapt to and thrive in the changing world of employment. Specifically, what does she think can be done to ensure our economic competitiveness? How do we foster more companies where work is about more than modest pay levels and a struggle for survival? How will we better support companies whose business model is based on recruiting and retaining a skilled workforce, and which have the products and service levels that will allow them to grow and thrive? How do we ensure that these opportunities are in every region of the UK, not just a few?

In the wake of the banking crisis, there is a growing consensus that our economy needs greater relative strength outside financial services. Advanced manufacturing must be part of this, but so must other sectors with growth potential. There must be opportunities across a range of green technologies, in the life sciences and in our creative industries, which have a strong position in global markets, as does higher education at present. Business services, from design and architecture to law and accountancy, have already achieved global reach. What will the Government do to attract world-class companies and encourage the growth of larger numbers of SMEs in these sectors? We need to be a country where the global companies feel that they must be located and able to grow; and a country where smaller companies can innovate, grow and prosper. We also desperately need to support innovation along the lines outlined by my noble friend Lord Kestenbaum.

The Government must be relentless and have a single-minded focus on creating the conditions for private sector growth. In practice, markets are inevitably and unavoidably shaped by what Governments do and what they do not. At present, we are seeing a badly managed retreat from what was and should be an active government strategy—business support dismantled; incoherent policy-making in the green economy; uncertainty over key infrastructure such as broadband; confusion over planning policies; reduced investment in regional growth and the high-tech economy; and muddled thinking on apprenticeships for young people, which were a beacon of hope, as my noble friend Lord Young of Norwood Green called them. Universities are dazed and confused by the implications of the new voucher system and therefore doing less with business. On that point, something that the whole House should be worrying about is the fact that applications to universities are down significantly for next year.

The powers of government go way beyond establishing the right fiscal conditions for the macroeconomy or supply-side measures such as investment in skills and infrastructure, important though those policies are. As we have heard today, what is needed is an activist approach to business and enterprise policy—a recognition that, used wisely and intelligently, government influence can help to create the markets that foster successful companies in the key sectors, which we need. Crucially, an activist approach means understanding what business needs and making sure that public policy is properly aligned and co-ordinated to deliver the confidence and certainty that business needs. Getting bits of it right is not good enough. It is the coherence that counts.

To conclude, I suggest to the Minister that this excellent debate gives her a golden opportunity to give her Government’s support for our recently announced growth initiative. This includes a £2 billion tax on bank bonuses to fund 100,000 jobs for young people and build 25,000 affordable homes; bringing forward long-term investment projects, such as new school and hospital buildings; temporarily reversing the recent VAT rise, which would mean a £450 boost for families with children; a one-year cut in VAT to 5 per cent on home improvements and repairs to help small businesses; and a tax break for every small firm that takes on extra workers. These measures would get the economy going and would certainly change the world of employment for those who are unemployed, those who are currently in education and training, and our children and grandchildren. We would all agree that such change would be for the better, as well as saving us from those three great evils that Voltaire warned us about, “ennui, vice et besoin”.

14:13

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, I start by congratulating, as have many other noble Lords, the noble Baroness, Lady Prosser, on securing this debate on a wide-ranging topic, on which she spoke with authority and passion, setting the tone for a very serious debate—one that I know the House has been happy to engage in. In the gap it brought to his feet my noble friend Lord Campbell of Alloway—another bonus.

As the noble Baroness outlined and as we can all bear witness, the employment landscape has changed beyond all recognition since the 1960s. Globalisation, technology and social change are still moving at hyper-speed. Europe has expanded eastwards, bringing in cheaper labour, and we face greater competition from the tiger economies. Many British workers will need to reskill to adapt to new job opportunities and many already have.

I will try to answer many of the questions that have been asked during this debate, but if I run out of time all questions will be answered by letter. The good news is that we are living longer but this means that we have to manage the effects of an ageing population. The noble Lord, Lord Young, talked about the removal of the default retirement age. We believe that this will increase the number of older people who are able to be in the workplace, stimulating the economy and leading to more job opportunities for everyone, including young people.

More women are working now than ever before. Part-time working has increased, as has the overall diversity of working patterns. My noble friend Lady Randerson spoke about this growth of part-time and temporary workers. The UK labour market is internationally recognised for its strength and flexibility. Our light-touch system of employment regulation is a key driver of that strong performance. Our labour market has achieved a steady rise in employment, despite cyclical peaks and troughs. During the recent recession employment fell by much less than many had expected, even given the fall in GDP. Part of this success is due to our flexible labour market. My noble friend Lady Randerson rightly pointed out that part-time working is an important choice for many workers, especially some of the older workers to whom she referred, and that part-time staff are a huge resource for business.

The noble Lord, Lord Collins, talked about his concerns over discrimination against lesbian, gay and bisexual workers. The Government’s equality strategy sets out our vision for a strong, modern and fair Britain. It is built on our two principles of equality: equal treatment and equal opportunity. This means building a society where no one is held back because of who they are or where they come from. It is obvious from the most moving speech that the noble Lord made that we must be very vigilant in this. In relation to the world of work, we commend the good work of ACAS in promoting better workplaces. I know that the noble Baroness, Lady Donaghy, used to be chair of ACAS. Britain’s future lies in nurturing a highly skilled, quality workforce, and in harnessing the ingenuity, creativity, diversity and inventiveness of all the British people.

The noble Lord, Lord Stevenson, asked a question at the end of his speech. I have not had much chance to catch up with it but I hope that this will help. Supporting economic growth is our central task. The original growth fund is making a valuable contribution to growing a private sector-led economy in England. In particular, it will support areas and communities that are currently dependent on the public sector in making the transition to sustainable private sector-led growth and prosperity.

Education and skills are vital to our future and essential to building sustainable growth and stronger communities. Here, we agree with the noble Baroness, Lady Prosser. We need a long-term strategy to deal with issues raised in the global market. The Government’s priority is to achieve strong, sustainable and balanced growth, and we are sticking to our plan. We are creating a new model of growth, driven by investment and exports. A whole new government drive to promote trade and investment was announced in the trade and investment White Paper. It includes an expanded remit and updated strategy for UK Trade & Investment and refocusing the FCO on commercial diplomacy and new and improved products from the Export Credits Guarantee Department.

Measures so far to take forward our universities, technical colleges and all levels and styles of education include expansion of the university technical colleges programme to at least 24 new colleges by 2014. Each will offer 600 to 800 14 to 19 year-olds the opportunity to take a highly regarded, full-time, technically oriented course of study. An increased apprenticeship budget of more than £1.4 billion this year is enough to train at least a third of a million apprentices. The noble Lord, Lord Young, an apprentice himself—fast becoming the most famous apprentice in the House—was the campaigning Minister in the previous Government. It has been my pleasure and privilege to build on the work that he has already done. He talks constantly about the need to create apprenticeships for 16 to 18 year-olds. We agree and we are doing many things to advance that. We have seen high levels of employment in the UK due to the flexibility of our labour market, but we must work to build on this strength.

The noble Lord, Lord Desai, spoke of the need to encourage inward investment and suggested that national insurance contributions might no longer be a good idea. I was interested to hear this—I always expect something interesting from the noble Lord, Lord Desai. I have a real answer for the noble Lord, Lord Desai which I hope to give him later. The Government’s role is to put the right framework in place and provide support where necessary. The noble Baroness, Lady Prosser, and the noble Lord, Lord Kestenbaum, spoke of the need to invest in research and innovation. I was interested in the noble Lord’s descriptions, which did not always find favour with some of those on his own Benches.

The noble Lord, Lord Lea, said that the Government should benchmark employment law across Europe. The Government do not have to do that. The World Bank and the OECD conduct such studies regularly and they are always praising this country’s strength and flexibility. I hope that he finds that encouraging. The Government are helping women to continue to develop their careers by making a commitment to implement a system of flexible parental leave. This will give families more choice on how they care for their children and encourage early discussions between employees and their employers about leave plans in the important first year of a child’s life. We agree with the noble Baroness, Lady Prosser, that we need positive action on diversity and participation in the workplace and we are working towards this.

The noble Lord, Lord Lea, spoke about the rolling back of maternity rights and the number of women in employment. Despite the recession, the employment rate for women remains historically high at 65.4 per cent compared with 53 per cent in 1971. I believe that this is the figure that the noble Lord, Lord Lea, could not quite remember in his speech. We have no intention of reducing the total periods of leave and pay available to women. In line with our coalition commitment to encourage shared parenting, we recently consulted on proposals to introduce a system of flexible parental leave so that parents can choose how best to share their caring responsibilities between them. Where families choose, mothers will still be able to take exactly the same amount of leave and pay. Some of the more enlightened companies I have worked with—I particularly remember Unilever 15 years ago—made arrangements to enable women to come in during their parental leave and have their babies looked after while they were brought up to speed and kept up to speed, so that when they returned they had not fallen so far back that someone else had taken their job. I am therefore personally keen to see this piece of work go forward.

Now, more than ever, we need to ensure that the overall system of employment law helps rather than hinders growth. It is essential that the labour market functions in a way that gives employers the confidence to create new jobs. We have an extensive programme of welfare to work policies, but we also need our labour markets to be even more effective. Our aim, therefore, is to set employers free from unnecessary red tape while safeguarding the rights of individuals. Businesses can then concentrate on doing business and employing people rather than filling in forms. To ensure that we have the balance right, we are reviewing employment law. The employment law review has been under way since last May and will continue until the end of this Parliament. The review is an essential element of the growth review, an ambitious and relentless focus on the role government can play to drive, to ensure support and to enable the right conditions for businesses to thrive and achieve strong, sustainable and balanced growth.

The noble Lord, Lord Monks, asked about the current economic model. He thought that the one we had was bust and that we are cutting too quickly. We do not, of course, believe that. It is vital that we renew the balance within the country. Our top priority is to achieve sustainable and balanced growth. We have prioritised capital investments that support long-term economic growth because we believe that is the right way forward to keep our jobs safe and secure. We have launched a growth review and are working closely with industry to create a new model of economic growth, driven by investment and exports. We have taken decisive action to tackle the deficit, restoring economic confidence and stability.

The noble Baroness, Lady Wheeler, spoke of the importance of leadership and management skills and the Investors in People standard. We look forward to considering the recommendations of the review of the IiP standard that the UK Commission for Employment and Skills is currently undertaking and to which she referred. We are already tackling some of the problems that we have identified. Employers regularly tell us that they want to grow, but are put off by the fear of ending up in employment tribunals. We have therefore consulted on a framework that has, at its heart, dialogue rather than confrontation between employers and employees—conversation rather than diktat. We believe that businesses and workers can sort things out better than government.

The noble Baroness, Lady Donaghy, highlighted the labour market’s need to be able to respond to changes resulting from the rise of social media. The noble Lord, Lord Haskel, talked of joint enterprise and employee engagement. We have consulted on plans to improve and streamline employment tribunals and announced that we will extend the qualifying period for bringing claims for unfair dismissal. The noble Lord, Lord Desai, said that making it easier to sack staff will not help unemployment. Our announcement of the increase in the qualifying period for unfair dismissal claims from one to two years aims to increase business confidence in recruiting, which is in everyone’s interest. We believe this strikes the right balance between protecting workers’ rights and giving businesses, particularly smaller ones, more confidence to take on people to train and to encourage them to take many more.

The noble Lord, Lord Morris, spoke of employment tribunals, unfair dismissal and fee charging. Fee charging by employment tribunals is the policy responsibility of the Ministry of Justice and I hope the noble Lord will respond to the consultation on fee levels which it will be launching in due course. We have concluded that it is right to ask users to contribute to the costs of running the employment tribunal system but it is important that we develop a system which is as fair as we can make it for vulnerable workers. The Red Tape Challenge focus on employment related law will help us gather more ideas on how we can improve or get rid of specific regulations. We are considering more than 1,200 comments on employment related laws which we have received through the Red Tape Challenge website.

The noble Lord, Lord Lea, spoke of Adrian Beecroft’s contribution on employment law and protected conversations. Adrian Beecroft has been asked to contribute his thoughts to government to support the work of examining the burden of a cross-government employment related law. This is part of the wider consultation with stakeholders for Red Tape Challenge. His views will feed into that process and we do not plan to publish them. As I have said, we have already announced plans to raise the qualification period for unfair dismissal. This is an outside view that we are taking notice of—that is all.

It is not just about what we enforce. We also need to ensure that the system of enforcement is both effective and cost-effective, and we need to do so in a way that minimises inspections and other burdens on reputable businesses. That is why earlier this month we announced our intention to review whether a streamlined enforcement regime could be implemented. As part of this work, we will consider potential enforcement models, including whether there could be benefits from establishing a fair employment agency. By developing a better system of enforcement we will be able to increase its impact and ensure that the most vulnerable are aware of their rights and supported in their protection. We will report again on progress in the spring.

The Government are determined that employers that operate outside the law must not be allowed to undercut their legitimate competitors by exploiting their workers. Ensuring that workers are properly protected from abuse is not only good for workers; it is good for business and the economy as well.

Ultimately, our vision is for an education system attuned to the changing world of employment, with young people given the skills for work and for life—and for a labour market that is: flexible, by encouraging the creation of jobs by making it easy to get people into work and to stay in work; effective, by enabling employers to manage their staff productively; and, above all, fair, with employers competing on a level playing field and workers provided with a strong foundation of employment protections.

[Lord Morris of Handsworth]

Can the Minister say whether the Government have any plans to charge users of other tribunals, apart from industrial tribunals, for entry and accessing those facilities?

[Baroness Wilcox]

No, at the moment I cannot give the noble Lord an answer, but I will go back and ask whether there are other plans that I do not know about and cannot answer on today. I will ensure that the noble Lord gets a proper reply to that question.

14:32

[Baroness Prosser]

My Lords, I am extremely grateful to everyone who has contributed to the debate. It has been rich and wide-ranging, and we have covered all kinds of important issues within the world of work. Skills were mentioned by many noble Lords, as was the growth of technology, the use of social media, equalities and fairness, public and private employment and, of course, employment rights. Importantly, towards the end of the debate, my noble friend Lady Wheeler raised the role of management and the importance of management skills.

Part-way through the debate, a comment was made that the majority of contributors to this debate were people with a trade union background. That is correct, but I should like noble Lords and the House to recognise that as a positive, because the contributions made by those of us from a trade union background represent many years of collective knowledge and experience that we want to use in a debate such as this, not simply to be overtly critical or oppositionist, but to demonstrate that that experience tells us that some of the ideas currently being mooted within government quarters may have unintended consequences. We have been here before. We know just how difficult the world of work becomes when it is out of kilter, out of balance and unfair.

I very much thank the Minister for her reply. There was a great deal of positive comment in it. I again thank the whole House. I beg leave to withdraw the Motion.

Motion withdrawn.

Eurozone Crisis

Thursday 27th October 2011 Lords Chamber

Statement

14:34

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I shall now repeat a Statement made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows.

“Mr Speaker, I wanted to update the House as early as possible on developments in the eurozone and, in the absence of the Prime Minister as he travels to the Commonwealth Heads of Government meeting, report on the good progress made at yesterday’s European Council.

The crisis in the eurozone has caused instability in financial markets, has greatly undermined confidence around the world and is having a chilling effect on economic growth in many countries, including our own. It is in our overwhelming national interest that a coherent, comprehensive and lasting solution to the eurozone’s problems is found, for the decisive resolution of this crisis would provide the single biggest boost to the British economy this autumn, while the break-up of the euro would be the single greatest threat to our prosperity.

Our view about how to solve the eurozone’s immediate problems has been clear, consistent and forcibly expressed. The Prime Minister and I have set it out to the House on many occasions: reinforcement, recapitalisation and resolution. First, eurozone member states need to reinforce their bailout fund to create a firewall. Secondly, weak European banks need to be recapitalised. Thirdly, the unsustainable position of Greece’s debts needs to be resolved. But if the solution is to last, as I said many months ago, the members of the euro also need to address the logic of monetary union by pursuing greater fiscal integration within the eurozone, while at the same time we protect Britain’s interests.

We have to improve competitiveness—competitiveness in the peripheral economies of the eurozone as measured against the core economies like Germany, and competitiveness across the whole European continent versus the rest of the world. This is the solution of the crisis we have been advocating for months and the solution once again advocated by the Prime Minister at yesterday’s European Council.

Our view is that last night very good progress was made towards solving the immediate crisis—very good progress on all fronts. The deal put together is much better than was expected yesterday afternoon, but much detail remains unresolved. Having put pressure on the eurozone to get this far, we have to keep up the pressure to get the details completed. They have started down the road; now they have to finish the job.

Let me take each element of last night’s deal in turn, and say how it affects Britain. First, on recapitalising banks, we are pleased that the European Council agreed to the proposal hammered out by myself and other Finance Ministers at the weekend ECOFIN. All major European banks will be required to hold at least a 9 per cent core tier 1 capital ratio by the end of June next year, including marking to market all of their exposure to sovereign debt. The European Banking Authority, based here in London, assessed that achieving this target means banks will require an extra €106 billion of capital, and the Council yesterday confirmed that if this cannot be raised privately, then Governments will have to step up to the plate.

I can confirm to the House today that, in the assessment of the European Banking Authority and our own tripartite authorities, no British bank requires additional capital. This is an important expression of confidence in this country’s banking system at a time of global financial stress. EU member states also agreed to co-ordinate guarantees of term funding, should they be required. We have also ensured that state-aid rules will be properly applied, and European banks will be restructured if necessary, just as the European Commission demanded of the last British Government two years ago.

While some would have wanted an even tougher banking agreement, and even more capital going into Europe’s weak banks, we should welcome what has been achieved with this agreement. Unlike the totally inadequate stress tests of last year, we now have a commitment to significant extra resources for the European banking system. However, the UK and others insisted that that commitment from the whole of the European Union on banking be conditional on the two other key components of the solution to the crisis that I set out: a reinforced firewall and a resolution of Greek debt. These are both properly matters for the eurozone, not the UK—and both were matters on which progress was also made last night.

On Greece, a headline agreement was reached to reduce the Greek debt-to-GDP ratio to 120 per cent by 2020. The eurozone will contribute an additional €30 billion. Because the British Government have made sure that we are not part of the Greek bailout, none of that extra €30 billion will come from our taxpayers, while private holders of Greek sovereign debt will be asked to accept a nominal write-down of 50 per cent. A lot more work is needed to put this all into practice, including detailed negotiations with the private sector—but we said Greece’s debts were unsustainable and we are pleased to see a resolution in sight.

On reinforcing the size of the firewall, the eurozone has set out two options that could operate in tandem. One is to provide, from the bailout fund, insurance on new debt issued by eurozone countries; the second is to create special purpose vehicles that can attract resources from private and public investors. In their statement, they said that,

“the leverage effect of both options will vary”,

but they could be,

“expected to yield around 1 trillion euro”.

We have always believed that the role of the European Central Bank is critical and I welcome the positive statement made by Mario Draghi, the incoming ECB president.

Talk of special purpose vehicles has given rise to questions about the involvement of the IMF and major shareholders such as the UK. As I have said to the House on many occasions, Britain has always been one of the IMF’s largest shareholders and biggest supporters: we helped create the institution 60 years ago; the last Government agreed to increase its resources two years ago; and this Government not only ratified that agreement but helped to make the IMF more representative of the new world economy by brokering a deal last year that gave countries such as China and Brazil a greater say, while securing Britain’s seat on the board. The IMF has been an active participant in the packages put together to support Ireland, Portugal and Greece. It has also been active in extending flexible credit lines to Poland and Mexico—neither of which are in the eurozone, of course—as well as supporting other countries in central and eastern Europe such as Hungary, Romania and Latvia. Indeed, it currently has 53 lending programmes around the world, of which only three are in the eurozone.

Supporting countries that cannot support themselves is what the IMF exists to do, and there may well be a case for further increasing the resources of the IMF to keep pace with the size of the global economy. Britain, as a founding and permanent member of its governing board, stands ready to consider the case for further resources and contribute, with other countries, if necessary. Let us remember that support for the IMF does not add to our debt or deficit, and that no one who has ever provided money to the IMF has ever lost that money. But let me be very clear: we are prepared to see an increase only in the resources that the IMF makes available to all the countries of the world. We would not be prepared to see IMF resources reserved only for use by the eurozone. By all means, the IMF can use its expertise and advice to help the eurozone create the special purpose vehicle that it is considering. By all means, let countries with large foreign currency reserves such as China consider putting their own money into the eurozone’s special purpose vehicle—that must be their decision—but the IMF cannot put its own resources in; it can lend only to countries with a programme for adjustment.

Moreover, I can confirm today that Britain will not be putting its resources in either. We do not have a surplus; we have a very large deficit. We have had to use our own resources to recapitalise our banks and to stand behind our currency. An active member of the IMF? Yes. A supporter of the IMF, helping with advice and technical support? Yes. But the IMF contributing money to the eurozone bailout fund? No. Britain contributing money to the eurozone bailout fund? No. That is Britain’s clear position.

We expect the eurozone members to use the next few days—at most, weeks—to provide much more detail about their plans to increase their firewall and sort out Greek debt. We have made it clear that the sooner this happens, the better for the whole world economy. We must maintain the momentum.

This package will not on its own resolve the longer-term issues of how to make the euro work more effectively. Those longer-term issues were addressed yesterday, and they included proposals for greater fiscal integration and mutual control over the budget policies of eurozone member Governments. I said many months ago that this is where the remorseless logic of monetary unions leads, and it does involve a loss of national sovereignty for countries in the eurozone.

It is in Britain’s interest that the euro operates more effectively, provided that the interests of all 27 member states are properly protected in key areas of European policy like the single market, competition and financial services. We are insistent that our voice will continue to be heard and our national interests protected. We have found allies among the other 10 members of the EU not in the euro. An important marker was put down in Sunday’s European Council conclusion.

No one pretends that sorting this out in a satisfactory way will be easy, but it is a necessity. That is the context in which we should approach potential changes to the treaty. This coalition Government have already proved that they can protect Britain’s interest by getting us out of the last Government’s involvement in eurozone bailouts, holding down the European Union budget and putting into law the guarantee that no further powers or competencies can be transferred to Brussels without the consent of the British people in a referendum. Now this Government will protect Britain’s interests again as the discussions on a possible limited treaty change begin. We will seek to rebalance the responsibilities between the EU and its member states, which in our view has become unbalanced.

Finally, the euro will not find lasting stability until its peripheral members become more competitive. That means credible plans to reduce budget deficits—a commitment made in the very first section of yesterday’s agreement—but it also involves difficult decisions on pension ages, business tax rates, welfare reform and educational standards. Britain, thankfully, is not in the euro, but we are taking these difficult decisions because the ultimate lesson of this crisis is that unless you can pay your way in the world, and compete around the globe, then your country will be next in the firing line. I am determined that that country will never be Britain”.

My Lords, that concludes the Statement.

14:46

[Lord Liddle]

My Lords, I thank the Minister for repeating the Statement that the Chancellor made in the other place. As my colleague Rachel Reeves acknowledged there, we on this side of the House welcome the agreement that has been reached, but we also believe that there are many crucial, unanswered questions; I hope that the noble Lord can help us deal with some of those today. The future of the eurozone is vital to our national interests. It has huge ramifications for British businesses and families and that is why we need to see on the part of our Government a policy of constructive and positive engagement, even though we are a “euro-out”.

On the recapitalisation of the banks, does the Minister believe that the deal announced is sufficient and that UK banks do not require any further recapitalisation? What estimate has he made of the exposure of UK banks to Greek, Italian, Portuguese and Spanish sovereign debt? What can he tell us about that? Does the noble Lord rule out any possibility that the Irish might at some stage ask for similar treatment to that of the Greeks? What would then be the impact on the UK banking system? What would then be the expectation of our partners as to our role?

On the expansion of the European Financial Stability Facility, does the noble Lord believe that the €1 trillion package is sufficient? Is it the big bazooka that the Prime Minister talked about so eloquently before the summit? Does he think that we are going to be back here discussing these issues in a few months’ time, which would add to the uncertainty that is undermining confidence?

Can the noble Lord explain in more detail—and I understand the difficulties here—how the leveraging of the EFSF will work? If it is not clear now, when does he expect it to become clear in terms of credit enhancement and special purpose vehicles? If the EFSF must also fund bank recapitalisation, will it be sufficient to give confidence to the markets, and will there be sufficient remaining funds to underpin the sovereign debt of member states in difficulty, such as Italy?

On the question of British contributions, paragraph 22 of the euro summit statement says:

“In addition, further enhancement of the EFSF resources can be achieved by cooperating even more closely with the IMF. The Eurogroup, the Commission and the EFSF will work on all possible options”.

Are we to interpret what the noble Lord said in the Statement as meaning that the British would oppose any such exploration and try to veto such efforts?

Is not the big thing missing from the agreement that has been concluded the lack of any plan for jobs and growth in Europe? Is it not the case that countries such as Italy are not conceivably going to be able to solve their debt problems without a revival of growth? Is this not a time when Britain should have been leading the charge with our partners to argue for a proper plan for jobs and growth in Europe? We need not simply collective austerity but a new drive to open up the single market, an investment plan using up unused structural funds—of which there are hundreds of millions in this country—and a greater role for the European Investment Bank, which has already played a considerable role in financing small businesses. We need to look at whether this can be extended to provide central support for privately funded energy and other infrastructure projects. Should we not be putting together that kind of European plan for growth?

However, is not the real problem that this Government cannot do that because unemployment is at a 17-year high, there has been no growth in this country for a year, borrowing is £46 billion higher than was planned and, by clinging desperately to an austerity plan that is failing here in Britain, as my colleague Ed Balls has so persuasively argued, we are nailing our colours to a mast of austerity when what we need is a comprehensive plan for growth? Is not one reason why the Government are being held back from putting forward a plan for growth in Europe that they are fundamentally conflicted on Europe, not really being able to make up their mind whether they want Britain in the room or out of the room?

On the arrangements for future decision-making that have been agreed, the agreement says:

“The President of the Euro Summit will keep the non euro area Member States closely informed of the preparation and outcome of the Summits”.

What does “closely informed” mean? Does it mean anything more than Britain simply being told by a letter in the post, as it were, what has happened in Brussels? What arrangements will be made to ensure that the British voice is heard loud and clear?

On the forthcoming treaty changes, which are mentioned, it is totally unclear where the Government stand. I understand that there was a report this morning from a No. 10 press briefing that any treaty changes were expected to be minor and certainly would not require a referendum in this country. In that case, how will they be a vehicle for the repatriation of powers and the renegotiation of Britain’s relationship with the European Union that the Prime Minister promised his Back-Benchers in the House of Commons earlier this week? The fact is that, as long as the Government fail to resolve these fundamental issues about their stance towards our membership of the European Union, our influence over the eurozone’s future is going to be minimal.

14:54

[Lord Sassoon]

My Lords, I congratulate the noble Lord, Lord Liddle, on asking, in my experience, the maximum number of questions in the minimum amount of time, which certainly gives me a bit of a challenge. He addressed some of the key issues that are left outstanding, which is very helpful, and I shall attempt to address as many of his questions as I can.

First, on the sufficiency of the bank recapitalisation, what is important here is that for the first time, unlike the somewhat obscure and clearly failed stress tests—failed in the sense that they were not nearly tough enough—we have a very clear direction about the hurdle of 9 per cent core tier 1 capital on the basis that sovereign debt is market to market and the European Banking Authority has done the calculations on that basis. That is materially different from the way that the assessment was made last year, which was woeful in its inadequacy. To be absolutely clear, through that process and through the ongoing process of the tripartite authorities—particularly the FSA in the UK—under this assessment UK banks do not need any new capital, as indeed is the case for banks in a number of other countries, including the Netherlands and, critically, Ireland.

The noble Lord asked about Ireland and I shall come back to that in a minute. He also asked specifically about the UK’s exposure to other peripheral countries, and it may be helpful to give the latest data on that. The information is set out on the Bank of England website, and the latest numbers that it gives are that UK financial and monetary institutions have exposures to the public sectors of the peripheral eurozone countries—that is, Greece, Ireland, Portugal, Spain and Italy—of up to $34 billion, the currency in which the numbers are reported. Twenty-five billion dollars of that relates to the public sectors of Italy and Spain, and a total of $9 billion to Greece, Ireland and Portugal—$3 billion to Greece, $4 billion to Ireland and $2 billion to Portugal. These are relatively modest numbers in most cases compared with those for other core European countries. They are much lower than the exposures of banks in France and Germany, for example, to Greece.

So far as concerns Ireland, as I just said, the first thing that came out of the statement overnight is that the Irish banks do not require further capital injections as a result of this package. I support the euro summit’s statement on Ireland—that it is making good progress on the full implementation of its adjustment programme. As we all know, it is clearly in our national interest that the Irish economy is successful and that its banking system is stable. Ireland accounts for some 6 per cent of Britain’s exports, and that is why we signed the bilateral loan agreement with it. As is clear from everything that has happened since then, the Irish Government have a strong commitment to programme implementation, and we very much welcome that.

A recently completed staff mission ahead of the fourth EU/IMF review of Ireland’s programme concluded that Ireland is indeed delivering its programme effectively and making substantial progress on deficit reduction, banking repair and structural reforms. The progress that Ireland has made is a positive lesson for other countries in Europe.

The noble Lord then asked whether the €1 trillion is sufficient. The critical point for now is that, although a lot of numbers have been bandied around in negotiating the package, we have gone up a step from €440 million to €1 trillion and that is a very significant increase. The first priority is to see to the details because, as the noble Lord, Lord Liddle, points out, important details have to be put in place. That has to be the next priority and there is a commitment that we should get the details on that by the end of November, which answers the noble Lord’s question. Otherwise, all I would say about indications of the sufficiency of the package is that the markets—whether the equity markets, the debt markets or the markets in European banks—have been positive today and although we should not set too much store by one day's reaction in the market, clearly that reaction has been positive, having looked at the statement and the package.

Turning to jobs and growth, of course we want the EU27, as well as the eurozone, to be putting in much more effort, as I have already said, to questions of structural reform, competition policy, external trade and so on. From the Statement it is clear that yesterday the Council was looking hard at these matters, not least in drawing attention to the Spanish plans for structural reform and the new Italian plan for growth. To be fair to the eurozone, both in the generality and in relation to two of the countries that wish to see speedy action, growth issues are certainly not forgotten.

On the noble Lord's jibes about the UK, I stress again that the approach of the UK Government is threefold: first, we must stick to the deficit reduction plan if we are to have the continued low interest rates which we need for sustained recovery; secondly, yes, there is room for monetary activism, as seen in the Bank of England's recent announcement on more quantitative easing but also in my right honourable friend the Chancellor's announcement that we are looking at further credit easing measures; and thirdly, yes, we need to continue to bring forward supply-side reforms, as we will do in and around the autumn Statement next month to underpin medium-term balanced growth.

The noble Lord asked about issues concerning the structure of the euro-ins and the euro-outs, treaty changes and so on. As regards what “closely informed” means, the best evidence is what happened over the past few days: the Prime Minister successfully argued that we needed to have a seat at the table yesterday for issues that concern the whole EU27 and specifically there was the bank recapitalisation. That was accepted; we were there; the other euro-outs were there and we were kept extremely closely informed about the deliberations within the eurozone. The best thing to look at is the evidence of how that worked over the past couple of days.

The eurozone Statement talks about possible treaty changes, so we must not jump the gun and say that there will be some. I do not have the wording of that paragraph in front of me, but it makes the point that they are not necessarily extensive changes—I forget the adjective.

[Lord Liddle]

Limited.

[Lord Sassoon]

I thank the noble Lord for that—possible limited treaty changes. We should not get excessively excited too soon about that but, if and when the treaty changes come forward, the first priority of the UK Government will be to ensure that those treaty changes are fit for purpose in terms of the better governance that we want in the eurozone, and the second is that we will take every opportunity at that point to see what advantage we can get for the UK out of the discussions around any package that may come forward. I hope that that rather briskly answers the noble Lord’s many questions.

15:05

[Lord Newby]

Reverting to a question raised by the noble Lord, Lord Liddle, and the IMF, the Chancellor very helpfully pointed out in the Statement:

“Let us remember that support for the IMF does not add to our debt or deficit, and that no one who has ever provided money to the IMF has ever lost that money”.

Why, therefore, does he go on to say,

“But the IMF cannot put its own resources in—it can only lend to countries with a programme for adjustment”,

not least because I thought all the countries that we were talking about had a programme for adjustment? I cannot see why the Government are so averse to involving the IMF, particularly given that the eurozone Ministers are very keen to work with the IMF. Secondly, I ask specifically about tax co-ordination. The European statement says:

“Pragmatic coordination of tax policies in the euro area is a necessary element of stronger economic policy coordination … Legislative work on the Commission proposals for a Common Consolidated Corporate Tax Base and for a Financial Transaction Tax is ongoing”.

The implication is that the eurozone countries are considering imposing those taxes themselves. Is it the Minister’s understanding that they will be in a position to impose those taxes and that common tax base—with the UK out, under the outs—and, if they did that, what would be the Government’s attitude towards it?

[Lord Sassoon]

My Lords, first, I shall try to clear up what I think is a small confusion in relation to what the IMF can or cannot do under its own rules and what we would be prepared to be part of or not part of. Of course, the IMF is involved directly in the Greek package, as it is with two other packages within the eurozone. So three programmes out of the 53 in which the IMF is currently involved are indeed eurozone ones and that is perfectly proper and we support the IMF’s commitment in adjustment programmes of that kind. We would not support the IMF participating in some special purpose vehicle fund, but I do not believe that it has the ability to do that anyway and the UK certainly will not be involved in that. If China and other countries want to be involved, that is fine and that is their decision, but we will not be involved and we will not support any IMF involvement in that route. We will support the IMF's involvement in country adjustment programmes, such as it has done throughout its history. That is what the IMF is there for. There may be some confusion on that.

On tax co-ordination, first, the UK Government stick strictly to their position that we believe that taxation is, and should remain, a matter of national competency. It is up to the eurozone if it wants to propose some different arrangements within the eurozone consistent with the need for greater fiscal co-ordination in it. On the one specific proposal that has come forward so far—the financial transaction tax—first, we have said that there may be some basis for such a tax but only where it is globally applicable because if it is applied in Europe it will simply drive business away from Europe and, critically, away from the City of London, and that makes no sense. Secondly, in bringing forward that proposal the Commission was completely clear that the article under which it comes forward is one on which unanimity is required and therefore QMV could not force us into it.

[Lord Reid of Cardowan]

My Lords, I do not in any way want to belittle any of the efforts that have been made, but does the Minister accept that over the past 24 hours in Europe we have been arguing over the size of the sticking plaster on a corpse that has an underlying chronic problem? Did he not indicate the nature of that problem when he said that the eurozone will work only if the countries in it approximate towards relative competitiveness? Is not the key problem that that should have preceded the onset of a single currency? The delusion that you could politically impose a single currency on such variegated competitive levels inside 17 countries was always bound to end with the chronic problem that we are facing. In view of that, what is the strategic thinking of the Government? Do they now maintain that the present membership of the euro is an inviolate and irreducible minimum? If they do, do they therefore accept that it can exist only with the concentration of ever closer political and fiscal union inside the eurozone? Can the Minister explain how support for ever closer political and fiscal union inside the eurozone accords with the Government’s view of opposition to ever closer political union within the wider 27? If not a contradiction, is there not at least a very difficult paradox underlying the strategic position in which the Government now find themselves?

[Lord Sassoon]

First, it is probably not productive to rake over too much of the history of this. An awful lot of those who advocated the creation of the euro and the UK’s participation in it have been proved completely wrong by the way that events have unfolded over recent years. Therefore, arguing about whether competitiveness should have come before or after the creation of the euro is more for historians. That is why it was in my right honourable friend the Chancellor’s Statement that the competitiveness of the euro-periphery countries, vis-à-vis Germany as the benchmark of economic and industrial efficiency in Europe, is a critical issue that has to be addressed; and that the second dimension is the competitiveness of the EU as a whole in a global economy. I completely agree with the noble Lord that this has to be central to the solution going forward.

As to who should or should not be in the euro and what the size of it should be, that is for the euro to work out. The Government have no view on whether euro membership is inviolable. We simply say that that is a matter for the eurozone. What we want to see is these issues of competitiveness within and without the eurozone very high on the agenda. As far as dealing with internal competitiveness is concerned, that inevitably means a degree of closer fiscal co-ordination, the inevitability of transfer payments between members and all the logic that flows from that.

The competitiveness of the EU27 and the outward-facing euro are completely different matters that do not require similar questions of political union. We have a very good paradigm in which the EU27 can co-operate. It is just a matter of them focusing on the structural, market, competition and financial regulation issues, none of which requires any closer political union. They are technocratic, single-market trade and economic issues.

[Lord Higgins]

My Lords, I congratulate the Chancellor on the extremely active and skilful way in which he has defended British interests in the course of these very complex negotiations. As far as the possible costs of the operation are concerned, will my noble friend clarify the situation? Is he saying that under the arrangements that are now put forward there can be no cost to the UK taxpayer? It would seem to be true of the first part of the Statement. The position with regard to the IMF seems a little obscure because, if I understand it correctly, the Chancellor is saying that he is prepared to contribute more to the IMF but will not contribute if that money is going towards bailing out the eurozone or members of the eurozone. Will my noble friend say how that is to be achieved because, from my experience of the IMF, I am not at all clear?

As far as the banking side of things is concerned, my noble friend suggests that the Government may get involved in the process of recapitalisation if other methods do not succeed. Will he tell us what the likely or potential cost of that could be and, in particular, if we are going to contribute to the recapitalisation, is there any implication as far as ownership of the banks is concerned?

Finally, I shall pick up the point just made. At the end of the day, as far as I can see, none of these huge amounts of money being thrown around will make a significant difference to the competitiveness of, let us say, the Greeks. If the IMF is involved, then perhaps it will because it imposes very stringent conditions which, on the whole, have been enforced, but all this money is simply flowing around to bail out the Greeks. It is not making them more competitive. Indeed, is it not fairly apparent that the Greeks joined the eurozone at an exchange rate at which they were not competitive? As far as one can see, it is inconceivable that they will become competitive. These measures certainly do not do much to achieve that. In that case, are we simply delaying the day, sooner or later, when the Greeks have to leave the euro?

[Lord Sassoon]

My Lords, let me try again on the IMF because my right honourable friend and I seem to have failed so far to get this clear. I will have another go. There was a proposal under the previous Government, which was endorsed by this Government—and voted against by the Opposition in another place even though their party had previously put it forward—for the IMF to increase its resources to match the growth in the global economy. It has nothing to do directly with the eurozone but is to do with the size of the global economy and the IMF’s global mandate. We support that increase in resources.

I should say again that no member shareholder of the IMF has lost any money on the back of the IMF’s contribution to the many adjustment programmes that it has entered into for many years. In relation to Europe and the eurozone, the IMF is involved in the three eurozone programmes. We have no difficulty about the IMF being involved. That is what it is there to do, provided it is entering into adjustment programmes related to eurozone countries on the same basis as it has done to this point and as it would do with any other country. That is absolutely fine. However, the IMF should not contribute to some special eurozone fund—that is not what the IMF is there for—and I have no reason to believe it will do that. We certainly would not be part of any such special use of IMF resources.

It is not correct to say that there will be any UK contribution to the recapitalisation of the eurozone banks. If there is a contribution from the public sector, the taxpayers of Europe, it will come from those countries that have contributed to the ring-fenced fund, the EFSF, and the UK is not part of that fund. We have recapitalised our own banks. We are not contributing to the recapitalisation of the eurozone banks. I hope that that is also clear.

Greek competitiveness is addressed by the adjustment programme agreed with the EU and the IMF. The challenge is to make sure that, under the normal ongoing monitoring programme over the next few years, Greece is held to its commitments. But, critically, there are, in its adjustment programme on which its bailout package is conditional, all sorts of conditions aimed to increase Greek competitiveness.

[Lord Brooke of Alverthorpe]

My Lords—

[Lord Lea of Crondall]

My Lords—

[Lord De Mauley]

My Lords, there is plenty of time. Perhaps we may hear from the noble Lord, Lord Brooke.

[Lord Brooke of Alverthorpe]

I am grateful and I will be brief. I should like further clarification on the position of the IMF, which has been significantly involved with these negotiations. As I understand it, the IMF is already subscribing to three country adjustment programmes and will continue to do so. It has indicated that it may be required to look for more money from members of the IMF to put more cash into those programmes. I think that I am correct in my understanding of the Minister on that. If that is the case, we are therefore putting more money into the eurozone venture.

[Lord Sassoon]

My Lords, I will not repeat at length what I have said. It was the proposal of the previous Government, and endorsed by this Government, that we should support an increase of resources of the IMF to match its global commitments, which continues to be the situation. We will continue to be supportive of the IMF having resources in total commensurate with its global mission and mandate. That is quite separate from its contribution to EU programmes, which are looked at country by country in the same way as the IMF looks at the other 50 programmes that it has on the go at the moment, and other proposals that may come forward.

[Lord Maginnis of Drumglass]

My Lords, I thank the Minister for bringing the Statement to this House. Perhaps I may digress slightly from the euphemistic terms that he has used today to explain away a potential disaster. I have noticed that the Government bring domestic issues to this House in fairly radical terms instead of, perhaps, in succinct amendments. I am thinking of education, health and so on. How is it that the Government ignore the fundamental flaws in the European arrangements which have brought us to this state? How is it, for example, that we are prepared to accept in July 2012 the Republic of Cyprus taking over the presidency, when it is an acolyte of Greece that is probably £6 billion to £8 billion in debt, if one discounts the funny Russian money? How is it that we are prepared to allow from July next year for six months something that is bound to impede any efforts by the Commission to move the problem forward in the Greek situation?

[Lord Sassoon]

My Lords, I am answering questions on the eurozone crisis. The question of Cyprus has nothing to do with it. I am sure there will be other opportunities to discuss that.

[Baroness Falkner of Margravine]

My Lords, today marks the beginning of a profound change in our relationship with the EU. If we are going to have fiscal and political integration in 17 countries, leaving 10 outside, it is undoubted that we are going to have a different relationship. Winston Churchill said that the British nation was unique in wishing to hear bad news, irrespective of how bad it was. In saying that British banks do not require recapitalisation in the assessment of the European Banking Authority, can the Minister tell us when the authority made that assessment in the light of the fast-changing nature of the evolution of this crisis and the lack of transparency in the role of credit default swaps? The timing of when this assessment was made would be very useful to know.

[Lord Sassoon]

It made the assessment very recently. Indeed, the numbers are going to be reworked over the coming days and weeks to make sure that they are as absolutely up to date as they need to be for the recapitalisation to take place.

Impact of Government Policies on Family Budgets

Thursday 27th October 2011 Lords Chamber

Debate

15:26

Moved By

[Lord Knight of Weymouth]

To call attention to the impact of Government policies on family budgets; and to move for papers.

[Lord Knight of Weymouth]

My Lords, I am pleased to introduce this debate on the impact of government policy on family budgets. Before I come to the substance of my contribution, I want to say something about the choice of the word “family” in this debate. Yesterday I asked, through Twitter and Facebook, for examples of how people have been affected by government policy in the past 18 months. I quickly had a response from someone called Ma on Twitter. She—I think she may be a she—said:

“Every single politician who talks about families is talking about those with kids. That has never changed. For my entire life in this country, I’ve been an irrelevance. Why? Talk about being ‘excluded’”.

I apologise to her if she felt excluded by the use of the word “family”. Over a series of tweets she had important things to say for us in this debate. I quote:

“I’m visibly older. What happens when I need to find a new job and can’t? This government will have me out in the street. I’m way past old enough to be a grannie now. Am I supposed to live in a student flat or crummy bedsit now? One wage coming into my home to pay for fuel. How does that work, exactly? One wage to pay for housing? All very well to care about kids. I didn’t have them in part because I couldn’t afford them. So I’ll freeze now? Nae good”.

She may have been Scottish. Clearly single people are suffering under this Government as well as more traditional definitions of family and I am happy to speak for them too as best I can. The other most striking response was on Facebook from Caroline O’Brien. She wrote:

“One thing that I haven’t seen mentioned is the effect of cuts in local services on family budgets. Particularly on families with special needs children. Very often as services are withdrawn families are forced to try to make up the shortfall or see their children suffer. Whether that is getting independent assessments of educational need, private speech therapy, funding activities previously coming from youth services or providing transport. The withdrawal of EMA is going to hit us too, as my daughter starts A levels next year and as for thoughts of university, the debt levels are terrifying. I am also noticing that charities are being hit hard, so far less help is now available from them. Many of these things are just starting to have an effect but from where I am standing the future seems bleak for so many families. I know I am lucky. We can afford to buy the food we need, heat our house and pay the mortgage but is equality of opportunity for my kids really something that should be cut? After all it is the tax payer who will have to pay if my kids are unable to participate in society in the future”.

[Lord Campbell of Alloway]

Would the noble Lord forgive me for asking whether his interesting speech is within the remit of the problems of this particular Statement?

[Lord Knight of Weymouth]

I am speaking to the Motion in my name around the impact of government policies on family budgets and I believe I am speaking directly to that, but I welcome the interest from the noble Lord.

Those two responses are the authentic voice of people in this country—not the poorest perhaps but certainly what has been described as the “squeezed middle”—and it is appropriate that we heard from them first in this debate.

In the remainder of my time I want to make three broad points. First, the lack of growth in the economy is hitting family budgets hard and the country desperately needs a credible and urgent plan to return to growth. Secondly, tackling two of the big inflationary items in budgets, food and energy prices, means taking on vested interests and pushing them to act in the long-term interest rather than for short-term gain. Finally, this Tory Government are failing because they are out of touch with the problems of ordinary families in this country.

I start with the last of those first. It was, I think, in George Osborne’s 2009 party conference speech that we first heard his soundbite: “We are all in this together”. The Government want us to believe that the pain is shared fairly. Does the Minister still believe that to be true? The evidence that he is hitting the poorest hardest is stark. I quote from Peter Wilby’s excellent piece in the 17 October edition of the New Statesman, where he said:

“One of Labour's most outstanding achievements in office was to reduce child poverty during an economic boom. This sounds nonsensical, but isn't. Poverty is defined relatively; children living in families that receive below 60 per cent of median income count as poor. As the median nearly always rises during a boom, more children automatically become poor unless employers increase their parents' wages or ministers increase their benefits. The Tories are about to pull off the opposite trick. In recessions, the median falls and so, unless poor families' wages and benefits are hit harder than average, child poverty automatically falls. In 2009-2010, that was exactly what happened, with 300,000 children coming out of poverty. But that was before the Tories got to work. Now, the Institute for Fiscal Studies reports, we can expect the same number (though not necessarily the same children) to go back into poverty over the next two years, despite the likelihood that median incomes will remain, at best, stagnant. You couldn't have a clearer illustration of the difference between Tory and Labour governments”.

On the income side of family budgets, we know that wage increases are not keeping up with inflation and that families are therefore suffering real-terms cuts. The Government are adding to that by their own attacks on pay in the agricultural sector by abolishing the Agricultural Wages Board, on the pay and conditions of school support staff by abolishing their negotiating body, and on public sector workers generally by imposing an effective extra tax on them through increased pension contributions beyond those being recommended by the noble Lord, Lord Hutton.

At the same time, the Government are of course cutting the benefits bill. Their cuts to housing benefits, to tax credits, to child benefit, to childcare, to educational maintenance allowance, to baby tax credits, to the maternity and health in pregnancy grants, to concessionary transport and to disability living allowance amount to a list that is long and painful. These cuts are hitting the poorest hardest, because it is the poorest who claim the most benefits, both in and out of work. Worst of all, for some families, unemployment is rising once more, with too many families now going through the trauma of a sudden collapse in their income. It is clear that “We are all in this together” rings hollow. If Ministers want to continue to claim that their choices on spending have been spread fairly, they are even more out of touch than I thought.

I turn to spending. The biggest hit on family spending overall was the Government’s decision prematurely to raise VAT to 20 per cent. As former Monetary Policy Committee member Professor Blanchflower wrote recently:

“It certainly appears that increasing VAT from 17.5 per cent to 20 per cent was a big mistake—it increased … Consumer Prices Index inflation by 1.5 percentage points and hit ordinary working people's living standards”.

His call to reverse that increase was repeated by last year’s winner of the Nobel Prize in economics, Christopher Pissarides, who said this month:

“Cutting VAT back to 17.5 per cent … will revive job creation and reduce unemployment. Deficit reduction is best done with spending cuts when the economy is recovering, not with higher taxes in a downturn”.

Last week’s inflation figures made grim reading. CPI, the Government's preferred measure, has never been higher at 5.2 per cent, and RPI, at 5.6 per cent, is the highest since June 1991. It is little wonder that the Markit Household Finance Index published this week showed 37 per cent of UK households expecting their financial situation to worsen this month, against only 7 per cent expecting an improvement, or that the Family Lives survey of December last year found that 53.3 per cent of families said that their finances were in a worse state now than last year.

If we look at the detail of the inflation figures, we see the reality for families. Bills for gas and electricity have risen by 9.9 per cent in the past month and are up 18.3 per cent since last year. Transport has risen 12.8 per cent in the past year and food is 6 per cent higher than 12 months ago. I expect that my noble friend Lady Smith of Basildon will talk about energy prices in her speech, but we know that the poorer you are, the higher the proportion of income is used in food and heating. I fear that this winter many more will have to choose between the two as the decision to cut winter fuel payments to £200 for over-60s and £300 for over-80s adds to the misery.

With regard to fuels costs, I have to press the Government on why they are not giving teeth to the groceries code adjudicator. This new body will be funded by the supermarkets. The responsible Minister, Ed Davey, has said it will “safeguard the consumer interest”, and it will lead, in the words of the National Farmers Union to,

“fewer instances of flagrant bully-boy tactics … by the supermarkets”.

Yet the Government have rejected two Select Committee reports calling on them to implement the regulatory body quickly. It was ready to go last summer. The Government rejected proposals to allow it to fine without a resolution in both Houses of Parliament and to allow it to act on anonymous complaints. On the three big tests, the Government have shown that they are unable to resist the power of the vested interests of the supermarkets and unwilling to set up an effective regulator—the effective regulator that consumers and producers of food want and need.

Since the Minister is so well briefed on Europe now, and given the warm relationship that the Prime Minister has developed in Europe with the likes of President Sarkozy, perhaps the Minister can tell us how we will get heard on more radical reform of the common agricultural policy, which his friends in the TaxPayers’ Alliance claim costs every household in this country £398 per year in higher food prices. If the Government are serious about helping family budgets, they must be willing to take on the short-termism and vested interests that are raising food and energy prices. That is the new bargain with business that Ed Miliband talked about last month in Liverpool and it is sorely needed.

Finally, what families in this country need more than anything is growth in the economy. Growth brings jobs, job security and consumer confidence. We are in a vicious circle that needs reversing. Today’s British Retail Consortium figures show 23,000 fewer workers in high-street stores than a year ago because of the collapse in consumer demand. How are the Government going to reverse it? To get the economy moving, we need spending to increase. As we have seen, that certainly will not come from consumers. Despite the welcome deal overnight in the eurozone, the best prospect of an export-led recovery is if China starts to import more, and we cannot see any signs of that. The lack of delivery by Project Merlin means that the prospects of businesses accessing the finance that they need are poor, so they are unlikely to start spending either.

That leaves the Government. In this downward spiral, we need a kick-start from the Government. That is the consistent lesson from history. We need a plan for growth. Call it plan A plus, call it plan B, call it whatever you like, but give us a plan for growth that will work. The Shadow Chancellor, Ed Balls, has offered his plan: reverse the VAT increase until growth is sustained; cut VAT to 5 per cent for home improvements; bring forward investment in schools and hospitals; repeat the bankers’ bonus tax to invest in building new homes and thereby create work for 100,000 more young people; and offer small business a national insurance incentive to take on new staff.

The Minister may say we cannot afford to do it; we say we cannot afford not to. Where else is growth going to come from? Families in this country are up against it. The conversations around the kitchen table are very bleak. Too many cannot tighten their belts much more, and the real impact of many of the cuts is still to come. The poorest are hit the hardest. It is not fair. Without a change of heart from this Government and without serious progressive measures, I fear massive social problems, a sustained recession and a blight on families’ chances for a generation. The families of this country need action now.

15:39

[Lord Stoneham of Droxford]

My Lords, this debate is being held at a time of worrying outlook for the economy. No family or household who saw the figures last week of a 5.2 per cent increase in inflation and a comparable increase in salaries of 1.8 per cent needs telling that grappling with high energy and food prices is very tough indeed. There is huge concern about job security, declining real incomes and frail confidence both in business and in households.

When I joined the House of Lords I thought that it had a reputation for being best at strategic policy debates. Although I would like to thank the noble Lord, Lord Knight, for initiating this debate, I regard it as more of a tactical debate with strong political undertones if not overtones. I have always admired his political skills, not least in retaining Dorset South in 2005. As somebody who was helping to organise the Liberal Democrats’ election campaign that year, and also as a man from Portsmouth, I admired the way in which he arranged for the Sea Cadets to give the Prime Minister a welcome on the first day of that election campaign in Weymouth. It was one of the high spots of the campaign, which certainly did not get better in my view. It showed real political skill.

I would, however, like to correct the noble Lord. He kept referring to the Tory Government: this is a coalition Government. There are good reasons why this is a coalition Government. The Government are trying to grapple with decisions. If there had been a Labour Government, they would have had to grapple with the same problems.

All recessions are painful but I have worked through five of them and this one is undoubtedly the worst. This one is particularly bad because there has been a decline in gross domestic product, and that is bound to cause a fall in living standards. All recessions, sadly, weed out marginal companies and businesses, and that creates unemployment. Sadly, resources at a time of recession are always at their weakest to protect the vulnerable, and that is one of the difficulties that we face now. The aim of the Government is obviously to ensure that the broadest backs share the greatest burdens in this situation as we work to restore the economy, the destruction of which, I must point out again, started under a Labour Government.

At this difficult time, I recall JK Galbraith's warning to President Kennedy. He said:

“Politics is not the art of the possible. It consists in choosing between the disastrous and the unpalatable”.

Sharing pain in these circumstances is not easy, but the broad parameters of what the Government are doing are right. There will be no restoration in confidence, job security and growth unless there is confidence in the fiscal debt recovery plan both nationally and globally. Wherever possible we have to direct help to the most vulnerable. I particularly welcome the Government’s initiative, made despite all the pressures, in raising tax thresholds. At a time of severe economic pressures we have also given the triple guarantee for state pensioners, building on the pension credit scheme of the previous Government, which should protect those who are most vulnerable to inflation and least able to protect themselves. The brave universal credit reform will seek to reduce poverty, simplify a very complex system and improve work incentives.

The problem now is that many of the principal factors impacting on household budgets are externally driven. The exchange rate devaluation was 25 per cent in the last two years of the Labour Government. It has helped growth but—as Harold Wilson rudely discovered in 1967—the pound in your pocket is bound to be affected by higher prices.

The noble Lord, Lord Knight, mentioned fuel. Prices are obviously affected by the weak pound and the rise in wholesale energy prices. We would normally expect energy prices to fall in a recession. Most forecasters have been surprised that they have not fallen and there may be hope now that we may see some fallback in wholesale prices. But energy prices are now acting as a squeeze on real disposable income and deflating the economy. That is not a new problem. In a recent independent review of fuel poverty, Professor Hills has shown that the growth in households in fuel poverty grew from 2 million to 5.5 million between 2004 and 2009. This is a problem of rising wholesale energy prices and poor quality housing stock which is not sufficiently insulated to reduce the demand for energy, and therefore to help offset the price increases.

Although fuel costs and the weakened exchange rate are two key components of the extra costs on household budgets, we must accept that VAT has imposed a significant one-off increase in prices this year. I accept that the consequences of this tax and how regressive it is are disputed, depending on whether you assess it on income or household expenditure. However, the arguments are more complex when choosing between a cut in public spending or an increase in VAT. The critical question is where £13 billion in revenues would otherwise come from. Let us also not forget that no other authority than Alistair Darling was going down this track in 2009. I do not think that there is any guarantee that reducing VAT necessarily increases consumer spending; spending declined by 3 per cent in 2009 when the last Government tried it.

Let us also not forget—the noble Lord, Lord Knight, did not mention it—the benefits of low mortgage-interest rates. As the noble Lord, Lord Sassoon, reminded us in Questions today, a 1 per cent rise in UK interest rates today would add £10 billion to family mortgage bills alone. Actually, in the last year, the average fixed mortgage rate has fallen by almost 1 per cent. At least in this recession, unlike in 1989, we have not had negative equity in serious terms, with people forced to sell their homes because of high interest payments.

The Governor of the Bank of England has warned us that we are about to face the longest decline in real disposable incomes for some time. So what needs to be done to protect households? I believe that the Government must keep to their strategy that the broadest backs should suffer the greatest burden and that the most vulnerable should be protected. It is more than a symbolic gesture that we are maintaining high-pay restraint and the top rate of tax and that we have increased the CGT rate to 28 per cent.

Though all those aspects have to maintained, we must also maintain the Government’s ongoing commitment to raising tax thresholds as we can afford it. We must also maintain the commitment to the triple guarantee for pensions in April 2012. With quantitative easing, we must also recognise that this will create problems for those depending on interest from their savings, and indeed those approaching retirement and taking up occupational pensions. We must not forget that the consequences of low interest rates mean that people living on their savings and on occupational pension schemes are under severe pressure at this time.

In the energy sector, I hope that we will look at recognising what Professor Hills has said this week—that fuel poverty is very much linked to the issue of quality of housing as well as pricing, and that we need more schemes for better insulation, pioneered and financed by energy providers. Indeed, we need a whole series of partnerships. If the Government cannot provide the money then the partnerships will have to come through activity in the housing sector, with housing associations and the private sector, to develop funds for more social housing. It will have to come from energy companies, through some of the work of the regulator, to help those on low incomes and to encourage schemes for energy insulation, all of which are employment-generating activities. The banks need to be seen as sources of credit for small businesses. We need to work on that.

Always remember that once confidence has been shaken it takes a long time to rebuild it. The best protection for vulnerable groups is a growing economy, low inflation, and more choice of jobs. That requires a renewed partnership between industry and Government, to use the resources for business investment which they have but, for the time, are cautious in using.

15:49

[Lord Stevenson of Balmacara]

My Lords, I am delighted to be participating in this debate. I congratulate my noble friend Lord Knight of Weymouth on initiating it and on his speech, with which I agree 100 per cent. I will talk today about debt and its impact on families and on the financial services sector. In so doing, I declare an interest as the chair of the Foundation for Credit Counselling. Operating currently as the Consumer Credit Counselling Service in all parts of the United Kingdom, we are the UK’s leading debt advice charity. We provide confidential, free and independent counselling and money management assistance and, now in partnership with Citizens Advice, we have reached nearly a million financially distressed families in the last two years.

Our typical client—just to give a sense of what we are dealing with—owes over £25,000 to between five and eight lenders, which include the banks, the credit card companies, store cards, utility companies and the Government. The role of the charity is to work with lenders—who do not get nearly enough praise for the highly responsible way they work with us on this issue—to find an appropriate way of dealing with problem debt, including setting up an affordable debt management repayment plan, which is free to the client, welfare benefit checks and other debt solutions.

As I said, we are in contact with over 1,000 clients a day. The issues which they tell us are worrying them at the moment include the rising cost of living—with CPI inflation at 5.2 per cent last month, and RPI inflation at a 20-year high of 5.6 per cent—and energy prices, which, as has been discussed, have increased: electricity by 7.5 per cent and gas by 13 per cent. From our statistics we find that 30 per cent of clients are in fuel poverty, defined as having to spend 10 per cent of their net income to heat their homes adequately. A similar proportion of those seeking our help did not have the means to meet their day-to-day cost of living let alone to repay their debts. Underemployment, mainly part-time employment as opposed to unemployment, is starting to emerge as a major reason for debt problems.

We also work with other think tanks and organisations, including the Bank of England, which uses our data to provide more information. In a recent report, Debt and Household Incomes, the Financial Inclusion Centre reported that, in its calculations, 6.2 million households can be identified as financially vulnerable; that 3.2 million are already in financial difficulty, because they are either three months behind with a payment or in some form of insolvency; and that 3 million are at risk because they find it hard to make ends meet or may be vulnerable to increases in household bills. The Resolution Foundation reported in August, having done a MORI poll, that 48 per cent of people on low to middle incomes have no cash remaining at the end of the month after meeting their expenses. This month, a Lloyds Bank survey of their current account holders reports that one in 10 Britons do not have enough money to meet their monthly outgoings, such is the parlous state of their personal finances. That report’s other main finding was that incomes continued to fall in real terms in September, being on average 1 per cent down on last year, and that spending on essential items such as food and petrol has risen by 3.5 per cent compared to last year.

What are we to make of all this? In the immediate future, we know from our clients that people are borrowing less and, where they can, repaying their debts. That is a good thing, even though it may impact adversely on GDP. Yet as incomes are declining in real terms and saving is still not yet a habit, more and more people who come to us are unable to pay their debts. I will share some of my medium-term worries with your Lordships’ House. First, on the timing of the return to what we might call normal mortgage interest rates, we kid ourselves if we think that this extended period of ultra-low interest rates will last indefinitely. When we get back to real mortgage interest rates, which will be of the order of 5 per cent, it will cause significant damage to the budgets of millions of home owners.

A second concern is the impact that student debt will have on people who go to university after 2012. We had a recent Written Answer in this House which estimated the debt burden for new graduates after 2015 at between £40,000 and £50,000. How will they ever earn enough to repay that, and how will they get other borrowings in place to buy a house or start a family without recourse to the bank of Dad and Mum? This will certainly discriminate against those from deprived backgrounds and do nothing for social inclusion. My third and major worry in this area is that unless the bottom two deciles of income distribution get a real increase in their basic earnings—say of the order of 10 per cent—I do not see how they are ever going to square their family budgets, let alone repay the debts they have accrued. Where is that growth in real incomes going to come from?

The UK economy faces hard times. Debt is increasingly defining the experiences of what I might call the haves and the have-nots. The haves are households with no or low debts, savings and assets to provide a cushion in case of hard times, as well as sufficient income so that they do not have to rely on credit to make ends meet.

The have-nots are the millions of households who are burdened by debt, with little or no savings to protect them, struggling to make ends meet every month and increasingly vulnerable to predatory lending practices. I call on the Government to protect consumers from the aggressive practices of predatory lenders and commercial debt management companies who exacerbate, rather than alleviate, financial problems. This needs to be done through a combination of tough, properly enforced consumer protection and ensuring that financially vulnerable households have access to independent, objective and free debt advice.

In the future the legacy of personal debt will be one of the single biggest influences on the quality of household finances and will have an impact on the financial services industry. UK household finances have become unbalanced. Converting the UK from a debt culture to a savings culture, so as to promote self-reliance, is a major public policy challenge. This may be comparatively easy for the haves; however, if the financially vulnerable have-nots are to be supported on the road to self-reliance and freedom from debt burdens, they will need good, independent, free debt advice and financial work-outs from trusted intermediaries. However, this legacy of debt has wider implications for UK households and the financial services industry. UK households may be entering a new economic paradigm: a sustained period of high public debt, low economic growth, low interest rates and higher inflation with record levels of personal debt. This will affect household disposable incomes, consumer behaviour and attitudes to risk. This in turn will impact on the revenues and sustainability of business models in the financial services industry.

15:56

[Baroness Pitkeathley]

My Lords, I am grateful to my noble friend Lord Knight for initiating this important debate. I wonder how many of your Lordships know what it is like to live on the margins. I am not referring to those who live outside the norms of society, to those who break the law, have a drug or alcohol problem or are homeless. I mean those who are just about coping, either financially or emotionally, and often both. I well remember a time, as a single parent, when I was just about coping financially, when I would go to sleep every night and wake every morning wondering how I could balance my income with the demands on it and constantly juggling the importance of paying this bill while putting off paying another. I am glad to say that that was a long time ago and now I feel confident enough to know that I have some leeway, some cushion to protect me if disaster strikes, if I become severely ill or if the roof blows off. I suspect that most of your Lordships are the same, but for millions of people, that is not how it is. They live just coping, because of a network of factors, financial, social and emotional, which, if they are kept in balance, allow them—just—to cope.

I want to talk about the experience of two such families. First, take the experience of Annette, a single mother of two children, newly divorced from a violent husband. She has an almost full-time job in a supermarket and receives tax credits, help with childcare and child benefit, all of which are now being reconsidered and are likely to disappear or be reduced. At present her children go to a breakfast club two mornings a week, to an after-school club once a week and to a play day at the local library on a Saturday morning. This helps her with her shifts at the supermarket and with the food bills. Every other Saturday the children have a supervised contact session with their father at a local children’s centre. Midweek, she and the younger child attend a Sure Start centre where she meets others and receives help and support. She greatly values the social contact this gives her and the friendships she has made.

All these services, the things which mean that she just about copes, are now under threat because of cuts to either their voluntary—let us never forget how many of these services are provided in the voluntary sector—or statutory funding. If this young mother were like most of us in this House and had a cushion, even a cushion of £20 a week, this would not be so important, but she does not have that cushion and, as a consequence, she very soon may not cope at all, because this fragile network of support on which she relies is being taken away What will be the result of that? It does not take a genius to see that extra stress on this already highly-stressed situation will have dire consequences down the line. Annette’s mental health is likely to suffer. The children’s relationship with their father may be broken. The nutrition of the children may suffer. Let us not forget that a quarter of Britain’s schoolchildren go to school without breakfast. Annette may lose her job and become entirely dependent on benefits. Need I go on? What is the potential bill for the state then, compared with the small amounts that it is investing in this family now?

The next family to which I want to draw your Lordships’ attention is that of a carer, Shirley. She is aged 55. She is looking after her mother, who is 85 and is disabled by a stroke, which has affected both her mobility and her speech. Shirley’s husband is about to retire but of course his pension is not going to be as much as they had expected. She works very part-time and receives the carers allowance—which, fortunately, is not to be taken into the universal benefits proposals, as was originally intended—but she is increasingly worried about the impact of local authority spending restrictions on the services they use for her mother. One of the day-care centres has already closed. The respite service, which enables the carer and her husband to have a night out once a fortnight, provided by a voluntary organisation, is under threat. The speech therapy group at the local hospital will come to an end next March when the specialist nurse who runs it retires and is not replaced. Shirley, not surprisingly, is very worried about fuel bills as her mother is immobile and some form of heating has to be provided in the house night and day. Her experience is typical.

Age UK says that spending cuts are projected to reduce spending on older people’s care by £300 million over the next four years. Real spending on older people’s care will be £250 million lower in 2014 than it was in 2004, but over the same period the number of people over 85 has risen by two-thirds. In 2005, 50 per cent of councils provided support to people assessed as having moderate needs, but in 2011 the figure has fallen to 18 per cent. As a result, the number of people receiving local authority-funded care at home has reduced from just under 500,000 in 2004 to just under 300,000 in 2009.

A survey in April 2011 of 61 councils by Emily Thornberry MP showed that 88 per cent of them were increasing charges for social care services, 16 per cent were raising eligibility criteria and no fewer than 54 per cent were cutting funding to the voluntary sector, which provides so many essential services. In addition, two-thirds were closing care homes or day centres.

I emphasise that cuts in support to caring families like this are a false economy. If financial and practical support to carers is cut and caring breaks down as a result, there will be a considerable knock-on cost to health and social care services, as well as serious damage to family life. I remind your Lordships, as I often do, that there are 6 million carers in the United Kingdom providing care to a value of £119 billion every year.

Both those typical families are doing their best to cope. They are fulfilling their family and societal obligations lovingly and dutifully, but government policies are having detrimental effects so significant that the end result may be family breakdown, with all its attendant costs to the state and to society itself.

We are all aware of the dire financial situation in which global events have placed the UK, but it must surely make sound economic as well as moral good sense to continue supporting families such as those that I have set before your Lordships. Local authorities and the voluntary sector are having to cut services that provide the difference between people just coping and not coping at all, and we shall all reap the whirlwind from that before many years have elapsed.

May we be assured that the Government, however inexperienced Ministers are in the normal lives of citizens, understand that many of them are just coping and just managing? Can the Minister assure the House that he understands that withdrawing these networks of support will result down the line in fractured and fragmented families which, in the end, will cost us all a great deal more?

16:04

[Baroness Smith of Basildon]

My Lords, we owe my noble friend Lord Knight of Weymouth a debt of gratitude, not just for bringing forward this debate today but for his passionate comments. I like to think that when I am winding up a debate I can say how much I have enjoyed the contributions. While these have been very valuable, I regret to say that “enjoyable” is not the word that I would use on this occasion, given the depressing and serious impact that government policies are having on families, whatever their shape and size.

I was particularly interested in the comments of the noble Lord, Lord Stoneham. He expressed concern over the political nature of the comments of my noble friend Lord Knight. While he paid great tribute to my noble friend’s political skills, we have to understand that economics and politics are inextricably linked, and that it is political judgment that has led to the economic decisions that the Government have made.

At the previous general election the economy was the key issue. There was little disagreement over the need to tackle the deficit. Where there was a real divide was on the issue of how that should be done. The Labour Party took the view that it could and should be reduced alongside economic growth, while the Conservative view was that cuts had to be harder, deeper and faster to have the kind of impact on the economy that the party wanted to see. In the event, no political party won an outright majority. In fact, more people voted against all three major political parties than voted for them. Eventually, a Conservative-led coalition Government was formed with the Liberal Democrats and those hard, fast and deep cuts that were promised by the Conservatives became a reality.

As we have already heard from my noble friend Lord Knight, at the 2009 Conservative Party conference the Chancellor in waiting, George Osborne, promised that everyone would play their part in a deficit-reduction plan. He said:

“Everyone must pay their share”.

The famous and now discredited, “We’re all in it together”, was repeated three times in his speech, and then again by David Cameron. It is an excellent soundbite; it was attractive, understood and believed by many to be a commitment. It appealed to that very British sense of fairness. Everyone in the country would suffer equally in the pain that was to follow, no section of society would hurt more than any other, and all would pay their fair share. However, in their impact the Government’s actions have achieved precisely the opposite, as we have heard today. The noble Lord shakes his head but I urge him to talk to people who are feeling the impact of this Government, and not just read the brief that he has received from civil servants.

That impact has achieved the opposite of what the Government said that it would. The evidence that some people have been hit harder than others is overwhelming. We have heard something of the pressures on families from my noble friends Lord Knight, Lady Pitkeathley and Lord Stevenson. We have heard real examples of real families. My noble friend Lord Knight read out what he called a long and painful list of cuts that are hitting the poorest hardest. My noble friend Lady Pitkeathley’s examples of particular families highlighted not just the suffering that they face but the invaluable role that the voluntary third sector plays and how hard charities are being hit as local authorities cut their funding. That issue was raised with David Cameron at Prime Minister’s Question Time. He said that local authorities should recognise the value of charities before they cut their money. I have to say to Mr Cameron that they do recognise the value, but when their funding is being cut and they are under pressure local authorities are often left with little choice.

The comments of my noble friend Lord Stevenson were particularly useful to this debate. His experienced observations from supporting those in debt via a charity add a significant contribution to the matters before us today. However, it is also very worrying that this will just get worse. I welcome my noble friend’s constructive comments about what would help and hope that the Government will take them on board.

My noble friend Lord Knight referred to the Institute for Fiscal Studies report that was published earlier this month, which forecast the biggest drop for middle-income families since the 1970s, pushing 600,000 more children into poverty, taking the figure up to more than 3 million within two years. That is alongside 2.5 million working-age parents and 4 million working-age adults who do not have children being forced into poverty. However, for those not in poverty but who are struggling to make ends meet—the squeezed middle, as we heard from my noble friend Lady Pitkeathley—the IFS predicts that average income will fall by 7 per cent after inflation. That is the biggest fall in living standards for 35 years.

This is not just about numbers. As the chief executive of Barnardo’s, Anne Marie Carrie, said:

“This isn’t just about statistics as every day thousands of families are being forced into making choices between heating or eating”.

Unfortunately, that is not an exaggeration. The most startling increases in energy bills are forcing people to go cold or face alarming bills, which they may not be able to pay. The increase in energy prices of around 18 per cent in the past year—more in some cases—is crippling for families.

The Government’s response, with Chris Huhne complaining that people can not be bothered to switch energy companies, is an insult and is also inaccurate. It proves how out of touch he and the Government really are on this issue. In a Which? investigation, a third of calls to energy companies failed to elicit the lowest tariff, as requested by the customer. If an energy company is unable to identify the lowest tariff, how can the Government possibly expect the customer to do so? Why do the Government not ensure that the energy companies reduce the number of tariffs and automatically offer the lowest to the customer? Am I right to be curious about why any company would want such a confusing and complex system of tariffs, which it does not apparently itself understand? Whose side are the Government on in this argument?

Given the dramatic increases in energy prices, the Government must take action to stop those who have the least paying the most. Individuals with pre-payment meters are not eligible for any discounts, so they end up paying more and often, in effect, disconnect themselves as they just cannot afford it. As prices rise to their highest ever, the over-60s will get £50 less winter fuel payment this year than last year, and the over-80s will get £100 less. Warm Front, the Labour Government’s scheme for over 10 years, of which we are extremely proud, has brought warmth to the homes of pensioners, those with disabilities and the vulnerable. It is now being wound up. Having helped more than 2 million people with their bills, insulation and energy efficiency, the budget has been drastically cut this year and next, and will be ended altogether by 2013. The Government’s answer is the Green Deal. I appreciate noble Lords’ concerns about energy efficiency, particularly in private sector homes, but in principle the Green Deal is a good scheme which can make a contribution to making homes more energy efficient and reducing bills, as energy efficiency measures can be installed and paid back over time through energy bills. However, given that it is not to be available initially to those in some of the coldest, most energy-inefficient homes in the private rented sector, there is a lost opportunity to support those most in need.

I turn to feed-in tariffs for renewable energy. The best reasons for feed-in tariffs are an increase in energy supply, thus making a contribution towards energy security, and to help those on lower incomes and local communities reduce their bills. But the Government have changed and cut the scheme so that the main beneficiaries will be private households that can afford the initial capital cost, knowing that they can recoup this in time. That is great for them but, despite today’s announcement, the restrictions placed on the scheme have greatly reduced the benefits when just some relatively minor tweaks could have achieved the Government’s objectives in reducing costs without losing so much capacity and limiting those who can benefit.

Although VAT on domestic energy bills remains at 5 per cent, the Government have increased VAT on energy bills for business customers from the Labour Government’s reduction. This really hurts businesses, especially when prices are so high, and the increase just gets passed on to the customer in consumer prices. So we have higher costs at a time when unemployment is rising. In the quarter from June to August 2011, the average weekly pay increased by 2.8 per cent, compared with last year. However, bonus payments are up 28 per cent. In that same three months, 178,000 fewer people were in employment than in the previous three months. ONS statistics show that the two constituencies in my home town of Basildon are suffering a 12 per cent and 10.9 per cent increase in those who are unemployed and claiming JSA. That is just one side of the equation and I want to come back to my opening remarks and those of my noble friend, Lord Knight.

The Government said, “We’re all in it together”, and that everyone would take their fair share of the pain. The Government promised to tackle bankers’ bonuses. It was reported earlier this year that the chief executive of Barclays said it was time for banks to stop feeling remorseful—as he wallowed in his £9 million payout. Labour’s plans for greater disclosure were rejected and, despite the Government’s levy on banks, the bonus culture continues unabated with an estimated £7 billion to be paid out this year. In 2009, before the General Election, George Osborne said that the Government should act in the light of the unacceptable bank bonuses and that we could not wait for the “promised land” of “responsible bonus culture”. Does that mean that the Government now think these bonuses are responsible and acceptable? We are told that the best the coalition Government can now hope for is a declaration that bonuses are less than they would have been, despite reports that salaries will increase by up to 40 per cent in some cases to compensate for the so-called cuts or deferral of bonuses. So no fairness there.

The Secretary of State for Communities and Local Government, Eric Pickles, said he would crack down on the pay of council chiefs. Yet it is reported that even in the council next door to his in my home town of Basildon, the chief executive is to work for just three days a week from 2013 on a salary of £100,000 a year, and the council still has not cleared up the mystery of whether he will receive his pension at the same time. This is what really hurts people—when unemployment is rising, energy prices are soaring, those travelling to work face an average 8 per cent increase in their fares, supermarket prices are increasing, and the Government fail to act. Yet others are completely immune from pain, or at least from the fairness that the Government said they were so keen on.

It does not have to be like this. My noble friend Lord Knight read out to your Lordships’ House the five-point plan proposed by the shadow Chancellor. The Government are cutting too far, too fast and too deep. They are cutting jobs and choking off economic growth. That is the choice the Government have made; but it is the wrong choice. It is not just bad politics—it is bad economics, because it is hurting people and the economy. This includes people such as Caroline O'Brien to whom my noble friend Lord Knight referred; Shirley the carer to whom my noble friend Lady Pitkeathley referred; and it includes my noble friend Lord Stevenson’s charity that is helping people with debt.

The Government need to start thinking about such people as individuals and take action that will support them and their families—and the economy. I urge the Minister to take on board the comments that have been made today.

16:16

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I am grateful to the noble Lord, Lord Knight of Weymouth, for initiating this debate on an important topic and for all the contributions that have been made.

As your Lordships are aware, and as we have been reminded, we are living through a period of real international uncertainty and instability. The eurozone, as we heard earlier, has been and is at the epicentre of this crisis, but the volatility has reached right around the world—to the US and China, and of course here in the UK. We are not immune from what is going on in our largest export markets. That instability acts as a powerful drag on what was already a difficult recovery from the deepest debt-fuelled recession in living memory.

It is right when we face such difficulties to ask ourselves: are we doing enough to support families; are we doing enough to protect the budgets of the poorest families; are we doing enough to provide opportunities for the youngest in our society; are we doing enough to support working parents; and, most importantly, are we doing enough to put the economy back on track to provide the opportunities, jobs and growth that we all need? When we came into government we inherited the deepest recession since the war and the largest budget deficit in our modern history. The adjective that the noble Baroness, Lady Pitkeathley, used was “dire”. I agree. It was absolutely vital that we tackled that deficit. High deficits lead merely to higher inflation, taxes and interest rates. Cutting the deficit is a vital precondition to growth and prosperity. I am grateful to my noble friend Lord Stoneham of Droxford for underlining this point.

As we have seen over the past year, UK gilt yields and interest rates generally have fallen dramatically in response to the tough choices that we made in our spending review. Low interest rates help businesses to refinance debt and help families to stay in their homes. Of course the noble Lord, Lord Stevenson of Balmacara, was quite right to remind us that even in this time of low interest rates, debt is a very real problem for many in our society. Even a 1 per cent increase in interest rates would take £10 billion out of the pockets of families through higher mortgage payments. I therefore applaud the debt advice provided by a wide range of private and not-for-profit organisations. It is important that consumers know that many free and high-quality sources of help and advice are available from publicly supported projects and the voluntary sector.

Perhaps I may add a comment on one aspect to which the noble Lord, Lord Stevenson, drew attention—graduate debt—because I do not entirely share his analysis. Under the new system, all graduates will pay less per month than under the old system and they will have a longer repayment term of up to 30 years compared to the current 25 years. It is important to remember that.

Generally, on the deficit and interests rates, it is by getting ahead of the curve, by consolidating on our own terms, that we have avoided the uncertainty and the instability that have cut through other countries and plunged families in other parts of Europe into even more austerity and difficulty. More than that, in our spending review, we took the decisions to tackle the deficit in a proportionate, responsible, but also a fair, way. Therefore, I completely reject the charges coming from the noble Lord, Lord Knight of Weymouth, and the noble Baroness, Lady Smith of Basildon. Indeed, we are all in this together and it is critical that those who can, pay most. That is why we have tackled the deficit in the way we have.

The first transparent analysis of the distributional effects of our budget and spending measures—something never produced by previous Governments—shows that after combining the impact of tax, tax credit and benefit, and public service spending changes announced by this Government, the top 20 per cent of households will make the greatest contribution towards reducing the deficit as a percentage of their income and benefits in kind from public services. We take those distributional effects very seriously.

We are also taking more from the banks in our ongoing taxation of them than the previous Government did through their one-off tax on bonuses. In relation to VAT, I share the analysis of my noble friend Lord Stoneham of Droxford. I believe that what we did to reverse the previous Government’s national insurance tax—a tax on jobs—is what really mattered in making the difficult choices about where to prioritise tax measures so as to get our economy going again. These are painful choices, but it was our partial reversal of that tax on jobs, which noble Lords opposite did not mention, that was key to getting the economy going again. We took particular care to reduce the impacts on family budgets.

In relation to fuel poverty and rising fuel prices—a very important subject raised by the noble Baroness, Lady Smith of Basildon, my noble friend Lord Stoneham and the noble Baroness, Lady Pitkeathley—we have to acknowledge first of all the reality of rising world oil prices. We cannot be insulated from that. But what has this Government’s response been? We cancelled the previous Government’s fuel duty escalator and cut fuel prices. We have taken action on fuel duty, which has resulted in average pump prices being about six pence a litre lower than if we had continued with the previous Government’s fuel duty plans. A typical Ford Focus driver will be paying about £56 less this year than he or she otherwise would have been doing. We have introduced the fair fuel stabiliser so that when oil prices are high, and oil profits are higher, fuel duty will increase by inflation only. This will ensure that the burden of high oil prices is better shared between oil companies and motorists. I say again that energy price increases are never welcome for consumers and we recognise that. It is important that these are limited to the costs and risks borne and are not about energy companies making excessive profits.

That is why we strongly support Ofgem’s work in ensuring competition in the energy industry, including the recent proposals stemming from the retail market review launched in November last year. That is why we are taking a range of other actions to increase people’s control over—and help them reduce—their energy bills. We are setting up the Green Deal for energy efficiency and the supporting energy company obligations. We are rolling out smart meters that will enable consumers to manage their energy use better and introducing the warm house discount to provide cash rebates for around 2 million vulnerable households by 2014-15. So, yes, we share the concern but I reject the charge that we are not going about it in a sensitive and proportionate way.

Taking some of our other measures to help families, we have made significant above-indexation increases in the child tax credit for the next two years, increasing it by £255 and benefiting 2.4 million low to middle-income families. This will also ensure that modelled tax and welfare policy introduced by this Government will have no adverse impact on child poverty for the next two years. I say that directly to the noble Lord, Lord Knight of Weymouth. He shakes his head but, again, we now have the benefit of the introduction by this Government of the independent Office for Budget Responsibility so that we can no longer make up such claims; all these things have to be independently assessed.

We made changes to the personal allowances to provide support for hard-working families on low and middle incomes, and increased the rewards for work. The increases in the personal allowances announced at the 2010 and 2011 Budgets will benefit 25 million individuals in 2012-13 and take 1.1 million of the lowest-income tax payers out of tax altogether. Our aim is to ensure that no one earning less than £10,000 will be caught in the income tax net. My noble friend was completely right to draw attention to this policy.

[Lord Knight of Weymouth]

I am grateful to the noble Lord for giving way. I would not normally intervene but he mentioned the Office for Budget Responsibility. Would he support the OBR having to report on relative child poverty as part of its reporting?

[Lord Sassoon]

The OBR has a very clear and extremely wide remit. The previous Government had absolutely no check on any of their numbers. They could rewrite cycles or determine what path of growth they wanted to show. So I think we are now in a completely different world. Perhaps I may press on, because time is short.

We have reformed child benefit so that families with a higher-rate taxpayer are no longer eligible. Low and middle-income families are no longer being taxed to pay for child benefit for the rich. That, again, is another aspect of fairness. Of course, noble Lords have mentioned the important triple lock on pensions that we have introduced.

Finally in this area, this month my right honourable friend the Chancellor announced a freeze on council tax bills. Therefore, there will be a council tax freeze for a second year and that will provide real help for households in difficult times. Of course, in the spending review there were still difficult decisions to make on what to cut, but the previous Government’s welfare spending was both unsustainable and unsuccessful.

Tackling poverty is not about moving families and children above some arbitrary line. It is not reduced by throwing good money after bad. This Government are taking a long-term strategic view to tackling poverty, which is about more than just welfare transfers; it is a strategy focused on transforming people’s lives and the lives of future generations. I am grateful to the noble Baroness, Lady Pitkeathley, for reducing these almost abstract concepts to some really vivid case studies. I say to noble Lords that it is to that end, and it is in recognition of these very difficult situations, that we are increasing expenditure on public services where they can tackle the root causes of disadvantage. That is why we will introduce the fairness premium, refocus Sure Start and improve education. That will help to break cycles of disadvantage. The new fairness premium is worth £7.2 billion over the spending review period and will provide support to the poorest families in the UK. It will extend 15 hours a week of early years education and care from 2012-13 to all disadvantaged two year-olds; it will maintain Sure Start in cash terms, including new investment in Sure Start health visitors; it will introduce a substantial schools premium, rising to £2.5 billion by 2014-15, to support the educational development of disadvantaged pupils; and it will protect those on the lowest incomes in higher education through a scholarship fund of £150 million by 2014-15.

We are also reforming welfare to ensure that welfare payments are targeted at those who need them most and we are reforming tax credits to focus them on those who need them most. That means reducing the rate at which tax credits are withdrawn, while reducing the threshold at which they are paid. Importantly, we want to ensure that those who can move into work have a real incentive to do so. Currently some 800,000 individuals, including around a quarter of a million children, live in households where no one has ever worked. That has to be changed and it will be changed through the new universal credit being introduced over two Parliaments. To support working parents, the Government have agreed the extension of support with childcare costs to those working less than 16 hours, as part of the new universal credit, which will enable the transition of second earners, typically women, into the labour market.

In conclusion, this Government fully understand the difficulties that families face in the current economic environment. The biggest thing that we can do as a Government to help families is to return the economy to sustainable growth: private sector growth through innovation, enterprise and export—sustainable, not debt-fuelled growth—that delivers the stability and jobs that we need across the country. That is our overriding priority. Tackling the deficit is the precondition to realising that ambition. The recovery will be difficult, but we will not let the poor and vulnerable bear the brunt of these difficult times. We are committed to helping families, young people and jobseekers realise their ambitions and fulfil their proposals. I am grateful to the noble Lord for introducing this debate.

16:31

[Lord Knight of Weymouth]

That is all right, then. The view from the Treasury is that everything is just fine. To too many families up and down the country, who are really struggling with their budgets, I am afraid that that will sound complacent and out of touch because, quite simply, the Government’s economic policy is not working for them.

We have had a really interesting debate and I am sure that we shall return to this subject. I am grateful to the noble Lord, Lord Stoneham of Droxford, not only for his kind comments about me, but also for being confident and brave enough to take on responsibility for the economic policy on his party’s behalf, the Liberal Democrats, as well as the Conservatives. I am grateful to my noble friends Lord Stevenson of Balmacara and Lady Pitkeathley for making very important speeches. What my noble friend Lord Stevenson said about the legacy of personal debt is something that we should keep in mind when we return to this subject. My noble friend Lady Pitkeathley’s two poignant stories told the stories of so many more people who are now struggling to cope. I am obviously grateful to my noble friend Lady Smith of Basildon for the detail that she gave us about the impact of the high cost of energy now.

The Minister started off his comments by saying that it is difficult but that external forces are responsible for making the recession more drawn out and more painful. If he is going to pray in aid external forces now for why his Government’s economic policies are not working, he cannot talk any more about the legacy that they inherited and the economic mess because that was down to the external forces of the global financial crisis. I shall come to a truce with him: I will not bang on at him about how he has got it all wrong, how everything that is going on with the economy of this country is all the Government’s fault and I will admit that there are some external forces if he, too, will stop going on about how it is all the horrible inheritance from the Labour Government because that was all down to the global financial crisis. Before that hit, our level of debt in this country was the second lowest of any of the leading industrialised nations in the world.

We shall return to this subject, but it has been a good debate. I beg leave to withdraw my Motion.

Motion withdrawn.

Middle East: Water

Thursday 27th October 2011 Lords Chamber

Question for Short Debate

16:34

Asked By

[Lord Alderdice]

To ask Her Majesty’s Government what assessment they have made of the Strategic Foresight Group’s report The Blue Peace on transforming water from a source of conflict into a basis for co-operation in the Middle East.

[Lord Alderdice]

My Lords, first, I declare my interests as in the Register of Lords’ Interests. I am president of ARTIS (Europe) Ltd, which is a research and risk analysis company that takes some interest in the affairs of the Middle East and further afield. I have a number of non-remunerative interests in the Gulf policy forum, International Dialogue Initiative, World Federation of Scientists, Conflicts Forum, and Oxford Research Group. Of course, as I think noble Lords are aware, my real interests in this issue, this area and this subject go back a good deal further than any of my involvements in the organisations that I have mentioned and come from my experience in my part of the world, where I became aware that groups of people can be set against each other not because anybody wants conflict or its terrible results, but because they find themselves trapped in it.

I am particularly honoured not only that a number of noble Lords who share those interests are participating in this debate but, in particular, that the noble Lord, Lord Williams of Baglan, has chosen this debate for his maiden speech. He is an extremely distinguished diplomat, but I was privileged to come to know him through his involvement as UN special representative and then UK special representative in the Middle East. In conversations with him, I have found him thoughtful, enlightening, instructive, supportive and encouraging. It is a great delight to me to see him on the red Benches of your Lordships' House because I have no doubt that he will bring a very distinctive style and an extraordinary and distinguished experience to the corpus of knowledge and understanding in your Lordships' House.

Even before meeting the noble Lord, Lord Williams, I found myself very much involved in trying to find ways in which it was possible to encourage or facilitate people in the Middle East, not just in Israel and Palestine, although that is an important part of the area, but in other places, to see if any of the experiences that we had in the United Kingdom and more broadly might be helpful to them in finding a way out of the problem. Initially, I found myself doing what I had found extremely difficult to do at home, which was to engage with people who I not only disagreed with deeply but who were prepared to use or to threaten to use violence. I found that although it was possible for me to do that, many others simply found it beyond what was possible for them to consider, at least at that juncture, although my experience is that eventually it is necessary in most cases, but not all, to engage with those who cause the violence if you want to bring the violence to an end.

I then began to look at what had been necessary to create the context where we could address the issues between the British and Irish Governments and within the Province of Northern Ireland. The truth was that we probably would never have been able to do it if there had not been a wider framework in which that was possible: in particular, the European Union, and the good relations of both our countries with the United States. Some noble Lords will remember that some years ago I introduced a debate in your Lordships' House on the development of an inclusive, semi-permanent conference on the Middle East, the creation of a table where people from different countries with very different prospects could meet and engage with each other, as we have done in the European Union. Despite all the current financial and economic difficulties, we must not forget that we have now had two and more generations of peace in western Europe. I sometimes think we forget about that when we get so involved in the economic questions. Fundamentally, the European Union is an instrument of peace and conflict resolution much more than it is a matter of economics, which is the instrument, not the purpose.

I found that even as we tried to press this question there seemed to be a lack of urgency, so I went back to my colleagues in the Strategic Foresight Group, which is based in Mumbai, who had helped to put together that report on the inclusive semi-permanent conference for the Middle East and encouraged them, along with some other friends from the Middle East and the United States, to produce a report on the cost of the conflict, which is many trillions of dollars over a number of years. I rather hoped that when people saw the enormous cost, not just to people in the region, but to all of us, perhaps it might encourage them to address these questions. But while we think that economics is the dominant factor, I am afraid that the truth is that there are some things that are even more important for us as human beings, and we sometimes engage in activities that are to our massive economic detriment because there are other values that drive us.

I went back to my colleagues in the Strategic Foresight Group to think about whether there were things that we were missing or that we did not understand and were necessary. As we looked back at the European Union, whose development has been of such importance, as I have said, we were struck by the way in which, after the Second World War, the matters chosen for co-operation—coal and steel—were the very materials used to create the weapons of war and were based in the very areas that had been matters of dispute. We began to ask whether there are similar commodities in that region that could be or could become the cause of conflict, but which, if handled in a different way, could become the mechanism for co-operation, because they are shared requirements and shared needs. In the Middle East, the issues are not coal and steel, but water, energy and the environment. These things transcend borders in any case, but in a region like the Middle East many borders were simply straight lines drawn on a map with little cognisance given to social questions of tribe or community, to geographical and economic geographical questions, or to rivers and mountains and other kinds of naturally bounded communities. Things like water, energy and the environment transcend all our borders, especially in the Middle East.

Through colleagues in the World Federation of Scientists and a number of other such specialist groups, we began to look at water in particular. We thought that, if it is possible for people to understand that we need to engage with these issues as human communities and that we can learn a great deal from each other, perhaps with that engagement on human, social, economic and scientific projects, separate from the apparently almost insoluble political questions, we can build relationships between the countries that will enable us to address these other questions, as has been the case in our own part of Europe.

Our friends in the Strategic Foresight Group put together a report, which some noble Lords will have read while others will have read a précis of it. But noble Lords will clearly see that a thorough, thoughtful and deep piece of work has been done on many of the technical and scientific questions that must be addressed. But that, in a way, is simply to show that these are serious issues which need exploration. In practice, when we have gone to these countries and Governments, and have been able to bring many of them together in conferences in Turkey, Switzerland and elsewhere, it has been clear that there are opportunities to co-operate.

Noble Lords will not be surprised to know that we very quickly ran into the problem that most countries in the region simply would not sit down with the Israeli Government. We tried various ways to facilitate that but we came to the conclusion that for the present that is not possible, which is a dreadful pity. The Israeli Government and the Israeli scientific community have been remarkable in the developments of technology that they have been able to make in their region. Their capacity for recycling water, for example, and for using it is way ahead of any other country in the world. There are so many things that they could give—and in terms of the availability of water, a country like Turkey has so much to give. But it simply proved to be impossible to get them together at this stage.

Therefore, we tried to bring together those countries in the north—Turkey, Syria, Lebanon, Iraq and Jordan—and to bring Israelis together with Palestinians and, indeed, with Jordanians. There has been some progress and there is an interest in moving forward on these issues. Of course, it is true that with the advent of the Arab spring, profound uncertainty has been thrown over all of this. In particular, it is impossible to do any work with Syria and the Syrian Government at the moment. One might well say, “Surely, that just throws the whole thing to the side”. I do not believe that for two reasons. First, the proposition that we tried to create institutions that enabled governments to co-operate on issues like water is not something for this week, next month or even the next year or two. We did not develop the European Union over a year or two but over many decades. This approach requires decades of overcoming hurdles and working together. The second thing is that if we do not have positive outcomes and directions for the Arab spring, then what may have started as an exciting prospect for the region could turn out to be much more disappointing and difficult.

I am grateful to the House for the opportunity to raise this question and I hope that the Minister may at least be able to indicate Her Majesty’s Government’s preparedness to address this issue. We are not looking for money from the Department for International Development but for diplomatic encouragement through the Foreign Office to our diplomats in the region.

16:45

[Lord Palmer of Childs Hill]

My Lords, I thank my noble friend Lord Alderdice for putting down this subject for debate in your Lordships’ House. I also thank him for inviting me to a seminar earlier this year where I heard detailed speeches about the report to which he refers. It made me thirst to find out more about water. We must remember, as he has said, that there are other examples such as the European Coal and Steel Community, which was a six-nation international organisation. That brought people together in what were difficult times. Whatever one’s views on the European Union—this week there have been a lot of views on the European Union—it must be said that linking economies together has resulted in western European peace for over 60 years.

So can the same be achieved by a regional sharing of water? I believe it can. The problem is that there is not enough natural water to go round. Water or lack of it could be tomorrow’s conflict in many arid regions—Turkey/Syria, Turkey/Iran and Egypt/Sudan to name several. The region described as the “southern circle” in the tome to which my noble friend Lord Alderdice refers shows how co-operation in this field can be made even without formal peace and has been shown for decades between Israel and Jordan. I take a certain amount of pessimism from his comment about people not being able to sit down, but Israel and Jordan have been sitting down quietly on this issue. I believe the way forward is shown by water technology in Israel, as he referred to. Israel is a leading producer of alternative, marginal water—essentially, desalination and waste-water treatment. This will in the next 10 years make up 50 per cent of Israel’s total water supply. Ninety-two per cent of Israel’s waste water was treated and about 75 per cent of that is used in agriculture. Other technologies include three large desalination plants. Within 10 years 23 per cent of potable water in Israel will be from desalination. Of course, the water of choice is freshwater and recharge from rainfall.

In the Palestinian territories in the West Bank, waste-water treatment is sadly poor and there is no production of desalinated water. They have obviously had other problems which have been given priority. There are some desalination plants in Gaza but there is a great need for more. With Gaza’s geographical position on the coast, there is a huge potential for more desalination. As the Arab spring, referred to by my noble friend Lord Alderdice, moves into the autumn, it is bound to struggle. When economies suffer terribly and agriculture is sadly devastated because of water shortage and desertification, co-operation needs to be built as soon as possible. Know-how on water treatment, sophisticated desert agriculture and the fight against desertification exists in the region in centres of excellence. I hope the EU, including the UK, will push forward with cross-border co-operation in these areas without waiting for slow political processes or listening to extremists in any country who flourish when conditions deteriorate. Co-operation in these areas is vital and might create better grounds and confidence that will accelerate political solutions.

I welcome The Blue Peace report on which this debate is based. There is, however, a view in the region that existing co-operation on water resources in what is called the southern circle in the book—that is, Israel, Jordan and the Palestinian territories—is already more advanced than the proposals in the report. Things move fairly quickly but there is always room for improvement. As an example of this, an expert on regional water co-operation at the Israel Ministry of Foreign Affairs was this week in Oman at the biannual meeting of the organisation for regional co-operation in water, the Middle East Desalination Research Center. The organisation is located in Muscat in Oman, and its members are, amazingly, Oman, Qatar, USA, the Netherlands, Japan, South Korea, Spain, Israel, Jordan and the Palestinian Authority.

Next week, Israel is planning to hold a course on desalination in Israel for Palestinians and Jordanians. Next week, too, the biannual meeting of another regional organisation for co-operation on water, EXACT, will take place in Jerusalem. At the same time, a new trilateral project between Israel, Jordan and the Palestinians, managed and sponsored by the USA and Norway, will be launched to deal with monitoring polluted ground water.

There is already impressive dialogue and co-operation on water issues between Israel and its neighbours in the region. This far exceeds regional co-operation in other areas and, amazingly, has managed to survive the problems that have beset the peace process.

Regional co-operation and dialogue on water issues began as long ago as 1992 as one of the five working groups established at the Madrid summit in 1991. The five areas covered were, as your Lordships will remember, water, environment, refugees, regional economic development and security. Water is the only main activity that has survived from the five groups and it remains active. Matters have moved on from the position in the Blue Peace paper.

The idea proposed in the Blue Peace paper to import water from Turkey is currently off the table for Israel as well for the Palestinian Authority, first of all for economic reasons. Even if Israel were to change its mind, it would need the water only for the next two years before it completed its national desalination project in 2013-14. The Palestinians do not have the facilities to absorb and distribute this water, even if Turkey were to provide it for free, although that may be a pessimistic viewpoint.

The paper suggests that the RSDSC—the Red Sea-Dead Sea Canal—is a long-term project, but the feasibility study is, I am pleased to say, in its final stage. By way of a subproject of the Red Sea-Dead Sea Canal, the general intention of the three beneficiaries, Israel, Jordan, and the Palestinians, is to build a desalination plant in Aqaba to create additional water for all three parties in the short term.

Co-operation on water between Israel and Jordan has improved in the past two years. During that period, because of the drought in the region and common work on the feasibility study for the Red Sea-Dead Sea Canal, new ideas were exchanged and things have moved forward, and there is an element of optimism. With the Palestinians, relations are more complex—perhaps I should not go into them in detail.

Israel implements its commitments on water provision. However, it is true that not everything goes smoothly and none of the Governments in the area is perfect. But generally, if one takes into account the multilateral regional co-operation, it can be said that the water situation is in some ways the opposite of the political situation in the region.

Water co-operation can help to build confidence between rival parties. No doubt this can be a good model for other areas of co-operation, but it cannot be a substitute for other tracks of the peace process.

We have a conundrum: can water bring peace, or does peace bring water? I am not sure, but what I am sure of is that I compliment my noble friend Lord Alderdice on bringing this debate to the House, on the expert way in which he has presented the paper, and on the background briefing that he has given to people such as me to make us more enthusiastic about water as a means to peace.

16:54

[Lord Williams of Baglan]

My Lords, I begin by thanking your Lordships for the warm welcome that I have received from all sides of this House. Noble Lords may recall that I was introduced on 18 October last year, but took a leave of absence from the House to continue my assignment as UN under-secretary- general for the Middle East for 12 months. I take this opportunity, therefore, to apologise to your Lordships for the delay in my maiden speech.

There are many Welsh men and women in this House, and two bear the name of the town in which I was brought up—Aberavon, or Port Talbot, in English. Indeed, as a child, I remember my noble and learned friend Lord Morris and the noble and learned Lord, Lord Howe, fighting the general election of 1959 for a seat in the other place.

I have spent nearly my whole career in international affairs. It has often taken me overseas for extended periods, to Indonesia, Bosnia, Cambodia and Lebanon. I have worked as an academic, as well as for Amnesty International, the BBC World Service, the Foreign and Commonwealth Office and the United Nations.

In my UN career I had the privilege—not always a pleasure—of addressing the Security Council on several occasions, usually on the Middle East. I find it somewhat daunting now to address your Lordships’ House in this important debate initiated by the noble Lord, Lord Alderdice. He has shown a strong interest in the Middle East over many years, and I commend his attention to an area that remains critical to world peace. I also thank him for his very kind remarks about our previous meetings and my experience in the region.

I have spent the last six years working almost exclusively on the Middle East, the past three based in the region. In particular, I was entrusted by Secretary-General Kofi Annan, and then by his successor, Ban Ki-Moon, to secure the cessation of hostilities established by Security Council Resolution 1701 following the 2006 war between Israel and Lebanon. That resolution has worked remarkably well in securing stability, and there have been no major incidents between the two countries over the past five years. The people of Lebanon have been spared the many Israeli incursions that marked the quarter of a century between 1982 and 2006. For their part, the people of Israel, as former Prime Minister Ehud Olmert remarked to me, have been spared the many Hezbollah rocket attacks and raids that marked the years before 2006.

However, it has not been possible to move forward to a formal ceasefire, let alone a peace treaty. To some extent, the intransigence of both parties is at fault. In particular, there are Israel’s daily violations of Lebanese airspace and continued occupation of a Lebanese village. On the Lebanese side, there is the presence of perhaps the world’s most strongly armed non-state actor, Hezbollah, an organisation with a formidable constituency among Lebanon’s Shia community. On the one hand, Hezbollah presents itself as a party that contests Lebanon’s democratic elections and, on the other, it maintains a powerful militia outside the authority of the Lebanese state.

The failure to secure a Lebanese-Israeli peace, despite the fact that the two countries were until recently the only democracies in the Middle East, has been maintained by other factors. One has been the role of President Assad’s Syria casting its dark shadow over Lebanon and facilitating Hezbollah’s rearmament by an Iranian leadership that denies the very right of Israel to exist. Finally, the absence of progress in the peace process between Israel and the Palestinians inevitably freezes the prospects of peace between Lebanon and Israel and between Israel and Syria.

The immediate prospects for peace appear bleak. Frustration among the Palestinian leaders has led to their bid for statehood at the UN. That frustration has been intensified by the Palestinian sense that the efforts of President Mahmoud Abbas and Prime Minister Salam Fayyad to ensure security in the West Bank have not been met by an adequate response from the Israeli Government. In recent years, I have seldom met an Israeli general or security chief who has not attested to the genuine endeavours of the Palestinian leadership in this regard. Israel has offered talks, but with the continuation of extensive settlement activity in the West Bank and east Jerusalem and with far-reaching security demands regarding the Jordan Valley.

It is striking and ironic that the impasse over the Middle East peace process, the most serious since the Oslo agreements of 1993, has coincided with the unprecedented wave of political revival in the Arab world epitomised in the last week alone by the elections in Tunisia on Sunday and the demise of Muammar Gaddafi. Israel has not been alone in failing to comprehend the strategic significance of the Arab spring. The era of one-man rule and of authoritarianism is drawing to a close in the Arab world as it did earlier in eastern Europe and other regions of the world. We must brace ourselves for further political tumult in the region, some of which may not be to our liking.

In the Middle East, differences between states are too often seen through the prism of the Arab-Israeli conflict. The issue of water raised by the noble Lord, Lord Alderdice, is one such. Palestinians believe strongly and with some justification that their water resources have been taken advantage of by settlers in the West Bank. One often hears that argument, with less justification, in Lebanon and other Arab countries. It often fails to recognise the fact that while Israel goes to great lengths to preserve its water supplies, Lebanon’s infrastructure, for example, is woefully inadequate in this regard.

In recent years, new sources of tension have arisen, aside from the issue of water that the noble Lord, Lord Alderdice, has drawn to our attention. I think particularly of the development of maritime resources and, above all, gas. Israel is well advanced now in the exploitation of natural gas in the offshore blocks that abut its coast. Cyprus and Lebanon are taking the necessary steps in this regard and Turkey has recently signalled its intent to embark on exploitation of maritime resources in the eastern Mediterranean. I hope that these resources can be seen as a source of opportunity and work for all the countries and peoples of the region but, in a region where maritime borders and boundaries are barely defined, I am concerned about the potential that exists now for further sources of conflict between its countries.

In closing, I wish to record my indebtedness to my sponsors, my noble friend Lord Dubs, and my former UN colleague and noble friend Lord Malloch-Brown. I also register my gratitude to the staff of this House, without whose advice a new Member would not find his way around.

17:03

[Baroness Falkner of Margravine]

My Lords, it is a particular pleasure to follow the speech of the noble Lord, Lord Williams of Baglan. He and I share many similar interests. He read international relations a few years before I did, but he put it to far better use through a long and distinguished career in academia, the Foreign and Commonwealth Office, the United Nations and think tanks. Looking at his background, I was struck that our House, too, is becoming a refuge for that elite band of political fixers, the special advisers. The noble Lord was a special adviser to the late Robin Cook and to Jack Straw, Foreign Secretaries who in their time were certainly in the hot seat.

The noble Lord also brings a wealth of knowledge on the Middle East, as we just witnessed in his maiden speech. He will be pleased to know that a singular feature of this House is its expertise and strength in numbers of Peers who speak on foreign affairs. No matter how esoteric a subject, he will always find friends here to share his concerns and we look forward to his active participation in this House.

I turn now to the substantive debate, for which I am very grateful to my noble friend Lord Alderdice for initiating. It is seldom that one sees an initiative on peace in the Middle East without the presence of my noble friend somewhere in the frame.

Water was always a source of conflict, but what has changed in recent years is that it is being seen much more clearly in that light. It is therefore appropriate that the Strategic Foresight Group has gone to the heart of the region which is most conflict prone—the Middle East—to look at this aspect of what constitutes an impediment to peace and prosperity.

Prosperity in the region, and the role of water in providing for this, is the key to future development for the millions who live there. The pressures of demography, the requirements of agriculture and food security, jobs and livelihoods, sanitation and health and the natural environment are all dependent on adequate supplies of usable water. The politics of water is therefore closely linked to the politics of sovereign statehood. It is seen as an essential element of territorial integrity, but one which is increasingly beyond the control of a single state, if it ever was.

One factor that is gaining recognition in the debates over water security is the advent of climate change. As is now widely recognised, continuing climate change will exacerbate the water crisis in arid regions of the Middle East. Given that average global temperatures are likely to rise by 2 degrees Celsius during the 21st century, Middle Eastern countries are inevitably faced with a worsening water crisis.

This report builds on a successful record of transboundary water co-operation, which can be drawn on as models to go forward. In 1963 the European countries along the Rhine river signed up to the International Commission for the Protection of the Rhine against Pollution. This helped to institutionalise co-operation between Germany, Switzerland, France and the Netherlands, and led to a dramatic decline in pollution. In 1972, the United States and Canada signed the Great Lakes agreement to protect the Great Lakes from pollution. This, too, significantly improved water quality in a heavily industrialised area.

The single distinguishing factor in those successful examples was that those countries already had good relations between each other. There was little fear of conflict and all had an economic interest in improving quality rather than disputing quantity. The main problem with water in the Middle East is scarcity. The competition for scarce water promotes a zero-sum mentality and can lead to greater tension.

Pollution issues, by contrast, are more amenable for resolution in a co-operative manner, as they can give rise to positive-sum co-operation. In the case of the Middle East, as we know, history has a long tail. The legacy of Ottoman rule still affects relations between Syria and Turkey. The more recent tensions in the Lebanese-Syrian relationship are being further aggravated by current events in Syria, and the Israel-Palestine dispute is one which has been already mentioned. The deteriorating relationship between Turkey and Israel also makes political co-operation in the region more challenging, as does Iraq's relationship with Turkey.

Let me turn to the most significant proposal in the report—that of taking a coalition of the willing, to establish mutually agreed circles of co-operation. A body comprising a political mechanism to define and take forward a common vision, to identify priorities, and to arrive at and implement decisions, would represent a major step forward. I like, too, the idea that the co-operation council would create protocols, devise guidelines and promote practical measures for joint projects. In reading the report I was struck by the singular lack of scientific consensus on how much water, and of what quality, was available as the sources flowed downstream. The lack of agreed data sets is bound to lead to conflicting versions of reality. This is further compounded by seasonal variations in rainfall and water surges across the region, which makes it impossible for one country to be able to realistically measure what has happened in another country without any co-operation on the ground.

It is also right that the envisaged activities of the council focus on issues that are less politicised and require relatively low levels of international co-operation. Developing common principles, promoting research, setting up early warning systems and developing methodologies for water management are all sensible steps and can be achieved below the level of high politics. Streamlining the legal architecture within countries is far more doable than trying to get countries to sign up to fresh treaties from the outset.

The proposals are ambitious—rightly so, in my view—in calling for engagement at the level of heads of government and/or high representatives. Unless the political will is there to support and deliver the objectives of the co-operation council, there will be little advance in policy co-ordination.

What was nevertheless confusing in the proposals was the rejection of the council as a negotiating platform. It seems to me that it is sort of self-contradictory to define a body as being run by Governments to reach political decisions yet to deny that negotiations between the parties will take place, particularly where concessions are sought in the face of a perceived national interest.

However, I also take encouragement from the examples of co-operation in the report, using water as an instrument for peace. The 1993 formation of the executive action committee including Israel, Palestine and Jordan, to share information and keep a dialogue open regarding their shared water resources, points the way. The setting up of joint measurement stations on the Tigris and Euphrates rivers also moves us forward. The initiatives between Syria and Turkey in 2009 and 2010 also show promise by focusing on areas where agreement is within reach, rather than being bound down by the evident disagreement that already exists. However, with the political situation in Syria, as with all other politics I suspect that there is now little progress in building on those measures.

Turning to that other long-term conflict—that between Israel and Palestine—I welcome the proposals for confidence-building measures between Israel and the Palestinian Authority. What is urgently needed, however, are moves towards reconciliation between the Authority and Hamas to allow for the Palestinian people to be represented by a single Government. I was in Gaza in July and saw for myself the effects of water scarcity there which are so graphically described in this report. In fact, at the main water management station which we visited, the maps defining usable aquifers painted an even starker picture than that presented in the report.

Overall, the report gave us a wealth of ideas for managing the problem of water. Seeing how pressing the problems are, I was disappointed in its lack of development on the theme of demand management. We know that poor infrastructure, inadequate use of waste water, leaking pipes, agricultural misuse and household demand are all significant contributors to water waste. Lebanon, which is described as being in the middle of the spectrum of water scarcity, loses over 40 percent of its available water to leakage and poor transportation networks. We have the example of Jordan, which loses 35 per cent of its water to bad systems and old pipes, while in some parts Syria loses 60 per cent.

Many of the solutions to managing water can be found in domestic politics and can thus be adopted without waiting for international solutions. Developing a comprehensive water law, investing in drought and flood management and improving water use efficiency by households and businesses are all measures that can be undertaken here and now. I note that the report details Israeli expertise in this area and points to successful pilots in reusing waste water in the West Bank territories. I also know that the UK has expertise in all these areas. Can my noble friend the Minister tell us today whether the Department for International Development has resources that can provide assistance in this regard?

To conclude, the work of the Strategic Foresight Group has provided an excellent platform for anticipating a potential problem, looking at it comprehensively and arriving at pragmatic solutions which can be implemented in the short, medium and long terms. All that remains is to find the political will to implement it. The changes in the Arab world in the past year have provided both opportunities and threats. It is for the countries involved to see that doing nothing is no longer an option. If they are to safeguard the interests of all the people who live in the region, The Blue Peace’s idea is one to build upon.

17:14

[Baroness Deech]

Like others of your Lordships, I welcome and feel privileged to have been here for the maiden speech of the noble Lord, Lord Williams of Baglan. We can readily see that the House will benefit from his wide experience and I wish him a long and happy career here. I also congratulate the noble Lord, Lord Alderdice, and agree with all the encouraging words and actions that he has described, stemming from his own experience. I express an interest as a trustee of the Jewish National Fund, which invests inter alia in environmental projects in Israel.

I welcome the fact that the international community is addressing in a constructive way, in the excellent report The Blue Peace, the issue of transforming water supply into a trigger for collaboration and peace in the Middle East. As I will show, there are some grounds for hope. Already, as a result of the peace treaty between Israel and Jordan in 1994, Israel provides Jordan with a significant contribution to Amman’s water supply, plus a storage capacity, and in return Israel is allowed to pump groundwater from the Arava basin from wells in Jordan. Israel and Palestine have an active joint water committee that meets regularly and Israel supplies water to Gaza, although maintenance is another issue.

The entire region is beset by common problems; a growing population, a diminishing supply of water and elevated expectations coming with higher living standards. Syria is drought-hit, through climate change, manmade desertification and lack of irrigation. One has to think long-term, for the alliances and enmities in the Middle East may change. Alongside the massacres inflicted by Syria’s Government on their own people, their mismanagement of agriculture and irrigation add to their woes. Israel can hardly be expected to reach a deal with Syria over Lake Kinneret while that country is in a state of uprising. Iraq accuses Syria, Iran and Turkey of practices that reduce the flow of water to the Tigris and Euphrates. The political instability of these countries exacerbates the environmental concerns. Turkey is unlikely to be a reliable partner in relation to the export of Turkish water to the Jordan Valley, a project which has been considered, because of Turkey’s changing needs.

However, there is good news too. At Ben Gurion University in the Negev there is funded a joint project between Israelis and Palestinians to address clean water issues in the West Bank area of Nablus; the team includes one person from Ben Gurion University, a professor from the Biodiversity and Environmental Research Centre in Nablus and an American. They are working on purifying secondary waste water, an immediate resource for irrigation. Also at Ben Gurion University, researchers have an award from the NATO Science for Peace programme to work on desalination in Jordan and in Israel; they work in collaboration with colleagues from the Hashemite University of Jordan and from the US. Ben Gurion University has its first Jordanian PhD student. Having completed his first degree in Jordan, he went on to earn his masters degree at the Zuckerberg Institute for Water Research and then on to the PhD program there in the Negev and it has resulted in published research by Palestinian, Israeli and Jordanian authors together. Israeli technology is being introduced into Jordan.

There is a project known as the Red Sea-Dead Sea Canal project, already mentioned this afternoon—sometimes called the peace conduit—which, if it comes to fruition, will be a joint Israel-Palestine-Jordan undertaking. It envisages a pipeline from one sea to the other that would carry up to 2 billion cubic metres of seawater per annum to the Dead Sea, of which half could be desalinated and the rest would replenish the Dead Sea. The water level there has dropped in 50 years by almost 30 metres and the surface area has shrunk by a third in a century. There are environmental concerns with the project, which the World Bank is considering at the moment, but if it worked it would be a splendid demonstration of regional co-operation. The potential donors to this are Italy, France, Greece, Korea, Japan, Holland, Sweden and the USA. One can but hope that the current euro financial crisis does not weaken this venture, one I hope that the UK Government will encourage. Its success would arrest the deterioration of the Dead Sea environment and provide drinking water to the Middle East.

Israel, Jordan and Syria have all diverted water from the upper Jordan Valley and deprived the Dead Sea of the input of water. But the situation is not necessarily a manmade problem. Research has estimated that today’s low level of the Dead Sea was also the case in about 800 AD. The temperature in the Middle East over the centuries has oscillated between calamity and abundance, the researchers say. We should not always blame human activity, for over time climate change has affected human behaviour in migration and agriculture as much as the other way round. Nevertheless, at this time drought is increasing in the Middle East.

It does not help the situation for accusations to be flung by one country at another. They are all in it together. Amnesty International rather predictably whipped up what has been called hydro-hysteria in its report Thirsting for Justice in 2009, which took a one-sided approach to the evidence on water resources between Israel and Palestine.

The Palestine Water Authority has had much responsibility for water delivery since the mid-1990s and is beset by accusations of mismanagement, although it is in receipt of grants from the World Bank and others. Before 1967, only 20 per cent of the Occupied Territories was connected to a water network; now 90 per cent has running water. Israel has stuck to its commitment under the Oslo peace accord and has even increased the committed allocation, with the result that the water supply for Palestinians is better than that provided in Jordan and Syria. However, 30 per cent is lost through leaks in the West Bank.

What are the solutions? First, the UK Government should urge the World Bank to progress the Red Sea-Dead Sea project and join in themselves, if they can. They should encourage the joint Palestinian-Israeli meetings taking place through the joint water committee. They should publicise and, if possible, assist in grants to the outstanding initiatives of the Ben Gurion University, with especial emphasis on desalinisation and joint working; there is already one scholarship for a Ben Gurion University student to Oxford and a project to create another at Oxford Brookes. They should note that the Palestinian National Authority is the world’s largest per-capita recipient of international development assistance, and try to ensure that some of that largesse is devoted to water management and improved water delivery.

The thinking behind the Blue Peace report and all the many studies of the water issue rests on an assumption that people want to live in peace and use water as a natural way of sustaining life. If martyrdom is preferred, then all assumptions collapse. There is an old fable about a scorpion asking a frog to carry him across a river. The frog is afraid of being stung during the trip but the scorpion argues that if it stung the frog, the frog would sink and the scorpion would drown. The frog agrees and begins carrying the scorpion, but mid-way across the river the scorpion does indeed sting the frog, dooming them both. When asked why, the scorpion points out that this is its nature. There is a variation on the ending in which the scorpion says, “It is better that we should both perish than that my enemy should live”. This is what I feared might apply to water in the Middle East, but I am cheered and wish to end with the words of the Jordanian PhD student at Ben Gurion University, who maintains that water is a great conduit for peace in the region. He says:

“The problem in what’s happening right now in the region is that there’s no trust at all between our leaders—but between our scientists there is trust”.

17:23

[Lord Triesman]

My Lords, it is very useful to have this debate at this time. I congratulate the noble Lord, Lord Alderdice, and all noble Lords who have taken part. I especially congratulate the noble Lord, Lord Williams of Baglan, on an outstanding maiden speech. He is a great friend, a great diplomat and a great addition to your Lordships’ House.

At present, little is happening to inspire confidence in the Middle East peace process, much as we would all wish it. This fact alone should encourage us to seize the moment to engage in genuine strategic thinking about what is happening, what could make the problems of the region more acute and what might be done to mitigate them. To be candid, I fear that today’s debate will identify a problem that has been explored before. However, what we have is an opportunity to review past efforts to consider water insecurity and to evaluate whether any new proposals can take us forward appreciably. It is in this light that I welcome a debate on the work of the Strategic Foresight Group and the publication of The Blue Peace. I thank the noble Lord, Lord Alderdice, for making sure that I had a full copy of it; I appreciate that greatly.

In particular, I welcome the fact that the report starts with hard data. No solutions, other than those that take a hard look at hard data, have any prospect of success. Some of the data are telling. The region is home to 6.3 per cent of the world’s population but contains just 1.4 per cent of the world’s renewable fresh water. Climate change will make that worse. This is a region greatly challenged by developing efficient, collaborative, multinational governance systems. All of these factors bear on the issues that we are discussing.

I started by saying that the issues of water insecurity and its implications for regional peace and prosperity have been discussed on past occasions. I shall set out just one or two examples. They have not led to concrete action and they illustrate why it is sensible to look at a new programme. First, in its quite remarkable periodic exercises in scenario planning, Shell considered not oil but water security in the Middle East. It considered social, economic and political dynamics in that context. Its analysis illustrated the dangerous confluence of factors that might increase regional insecurity.

The demands for reliable water sources in the region become sharper when considered against the background of demographic change. Developments in medical science are likely to have a large impact on a region’s population, especially when it becomes increasingly possible to intervene in, for example, genetically carried diseases that have lowered life expectancy in the Middle East. Although the number of live births per mother halved between 1960 and 2001, it remains likely that the upward trend in population will continue. A far larger, healthier and, by definition, initially far younger population will in due course place greater demands on water resources. The more this trend develops, the greater the competition for water resources will be. Indeed, as Shell suggests, it will become more significant than competition for oil resources. Between the nations of the region, the population grew from 173 million to 366 million between 1970 and 2001. However, the amount of fresh water per capita halved in that period. The greater the competition, the sharper the possible conflicts over control of river flows, especially where there are few viable developments in the use of seawater or desalination.

The second example comes from the work of RUSI and Chatham House, which suggests that states in the region have begun to turn their attention to securing the military capacity, if necessary, to secure their future water requirements. I do not suggest that this inevitably leads to an arms race but it is likely to produce a significantly different military doctrine in the region. In a troubled region, that could promise still more trouble, as several noble Lords have said.

These have been brief summaries of important past analysis. I suggest with great respect that this report might have been a little stronger if it had also made an assessment of those efforts. However, what this research unquestionably adds to the past thinking flows from what I have tried to summarise. If water insecurity is liable to prepare people for potential conflict, it is imperative to argue that the better alternative is regional co-operation among nations that have not co-operated to any great extent. Water sources know no boundaries and the route between open and inland seas almost always passes through more than one polity. Cross-border management of this scarce resource is possible only if it is a peaceful option. A good deal of work, including by the Swiss Foreign Minister, has been done in observing that five of the seven nations covered by this report are already experiencing a structural deficit in water, with a huge depletion in the rivers of the region.

I am able, with some enthusiasm, to support the creation of joint water co-operation councils. Given the river flows—I will return to artificial channels—it is rational to advocate the creation of a council involving Iraq, Jordan, Syria, Lebanon and Turkey, although there are obvious problems in the practicality of the grouping at this stage. I can see the rationale for a further joint water council, involving Turkey, Syria and Iraq, to manage the Tigris and Euphrates river basin. On the artificial channel proposals, I also support the idea of pressing the World Bank to go beyond its report and its research stage to see whether it can drive this towards reality.

My reservations are all obvious. In many countries, in each council grouping, there is more of a history of mistrust over water than there is of co-operation. That must change, but it will not happen soon. Some of the countries—Syria is the most obvious, as the noble Lord, Lord Alderdice, noted—show that they are more likely to tear themselves apart and their political institutions are not likely to deal adequately with that. So that change will not happen any time soon either. The report suggests circles of co-operation, with Israel becoming involved only in a second phase. That may be a statement of regional realism, but I suspect that if there is not parallel development—or an attempt at parallel development—across all the nations in the region at the same time, one key and very valuable goal of this report could be undermined. That goal is this reality: with water co-operation and water security, it is not only available, potable water that hugely improves the human condition, but the development of the prospect of diplomatic normality, of peaceful co-operation in other spheres and of mutual economic development—in short, the creation of social circumstances in which health, education and all other advances become possible.

I wholly subscribe to that perspective, but I observe that the possibility of delaying the entry of one of the major military powers in the region, a state which has projected military power when aspects of its security are believed, by it, to be at risk, may significantly limit the potential for peace and normalisation that this kind of programme could achieve. This analysis may be wrong, but I think it identifies an important risk which may not have been addressed fully in the report.

If this report is to be successful in the way it is received, it needs to do a number of things with great effect. First, we must ask whether the proposals constitute a viable plan, owned and led in each of the participating nations and to which the international community and the domestic military of those nations can contribute without shaking local ownership. Secondly, will the institutional forms created generate coherence and greater coherence from the outset? There is a risk that they could be a theatre for staging conflict and we need to be sure to mitigate that risk. Thirdly, are all the lead nations involved? I have already commented on that. Fourthly, will the programme build local capacity, to ensure local ownership of technical and managerial objectives? I believe it has that capability. Fifthly, will the programme help focus aid and development priorities, providing the best and most sustainable outlets for aid expenditure? Sixthly, will the programme create employment, providing routes out of poverty and will it grow employment by cutting the costs of starting and doing business? The provision of potable water has, in general, been a significant factor in achieving that objective. Finally, is there a reliable and detailed audit of the impact of this kind of programme on all the local economies, showing the value of peace building as opposed to conflict and helping the programming of donor support? I admire much of what is in this report. If it can begin to address those questions about long-term stability, it will be a very important contribution indeed.

17:35

[Baroness Northover]

My Lords, I thank my noble friend Lord Alderdice for bringing this interesting and challenging report to the attention of the House. I know that he works tirelessly on the issues of peace and reconciliation, and he is to be commended for this work. Given his profound experience in Northern Ireland and elsewhere, it surely behoves us to listen to him closely. I thank all noble Lords for their contributions to this debate—contributions that are clearly borne out of deep experience. I especially congratulate the noble Lord, Lord Williams of Baglan, on his excellent maiden speech. His detailed knowledge of the region shows the profound challenges that the region faces and how important it is that we listen to those with possible routes through. I look forward very much indeed to his future contributions. I know that we will all benefit from his engagement here.

This report presents us with an innovative and striking proposition. We are all aware that factors such as resource scarcity—including that of water—climate change and population growth may increase the potential for conflict. The noble Lord, Lord Triesman, rightly emphasised the key importance of population growth in the region. On water, the facts seem to bear out the potential for conflict. By 2025, more than 2.8 billion people in 48 countries may face water scarcity. Meanwhile, the International Water Management Institute has estimated that demand for water for agriculture alone could increase by over 30 per cent by 2030. My noble friend Lady Falkner flagged up the great significance of climate change in all this.

However, this report puts forward the premise that water should become an instrument of co-operation rather than conflict. As the report notes, water sources and rivers are no respecters of national boundaries. As my noble friend Lord Alderdice and others have so eloquently explained, water could become a theme of dialogue and co-operation between nations. All in a particular region must, of necessity, have an interest in resolving the challenges posed. This could then assist in other areas. As he said, this may not be achieved in a day or a week. The true resolution of conflict is a long-term challenge.

From noble Lords’ accounts, we can see how deep are the problems in terms of conflict, simply over water—not that there is yet even an agreed set of data, as my noble friend Lady Falkner pointed out. Set that against some of the political problems, as laid out, for example, by the noble Lord, Lord Williams, and my noble friend Lady Falkner, and one can see the depth of the challenge. However, as my noble friend said, doing nothing is no longer an option.

The Government place high value on innovative approaches such as those that look at how to use issues of mutual concern, such as shared and scarce resources to reduce conflict. Seeking to reduce conflict is a key element of our foreign and development policy. We have committed to spend 30 per cent of development aid in fragile and conflict-affected states by 2014-15. The Building Stability Overseas strategy published in July of this year, which spans the FCO, the MoD and DfID, sets out the UK Government’s overarching approach to try to prevent conflict and tackle instability through a strong integrated approach, bringing together all these areas of development, diplomacy and defence. A key pillar of this strategy is to invest in upstream prevention to tackle the underlying drivers of conflict and build capacity to manage tensions within and between nations constructively.

The type of approach suggested in this report on using water management as a source of regional co-operation rather than conflict has been seen to work well in some areas of the world that share scarce water resources. The Department for International Development is currently supporting regional initiatives, mainly in Africa and Asia, which have shown that water resource management can serve as an entry point for co-operative development. These include the water initiative under the Southern African Development Community, the Nile Basin initiative, and the South Asia Water Initiative.

The initiatives have already helped to build trust and stronger relationships between countries, and this improves the management of water within and between countries for the benefit of all. These approaches have worked well where initiatives were effectively co-ordinated and avoided duplication of effort.

Another lesson, which the report supports, is that, while distribution and management of water is highly political, it is sometimes better to treat co-operation on water as a technical, rather than a political, issue and hence to encourage practical co-operation between experts rather than politicians. We have heard from both the noble Baroness, Lady Deech, and the noble Lord, Lord Palmer, details of some of the university and other collaboration which is currently under way. That is very encouraging.

The noble Baroness, Lady Deech, rightly emphasises the importance of co-operation in science and technology and noble Lords will be no doubt be interested in the UK Government’s recent initiatives in this field. Tonight, my right honourable friend the Chancellor of the Exchequer will travel to Israel and the occupied Palestinian territories; during his visit he will launch the new UK-Israel high-tech hub and give political profile to the importance of co-operation in this field.

The report we are discussing today specifically focuses on the Middle East, where the fair and effective distribution of shared water resources is an absolutely key issue. Jordan, Lebanon, Syria, Turkey, Iraq, Israel and the occupied Palestinian territories are its main focus. The report, however, is cognisant of the enormous political difficulties, including those between Israel and its Arab neighbours, and therefore presents a road map for action which begins with efficient internal management, storage and distribution. It also proposes the interesting idea of establishing a co-operation council for water resources for Iraq, Jordan, Lebanon, Syria and Turkey and, separately, a confidence-building initiative between Israel and the Palestinian Authority. We pay tribute to the authors and the sponsors for exploring and raising these ideas.

Noble Lords will be very well aware of the dramatic changes that have affected the region and the challenges and opportunities that they bring. The report was, of course, published before the remarkable events of the Arab spring, to which the noble Lord, Lord Alderdice, and the noble Lord, Lord Williams, have referred. Many states are undergoing rapid transition and leaders in those countries have pressing issues to deal with so that they can respond to the legitimate demands of their population. The Government are committed to working through the Arab Partnership with the international community to support the democratic transitions that we hope are under way. However, we are aware that each of these countries will face a great range of challenges, not least in resource allocation. The noble Lord, Lord Alderdice, is surely right to say that, as we focus on what is happening in the Arab spring, we should not forget the other challenges that these countries will face.

In the region, the UK funds the Global Water Partnership, which has supported a regional water partnership for the Mediterranean. Partners have included Israel, Jordan, Lebanon, Syria and Turkey, among others. These independent regional groups have promoted the concept and implementation of integrated water resources management as a vital approach to managing this area’s resources.

Water is, as we have heard, one of several important subjects for negotiations between Israelis and the Palestinians. Noble Lords have shown how acutely aware they are of this problem. UK officials regularly raise concerns over water issues with Israeli counterparts and we have brought the Foresight report to the attention of the EU donor and co-chair of the water sector working group with the Palestinian Authority. I reiterate that our immediate focus remains to bring the parties back to peace negotiations. However, my noble friend Lord Palmer urges us not to wait for the political process before advocating co-operation on water.

My noble friends Lord Alderdice and Lord Palmer emphasised how much Israel can contribute through its technological expertise—a point also emphasised by the noble Baroness, Lady Deech. I agree that the use of technological solutions may well be one of the key ways to address water shortages. Individual, practical and immediate water management measures should not need to wait for political negotiations to be completed.

The noble Lord, Lord Triesman, posed a series of challenges, which showed his very deep knowledge of this area. I hope that the authors of the report respond to those challenges, and I should be extremely interested in knowing what those responses are.

My noble friend Lady Falkner wondered whether DfID would consider working in waste water management in West Bank territories. There are currently 30 donors, NGOs and agencies working on water issues in the West Bank, and DfID has therefore decided not to focus on water issues because of this good coverage. However, as I said, UK officials have brought the report to the attention of these groups. Nevertheless, we would be happy to host a round table meeting on the challenges of conflict over water in the region and all noble Lords will be encouraged to feed into this.

In conclusion, I again thank noble Lords for their participation in this very important debate. It has highlighted the issues of water and conflict, and the need to identify innovative and new approaches to address some of the challenges that they will increasingly pose in the future. We have a shared interest in preventing conflict, promoting constructive dialogue between nations to manage scarce resources and ensuring a sustainable supply of water to all populations. We therefore very much commend those who are working to develop ideas on how best to achieve this.

House adjourned at 5.47 pm.