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Nick Smith (Blaenau Gwent) (Lab)
1. What steps he is taking to assist schools and colleges to register for the opportunity to obtain free tickets for the London 2012 Olympics.
The Minister for Sport and the Olympics (Hugh Robertson)
Since our last session of DCMS questions, Iain Sproat, a former sports Minister, has passed away. On behalf of all Members, I should like to convey our condolences to his wife Judy—who, incidentally, is a former parliamentary reporter—and to his family and friends.
Let me also, on behalf of the ministerial team, welcome the right hon. Member for Dulwich and West Norwood (Tessa Jowell) and the rest of the new shadow team to the Opposition Front Bench.
The London Organising Committee of the Olympic Games and Paralympic Games is making up to 100,000 free tickets available to schools and colleges throughout the United Kingdom which sign up to the Get Set network by 16 December. In addition, the Mayor has purchased 75,000 tickets to be allocated to young Londoners through the network. Lord Coe has recently written to the schools and colleges that have not yet signed up to encourage them to do so, and 1 fully support him in that approach.
Nick Smith
It is disappointing that after 14 months, 75% of tickets for schools outside London have not been taken. Will the Minister assure us that every effort will be made to ensure that young people, not just in the home counties but throughout the United Kingdom, are given this one-in-a-lifetime Olympic opportunity?
Hugh Robertson
I thank the hon. Gentleman for asking that question, because it gives me a chance to encourage Members on both sides of the House to get out in their constituencies and encourage as many young people as possible to go. The involvement of young people was one of the central tenets of the London bid, and I am sure that Members in all parts of the House want as many schoolchildren as possible to have that opportunity.
Charlie Elphicke (Dover) (Con)
Children have been heavily involved in the “pass the passion” celebration in Dover, where the torch will stop on the way to London. Is it not particularly important for children to have access to free tickets when they have played a real role in the torch’s progress around the country?
Hugh Robertson
Of course it is. The very fact that the torch will spend a night in Dover, which is emblematic as a port of entry to the United Kingdom, is yet another powerful reason for young people to become involved.
Tessa Jowell (Dulwich and West Norwood) (Lab)
I welcome what the Minister has said. Obviously there is not a single Member in the House who will not want young people to have access to every available ticket, and we will support that fully in every possible way. However, does the Minister share my fear that the excitement stimulated by the prospect of young people going to the games is being undermined by the gradual disappearance of school sport from the lives of children throughout our schools? Does he agree that, as the school sport partnerships are dismantled and redundancy notices handed out, we should at least establish the desired levels of continuing participation, and take advantage of the chance that still remains to fulfil our legacy promise to transform a generation of young people through sport on the strength of London 2012?
Hugh Robertson
School sport is a vital part of the base of the sporting pyramid, and most young people in the country will have their first experience of sport at school. I make no bones about the fact that it is difficult for us to deliver our commitment against the current public expenditure background, but the right hon. Lady is absolutely right to say that we should make every effort to do so.
My Department’s funding is confirmed for the next four years, and 8,000 schools are now signed up for school games, which is a much better result than we had expected. We are engaged in discussions with the Departments for Health and for Education about the further support that they will provide, and we fully intend to make this a key tenet of London 2012.
Duncan Hames (Chippenham) (LD)
We have heard about the schools and colleges that have not taken up their allocation, but aspiring young Olympians in sports clubs such as the Melksham school of gymnastics are disappointed not to have been able to secure tickets. What provision is the Minister making for young members of sports clubs to attend the Olympic and Paralympic games?
Hugh Robertson
The problem is simple: we had 26 million applications for 6.5 million tickets. Even the most basic calculation will make it clear that one will not go into the other, and that there will be a lot of disappointed people. The good news is that I am sure some members of that gymnastics club will have obtained tickets, or will obtain them in further rounds. We should also bear in mind the fact that one of the successes of the last six months has been the securing of the world gymnastics championships, which are coming to this country in 2015.
Nia Griffith (Llanelli) (Lab)
2. What steps his Department is taking to assist young people into employment in the creative industries; and if he will make a statement.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
The Government support young people wishing to enter the creative industries at all levels through apprenticeships, careers advice, degree courses and business start-up schemes. We are expanding apprenticeships, including those in the creative industries, and the National Skills Academy, which was set up by Creative and Cultural Skills, has been successful in increasing the number of career opportunities for young people.
Nia Griffith
I am sure the Minister will be aware that the television media company Tinopolis, which is in my constituency, is a significant employer of young arts graduates. Vice-chancellors up and down the country are worried about what arts courses they will be able to provide. Can the Minister tell me how many students are taking such courses this year, and how that compares with the number last year?
Jake Berry (Rossendale and Darwen) (Con)
When young people do manage to get a job, if they choose to listen to the radio in their workplace they may be subjected to hounding by PPL. That company is repeatedly phoning a constituent of mine to demand money for a radio licence when he is working at home in his garage. Will the Minister meet me to discuss this case and the behaviour of the company more generally?
Pete Wishart (Perth and North Perthshire) (SNP)
As the Minister will know, the Hargreaves review of intellectual property will result in many opportunities for young people in the creative industries, but there are also some wild and fantastic assumptions, including the claim that if all the recommendations are implemented it will bring £7.9 billion into the economy. That amounts to almost 0.6% of GDP. The Business Secretary now calls this a ballpark figure, as these estimates start to unravel. What is the DCMS view of that figure of £7.9 billion?
Dan Jarvis (Barnsley Central) (Lab)
The creative industries are incredibly important for jobs and growth, but I am sure the Minister agrees that websites that illegally give access to copyright material are a major problem. Will he assure the House that he will play an active role in discussions between rights holders, search engines and internet service providers in order to tackle these illegal websites, and does he believe an agreement will be reached?
Mr Vaizey
First, may I welcome the hon. Gentleman to his Front-Bench position? I look forward to exchanging views with him for many years to come.
I wholeheartedly endorse what the hon. Gentleman has said. I am working with rights holders and ISPs to achieve a self-regulatory solution. It is also important to work with credit card companies and advertisers; Indeed, later today I shall speak to the Internet Advertising Bureau on this very subject.
Caroline Nokes (Romsey and Southampton North) (Con)
3. What progress his Department has made in rolling out superfast broadband to rural communities.
Nicky Morgan (Loughborough) (Con)
10. What progress his Department has made in rolling out superfast broadband to rural communities.
The Secretary of State for Culture, Olympics, Media and Sport (Mr Jeremy Hunt)
We have already announced plans to roll out superfast broadband to 90% of the country by 2015. Good progress has been made, with nine parts of the country already at procurement stage, including Highlands and Islands, Lancashire, Cumbria, Wales, North Yorkshire, Rutland, Herefordshire and Gloucestershire, Surrey, Kent and Medway.
Caroline Nokes
Broadband Delivery UK has allocated £8 million to Hampshire for the delivery of rural broadband. Although that is very welcome, and much more than was received under the last Government, residents in the rural Test valley are still concerned to know not only when they will receive faster broadband but how long it will take to get there. What can be done to speed up the process?
Mr Hunt
Absolutely. First, we need Hampshire to submit a broadband plan explaining how it will get broadband access to 100% of Hampshire residents, with 90% of them getting superfast access. We are strongly encouraging councils to look at the 10% who will not get superfast immediately and to make it as easy as possible for them to get superfast access by 2015, especially by those communities finding their own community solutions.
Nicky Morgan
I recently met the Leicestershire county council champion for broadband, Mr Byron Rhodes. He is very grateful for the financial assistance he is getting from the Government, but he has asked me to make the point that councils would appreciate having the maximum flexibility in delivering their own solutions. Does the Secretary of State agree that councils are best placed to deliver maximum connectivity, as they know their own areas best?
Mr Hunt
I absolutely agree. We have quadrupled the amount of money going into superfast broadband roll-out. When £530 million became available following the BBC licence fee settlement, we could have signed one big contract with BT for a national roll-out. Instead, we parcelled it up into 40 lots, and made it available to councils so they can take ownership of solving broadband problems in their areas. The response has been superb and there is enormous enthusiasm, so that was a good localist solution.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
Many of those in rural communities who use superfast broadband will log on to Amazon to buy books and other artefacts, but does the Secretary of State agree that Amazon needs no help from the British Library? Will he look into the worrying development that the British Library is allowing users browsing its online catalogue to click through to Amazon, which will potentially have a major effect on the book retail market?
Mr Hunt
We obviously want to support the retail book market, but as a Government we have to be neutral about whether people obtain their books through the internet or by going to bookshops. However, I will certainly look into the concerns that the hon. Gentleman raises. The reality is that companies such as Amazon are doing a great deal to promote reading. I think that partnerships with organisations such as the British Library can have a positive impact. I will happily look at what he says.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
This week’s “Communications Infrastructure Report” by Ofcom reveals that 14% of British homes still do not have access to decent broadband. By delaying Labour’s universal broadband pledge by three years, are not this Government letting down rural businesses and communities?
Mr Hunt
I gently remind the hon. Lady that we have quadrupled the amount of money available for superfast broadband; we have brought forward the roll-out of superfast broadband from the next Parliament, which was and still is Labour’s policy, to this Parliament; and in October the Chancellor announced £150 million to get rid of mobile coverage gaps and increase mobile coverage to 99% of the population. I think that our record is pretty good.
Jeremy Lefroy (Stafford) (Con)
4. What steps he is taking to encourage inbound tourism from other EU member states.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)
Visit Britain’s tourism marketing activities have been refocused to include a stronger emphasis on promoting the UK to potential EU visitors. That is in contrast to the previous Government, who took this important market for granted. Our most recent initiative is GREAT, a major international campaign announced by the Prime Minister on 21 September, which will promote the UK globally as one of the best places to visit, study, work and invest.
Jeremy Lefroy
The exhibition of the Staffordshire hoard of Anglo-Saxon gold in Washington DC is a great success and will encourage tourism to the UK. Will my hon. Friend work with the owners of the hoard to encourage the promotion of similar exhibitions in European cities?
John Penrose
My hon. Friend is absolutely right: the Staffordshire hoard is a glittering jewel, both literally and figuratively, in the British crown. It shows our history in a completely new light and transforms our understanding of a particular period of our nation’s story. It will indeed draw many tourists to this country, and I hope that it will be involved in many international tours to spread that message more widely.
Mr Ben Bradshaw (Exeter) (Lab)
The vital south-west tourism industry says that the single measure that would make a difference to it would be an extra hour of daylight, particularly in spring and autumn. When will the Government fulfil their promise on this, and why is the Department not pushing much more vigorously within Government for the change?
John Penrose
The right hon. Gentleman will be aware that a private Member’s Bill on that issue is going through Parliament. He will also be aware that my right hon. Friend the Prime Minister has said that the Government do not want to move forward on this without the consent of people from the whole of Britain. That means that the people of Scotland, for example, must be comfortable with the move before we take it forward.
Mr John Whittingdale (Maldon) (Con)
I congratulate the Government on the boost to tourism that will be achieved with the extra money from the regional growth fund. I also commend the Secretary of State for the amount of time that he is devoting to taking an around-Britain tour to promote tourism. Does the Minister agree that it is not just his Department that needs to prioritise tourism? It is essential that Departments such as the Department for Transport and the Home Office, in relation to visa policy, also recognise the importance of tourism to our economy.
John Penrose
I could not agree more. This is quintessentially a cross-departmental role that we have to fulfil. The Government’s tourism policy, published in March this year, deliberately included input from all those Departments to ensure that we were all speaking with one voice.
Pamela Nash (Airdrie and Shotts) (Lab)
5. If he will take steps to promote the holding of festivals and cultural events in 2012.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
The most prominent 2012 cultural festivals and events will come under the cultural Olympiad umbrella. Since my appointment, I have taken every opportunity to work with the London Organising Committee of the Olympic Games and Paralympic Games in arranging a cultural Olympiad of which we can be proud.
Pamela Nash
I thank the Minister for that answer. Will he share with the House how much of the cultural Olympiad budget has so far been spent in Scotland? Will he assure the people of Scotland that when the follow-up programme is announced later this month, Scotland will get its fair share?
Mr Vaizey
I am certain that Scotland will get its fair share. In fact, I have recently had a meeting with the Scottish culture Minister and we are going to have a cultural policy meeting of all Ministers. Ministers from around the world will go to Edinburgh after the Olympics. The Edinburgh international festival will play a prominent part in the cultural Olympiad. There were 70 events in Scotland at the last open weekend in 2011. Scotland is fully on board the cultural Olympiad, and quite rightly so.
Tony Baldry (Banbury) (Con)
Next year also provides an opportunity for a grand national festival and celebration because of the Queen’s diamond jubilee. May I tell my hon. Friend that in Banbury and Bicester we are already planning for that event, and in Banbury we intend to hold the largest street party in the country?
Chris Bryant (Rhondda) (Lab)
And doubtless next year you will blame the jubilee for the collapse in the economy.
Barry Gardiner (Brent North) (Lab)
The Minister spoke of an Olympic year in which we can be proud. How does he propose to deal with the current dispute between the London Organising Committee of the Olympic Games and Paralympic Games and those campaigning on behalf of the 25,000 victims of the Bhopal disaster, and Union Carbide/the Dow Chemical Company having been given the wrap for the stadium? That does not fit with the sustainability and corporate social responsibility criteria of LOCOG.
Mr Vaizey
I am aware of the dispute, which is obviously on the desk of my colleague the Minister for Sport and the Olympics. I would say that the Dow Chemical Company is a top sponsor of the International Olympic Committee and my understanding is that it has been for many years.
Bob Russell (Colchester) (LD)
6. What discussions he has had with the Football Association on ensuring that all Football League stadiums have adequate access and facilities for disabled spectators.
Stephen Lloyd (Eastbourne) (LD)
17. What discussions he has had with the Football Association on ensuring that all Football League stadiums have adequate access and facilities for disabled spectators.
The Minister for Sport and the Olympics (Hugh Robertson)
With permission, Mr Speaker, I will link questions 6 and 17.
We are working hard to bring all stadiums up to the necessary standards—
Mr Speaker
Order. May I say to the Minister that it is a courtesy for the Department to seek clearance of such groupings in advance of the sitting? Exceptionally, I will allow it today but it is a rank discourtesy to the House simply to announce it in that way without prior notification.
Hugh Robertson
I can only apologise, Mr Speaker. I thought that that had been done.
We are working hard to bring all stadiums up to the necessary standards. The Sports Grounds Safety Authority, formerly the Football Licensing Authority, has published “Accessible Stadia”, which has made an important contribution to delivering better facilities for disabled spectators, not just at football grounds but at all sporting venues. However, much needs to be done and we are working closely with the Football Association and the professional leagues to achieve this.
Bob Russell
I thank the Minister for that comprehensive response. I invite him to congratulate the Muscular Dystrophy Campaign on its Trailblazers campaign on promoting better access to stadiums. Will he meet a delegation of young people from the campaign to discuss their aims?
Hugh Robertson
I am very happy to acknowledge the campaign in the way that the hon. Gentleman asks. If he would allow me, I would rather those young people met the Football League first. If he has any difficulty in fixing that meeting, I would be happy to do that. If there are any issues that cannot be resolved or that arise out of that meeting, I will of course be happy to meet them in due course.
Stephen Lloyd
I thank the Minister for his answer. The Liberal Democrats and, in particular, my right hon. Friend the Member for Bath (Mr Foster), have been campaigning on this issue tirelessly. A large proportion of the 30,000 disabled supporters who regularly attend matches in England still encounter a range of problems related to access, so I would be grateful if the Minister could outline what additional spend may be possible in the next year or so in support of the Trailblazers campaign.
Hugh Robertson
Directly, Sport England has earmarked £8 million of lottery funding for disabled sport issues, but there is an opening at the moment in a way that there possibly has not been before. As a result of the Select Committee’s report on football governance, the football authorities are consulting on a range of licences that will govern the running of the leagues. This is an extremely good moment for the hon. Gentleman and others interested in this campaign to feed into that process and make recommendations.
Mr Gerry Sutcliffe (Bradford South) (Lab)
But the Minister will know that this is long overdue; as the previous sports Minister, I tried, as he has done, to push the FA into making sure that access was available. Is this not about the role of the FA too? Can he update us on its reorganisation?
Hugh Robertson
Yes, of course I can. I pay tribute to the work that the hon. Gentleman did on this during his time in office. As a result of the Select Committee report, we produced a response in September. That has set a straightforward deadline to the three football bodies—the FA, the Football League and the Premier League—to come back to us with firm proposals to address the three central tenets of that report: the FA board, the licence, and the link with the councils. I expect that work to be completed by the end of February.
Clive Efford (Eltham) (Lab)
In this day and age it really is not acceptable that only 13 football grounds in the country meet the minimum standards and I am sure the Minister would agree that we should be moving towards a time when people with disabilities should not be turned away from a football ground because they cannot be accommodated. In its evidence to the Select Committee, Level Playing Field highlighted a number of horror stories. Its representatives talked to me about a gentleman who had turned up on crutches and been turned away because, he was told, his crutches might be used as a weapon. What is the Minister doing actively to move the FA to improve the situation and increase the number of grounds that provide at least the minimum facilities for people with disabilities?
Hugh Robertson
I hope that I am not traducing him but I think the current chairman of the FA was the chairman of the National Association of Disabled Supporters beforehand.
Hugh Robertson
The former sports Minister nods. There is therefore somebody at the head of the FA who understands this agenda. As I said in answer to an earlier question, there is an opportunity now with the new licensing system, and I will certainly encourage the FA to take every available step.
Mr David Hanson (Delyn) (Lab)
7. What plans he has for the future sale of the 4G spectrum.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
Ofcom is consulting on its plans for the auction of 800 MHz and 2.6 GHz spectrum by the end of 2012. The Government are also committed to releasing 500 MHz of spectrum, which is currently used by the public sector, over the next 10 years.
Mr Hanson
Will the Minister confirm that he will undertake that sale by the end of 2012 and that that will be a firm commitment to the House? May I also, in passing, urge him to examine very favourably the recommendations that have been issued today by the hon. Member for Maldon (Mr Whittingdale) and the Select Committee on Culture, Media and Sport about ensuring that private companies do not make windfall profits from what were once public assets?
Mr Vaizey
The right hon. Gentleman makes very valid points. This is an independent process that is run by Ofcom, but he is right to indicate that if mobile phone companies decide to litigate this process, as they have in the past, that will seriously hold it up and be of great detriment to the consumer.
Alun Cairns (Vale of Glamorgan) (Con)
The Minister’s focus on delivering broadband through mobile technology and fibre is commendable and the investment is very welcome, but will he join me in calling on mobile operators and Ofcom to deliver the will of the House by delivering 98% broadband coverage through mobile technology in the 4G network?
Mr Vaizey
I very much welcome the Select Committee report that was published this morning. The House will be aware that the Chancellor of the Exchequer has announced an additional £150 million to invest in mobile networks in order to cover many of these not spots. We certainly wish to get much greater mobile phone coverage, particularly because of its importance to broadband.
Helen Goodman (Bishop Auckland) (Lab)
When the Labour Government left office, the sale of the 4G spectrum was scheduled for 2010, but it has been delayed twice since the general election, which has meant a loss of £300 million a year in fees and a delay of at least £2 billion in auction receipts. If Ministers had pressed Ofcom to do this to the original timetable, they would have needed no cuts in their departmental budget and they could have handed over a surplus to the Treasury. Why have they been so lackadaisical?
Mr Vaizey
I welcomed the hon. Lady to her new position at two very lively Westminster Hall debates last week, but may I welcome her again, to the Dispatch Box? It is hard to know where to start in pointing out how wrong the points she makes are. First, any receipts would have gone to the Treasury; and secondly, the delay was caused by the previous Government, who could have done this five years ago. They left us an order on their last day in office at a time when Orange and T-Mobile were separate companies, but when those companies merged that had to change. We have got on with this whereas Labour delayed for five years.
Bill Esterson (Sefton Central) (Lab)
8. What assessment he has made of the effects on the arts of reductions in public expenditure.
The Secretary of State for Culture, Olympics, Media and Sport (Mr Jeremy Hunt)
Cuts are a challenge for all arts organisations and we have tried to mitigate the situation with four-year budget settlements and an increase in lottery funding of 43%, with the result that we have been able to preserve free admission to museums.
Bill Esterson
I could thank the Minister for that very complacent answer, but the arts have faced huge cuts of 29% and the Government say that the cuts will be replaced by “philanthropic giving” although the level of donations always falls in a downturn. How much of the 29% cut in the arts has been replaced by philanthropic giving?
Mr Hunt
Let me tell the hon. Gentleman. Philanthropic giving to major arts organisations stands at £250 million and went up 6% last year. Lottery funding changes that we introduced, which his party did not support, will add £80 million a year to the arts budget by 2013—so, more philanthropy and more lottery. His party was talking about cuts of 20% across the whole of Government whereas we have limited cuts to 15%, so there are lower cuts as well.
Mr Don Foster (Bath) (LD)
I welcome the shadow Secretary of State and her team to their new posts.
Does the Secretary of State agree that the biggest threat to funding for the arts is anything that damages income to the national lottery, such as the so-called society lottery set up by Richard Desmond and his newspapers? Does the Secretary of State believe that that lottery abides by the spirit and letter of current legislation? If not, what is he going to do about it; and if he believes it does, should we not change the legislation?
Mr Hunt
My right hon. Friend is well aware of my concerns about anything that challenges or threatens the important income that goes to good causes from the national lottery. He will know that the Gambling Commission and the National Lottery Commission are looking at this, and we await what they have to say with great interest.
Dame Anne Begg (Aberdeen South) (Lab)
9. If he will ask Ofcom to review its code on electronic programme guides.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
It is the duty of Ofcom from time to time to review and revise the electronic programme guide code. We will consider the electronic programme guide as part of the communications review.
Dame Anne Begg
I add my condolences to those expressed by the Minister to the family of Iain Sproat who, when he represented Aberdeen South, was my MP for a short time. Will the Minister ask the Department and Ofcom to look at guaranteeing front-page prominence for public service broadcasting channels such as the UK’s highly successful children’s channels, and extending that prominence so that children’s services are as easy to find on on-demand TV as they are on live TV?
Mr Vaizey
The hon. Lady makes a good point. As my right hon. Friend the Secretary of State has pointed out, the EPG is the most important lever to protect public service broadcasting going forward. We are reviewing it as part of the communications review, and we may legislate to protect public service broadcasting.
Greg Mulholland (Leeds North West) (LD)
12. What support his Department has provided to the rugby league Four Nations tournament.
The Minister for Sport and the Olympics (Hugh Robertson)
Sport England is providing £27.5 million to the Rugby Football League to support the grassroots in the period 2009-13. We are also providing up to £1.5 million to help with the hosting of the rugby league world cup in 2013. As with the six nations tournament in rugby union, we do not provide direct financial support for the Four Nations cup in rugby league, but I wish it every success.
Greg Mulholland
I thank the Minister for his answer and for his support. The all-party rugby league group is delighted to host the Rugby League International Federation board today, and I am sure that he will want to join us in welcoming the return of international rugby league to Wembley with the Four Nations double header on Saturday. Does he welcome the fact that there is going to be a statue of a rugby league player at Wembley, and will the Government assist in making that a success as well?
Hugh Robertson
I join the hon. Gentleman in welcoming the international board. That is a fantastic achievement, and yes, it is right that an appropriate way to mark that connection should be found at Wembley, which is a stadium that resonates with rugby league history as well as football history. I will of course do anything that I can to help.
Mark Pawsey (Rugby) (Con)
In the other rugby code, rugby union has just seen a successful world cup in New Zealand. The next tournament will be in England in 2015, and the town of Rugby in my constituency is already preparing to receive visitors to the home of the game. Will the Minister lend his support to that work?
Hugh Robertson
Yes, certainly. Was it not in Rugby that William Webb Ellis first picked up a ball and ran with it? That will clearly be a key part of the celebrations in 2015, and we will do everything that we can to support them.
Tom Brake (Carshalton and Wallington) (LD)
13. What discussions he has had with the Chancellor of the Exchequer on the effects on levels of participation in sports of the VAT status of sports clubs.
The Minister for Sport and the Olympics (Hugh Robertson)
A range of tax benefits is available to community clubs under the CASC—community amateur sports clubs—scheme, including 80% mandatory rate relief, gift aid on donations, and exemption from some levels of corporation tax. I wrote to the Economic Secretary on 10 August to ask that tax exemption thresholds be increased in line with inflation. To date, just over 6,000 clubs have registered and have benefited from an estimated £100 million in savings since the launch of the scheme.
Tom Brake
I thank the Minister for his response. Will he look in particular at an issue that has been raised with me by Powerleague, a five-a-side organisation that believes that the tax arrangements on VAT, which had been in place for the past 20 years but have recently been changed, will have a heavy impact on its membership?
Hugh Robertson
I wrote to the Treasury to take that issue up on behalf of a number of small five-a-side providers. The issue is not that the regulation has changed but simply that its interpretation has been clarified. Some providers were paying VAT, but others were not. That conversation is ongoing, but the point of the intervention by Her Majesty’s Revenue and Customs was to level the playing field.
Gavin Shuker (Luton South) (Lab/Co-op)
I thank the Minister for his answer to the right hon. Member for Carshalton and Wallington (Tom Brake). I would like to raise the same issue: playfootball.net in Stopsley in my constituency is facing challenges to its finances as a result of the changes. Surely if the regulation has been applied in a certain way for the past 20 years, suddenly to change it now would be a silly idea.
Hugh Robertson
The issue is fairness in the tax system. If some providers are being taxed in a certain way and others are not, that provides a competitive advantage that many would argue is unfair. What is important is that the same rules apply, whatever they are. As I said, we are in discussions with the Treasury and we will continue those discussions. The important thing is that the rules are applied equitably to all providers.
Gordon Banks (Ochil and South Perthshire) (Lab)
14. If he will assess the economic and cultural value of dance to the UK; and if he will make a statement.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
My Department fully recognises the economic and cultural value of dance to the UK. The performing arts, including dance, contribute more than £3 billion to the UK economy.
Gordon Banks
I am grateful for the Minister’s response, which shows the economic benefits of dance to the UK, although he did not mention the cultural benefits. I declare an interest, as my son is a dancer and works in that industry. Does the Minister agree that injured dancers are unable to contribute to that cultural and economic benefit? What is the Department doing to assist the sector to get dancers who are injured back to health, fitness and work?
Charlie Elphicke (Dover) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Culture, Olympics, Media and Sport (Mr Jeremy Hunt)
With permission, Mr Speaker, I would like to inform the House that on Monday we will be announcing the route of the torch relay for next year’s Olympics. The torch arrives on 18 May. It will be travelling for 70 days, going through 1,000 communities. Unfortunately, it will not go through every hon. Member’s constituency, but I can assure the House that 99% of the population will be within 20 miles of the torch route.
Charlie Elphicke
People often think of DCMS as the Ministry of Fun. Does the Secretary of State just have fun or is there a serious side to his Department in terms of the growth agenda and getting our country doing well in future years?
Mr Hunt
My hon. Friend makes a good point. We focus heavily on growth through our broadband agenda, our tourism agenda and the economic boost of the Olympics next year, but I would not want to deceive him by saying that it is not fun as well. He could be part of that fun by coming along regularly to DCMS questions.
Ms Harriet Harman (Camberwell and Peckham) (Lab)
Sorry to spoil the fun. With mounting evidence of the Murdoch empire knowingly using illegal phone hacking, and with the Press Complaints Commission appointing a Tory peer, former Thatcher Cabinet Minister Lord Hunt, as its new supposedly independent chair, it is ever more evident that radical change is necessary and must not be kicked into the long grass. Will the Secretary of State tell the House when he expects to be in a position to bring forward his Green Paper, and when he expects to be able to introduce legislation?
Mr Hunt
I welcome the right hon. and learned Lady to her position. I hope that she agrees with me that this is the best job in government and that it has some fun in it as well as the serious issues that she mentions. I agree with her entirely. [Interruption.] The hon. Member for Rhondda (Chris Bryant) is making comments from a sedentary position. Let me remind him that 300 breaches of the Data Protection Act were brought to the attention of the previous Government by the Information Commissioner and they did nothing about that. We have had one, and we are overhauling the system of press regulation. We do not want to go too far in the opposite direction and stop the press being free, vibrant and robust. That is very important. The independent inquiry by Lord Justice Leveson will be reporting on press regulation and the relationship between the press and politicians by September next year, and we hope to be able to bring to the House a White Paper before the end of next year, which will include what we think should happen on the basis of his recommendations.
Neil Carmichael (Stroud) (Con)
T2. I welcome what the Government have already done to enhance super-fast broadband opportunities. Does my right hon. Friend agree that we need a clarion call to all businesses and communities, especially in rural areas such as Gloucestershire, to make sure that people understand that there is a strong demand for enhanced service?
Mr Hunt
I completely agree with my hon. Friend and thank him for his excellent work. I have been to Gloucestershire, where the county council is on fire with excitement, which I was not expecting, at the prospect of super-fast broadband getting to the most remote villages. It has a big role, he has a big role and we must do everything we can to bang the drum.
Natascha Engel (North East Derbyshire) (Lab)
T5. Lord Taylor’s inquiry into the Hillsborough disaster recommended the banning of standing in football stadiums in the top two divisions. Does the Minister agree?
Andrea Leadsom (South Northamptonshire) (Con)
T3. Has the Minister seen a demonstration of TalkTalk’s HomeSafe system, which enables families to keep their children safe not only from internet porn, but from sites on suicide and on bomb-making, and all sorts of unsuitable sites? Does he agree that unless internet service providers do more to enable family-friendly systems to protect children, the Government will have to legislate?
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
My hon. Friend makes a good point. I have seen the TalkTalk system. I have said to ISPs again and again that I prefer self-regulation to legislation, but the mood of the House is for action and legislation. This is not about censorship, but about giving families the tools to protect their children from inappropriate content, and we rely on ISPs to come up with solutions.
Bill Esterson (Sefton Central) (Lab)
T6. May I again press the Secretary of State on phone hacking in News International? Will he guarantee full co-operation between his Department and Lord Leveson’s inquiry?
Jessica Lee (Erewash) (Con)
T4. Is the Minister aware of concerns over the quality and frequency of subtitling services on television? A constituent of mine who relies entirely on subtitling feels that the service could be significantly improved and that in the 21st century it should be 100% accurate.
Chris Bryant (Rhondda) (Lab)
In 2007, News International’s lawyers, as we now know but have recently learned, wrote to senior management at the News of the World, including James Murdoch, to make it explicit that the “sole rogue reporter” line was completely untrue. Does the Secretary of State really believe, with BSkyB’s annual general meeting coming up on 29 November, that James Murdoch is a fit and proper person to chair the company any longer?
Mr Hunt
The hon. Gentleman has campaigned extensively on this. The most important thing is that the truth comes out. James Murdoch is speaking to the Select Committee, Lord Justice Leveson is conducting an inquiry and there are extensive police inquiries. It would be inappropriate for me to make specific comments on who should do what job before the inquiries are completed, but this Government launched the process to resolve this and are doing everything possible to ensure that we end up in the right place.
Matthew Hancock (West Suffolk) (Con)
T7. Will the Minister commend the work of Attitude is Everything, which works extremely hard to promote disabled access to music venues? Going to a music concert is brilliant for the morale of many disabled people and people in wheelchairs, and access—
Mr Speaker
Order. The hon. Gentleman will resume his seat when asked to do so. He is making a very important point, but it must be made briefly, and that is the end of it.
Mr Vaizey
I received my hon. Friend’s invitation and immediately sent it to my officials with a note stating, “This invitation comes from one of the most important Members of the House and a rising star, and we must take his concerns seriously.” He raises the important issue of disabled access, which we have already discussed in relation to sport.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The Government have spent the past year attacking FIFA following the World cup bidding process, but does the Minister think that a flimsy assurance from the organisation’s president is sufficient guarantee that a Team GB Olympic football team will not compromise the footballing independence of Wales, Scotland, Northern Ireland and England?
Hugh Robertson
The key thing with FIFA is not what it says but what it does, and as far as the larger reform programme is concerned we will judge FIFA by its results. It has been absolutely categorical about this issue, and it is about time everybody stopped playing politics with it and remembered the athletes, who have an unbelievable opportunity to compete in a home Olympics. Can we get behind the athletes and stop playing politics?
Jo Swinson (East Dunbartonshire) (LD)
My constituent Julia Donaldson is the author of many much-loved children’s books, including “The Gruffalo”, and she is also the children’s laureate. As a passionate advocate of the benefits of reading for children, she is also concerned about the possible impact of library closures. Will the Secretary of State agree to meet Julia and a group of campaigners to discuss the issue?
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
On the question of Olympic security, most competing nations will have training centres and cultural homes or houses. May I ask the Minister whether the list has finally been published, and seek an assurance that those venues will be protected during the course of the games?
Hugh Robertson
The final list has not yet been published, because negotiations are still ongoing and there is quite a long tail in Olympic terms, with smaller nations and so on and so forth; indeed, some of the larger ones are split between a number of venues. It is the responsibility of those nations to tie up security with the local police force, but that is very much part of the agreement and will be done.
Mary Macleod (Brentford and Isleworth) (Con)
Now that the International Association of Athletics Federations has received an assurance that the athletics track will remain in the Olympic stadium, what has been done to help promote London as an outstanding city for the world athletics championships?
Hugh Robertson
I thank my hon. Friend for that question, which is a good one at the end of Culture, Olympics, Media and Sport questions. We have already had the evaluation commission in London; the Mayor and I spent two days with it. The bid comes up next week, and I am sure that everybody in the House will want to wish UK Athletics and the bid team—and probably even me as part of it—all the very best of luck, because it would be a fantastic tournament to bring home to this country.
Mr Peter Bone (Wellingborough) (Con)
1. What progress has been made in implementing the Prime Minister's policy to hold more free votes in Parliament.
The Leader of the House of Commons (Sir George Young)
The Government are committed to strengthening the opportunities for hon. Members to hold the Executive to account. We have introduced a number of measures to increase Back Benchers’ power, including establishing the Backbench Business Committee, helping to facilitate the election of Select Committee Chairs and members, extending Select Committee powers over public sector appointments and relinquishing the Executive’s power to call general elections.
Mr Bone
I obviously did not make my question clear enough; I was talking about free votes. Quite rightly, the Government have reformed a lot in Parliament and have done a very good job, but as a reformer, here is just a suggestion: between now and the end of the Session, could we have free votes in Committees to test out what the Prime Minister promised us in May 2009 and see how it works?
Sir George Young
For my hon. Friend, every vote is a free vote. The speech that my right hon. Friend the Prime Minister made referred to Public Bill Committees and suggested not total free votes but more free votes; and we have had more free votes in the House on certain issues which, in the previous Parliament, were whipped. Having said that, I hope my hon. Friend will understand that most of us got here wearing a party label, and that it is wholly legitimate for the party to expect some loyalty to the manifesto on which the Member stood.
Angela Smith (Penistone and Stocksbridge) (Lab)
Since gaining the keys to No. 10, the Prime Minister has alienated at least 81 of his colleagues over the vote for the EU referendum and is yet to deliver free votes on other issues. Is it not the case that here we have a Government led by a cavalier Prime Minister, who is abandoning his cheap promises more quickly than he is distancing himself from his unhappy Tory Back Benchers?
Sir George Young
The hon. Lady would be speaking from a position of strength had her party not divided on precisely the same issue as the Government. It is an issue on which all parties were divided last week, and my right hon. Friend has not alienated 81 Back Benchers.
Duncan Hames (Chippenham) (LD)
2. How many e-petitions he expects to have attracted 100,000 signatures on the Government's e-petition website by the end of July 2012.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
Since the launch of the site in July, five petitions have reached the threshold of 100,000 signatures, and three out of those five have already been allocated time for a debate. I am not able to predict precisely how many more petitions will reach the threshold by July next year, but the current rate demonstrates the significant interest and support that e-petitions have created.
Duncan Hames
There is, indeed, a significant interest. I am glad that the Backbench Business Committee has been able to schedule a debate on the FairFuelUK campaign’s petition later this month, and I look forward to a debate now that our campaign for financial education in schools has reached 100,000 signatures on the e-petitions site. Given that petitioners will naturally expect to secure a debate once they reach that threshold, will my hon. Friend keep under review the amount of time that is allotted to the Committee this year?
Mr Heath
We have already made it clear that, in the light of the extended first Session of Parliament, the intention is to provide extra days for the Backbench Business Committee, which is doing a very good job of reflecting interests outside. The threshold is one of eligibility—making a petition eligible for debate. It is then for a Member of the House to take that forward, and for the Backbench Business Committee to decide whether it is a matter that has not been debated in some other form.
Gavin Shuker (Luton South) (Lab/Co-op)
The substantive point is that when people outside the House are asked to sign a petition they expect it to be debated on the Floor of the House.
Gavin Shuker
The Deputy Leader of the House says no, but many of my constituents believe that to be the case. If that is so, and it is the Government’s intention, will they make available such business in Government time, rather than relying on my colleagues on the Backbench Business Committee?
Mr Heath
That was never our intention for the petition site. It is a mechanism for allowing members of the public to express an interest in a matter, and it is for the Backbench Business Committee, which has the time available, to consider that. If we find that there is a huge oversubscription, of course we will have to look at it, and I think the Procedure Committee will want to do that in due course. It makes sense to do so. However, we must not lose the capacity for the House properly to consider legislative business as it should, or to consider matters raised by hon. Members, which is also important.
Jo Swinson (East Dunbartonshire) (LD)
3. What steps he has taken in support of the Parliament week initiative; and if he will make a statement.
Christopher Pincher (Tamworth) (Con)
5. What steps he has taken in support of the Parliament week initiative; and if he will make a statement.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
I pay tribute to all hon. Members and staff of the House who are contributing to the excellent array of events in Parliament week. As part of that, my right hon. Friend the Leader of the House will meet members of the UK Youth Parliament, and will speak at the beginning of its debate in this place tomorrow.
Jo Swinson
I thank my hon. Friend for that reply, and associate myself with his remarks about congratulating all the staff involved in making the events possible. Parliament week is a fantastic initiative, with events around the UK, the BBC’s “Question Time” in Westminster Hall, and the excellent UK Youth Parliament debate here tomorrow. What does my hon. Friend think can be done to extend the spirit of Parliament week in promoting democratic engagement to the other 51 weeks of the year?
Mr Heath
I commend my hon. Friend for her contribution; I understand that she took part in a young people’s “Question Time” event on Monday evening before an audience of more than 200. That was excellent. Engagement with the public, particularly with young people, is extremely important. The programme takes place not just in this place in Westminster; the whole point is to take that engagement out to the country, using a variety of methods. My hon. Friend makes a very good point that it should not be just for one week a year. We must make sure that the general public understand what the House is for, and how they can engage with it. We are determined to make that a reality every week of the year.
Christopher Pincher
Following on from what the Deputy Leader of the House has said, as part of Parliament week I gave a tour of Parliament for sixth-formers from Landeau Forte college this week, and next week I will see students from Rawlett college. What can the Government do every week of the year to make sure that students learn more in schools about our Parliament and its history, so that they are more engaged with Parliament and the democratic process?
Mr Heath
I commend the hon. Gentleman for his involvement with young people. As I said, we must build on the extremely good work being done by the Department for Education, the education services in the House and others to make that a reality. A variety of things are happening that may engage the interest of young people. For example, there is even a parliamentary week app for tablets. I have downloaded it, and it is very good. The only drawback is that for some obscure reason, it has a 12-plus rating on the grounds of mild or occasional sexual content, nudity, fantasy violence, alcohol and drug abuse, profanities and crude humour—all of which are far from the normal life of hon. Members.
Dame Anne Begg (Aberdeen South) (Lab)
I took the opportunity to write to all the schools in my constituency to inform them about Parliament week and the excellent resources that were available to them. As a result, I was at a school last Friday and I will be visiting another school tomorrow. Does the Deputy Leader of the House know how many hon. Members have actively taken part in promoting and attending Parliament week events? How will he encourage those who have not participated on this occasion, to make sure that they do so next year?
Mr Heath
The honest answer is that I do not know how many hon. Members have taken part, but from speaking to colleagues around the House, it seems that a significant number have done so. Those who have not done so have missed an opportunity, and let us hope that they will do so at different stages, not only during Parliament week next year but throughout the year, as the hon. Lady suggests.
Ian Paisley (North Antrim) (DUP)
The promotion of Parliament is of course a noble cause. However, does the Leader of the House agree that the continuation of allowing Members who do not take their seats in this place to claim expenses from this place, to claim offices in this place, and to claim salaries from this place is a scar on Parliament? When is he going to bring a comprehensive statement to this House—
Mr Speaker
Order. I have allowed the hon. Gentleman to place his thoughts on the record on that very important matter, but unfortunately it does not relate to Parliament week, and therefore we will have to leave it there for today.
Simon Hughes (Bermondsey and Old Southwark) (LD)
4. What plans he has for future pre-legislative scrutiny of Government legislation; and if he will make a statement.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
The Government recognise the value that pre-legislative scrutiny can add and we are committed to seeing more measures published in draft. So far this Session, we have published draft measures on Lords reform, financial services, defamation, detention of terrorist suspects, individual electoral registration and electoral administration, and a groceries code adjudicator. The Government expect to publish further measures in draft this Session, including on parliamentary privilege.
Simon Hughes
I am seriously grateful to my hon. Friend and to the business managers for arranging more pre-legislative scrutiny, which is very important. Can he assure us that, as the plans are laid for the next parliamentary year, starting next May, all Departments understand the benefit of, and the priority for, pre-legislative scrutiny and the disbenefit of introducing Government changes to Government Bills after they have been published?
Mr Heath
I am grateful to my right hon. Friend. That is exactly the point that we repeatedly make to Departments: it is in everyone’s interests including theirs that we have proper scrutiny, because better legislation has an easier passage through the House. Increasingly, we have dealt with measures rather than whole Bills, because when a measure is ready for publication it makes sense for the House to have an opportunity to scrutinise and improve it prior to the publication of a Bill.
Diana Johnson (Kingston upon Hull North) (Lab)
Can the Deputy Leader of the House therefore give a guarantee that in future all Bills will have had pre-legislative scrutiny before they get on to the Floor of the House, so that we do not have the debacle that we had over the Health and Social Care Bill?
Mr Heath
I cannot give that guarantee any more than the previous Government, of whom the hon. Lady was a supporter, could give it. There will, for instance, be Bills that start in the Lords, where there is a different procedure, which means that they would not be subject to pre-legislative scrutiny in this House. However, it is our intention, wherever possible, to ensure that it happens. Inevitably, there is a slightly different position with an incoming Administration, when it is in no one’s interests for the House to do absolutely nothing for six months while we await Bills for pre-legislative scrutiny.
Hugh Bayley (York Central) (Lab)
6. What steps he is taking to improve access for hon. Members to Government Ministers and officials.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
The Government are committed to hon. Members having access to Ministers and, where appropriate, Government officials. My right hon. Friend the Leader of the House has recently taken up a number of cases with his ministerial colleagues where it was felt that meetings with Ministers were not forthcoming. If the hon. Gentleman has any specific concerns, my right hon. Friend and I will be happy to take them up on his behalf.
Hugh Bayley
I am grateful for that reply. I have never been admitted to a Government Department—at least, not since I was a Minister—without having a prior appointment, showing my parliamentary pass, and being accompanied by a pass-holding civil servant. How was Adam Werritty able to avoid those restrictions? Will the Government regularly publish details of all official meetings between Ministers and other people to reassure Parliament that access to Ministers is transparent and not partisan, and based on need and Government policy?
Mr Heath
The report from the Cabinet Secretary has been published, and changes in the ministerial code have been put in place. Clearly things happened in this instance that have been regretted and have resulted in changes, but I do not think we should have free access to Departments. It is very clear that that is also the Prime Minister’s view.
Miss Anne McIntosh (Thirsk and Malton) (Con)
The Leader of the House is aware of my interest in having access to Ministers taking decisions in Europe, and particularly in Back Benchers having the power to amend draft regulations. Rather than being able to amend a motion to hold Ministers to account, may we please have the power to amend the actual implementing regulations?
Mr Heath
I think we have strayed a little far from the original question, which was on access to Ministers, but—[Interruption.] The hon. Member for Rhondda (Chris Bryant) says more from a sedentary position than he does standing up, and that is saying a lot. [Interruption.] He is carrying on doing it now. [Interruption.]
Mr Heath
I am so glad somebody does.
The hon. Member for Thirsk and Malton (Miss McIntosh) raises an important point. She may like to approach the Procedure Committee, because it is really a question of procedure, rather than one of access to Ministers, on which I might reasonably be expected to have some impact.
Natascha Engel (North East Derbyshire) (Lab)
7. If he will establish a regular day of the week in sitting time for Back-Bench business.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
This issue could be considered as part of the review of the operation of the Backbench Business Committee. The hon. Lady knows, because we have had discussions, that we hope that will be undertaken fairly soon.
Natascha Engel
I thank the Deputy Leader of the House, but what reasons can he give for not having a regular slot? Would it not just be much, much easier?
Mr Heath
The hon. Lady will recall that she sat on the Wright Committee. I did not, but she did and so did my right hon. Friend the Leader of the House, and we were committed to putting into effect the recommendations of the Wright Committee. She will recall that the Committee stated, in paragraph 214 of its report, that
“it could be left open to a process of regular discussion and negotiation as to which day of each week would be devoted to backbench business. This would avoid the rigidities referred to above.”
We have simply taken that recommendation—she may or may not have agreed with it, because I know she did not agree with all of what the Wright Committee recommended—and put it into effect. I have to say, there are advantages to having that flexibility.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
8. What plans he has to bring forward proposals for a Select Committee on Civil Society; and what representations he has received on the remit of any such committee.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
In light of the recommendations of the Wright Committee that the House should reduce the number of Committees and end overlapping or duplicate remits, we have no plans to do so.
Alun Michael
It is very interesting that the Cabinet Office website, which announced with great passion that that Committee would be provided, does not record the withdrawal of that offer. Why has the Government’s decision been reversed, and why is it being kept secret?
Mr Heath
The establishment of Committees is a decision for the House, not the Government, as the right hon. Gentleman will be aware. The Cabinet Office is scrutinised by the Public Administration Committee, which is currently undertaking an inquiry into civil society entitled “Smaller Government: Bigger Society?” I pay tribute to the hon. Member for Harwich and North Essex (Mr Jenkin) and his Committee for their work on that matter and on other issues that are important to the Government. The matter is being looked at by a parliamentary Select Committee.
Mr Speaker
From that hon. Member we can now hear; I call Mr Bernard Jenkin.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
May I thank my hon. Friend the Deputy Leader of the House for that answer?
Eurozone Crisis
(13 years, 1 month ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
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Mr Peter Bone (Wellingborough) (Con)
(Urgent Question): To ask the Chancellor of the Exchequer to make a statement on the euro crisis and its implication for the United Kingdom.
The Financial Secretary to the Treasury (Mr Mark Hoban)
Hon. Members will be aware of recent developments in the eurozone. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer are at the G20 meeting in Cannes as we speak, and we understand that the Greek Cabinet is due to meet imminently as well. We will not be providing a running commentary on the market and media speculation of those events, but I can reassure the House that the Prime Minister will be making a statement to the House on Monday.
What is clear, however, is that the instability in the eurozone continues to have a chilling effect on the rest of the European, the UK and the entire global economy. As the Chancellor has said, a resolution to that crisis is in our vital national interest. It is vital that the eurozone members reach a solution that is coherent, comprehensive and lasting. Last week, European Heads of State reached an outline agreement that laid out a blueprint to resolve the crisis. It was a three-pronged strategy. First, weak European banks should be recapitalised. Importantly, in the assessment of the European Banking Authority and our own regulatory authorities, no British banks require additional capital, which is an important expression of confidence in the country’s banking system.
Secondly, the unsustainable position of Greece’s debts should be resolved. In particular, a headline agreement was reached to reduce the Greek debt to gross domestic product ratio to 120% by 2020, through an additional €30 billion of euro area money and private holders of Greek sovereign debt being asked to accept a nominal write-down of 50%. Thirdly, eurozone member states should reinforce the bail-out fund to create a firewall, either by using the fund to insure new debt or by attracting public and private investors through a special purpose vehicle. Both mechanisms are designed to have the capacity to leverage around €1 trillion. This package demonstrated the commitment of the euro area member states to stand behind the single currency. It was progress, but more details are needed on how it will work.
Right hon. and hon. Members will be aware, however, of developments in Greece since that agreement was reached last week. There is no doubt that the decision by the Greek Prime Minister has added to the instability and uncertainty in the eurozone. Ultimately, it is up to Greece to make its own decisions, but it is critical that all parties stick to the deal that was agreed last week. That agreement is an important part of the economic recovery here in the UK, across Europe and across the global system. If the euro area collectively does not decisively sort out its ongoing problems, the uncertainty that that creates and its impact on global confidence will continue to undermine economic recovery across the world.
This is uncertainty that the global economy can ill afford, and uncertainty that has been a drag on all our economies for months. We will continue to urge our euro area counterparts to press for a decisive resolution of the crisis at the G20 at Cannes over the coming days, but at no point have we committed any British taxpayer money—not to Greece, not to the bail-out fund.
I want to address directly the question of UK commitments through the International Monetary Fund. Britain has always been one of the largest shareholders in the IMF, 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. We stand ready to consider the case for further resources if necessary, but let me be clear: we are only prepared to see an increase in the resources that the IMF makes available to all its members. We would not be prepared to see IMF resources reserved only for use by the eurozone. The IMF can use its expertise to help administer its fund, but it can only lend to countries with a programme for adjustment. A potential special purpose vehicle for the euro area bail-out fund does not fit that bill.
Last week’s announcement, however, was only the first step to resolving the immediate crisis. In the long term, it is vital that the euro area members follow the remorseless logic to closer fiscal union. It is equally vital that we work together to improve competitiveness in the peripheral countries of the eurozone, as well as the overall competitiveness of the European bloc in the world economy.
The ongoing instability in the euro area is a vindication of the Government’s decision to get ahead of the curve, cut our own deficit and improve our economic competitiveness. Our decisive action to cut the deficit means that the UK has stayed out of the storm, and is the reason we have gilt yields close to the likes of Germany, rather than similar to those of Greece, Italy or Spain. We will encourage our euro area counterparts to do the same over the coming weeks. As I said, the Chancellor and Prime Minister are in Cannes. It is vital that leaders commit in Cannes to increase confidence in the global economy, agreeing the detail of the euro area rescue. The Prime Minister will update the House on Monday.
Mr Bone
I thank you for granting this urgent question, Mr Speaker, and the Minister for his full response.
It has long been argued by Conservative Ministers that retaining the pound and allowing it to float in line with market conditions has enormous benefits for the British economy. If the British economy is having a difficult time, the value of the pound will fall, which makes exports cheaper and foreign companies’ imports more expensive, thereby increasing growth, jobs and prosperity in the United Kingdom. Equally, Conservative Ministers have always argued that the Bank of England’s ability to set UK interest rates allows the country to encourage growth in a recession and control expansion in a boom.
Both those powerful economic weapons are being denied to Greece, as it is in the euro straitjacket. Will the Minister explain why it is the Government’s policy to deny Greece a way out of its economic crisis by allowing it to withdraw from the euro and re-establish the drachma? Does he think it was a mistake for the German Chancellor and the French President to increase the crisis by making the Greek referendum on the bail-out a referendum on whether Greece remains in the euro? Does the Minister agree that the Greek Government were right to consult their people on the proposed austerity measures, so that if the country votes yes, they will have a mandate to drive through the reforms? What other countries does he think would come under market pressure because of the instability of the euro? Were the President of France and the Chancellor of Germany right to say that they wanted to save the euro at any cost, rather than putting the interests of Europe first? Finally, do the Government have a comprehensive contingency plan for when the euro collapses?
Mr Hoban
I am grateful to my hon. Friend for his question and his response to my statement. He is absolutely right: it was right for this country to stay out of the euro. That is the settled position of the coalition Government, and it is the right position to adopt. However, that was a decision that the people of this country made. It was not made under duress from other countries; it was a free choice that we made. On that basis, it is better for the Greeks to make their own decisions than for us to offer them advice.
My hon. Friend asked about contingency planning. He would expect every good Government to have plans in place to cover a range of eventualities, and this Government are well prepared for any eventuality.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister should at least have the grace to admit that the reason we are not in the euro is because of decisions by the Labour Government.
Clearly there are major ramifications from the uncertainty in Greece. With the Greek Treasury due to refinance €8 billion on 19 December, time is of the essence. The Minister has told the House that UK banks have more than £2 billion of direct exposure to Greek sovereign debt, so what assurances did the Prime Minister seek from his Greek counterpart at last week’s summit about the implementation of that deal?
The market pressures on the Italian Government are now considerable. Can the Minister reassure the House that the Treasury is preparing for all eventualities? Will he confirm that UK banks have an estimated €10 billion of exposure to Italian sovereign debt? The Italian Government have been unable to agree a deal on structural reforms ahead of this week’s G20 meeting. While the UK has in the past offered bilateral loan aid to Ireland, clearly we would want to avoid being drawn into more significant loans to larger countries. Will the Minister therefore explain whether, in general, the Treasury will entertain support only via the IMF, or could bilateral loans be on the agenda on a case-by-case basis?
Does the Minister believe that the €1 trillion bail-out fund will be sufficient if other eurozone countries are drawn into the danger zone? Will the Greek referendum delay the establishment of the fund?
On the IMF, the Minister knows that many people are anxious to safeguard the interests of British taxpayers, and it would be wrong for the British people to pay twice over—through temporary, ongoing EU funds and the IMF. Does he therefore agree that the eurozone should not rely principally on IMF money for the bail-out and that there can be no excuses for eurozone countries not putting up their own resources? If we are to see a full and permanent euro bail-out fund, we agree that our role should be through the IMF, but what does the Treasury expect will be the scale and timing of any further increases in IMF funds for the eurozone, however they are described?
Finally, with our own growth so weak and with unemployment rising, the Chancellor must surely be regretting his claim that the UK is a “safe haven”. When will the Government take urgent steps to bolster the strength of our own economy to insulate us properly from this international turbulence? Is it not now abundantly obvious we need an immediate plan to boost jobs and growth here in the UK and across Europe? What will the Prime Minister be proposing to boost growth when he meets his G20 colleagues? The Government continue to play a dangerous ideological game, but it is time that they stepped up to the mark and opted instead for a proper strategy for jobs and growth.
Mr Hoban
Let me first tackle this issue of who kept us out of the euro. The fact that a previous Conservative Government secured an opt-out from the Maastricht treaty meant that we were not going to join the euro. Also, one of the things that we did when we came into office last May was to close down the euro preparations unit in the Treasury. We are taking action on contingency planning for a whole range of outcomes, and that work is under way in the Treasury.
The hon. Gentleman asked whether work would be put on hold on the three legs of the deal that was agreed last week. It is important that the euro area continues to work on those three legs, particularly on the ring fence and on the recapitalisation of the banks. They are important parts of the package, and they are needed to ensure that the eurozone is stabilised. He talked about the various European mechanisms that are in place to support finance. He will remember that the Greek bail-out was originally paid for purely by the eurozone; the UK did not contribute to it and has not contributed to subsequent parts of the bail-out package for Greece. We have negotiated that when a permanent mechanism is put in place to replace the one that the previous Government signed us up to, which we do have to contribute to, that permanent mechanism will not require UK participation. That is an achievement of this Government, getting us out of the mess that the Labour Government put us into in May last year.
The hon. Gentleman referred to the IMF. He will have to remember that it was he who led opposition to increasing our subscription to the IMF—[Interruption.] He says that that was to safeguard Britain’s subscription to the IMF, but it would in fact have marginalised the UK in international debates on tackling the global economic problems that we face today. Labour should think very carefully about its repudiation of the legacy left to it by the previous Prime Minister, who agreed to a trebling of resources for the IMF. We need to take action to stabilise the situation in the eurozone. The uncertainty is casting a chilling effect on the UK economy, and it is important that those issues are tackled as soon as possible.
Mr Andrew Tyrie (Chichester) (Con)
I wonder how much we can reasonably learn from the Minister, given that the negotiations are taking place in Cannes and that he is here with us today. Anyway, there are one or two questions that we might ask. What assurance can he give us about the UK banks’ exposure not only to Greece but to other eurozone countries at risk? What confidence does he have that the eurozone banks have the capital strength required to withstand a eurozone default?
Mr Hoban
My hon. Friend asks some interesting questions. I think that I would rather be here in the House than in Cannes at the moment—[Interruption.] It is important that Parliament should hold Ministers to account on these matters, and I am here to answer its questions. On my hon. Friend’s first question about the strength of the UK banks, there has been a process with the leadership, through the European Banking Authority, which is based here in London, and it concluded that the UK banks did not need to be recapitalised. That is partly a consequence of the measures taken over the past two or three years to increase banks’ holdings of capital and highly liquid assets, which have helped to ensure that they are to an extent insulated from the problems in the euro area.
On my hon. Friend’s wider question about the strength of the European banks, I can tell him that, in calculating the amount of additional capital that banks should hold, the EBA determined that they should hold 9% core tier 1, and that, crucially, their holdings of sovereign debt should be marked to market rather than held at face value. That led to the calculation that banks across Europe need to hold an additional €100 billion of capital.
Keith Vaz (Leicester East) (Lab)
May I urge the Minister not to join others who are criticising Greece for its decision to hold a referendum? George Papandreou is a decent and honourable man, and at the end of the day, if he wishes to put this to the Greek people, it is a matter for them. Whatever their decision—I hope that they will vote to accept the bail-out—we should accept it. This is a country that has voted with us on the European Council on many occasions over the last 20 years.
Mr William Cash (Stone) (Con)
The Minister will know that the presidency conclusions last week set out 10 new areas of European economic governance. What is the legal basis in the existing treaties for the creation of these new areas of governance and for the creation of a euro summit? Was the Prime Minister asked to give UK consent? Did he give his consent or were the Government bypassed? As Chairman of the European Scrutiny Committee, I would be grateful for specific answers to those questions.
Mr Hoban
My hon. Friend will be aware that a number of actions have been taken throughout this crisis intergovernmentally rather than through the institutions of the European Union. That applied to the creation, for example, of the European financial stability facility. There are ways in which actions can be taken that do not depend on the treaty because they are done between Governments rather than between Governments and the European Commission.
Chris Bryant (Rhondda) (Lab)
The Minister said something very interesting earlier. He used a phrase that I do not think I have heard a Minister of either side ever use before, which was the remorseless drive towards fiscal union—and, as I understood it, in an approving sense. The danger of that, of course, is that we will end up supporting for the first time a two-speed—a two-tier—Europe, with us very definitely at the second speed and in the second tier. Is that really what he wants?
Mr Hoban
We have always accepted that the remorseless logic of monetary union is closer fiscal integration. I believe that this crisis demonstrates that monetary union needs to be underpinned by closer fiscal integration. That is not a new expression on my part; I said nothing novel; the Government have taken this view for some time. We need to ensure that the institutional arrangements are in place to support that. What I think hon. Members on all sides of the House want is a stable eurozone because it will contribute towards economic recovery in the UK.
Mr John Redwood (Wokingham) (Con)
As joining a single currency is like taking out a joint bank account with the neighbours, when does the Minister think the neighbours will agree how much overdraft they can afford and who gets to pay the bill for it?
Mr Hoban
My right hon. Friend will recognise that the agreement that was reached in the European Council last week and then later in the summit of eurozone Governments was on what size the bail-out for Greece should be and what the ring fence should be around that. We welcome last week’s announcement. What is very clear, however, is that more work needs to be done on those questions—particularly what the size of the overdraft will be and who will pay for it. We need eurozone leaders to move that forward as quickly as possible.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Part of Europe’s plan to get Europe and the eurozone out of this mess is the introduction of a financial transaction tax. Will the Minister confirm from the Dispatch Box that such a tax could be introduced through qualified majority voting and that this is essentially own resources, just by another name?
Mr Hoban
I have to tell the hon. Lady that I am not entirely clear what role a financial transaction tax would play in resolving this crisis. The EU’s own impact assessments on that tax demonstrated that it would lead to lower employment and lower growth across Europe. I do not think that that is in any way going to help tackle the problems in Europe when what we need is more investment, more jobs and more growth.
Stephen Williams (Bristol West) (LD)
I think we all heard my hon. Friend the Member for Wellingborough (Mr Bone) advocate Greece’s withdrawal from the euro, and a worryingly large number of his Conservative Back-Bench colleagues seem to will the destruction of the euro area. Does the Minister agree that a fragmentation or break-up of the eurozone is not in our economic interest or indeed the national interest?
Mr Hoban
We have made it very clear that the instability and uncertainty in the eurozone has a chilling effect on the UK economy. What our actions have been driving towards over the course of the last few months is encouraging our partners in the eurozone to take the action needed to tackle the problems so that we can see economic growth strengthened across the whole of the European Union.
Mr Dennis Skinner (Bolsover) (Lab)
I wonder whether the Minister has seen the film “Groundhog Day”. I was here in the early ’90s with another Tory Government, another euro crisis and another Prime Minister battling for his life—the same players, only this time there are about 40 more Tory rebels. It finished up with a Prime Minister being kicked out of office.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Why are the Government advocating fiscal union? I put it to the Minister that the words “remorseless logic” are, in fact, a cover for a policy preference, and that the remorseless logic of the present situation is that fiscal union will be economic dictatorship, that it will fail and that we had better be planning for something else.
Mr Hoban
I think my hon. Friend would recognise that if a monetary union is to be successful, it requires closer fiscal integration. That is a precondition of the success of monetary union. When the decision was made to opt out of the Maastricht treaty and to keep sterling, one reason for doing so was that monetary union had to be underpinned by fiscal integration. One follows the other as surely as night follows day. That is why I think we were right to take that position then and we are right now to encourage the eurozone, if it wants the euro to be successful, to move towards closer fiscal integration. Frankly, if it does not, it will cause huge economic damage to all of us.
Tony Lloyd (Manchester Central) (Lab)
Is it not a matter of plain fact that the Government’s negotiating position and therefore the protection of our national interest is hamstrung because all the time this Minister and his colleagues have to address the Eurosceptics? Britain has got to be involved in these negotiations through the IMF and at Cannes. The Minister needs to face down his Eurosceptics and explain why, if the euro goes down, we lose.
Mr Hoban
I find the position adopted by Labour Members quite curious. They want us to be at the top table, yet they voted against the increase in our subscription to the IMF, so we would not be at the top table. I believe we have played an important role through European Councils by trying to push our eurozone partners to make progress on tackling problems in the eurozone. We are very clear that matters such as the completion of the single market, competition and financial services should be dealt with by all 27 member states, not by the 17. I believe that this Government are punching way above their weight.
Andrea Leadsom (South Northamptonshire) (Con)
If the remorseless logic of greater fiscal union proves to be true, can my hon. Friend tell us what steps he intends to take to ensure that Britain’s voice is still heard under QMV?
Mr Hoban
That takes us back to the answer I gave to the hon. Member for Rhondda (Chris Bryant)—that when it comes to discussions about future institutional changes in the EU, we need to ensure that Britain’s interests are safeguarded. Matters such as competition, financial services and the single market should be dealt with by all 27 member states, and we will be relentless in our pursuit of the national interest in that context.
Jeremy Corbyn (Islington North) (Lab)
Does the Minister agree that condemnation of the Greek people’s right to have a referendum is entirely incorrect and that they do have that right to hold a referendum; that the people of Greece have suffered greatly through cuts, wage reductions, cuts to pensions and everything else—and they are due to suffer even more—and that it is entirely wrong for the eurozone leaders to try to impose a Government of so-called national unity on the people of Greece to drive through an austerity package without giving the people a choice to decide themselves on their own future?
Mark Lancaster (Milton Keynes North) (Con)
What would be the consequences of the UK failing to pay its IMF subscription?
Mr Hoban
We would lose our seat on the IMF board; we would lose credibility in international economic debates; and we would lose our influence on measures to solve global economic problems. We would become marginalised—rather like Labour Members when it comes to their contributions to economic debates.
Mr Ben Bradshaw (Exeter) (Lab)
In 2009, when the world faced economic catastrophe after the banking collapse, there was real leadership at the G20 summit in London, which helped to avert a disaster and put Britain back on to a path of growth. Where is that leadership now, and where is the plan for growth?
Mr Hoban
I thought that the outcomes of that G20 summit were very impressive. I particularly welcomed the achievement of the previous Prime Minister in agreeing a commitment to treble the resources available to the IMF, but the right hon. Gentleman, along with his colleagues, voted against that commitment.
Joseph Johnson (Orpington) (Con)
According to the BBC’s economics editor, Stephanie Flanders, the European Commission said this morning that any country that left the euro would also have to leave the European Union. Is that the Government’s understanding of the EU treaties?
Michael Connarty (Linlithgow and East Falkirk) (Lab)
It is obvious that, like many other Members in the Chamber, the Minister has not read the Lisbon treaty, because the hon. Member for Orpington (Joseph Johnson) is right. I give way to no one in my support for the IMF—as is clear from the way in which I voted—and my support for the recapitalisation of the banks, but the reality is, surely, that the ordinary people of Greece will go through a massive amount of pain, whereas the bankers, both here and there, will walk off with the money. We are looking after the banks, not the people, so is it really surprising that the Greek people may want to reject the proposal that the Government were involved in placing on their backs?
Mr Hoban
We all recognise that difficult decisions are involved in the tackling of fiscal deficits, and those decisions must be made. It is owing to this Government’s actions that our interest rates are similar to those of Germany, while our deficit is at the same level as that of Greece.
Mr John Baron (Basildon and Billericay) (Con)
May I suggest that my hon. Friend should not listen too closely to what is said by Labour Members, given that this crisis is about debt, and given that the last Labour Government more than doubled the national debt? [Interruption.] Yes, they did.
Having said that, may I ask whether my hon. Friend agrees that the set of measures put together by the euro leaders are nothing more than a sticking plaster? They do not address the central cause of the problem, which is a lack of competitiveness. If countries cannot pay their way, this issue will come back to haunt them.
Mr Hoban
My hon. Friend is absolutely right. We need fiscal entrenchment across the eurozone to take place in the same way as we are tackling a fiscal deficit here in the United Kingdom. However, we also need measures, in Europe and elsewhere, to promote growth. That is one of the key areas in which the Prime Minister has been influential, shaping a debate in Europe and persuading European leaders to recommit themselves to improving measures to promote growth and bring about the recovery that the eurozone economy needs.
Natascha Engel (North East Derbyshire) (Lab)
If UK taxpayer money is being paid to the IMF and the IMF is paying towards the eurozone bail-out, how can the Minister guarantee that no UK taxpayer money is going towards the bailing out of the eurozone?
Mr Hoban
The money that nations contribute to the IMF goes into its general resources. I believe that there are currently 53 IMF programmes, only three of which are in the eurozone. We have made clear that if the IMF needs to increase its resources to tackle some of the global issues that face economies at present, we will listen to its requests.
Mr Julian Brazier (Canterbury) (Con)
While I strongly support my hon. Friend’s tough domestic stance on fiscal matters, may I suggest that, in view of the borrowing problems in Italy, the 20% fall in the monetary base in Portugal and similar problems in Spain, there is a strong case for moving the Cannes conference to the gardens of Versailles?
Helen Jones (Warrington North) (Lab)
The Minister has signally failed to answer the questions put to him about the plan for jobs and growth. Will he now tell us exactly how the Government propose to ensure that we get demand back into the economy and tackle unemployment, which is the only real way out of this crisis, and how we are to exercise influence in Europe to secure a similar euro-wide plan?
Mr Hoban
One of the best ways of putting more money in the pockets of families and giving business men more money to invest in their businesses is to keep interest rates low. Borrowing more, which is the Labour party’s prescription, would simply put our interest rates at risk, so that households would have less money in their budgets and businesses would be strapped for cash. We will take no lessons in how to handle our economy from a party that doubled the national debt.
Laura Sandys (South Thanet) (Con)
The IMF is a collective that is there to build greater economic stability. Why should our approach to funding economic stability in Mexico, the Philippines or Peru be different from our approach to funding it in Greece?
Mr Hoban
My hon. Friend has made an important point about the global role of the IMF. It is there to support economies that face challenging circumstances. There is a range of programmes in 53 states, and it is right for the IMF to have the resources that it needs if it is to help to stabilise the global economy.
Mr David Winnick (Walsall North) (Lab)
Why are the EU leaders so fearful of democracy? In view of the massive cuts that are to be imposed on the Greek people under the deal that was negotiated this week, what sort of democracy would it be if they were denied the opportunity to say yes or no?
Mr David Nuttall (Bury North) (Con)
Does the Minister agree that the International Monetary Fund should not be expected to do what the European Central Bank is incapable of doing simply because of a lack of political will on the part of eurozone countries?
Mr Andrew Love (Edmonton) (Lab/Co-op)
Is not the problem in Greece a lack of growth and no sign of growth in the future? Is not the problem in the eurozone a lack of growth and no sign of growth in the future? Is that not also the problem in the United Kingdom? When will the Government respond to the need for jobs and growth, not just here in the UK but throughout Europe?
Mr Hoban
There must be structural reforms to remove some of the barriers and blockages to growth, not just here in the UK but throughout the eurozone, and that is why we included a plan for growth in this year’s Budget. The Chancellor will return to those matters in the autumn statement. I note, incidentally, that every time we propose a measure that would help to improve job prospects by tackling regulation and red tape, it is opposed by the Labour party.
Mr Desmond Swayne (New Forest West) (Con)
Given the interpretation that was placed on his words by the hon. Member for Rhondda (Chris Bryant), will the Financial Secretary confirm that this has nothing to do with a two-speed Europe, and that whatever the speed at which the eurozone hurtles towards fiscal integration, we will not be following it at any speed at all?
Ian Paisley (North Antrim) (DUP)
The Financial Secretary said that the Prime Minister would make a statement on Monday. Will it include the issue of the bilateral loan to Ireland, and will the Financial Secretary insist that if it does, it will address the way in which the National Asset Management Agency is now treating businesses here as a result of a soft loan from the United Kingdom?
Mr Speaker
Order. As the House knows, there is intense interest in this subject, which I am keen to accommodate. However, I must now insist on single short supplementary questions without preamble, and ask for the wonderfully succinct replies from the Minister to continue.
Charlie Elphicke (Dover) (Con)
Does the Financial Secretary agree that, while much progress has been made over the last 18 months—demonstrated most recently by this week’s excellent growth figures—we need measures to protect us from the implosion of the eurozone? What does he think are the best options to shield us from wider economic turbulence in that direction?
Kevin Brennan (Cardiff West) (Lab)
In the wake of the eurozone crisis, the latest polls show that the UK Independence party is within 1% of replacing the Liberal Democrats as the third party in British politics. Is not the relentless logic of both that and the rebellion of the 81 a Prime Minister lurching ever further to the right and isolationism on Europe?
Mr Hoban
That is a slightly bizarre question from the hon. Gentleman, from whom we expect better. We are engaged in the debates in Europe. We need to make sure we stand up for Britain’s interests in Europe, which is why we are keen that areas of vital national economic interest—such as financial services, the single market and competition—are dealt with by all 27 member states rather than just the eurozone countries.
Claire Perry (Devizes) (Con)
I am sure that my hon. Friend is aware that there are only 52 shopping days left before Christmas, so for ordinary Greek families now is a terrible time to be facing such economic uncertainty. Does he agree that Governments must live within their means and deliver stable financial policies for their people?
Barry Gardiner (Brent North) (Lab)
British banks are responding to the increased instability not only by tightening controls, but by tightening credit. How will the Government respond to the reduction in liquidity being made available to British business and ensure that firms are able to borrow and flourish?
Mr Hoban
As I said, British banks are better placed as a consequence of measures taken to strengthen their capital and improve their holdings of high-quality liquidity. We have also agreed lending commitments with Britain’s major banks through Project Merlin, and the Chancellor has said he will announce further measures to improve the availability of credit in the autumn statement.
Christopher Pincher (Tamworth) (Con)
Does my hon. Friend agree that we can only support a financial transaction tax if it applies internationally, rather than just to Europe? Does he further agree that because there is no international consensus in favour of such a tax, it will not be introduced?
Mr Hoban
We have said we are not against a financial transaction tax in principle, but it does need to be applied globally. The EU’s own impact assessment demonstrates that an EU-only financial transaction tax would destroy jobs and increase unemployment. It is a bad idea at a time when Europe needs jobs and growth.
Angela Smith (Penistone and Stocksbridge) (Lab)
Faltering economic growth is damaging economies not only in the EU, but across the globe, yet the Financial Secretary has today refused to acknowledge the damage his Government are doing to economic growth. When will they come up with a plan B?
Mr Hoban
Well, the plan B proposed by the Labour party would increase borrowing by £20 billion a year, potentially lead to higher interest rates—which would affect families throughout the country such as by adding to their mortgage payments—and increase the costs on business. I do not think this economy needs a plan B from the Labour party.
Tony Baldry (Banbury) (Con)
Standard & Poor’s has recently reconfirmed the UK’s triple-A credit rating, but has made it clear that there will be downward pressure on that if the Government falter on fiscal consolidation. Yet is that not exactly what the Opposition are exhorting the Government to do: to falter on fiscal consolidation?
Mr Hoban
That is absolutely right: that is what Standard & Poor’s said in its report last month. When we came into office, the country’s credit rating was on negative outlook; now it is on stable outlook. That is a consequence of the action this Government have taken to tackle the mess left by the Labour party.
Derek Twigg (Halton) (Lab)
Have the Government drawn a line in the sand for the amount of money they will not exceed if asked by the International Monetary Fund to contribute to a greater extent specifically to deal with the euro crisis?
Jessica Lee (Erewash) (Con)
My hon. Friend has mentioned the abolition of the euro preparations unit. In the current circumstances, will he assure the House that there is no prospect of the unit being resurrected as that would be a complete waste of public money?
Geoffrey Clifton-Brown (The Cotswolds) (Con)
Will my hon. Friend assure the House that before the IMF gives any money to bail out the eurozone, sufficient stringent financial conditions are put in place to ensure that there is a realistic prospect of that money being repaid?
Mr Hoban
My hon. Friend makes an important point. Stringent conditions are linked to the packages offered to Greece, Ireland and Portugal, to ensure that the money is used well and wisely, and that the structural reforms that are needed to generate growth in those countries are implemented.
Henry Smith (Crawley) (Con)
I am very pleased that my hon. Friend has said that Her Majesty’s Government are preparing contingency plans for the possible break-up of the eurozone, but can he confirm that they will not include the possibility of our joining the euro, as seems to be still the official policy of the Labour party?
Mr Hoban
I do not think there is any intention for us to join the euro at a time when it is breaking up. The only party in this House that seems to express an interest in joining the euro is Labour, whose leader, when asked when they would join the euro, said:
“It depends how long I’m prime minister for.”
Paul Uppal (Wolverhampton South West) (Con)
Does my hon. Friend agree that one of the most important lessons we can learn from this crisis is that if there had not been a change of Government in this country in 2010, we would be talking today in the Chamber about the UK sovereign debt crisis, not the Italian and Greek crisis?
Harriett Baldwin (West Worcestershire) (Con)
Two-year Greek interest rates reached 100% this morning. Will the Financial Secretary remind everybody how important it is for jobs and growth that despite the fact that we have a higher deficit than the Greeks, our interest rates are closer to those of the Germans?
Mr Hoban
My hon. Friend hits the nail on the head. It is because we took that tough action and are tackling our deficit, and have a credible plan for putting our public spending back on a firm footing, that we have lower interest rates than countries with a lower deficit than ours.
Bob Blackman (Harrow East) (Con)
This week we have witnessed the spectacle of the Greek Prime Minister being summoned, like a naughty schoolboy, to President Sarkozy’s study for having the temerity to call a referendum in order to get the support of his people for the proposed austerity measures. Given that our deficit and debt levels are higher than Greece’s, what does my hon. Friend think would be happening if we had adopted the policies of the Opposition?
Mr Hoban
I think we would find that our credit rating would be under pressure, as Standard & Poor’s suggested in its report last month, and we know that when credit ratings are downgraded, the natural consequence is higher interest rates, which hits families and businesses and makes recovery harder to achieve.
Mary Macleod (Brentford and Isleworth) (Con)
The Leader of the Opposition does not believe that the EU has too much power. Will my hon. Friend confirm that we will never go into the euro?
Bob Stewart (Beckenham) (Con)
My question is about Italy. Its interest rate is floating upwards and currently stands at about 6.5%, which is unsustainable. Will the Minister give us his views on Italy’s problems, especially with regard to its just paying off its interest rather than repaying its debt?
Business of the House
(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ms Angela Eagle (Wallasey) (Lab)
Will the Leader of the House give us the business for next week?
The Leader of the House of Commons (Sir George Young)
The business for the week commencing 7 November will be as follows:
Monday 7 November—Money resolution relating to the Localism Bill, followed by consideration of Lords amendments to the Localism Bill. In addition, my right hon. Friend the Prime Minister plans to make a statement following the G20 summit.
Tuesday 8 November—Motion to approve a European document relating to European budgets, followed by motion to approve a reasoned opinion relating to credit institutions, followed by Backbench Business Committee [un-allotted half day], which will include the presentation of the 10th report from the Transport Committee on high-speed rail, followed by a motion relating to the cost of motor insurance.
Wednesday 9 November—Opposition day [unallotted day]. There will be a debate on youth unemployment and jobs, followed by a debate on individual voter registration. Both debates will arise on an Opposition motion.
Thursday 10 November—General debate on armed forces personnel.
The provisional business for the week commencing 14 November will include:
Monday 14 November—Consideration of Lords amendments.
Tuesday 15 November—Motion relating to fisheries, followed by motion relating to fuel prices. The subjects for these debates were nominated by the Backbench Business Committee.
I would like to inform the House that we will meet at 11.30 am on Tuesday 15 November.
I should also like to inform the House that the business in Westminster Hall for 24 November 2011 will be:
Thursday 24 November—A debate on extradition.
Ms Eagle
I thank the Leader of the House for his statement. We meet for business questions in the middle of the first ever Parliament week, which aims to make people more familiar with the vital work that we undertake here. The theme is “Stories of democracy”. From the Levellers to the suffragettes, there are many inspiring stories of the fight for the vote that we should celebrate in this place. It is more important now than ever, in these times of economic upheaval and insecurity, that we cherish and value our democratic traditions.
I am sure that the Leader of the House, like me, is looking forward to welcoming the UK Youth Parliament to these Benches tomorrow. With almost 1 million young people unemployed—the highest level since comparable records began—we certainly need to hear the voices of young people. I look forward to joining them at the start of their debate.
On Monday’s consideration of the Localism Bill, does the Leader of the House feel comfortable with the chaotic way in which the Bill has been handled by the Government? Having resisted our arguments in Committee in this place, they promptly deleted or amended great chunks of the Bill in the other place. Ministers still have a problem with their own side on the national planning policy framework.
Tuesday’s disappointing growth figures confirmed that the UK economy is still bumping along the bottom, when we need strong growth to get unemployment and the deficit down. Thanks to the Chancellor’s rash choice to cut too far and too fast in his spending review last year, we are experiencing the slowest recovery from recession in 100 years. Will the Leader of the House admit that the Government will have to revise down the growth figures and revise up the amount of borrowing for the fourth time in 18 months? How many more times must the Chancellor come to this House and admit that he has got his sums wrong before we get a plan B?
It has been reported in the run-up to today’s G20 meeting that the Treasury is preparing to increase our contribution to the International Monetary Fund bail-out funds, despite the Chancellor giving the impression to this House that there would be no additional contribution from the UK to help solve the eurozone crisis. Has he been entirely frank with the House? Is the attempt to claim that none of this money will end up supporting the eurozone not dancing on the head of a pin?
While nearly 1 million young people are worried about whether they will ever get a pay packet while this Government are in office, one small group of people are doing very well indeed. A report by Income Data Services showed that the total earnings of directors of FTSE 100 companies increased by an eye-watering 49% last year. That comes when public sector workers have a pay freeze and there has been a below inflation increase in the private sector.
In May last year, the Prime Minister trumpeted his creation of the fair pay review led by Will Hutton. The Secretary of State for Business, Innovation and Skills said of out-of-control executive pay:
“It is time to return to planet Earth.”
Yet one year on from those comments and nine months after the Prime Minister received the report, executive pay continues to rocket out of control, unchecked by Government action. When will the Government bring to this House concrete proposals to do something about this matter? Does the Leader of the House not accept that until the Government act, no one will take seriously the Chancellor’s preposterous claim that we are all in this together?
Has the Leader of the House seen today’s damning report from the Fawcett Society, which accuses the Government of being responsible for the greatest risk to women’s financial security in living memory? When will the Government start to listen to the growing chorus of women’s voices that is demanding that they change course?
Finally, the House was shocked to discover that, despite announcements by the Prime Minister’s spin doctors last November that Lord Young of Graffham had resigned, revelations have now surfaced that he never even left the building. We were told that he had resigned for embarrassing the Prime Minister by proclaiming that many people had
“never had it so good”
as since the start of “this so-called recession”. It seems that he has continued to advise the Prime Minister at the heart of the Downing street machine. Can we have a statement from the Leader of the House on this Government’s understanding of the definition of the word “resignation”? Will he please clarify the position of Lord Young—was his resignation a sham or has he somehow been unresigned?
Sir George Young
I look forward to welcoming the UK Youth Parliament to this Chamber tomorrow and to making a short preliminary address along with you, Mr Speaker, and the hon. Member for Wallasey (Ms Eagle). I hope that many of those young people will return in due course as Members when the Chamber is sitting, rather than on a non-sitting Friday.
We are to debate youth unemployment on Wednesday on an Opposition day. I remind the hon. Lady that youth unemployment went up by 40% under the previous Government, at a time when the economy was doing better than it is currently. The Opposition therefore have little to lecture us about on that.
The Localism Bill does not actually include the national planning policy framework. I hope that the hon. Lady will welcome what is happening on Monday, when we will spend a whole day on localism. There are a number of Government amendments that I hope will be welcomed on both sides of the House because we have listened to the debate on the Bill and made some changes.
On forecasts, the hon. Lady ought to know that the Government do not make economic forecasts. That is done by the Office for Budget Responsibility. Its next report will come out on 29 November when the Chancellor makes his autumn statement. Some of the issues that the hon. Lady raised in relation to the IMF have just been dealt with by my hon. Friend the Financial Secretary.
I am sorry that the hon. Lady did not find time to welcome the news from earlier this week about the revival of Stanley dock in north Liverpool, as a result of the regional growth fund, which will help to reduce unemployment in and around her constituency.
Finally, on executive pay, it is worth reminding the House that the average chief executive of a FTSE 100 company earned 47 times the amount earned by the average employee in 1998 and 115 times that amount in 2009, so the gap actually widened under the last Labour Government. I agree with the hon. Lady that there is an unsustainable disconnect between how our largest listed companies perform and the rewards that are on offer. Concern on that comes not just from Government, but from investors, business groups and others. We are considering ways to reform remuneration committees and to empower shareholders, for example by making shareholder votes on pay binding and ensuring that there is shareholder representation on nomination boards. We are consulting on a number of issues, but at the end of the day, it is up to shareholders rather than the Government to determine executive pay.
Philip Davies (Shipley) (Con)
May we have a debate on transport funding? A recent survey showed that Bradford was seen as one of the most congested cities in the country. My constituency is probably the most congested part of the Bradford district. I am not asking for extra funding for transport, given the terrible financial legacy that this Government were left by their predecessor. What I am asking for is that Yorkshire gets a fairer slice of the transport cake and that Bradford gets an even fairer slice than that.
Sir George Young
I understand my hon. Friend’s anxiety that a larger share of the transport budget should be allocated to his constituency to deal with congestion. There will be an opportunity at Transport questions on 10 November for him to press the case for more funding for his constituency with my right hon. Friend the Secretary of State for Transport, whom I will forewarn that my hon. Friend is on the way.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Does the Leader of the House share my concern, in this important and welcome Parliament week, that increasingly there are organisations and individuals in this country who do not believe in equal rights for women? Many of us put our heads in the sand and ignore this issue. It is something that worries me and my constituents, and this House should start to address it.
Sir George Young
I hope that the hon. Gentleman will welcome a number of initiatives that we have taken recently. For example, we are extending child care for women who work for fewer than 16 hours a week. Yesterday’s statement by the Chief Secretary to the Treasury on the reform of pensions had much in it for women, who tend to have part-time and less well-paid jobs. They will gain from the reforms that we outlined. The hon. Gentleman makes his comments in a week when my right hon. Friend the Prime Minister announced proposals to change the rule of primogeniture for the monarchy. If one looks across the board, we have taken a number of steps to promote the cause of women.
Amber Rudd (Hastings and Rye) (Con)
The Government have allocated a welcome £20 million to support advice agencies following changes to the Legal Aid, Sentencing and Punishment of Offenders Bill. May I press my right hon. Friend for more information on that £20 million so that advice agencies such as mine in Hastings can find out more about when and how it will be allocated?
Sir George Young
My hon. Friend is right to say that, in the summer, the Lord Chancellor announced £20 million for those providing advice. Announcements will be made shortly about the allocation of that fund, and I know the anxiety felt by the citizens advice bureaux that are waiting for it. I will remind my right hon. and learned Friend that there is a very strong bid from Hastings.
Valerie Vaz (Walsall South) (Lab)
In a written answer to the hon. Member for Kettering (Mr Hollobone), the Cabinet Office said that the public duty costs allowance for former Prime Ministers amounted to £1.7 million in the past five years. May we have a statement on the actual work that these former Prime Ministers have done and whether they have had to provide receipts?
Sir George Young
The hon. Lady is tempting me out of my comfort zone. I am not sure that the Government have responsibility for these particular payments. Those concerned are, by definition, no longer Members of Parliament—at least many of them are no longer Members. I will make some inquiries with the relevant authorities to see whether any further light can be shed on her question.
Mr James Arbuthnot (North East Hampshire) (Con)
May I thank my right hon. Friend for providing a day to debate armed forces personnel shortly before Remembrance day? However, does he agree that the arrangements between the House and the Backbench Business Committee in relation to defence matters are not working? Although I would sometimes like to blame that Committee, on this occasion I really cannot do so. Will he enter into negotiations with the Chair of that Committee, who is doing as good a job as she possibly can in the circumstances?
Sir George Young
I certainly endorse the last remark. Now is not the time to go into the theology of the Wright Committee and the division of responsibilities between the Government and the Backbench Business Committee. My right hon. Friend will know that the four days for defence debates that were traditionally provided by the Government were transferred to the Backbench Business Committee. I understand why it has not been able to find time for them and, in recognition of that pressure, as he has said, we have now found a day for a debate on armed forces personnel. The Government will continue to do what they can to make sure that we do have adequate time for defence debates, and in the review of the Backbench Business Committee, I will see, in conjunction with the hon. Member for North East Derbyshire (Natascha Engel), whether we can move towards a different regime that meets the aspirations of my right hon. Friend and the responsibilities of the Backbench Business Committee.
Mr John Spellar (Warley) (Lab)
Yesterday, in the Chamber, the Prime Minister roundly and rightly denounced metal theft. But he then went on to say:
“We are working with the Association of Chief Police Officers to put in place an action plan to deal with this, which will involve looking again at the whole regulation of scrap metal dealers.”—[Official Report, 2 November 2011; Vol. 534, c. 918.]
That is totally unsatisfactory. Everyone knows the answer—it is to license the dealers and to prevent them from dealing in cash. So can the Leader of the House arrange for a debate when that can be explored or, better still, could he use the two spare days he has created in the week after next to put it through and stop what the Prime Minister rightly called “this appalling crime”?
Sir George Young
I am grateful to the right hon. Gentleman. It is an appalling crime and the current legislation is basically unenforceable. Dealers are meant to register with their local authority but there are no penalties if they do not do so. The Government are consulting on a range of measures, including the ones he has mentioned—the banning of cash payments, with everything being done by cheque, and having a much tougher regime. We are consulting to see whether we can have a better regime that reduces the damage done by all these thefts.
Bob Russell (Colchester) (LD)
Mr Speaker, I am sure that you and the whole House will rejoice at the announcement that today a contract will be signed to build an airport on the island of St Helena, and I would like to extend the House’s thanks to all involved. This will bring to an end five centuries of isolation for British people who are proud to live on this overseas territory. With that in mind, will the Leader of the House find time for a debate so that we can discuss how the overseas territories are an important part of this country?
Sir George Young
I am grateful to my hon. Friend for that. It is indeed the case that, after protracted negotiations, the Department for International Development has now agreed to fund the airport in St Helena. I would welcome such a debate, and he might like to put in for a debate on the Adjournment so that we can discuss this issue at more length.
Mr Ben Bradshaw (Exeter) (Lab)
Exeter city council and the energy company E.ON have spent considerable time and money preparing to install 500 solar panels on council homes in my constituency, thus reducing tenants’ bills by £120 on average and helping to reduce carbon emissions. That excellent scheme is now threatened with cancellation because of the Government’s decision to more than halve the feed-in tariff. May we have an urgent debate in Government time about this incredible incompetence?
Sir George Young
As the right hon. Gentleman will know, the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle (Gregory Barker) made a statement on this matter on Monday, explaining why the scheme had to be changed. If we did not do this, all the money would have been mopped up by those few people who are currently eligible; the lower the tariff, the more people that can benefit. We had that exchange on Monday. We are now consulting on how we take the scheme forward and I will take the right hon. Gentleman’s comments on board.
Andrew Stephenson (Pendle) (Con)
On Monday, we heard that the Government will provide £9 million to reopen the Todmorden curve, cutting journey times between Burnley and Manchester. We also heard about an additional £7.5 million in business support for local manufacturing small and medium-sized enterprises being made available through Regenerate Pennine Lancashire. Both those projects were funded by the Government’s regional growth fund which, it is estimated, will create or safeguard more than 55,000 jobs in the north-west of England. May we have a debate on the huge beneficial impact of the fund on the north-west of England?
Sir George Young
I am sorry that some hon. Members have taken a rather dismissive view of the regional growth fund, and I am grateful to my hon. Friend for identifying a number of projects that will go ahead. We announced £950 million of funding in round 2, supporting 119 businesses and creating or protecting 201,000 jobs. There may be an opportunity on Wednesday for him to come in on that debate, amplify the benefit to many constituencies from the regional growth fund and perhaps encourage those who have been less than generous about it to change their mind.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
This week, Merseyside police announced that it is having to cut 250 officers over the course of the next two years because of the Government’s slashing of its budget. Deputy Chief Constable Bernard Lawson has admitted that there will be an impact on the service that the force is able to provide for my constituents and all the people of Merseyside. May we have an urgent debate on the impact that the Government’s spending cuts are having on front-line policing?
Sir George Young
The hon. Lady will remember that, before the last election, the then Home Secretary made it clear that if he and his party were re-elected, they would not be able to guarantee that there would be no reductions in the number of front-line officers. It is the view of the Government that it is possible for police authorities to cope with the budgets they have been allocated and protect the effectiveness and visibility of front-line policing.
Pauline Latham (Mid Derbyshire) (Con)
In response to a question from a Labour Member, the Leader of the House mentioned the Commonwealth discussions that the Prime Minister has had about the royal succession. May I urge the Leader of the House to tell us when we might expect a debate on the royal succession Bill and what that Bill might include?
Sir George Young
When we have a Bill there will, of course, be a debate. I am grateful to my hon. Friend for raising the issue. In his statement, the Prime Minister said that we are intending to legislate
“to end the system of male preference primogeniture and the provision that anyone who marries a Roman Catholic would be ineligible to succeed to the Crown.”—[Official Report, 31 October 2011; Vol. 534, c. 31WS.]
Any legislation that we bring before the House has to work for 16 countries, and to that end a group of senior officials from across those countries is working urgently to agree the necessary legislation. When that has been done, it will be brought before the House.
Keith Vaz (Leicester East) (Lab)
Further to that answer, may I say that the Prime Minister needs to be praised for making his announcement in Perth, which was of course supported by the Leader of the Opposition and the Deputy Prime Minister? Further to what the hon. Member for Mid Derbyshire (Pauline Latham) has said, I have a Bill before the House, which is to have its Second Reading on 25 November, that deals with this very point. I am happy to give that Bill to the Leader of the House so that, instead of drafting new legislation, he can use it and introduce the measures as soon as possible, because when it happens here first, it will then happen in the other 16 countries.
Sir George Young
That is an enormously generous offer from the right hon. Gentleman, but he will have heard what I said a moment ago about a working group that is preparing the necessary legislation. He may well have anticipated the output of this hard-working team of people and perfectly drafted his piece of legislation to anticipate what they will recommend, but I am afraid that the Government do not have that total confidence and it might be best to await the output of the working group before we look again at his Bill.
Paul Uppal (Wolverhampton South West) (Con)
Given the excellent news that Jaguar Land Rover is opening a new engine plant—a £355 million investment, which will create up to 750 new skilled jobs—just outside my constituency, will the Leader of the House find time for a debate on the skills gap, as this can provide a platform and a legacy for learners in Wolverhampton?
Sir George Young
I am grateful to my hon. Friend for balancing the news. There is good news in parts of the country and he has just reminded the House of that particular piece of good news. I understand that Jaguar Land Rover is working with the National Apprenticeship Service, the Skills Funding Agency and the black country local enterprise partnership on the whole issue of skills for the new plant. I hope it will be possible to train those who are currently unemployed to give them the skills that they need to work in this new investment—this new engine plant. We are supporting this particular project through the grant for business investment scheme, which is providing up to £10 million.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Given the fuss last week about the FairFuel petition, does the Leader of the House accept that No. 10 and the Government may have misled the public into thinking that e-petitions that achieved 100,000 signatures would automatically be debated here? Does he agree that they may also have misled Back Benchers into thinking that the Backbench Business Committee would be there to represent our interests? I know that he would not mislead anyone, but is not the solution to reserve some additional days exclusively for e-petition debates so that the Backbench Business Committee can do the job it was set up to do?
Sir George Young
I am grateful to the hon. Gentleman. If he looks at the coalition agreement, he will see that we made it absolutely clear that once an e-petition got 100,000 signatures it would be “eligible for debate”—I think that is the wording—so there is no question of my or anyone else’s misleading anyone about that. His suggestion that there should be extra time specifically for e-petitions is a helpful one. He will know that the Procedure Committee is reviewing the parliamentary calendar and that we are committed to reviewing the work of the Backbench Business Committee. It may be that those two reviews work together in tandem and that we are able to find extra space within the calendar to debate e-petitions. I know that this is an issue on which the Chair of the Backbench Business Committee has strong views.
Tessa Munt (Wells) (LD)
The Government’s cancer strategy for England recognises that access to radiotherapy is critical to improving outcomes. Radiotherapy takes only 5% of the estimated total NHS spend on cancer care but 50% of patients can benefit from it. May I ask the Leader of the House whether he has seen and supports Cancer Research UK’s “A voice for radiotherapy” petition, which has been signed by more than 36,000 people and will be handed in to Downing street this afternoon? As 2011 is the year of radiotherapy, may we have an urgent debate this year on better and fairer access to radiotherapy in England?
Sir George Young
I am grateful to my hon. Friend for raising the profile of Cancer Research UK’s petition. I agree that it would be helpful to have a debate and to see what more we can do to reduce any delays in the use of radiotherapy or, indeed, chemotherapy once people have had their operation. There will be an opportunity at Health questions to raise this issue quite soon but, in the meantime, she might like to put in for a Westminster Hall debate so that we can do justice to the important issue she has just touched on.
Andrew Miller (Ellesmere Port and Neston) (Lab)
The last time the Minister for Universities and Science, whom I hold in very high regard, appeared before the Select Committee on Science and Technology, he made a statement that affected the science budget stemming from the break-up of the regional development agencies and the redistribution of moneys. That has subsequently been the subject of a series of exchanges about what he actually said versus what he meant to say. Coincidentally, over the summer a very good paper has been published by the Campaign for Science and Engineering in the UK showing that the Government’s science budget is affected by smoke and mirrors. May we have an urgent debate in Government time about the truth around the science budget?
Sir George Young
On 8 December, which is some time away, there will be an opportunity to raise the issue. In the meantime, I should like to raise with my right hon. Friend the Minister for Universities and Science the issue that the hon. Gentleman has just touched on to see whether there is any gap between what my right hon. Friend said and what he meant to say—I am sure there was not—and to deal with the allegation that there are smoke and mirrors in the science budget.
Sir George Young
It sounded as though the hon. Gentleman was blaming him. None the less, I shall raise the matter with my right hon. Friend and ask him to write to the hon. Gentleman.
Guto Bebb (Aberconwy) (Con)
May we have a debate on the impact of the VAT threshold on micro-businesses and their growth potential? In my constituency, many small businesses involved in the tourism sector are in the process of closing for the winter period. They are closing not because they are scared of work or because there is no opportunity for them to create a market and carry on working, but because the current VAT threshold creates a cliff edge that penalises them for being successful.
Sir George Young
I am grateful to my hon. Friend and of course we will take on board what he says. The current VAT threshold, at £73,000, is one of the highest in the EU. It is the case that some traders would like it to be raised so that they are outwith it, but others would like it to be reduced to avoid unfair competition from those who are exempt. I believe that we have got the balance about right, but in the light of his comments I am sure that Treasury Ministers will want to keep this under review.
Jessica Morden (Newport East) (Lab)
We have just passed the fifth anniversary of the collapse of Farepak, but my constituent Deb Harvey, who was a Farepak agent, and her customers have not received any compensation and are still waiting for justice to be done in relation to the people who caused the collapse of the company. Does the Leader of the House feel that we should find time to revisit this issue, not least to ensure that it never happens again?
Sir George Young
I am grateful to the hon. Lady for raising this issue. I think we have had debates on Farepak in the past—possibly in the last Parliament. I will raise this with appropriate Ministers to see where we have got to in the process of getting funds for those who lost money. I would welcome a debate on this matter and she might like to apply to you, Mr Speaker, for a debate on the Adjournment.
Christopher Pincher (Tamworth) (Con)
May we have a debate on student visas? I am conscious that the Government have already barred 470 colleges from accepting new students as part of their immigration crackdown, but a debate would enable us to explore the extent of the abuse that has been going on and to understand what the Government are doing to stop it.
Sir George Young
I understand that there is an e-petition on the slightly broader issue of immigration and if that got through the 100,000 threshold, there would indeed be a debate in which it would be relevant for my hon. Friend to raise this issue. [Interruption.] There might be a debate—indeed. In addition to the 470 colleges that my hon. Friend has touched on, 302 have had their licence revoked and a further 172 have been allowed to continue to teach current students but may not sponsor any new ones from the EU. I hope that he is assured that Ministers at the Home Office have this matter under serious consideration.
Grahame M. Morris (Easington) (Lab)
The Leader of the House has previously told us that he is not keen on having any debate that involves the expenditure of additional resources. However, I wonder whether we might prevail upon him to persuade the Health Secretary to have a debate on NHS procurement, not least because we desperately need a credible plan for jobs and growth, and NHS procurement could provide a way of securing such a commitment.
Sir George Young
I am grateful to the hon. Gentleman. I think I am right in saying that the Select Committee on Health, or possibly the Public Accounts Committee, has recently produced a report on NHS procurement—I think it was the PAC—in which case the Government will want to respond to that in due course. If there are lessons to be learned in order to procure more efficiently, get better value for money and, indeed, create jobs by so doing, of course the Government would like to pursue that.
Kris Hopkins (Keighley) (Con)
Ilkley business forum in my constituency has established a new scheme to protect local independent traders and to save the town centre. May we have a statement making clear the Government’s support for small traders and outlining what they are doing to protect such traders from national chains and internet shopping?
Sir George Young
I am interested to hear what my hon. Friend’s local authority has done. I believe that our planning proposals will give more weight to local authorities to take the sort of initiative that he has just touched on to protect independent stores and local traders. As for protecting them from unfair, predatory trading from some of the giant chains, the draft Groceries Code Adjudicator Bill may give some protection. Of course, the Government have in the pipeline the broader agenda of deregulation, which I hope will help all the small shopkeepers in his constituency.
Graham Jones (Hyndburn) (Lab)
We heard today that house building fell to an all-time record low of 121,000 and that the Select Committee on Communities and Local Government has produced a report that condemns the Government’s regeneration policy. Areas such as Woodnook in my constituency are really suffering. Last week, Shelter revealed that in 55% of local authorities people are being priced out. When will the Housing Minister come to the Floor of the House and debate the debacle that is the Government’s housing policy? Let us get to the bottom of this because it is a disgrace.
Sir George Young
There was an exchange on housing on Monday when we had Communities and Local Government questions. We have taken a number of initiatives to promote housing. There is the new homes bonus to encourage local authorities, there is our streamlining of the planning system to remove unnecessary delays and, crucially, as we heard in the previous statement, there are low interest rates, which are crucial to enable first-time buyers to get on to the housing ladder. I hope that a combination of those measures will lead to a revival in house building, and it is worth reminding the hon. Gentleman that we had the lowest output in peacetime since the 1920s under the previous Government.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I thank my right hon. Friend for his sympathetic tone about the lack of defence debates that we have had so far in this Parliament. We are still waiting for debates on procurement and defence policy, for example, and we are also still waiting for the annual debate on the civil service. Is not the right answer that we should move swiftly towards having a fully fledged business Committee so that we can end the division of responsibility that has led to these problems?
Sir George Young
The proposal in the coalition agreement envisages, certainly in the short term, two Committees: a BackBench Business Committee dealing with Back-Bench time, and a House business Committee dealing with Government time. In the longer term, we may move to a single, integrated Committee, but the initial proposal was that there should be two, side by side. Whether that would resolve the dilemma on which my hon. Friend touched, I am not sure because there would still be tension between, on the one hand, providing more time for Back-Bench business and, on the other, providing adequate time to scrutinise Government legislation. [Interruption.] We are sitting longer in the first two years of this Parliament than in the first two years of the previous Parliament. In the remaining days of this Session, I will see whether there is headroom to provide for more debates on defence, which is what prompted my hon. Friend’s initial question.
Pat Glass (North West Durham) (Lab)
This week, the Government announced a review of feed-in tariffs, which will put at risk jobs across the country, not least at Romag in my constituency which, among other things, is responsible for the security screen in the Commons. At the same time, the Government have provided a regional growth fund so that companies can import solar panels from China for assembly in the UK, so that the onward sale is British. May we have an urgent statement on that piece of economic insanity?
Sir George Young
We have had a statement on this enlightened policy, if I may phrase it slightly differently. I am sure that the hon. Lady was in the House when the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle (Gregory Barker) replied to that question. The return on solar panel investment will be roughly what it was when the Labour Government began the scheme. We have recalibrated it to take account of the falling costs of solar panel installation. We are consulting on what replaces the regime after 12 December, and her thoughts will be welcome.
Bob Stewart (Beckenham) (Con)
May I reinforce what my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot), the Chair of the Select Committee on Defence, and my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) have said? I am quite shocked, as a new Member, that while we are fighting what looks increasingly like a guerrilla war in Afghanistan and are taking casualties, the House has not spent time generally looking at what we are doing in defence.
Sir George Young
I detect the serious mobilisation of the armed forces on the Benches behind me, pressing for a further defence debate. As my hon. Friend knows, we have provided one day and, as I said in response to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), between now and the end of the Session, now that most of the major Bills have gone through the House, there may be headroom to provide some of the debates that were provided in Government time in the previous Parliament but which, for whatever reason, have not been forthcoming so far in this one.
Fiona Mactaggart (Slough) (Lab)
The right hon. Gentleman will be aware that I apologised to the Economic Secretary to the Treasury for my patronising tone in my question to her on Monday, but will he ask her to come back and apologise to the House for misleading it when she claimed that unemployment under the previous Government reached 30%?
Mr Speaker
Let us hear the response from the Leader of the House, but I must say, while I note what the hon. Lady has said, that we need to be very careful about accusing Members of misleading the House. She may wish to insert the word, “inadvertently”.
Fiona Mactaggart
I am sure that it was inadvertent. Perhaps the Economic Secretary would come to the House and explain how she arrived at that figure.
Sir George Young
In fairness to the hon. Lady, I welcomed what she said at the outset of her remarks about apologising for any offence that she may have caused my hon. Friend the Economic Secretary. I will draw my hon. Friend’s attention to this exchange, and ask her to write to the hon. Lady clarifying the use of the figures and, I am sure, justifying any figure that she used in the Chamber.
Richard Graham (Gloucester) (Con)
Given the recent publication of the Justice and Security Green Paper, which includes proposals on the reform of the Intelligence and Security Committee, and covers the protection of sensitive material, which is especially relevant to my constituents in Gloucester who work at GCHQ, will the Leader of the House consider providing time in the near future for the annual debate on the ISC?
Sir George Young
I am grateful to my hon. Friend, and I recognise his constituency interest. We have both seen the ISC annual report, as well as the consultation exercise announced by my right hon. and learned Friend the Lord Chancellor a few days ago and the recently published Justice and Security Green Paper. I shall reply in similar terms to the reply that I have given on an earlier occasion. I hope that it will be possible to find time to debate this important matter during the remainder of the Session, but whether in Government or in Backbench Business Committee time is something that needs to be resolved.
Ian Lavery (Wansbeck) (Lab)
In Ashington in my constituency, 20.7% of 16 to 18-year-olds are classified as NEETs—not in education, employment or training. Will the Leader of the House make time to discuss the bleak future faced by hundreds of thousands of young people as a result of the Government’s policies?
Sir George Young
I announced in the business statement that there would be a debate in Opposition time on youth unemployment on Wednesday, so the hon. Gentleman will have an opportunity to raise those issues. There will also be an opportunity for Ministers to explain the initiatives that they have taken, including the Work programme, investment in apprenticeships, and universal credit, which were all introduced to try to help the people in his constituency who hope to get into work.
Mr Mark Williams (Ceredigion) (LD)
May we have a debate on the appalling human rights situation in Iran, made worse by the spectre of 3,250 Iranian citizens who are in Camp Ashraf and who will be forcibly removed in 57 days, probably back to Iran, potentially with catastrophic consequences?
Sir George Young
I understand the concern expressed by my hon. Friend. I will contact the Foreign Secretary and ask him to write to him outlining what representations the British ambassador and the Foreign Office have made on this issue.
Nic Dakin (Scunthorpe) (Lab)
A report by the Fawcett Society shows that women are affected worst by Government cuts. Notwithstanding the earlier comments by the Leader of the House, may we have a clear statement from the Government about what they are going to do to ease that pressure on women’s lives?
Sir George Young
Women have an interest in the Government’s economic policies, which lay the foundations for sustainable growth, enabling the country to remain competitive. They have an interest in the success of the action that we have taken to get the deficit down and rebuild confidence in the country. Women have much to gain from the success of that policy.
Mr Peter Bone (Wellingborough) (Con)
At the start of Parliament week, and with a leading Parliamentarian at the Dispatch Box, one thing that the Government could do very quickly is move towards the establishment of a business of the House Committee, so that Parliament timetables everything? The commitment, I accept, is not to go beyond 5 May 2013, but could we have it earlier, and may we have a statement from the Chief Whip welcoming that measure?
Sir George Young
I know that my hon. Friend has a good working relationship with my right hon. Friend the Patronage Secretary, particularly in the light of the private Member’s Bill that my hon. Friend introduced to abolish the Whips Office.
The Wright Committee recommended the measure but, at the end of the previous Parliament, the outgoing Government failed to accept that recommendation. We remain committed to doing it in the third year of this Parliament. Whether it makes sense to bring it forward before the review of the Backbench Business Committee is complete, I am not certain. However, we are committed to further reform of the way in which the House manages itself, and we are committed to the establishment of a House Committee to work alongside the Backbench Business Committee so that there is a slightly broader basis on which Government business is decided.
Barry Gardiner (Brent North) (Lab)
Will the Leader of the House take a careful look at the timing of consultations? Many Members have long believed that consultations are not necessarily the most effective way of changing Government policy, but the consultation on the feed-in tariff is the first occasion on which that which is being consulted on has been announced to come into effect 12 days before the end of the consultation. Considering that point would help the Government, if only to avoid judicial review.
Sir George Young
That seems to be a repetition of a question that the hon. Gentleman put on Monday to the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle. We had to have a cut-off point to stop the erosion of funds under the current scheme. We are now consulting on what should replace that scheme, which is a sensible way forward.
Mr David Nuttall (Bury North) (Con)
May we please have a statement on the Commonwealth Heads of Government meeting? Apart from the agreement in principle that was reached to amend the rules relating to royal succession, many other matters were discussed. The Prime Minister routinely makes oral statements to the House after European Council meetings, and it would help reflect the great importance of the Commonwealth if it became routine for oral statements to be made following Commonwealth Heads of Government meetings in the future.
Sir George Young
I am grateful to my hon. Friend for his recognition that the present Prime Minister regularly makes statements to the House. He has made 23 so far this Session—a higher average strike rate than his predecessors. With statements after Commonwealth Heads of Government meetings, we have followed the procedure adopted after earlier such meetings. There was a written statement to the House in 2005, in 2007 and in 2009, and we have simply carried that procedure forward.
Diana Johnson (Kingston upon Hull North) (Lab)
I have been contacted by Mr Les Bennett, a small businessman in Hull. Seven weeks ago he took to market a new software application that would assist the solar panels industry. His business is now in ruins because of Monday’s announcement about the feed-in tariff. May we please have a debate on the Government’s commitment to small businesses and the renewables industry?
Sir George Young
Obviously, I am sorry to hear about the hon. Lady’s constituent. I am not quite sure why a software application should not continue to be relevant even though the tariffs have changed. I hope Mr Bennett can recalibrate whatever product he has, in order to cope with the new regime.
Joseph Johnson (Orpington) (Con)
Heathrow and Gatwick are operating at 99% capacity, leaving little scope for the UK economy to take advantage of the growth opportunities in the BRIC economies—those of Brazil, Russia, India and China. After the debate on the airstrip on the island of St Helena, in which the Leader of the House expressed such interest, might we perhaps find time for a further debate on UK aviation strategy and proposals for a new hub airport for London, so that such important opportunities do not go begging for a moment longer than necessary?
Sir George Young
There will be an opportunity at the next Transport questions for my hon. Friend to raise that issue. He raises a serious point about the future of aviation policy. I would welcome such a debate in Westminster Hall, either according to the guidance of Mr Speaker or in Backbench Business Committee time, so that the Government can set out their current aviation policy and those who are in favour of alternative provision can make their case.
Jonathan Ashworth (Leicester South) (Lab)
Could the Leader of the House find time for a debate on the future of local and regional newspapers, many of which have been under some strain recently? Is the right hon. Gentleman as delighted as I am that following my representations, the Leicester Mercury is now available in the Library?
Sir George Young
I congratulate the hon. Gentleman—but I hope that he is not going to start a bidding war in which all hon. Members seek to catch Mr Deputy Speaker’s eye and raise the fortunes of their local newspaper. We have just had Department for Culture, Media and Sport questions. I am not sure whether the hon. Gentleman was in his place, but I am sure that the Leicester Mercury will adequately record this exchange.
Mark Pawsey (Rugby) (Con)
There is concern in my constituency over the intention to close Birch ward, at the hospital of St Cross in Rugby, later this month. That action arises because of the need to reduce the deficit within the hospital trust, which includes a large private finance initiative hospital based at Coventry. May we have a debate to consider the consequences of PFI funding, which was so favoured by Labour in the delivery of health care?
Sir George Young
I am sorry to hear of the problems that confront my hon. Friend’s local hospital as a result of the private finance initiative scheme. We have done a review of PFI schemes that has produced annual savings of about 5% on NHS PFI schemes. I will draw the case of my hon. Friend’s hospital to the attention of the Treasury to see whether that scheme is one of those under review. Twenty-two NHS trusts have identified their PFI payments as an issue in terms of being financially sustainable, and plans have now been agreed for most of those at local health economy level, to ensure that that does not undermine their sustainability.
Bob Blackman (Harrow East) (Con)
Will my right hon. Friend join me in wishing Hindus everywhere a belated happy Diwali last week? As well as welcoming that important festival, will my right hon. Friend join me in welcoming the decision of the Department for Education to grant initial approval to St Chaitanya’s school, a new Hindu free school for the borough of Harrow that will provide 1,470 young people with a faith-based education as part of this Government’s excellent free schools programme?
Sir George Young
I join my hon. Friend in welcoming that initiative. I am glad the Government are taking it forward. It is the second scheme in this country sponsored by I-Foundation. It will be a free school, but like all schools that have a broad, balanced curriculum, it will build its ethos on the faith values of integrity, respect, courage, empathy, self-restraint and humility. I wish the school and its promoters every good fortune in the future.
Henry Smith (Crawley) (Con)
Recently a constituent came to me concerned that in the space of five days she had received seven separate letters, almost identical, from the Child Support Agency, each envelope containing an identical large booklet. Can we find time for a debate on the efficiency of the Child Support Agency?
Sir George Young
I think we all know from our advice bureaux that the current child maintenance system is not working properly. We have in mind a major child-centred reform promoting, where possible, agreement between the parents on the financial regime. I very much hope that once this new maintenance system is up and running, my hon. Friend will have fewer problems such as the one he has just described.
Glyn Davies (Montgomeryshire) (Con)
One of our great concerns is the low number of organ donations in the United Kingdom compared with other European countries, which has led to discussion about possibly introducing presumed consent, which I personally oppose. May we programme a debate in the Chamber to consider how we might increase that number, taking as an example what has happened in other European countries?
Sir George Young
I am grateful to my hon. Friend, and I have here my own donor card—which I hope will not be activated in the very near future. We have taken a number of initiatives. For example, when people renew their driving licence they are encouraged to take out a donor card. The issue of presumed consent raises a whole lot of ethical questions, and I am sure they should be debated, but at present the Government’s energy is devoted to encouraging the take-up of donor cards.
royal assent
Mr Deputy Speaker (Mr Nigel Evans)
I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:
Coinage (Measurement) Act 2011
Armed Forces Act 2011
Pensions Act 2011
Bill Presented
Household Safety (Carbon Monoxide Detectors) Bill
Presentation and First Reading (Standing Order No. 57)
Mr Barry Sheerman, supported by Jason McCartney, Meg Munn, Julian Sturdy, Steve Baker, Andrew Percy, Laura Sandys, Dr Hywel Francis, Karl MᶜCartney, Andrew Stephenson, Chris White and Heidi Alexander, presented a Bill to introduce a requirement that a functioning carbon monoxide detector must be installed in residential properties; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 25 November, and to be printed (Bill 245).
Commission on Devolution in Wales
(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Wales (Mrs Cheryl Gillan)
I beg to move,
That this House has considered the matter of the Commission on Devolution in Wales.
Before I commence the debate, may I—with the permission of the Speaker, which I sought earlier—say to the right hon. Member for Neath (Mr Hain), who speaks for the Opposition on Wales, that I was shocked to hear of the incident at the Aberpergwm mine at 3 am, but I was also exceedingly glad to know that all three men have been brought out of that mine successfully? It reminds all of us, particularly after the sad events at the Gleision mine, that men are putting their lives on the line each and every day to recover coal. Because both those incidents involved the right hon. Gentleman’s constituency, I thought we should acknowledge that.
Mr Peter Hain (Neath) (Lab)
I am very grateful, and thank the right hon. Lady for that, as will the families and the individuals involved. I thank her too for her support for the miners appeal fund and for her support over the tragedy at Gleision. Today’s incident, although obviously serious, particularly for those concerned—they have suffered injuries, but fortunately they are okay—is in a very different category from Gleision, which was a major disaster and tragedy. Aberpergwm pit is run extremely efficiently by a company with high levels of investment, recruiting miners and apprentices, and in all respects an admirable company. The incident is rather an exception, but it is the third one in my constituency in the past couple of months.
Mrs Gillan
The right hon. Gentleman knows that my door is always open. We have already spoken to other Departments from my office and we will continue to deal with these matters on a cross-party and non-political basis, as is the proper and right way to deal with them.
I am pleased that we have been able to give the House an opportunity to debate in Government time the work of the Silk Commission, the commission that I announced on 11 October would examine devolution for Wales.
The coalition agreement contained three specific items on Wales. First, we promised to take forward the housing legislative competence order that had been held up by the previous Government, and I am pleased to say that we delivered on that. Secondly, we promised a referendum on granting primary legislative powers in devolved areas to the Welsh Assembly Government, and we delivered on that, although on taking office I found that preparations were—how shall I put it?—behind the curve.
Mr Wayne David (Caerphilly) (Lab)
Before the right hon. Lady moves on from the subject of the coalition agreement, may I point out that her party, in opposition, blocked the housing LCO during the wash-up period before the general election?
Mrs Gillan
The hon. Gentleman, who was serving in the Wales Office at the time, arranged the timetabling so that the LCO would fall in that period; he could have delivered it much earlier.
Thirdly, we promised that following the referendum we would establish a process for Wales, in the vein of the Calman commission, and I am pleased to inform the House that we have delivered on that.
Huw Irranca-Davies (Ogmore) (Lab)
Before the right hon. Lady takes credit for every achievement, may I ask her to acknowledge that although the Government put the legislative framework in place, the referendum was delivered by the people of Wales, who voted for it? I am sure she will want to acknowledge that.
Mrs Gillan
The hon. Gentleman is dancing on the head of a pin. This Government gave the people of Wales the opportunity to vote in the referendum, as indeed they did, and I was pleased by the outcome. It was only as a result of a great deal of work and application by the Wales Office and others in government that we were able to deliver that on time and to the schedule anticipated.
I am pleased that today, before the first meeting of the Silk commission, we have given all Members an opportunity to register their views by allowing a full-day debate. It is fair to say that Westminster politicians rarely get the time to stand back and thoughtfully consider the future shape of our country’s constitution. We react to events, perhaps to political and tribal allegiances and timetables and, as John Major said in his Ditchley Foundation annual lecture, the Union cannot be maintained by constant antagonism—for example, between Wales and London.
Like our former Prime Minister, I opposed devolution because, as a Unionist, I believed it could be the slippery slope to separation. I am now less fearful of separation and more hopeful—
Mrs Gillan
The hon. Gentleman suggests that not all Members are less fearful. That is fair and, in the spirit of the debate, I want to hear from Members who do not share the views that he and I hold. My fears about separatism, which have diminished, might be reflected in some Members’ contributions. I am more hopeful that there will be a mature debate and reasoned solutions, delivering a degree of self-determination without threatening the strength of the Union. With the advent of the commission, we are getting time to contribute and reflect.
Geraint Davies (Swansea West) (Lab/Co-op)
Is not the real Conservative agenda to offer tax-raising powers in order to freeze the block grant and end up with a semi-detached Wales, with less representation, thereby securing a permanent Tory-run Westminster, fracturing or destabilising the Union?
Mrs Gillan
I do not know what tortuous mental processes the hon. Gentleman goes through, but I assure him that I have no ambitions in that direction whatsoever. He has been spending too much time with the right hon. Member for Neath, who sees conspiracy theories in every quarter. This is a genuine open consultation, and the hon. Gentleman will hear as I develop my speech that the Silk commission is giving us an opportunity to reflect and try to shape the architecture of devolution in Wales.
The commission provides a coherent opportunity to review the working of devolution in Wales and the financial accountability of the devolved institution. Assembly Members are accountable to the people of Wales at the ballot box. They are judged on their record, on the decisions they make and on the outcomes of their policy decisions. We all know that government is a difficult business that involves administering complex issues and looking after the totality of the system for the people of Wales. We therefore need the commission to examine how the devolution system is working, and whether changes might improve its performance.
Mr David Hanson (Delyn) (Lab)
Will the Secretary of State ensure that the commission looks carefully at the impact of the border? My constituency, and that of many others, is close to the English border. People who live in my constituency work in England, and people who live in England work in my constituency. The differing rates of VAT, corporation tax and quarrying tax, and of expenditure, are important on both sides of the border. I do not want the commission to look specifically at Welsh issues without taking representations from the English side of the border.
Mrs Gillan
I could not agree more with the right hon. Gentleman. I refer him to the commission’s specifications, in which we state that it should
“consider and make recommendations on how best to resolve the legal and practical implementation issues from devolving a package of fiscal powers”.
I think that says it all: we are keeping an open mind. The right hon. Gentleman knows that since becoming shadow Secretary of State, I have been concerned about the implications of the permeability of the border. The commission offers us the chance to look not only at recommendations that might be made but at the practical difficulties.
Mr Hanson
Does the Secretary of State agree that one of the factors that the commission should take into account is that Welsh Members of Parliament such as me, whose constituents use hospitals in England and work in English businesses, should have the right to vote on those matters, too?
Mrs Gillan
We proposed to hold this debate before the first meeting of the commission to enable Paul Silk and the other commissioners to hear Members’ views. The right hon. Gentleman’s point is well made, and I know that when the commissioners read Hansard they will take it on board. I do not want to tie the commissioners’ hands; they must decide how they will work.
Alun Cairns (Vale of Glamorgan) (Con)
The right hon. Member for Delyn (Mr Hanson) makes a principled point, the logic of which should have been extended to the previous referendums on devolution. Why did that not happen?
Mrs Gillan
If I recall correctly, the Richard commission reported before the Government of Wales Act 2006 was enacted. Reaction to the commission—a pick-and-mix effect—was interesting. The 2006 Act contained some items that had not been telegraphed quite so clearly, and the House certainly did not have the opportunity to debate it as fully as I am trying to ensure that we debate things today and in future. My hon. Friend is quite right about that.
Mrs Gillan
I am glad that the right hon. Gentleman agrees that we did not have enough time to debate the Richard commission, which is indeed a fact. I was thinking of the changes to the Assembly’s electoral system, which were not telegraphed extensively and we did not have a chance to discuss—
Mrs Gillan
We may have had plenty of time in Committee, but not beforehand, and there was no wide or extensive consultation. I take the right hon. Gentleman’s point, however.
Hywel Williams (Arfon) (PC)
May I just recommend to the House in general, and perhaps to the Silk commission, that the commission look at the reports of the Welsh Affairs Committee on cross-border issues—which were what started this little exchange? Although the reports recognised that there were problems, they also recognised that there was a great deal of good will across the border, and that the systems were working very well indeed.
Mrs Gillan
That is a very constructive intervention, and in my experience the system does work exceedingly well in some instances, but that will be a matter for the commission to consider, and it will want to look at examples of what is working well and what needs adjustment.
Mrs Gillan
I will give way to the right hon. Gentleman, then I must make some progress.
Mrs Gillan
The right hon. Gentleman will be very pleased, therefore, that the Assembly now has primary legislative powers, and I am sure that he will be spending a lot of his time constructively trying to encourage the Welsh Government to come forward with some legislation, because it is now many months since the election, and correct me if I am wrong—I see the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) and the hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for Arfon (Hywel Williams) nodding their heads—but we have not yet seen any draft legislation from the Welsh Government, even though they were well prepared in advance of the referendum.
David T. C. Davies (Monmouth) (Con)
My right hon. Friend will be aware, of course, that the loyal county of Monmouthshire voted no in the recent referendum, as it always has in previous referendums.
Mrs Gillan
That shows the advantage of this approach to constitutional change: all hon. Members, no matter where they come from, how they speak and from what direction they approach constitutional matters, will have an opportunity to express their views. I am grateful to my hon. Friend, and I am sure that he will speak later in the debate and let the House know what he feels the Silk commission should consider.
Before I took that series of interventions, I was saying that neither the Assembly nor the Welsh Government are accountable to the people of Wales for the money that they spend on the policies that they implement. The Welsh Government simply receive the Welsh block grant voted by Parliament, and spend it.
That cannot be right. With power comes responsibility, and it is surely better for the devolved institution to be accountable to the people of Wales not just for decisions on public spending in Wales, but by being responsible for raising some of the money needed to pay for those decisions. Even local authorities, despite receiving block grants, have responsibility for raising local council tax, and consequently they recognise the difficulty of raising tax moneys before they spend money. There is no reason why one institution—
Mrs Gillan
I have been very generous, and would now like to make some progress.
There is no reason why one institution should be immune from raising taxes, and instead simply spend money and continue to ask for more—but the Labour party seems to think that that should continue. Only last Friday the right hon. Member for Neath said in The Western Mail that seeking more accountability for the Assembly and the Welsh Government was a “curiously disturbing motive”, so I certainly look forward to hearing his further observations in a minute, because I should like him also to explain the contradiction between his position and that of the Labour First Minister, who welcomes the commission and its objectives.
The first part of the Silk commission’s remit is to look at financial accountability. It will consider the case for devolving fiscal powers and recommend a package of powers that could improve the Assembly’s financial accountability. Those powers would need to be consistent with the United Kingdom’s wider fiscal objectives.
The commission will consider the tax and borrowing powers that could be devolved to the Assembly and the Welsh Government. Those include powers in relation to landfill tax, air passenger duty and stamp duty, but they are not limited to those taxes. The commission’s remit, however, is to recommend the devolution only of taxation powers that are likely to have wide support, and it will need to consult broadly to secure that support not only in Wales but in other parts of the United Kingdom.
Huw Irranca-Davies
I thank the right hon. Lady for giving way again; she is generous. I wish to ask about her position as Secretary of State on a point of principle underlying the Silk commission’s consideration of such fiscal powers. Does she agree that it would be wrong of any review to make recommendations that were to the financial disadvantage of the people of Wales, recognising, good Unionist that she is, that the nature of the Union depends on ensuring that economically disadvantaged areas receive greater subsidy from other parts of the UK? On that point of principle, does she concur that today we should all agree that any review of fiscal union does not disbenefit the status quo in Wales, and should if anything improve its lot?
Mrs Gillan
The hon. Gentleman makes a valid and good point, but once again I do not want to prejudge or tie the hands of the Silk commission, although I cannot imagine a situation in which an agreed solution, as I have anticipated and laid out in the terms of reference, would disadvantage Wales. That is far from my motivation, as he will see as I progress with my speech.
The commission already has contributions to its evidence base from work such as the Holtham commission’s reports, which were prepared to a Welsh Assembly Government remit, but crucially, unlike Holtham, the Silk commission can take things a step further. The terms of reference require the commission to consider implementation and to make recommendations on how best to resolve the legal and practical implementation issues that arise from devolving a package of fiscal powers and having consistency within the United Kingdom.
The commission will aim to report on part 1 of its remit in the autumn of next year, and the Government will consider its recommendations very carefully. Members may wish to contribute directly to the commission as well as in today’s debate, but I very much hope that we will be able to hold a debate, again on the Floor of the House, at some stage following the delivery of part 1 of the commission’s findings, because the intention is to take the matter forward as consensually as possible.
The commission will then turn its attention to the second part of its remit—to look at the current constitutional arrangements in Wales. Specifically, it will consider the powers of the Assembly and the boundary between what is devolved and non-devolved, and make recommendations to modify the boundary, if they are likely to enable the Welsh devolution settlement to work better. Again, the commission will need to consult broadly on its proposals and make only those recommendations for change that are likely to have wide support.
Currently, the Assembly has powers in all 20 devolved areas, and it will be for the commission to decide whether there is a requirement to tidy up the devolution boundary, but any further changes to the settlement will need to be right for Wales and right for the United Kingdom as a whole. I anticipate the commission reporting on part II of its remit in 2013.
With the exception perhaps of the right hon. Member for Neath, there is broad agreement on the basis for moving forward and considering issues of both fiscal devolution and accountability. The Government have moved forward collaboratively with all four political parties in the Assembly, in establishing the terms of reference and the members of the commission, and I thank in particular all four party leaders in Cardiff Bay for the positive and co-operative spirit in which they are engaged with me and my office to agree the way forward.
David T. C. Davies
We are at an early stage in proceedings, but will my right hon. Friend and, perhaps, the right hon. Member for Neath (Mr Hain) when he speaks explain whether those nominees will be representatives who represent what their parties think, or delegates who simply pass on what their parties suggest?
Mrs Gillan
That is a matter not so much for me, but for the right hon. Gentleman, who I am sure will want to deal with it when he addresses the House. As far as the Conservative party is concerned, I want to be as inclusive as I can of people’s views, and that is why I am trying to create a period in which any member can make a contribution. The Conservative party, in particular, will make contributions to the Silk commission’s proceedings.
Hywel Williams
I merely wish to note that some distinguished members of the commission are not strictly aligned to political parties. I am sure that they will make a contribution that might even satisfy the hon. Member for Monmouth (David T. C. Davies). Given the quality of the representation, it would be strange if they were there merely to be mouthpieces for political parties. Clearly, they have a great deal to contribute as individuals.
Mrs Gillan
I am about to come to the composition of the commission, and I will pick up the hon. Gentleman’s point then.
Huw Irranca-Davies
On a point of detail about the possible extension of powers that the Silk commission is considering, will that include energy consents? The matter has been debated a lot recently, as the Secretary of State knows, and it has some support, and opposition, on both sides of the House. Ministers have made it clear that they do not think that it should be part of the commission’s deliberations. Will she clarify the situation?
Mrs Gillan
I am grateful to the hon. Gentleman for raising that matter, particularly as before the debate I was looking at the party manifestos for the Assembly elections. He will know that I regularly receive requests for powers over all sorts of areas, and I expect those areas to be looked at. It is fair to say that I expect the commission—this is subject to the way in which it wishes to conduct its business—to consider requests for energy consents for projects of more than 50 MW, and to consider trust ports, rail and separate Welsh legal jurisdiction, all of which have been raised up the agenda by one or other party, or the Welsh Government. It is right that it should have the opportunity to consider energy consents, but I have an extremely long list of things that other parties want fully devolved, which will not stop until the point of separatism is reached. He and I agree that that is not the way to go. The commission may find itself having to consider several other areas, but I am not going to restrict its operation by anything we say in the House. Indeed, I am looking forward to seeing the outcome.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Will the Secretary of State give way?
Mrs Gillan
May I make a little progress? The commissioners bring a wealth of experience to their important task. The commission is chaired by Paul Silk, a distinguished former Clerk to the National Assembly and to this House, whom we all know. Paul is already getting to grips with his task and introducing himself to those with an interest in the commission’s work.
The hon. Member for Arfon referred to the two independent members, and they are very distinguished. Dyfrig John CBE is chairman of the Principality building society and a former deputy chairman and chief executive of HSBC bank. Professor Noel Lloyd CBE is a former vice-chancellor and principal of Aberystwyth university. Neither is on the commission with a political remit. They are there as independent members to offer their best advice and to support the other members. I am sure that absolutely nothing from them will have a political bias. They will consider matters objectively and with expertise.
There are also four party political nominees on the commission, each nominated by one of the four political parties in the Assembly. Professor Nick Bourne is the Conservative nominee, and former leader of the Welsh Conservatives in the Assembly; Sue Essex is the Labour nominee, and a former Welsh Assembly Government Minister; Rob Humphreys is the Welsh Liberal Democrat nominee, and director of the Open university in Wales; and Dr Eurfyl ap Gwilym is the Plaid Cymru nominee, and best known for giving Jeremy Paxman a run for his money. I am sure that the commission’s debates will be lively. I believe that that is a first-class team, and it will meet for the first time tomorrow to consider how it will work through the next two years. The commission has a challenging brief because, importantly, we hope that it will build consensus on its proposals.
Mrs Gillan
I will give way first to the hon. Member for Carmarthen East and Dinefwr—I have not given way to him previously—and then to my hon. Friend.
Jonathan Edwards
Based on what the Secretary of State says about consensus, which we hope the commission will be able to achieve, will she outline the process, how its recommendations will reach the statute book, and the time frame? No one in Wales is interested in a kicking-into-the-long-grass game.
Mrs Gillan
It depresses me a great deal to hear hon. Members say that I am kicking the matter into the long grass. I am certainly not. I am trying to take a mature and adult look at the financial structures and the constitutional and legislative structures affecting Wales. However, I will not prejudge the outcome, and I will not be prescriptive, but I have to look at potential timetables. Three have been set out. One has a shorter time scale, which assumes that, whatever the recommendations, no manifesto commitments or referendum would be necessary. In fact, it would be very difficult to produce a Bill by the time of the next general election, and the time scale could be unfeasibly short. However, again, I am not ruling that out; I am simply saying that it would be difficult. If we did that, and if there were new fiscal and constitutional powers, they would be implemented post-2015.
Another scenario is based on a manifesto commitment and no referendum, which would lead us to believe that there would be legislation after the next general election. However, I do not know what the Silk commission will recommend, or whether it will require both manifesto commitments and a referendum, in which case the time scale would be slightly longer.
I would like the hon. Gentleman to take me at my word. We are taking a long, hard look at the matter in a genuinely cross-party way. I think he knows that I made some effort to ensure that his party was included, because I thought it was important to start as we mean to go on. I hope that we will continue in that vein, although I appreciate that anything could happen at any time.
Mrs Gillan
My hon. Friend can reassure his constituents that no member of the commission is being remunerated. They have all agreed to waive remuneration, but their expenses will be met from my Department. We have set aside a sum of money over three years to meet those expenses. At this stage, we are not sure how they will pan out, because I want the commission to decide how it will do its work, as it rightly should, and I do not want it to be restricted. He can reassure his constituents that the commission is doing this work for its love of Wales.
Jenny Willott (Cardiff Central) (LD)
I apologise for my voice being about an octave lower than normal. This is not a point I often make, but there is only one woman on the commission. Will the Secretary of State assure the House that it will take evidence from and talk to a wide range of people to obtain a broad range of views from both genders and across all communities in Wales, including different ethnic minority groups, so that it can take account of different perspectives?
Mrs Gillan
That point was well made. I, too, was concerned, and I looked at the gender balance, having been a former Minister for women. I think Sue Essex will be a doughty and robust member—[Interruption.] As my hon. Friend the Member for Lichfield (Michael Fabricant) says, she is equal to two men. I am sure she will give us a run for our money.
I agree entirely that many of the matters that the commission will discuss will be of great interest not only to women, but to ethnic minorities. I am sure that Paul Silk will take on board the concerns of my hon. Friend the Member for Cardiff Central (Jenny Willott).
We now have 12 years of experience of devolution in Wales. That has involved not one but two pieces of legislation that have been used to try to shape devolution to the purposes of the previous Government. There is obviously much that could be said about the effectiveness of the Assembly and the Welsh Government, but that can be better examined and tested with more accountability and the benefit of that experience.
The Government are now trying to ensure that we have a process to assess the position of Wales within the United Kingdom and to take a detailed, objective and structured examination of the architecture of devolution. This is a mature way to ensure that the Assembly and the Welsh Government get the responsibility they need to ensure accountability, and that the dividing lines on devolution benefit Wales and do not leave the Administration perpetually demanding more powers and more money rather than getting on with the business of running the devolved areas for which they have responsibility.
This is also an important statement of intent by the coalition Government. The Welsh Government receive nearly £15 billion a year from the Treasury, but, as I have said, are not accountable for raising a penny they spend. We do not think that is right, and I am certain that taxpayers do not think it is right either. I want the argument, for once, to move away from whether there is enough money to how it is spent and whether it is spent effectively. It is true to say that a Government who take from Peter and give to Paul can always rely on the support of Paul. We are asking the commission to see whether Paul can also make a contribution.
I look forward to hearing Members’ contributions and maintaining an open mind on how we can improve devolution and, through that, the economy of Wales and the well-being of its people. I hope that we will hear moderate, realistic and interesting views on the balance of powers between Westminster and Cardiff. I am sure that everyone in this House will send Paul Silk and the members of the Silk commission their best wishes for the task ahead.
Mr Peter Hain (Neath) (Lab)
Let me begin, Mr Deputy Speaker, by welcoming the fact that we have a Welshman in the Chair for this debate—a Swansea boy who is, I am sure, delighted that Swansea City is in the premiership playing some very good football this season.
Just for the record, I cannot let the Secretary of State continue to repeat the fiction that when she arrived at the Wales Office in Gwydyr house in early May, the cupboard was bare and nothing had been done about the referendum. She knows that that is not the case. She will also know that a couple of days before she went up the stairs at Gwydyr house to occupy the office, I had sought confirmation that we could have delivered the referendum by the autumn, if we really had to; it would have been a tight squeeze, to repeat the phrase used. Let us hear no more nonsense from her about that, or about the housing legislative competence order. As my hon. Friend the Member for Caerphilly (Mr David) reminded her, the housing LCO was ready for Royal Assent, and she sabotaged it; the Conservative party refused to carry it through. She knows that that is true, so I am surprised that she is continuing to say these things.
Mr Hain
I am happy to take an intervention a little later.
I am intrigued by accountability; that is why I picked up the Secretary of State on that issue in The Western Mail. I am glad that she reads The Western Mail, and my comments in it, assiduously. It is not for the Secretary of State for Wales to decide in which way the Welsh Government or the Welsh Assembly should be accountable to the people of Wales. The Welsh Assembly is elected by the people of Wales; she is not elected by anybody in Wales. That is the true line of accountability that operates.
Mrs Gillan
All I can say is that, as my hon. Friend the Under-Secretary once remarked, I am a Welshwoman born in Wales and therefore have a great interest in the land of my birth.
I read the right hon. Gentleman’s article in The Western Mail very carefully, and one of the things I objected to was his fear-mongering among the people of Wales. He gives the impression that we would halve public spending in Wales, and that is absolutely not the case. He should be ashamed of even suggesting that and frightening people in Wales in that way. He knows that this is an open consultation to see how we can do things better. Any fool can spend money, but those who spend money need to have some responsibility for raising it so that they can spend it rightly.
Mr Hain
My, my—the Secretary of State sounds rather furious. I seem to have touched a sensitive spot. I shall deal with this point later.
We welcome the establishment of the Silk commission, which, as the Secretary of State said, has been established on an all-party basis. The Welsh Assembly, which is well over a decade old, is now truly embedded into Welsh civic society, so there may be a case for looking at increasing its financial powers and flexibility. As the First Minister, Carwyn Jones, has indicated, devolving stamp duty, aggregates tax and new borrowing could be advantageous to the Welsh Government and, indeed, to the people of Wales.
I agree that Paul Silk is a very good choice for this task—a distinguished Clerk in this House before he became the first, and even more distinguished, Clerk of the Assembly. I welcome what the Secretary of State has said about wanting to go forward on a consensual basis. It is important that any Bill emerging from the work of the Silk commission is born out of consultation and consensus, unlike the Parliamentary Voting System and Constituencies Bill or the Fixed-term Parliaments Bill, which were forced on Parliament with little or no engagement with Opposition parties, the public or interested groups and experts.
Mrs Gillan
May I put the record straight? As the right hon. Gentleman knows, I gave every Welsh MP the opportunity to meet the relevant Minister on an open-ended basis. The PVSC Bill was debated on the Floor of the House for 53 hours and 40 minutes; there were plenty of opportunities for Members to contribute.
Mr Hain
Let me say this to the Secretary of State: when in a hole, stop digging. She knows that she denied Members the opportunity of a Welsh Grand Committee debate, which was requested by my right hon. Friend the Member for Torfaen (Paul Murphy) and by the leader of Plaid Cymru, the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd). Every member of the Welsh Labour group and other Members wanted that debate as well, because Wales is being savagely penalised by this Bill, on which there was no consultation at all.
Mrs Eleanor Laing (Epping Forest) (Con)
I speak as someone who was here in this Chamber for most, if not all of the 54 hours on the Bill that the Secretary of State mentioned. Does the shadow Secretary of State accept that that Bill, in changing the parliamentary boundaries, affects not only Wales but the whole of the United Kingdom, and that matters that affect the whole of the United Kingdom, including Wales, have to be dealt with in this House?
Mr Hain
Of course it had to be dealt with in this House, but the impact on Wales received virtually no debate. There is clearly a lot of sensitivity among Conservative Members on this matter, and I am not surprised. The Secretary of State rejected the request for a Welsh Grand Committee to discuss the fact that Wales is suffering a cut of 25%—a quarter—of our representation, which will affect a lot of parties and communities in Wales. That was never debated properly.
May I make one other point—
Mr Hain
If I am allowed to finish my response to the hon. Member for Epping Forest (Mrs Laing).
My other point is that such constitutional matters, particularly parliamentary boundaries, have traditionally always been dealt with on a consensual basis. This is the first time that a politically partisan rigging of the parliamentary boundaries has been introduced in this House and forced through.
Huw Irranca-Davies
This is very pertinent in learning the lessons in terms of how the Silk commission operates. We cannot have a debate when none of the voices are heard. The Secretary of State has said that she wants these voices to figure as part of the work of the commission, but that did not happen in the boundaries review. None of the Welsh concerns was heard and none was acted on; it was a travesty of democracy.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As was intimated by the intervention by Huw Irranca-Davies, we are now straying off the subject of the Silk commission, so could we get back on to that, please?
Mr Hain
Indeed, Mr Deputy Speaker, I am happy to, and I will not be led astray any more by interventions from the Conservative Benches.
The Labour Government, recognising the call from the majority within the Scottish Parliament, commissioned the Calman report, to instigate a serious and thorough analysis of how a new settlement in Scotland might be achieved. Crucially, it was based upon cross-party consensus, expert analysis and real engagement with the Scottish public. It is fundamentally important that this Government adopt a similar approach to Wales. I am encouraged by what the Secretary of State said in that respect, but in truth I am deeply suspicious of the real Tory agenda that lies behind the Silk commission.
The commission’s terms of reference state that any devolution of powers must be
“consistent with the United Kingdom’s fiscal objectives”.
Can the Secretary of State explain what is meant by that? I wonder whether, in drawing up the terms of reference, the Chancellor, the Secretary of State and others were thinking of Switzerland, which has a highly federalised and separate tax system in its various cantons, and which demonstrates how such a system can lead to lower public expenditure—not a model that we desire or will accept for Wales. Silk must not become an excuse for this right-wing Government to offload their financial obligations to lower-income parts of the UK, such as Wales.
Geraint Davies
Does my right hon. Friend accept that given that gross value added in Wales is 74% of the UK average, and that we therefore have a lower tax base to tax from, if an equivalent to the Scotland Bill passed 10 points of marginal taxation over to Wales, we would end up raising only 74% of the money possible? We could end up with 20p taxpayers contributing only 17.5p in the pound. That may be one of many methods used to reduce the amount of public expenditure in Wales, but the Government could say, “Oh, don’t worry, you’ve got tax-raising powers. You’ll be all right.”
Mrs Gillan
The right hon. Gentleman asked me a direct question, and I will give him a direct answer. Devolved funding rules, as set out in the statement of funding policy, operate within the UK’s fiscal framework. We therefore expect any changes that come out of the commission’s work or intergovernmental talks to be consistent with that framework, for example as set out in the programme for government. As he knows, that is because macro-economic policy is a reserved matter for the UK.
Mr Hain
I am grateful. The Secretary of State is confirming, then—I am not challenging her on this point—that should there be a derogation in the case of, for instance, stamp duty, that would be taken from the Welsh funding block. That is what I understand her reply to mean.
My second element of disappointment is that the Silk commission will not consider the Holtham commission’s proposals for funding reform in Wales. It was the previous Labour Welsh Government who established the Holtham commission, and it produced conclusive evidence that Wales is now underfunded compared with its needs. As I think both Government parties here in Westminster now acknowledge, it was either naive or cynical of them to promise in their manifestos swift and radical reform of the Barnett formula—a promise that they had to betray after just one week in government.
We are aware that Holtham does not offer a quick solution, and that there would be impacts on the other devolved nations and regions. The introduction of a Barnett floor, which was a Labour manifesto commitment and a proposition featured in the Holtham commission’s two reports, would have ensured that Wales’s position did not become worse. Why have the Government not considered introducing a floor similar to the one that we proposed, which was agreed with the Treasury? It could be implemented relatively straightforwardly, again with the agreement of the Treasury.
The green budget published last year by the Institute for Fiscal Studies entirely vindicated Labour’s approach to the funding of Wales. By showing that the Barnett formula is only now beginning to disadvantage Wales for the first time, it proved that we were right to stick with it until last year, and equally right to proceed with reforming it thereafter. Make no mistake, up until that point the Barnett formula had served Wales well. There is no doubt that had we ripped it up several decades ago, as the nationalists advocated, Wales would have lost out. The collapse of the banks and the scale of the financial crisis suffered by Iceland and Ireland have been devastating to the nationalists’ arguments for fiscal autonomy.
Mr Llwyd
I take it that the right hon. Gentleman read the deliberations of the Holtham commission. If so, he will have seen that Gerry Holtham opined that the year-on-year underfunding of Wales went back quite a few years. It is absolute revisionism to suggest that it goes back just to the last year of the Labour Government.
Mr Hain
If the right hon. Gentleman looks at the whole Holtham commission report, he will notice that spending was converging with the English average and coming towards the point that it reached last year, when it started seriously to disadvantage Wales. That was the point I was making.
Huw Irranca-Davies
To the best of my knowledge, the Holtham report did not mention the fact that in successive years of the Labour Administration, it was vital that we recognised Wales’s particular needs through the Barnett-plus funding settlements, which increased funding for Wales from some £7 billion to something in excess of £14 billion—way above Barnett. That reflects how the Labour Government ensured that Wales had the proper funds to do the work we needed to do.
Alun Cairns
The right hon. Gentleman underlines the fact that the Welsh budget doubled in that period, but will he recognise that Holtham also reported that in a period of spending constraint and public spending reduction, the Barnett formula protects the Welsh budget?
Mr Hain
I accept the hon. Gentleman’s point to the extent that Holtham did recognise that when there is a period of spending restraint, or even cuts, underfunding and funding convergence do not happen to the same degree. However, I am not sure what the hon. Gentleman is arguing. Is he saying that spending cuts and restraint have a good impact on Wales?
Roger Williams (Brecon and Radnorshire) (LD)
Does the right hon. Gentleman agree that reform of the Barnett formula is about not just Wales but Scotland as well? Of course, circumstances are very different in Scotland, and trying to reform the formula when there is a contracting economy would be very difficult for Scotland.
Mr Hain
We are talking about Wales, but I think most people, including the Scots, would concede that Scotland has done pretty well out of the formula compared with Wales. Wales is now losing out under it.
As the Barnett formula reaches the end of its life, now is the time to act. In refusing to address the convergence problem that is now occurring, the Government are penalising and disadvantaging Wales. We always acted responsibly and in the interests of Wales, and we are the only party with a deliverable and fair funding plan for Wales. Silk cannot be used to let the Government off the hook on Barnett. Although we are open to the idea of Wales raising some of the money that it spends—perhaps, as the First Minister has indicated, through stamp duty and aggregates tax—that must not be at the expense of the needs-based settlement that is vital for Wales.
Jonathan Edwards
As the right hon. Gentleman knows full well, the issue of Barnett will now be dealt with through discussions between the Welsh Government and the UK Government. Rather than try to undermine the Silk commission, would he not be better off turning his guns on the First Minister so that he gets his act together?
Mr Hain
I will make a bit of progress, then I will happily take interventions.
Holtham calculated that approximately £17.1 billion of tax revenue is raised in Wales every year. Total public spending in Wales is about £33.5 billion—almost twice the amount raised. We should not be ashamed or embarrassed by that. Wales’s needs are greater than those of other parts of the UK. We have a history of relatively high levels of ill health, caused by our industrial legacy of mining and heavy industry. Also, we suffered the cataclysmic shock of sudden and mass unemployment, with the wholesale pit and traditional industry closures in the 1980s, which left high levels of economic inactivity and, because the then Tory Government did not drive investment to create new industrial sectors, relatively lower levels of business activity. That is why we should look before we leap. The so-called devolution-max or independence-light settlement advocated by the nationalists —and, I suspect, tempting to the Tories—could be disastrous for Wales.
Jonathan Edwards
The shadow Secretary of State is quoting figures from the Holtham commission, but that commission reported that the revenue raised in Wales by UK-wide taxes was £17.1 billion and that UK expenditure was £25 billion, not the £33 billion that he has been quoting in the press today.
Alun Cairns
I am not sure whether the right hon. Gentleman has a brass neck or simply selective hearing or a selective memory. Does he not recall that Wales, in the 1980s, was not the poorest part of the UK, and that, in spite of Labour Governments in Cardiff Bay and a Labour Government in Westminster, Wales is now the poorest part of the UK?
Mr Hain
I am astonished that a Member of Parliament for a Welsh seat is trying to defend the Government’s impact on Wales in the 1980s. As a result of Tory policies, there was mass unemployment and people were smuggled on to incapacity benefit to disguise the unemployment figures and left there—a whole generation of young people—never to work again. I am astonished that he is trying to defend that.
Geraint Davies
I have figures from the House of Commons Library on the difference between expenditure and revenue showing net contributions of £14.6 billion in Wales and £14.3 billion in Scotland. Does that not demonstrate that independence for Scotland and Wales would only result in an impoverished Scotland and Wales? We need a fair system based on needs.
Mr Hain
That is exactly what I have been arguing.
Under devolution-max, as we understand it from the Scottish model, Wales would be responsible for raising all its own revenue, but we simply could not do it. It would be impossible suddenly to halve public spending in Wales. With devo-max, income tax and other taxes would literally have to double overnight just to maintain current spending levels, which is clearly a preposterous scenario—if ever implemented, it would have a devastating impact upon the Welsh economy and people’s way of life. However, I can see how it would be an attractive solution to some Tory stockbrokers in the south-east—people in Chesham and Amersham, for example—because it could mean massive tax cuts for them. Devo-max is yet another example of shared interests by the Conservatives and nationalists. It is no wonder that Plaid Cymru is so reluctant to criticise the Government, preferring to focus all its fire on Labour, as has happened in the past few minutes. They have much in common, which explains why they have consistently refused to rule out a coalition in Wales.
We should celebrate both the successes of devolution and the economic, social, cultural and political ties that bind us together—they are probably stronger now than ever before—but devo-max, or independence-light, is not the answer to the economic problems that Wales still confronts. Labour’s vision is of a Britain in which the stronger, richer parts support the weaker, poorer parts—a Britain fairer, more just and more equal, not an unfair, unjust, unequal Britain where the weakest go to the wall. I hope that the Silk commission will take close account of that important principle.
Mr Hain
If that nonsense is true, why did we have record employment under our Labour Government, why were there more jobs in Wales than ever before in our history under our Labour Government and why were there higher levels of business activity under our Labour Government? We had a record of economic success before the global financial crisis that was second to none. I am astonished that the hon. Gentleman is seeking to dispute that.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
Does my right hon. Friend agree that it is amazing to hear Government Members trying to rewrite the history of the ’80s? Many of us entered the House because of the experience of seeing young people abandoned by a Conservative Government and their economic policies so that they were unable to make their way in the world.
Mr Hain
My right hon. Friend makes a powerful point with great passion precisely because he was one of the people who entered Parliament to fight for the rights of young Welsh citizens who were denied by that callous Conservative Government.
I hope that the Silk commission will take account of the principles of fairness and justice in its deliberations. Some resources from the south-east of England are, and in future should still be, redistributed to Wales, the north-east of England and other areas of England with lower levels of economic activity and prosperity in order to help everywhere in Britain to become economically more sustainable. However, I remain suspicious that this right-wing Government do not share this vision for Britain and may exploit the Silk commission for their own ulterior motives.
Compared with Scotland, there is a much more significant amount of commuting across our border with England, as pointed out earlier by my right hon. Friend the Member for Delyn (Mr Hanson). Traffic flows across the Wales-England border are substantial. North-east Wales is highly integrated into the economy of Merseyside and north-west England, while in south Wales the bulk of traffic movement is focused along the M4 corridor. About 80,000 people live in Wales but work outside Wales in the UK, and about 50,000 people work in Wales but live in the UK outside Wales. This gives a total of about 130,000 people who travel across the border to work every day. A little over half of this cross-border traffic is accounted for by people commuting in and out of north Wales. Despite Scotland’s much larger population, the number of commuters crossing its border is roughly one third of the number commuting in and out of Wales.
More than 1.4 million people in Wales—nearly half its total population—live within 25 miles of the border with England, and nearly 5 million people in England live within 25 miles of the border with Wales. In aggregate, 30% of the population of Wales and England—nearly one third, or more than 16 million people—live within 50 miles of the border between the two countries. In contrast, the number of people living close to the Scotland-England border is much smaller. Only 5% of the combined population of Scotland and England—just one sixth of the equivalent for Wales, or about 3 million people—live within 50 miles of the border between those countries. Given that the Welsh economy is much more closely bound into the economy of England than is the Scottish economy, the potential for economic distortions and tax avoidance as a result of tax devolution is of greater concern in Wales than in Scotland, which is why the Calman agenda cannot simply be transposed wholesale on to Wales. We would like a clearer indication from the Government of how they intend to deal with these crucial cross-border issues, and I hope that the Silk commission will address them.
Something else is not within remit of the Silk commission, however, but the issue is much bigger than the Barnett formula or tinkering with the constitution—it has felt like the elephant in the room during today’s debate. There is a serious jobs crisis in Wales, and the Government need to wake up urgently to that. For example, Tata Steel employs 20,000 people in the UK, of whom 8,000 are in Wales, in overwhelmingly highly skilled, well-paid jobs, with three to four times that number of dependent jobs in the economy outside. In Wales, that means perhaps 25,000 or more jobs. Last week, MPs were briefed by Tata’s European chief executive. He did not mention corporation or any other tax, which the Silk commission is considering. Instead, his overriding criticisms of Government policy, which he worried was threatening the future of steel manufacturing in the UK—at Port Talbot, for example—were very different. He said that the Government had to act on raising demand for UK steel through infrastructure investment—in other words, through more growth and jobs. He also argued that energy costs were far too high—fully half as high again as in France. What are the Government going to do about that? Nothing.
David T. C. Davies
I had similar representations from Tata. The company is clearly worried about energy costs rising as a result of environmental taxes, which are being implemented because of a perception of increased temperatures, which do not seem to be increasing at the moment. Does the right hon. Gentleman think it is time to look at the issue again?
Mr Hain
I know that the hon. Gentleman has a reactionary view on the climate change agenda—perhaps that is reflected in his question—but the briefing that we had from the European chief of Tata Steel was clear. He said that it was overwhelmingly the lack of Government support and investment in the economy—and the demand for steel that comes from that—that was hitting his industry so badly, along with energy prices, thereby risking future investment. Incidentally, the hon. Gentleman’s question also gives me the opportunity to remind him that although he celebrated the county of Monmouthshire’s no vote, the fact is that 49.36% voted yes, while 50.64% voted no. That does not seem to be a massive rejection of devolution in Monmouth.
Huw Irranca-Davies
Will my right hon. Friend confirm from the discussions with Tata Steel and others that they are not opposed to environmental taxes per se? They are opposed to the Government’s inept handling of taxes such as the CRC, or carbon reduction commitment, and the carbon floor price, which are rightly perceived not as stealth taxes—there is nothing stealthy about them—but as a deliberate blow to our energy-intensive users. What they are saying to the Government is: “When you’re dealing with taxation issues”—as the Silk commission is—“you should do it with industry, not tell industry what’s happened to it after the event.”
Mr Hain
My hon. Friend, who has expertise in this matter from his previous shadow ministerial job, makes a valid point. Indeed, Tata Steel also talked to us about the carbon price element that is threatening the future of its industry in areas such as Llanwern and Port Talbot.
Mrs Gillan
The right hon. Gentleman will therefore be greatly reassured to know that I was at Tata Steel for our business advisory group meeting at the end of last month, where I had long discussions. I am sure that he would not want to cause any anxiety to the work force. I was pleased to hear that long-term investments continue to be made by Tata Steel and that it welcomes its good relationships and exchanges with my colleagues in the Cabinet on matters pertaining to the success of that business.
Mr Hain
I am glad that the Secretary of State had that conversation, but all I can do is report to the House—and it is important that she hears it too—what the European chief of Tata Steel told a group of Members who met him last week, which is as I have described it. He was not concerned about any of the issues to do with the Silk commission, as we are in this debate. It is important for the Government to recognise that they should not ignore the economic realities and flirt with tax devolution—by, for example, devolving corporation tax—when that is not even on Tata’s agenda.
As for investment, Tata Steel’s European chief pointed out that the new and welcome investment at Port Talbot might not have been made had he been aware of the climate now affecting the company as a result of the Government’s incompetence, which is damaging steel production. Instead of addressing that, the Government are, through the Silk commission, considering matters such as devolving corporation tax.
A review undertaken in 2007 by Sir David Varney for the Treasury pointed to academic research that suggested that only about half the impact of a corporation tax cut was usually recovered through increased growth and investment. The question is: would lowering corporation tax in Wales to, say, the Irish level—if the Silk commission is to consider that—generate enough extra tax, including income tax, to compensate for the £400 million or so that is likely to be lopped off the Welsh block grant to comply with European Union state aid rules and compensate the Treasury for lost revenue?
The Secretary of State for Northern Ireland is an enthusiast for devolving corporation tax. Nevertheless, he told me that he thought it would take at least 15 years for the Northern Ireland economy to generate the growth and jobs that he anticipated from halving corporation tax, as is planned there, that would be sufficient to produce an equivalent income to compensate for the loss to the Northern Ireland block grant. What Welsh Government would choose to lose around £400 million now and each year for the best part of two decades in the hope—and only the hope—that extra inward investment and business activity would eventually make up the shortfall?
Mr Hanson
To return to the cross-border issue, in the event of the Silk commission determining that corporation tax could be varied, would not the north-west of England then make the same demands on the Treasury for varying powers for its region? The point that my right hon. Friend should emphasise to the Secretary of State is that the Silk commission should look at the consequences of those variations for both Wales and the English side of the border.
Mr Hain
My right hon. Friend makes a powerful point that I hope the Silk commission will take account of.
It is simply no answer to offload tax-raising powers to Wales that will at best have a marginal impact and at worst—because of the compensating cuts in the Welsh budget—worsen the prospects for jobs, business and infrastructure investment in Wales. Meanwhile, in the real world, unemployment in Wales is rocketing. Six people are chasing every vacancy—many more in some areas of Wales—and the Government have no plan to deal with the problem. Unless they change course, it will get worse and worse.
Mr Hain
Absolutely. I have had many discussions with businesses in Wales that have been severely damaged—some have even been threatened with extinction and bankruptcy—as a result of public spending cuts, because they depend for their activities, whether they be providing services, procurement or whatever, on the public purse.
By all means consider the Silk commission agenda, but unless the Government change course, things will get worse and worse for Wales. It is the most vicious of circles: fewer working means fewer people paying taxes, which means less money to pay off the deficit. As Wales gets poorer, how can it be expected to raise its own money through taxes, as the Secretary of State would like, if the revenue coming in is being cut? There are serious questions for the Silk commission to consider, because the Government’s cuts are choking off growth, and tax revenue in Wales is diminishing substantially. I do not want the Welsh budget to be cut because of what might be deemed to be the gap in the revenue going to the Treasury arising from devolving taxes—which might happen as a result of the Silk commission—only to find that those taxes do not make up that gap.
Huw Irranca-Davies
My right hon. Friend is generous in giving way again. May I urge him to advocate from the Dispatch Box a tax change that we can introduce right now, namely a national insurance tax holiday for small businesses? That would encourage far more people to take on more employees, including women, who are significantly disadvantaged at the moment. We do not have to wait for the Silk commission; the Government should adopt our five-point plan right now.
Mr Hain
I completely agree, and I have been urging that on the Secretary of State in this debate. Cutting VAT to 5% for businesses involved in home maintenance and repairs could revitalise a building industry that is on its back in Wales. That should be the priority for the Secretary of State.
Families across Wales are struggling with rocketing food prices and electricity, oil and gas bills, and are worried about their jobs and their children’s futures. Far from our economy being a safe haven, our recovery was choked off last autumn, well before the eurozone crisis. Our economy has stagnated for over a year now. However, there is a better way. We need a plan for jobs and growth to get the Welsh economy moving again and help get the deficit down in a steadier and more balanced way. That is what the Secretary of State should be focusing on for Wales, not simply the Silk commission’s tax and powers agenda.
Jessica Morden (Newport East) (Lab)
My right hon. Friend has been generous in giving way, and I agree with him wholeheartedly. What my constituents want more than anything is for the Government urgently to come up with a jobs and growth strategy, which is currently missing. Does he agree that the establishment of the Silk commission, although a great thing in the long run, should not deflect from the urgency of the current situation?
Mr Hain
I completely agree; I could not have put it better myself. I hope that the Silk commission will consider the context in which it is operating, and that, if it does advocate some tax devolution, which I think would be sensible in some respects, it will consider the wider picture and the impact of the lost revenue, indirectly, to the Welsh budget.
Mr Hain
I want to make some progress, if my hon. Friend does not mind. If there is time at the end, I will certainly give way to him.
Labour has set out a clear five-point plan to create jobs, to help struggling families and to support small businesses in Wales. Our jobs plan includes tax breaks for small businesses taking on extra workers, a temporary VAT cut that would give families a boost of around £450 a year, and a tax on bank bonuses to fund jobs and training for young people. I urge the right hon. Lady’s Government to implement it, alongside the work of the Silk commission. If the Chancellor were to come to the House with such a plan for growth, we would support him.
Thanks to devolution, Wales is showing that there is an alternative. The Welsh jobs fund will provide 4,000 job and training opportunities for 16 to 25-year-olds each year, along with an extra 500 police community support officers for safer communities, and support for Welsh students so that they do not have to pay higher tuition fees. Labour First Minister, Carwyn Jones, is proving that, although cuts are unavoidable, they do not have to be allied to the chaos of a privatisation plan for the NHS, or to a plan to close down opportunities in our universities, or, with the greatest hypocrisy of all, to the simultaneous devaluation of vocational education while making it even harder for young people leaving school to get a job.
Guto Bebb
Was it not rather unreasonable of the right hon. Gentleman to say what he did about the health service in Wales, given that the National Assembly is cutting health expenditure in Wales while those cuts are not happening in England? My constituents are very aware that the Betsi Cadwaladr health trust is facing serious financial difficulties, not as a result of changes in Westminster but as a direct consequence of choices made by the Labour Government in Cardiff.
Mr Hain
Labour’s Government in Wales are not adopting a back-door privatisation plan for the health service in Wales, thank goodness—unlike what is happening in England. In addition, did the hon. Gentleman not see the important report in the media recently that leading health officials and clinicians are now stating conclusively that the health service in England is being cut as a result of his Government’s policies? All services in Wales are having to be reduced—of course they are—but why does he think that is happening? It is a result of the programme of cuts by the Government whom he supports.
Of course our Labour Government in the Welsh Assembly cannot insulate Wales from this Government’s damaging policies. But they can show that, for schools, for hospitals, and for jobs and skills, even in the toughest of times, there is and always will be an alternative to this right-wing Westminster agenda. It was wrong to say that there was no alternative to Margaret Thatcher’s destructive policies in the 1980s. That was paid for by hundreds of thousands of people across Wales in lost jobs, futures and, yes, even lives as that Government systematically undermined the national health service.
In Wales, thanks to devolution, we can protect ourselves just a little from the consequences of Tory-Liberalism. It is not full protection—it never could be—but it makes a real difference, a Labour difference, because the people of Wales voted for the only party committed to standing up for Wales: the Labour party. Wales is an example to the rest of the United Kingdom of devolution working as it should do. We have in Wales a new devolution generation led by Carwyn Jones. That new generation are not devo-sceptics or nationalists, but devo-realists who are at ease with devolution and who recognise the benefits of empowering people.
The strength of Welsh devolution is a testament to Labour’s achievements in office. We should not forget that the Prime Minister and the Secretary of State tried to prevent it from happening. They both stood on an anti-devolution platform as Tory party candidates in 1997. They both voted against the Government of Wales Act 2006, which I brought in as Secretary of State, and which delivered the full law-making powers now enjoyed by the Assembly. Now, in 2011, we will not allow them to use the Silk commission to diminish the devolution project, or to cut Wales adrift to appease the little Englanders on their own Benches. We will give the Silk commission a cautious welcome, but we are suspicious of the Government’s motives, as are the more than 130,000 people in Wales who are now out of work, and who are desperate for the Secretary of State to focus on jobs and growth, not on contriving devices to abandon her responsibilities in Wales.
For us, devolution has always been a means to an end. Labour has never fought elections solely on the issue of constitutional change. That would be a diversion from the real task, which at this moment requires above all taking a stand on the side of the people in the face of the most reactionary Government since the 1920s. Our vision for Wales does not involve a defence of the status quo. Our stance is one of modernisation and progress, even as we face the most difficult of policies inflicted on us by this Government. We urge the Silk commission to join us in standing up for Wales, and not to be seduced by this Government’s real agenda of hiving off their obligations to Wales.
David T. C. Davies (Monmouth) (Con)
It is always a pleasure to be here on a Thursday discussing Wales. Unlike some Members, I shall not be offering a welcome, cautious or otherwise, to the Silk commission. I have no doubts about the motives or the knowledge of any of those taking part in it, some of whom are well known to me, but I feel that we could save ourselves a lot of time and money by doing away with the commission and getting on with what we all know is going to happen. We know that the commission is going to spend until the summer of 2012 looking into the granting of fiscal powers to the Welsh Assembly. I suspect that all sorts of things will appear in the newspapers and on BBC Wales, and that there will be a debate or two. The usual faces of the great and the good in Wales will be wheeled out in support of all of this, and there will be public meetings on wet weekday evenings in various parts of Wales, to which a small representative sample of the public who all like the idea of giving further powers to the Assembly will turn up. At the end of it all, we will be told that the vast majority of people who responded were in favour of giving further powers to the Assembly, and those further powers will be given. Then phase 2 will begin, in which, I see from the report, we will consider “varying” the powers of the Assembly. Well, we all know what that actually means. It means increasing the powers.
Hywel Williams
The hon. Gentleman seems to be taking a rather “conspiratorial” view of these developments in Welsh politics. Does he think that the referendum, too, was a conspiracy?
David T. C. Davies
It is not a conspiratorial view; it is a view based on the history of what has been going on. We seem to be locked in a kind of constitutional groundhog day, with the same sequence of political events repeating itself over and over again. The process starts with the Welsh Assembly being granted a whole load of powers and saying, “That’s it, we’ve got all the tools we need for our toolkit.” That seems to be the popular term at the moment. “We’ve got everything we need now. We’re just going to get on with the job.” Then, a few years—or, in this case, a few months—later, it says, “Well, actually, we can’t do the job we need to do. We just need a few extra powers.” Then a commission of the great and the good is set up, often with the same people appearing time and again. They go off and consider the matter, public meetings are held, and they come back and say, “Yes, we need a bit more.” Perhaps a referendum is held, or perhaps there is just another Act of Parliament or some statutory instrument. The Assembly gets what it is given and everything goes quiet for a few months. Then the whole thing starts up again. We are in the first phase of the cycle at the moment. This is not a conspiracy; it is just how things have been happening in Wales since about 1999.
I would be delighted if we really were going to consider varying the powers of the Welsh Assembly, because I assume that varying can cut both ways. It could mean that, rather than just handing the Assembly new powers, we could look at taking a few powers away from it, once in a while. I suggested that in a Westminster Hall debate a few years ago, when Wales was doing particularly badly on the health service, but it did not seem to meet with much approval from anyone—certainly not anyone in my political party. The very fact that it had been suggested was a source of outrage to many.
The Welsh Assembly can take powers away from local authorities that are failing in Wales and, quite rightly, it has used them from time to time, so I see no reason why the Silk commission should not look realistically at the possibility of removing powers from the Welsh Assembly in devolved areas if standards have clearly dropped below those that all in the United Kingdom are entitled to expect.
Another area that I suspect the Silk commission will not look into—the right hon. Member for Neath (Mr Hain) mentioned it—is environmental taxes. To my mind, that would be very interesting indeed. As the right hon. Gentleman rightly said, Tata and other manufacturing companies in Wales that use large amounts of electricity are very angry about the way in which the environment has been used as a means to impose all sorts of extra tax burdens. The issue of the environment is worth exploring, but now is not the time or place—[Hon. Members: “Come on.”] It is very tempting, but I see Mr Deputy Speaker imperceptibly shaking his head at me. It is not for me to pose the question of why the temperature has not got any hotter since 1998, despite the fact that large amounts of carbon dioxide have gone into the atmosphere. That is not a question for today, but it is a very interesting one none the less—and I have never heard a satisfactory answer to it.
Let me move on to a more important question. If we accept that things will at some point start getting hotter because of carbon dioxide, requiring us to put all sorts of taxes on our industries, and if Welsh industries such as steel are affected, surely it is only right that those taxes be applied not just across the whole of the European Union or Europe but across the whole world. If we do not insist on that as a starting point, all that will happen is that those manufacturing industries—so important to us in Wales for jobs—will simply relocate to other parts of the world where those taxes are not being applied. It will not make a jot of difference to global carbon emissions, which will continue to come from wherever those factories relocate, but it will make a difference to jobs and the amount of tax that the Treasury collects within the UK. I would love to see the Silk commission looking into that idea, but I am afraid that I shall probably be disappointed.
You might conclude, Mr Deputy Speaker, from what I am saying that I am in some way against devolution—[Hon. Members: “No, never!”] I am not. I am devo-realist. I was against the idea of a Welsh Assembly and I have voted no at every opportunity ever since, but I say genuinely that I have a very high opinion of the abilities of the individual Members of the Welsh Assembly. I had the pleasure of working with them for eight years. I do not doubt their motives. I do not doubt the credibility of people like Rhodri Morgan, Dafydd Elis-Thomas or Nick Bourne, even though I might disagree with them on many fundamental issues.
My problem with what we are doing is very simple. The West Lothian question is the elephant in the room here. Every time we give further powers to the Welsh Assembly, we are weakening the United Kingdom. I believe that even some Labour Members, in their quieter and more reflective moments, share some of these concerns. Surely the priority for us constitutionally should not be thinking about granting further powers to the Welsh Assembly, but ensuring that all citizens of the UK have the same constitutional powers. The issue is about addressing the fact that we here in the Westminster Parliament vote on how the English run their schools, discuss how the English run their hospitals, yet we do not accept the right of anyone, including Members of Parliament, to have any say in how these issues are dealt with in Wales.
Jonathan Edwards
May I take it from the hon. Gentleman’s comments that he is arguing for a fully federal United Kingdom, whereby all the historic nations of the UK are treated on an equal basis?
David T. C. Davies
The hon. Gentleman is right. I have made that view public in the past. I think there is a strong case for looking at some form of English Parliament or some means to prevent Welsh and Scottish MPs from voting on matters that affect only England. I repeat that I have already made that viewpoint public. I do not pretend to know the exact answer, but I am in favour of something along those lines. It might well be that at that point, we would have to consider increasing the powers of the Welsh Assembly in line with those of the other parts of the United Kingdom. The hon. Gentleman will know, however, that that is something that happens in many countries across the world—in Canada, Germany and countries with a Commonwealth tradition such as Australia, for example. If that is thought through properly, it can work. My current difficulty is with the asymmetric nature of our arrangements. Giving further powers to Wales in this way—through the Silk commission if that is what it decides—is going to make them even more asymmetric.
Mark Tami (Alyn and Deeside) (Lab)
Would the hon. Gentleman not accept that in a border area such as mine, people go across the border to use hospitals, for example, so it is quite reasonable for me to be concerned about what is happening to the health service in England, because many people in my area use it?
David T. C. Davies
Of course I agree with the hon. Gentleman. I live on the border as well. Many of my constituents go across the border, but what right do he and I have to tell the English how to run their health service if we are not prepared to accept that English MPs whose constituents might come over into Wales should also have a voice over what happens within the Welsh health service?
Mrs Gillan
No doubt my hon. Friend will therefore give a warm welcome to the statement made on 8 September by the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Forest of Dean (Mr Harper), the Minister responsible for political and constitutional reform, announcing our intention of establishing a commission to look into the West Lothian question. I understand that in the not too distant future there will be further statements on the subject, which will of course address the important questions that my hon. Friend is raising today.
David T. C. Davies
I do indeed welcome that statement, and I look forward to participating, but I hope that we do not end up putting the cart before the horse. I hope that we do not all go off in different directions, rather than getting things done in an orderly fashion. The constitution is a very delicate thing, and it needs to be balanced.
Mr Hain
I agree with the hon. Gentleman that the constitution is delicate and needs to be balanced, but is not the answer to his question—the answer to the English question, if you like—that we should remedy the asymmetrical nature of devolution in the United Kingdom by devolving powers to the English regions, not just to the London region, which already has considerable powers? [Interruption.] The Secretary of State mutters from a sedentary position that that has been rejected, and I accept that it was rejected under our Government in the north-east referendum, but I felt at the time that that was a very low-grade form of devolution. One of the things that people told me on the doorsteps in such places as Middlesbrough and Tyneside was that they did not believe in another form of regional government if it did not involve any real powers. If it did involve real powers, however, that would be the answer to the hon. Gentleman’s question.
David T. C. Davies
I suspect that there may be something in what the right hon. Gentleman says. The referendum on powers in the north-east took place quite early in the process, and there is now a much wider understanding of the implications of devolution throughout the United Kingdom. Nevertheless, there is still a problem.
We devolved powers to Wales, Scotland and Northern Ireland on the basis of their historical roles as nations within the United Kingdom. I do not see how we can just come along and artificially create nations within England where nations have not previously existed. I also suspect that this is not a debate that any of us here should be having. It must ultimately be for English MPs to decide for themselves whether they are content to remain representatives in England or would prefer to be representatives in the regions thereof. Let us not forget that there are 6 million people in Scotland, 3 million in Wales and 1.5 million in Northern Ireland. We have not so far devolved powers on the basis of the numbers of people in the countries concerned, and we therefore have no real right to say that because there are 50 million or 55 million people in England, they do not have the right to have a Parliament based on their own historic nation.
Mr David
Does the hon. Gentleman not accept that until now the primary motivation for devolution has been not a recognition of nationhood, but the need to enhance democracy? That is what devolution is ultimately all about. It is not about placating nationalism; it is about enhancing democracy.
David T. C. Davies
There have been several motives for devolution. Nationalists saw it as a stepping stone towards independence—I imagine that they would be fairly honest about that—while others, some of whom are now on the Opposition Benches, were afraid of nationalism, and saw devolution as a way of preventing the nationalist genie from getting out of the bottle. I think that they were mistaken. I fear that some may have taken the narrow political view that Wales would always be dominated by Labour whereas Britain would not necessarily be, and that therefore it would not be a bad idea to carve out little corners of the United Kingdom where Labour could always have an inbuilt majority and a left-wing Government could rule. I dread to think that that is the case, but, being a bit cynical, I suspect that there may be some grounds for believing that it is.
Owen Smith
The hon. Gentleman is, as usual, being generous in giving way. Does he agree that a further crucial aspect of the rationale for devolution in Wales and Scotland was demand, and that that may have been a greater consideration than nationhood? Does he also recognise that, because of a feeling that—for reasons related to distance and divergence in economic performance—people are getting worse deals from the Government in some parts of England than in others, such as the south-east, there may well be a growing demand in some areas for a fresh look at the possibility of English regional devolution?
David T. C. Davies
The answer to the hon. Gentleman’s first question is that despite the enormous amount of money spent on the referendum in 1999, only one in four people went out and voted yes, so the demand could not have been that great. As for his second question about the issues that are bubbling away in the various regions of England, I do not profess to know the answer, and I certainly will not be trying to pose that question. As I said to the right hon. Member for Neath (Mr Hain), the English will have to work out for themselves whether they wish to base a future settlement on England itself or on regions thereof. It is not for us to tell them what to do.
Huw Irranca-Davies
It would be wrong for English MPs alone to discuss, and decide on, such matters. As a UK parliamentarian, I agree that English devolution is the great unanswered question. However, Welsh MPs—along with Scottish and Northern Ireland MPs—will want to have a say in that because it will have a considerable impact on the UK as a whole. I ask the hon. Gentleman to consider this point in his peroration, because we would not want non-England MPs to be shut out from the debate on English devolution. Nor would I want England MPs to be shut out from our debate here today, and it is great that some England MPs are present.
David T. C. Davies
That is a sensible point, but my peroration has become more of a conversation now, and I wish to return to it. I shall think about what the hon. Gentleman has said, however, and I suspect that all of us will want to contribute in various and different ways if and when the England question arises.
The Silk commission is addressing fiscal powers. The leader of Plaid Cymru—I think he is still the leader—said that that could have an historic effect on Wales, by which I assume he means that it will lead to all sorts of extra powers being acquired and Wales heading much further along the road that he wishes to travel down. I am very concerned about the prospect of giving fiscal powers to Wales, however. It is hard to see how we could maintain the integration of the various parts of the United Kingdom if we were all doing different things fiscally. The Silk commission has apparently ruled out borrowing, but I have been told by those in a position to know that it has ruled out only some kinds of borrowing, and anything can be examined. There are certainly ongoing discussions about different kinds of borrowing.
Mrs Gillan
The Silk commission can look at future borrowing, whereas current borrowing is at present the subject of bilateral discussions between the Treasury and the Welsh Government. The Silk commission can look at future borrowing.
David T. C. Davies
I thank my right hon. Friend for that clarification, but what she says will not help me sleep any more easily tonight.
Before this debate started, an urgent question was asked on the Floor of the House about what has been going on in the eurozone area. That is, in fact, fairly simple to understand. There is a central bank and a currency area with all sorts of individual parts within it—we call them nation states still, although Brussels will probably want to change that in a few years—and those individual parts have all been doing their own thing. The Greeks have been borrowing as much as they wanted, and have been spending it on allowing their civil servants to retire at 50 and on buying off strikes. In short, they have been spending it on doing things we would never even consider doing—filling people’s mouths with gold, as Nye Bevan would have put it. As a result, there is now an enormous crisis across the whole area because the taxpayers of Germany are simply not prepared to bail out nations that have been behaving in an irresponsible fashion.
Yet we in the United Kingdom, having escaped the economic servitude of the euro—which many Opposition Members would have liked to put us into—now seem to want to create a situation whereby exactly the same thing could happen on a smaller scale. We have a central bank and Government responsible for interest rates and general financial policy, but there is now a proposal that the constituent parts of the United Kingdom—specifically, in this instance, Wales—should be free to go off and borrow at low interest rates, knowing that ultimately somebody else could pick up the bill.
Jonathan Edwards
Does the hon. Gentleman not recognise that currently local authorities in Wales can borrow and raise their own revenue, so what is the difference?
David T. C. Davies
They can only do so under fairly strict terms of engagement. There is no major difference, but what I am saying is that I do not want any more bodies to be able to do that. I certainly would not welcome the idea of the Assembly doing what Westminster Governments have done before—let us be honest about it—which is wait until a general election is coming along and then suddenly borrow billions of pounds on the international markets knowing that not many people understand the difference between debt and deficit, and are therefore unlikely to be able to work out the probable consequences of what is happening. Governments buy themselves elections in that way. I do not want to put that temptation in front of Members of the Welsh Assembly.
Finally, I am even more concerned about the idea of a separate judicial system for Wales. That would be costly and complex.
Geraint Davies
Before the hon. Gentleman leaves the subject of taxation, on the important issue of inward investment and growth, which various speakers have focused on, does he agree that what business needs to provide inward investment is certainty? If there can be changes in corporation tax, income tax and all sorts of other tax, that will put companies off investing in Wales. The only tax that people want to get rid of is the tax that everybody is charged when they cross the Severn bridge—the Severn bridge toll. That is a real barrier to inward investment and trade. We should get rid of that and forget the rest.
David T. C. Davies
The hon. Gentleman knows perfectly well that getting rid of the Severn bridge toll is impossible, because he and I helped to write the report. It is not a matter of law, but a matter of a commercial contract between four companies that came together to build the bridge under certain agreements. There is nothing that we can do about it. Of course the Welsh Assembly, or even the UK Government, could decide to take on the costs of the Severn bridge if they wanted to. However, the hon. Gentleman knows very well that the Government do not have any money at the moment. We have a £1 trillion debt, most of which we inherited from his colleagues in the previous Government, and we are overspending by £168 billion every year. We are not really in a position suddenly to take on the burden of the Severn crossing.
I do praise the hon. Gentleman, however, because he has said something with which I entirely agree: business needs certainty. Businesses are already annoyed that they have to pay the cost of coming over the Severn bridge. The last thing they want is the potential for a load of extra taxes when they come into Wales, and a lack of certainty over whether those taxes may be applied at a later date if they decide to relocate there. To my mind, that is a very good argument for not devolving the power over such taxes to the Welsh Assembly.
I will finish on my point about the judicial system. The last person to toy around with the judicial arrangements in Wales was Henry VIII. He formed a judicial area for Wales, but people in Monmouthshire were so incensed that they decided to opt out of it and in to the Oxford assizes. That caused confusion all the way through to the local government reorganisation of 1974. Various people passed legislation, and some of it applied to Wales, some to Monmouthshire and some did not apply anywhere. Nobody knew what they were doing. People were driving to Chepstow to get a drink in the pub because the chapels had banned it, or something. It was absolute chaos. The last thing we want is a repeat of that. I say to all Members of the House that Monmouth is an integral part of Wales, Wales is an integral part of the United Kingdom, and for as long as I represent this constituency, long may that remain the case.
Paul Murphy (Torfaen) (Lab)
It is always interesting and a pleasure to follow the hon. Member for Monmouth (David T. C. Davies). I am not a great fan of Henry VIII, for obvious reasons. I agreed with some parts of the hon. Gentleman’s speech and disagreed with others. The thrust of his argument, I think, was that he was not keen on the Silk commission and its activities. I remind him that it was the Secretary of State for Wales who took the responsibility to initiate the commission, as she told us today. Government Members really have to get their act together on what they do and do not want.
I welcome the commission and I certainly welcome its members. I have known Paul Silk for at least a quarter of a century. I know all the other members in one capacity or another. I think that they are excellent people who will doubtless do a very good job. It would have been better, however, if the House of Commons had debated this issue before the commission’s terms of reference had been agreed, so that Members, including me, had the opportunity to contribute the ideas that are put before the House this afternoon.
I warn this House, my colleagues in the National Assembly and, I suppose, the members of the Silk commission that I, like the hon. Member for Monmouth, have some misgivings, warnings and suspicions about what lies behind this initiative. As with the Bible, people have different interpretations. Wars have been fought on interpretations of the Bible, but in this case people have different ideas as to what the Silk commission should or should not do, or as to why it should do it in the first place.
The first point to make is that the Secretary of State mentioned “consensus” at least six times. My right hon. Friend the shadow Secretary of State referred to the fact that there has been no consensus on constitutional issues in this House of Commons since the coalition Government took over. So I find it strange that we are now going to have consensus on this commission, given that we did not have consensus on the most important constitutional development that Wales has seen for generations: the 25% reduction in the number of our Members of Parliament. That is what I am concerned about. How can we accept that the Secretary of State or the Government are serious about consensus given not only that they did not give us time to debate that matter in the Welsh Grand Committee, as she knows we should have done, but when various debates were held in the other place, any sort of so-called consensus fell to bits and the decision was made anyway? Why should we, at this stage, believe that there is consensus on the Silk commission?
Alun Cairns
The right hon. Gentleman makes an extremely important point about consensus and it is a strong message that needs to go to the Silk commission, but is not the original root of all these inconsistencies that we now face the lack of consensus in 1997, when Labour let the genie out of the bottle and we started on the devolution road? I am mixing my metaphors, but I hope that I have made the point.
Paul Murphy
The hon. Gentleman knows that historically I was opposed to devolution—I changed my mind as the years went by—but we had to accept what the people of Wales decided. In 1997, they decided on devolution, albeit by a small majority—we must remember that the Conservative party did not get a majority of Members of Parliament, but we still have a Conservative-led Government—and in the referendum held earlier this year the overwhelming view of people in Wales was that there should be extra powers. It was the people who decided what they wanted in the end, and I agreed with them this time.
I repeat that we do not want to hear about consensus, given that that was abandoned by this Government when they introduced the Bill to reduce the number of our Members of Parliament. For the first time since 1832 we will have fewer than 40 Members of Parliament representing Wales in this House. I am not arguing about the nature of equal constituencies—that is for another debate—but I am saying that the reduction from 40 to 30 in the number of Welsh MPs reduces the influence of Wales within the United Kingdom. I will address that in a few moments’ time.
Part I of the commission’s remit is to deal with money: the financial responsibilities and the remit of the Welsh Assembly. We are told that this is all about accountability, but the hon. Member for Vale of Glamorgan (Alun Cairns) just referred to the devolution settlement of 1997. Such a settlement also took place in Scotland and later in Northern Ireland, where I played a part. In all those settlements that issue of financial accountability was raised, and it was argued by some, “If a parish or community council can raise revenue, why cannot a Government in Edinburgh, Belfast or Cardiff do so?”
When I chaired the talks in Northern Ireland on whether there should be income tax powers in Northern Ireland, the meeting lasted less than an hour. People in Scotland decided that they would have the possibility of tax-varying powers, but those have never been used. We in Wales rejected this from the beginning, and there was a reason for that: the resource base of Wales is much lower than that of Scotland—the resource base of Northern Ireland is even lower than that of Wales—and therefore the amount of money that could be raised by income tax in Wales or Northern Ireland, and, to a certain extent, in Scotland, is infinitesimally smaller than the amount that could be raised in England. This proposal was therefore abandoned.
The idea of how we finance our devolved Administrations, therefore, came down to the idea of the block grant. That system is not unique. The hon. Member for Monmouth (David T. C. Davies) referred to asymmetrical devolution, and that is what occurs in Spain, except that there they have devolution everywhere. They get their money through a system of distribution of block grants and, as my right hon. Friend the Member for Neath (Mr Hain) said, they are able to ensure that there is proper distribution of money so that poorer areas are helped by richer areas such as Catalonia.
Hywel Williams
There is of course the exception in Spain of the Basque country. I am not arguing for us to adopt that model, under which the Basque country is taxed and money is sent down to Madrid, rather than the other way around.
Paul Murphy
Yes; I am talking in general terms and that may well be an exception. A block grant, based on need, going to various parts of the devolved administration is the system that was decided on. That is why we have to be very careful; we tinker with this at our peril.
An issue on which the Secretary of State and I had an exchange back in May was about whether, were there ever to be income tax-raising or varying powers in Wales, we should have a referendum to approve that. She stated in her answer to me:
“He is quite right that giving tax-raising powers would involve another referendum”.—[Official Report, 11 May 2011; Vol. 527, c. 1148.]
It would not be constitutionally right or proper for there to be tax-raising or tax-varying powers in Wales, so far as income tax is concerned, without the people’s saying so.
Roger Williams
I do not think it has ever been suggested that the block grant should be replaced entirely by tax-raising powers. Most systems rely on a hybrid system, as with local government systems, in which there is a block grant as well as tax-raising powers.
Paul Murphy
I think that if the National Assembly for Wales ever had any tax-raising powers, the system would involve such hybridity. However, I say to the hon. Gentleman that there is a concern, which I suspect is shared by people in Northern Ireland, although the comparison between Northern Ireland and Wales can go only so far because there is a land border between Northern Ireland and another sovereign state on the island of Ireland and, obviously, we have no such border. It is suggested that if a corporation tax were introduced in Northern Ireland, although some interesting benefits could result from it, the block grant would be reduced correspondingly. If that is what is happening in Northern Ireland I would say to the Silk commissioners to beware, because the same could happen in Wales. We might be told, “You can have this tax or that tax, but we’ll cut your block grant,” and that will address the accountability gap that has been referred to. That would be dangerous because it would mean that what we are entitled to through the United Kingdom taxation system would be reduced by even more than is the case at the moment.
In recent months, other Members of Parliament have said in the House of Commons, including, doubtless, in this debate, “Wales, Scotland and Northern Ireland do much better than we do in the English regions. Look at the Barnett system that they have had for all these years. Look what they can do in Scotland—they can change student fees and pay to have their old people in homes and all the rest of it.” But those people forget that those countries might not do other things in the way that England does. That is what devolution is all about.
The thrust of that argument is that we in Wales are somehow or other getting more money than any other part of the United Kingdom. That is the case for some parts of the UK, but an interesting fact was referred to by the Holtham commission and in the House of Commons note in relation to the Oxford Economics report, which my hon. Friend the Member for Swansea West (Geraint Davies) mentioned. If we say how much money goes to Wales from central Government and how much money is raised in Wales, of course there will be a deficit. In Wales, the deficit between the money raised and the money going in is £14.6 billion. Some might say that that is a great deal of money, but in the south-west, across the Bristol channel from us, the deficit is £15.6 billion. In the west midlands, across the border from Powys, it is £16 billion, whereas in Yorkshire and Humberside it is £16.9 billion and in the north-west of England it is £23.9 billion. Let no one in this House, or anywhere else, tell us that somehow or other we are getting some sort of better deal in Wales than the English regions. It simply is not true.
There are two other issues on finance including, first, the Barnett formula, on which my right hon. Friend the Member for Neath touched. I cannot for the life of me understand why it is impossible for the Silk commission to consider the Holtham commission and, indeed, what happens to Barnett as part of its remit. I am not suggesting that it should hold up discussions between the Secretary of State, the National Assembly for Wales and the Welsh Government, but to say that a commission that is dealing with the Assembly’s financial responsibilities cannot look at how the block grant is dealt with is daft.
Roger Williams
I agree, but it has been suggested that such an approach would not be welcomed by the Welsh Assembly Government.
Paul Murphy
That is for the two Governments to discuss. In the House of Commons, we are debating what it is sensible for the Silk commission to consider. I said that I did not want that to hold up any discussions that are under way, because there are implications for Scotland and Northern Ireland, but it is crazy that that cannot be discussed while all the other issues affecting money are being discussed.
I cannot understand from the response of the Secretary of State to the hon. Member for Monmouth the difference between current and future borrowing. Either one agrees with the concept of the Welsh Government being able to borrow, or one does not. The Northern Ireland Executive and the Scottish Government will be able to borrow, and local government can borrow, so why on earth can the Welsh Government not borrow? It is quite incongruous that that is the case, and I am glad at least that they can discuss borrowing, even if they cannot discuss borrowing at the moment.
Part II of the terms of reference is about powers and functions, and I agree that there is a case for looking at incongruous and difficult cross-border issues, which need to be tidied up. Most Members of the House of Commons would be wary of transferring policing and justice to the Welsh Assembly. We have a different system from Scotland, and we are so bound up with the English judicial and legal system that I would not agree with such a transfer. Another issue that will not be discussed at all by the commission—this is why it would have been useful for the House of Commons to discuss its terms of reference before we had the debate—is the way in which the Assembly is voted in. If there is going to be a reduction in the number of constituencies, presumably to 30, with a relationship between Parliament and the National Assembly, which is voted on, it is unusual that that issue should not be debated or discussed by the Silk commission, particularly as any decision on how we elect the Welsh Assembly should be based on a proper mandate at a general election. I hope that the Secretary of State and her Government will not even contemplate discussing those matters until after the next election.
Nick Smith (Blaenau Gwent) (Lab)
I am interested in my right hon. Friend’s point about constituencies and coterminosity. Wherever possible, Assembly constituencies should align closely with boroughs and parliamentary constituencies, because that leads to better government, better democracy and better services.
Paul Murphy
But the Parliamentary Voting System and Constituencies Bill had nothing to do with better democracy and everything to do with partisanship. The Government were so stubborn in the other place in refusing 10% flexibility that taking local government boundaries into account is hardly possible because of the rigidity that has been introduced in the system. If there had been consensus, that might have been considered, but there was no such consensus.
Finally, we have to be careful that the proposals are not based on a hidden agenda from the Government—what I call the Trojan horse. The hon. Member for Monmouth referred to the West Lothian question, and the Silk commission’s hiving off financial responsibility to the Welsh Assembly, and perhaps—we do not know for sure —taking away the block grant is part of the agenda of the new Conservative party. It used to be the Conservative and Unionist party, but it has long since ceased to be Unionist.
The West Lothian question means that the Government want to have two classes of Members of Parliament, not British-United Kingdom Members of Parliament who speak on everything because we have been elected by our electors to talk about the United Kingdom—every part of it: Northern Ireland, Scotland, Wales and England. I referred to the complaints time and again that we are getting too much money in Wales and Scotland. Perhaps the most obvious thing is that out of 117 Members of Parliament representing constituencies in Wales, Scotland and Northern Ireland, only nine come from the Conservative party. It will probably be wiped out at the next general election in Scotland and who knows where else. The combination of all those things, to me, means that the Conservative party has now become a party of little England. I am sure the hon. Member for Monmouth, who represents a Welsh constituency, would agree.
David T. C. Davies
Does the right hon. Gentleman share my concern, then, about colleagues in his own party who refuse to appear before the Welsh Affairs Committee to discuss devolved issues? Does he not think that that smacks of a little Wales mentality?
Paul Murphy
No, I do not. I accept, though, that there are people in my own party who may agree with some of the things that I think the Conservative party is guilty of—that is, not being awfully worried if Scotland and Wales left the Union. I have been thinking that for over a year now.
The New Statesman published a very good editorial last week, which finished with this:
“For the Tory right, an independent England—economically liberal, fiscally conservative, Eurosceptic, Atlanticist—is an attractive prospect. The United Kingdom, one of the most successful multiracial, multi-faith, multinational states the world has ever known, remains a cause worth fighting for. Yet, over the past weeks, fixated by the EU, the Conservative and Unionist Party seemed less aware of this than ever.”
The Trojan horse is not Welsh nationalism, but the English nationalism of the Conservative and former Unionist party.
Mrs Gillan
I am enjoying the right hon. Gentleman’s contribution and I know that his words will be passed on to the Silk commission. I assure him that I remain a firm Unionist, not the sort of Tory that he describes.
On a point of information for him on the borrowing powers, the Welsh Government have the ability to borrow under the powers that they inherited from the Welsh Development Agency. The bilateral talks on those borrowing powers are about how that borrowing could be used more effectively. What the Silk commission has been entrusted with is examining new borrowing powers in the context of the package of tax and borrowing powers. I hope that that clarifies the position on borrowing, which I know has been the subject of some speculation.
Paul Murphy
Indeed; I am grateful to the right hon. Lady for telling the House that. In a sense, it confirms my view that there is confusion about what is happening with regard to Barnett and to borrowing. There appear to be simultaneous discussions on borrowing and on what happens to Barnett on the one hand, and the Silk Commission on the other, whose job it is to look at financial responsibility as well. I am saying, “Don’t stop the talks.” It is obvious that Governments have to talk to each other, particularly as we live in difficult times, but I am also saying—she has clarified the position with regard to borrowing—that it is important for that to be part of the Silk commission’s remit.
Although I welcome the Silk commission, I warn the people of Wales that the position is not as simple as it might seem on the surface. I believe that the Secretary of State is generally in favour of the Union, but—judging by the actions that have been taken in the House of Commons over the past year or so—I do not believe that that is true of much of the rest of her party. Those of us who are genuinely in favour of the Union want the Silk commission to be about helping the people of Wales ultimately to have a better deal from the United Kingdom.
Roger Williams (Brecon and Radnorshire) (LD)
It is always a privilege and a challenge to follow the right hon. Member for Torfaen (Paul Murphy). He put forward some considered and powerful arguments that I am sure the commission will read and take into account when they set out their programme for the work that they have to undertake.
As we look forward to Armistice day and remember the men and women who have made a sacrifice for this nation, we also remember the Welsh men and women who are currently serving in the British Army. Just today I had an e-mail from Brigadier Russ Wardle, who recently finished his tour of duty as brigadier of 160 (Wales) Brigade in Brecon. He told me that 40 servicemen are still in Baghdad performing important roles, training the Iraqi army and police in the duties they will take up shortly. I will meet the new brigadier, Brigadier Napier, shortly. I am so pleased the 160 (Wales) Brigade will stay in Wales, contrary to speculation just before the Welsh Assembly election.
I thank the Secretary of State for securing this important debate, which has already proved its worth. It is a great day for Wales. It is fantastic that there is cross-party consensus on the commission’s terms of reference to take a considered view on the funding and future of the Welsh Assembly. Liberal Democrats have consistently supported a commission to look at the funding arrangements between Westminster and Cardiff, and it is to the credit of the coalition Government that the Silk commission will go ahead after 13 years of Labour inaction on this crucial issue. Notably, the three promises on Wales made in the coalition agreement—the housing LCO, the further powers referendum and the commission—have now been met, and I commend the right hon. Lady for that. With good Conservative support, Liberal Democrat policies are helping the people of Wales.
Paul Murphy
The hon. Gentleman refers, rather provocatively for him, to Labour inaction and the fact that great events have taken place, but does he accept that it was a Labour Government who brought in devolution in the first place?
Roger Williams
I absolutely accept that and am sure that he would accept that Labour had the full support of the Liberal Democrats, including those in Wales. Indeed, my predecessor, Richard Livsey—sadly, deceased—played an important part in that and, I am sure, would have liked to play a part in the Silk commission, too.
That is not to say that the Secretary of State’s work is over; many other things need to be done for Wales, including nurturing and supporting the devolution settlement. I look forward to working closely with her in the near future.
Mr Mark Williams (Ceredigion) (LD)
Does my hon. Friend take some assurance, as I do, from the Secretary of State’s words on timetables? When questioned by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), she set out a range of timetabling scenarios, which was a relief to many of us. There is a hope and expectation that that can be achieved before the general election, but the fact that there is a timetable reassures those of us who were concerned about this being shoved into the long grass or into a cul-de-sac. The Government have proposed that as a real commitment.
Roger Williams
I thank my hon. Friend for his intervention, which brings me to a point I had intended to make later. The present coalition agreement sets out the programme for the first half of this Parliament. Work now needs to be set in hand to take forward the coalition for the second half, which will obviously include proposals for Wales. When Wales said yes to having a Welsh Assembly in 1997, the devolution package was missing one critical element. The Welsh Government have the luxury of spending money handed out by others, but unlike those in Scotland and Northern Ireland they have no power to borrow or raise money; as has been suggested, they have fewer powers than local authorities. I believe that the lack of accountability has led to some irresponsibility in the Welsh Government’s spending of money. Indeed, when the Chief Secretary to the Treasury visited Wales in April he said that the commission
“will aim to develop the financial autonomy of the Welsh Government to give Wales more opportunity to create the right environment for encouraging growth”
and jobs. I thank him for his support. As a Scottish MP, he brought knowledge of the Calman commission to the proposals, whose usefulness should not be underestimated. Welsh Liberal Democrats will engage fully and constructively in this process. We will urge the commission to bring more accountability and responsibility to the Welsh Government and to give Wales further power to drive forward economic development, creating jobs and prosperity in Wales.
Huw Irranca-Davies
I thank the hon. Gentleman for giving way in the midst already of several very good contributions, but will he clarify what he understands by “financial accountability”? We all understand it in broad terms, but will it be financial accountability with some additional tax-raising or tax-varying powers, or accountability from within a deficit that has been lopped off the block grant? Robbing Peter to pay Paul and then asking the Welsh Government to be accountable for money that the UK Government have taken away from them, and for which the Welsh Government are then able to raise taxes, does not seem like real accountability. I want to protect what is already in Wales, and if there is accountability let it be for additionality, not for something that has been taken away from Wales.
Roger Williams
I recognise the hon. Gentleman’s first point, but not his second. We would all like to see local authorities raising more of their spending power locally so that they become more accountable, and I believe that the situation would be the same for the Welsh Assembly Government, although I do not see any reduction in the spending proposed for them. I may come on to that later, however.
I thank also the Deputy Prime Minister for his work in broadening the commission’s terms of reference and composition. There were people who wanted a much smaller commission, of perhaps only three people and without political appointees, but I am glad that the consensus was for a much larger and broader one. The political appointees are a huge boost to the commission, and they bring vital political experience to its work.
I commend the choice of Paul Silk to chair the body. Paul has worked in this House, where he had a fine reputation, and in the Welsh Assembly, so he is perfectly placed to understand the workings of both. I cannot think of an individual who is better informed to carry out this important task, and I wish him well. I and my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) went to the same school at the same time as Paul, so I can vouch for his high academic attainment.
Dyfrig John brings to the table 35 years of experience in financial services, and his financial know-how will be invaluable to the commission. He and I were members of the Development Board for Rural Wales, along with the hon. Member for Montgomeryshire (Glyn Davies), who was chairman at the time, and Dyfrig was instrumental in maintaining a banking presence in Llandrindod Wells, which on its own would be enough to recommend him for the job.
Professor Noel Lloyd is a distinguished academic from Aberystwyth university, and before he became its highly regarded vice-chancellor he was a practising mathematician, so his ability to do sums means that Wales will not fall into the same trap as Ireland, which underestimated its reserves by €3 billion, or Germany, which did so by €50 billion.
Rob Humphreys, the Liberal Democrat representative, has long been a champion of devolution. He was heavily involved in Swansea’s yes campaign in 1997; he served on the all Wales convention; and he was the Liberal Democrat representative on the yes campaign steering group in 2011. Rob’s leadership of the Open university gives him a knowledge and understanding of young people and adults, and he will bring real expertise to the commission.
I also pay tribute to Nick Bourne, who served the people of mid-Wales very well during his time as an Assembly Member. His commitment to Wales, all things Welsh and, particularly, the Welsh assembly made him an example to all political leaders in Wales—and I look forward to his memoirs.
It is also great to have the ministerial experience of Sue Essex. She became the Minister for Finance, Local Government and Public Services following the 2003 election, so she has first-hand experience of the financial arrangements between Cardiff and Westminster.
Last, but certainly not least, there is Dr ap Gwilym, whose performance against Paxman showed his commitment to, knowledge of and passion for devolution. It is a dedicated and highly talented team with a range of expertise.
It was almost inevitable that we would talk about the Barnett formula, because it is an essential part of delivering a prosperous Wales. I am disappointed that it is not included in the Silk commission’s remit, but I understand that the Welsh Assembly’s Labour First Minister was not keen that it should be included.
I understand that bilateral discussions are taking place between London and Cardiff, and they will include not only the Secretary of State, but the Treasury.
Guto Bebb
I was surprised by the comments of the right hon. Member for Neath (Mr Hain) when he said that the Silk commission’s lack of consideration of the Holtham report is an omission. I, too, have heard the First Minister state categorically that the Holtham report should be subject to bilateral discussion between the two Governments. Are we seeing a split in the Labour party’s approach to the issue?
Roger Williams
I am sure that if there is a split, my hon. Friend will comment on it later in the debate.
I understand that bilateral discussions will take place, but I ask for more openness and transparency in that dialogue, because other people can play an important part in that work.
We can learn lessons from the Calman commission, which concluded that the devolution settlement had established a Parliament in Scotland that could be held to account for spending choices, but that lacked accountability in raising revenue. It proposed a reduction in block grant funding from the UK Government to Scotland in exchange for power for the Scottish Parliament to raise its own taxes. The Scotland Bill implements the recommendations and creates a Scottish rate of income tax. That will apply alongside existing UK-wide income tax.
In Scotland, the lower, higher and top rates of income tax will be reduced by 10p. The Scottish Parliament will then make a tax decision to levy an additional rate, which may match rates elsewhere in the UK, or be higher or lower. That will replace the Scottish Parliament’s existing power to vary income tax in Scotland by 3p up or down. Such a change, implemented by a Liberal Democrat Secretary of State, gives Scotland more accountability for its spending, and can be only good for the country. I would be pleased if the Silk commission recommended something similar for Wales.
The Calman commission addressed the rebalancing of the boundaries between devolved and reserved policy matters. It recommended devolution of further powers, including administration of elections, licensing power in relation to misuse of drugs, power to set the drink-drive limit, and power to set the national speed limit. It recommended that some powers be retained by Westminster, including regulation of health professionals and corporate insolvency. Aggregates and air passenger duty are not being taken forward for various reasons.
Luckily, this debate includes hon. Members on both sides of the House with first-hand experience of the devolved Welsh Assembly. They include the hon. Members for Monmouth (David T. C. Davies) and for Clwyd West (Mr Jones) and the right hon. Member for Cardiff South and Penarth (Alun Michael). I look forward to their contributions, and have enjoyed some of those that have already been made. My hon. Friend the Member for Montgomeryshire (Glyn Davies) also has considerable knowledge of the matter, but because of his Government role, he will not be able to speak.
Although the new arrangement has been simplified since the referendum, a lot of relevant legislation is spread among many Acts of Parliament. The Government would provide a service if they introduced a consolidation Bill to simplify and make accessible those elements of law that have been devolved, or if there were a 180° turn so that legislation sets out matters that are reserved to Westminster, and all others are devolved, instead of having the present position of legislation setting out devolved matters, and everything else being reserved.
Mr Mark Williams
The hon. Gentleman makes an important point, because there is confusion among the general public about which areas are devolved and which are reserved, as my hon. Friend will know from his constituents, and as I know from mine. We have an important duty to get the message of devolution out there to the general public. Does he hope, as I do, that the Silk commission will also reflect on that?
Roger Williams
My hon. Friend makes an important point. Even politicians sometimes have a less than perfect grasp of which issues are reserved and which are devolved. More importantly, the legal profession finds it very expensive to maintain an up-to-date record, or database, of changes in legislation. If something could be done to simplify that, it would benefit not only the public but the legal profession and people who have to deal with the legislation.
With the commission due to publish in autumn 2012, that leaves two and half years for this Parliament to see the implementation of measures on the issues on which agreement can be achieved. Will the Minister ensure that the report on those issues is produced as quickly as possible?
This is a historic opportunity for Wales. Finally, 12 years after the Welsh Assembly was set up, we can give it the ability and financial responsibility to do that which it was set up to do. It is building a better Wales—a strong nation, firm within the United Kingdom, and active in the European Union and on the world stage.
Mr Wayne David (Caerphilly) (Lab)
I am long-standing supporter of devolution. I believe that it is fundamentally correct for decision making to be as close to the people as is practicable. I consider myself to be a proud Welshman, and British, and I am also an internationalist and a European. I see no contradiction between those various identities.
In practical terms, I strongly supported the work conducted by Gerry Holtham, whose report is seminal. In particular, I strongly endorse his recommendation of the introduction of a Barnett formula, and I am pleased that that was in the Labour party’s manifesto at the last election. It would have been appropriate and sensible for it to be part of the wider consideration of fiscal issues. Nevertheless, that does not alter the fact that it is an important statement, and I look forward to its being acted on.
I welcome the establishment of the Silk commission. Like other hon. Members, I have enormous respect for Paul Silk, who has worked in the Assembly as well as in this institution. He is a long-standing occupant of the Welsh Room here in Westminster, and therefore, in some ways, follows in the footsteps of David Lloyd George. I also welcome the appointment of Sue Essex, whom I know personally and who has a profound understanding of finance and devolution. However, like my right hon. Friend the Member for Torfaen (Paul Murphy) and others, I have reservations about what might be the motivation behind some aspects of the establishment of this commission.
I think that the shadow Secretary of State, my right hon. Friend the Member for Neath (Mr Hain), has been very unfair on the Secretary of State for Wales.
Mr David
Yes, very unfair indeed. He asked how a Member from the south-east of England can have a proper understanding of the situation in Wales—but of course, as we all know, Chesham and Amersham is not in the south-east of England; it is in Buckinghamshire, which is a lot closer to Wales. However, I doubt whether that fundamentally alters the lack of understanding, let alone empathy, for the people of Wales on the part of our current Secretary of State. That is clearly shown in the way that the boundary changes that we are soon to see enacted were pushed through the House of Commons against the interests of democracy and without proper discussion in this House. Unfortunately, therefore, when the word “consensus” is used regarding constitutional matters, a question mark has to be put over whether that involves a genuine statement of intent.
I am concerned that the terms of reference are written in such a way that the work of the commission will be conducted within the parameters of the United Kingdom’s fiscal objectives. We all know what those central Government objectives are—to make cuts, cuts, cuts, and nothing but austerity, austerity, austerity. It is important to realise that when we are talking about fiscal matters regarding Wales, we are talking about not increased resources but fewer resources. The question is how that reduction in resources will be introduced.
We all know that Wales is very dependent upon the block grant, which has been cut by 1.3% since the Conservative-Liberal Democrat coalition came to power. The big danger is that there will be bigger cuts before too long, which is why the context of the commission is very important.
Another of the commission’s terms of reference is worth noting—the need to ensure consistency of fiscal powers within the UK. The hon. Member for Monmouth (David T. C. Davies) made the point that devolution, by definition, is asymmetrical, so why does consistency have to be a bedrock principle of the commission? We ought to recognise that whatever is proposed for Wales will be different from what happens in other parts of the UK, and so it should be.
My third and final reservation about the commission is the fact that Wales has historically been, and currently is, very dependent upon public expenditure. We all know that the Barnett formula and the block grant are important, but let us also recognise that there are other elements of public expenditure in Wales, which are often not recognised but are nevertheless crucial to its well-being.
One of the strengths of the United Kingdom is that, contrary to the nationalist interpretation of British history, Wales is not a subjected nation, under the heel of England. The reality is that there have been transfers of resources from the richer parts of the United Kingdom, particularly the south-east of England, to the poorer parts, and that is how it should be. That is the strength of the UK, and I would not like to see any measures adopted that placed a question mark over the integrity of the UK. Anything that did that would be not just a retrograde step for the concept of the United Kingdom, but potentially damaging to the people of Wales.
I mentioned Gerry Holtham, and we must recognise the importance of his in-depth analysis of the possibilities and options for the development of fiscal powers for Wales. In his introduction to that report, he stated:
“To be sure, economic reality and the integrity of the UK impose constraints on what it is practical or advisable to devolve.”
It is extremely important to bear that in mind, not least because he is an eminent economist but also because he is passionately committed to the principle of devolution. He is saying, in other words, that there is no point having devolution for devolution’s sake. We have to take a pragmatic approach of bringing power closer to the people, but we also need measures that enhance the material well-being of the people of Wales.
Nick Smith
I, too, support the principle of devolution, but what people in the towns of Tredegar, Ebbw Vale, Abertillery and Brynmawr are interested in at the moment is jobs. With long-term youth unemployment having risen by 60%, they want a Government who deliver real jobs to boost our economy in Wales.
Mr David
My hon. Friend makes a very important point. It is essential that we do not consider this as an abstract constitutional debate, because it has a direct bearing on the well-being of the people of Wales, their economic prosperity and the levels of employment that they enjoy.
I have sought to emphasise the importance of public expenditure to Wales. It remains important and will continue to be so well into the future. We are in the process of changing the nature of the Welsh economy, but by definition that process will take a long time to work through. It is important to recognise that. My hon. Friend the Member for Blaenau Gwent (Nick Smith) is correct, therefore, about the need to ensure that this is not an abstract debate, because it impinges on the lives and realities of the people of Wales.
I hope that this will be the start of the ongoing debate that unquestionably we need to have. I also genuinely hope that if we are to have change, there will be a political consensus, not only in the House, but among our colleagues in the Welsh Assembly and many people in Wales, too. That is a desirable outcome to work for, and I hope that it will be achieved, but at the end of the day, whatever course of action is decided upon, our acid test must be: what is best for Wales and its people?
Guto Bebb (Aberconwy) (Con)
I welcome the opportunity to speak in this debate, which is an important debate—although that could have been questioned last night when I was out dining with colleagues. As some Members will realise, we are on a one-line Whip, but I was explaining to colleagues last night that the Welsh Members were on a three-line Whip and that I had to take part in a debate on the Silk commission. One of my colleagues looked at me in a slightly surprised fashion, before asking, “What has silk production got to do with Wales?” Unfortunately, if we talked about the Silk commission to most people in my constituency, apart from the two or three who contacted me about the remuneration of its members, most people would probably give the same response as my colleague, so we need to get out there and talk about the commission so that people can engage with the process.
I fully recognise the description given by my hon. Friend the Member for Monmouth (David T. C. Davies) of how devolution has developed in Wales. Too often, something has been asked for as a means to an end, because the Assembly has argued, “If we get a little more power, we will change the situation in Wales”, and time and time again, further power has been given to the Assembly, only for the complaint to be made that more power is needed. It is crucial, therefore, that we have a real public debate in Wales.
Mr Mark Williams
Is the hon. Gentleman reassured by the breadth of the commission and the fact that there are representatives of all four political parties? Is he also reassured by Mr Silk’s assurance that he intends to take the commission out to the different communities in Wales in order to reassure them and further advance the debate?
Guto Bebb
I am grateful for that intervention; it is an issue that I shall touch on later, but yes, I welcome the fact that the intention is to ensure significant public engagement. However, we have experience in Wales of public consultation in relation to the Assembly that resulted in a pint and a curry and very few people turning up. It is important, therefore, that we have proper consultation on the commission.
Some of the comments made by the hon. Member for Caerphilly (Mr David) need clarifying. We hear a lot from Opposition Members about the cuts being imposed upon the Welsh Assembly by the Westminster coalition Government, but often those cuts are not placed in any context—no recognition that we face a financial crisis or recognition of the £150 billion deficit this financial year. I do not blame all those things on the previous Labour Government, but to make those comments about the cuts to the Welsh Assembly budget without any recognition of the context is irresponsible.
Guto Bebb
It is interesting to note that the Labour Government in Cardiff Bay were planning for 3% cuts per year for four years, yet, as we saw from the settlement granted by the coalition Government, the actual cut is in the region of 2% per year. That would be manageable in any small or medium-sized business in Wales, so I see no reason why it should not be manageable for the Welsh Assembly Government.
Some Members will have noticed that when the right hon. Member for Neath (Mr Hain) was commenting on the boundary changes, indicating, once again, that Wales was being extremely harshly treated, he refused more than once to allow me to intervene. The reason I wanted to intervene was that I was of the opinion that the hon. Member for Pontypridd (Owen Smith) had been promoted to the Opposition Front Bench as a result of his superb understanding of financial matters, because it transpires that he has written in a pamphlet that there is a need to reduce the number of Welsh MPs. However, the shadow Secretary of State for Wales argues otherwise, so now we understand why there has been a change on the Opposition Front Bench. The reason is simply because of disagreements between the two spokespersons.
Owen Smith
I would merely ask the hon. Gentleman to clarify this reference, which he appears to have plucked out of thin air.
Guto Bebb
The reference is to a pamphlet to which the hon. Gentleman contributed that was quoted at length by Professor Wyn Jones in a recent article in Barn. If he has misquoted the hon. Gentleman, the hon. Gentleman can take it up with the professor, but that article has been printed in a taxpayer-supported publication in Wales, and I shall stick by my comments.
We need to ask ourselves a simple question: why are we here today? We are here because the Wales Office has delivered on the promise in the coalition agreement to establish a Calman-like commission to consider how the Welsh Assembly is accountable to the people of Wales. I accept entirely that the Assembly is accountable to the people of Wales because they elect its Members, as several hon. Members have said. However, every Member in the Chamber will also recognise that local authorities are accountable to the electorate because local councillors are elected; yet they are accountable through the council tax increases they impose as well. Therefore, it is certainly arguable that there is a need for some financial and fiscal accountability in how the Welsh Assembly operates. We should welcome the fact that the coalition Government have recognised the need to consider the issue. It is a strength of the coalition that we are willing to look at difficult questions and consider them at length.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
Does my hon. Friend sympathise with companies such as those in my constituency that have said to the Silk commission, through us, “Please recognise that we are UK companies competing in the UK and global markets. We are proud to be Welsh, but we are UK-based companies when it comes to tendering for important work”?
Guto Bebb
I fully accept that. Indeed, I was recently at a CBI event in Flintshire at which exactly the same points were made, albeit not specifically in relation to the Silk commission, about how devolution has to work for Wales, while also recognising that small and large businesses—especially in parts of north Wales such as my constituency, where one can reach the English border in 45 minutes or less—must be treated equally to those across the United Kingdom. The commission that is being established will look into those issues. I would encourage businesses in my constituency and across Wales to engage fully, as I did to the CBI audience in Flintshire recently.
Huw Irranca-Davies
Does the hon. Gentleman agree that even though the commission’s terms of reference do not include the West Lothian question and the Barnett formula, it would be hard for the commission entirely to ignore them? It must proceed with some cognisance of the additional work being done across Government, because otherwise its conclusions may be aborted before they have even been published.
Guto Bebb
I thank the hon. Gentleman for what was again a thoughtful comment. It is recognised that there is a debate to be had on the Barnett formula between the Government in Cardiff and the Government in London. Where the Welsh Assembly wants to speak up on behalf of the people of Wales about the implementation of Holtham, that is the proper way to proceed. I welcome the fact that the coalition Government have announced movement on the West Lothian question. It has received a lot of attention in this debate, but when there was a Back-Bench motion on the West Lothian question, my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) and I were the only two Welsh Members present. However, it is important to take the issue into consideration, because ultimately—I think it was the hon. Member for Alyn and Deeside (Mark Tami) who also said this—it is important that, for example, Members from north Wales should have a voice on health issues in England. As someone who is dependent on health services provided in Liverpool and other parts of England, I sympathise with that view. Another argument, however, asks why we should have a voice on the health service in England if we do not allow any English Member to have a voice on the health service in Wales.
Mr Robin Walker (Worcester) (Con)
As an English Member, and a member of the Welsh Affairs Select Committee, I recognise that problem. Does my hon. Friend acknowledge that the cuts being made by the Welsh Assembly Government are placing an extra burden on those parts of England whose health services are used by people coming from Wales? Does he agree that the commission should take that into account?
Guto Bebb
I agree with my hon. Friend; that issue is being brought into sharp focus by the health service cuts in Wales. We have heard a lot about spending the health pound in Wales, which is something that I generally welcome, but sometimes the expertise for those services happens to exist in Liverpool or Shrewsbury—
Guto Bebb
Indeed. In those circumstances, it is crucial to recognise that there is an issue that needs to be addressed.
There are other reasons why we should welcome the Silk commission. When the referendum in 1997 produced a narrow decision by the people of Wales in favour of establishing the Welsh Assembly, Ron Davies, the Secretary of State for Wales at the time, famously said that devolution was a “process, not an event”. The reason for welcoming the commission is that, for too long, the devolution process has been one that has been internal to the Labour party. It has been driven by a need to keep the Welsh Labour party united, rather than by a need to ensure that the people of Wales have the best possible governance.
Mr Mark Williams
One subject that has been mentioned in the debate is the legislative competence orders, which many of us had to endure in the Select Committee. Attempts were made to set them in stone as an illustration of good government, rather than the real devolution that some of us are committed to.
Guto Bebb
It could be argued that the legislative competence order procedures and the Government of Wales Act 2006 were very successful in the context of what they were supposed to do, which was to keep the Labour party united. In terms of providing for good governance in Wales, however, they were an absolute disaster, and recognised as such by the people of Wales. The 2006 Act was also a belated party political attempt to create a situation that was favourable to Welsh Labour. It could be argued that my hon. Friend the Member for Montgomeryshire (Glyn Davies) lost his Assembly seat as a result of the changes to the way in which Welsh Assembly Members were elected, as implemented by the Act. Those changes were made for internal Labour party purposes, not as a result of any demand by the people of Wales. Not a single individual in my hon. Friend’s constituency argued that he should lose his seat because of changes that had been implemented to keep the Labour party happy.
Alun Cairns
Does my hon. Friend also recall that those changes to the electoral system were introduced against the advice of the Electoral Commission?
Guto Bebb
The hon. Gentleman should be aware that the system was changed specifically as a result of pressure within Labour party. There was no call for such change from the Welsh public. It has been argued that change should be made as a result of demand from the Welsh people, and I recollect no such demand.
Hywel Williams
I am sure that the hon. Gentleman will recall that that kind of dual mandate was allowed in Scotland. In fact, if my memory serves me correctly, I think that there was a Minister who held that kind of mandate when he was in the Labour Government there.
Guto Bebb
I thank the hon. Gentleman for that contribution. I do not doubt that his comment is accurate.
Another reason for welcoming the announcement is that it creates a cross-party and non-party commission, which is something very fresh and new in the Welsh context. As I have said, however, it will not work unless the people of Wales take an interest in the issue. I would therefore stress that we, as Members, need to go out and persuade our own electorate to take an interest in the commission and its work.
A second reason why we need to welcome the commission is the fact that although there have been numerous commissions and inquiries into the powers of the Welsh Assembly Government and how it should work, the Silk commission is different because it has been created by the Westminster Government. The Holtham commission produced a superb piece of work. I have read the documentation, and the arguments in the research are persuasive, showing that Wales has for several years suffered a degree of unfairness in the funding provided by central Government. The degree of unfairness was not as great as was claimed by Plaid Cymru Members, but the main point—that the Barnett formula was unfair—was, I think, proven by the report.
The Silk commission is different and more advantageous. Because it is a commission established by the coalition Government in Westminster, the ability to act on its findings is stronger. We are still waiting for the Holtham recommendations to be implemented, but our ability to act on the findings of the Silk commission is clear, which is another reason why we should welcome its establishment.
Huw Irranca-Davies
I thank the hon. Gentleman for being so generous in giving way. Having praised the Holtham report, as I do, does he agree that in respect of the Silk commission, one thing that we do not need to wait for is putting a funding floor in place to protect the interests of Wales as we go forward? As the Secretary of State said, we could be expecting to receive the Silk commission report just before the next election, perhaps just after it or even a bit longer after it. If we got on with the Holtham recommendations and put the funding floor in place, we would at least be doing our job for our constituents right now.
Guto Bebb
I thank the hon. Gentleman for that intervention. Given that an intergovernmental approach has been applauded by the First Minister, it is imperative for him to get down to the Treasury as soon as possible to discuss the issue. We are often told that there is a respect agenda between Westminster and Cardiff. It is not therefore for us to say to the First Minister that he must act now, but I would certainly recommend that the discussions should start—and the sooner they start, the better.
Mrs Gillan
Let me reassure my hon. Friend that the bilateral discussions on the Holtham floor are already taking place between the two Governments. It is quite right that those matters have been reserved for bilateral intergovernmental conversations.
Owen Smith
I do not intend to refer to the quotation in the pamphlet now—I shall do so later, if I may, and perhaps seek to get it withdrawn. I am intrigued to hear the hon. Gentleman say that he thinks the discussions should conclude as quickly as possible. Do I take it that he will urge his right hon. Friend the Secretary of State to do just that—to conclude the negotiations as soon as possible and then to implement them? As my hon. Friend the Member for Ogmore (Huw Irranca-Davies) has said, we do not need to wait for Silk; we could have this now.
Guto Bebb
I am slightly surprised by that intervention, because I thought it was self-explanatory. The sooner the discussions between the Government in Cardiff and the Treasury are concluded, the better. [Interruption.] My understanding is that this is a matter for the Welsh Government and the Treasury. I am sure that the pressure is being brought to bear by my Front-Bench colleagues.
Huw Irranca-Davies
I am genuinely trying to be helpful. I think the hon. Gentleman is saying that he would support the principle of the Holtham commission— that there should be a funding floor at this time. I understand what he says about the respect agenda. As a strong pro-devolutionist myself, I say that the respect cuts both ways. If parliamentarians like the hon. Gentleman and my hon. Friends were to express our clear opinion today, it would help our Welsh Assembly Government colleagues and the First Minister to come to a rapid conclusion, while also assisting the hon. Gentleman’s Front-Bench colleagues.
Guto Bebb
I thank the hon. Gentleman for his intervention. For clarity, let me say that I am previously on record as stating that the Holtham report was persuasive, and the sooner the recommendations were implemented the better—recognising, of course, the financial constraints faced by the Westminster Government. I hope that fully clarifies the matter.
Before I turn to the detail, let me say that when we talk about the process of devolution in the Welsh context, there is often a misunderstanding about exactly what the people of Wales are saying. Many Members will claim that the result of the referendum in March was a clear indication of the will of the people of Wales. Like many of my colleagues, I was surprised by the extent of the support for change, but it must be said that that change happened on the basis of a comparatively low turnout. I am not one to argue that those who do not turn out have an equal voice: democracy means that people must take part in order to ensure that their voices are heard. However, I think it should concern all of us who want to ensure that we have an Assembly that works for the benefit of the people of Wales that only 35% or 36% of the Welsh population turned out to vote in that referendum.
There is currently a disengagement with the political process in Wales, which, unfortunately, is more pronounced in relation to elections to the Welsh Assembly than it is in relation to Westminster elections. For example, I was elected to the Aberconwy constituency on a turnout of 70%, one of the highest turnouts in any Welsh constituency for a Westminster election. The turnout for the Assembly election was about 40%. Those who argue that the voice of the people of Wales was heard clearly back in March are actually arguing that a turnout of 35% and a yes vote of 60% constitute a clear democratic mandate. They do not. A great deal of work remains to be done to persuade the people of Wales that the Assembly is working on their behalf, and I think that the commission will have an opportunity to engage with them.
Other myths are being peddled by those who do not support the Assembly. There are plenty of them in Wales, and they tend to hear what they want to hear. They say that when they mention the Assembly, people complain that it is not delivering on health. I think that that is true, and it is a complaint that we hear on the doorstep. They say that people also complain that educational standards in Wales are extremely poor in comparison with those in England and many other parts of the European Union. I think that that is true as well, and again we hear about it on the doorstep. However, I believe that the enemies of the Welsh Assembly often misunderstand complaints about its performance. They consider those complaints to be an indication that people are fed up with the Assembly and do not want it, but I do not agree.
I think that the people who complain are not dissimilar to a mother who criticises a badly behaved son or daughter. The mother will be more than happy to complain about the behaviour of that son or daughter, because after all she has a right to do so, but when she hears someone else complain about it, she immediately goes on the defensive. I think that the same applies to the attitudes of people in Wales towards the Assembly. Yes they criticise, yes they complain, but ultimately there is a feeling—which I think those who are unhappy about the Assembly must take on board—that it is “our” Assembly. Perfect? No, it is not. Could do better? Undoubtedly. But there is, I believe, an acceptance that it is the Welsh Assembly, and I think that those who are unhappy about the way in which it is developing should engage in the process that we are discussing to ensure that we have a better performing Assembly to serve the people of Wales.
The first part of the Silk commission’s work will relate to fiscal responsibility—an issue that I believe we should consider seriously. Yes, the Assembly has a responsibility to answer to the people of Wales, and yes, its members are elected by the people of Wales, but ultimately we need a degree of accountability for fiscal decisions. Time and again during the 18 months for which I have been a Member of Parliament, we have heard members of Opposition parties criticise the cuts being made at Westminster, and we have heard Assembly Members criticise them as well. It is easy for them to make such criticisms: there is no need for them even to think about the deficit, because it is not the Assembly’s responsibility. The cuts being made in Wales—which are much lower than expected, and lower than cuts in many other parts of the United Kingdom—are being made in a context, and the problem with the current set-up in the Welsh Assembly is that that context is missing from its debates. That is why I think we should think about fiscal responsibility.
Welfare reform provides a useful analogy. The changes proposed in the Welfare Reform Bill, which has completed its passage through the House of Commons and is currently in the other place, are built on the concept of giving people who receive state benefits a degree of accountability and responsibility. There is a difficult argument to be had. I have been talking to housing associations in my constituency about the importance of ensuring that housing benefit is paid directly to claimants, to enable them to have the same respect and dignity as any other member of society in terms of paying rent and taking responsibility for their financial position. The same responsibility should apply to Governments. After all, the smallest community council in my constituency will raise local taxation, and I see no reason why the Welsh Assembly should not have the same degree of responsibility and accountability.
Having said that, it is important to point out that there are difficulties. The right hon. Member for Delyn (Mr Hanson) is no longer present, but he made an important point about people commuting across the border to work in jobs in north Wales. One of the jewels of the Wales economy is the Airbus factory in Broughton, which is committed to apprenticeships and training, and giving young people from north-east Wales genuine employment opportunities. We should be proud of that, and we should also be proud of the support Broughton has received from the Welsh Assembly, but we cannot deny the fact that many of the workers at Broughton travel in from England—or that many of the workers at the Ellesmere Port factories producing Vauxhall cars travel in from north-east Wales.
Hywel Williams
I am slightly disappointed that the hon. Gentleman and other Members seem to think of such cross-border traffic as a problem. As I have already said, a Welsh Affairs Committee report acknowledged that there were some problems, but noted that in general the arrangements were working quite well. To give just one example, more people from England are registered with GPs in Wales than vice versa. There is a technical reason for that, by my point is that cross-border travel need not be a problem.
Guto Bebb
The hon. Gentleman is mixing up the question of fiscal changes, which is what we are discussing, with the issue he raises about GP surgeries. The fact that Northern Ireland has an uncompetitive tax regime compared with that of the Republic of Ireland is a huge political issue, and it is also well known that the republican factions in Northern Ireland have financed themselves through smuggling operations because of the different rates of duty on petrol.
I do not want to overstate this issue, but we should take it seriously. I am sure that we can successfully address it, and the Silk commission has been set up precisely to examine such matters. Members of Plaid Cymru often refer to the Holtham report as a document that is beyond criticism, and it highlights this issue in some detail. I think the Silk commission needs to look into it and come to a conclusion.
On fiscal responsibility, I was intrigued by an article in today’s edition of The Western Mail. I do not read The Western Mail often—after all, I am a north Walian, and we tend to read the Daily Post up in north Wales—but in that article it appears that the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) said that he did not support fully devolving fiscal responsibility and tax-raising powers to Wales at this point in time, as he thinks that would be inappropriate.
Guto Bebb
I agree with that; I think it would be inappropriate. We know that there is a huge funding gap between the amount of money raised in taxes in Wales and the public expenditure in Wales. I would therefore ask the hon. Gentleman whether he disowns the policy of his party, which is to call for independence—a policy that I am pleased to say the party never advocated when I was a member of it.
Hywel Williams
On a point of order, Mr Deputy Speaker. Do you agree that when a Member mentions another Member, it is usually proper for the Member mentioned to be able to respond?
Mr Deputy Speaker (Mr Lindsay Hoyle)
That is not a point of order, as the hon. Gentleman knows, but it is a customary courtesy in this House that if a Member mentions another Member they then give way to them. That is up to the Member concerned, however.
Jonathan Edwards
I thank the hon. Gentleman for his courtesy in giving way. As a former Member of my party, he will know that independence for our country is an aspiration, but that does not mean that we want it tomorrow. One reason for gradually devolving fiscal powers is to empower our economy to be strong enough to achieve that ambition.
Guto Bebb
That is an interesting clarification, which is contradicted somewhat by an article by one of the Plaid Cymru leadership contenders that appeared in the Daily Post last week, and in which it was stated that the constitutional aspiration of the party of Wales was clear. It was not a very clear statement, I thought.
Owen Smith
This is not a point of order, but just a request for clarification. Is there a reason why the hon. Gentleman did not approach me in the Tea Room before mentioning me and misquoting me in the Chamber?
Guto Bebb
The hon. Gentleman was not in the Tea Room when I was there. I hope that he accepts my apology.
On part I, it is important that we consider the issue of fiscal responsibility. Some of the areas that the First Minister has said are appropriate for change are not acceptable, because they are not significant changes. For example, I do not think that the average person who votes in an Assembly election will be motivated to vote one way or the other because of a slight change in the aggregates tax. We need to look at proper fiscal changes.
Paul Murphy
The hon. Gentleman refers to significant changes. Does he accept that the most significant change in income would arise from income tax? Does he also accept that before that could be introduced, the people of Wales would have to decide on it in a referendum?
Guto Bebb
I am not sure whether the most significant change would have to be in income tax. There is an argument for changing the rates of employers’ national insurance contributions, which could be beneficial from a Welsh economic perspective. Whether the changes require a referendum depends on the range and the outcome of the Silk commission. I would not want to commit myself on that at this point in time.
The concept of fiscal responsibility is something that everybody in Wales should welcome. I find it difficult to understand how anybody in this Chamber who believes that the Welsh Assembly should have a degree of accountability to the people of Wales can be opposed to the concept of fiscal responsibility. I look forward to the findings of the Silk commission on part I. I believe that they will contribute to the debate. It is crucial that all stakeholders in Wales contribute to this debate, because otherwise we will end up with a discussion not dissimilar to what the hon. Member for Monmouth described.
Finally, part II deals with constitutional changes and what further boundaries we need to consider, beyond the changes that have already been made. It is important to state that we are talking about boundaries within policy areas, not physical boundaries. Several individuals I know who live in Oswestry are slightly concerned about the comment that we are looking to change the boundaries. Personally, I would be delighted to welcome back Croesoswallt—or Oswestry—to Wales, but I do not think that that is the intention of the Silk commission.
When we talk about boundaries, we are talking about whether there are aspects of the relationship between the responsibilities of the Assembly and those of Westminster that we need to look at again. As has been said, matters such as transport are not fully devolved. That may be a good or a bad thing, but the main arteries going in and out of north Wales and south Wales go from east to west. Therefore, if there were improvements to the A55 in Flintshire they would be wasted unless there were improvements to the M56 in Cheshire. There are clearly transport issues that need to be examined. We have also spoken about the fact that health is not fully devolved.
Finally, we need clarification on energy policy. The opportunity for economic and employment growth in Wales as a result of large-scale energy projects is something that we should all welcome. However, there is confusion over whether permission for such projects is granted by the Welsh Assembly or Westminster. Businesses looking to invest in hydro, wind power or tidal power need clarity about where the permission comes from and where the responsibility lies. That would be beneficial to the Welsh economy. I sincerely hope that that will be considered as the Silk commission moves on to part II.
Jonathan Edwards
I thank the hon. Gentleman for giving way again; he is being extremely generous. He will be aware that his party and the Lib Dems fought the National Assembly election in May on the basis that they would extend energy consenting powers. Does he agree that it is a disgrace that the UK Government down here are ignoring those pledges that were made to the people of Wales less than six months ago?
Guto Bebb
I again thank the hon. Gentleman for his contribution. This is a difficult subject. There is clearly a need for clarity for the business community. Having said that, I would be extremely concerned if I was a resident of Anglesey who supported the new nuclear power station and the issue was completely devolved to the Welsh Assembly, which has a pathological hatred of anything nuclear. Clearly this is an issue that needs to be examined. The point that I am making is that the Silk commission will allow us the opportunity to consider this subject in detail.
Ultimately, what we do have—this is probably why the shadow Secretary of State was so churlish in his response to the announcement of the Silk commission—is a coalition Government who are willing to consult on a cross-party and non-party basis, and to talk to the people of Wales about the way in which Wales should be governed in the future. The Silk commission is being established to try to create real accountability for the Welsh Assembly, and in particular, it is examining the way in which some devolved areas need to be considered again to ensure that we have a settlement that works for Wales. I am astounded that any Opposition Members would oppose a consultation process.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Before I call the next speaker, I remind hon. Members that we have six speakers and one hour and 20 minutes left. We ought to make sure that we get everybody in, as this is an important debate for all who wish to take part.
Hywel Williams (Arfon) (PC)
I am somewhat surprised to be called now. I hope that my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) will have the opportunity to make a contribution, and I will be very brief.
First, may I apologise to the House on behalf of my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd), who has had to leave because of a medical appointment? I was glad to hear the hon. Member for Aberconwy (Guto Bebb) expressing his interest in and loyalty to the Assembly. I shall briefly regale the House with a malapropism that came out on Radio Cymru—only the Welsh-speaking Members will understand this. A farmer from Ceredigion phoned in and called the Cynulliad “the cyn lleied” [Laughter.] I will now explain. The Cynulliad is the Assembly whereas “cyn lleied” means so little. By just a simple transposition he was able to make his point.
My party of course welcomes the establishment of the commission. We are very glad that all four parties in Wales are represented, in addition to the distinguished independent members. It is a great improvement on the Calman commission in Scotland, in which, for whatever reason, not all the parties took part. We are seeing some of the consequences of that in Scotland, where there continues to be extreme controversy about the constitutional settlement. I hope that in Wales we are one step ahead of that problem.
As all hon. Members would hope, Plaid Cymru will participate in and contribute positively to the work of the commission, trusting that its recommendations will lead to better governance of Wales, in the gradualist fashion that my party has always followed. Reference has been made a number of times to our ambition for independence for our country, but I think all hon. Members would concede that in the way we have operated over the years we have been a gradualist party aiming towards independence but prepared to work with everyone else to improve the governance of our country, with growth and prosperity for our country as our aim.
Where others shy away from seeking greater responsibility for the Welsh people and our Government, my party wants them to take it. We want them to do so because by taking responsibility for ourselves, we can create and build the better Wales—the Wales that we all want to live in. Devolution should not stop—indeed, it cannot stop, as Ron Davies said all those years ago—and it will not stop, despite the Secretary of State’s apparent call for a moratorium, which I saw in The Western Mail about three weeks ago. It is clear that in respect of the requirements of good governance, this Government take action, as did the previous Government, to transfer powers to Welsh Ministers. We see statutory instruments appearing fairly regularly to transfer powers. They are perhaps minor powers—they are not changes of principle —but that process will continue.
Mrs Gillan
May I reassure the hon. Gentleman that what I had envisaged was that the major questions—such as energy, ports and the other areas that have from time to time come across my desk, with demands having been made that powers in those areas be passed down—should rightly be looked at by the Silk Commission, but I am certainly not ruling out transfers of administrative matters from time to time where it makes sense? To rule that out would be nonsensical and the door is always open on those issues. I think it is a question of common sense, but we must not undermine what the Silk commission will look at in part II.
Hywel Williams
I am grateful to the Secretary of State for making that point, because her comments and those of other hon. Members could easily be misinterpreted if looked at briefly.
It seems clear that the current arrangements are not sustainable in the long term. The settlement between London and Cardiff is complicated, but that need not be a bad thing—sometimes complicated is good if the system works very well. The system does seem complicated but it is, thankfully, now much clearer than it was under the highly unsatisfactory legislative competence order system that we struggled with under the previous Government. The Under-Secretary was on the Welsh Affairs Committee with me and I am sure that he was tempted to jump to his feet when the housing LCO was mentioned. However, I shall not intrude into that particular piece of history.
Roger Williams
Does the hon. Gentleman agree that the system is not only complicated but is spread over a great body of law, making it very difficult to use that law for its proper purpose? Does he agree that the Silk commission could look at that as well?
Hywel Williams
There have been persistent complaints from members of the legal profession in Wales and others, including academic lawyers, who have looked at the changes to the body of law in Wales and found that it is difficult to keep track. There are people who are doing a heroic job of trying to keep track of the implications and I only wish that they were better resourced. Unsurprisingly, my opinion is that there should be a devolution of jurisdiction to Wales, which would make things rather clearer, but I shall say something about that later.
Huw Irranca-Davies
Does the hon. Gentleman agree that the Silk commission, whatever its outcome, will not get rid of complexity entirely? Indeed, some complexity is a necessary—if not evil—part of the devolution process. The level of maturity of this stage of devolution means that there is often administrative negotiation, including over aspects that the Welsh Assembly Government want to pass back or to be retained here because it makes more sense to do them on a UK-wide basis. For example, some aspects of marine matters have been devolved, but the Assembly has later returned to say, “Actually, we’d like that little bit to be done on a UK-wide basis, because that is where the resources lie.”
Hywel Williams
I thank the hon. Gentleman for that intervention. As I said, sometimes complexity is good and necessary. I do not want to appear too Panglossian about this, but it seems to me that we have a system that works fairly well. However, as we say in Welsh, nid da ble gellir gwell—it is not good if it can get better. Certainly that is our ambition.
The principle of the system for Wales inevitably still leads to a lack of clarity and some confusion for the public. I am glad to see that the commission will be looking at systems of devolution in other parts of the world. The hon. Member for Brecon and Radnorshire (Roger Williams) referred to the Scottish model as one under which everything is devolved other than that which is not, as compared with the situation in Wales, where nothing is devolved other than that which is. There is a great deal to commend that particular system.
I also encourage the commission to look beyond the boundaries of the UK. In an intervention on the former Secretary of State, the right hon. Member for Torfaen (Paul Murphy), I pointed out that the system in the Basque country, in terms of money, is slightly different to that in the rest of Spain, which generally operates on a block grant principle, whereas the Basques have historically, over many centuries, raised their own taxes and then sent a certain amount of money down to Madrid. That is easier for them given that the gross domestic product in the Basque country is currently 140% of the average across the country, so they are in the rather lucky position of having the money to do that. It is interesting that the Basque country has a steel industry and a history of heavy industry, but seems to have managed to go beyond that with the Mondragon co-operatives and various other methods that it has adopted. The area is similar to Wales in population and culture, with a smallish linguistic minority, but there we are—it seems to be succeeding where Wales is not.
I would say this, but I think that the will of the people of Wales was made clear in the referendum. I take the point made by the hon. Member for Aberconwy about the turnout, but unless we have compulsory voting there will be variations in turnout and I do not think that the lowish turnout for the Assembly elections indicates disenchantment with that body—rather, it is growing in popularity and interest. He made a good point about defending the institution. It may be a body that we are not always particularly keen on, but at least it is ours, and people must defend it. I hope that the commission’s timetable allows for legislative change before the next election, but I am grateful to the Secretary of State for setting out the options, which will repay close study.
I am conscious of the fact that time is passing and that other hon. Members wish to speak, but I will make a couple of further points. There is plenty that could be done, and I recommend that the commission look at two excellent private Member’s Bills, which happen to be mine: the Bilingual Juries (Wales) Bill, which I introduced in 2007 and which failed abjectly to proceed; and the Jobcentre Plus (Wales) Bill that I introduced earlier this year and which the hon. Gentleman opposed very successfully indeed, along with many of his friends across the border.
Those are two practical changes that could profitably be looked at by the commission, and I am sure that there are more. In my party at least, we have an appetite for change. We have done the work, and we have the imagination to think about what sort of changes might be introduced, so I commend both those measures.
If hon. Members want an example of why the devolution of certain measures is necessary, I refer them to the recent shenanigans of S4C and my early-day motion 2316. The scrutiny of the Public Bodies Bill by the majority of Members from Wales was entirely deficient as far as S4C was concerned. There were five Members from Wales on the Committee that considered the Bill. Two were unable to speak because of the role that they played, but the other three Members worked very hard indeed, and I pay tribute to the hon. Members for Clwyd South (Susan Elan Jones) and for Ceredigion (Mr Williams). We were able to debate the issue at length, and I was glad that we could do so. Subsequently, I secured a Westminster Hall debate on the subject, which was well attended.
When the Public Bodies Bill was on Report, however, we did not, for reasons that I will not go into—I shall not begin to point fingers—reach the amendment on S4C, so the majority of Members from Wales did not have an opportunity to express their opinion. That is one reason why the commission should look at an area that is difficult and complicated to devolve.
Alun Cairns
In view of the fact that the hon. Gentleman is commenting on S4C, will he congratulate the Secretaries of State for Wales and for Culture, Olympics, Media and Sport on the fantastic deal that S4C has secured with funding from the BBC?
Hywel Williams
The deal that was eventually reached has pleased no one and has pleased everyone to some extent because S4C has taken a hard hit on money. However, I pay tribute to the Secretary of State, and to Members from all parties, including Lords Wyn Roberts, Dafydd Wigley, Dafydd Elystan-Morgan and John Morris, who pressed the case, along with the BBC Trust member for Wales, Elan Closs Stephens, Cymdeithas yr Iaith Gymraeg, my hon. Friends and, perhaps, me. Everyone is included—success has many parents—so let us leave it at that. All I want to say is that broadcasting should be subject to fair scrutiny.
Alun Cairns (Vale of Glamorgan) (Con)
I am grateful for the opportunity to contribute to this extremely important debate for Wales, for the constitution, and for the stability of devolution, both in Wales and across the United Kingdom.
I congratulate the Secretary of State on securing the debate in Government time and on the way in which she introduced it. This is a genuine debate about the need for greater accountability and stability in the devolution settlement. It will set the scene for the Silk commission. Of course the commission is independent and I congratulate each and every one of its members. They need the freedom to investigate the issues, but this is an important debate about Wales, in Government time, in the Chamber.
In the past the Conservative party and the Conservative Secretary of State have been accused by Opposition parties of being devo-sceptics, but the reality is very different. Few predicted that it would be a Conservative Secretary of State who delivered a referendum on further powers for the Assembly. Even fewer would have predicted that a Conservative Secretary of State would move to advance the settlement to secure its stability over the longer term.
Stability is the key point. Over the past 13 years, Wales has experienced significant constitutional change in a piecemeal approach that has served the interests of the Labour party. There is no doubt about the mess created by the Government of Wales Act 1998. We started off with the National Assembly for Wales. Then we had a change in the voting system, which was opposed by the Electoral Commission. Then we had the Richard commission, which was generally ignored, and the legislative competence order model taken from that was unworkable. The Holtham commission’s report has not been debated even in the National Assembly for Wales. That was followed by a second referendum. All that was done to serve the partisan interests of the Labour party and to try and overcome the differences between the Labour Members in the Welsh Assembly and those on the Opposition Benches in this Chamber.
The churlish way in which the shadow Secretary of State responded to the opening comments from the Secretary of State for Wales demonstrated that the Opposition do not know how to react. There is obviously some enthusiasm from the Labour party in Wales for the Silk commission, but Labour Members here are worried about their personal futures, rather than thinking about the needs of Wales and the ability of the Silk commission to address them in order to deliver stability.
In view of the previous constitutional upheaval, the outcome of the Silk commission must be sustainable and must deliver stability, leading to a settlement that will not require further changes for a generation. Such confusing changes over recent years have led to a confused model of accountability. The public find it difficult to understand who is responsible for what because of the changes since the Government of Wales Act 1998, the referendums and other developments. The Welsh Government choose to perpetuate the confusion by blaming Westminster for anything that goes wrong in Wales, regardless of their own responsibility. They have learned from the early Blair years to become masters of spin.
Take the recent controversy over the establishment of wind farms. This is a subject that is extremely important to my hon. Friend the Member for Montgomeryshire (Glyn Davies), who is fighting hard for his constituents. The applications for wind farms in some of the most beautiful parts of Wales stem directly from the First Minister’s technical advice note 8 policy, which established strategic search areas identifying specific parts of the country that would be looked on favourably for wind farm applications.
As soon as the impracticality and unpopularity of the policy was exposed, we had a statement from the First Minister that he wanted to lead the charge to the Westminster Government to try and stop it happening. But the application was rooted in the TAN 8 policy developed in 2005, when Carwyn Jones was Minister for Environment, Planning and Countryside and had responsibility for driving that policy. The Welsh Government enjoy the resulting confusion, blaming Westminster when the responsibility lies on their desk.
That brings me to the respect—or should I say lack of respect?—agenda shown by many Labour politicians in Cardiff Bay. The agenda is a one-way street. Anyone listening to First Minister’s questions on a Tuesday in the Assembly will hear that everything that goes wrong is the coalition Government’s fault, yet it was Labour, here and in Cardiff Bay, that left Wales the poorest part of the United Kingdom and left an education system and standards that trail those in the rest of the UK, an inferior model for cancer care, longer waiting times for any medical interaction and every Welsh economic indicator—inactivity rates or unemployment rates—scoring much worse than those in any other part of the UK. That has not changed over the past 18 months, but anyone listening to First Minister’s questions will recognise the audacity shown by the First Minister, reflected today by the shadow Secretary of State, in blaming Westminster for anything that suits them. Labour is happy to perpetuate confusion and use a publicly funded publicity machine to criticise the Westminster Government.
The reason for the decline in health, education and the economy is that since 1999 the Welsh Assembly Government have chosen to make the argument about structures, strategies and powers rather than deal with the real issues. The Welsh Assembly Government have become unaccountable because they can blame Westminster for anything that goes wrong.
On the economy, we began with the national economic development strategy. A few years later “A Winning Wales” came out. Later, the Assembly came out with “Wales: A Vibrant Economy”. Running in parallel were the entrepreneurship action plan, the European aid programmes, which began with 600 partnership models, and a 90% target for GDP by 2010, which has not been met. The Assembly must be held responsible and accountable.
Alun Cairns
My hon. Friend underlines my point about the failure of the Cardiff Bay Government to seek to improve the quality of life: the economy, social care and education standards. In the 1997 referendum and the first Assembly elections in 1999 we were told that the devolution dividend would change all those things. Labour has failed, and it has not changed in the past 18 months. It blames Westminster for the underfunding that Holtham identified.
Owen Smith
The hon. Gentleman and his colleagues call for accuracy in the context in which we set our remarks about the public spending cuts in Wales, but should they not set themselves the same standards when discussing the profundity of the long-term, systemic economic problems facing Wales, which are reflected in our once again qualifying for objective 1 funding? I profoundly regret that, as I am sure he does, but the fact that we qualify shows how deep seated the problems are.
Alun Cairns
I am grateful for that point, but the hon. Gentleman misses the key issue: Labour’s failure over 13 years. Labour Members salivate in decrying the 1980s. Wales was not the poorest part of the United Kingdom at the time, but it was when they left office. [Interruption.] The hon. Gentleman says from a sedentary position, “It is not true”. Well, I will happily hear about the economic indicator that points out that Wales is not the poorest part of the United Kingdom.
Owen Smith
I did not say, “It is not true”, and the hon. Gentleman makes a semantic point, because we are talking about fractions. Many parts of the UK have not benefited in lots of respects; in fact, they all share the characteristics of being post-industrial parts of Britain with the same deep-seated economic problems as Wales. Those problems are not something to be solved quickly, but the Assembly has worked extremely hard and been extremely effective in all sorts of areas of public life in Wales.
Alun Cairns
I am stunned by the complacency of the hon. Gentleman, an Opposition Front-Bench Treasury spokesman who really should have a better handle on these issues. He talks about semantics and very small percentages, but when Labour left office after 13 years of government Wales was the poorest part of the United Kingdom, despite all the great announcements that we heard during the period, on the Barnett settlement, Barnett plus, European money, match funding, PES—public expenditure survey—cover and how lucky Wales was to have a Labour-run Westminster Government as well as a Labour-run Welsh Assembly Government. The data are quite clear that there has been blatant failure. They highlight the fact that Wales is the poorest part of the United Kingdom, and I am aghast at the hon. Gentleman’s complacency.
Guto Bebb
When the Welsh Affairs Committee visited Germany recently, the business people whom we met had no idea of any business organisation or Welsh Assembly Government Department with responsibility for inward investment, but every single one of them was aware of the Welsh Development Agency, an organisation that served Wales well in the 1980s but was abolished by the Welsh Government on the basis of a personal decision by the First Minister, who did not even have the courtesy at the time to inform the agency’s chairman of his intentions.
Alun Cairns
I am grateful again to my hon. Friend, who highlights an important point. The hon. Member for Pontypridd (Owen Smith) looked on favourably when the Welsh Development Agency was mentioned, and so many businesses in Wales would love to see it returned.
We heard from my hon. Friend the Member for Worcester (Mr Walker) earlier. When his father was Secretary of State for Wales, Wales attracted 20% of the UK’s inward investment with just 5% of the population. How great it is to have another Walker family member showing such an interest in Wales. That is the difference—from the time in the ’80s when those jobs were being created and the economy was being restructured, to the failure that we have seen over the past 13 years. I also seem to recall the right hon. Member for Neath (Mr Hain) questioning the judgment of the then First Minister, Rhodri Morgan, in seeking to abolish the WDA and bring it into the Welsh Assembly Government.
Those differences are similar to the differences today between Labour Members at Westminster and Labour Members in the Welsh Assembly, who are far more enthusiastic about the Silk commission. Indeed, it is quite obvious that Labour Members here are in an uncomfortable position on Silk. They do not know how to react, and the shadow Secretary of State for Wales, in today’s article in The Western Mail and in his response to today’s debate, has tried to position himself by thinking, “How can we get out of this with some sort of political advantage?”, rather than recognising that Assembly Members need to be more accountable for their policies.
I have listed the failed policies and, ultimately, the one on the economy, and we could go on to health, cancer care or any others that I have mentioned, because Opposition Members need to accept and recognise their part in that failure, rather than simply looking up the M4 and blaming everyone else when they quite honestly know that they are responsible.
Many Members have referred to the need for engagement, and I cannot underline that point enough. Advocates of devolution point to the outcome of the recent referendum, when 63% voted in favour, yet the turnout was only 35%, which demonstrates that a significant number in the population are not engaged. The key challenge for the Silk commission and the Welsh Government is to capture their imagination, hear their concerns and get them involved, because, troublingly, the views of anyone sceptical of devolution are almost dismissed, and I suspect that they largely make up the 65% of people who did not vote at the time.
Jonathan Edwards
The hon. Gentleman is using, as did the hon. Member for Aberconwy (Guto Bebb), the turnout for the referendum as a battering ram to try to hold back the whole process. The referendum was fought on an extremely technocratic question, and I was amazed that more than 30% of the people of Wales voted on a question that hardly anyone understood.
Alun Cairns
I am surprised at that intervention, and the low sights that the hon. Gentleman sets for himself. He was amazed by a 30% turnout. That almost sounds as though he was delighted with it. If that had been the case in the referendums in Scotland and Wales back in the late ’70s, they would have been dismissed.
There is a need for engagement on the issue. I do not for one second use the low turnout as a reason to batter devolution, but it underlines the fact that many people throughout Wales and in almost every local authority area—ironically, the highest turnout was in Monmouth, at 50%—are troubled about devolution or do not understand it. Their views are as important as those of the strongest advocates, who I suspect are within Plaid Cymru.
Alun Cairns
I could not agree more with my hon. Friend, who further underlines the point.
The key theme is accountability, which was covered extremely well in the excellent report of the Holtham commission, which set the backdrop to the Silk commission, highlighting key issues relating to accountability and some of the points that I tried to make earlier. The report states that the public sector, and I would say the Welsh Government specifically, is
“in some ways detached from the economic circumstances of the citizens it serves”—
that is the need for better accountability—and
“simply blaming Westminster for inadequate resources”
is not an option. That is effectively the position we are in.
The change of Government at Westminster has produced a chorus of an argument from the Welsh Government in Cardiff Bay, to the extent that the level of debate is stymied to mere rhetoric. The best description of the Welsh Government’s approach came from a former Labour Member of this House who said that the Welsh Government is in danger of becoming an
“institutional chip on the Welsh shoulder.”
That encapsulates the approach. The accountability argument must be underlined time and again.
It is too easy for the Welsh Government to play the blame game, and I hope that the Silk commission will consider accountability extremely seriously. The Holtham report offers useful pointers. It states that if it is decided that there is merit in devolving fiscal powers, the tax should be one that
“is paid by a high proportion of Welsh residents…raises substantial revenue”
and
“is ‘visible’ to most citizens”.
It is not surprising, therefore, that in seeking to avoid my accountability argument the Welsh Government and the First Minister call for air passenger duty, stamp duty, aggregates tax, landfill tax, and other obscure taxes. The more obscure they are, the less accountability there is, so they can continue the blame game. That is unacceptable, and I hope that the Silk commission will reject that.
Owen Smith
Again, I intervene on a point of accuracy. The hon. Gentleman quoted extensively from the Holtham report, which he purports to have read, so he will know that those are the very taxes that Gerry Holtham refers to as potentially being among the minor taxes that would be transferred to Wales.
Alun Cairns
The hon. Gentleman mistakes my recognition of the quality of the Holtham report for an indication that I agree with all its conclusions, and I simply do not agree with all the conclusions. I said earlier that it is a useful backdrop to the Silk commission. That should be recognised.
To pursue the argument about accountability and the approach taken by the Welsh Government, in a similar vein it needs to be noted that over the past 12 years the Labour party in Wales used council taxes to raise additional funds and then put the responsibility on to local authorities, most of which, as a result of 13 years of Labour Government, were not Labour. The Conservative party ran the same number of councils in Wales as the Labour party, and that is a far cry from how it was at the time of devolution. Most of the funding for local authorities comes from the Welsh Government, so I would suggest that over the past 10 years or so there has been a deliberate strategy of squeezing funding from local government in Wales, forcing local authorities to raise more money in council tax. That is demonstrated by the fact that over the past five years the average council tax increase in England was 2.6%, compared with 3.8% in Wales. That amounts to a plan to make local authorities responsible for the additional revenue that they are raising instead of becoming accountable for themselves. I could go on to talk about the re-banding mistakes that were made in some areas, which squeezed even more council tax out of some of the people who were least able to pay.
I will close by sounding a note of caution about the volatility of many taxes. Whatever the Silk commission develops and comes up with, I hope that it will recognise the volatility between the level of income tax raised three years ago in Wales compared with the level raised now. There is a significant difference, and that will be another important factor for Silk to consider.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We have to be very careful about time now; I think that the length of that speech was rather excessive. We still have four Members to get in and roughly 44 minutes left for them to speak.
Owen Smith (Pontypridd) (Lab)
It is always a pleasure to follow the perfectly formed hon. Member for Vale of Glamorgan (Alun Cairns). I had hoped to follow the hon. Member for Aberconwy (Guto Bebb), as that would have given me an immediate opportunity to respond to his curious remarks—
Owen Smith
In a moment.
I could have responded to the hon. Gentleman’s curious remarks about some mysterious article that I have ostensibly written.
Owen Smith
I will give way in a moment.
The hon. Gentleman said that somewhere in an article I had advocated a reduction in the number of Welsh MPs. If I had been mistranslated, that would have been a different matter, but I have certainly never advocated that. However, the article in question is relevant, and I will talk about it in a moment. Over to the hon. Gentleman.
Guto Bebb
I am grateful to the hon. Gentleman for allowing the facts to be stated clearly on the record. The article is called “Towards a New Union” and it was published by Compass. In talking about how to ensure that the West Lothian question is dealt with without moving to federalism, it states:
“Such a reformation of English local government, allied to the reduced number of Welsh and Scottish MPs at Westminster, would go a long way to answering the English Question.”
I think that the article was translated correctly and that my statement was also correct.
Owen Smith
I suggest that in future the hon. Gentleman needs to do more than take selected excerpts from things. He should read all 5,000 words of the article, in which he would clearly see that I am talking about the fact that we are going to have the number of Welsh MPs reduced—not that it is desirable, not that it is justified, but that it is a matter of fact as a result of the shameless gerrymandering of the electoral map in Wales that we have seen as a result of the Parliamentary Voting System and Constituencies Bill. I suggest that the hon. Gentleman needs to read it all—or if he would like to withdraw his remarks, which are wholly inaccurate, he can do so now.
Owen Smith
I do not, at all. I am quoting accurately from my article. I suggest that the hon. Gentleman read it and that in future he does his homework a little better lest he be in danger of misleading the House about my opinions, if nothing else. [Interruption.] He can withdraw his remarks whenever he wants.
I thank the Secretary of State for scheduling today’s debate. Labour Members and, I am sure, Members right across the House are extremely grateful that after 18 months we have a debate about a Welsh matter on the Floor of the House. We did not have a substantive one, of course, about the Welsh aspects of the Parliamentary Voting System and Constituencies Bill, we have not had one about growth, and we have not had one about the disproportionate effect of cuts in Wales, but we are having one today, for which I am very grateful.
I asked the Library staff to look into when we last had such a long interregnum between substantive Welsh debates on the Floor of the House, but once they got back to the 1940s I told them to stop bothering.
Mrs Gillan
The hon. Gentleman will no doubt make absolutely every effort to ensure that the Backbench Business Committee, which is now responsible for scheduling our St David’s day debate, allows us to have it. It did not do so last year, despite my letters to it and despite other Members appearing before it to ask for that debate. If we have that debate, we can cover all the matters that he mentions.
Owen Smith
With the greatest respect, I find it extraordinary that the Secretary of State should now view it as the job of the Backbench Business Committee to decide whether we have a debate on Wales. I am surprised that she should go to that Committee to request a debate, rather than go to her colleagues around the Cabinet table such as the Chief Whip and ask for a debate in Government time.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We are having a debate on devolution in Wales, so I am not quite sure whether a future debate is relevant. We ought to stick to the agenda.
Owen Smith
Indeed, and thank you, Mr Deputy Speaker.
Today’s debate and the Silk commission are extremely important, and I welcome them for two reasons. First, they enable the discussion of issues of genuine magnitude. Part I of the commission’s role on fiscal powers, and part II on the boundaries between the competences of Westminster and Wales, both cover enormously important issues that will have an impact on people in Wales in particular and across the rest of the UK. Secondly, the debate is important because it provides an opportunity to discuss the wider issue of the Union, to which my article referred, and the wider context in which the Silk commission is set. A lot of Members, particularly my right hon. Friend the Member for Torfaen (Paul Murphy) in his excellent contribution, have taken that opportunity. I wish to talk about that wider context.
Government Members, including the Secretary of State, have looked askance today at Opposition Members who have said that they are suspicious of the motivation that may lie behind some of the remarks that have been made, and perhaps even behind the Government’s whole direction of travel with regard to the Union. We are seeing diminishing support from the Conservative party for the concept of the Union.
Those concerns are not plucked out of thin air, and they are not illegitimate. They are born of our reading and listening to comments made by Conservative Members, and of hearing comments such as those of the former Prime Minister, Sir John Major, who said that Scottish ambition was “fraying English tolerance”. They come from reading the conclusions of the report commissioned by the Prime Minister, when he was in opposition, from the current Justice Secretary. It recommended that the only way to deal with the West Lothian question was to create an English Parliament with English votes on English issues, denying Welsh, Scottish and Northern Irish Members a vote.
Owen Smith
The Secretary of State shakes her head, but that was the conclusion drawn by a commission led by the Justice Secretary.
Owen Smith
No, it has not been done, as the hon. Lady says. It is very good to see her today—I am very pleased that we have an English Member taking part in the debate, which is extremely important. However, I say to her that what came out of that report was a commitment in the Conservative manifesto and the coalition agreement, which has now been enacted, to begin a debate on the West Lothian question. We are concerned about the direction of travel and the trajectory that many Members now feel has been set.
In recent debates in Westminster Hall and elsewhere, many Members have referred rather aggressively to resentment felt by English constituents about the supposed unfair stipend or subsidy afforded to, and enjoyed by, citizens in Wales, Scotland and Northern Ireland. As Opposition Members have tried to point out today, that is not an unfair stipend, but a reflection of the accurate needs, born of the industrial heritage and present problems, of Wales, Scotland and Northern Ireland. Neither, as my right hon. Friend the Member for Torfaen mentioned, is it a reflection of the relative receipt of revenues in Wales versus parts of England where a needs-based formula already applies: for example, greater subsidy—if we want to use that word—and support is afforded to the north-east, the north-west and even the south-west than is afforded to Wales. It is legitimate, therefore, for us to voice our concerns about the Government’s attitude to the Union. That is not scaremongering; it is merely a question and a set of observations on our part.
The other reason we are worried, of course, is that, traditionally, Conservative and Labour Governments have not been partisan in how they have addressed the constitution, but for the first time, judging from how the Parliamentary Voting System and Constituencies Act 2011 was addressed in this place, a partisan attitude has been taken to the constitution. I hold that view absolutely fully. It is a view that I have heard expressed on many occasions by Conservative Members, not in the House, but outside. They view the Act as being underpinned by partisan motivations, and I fear that we might be seeing a similar set of motivations here. I sense that the Tory party has been seduced by the prospect of hegemony in England in the long term, even if it means a truncated, fragmented UK. I, for one, as a Welshman and proud British citizen, do not want that to come about.
Alun Cairns
Speaking as a Conservative Member, I do not accept that point. In my mind, the purpose of the Silk commission is to provide accountability and stability for the long term, but the motives about which the hon. Gentleman talks were behind devolution in 1997, when it suited the Labour party in Wales, rather than Wales as a nation.
Owen Smith
I wholly dispute that. Devolution in 1997 was born of need and demand in Wales. It had been developing for a long time. It perhaps had not come fully to fruition in 1979, but by 1997 there was a clear demand for it, and that demand has thickened over the past 13 years, right through to the referendum, when we saw it greatly increased.
Alun Cairns
I am grateful to the hon. Gentleman for giving way; he is being extremely generous. If demand was so strong, why was there only a 50% turnout and 7,000 majority? That is how strong his demand was.
Owen Smith
Several Government Members have talked about what, to put it bluntly, is ancient history now and pointed to the size of the mandate and turnout, but we all know that politics is a precarious, parlous business. The Tory party clearly thought that it had a sufficient mandate at the last election. It did not get a majority, but nevertheless it is the ruling party. We have to bury that argument and move on. Right now, there is clear support for devolution in Wales, as was shown in the recent referendum. That is not in dispute. It ill behoves Government Members, who purport to support devolution, to keep dredging up these ancient concerns and this ancient history, because, frankly, it gives us the suspicion that they still have not quite bought into it.
I have a second concern, which, actually, I share with some Government Members—even, perhaps, the hon. Member for Monmouth (David T. C. Davies)—about the constant, cyclical nature of the interaction between demands and desires, legitimate or otherwise, for additional, incremental powers in Wales, Scotland, Northern Ireland and even, perhaps, England. That is a problem. It leads to perpetual pressure for change and to very few instances in which we—legislators in this place and the devolved Administrations, which have their own particular locus—can put our foot on the ball and contemplate the broader picture, the country’s longer-term trajectory. That is hugely important. The Silk commission ought to consider that wider context.
In particular, however, this House needs to consider that wider context and be the place in our country where we contemplate the aggregate impact of the changes to the particular discrete functions and powers of different parts of the UK and where we think long term about what the benefits and disbenefits might be. That is not to take an anti-devolutionist perspective, however. I am thoroughly committed to devolution and the principle of subsidiarity—pushing down power and democratic accountability as low as we can—which is why I talk in my excellent and recommended article for Compass about reinvigorating local government democracy in England, which would be a jolly good thing. However, I am also British—indeed, proudly so—and I feel that my values and those of the Labour party transcend national boundaries and the identity politics that stem from an obsession with national boundaries. My concern is that the wider picture—the longer-term perspective—is too infrequently considered in this place or, in particular, the devolved Assembly. I do not want Wales to be as politically peripheral in Britain as it is de facto geographically peripheral. I worry that at some point that will be the net consequence—the aggregate impact—of these things.
Let me turn briefly to some of the specificities of what Silk will consider. I will take only one—corporation tax—but for me, they all highlight the risk that we might face. Anyone picking up the Financial Times this morning could have read an article about Peter Robinson, the First Minister of the Northern Ireland Assembly, who has advocated adopting a 10% corporation tax rate to compete with the 12.5% rate in the south. My view is that this would be hugely difficult and dangerous. Although it might be advantageous for Northern Ireland in the short term, we should also consider the risk that it would necessarily lead to arbitrage between the two areas and to different pricing arrangements. If we had variable taxation bands between different parts of the mainland, we would certainly see arbitrage across the borders and we would need internal transfer pricing policy and legislation in this place and the other jurisdictions. Given the difficulties with legislative vehicles to deal with transfer pricing between European countries—the disaster, even—what on earth would they be like within the UK?
Westminster needs to hold the ring. Westminster needs to consider the risks. Westminster needs to be the place where this debate is thought about, in conjunction with the discrete and—from the perspective of the local jurisdictions—eminently reasonably changes that may be wished for. This place also needs to be where the broader economic context is considered, because, bluntly, some of the peripheral changes to taxation that we are talking about and that Holtham talks about—indeed, perhaps even the larger changes too—will not lead to the growth, jobs, wealth and opportunity that would be created by measures that the Government could be implementing right now, such as those in Labour’s five-point plan.
Nick Smith
I congratulate my hon. Friend on his support for subsidiarity and decisions being made at the right level. The success of the Welsh Assembly, particularly in the last few months, has been based on its good ideas, such as the Welsh job fund and introducing local police support officers, all because people in Wales are fed up with the horrible attacks that we have seen from the Government.
Owen Smith
My hon. Friend is absolutely right. The Welsh Assembly has understood that in order to stimulate our economy we need a stimulus. We cannot sit on our hands and assume, as the Government do, that laissez-faire economics will drive economic progress in our country.
Owen Smith
I will not give way; I am going to finish in a moment.
We need a stimulus, which is why the five-point plan that Labour has produced is absolutely what we should consider implementing. It is also why we should be celebrating what Carwyn Jones and the Welsh Assembly Government have done along the same, as it were, Keynesian lines.
I will conclude with the broader economic picture. It is for this place to bring the global and European context to bear in this debate. However, it is ironic that at a time when Members in all parts of the House are advocating greater collaboration and greater cohesion and integration of states’ fiscal powers on the continent—it is particularly ironic that Conservative Members should be doing that at all—we in the UK are contemplating disaggregating those fiscal powers. That is a profound irony—one perhaps born out of the peculiarity of how our constitutional thinking has developed. It is for us—and, in particular, the Secretary of State for Wales and her Northern Ireland and Scotland colleagues—to ensure that those thoughts are brought to bear round the Cabinet table and to subjugate any party political interest beneath the national interest, for all our citizens right across the UK.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. There are three speakers to go, and we have 25 minutes left for them. If they can divide that time equally, that would be very helpful.
Mrs Eleanor Laing (Epping Forest) (Con)
I thank the hon. Member for Pontypridd (Owen Smith) for his kind words in welcoming me to the debate as the only Back Bencher not representing a Welsh constituency. I am here quite deliberately because I agree with the hon. Gentleman, as well as the right hon. Member for Torfaen (Paul Murphy) and, of course, all my hon. Friends on this side of the House, that it is this Parliament, the Parliament of the United Kingdom, that ought to debate matters concerning the Union. I am very much a Unionist, and I will never be anything else. If we start to draw lines and say that people who are elected to seats in Essex should not speak on Welsh matters, or that those who represent Cornwall should not speak on Scottish matters, we are negating the very concept of the Union, which most of us wish to defend.
I am sorry to see that the shadow Secretary of State, the right hon. Member for Neath (Mr Hain), is no longer here, because I have saved up all my political arguments to put to him across the Floor. He made some appalling remarks in his speech, but it is his right to do so. I can tell the House that, just as he has Scottish roots, my maiden name is Pritchard, and you cannot get much more Welsh than that. I do not think that my father ever set foot in Wales in his life, however, and I do not think that his father, or his father before him, did either. I must have some Welsh blood somewhere, but that is not the point.
The point is that we are the Parliament of the United Kingdom, and the devolution settlement that we have put together for certain parts of the United Kingdom affects all of the United Kingdom. It is like a tube of toothpaste; you cannot press one part of it without making an impression on the other parts. Anything to do with devolution, and anything that affects our constitution in any way, affects the whole of our country. There ought to be more Members from other parts of the United Kingdom here today, so that they might understand that we, as a whole, have responsibility for what happens in any part of the United Kingdom.
I also agree with the hon. Member for Pontypridd—this is getting disturbing—that the distribution of taxpayers’ money to Wales, Scotland and other parts of the United Kingdom is fair because it is based on deciding which part needs the most input from taxpayers’ investment in our country as a whole.
Owen Smith
On a point of fact, the distribution to Wales is not based on need—that is why we have long argued for a needs-based formula—but it is reflective of need.
Mrs Laing
I appreciate what the hon. Gentleman is saying. I do not believe that we should have a needs-based formula. I would always argue that the Barnett formula distributes taxpayers’ money in a reasonable manner, even though it obviously needs to be reformed and brought up to date. Just as Newcastle does not require the same sort of taxpayer subsidy as Surrey, and just as the centre of Birmingham does not require the same amount as the leafy lanes of Kent, so it is important that we get the balance right in Scotland and Wales.
Jonathan Edwards
Does the hon. Lady recognise that London gets a higher percentage of public expenditure per head than any other part of the British state, including Wales?
Mrs Laing
Of course, because some areas of London are desperately in need of help from taxpayers’ money. There are enormous areas of poverty, deprivation and need in London; that is why it happens. Of course it does. If the hon. Gentleman is not willing to be fair to people who live in London, why should the rest of the country be fair to his constituents?
That brings me to the other points made by the hon. Member for Pontypridd and the right hon. Member for Torfaen. Although I would argue that the distribution of taxpayers’ money is currently done fairly, the democratic balance between different parts of our United Kingdom has not, until now, been fair. It is totally outrageous that the hon. Member for Pontypridd should describe as “shameless gerrymandering” the equalisation of constituencies. In what way is it democratically fair that Pontypridd has 58,000 electors, Torfaen 61,000 and Neath 57,000, while the Secretary of State’s constituency has 70,000 and mine has 72,000?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We are debating devolution, not constituency size. We are in danger of dragging the debate somewhere we should not be going to at this time of the evening.
Mrs Laing
Of course, Mr Deputy Speaker. I was merely illustrating the balance of fairness, and saying that if we are to distribute funds fairly, we should distribute democracy fairly, too. Many Opposition Members have made that point this afternoon, and it was time for it to be corrected. I am glad you allowed me to do so, Mr Deputy Speaker. I appreciate that we have had a long debate and that Opposition Members still wish to speak, so I shall be brief.
The constitutional development of our country is ongoing and continuous. Like other Members, I was not in favour of devolution to begin with, but I have come to realise the benefits from having devolved government, so I warmly welcome the Secretary of State’s setting up the Silk commission. This is a genuine commission. The Secretary of State has made it clear that she has no “pre-conclusions” about what the Silk commission should do or where it should go. Just as the Calman commission did an excellent job for Scotland, resulting in the Scotland Bill, I am sure that the Silk commission will do the same for Wales.
It is important for the commission to look seriously, as I am sure it will, at the issue of accountability as its first duty. Democratic accountability obviously comes through accountability for spending money and therefore for raising money. At present, the settlement in Wales gives the power to spend without the responsibility to raise taxpayers’ money. I argue that accountability is possible only if there is a link between the casting of the vote, the paying of the taxes and the outcome of the election.
Owen Smith
Is not the logic of that argument that all spending should be devolved to Wales in order for it to be fully accountable, or is it enough for just a tiny fraction of spending to be devolved? Does that take the trick?
Mrs Laing
No, that is not the logic at all. If the hon. Gentleman argues in that way, he is arguing against himself. He agrees with me and with many of his hon. Friends that it is this Parliament that represents the whole of the United Kingdom, so this Parliament must have the responsibility not only for raising most taxes but for spending them. He has argued, as have others, that devolved Assemblies and Parliaments must bear responsibility as well as wielding power. As I say, if that is his argument, he is arguing against himself.
Mrs Gillan
My hon. Friend is making a valuable contribution to the debate. It is interesting to note that regional-level Governments in other countries raise a percentage of their own expenditure. For instance, in Germany regional Governments raise 56% of the 63% that is spent, and in Spain they raise 23% of the 49% that is spent.
Mrs Laing
As ever, I thank my right hon. Friend. Those examples illustrate my argument extremely well.
There is no doubt that there cannot be proper accountability without a well-constructed democratic system involving fiscal responsibility as well as democracy. At present Wales benefits enormously from public spending. The public expenditure cuts in Wales are considerably smaller than cuts in the rest of the United Kingdom, and public spending is currently 12% higher. As I have said, I entirely support that position. No one is trying to do Wales any harm; quite the opposite.
I am pleased that my right hon. Friend has given the Silk commission the duty of examining the future scope of devolution. Wales can learn much from what has happened in Scotland. There is a significant difference between the situation in Scotland and the situation in Wales because Scotland has, historically, its own legal system and other institutions that Wales does not have—I say that as a Scots lawyer who is perpetually confused by English law when we discuss it in the House—but the commission is nevertheless likely to bring Wales great benefits for the future.
Huw Irranca-Davies (Ogmore) (Lab)
I had intended to speak for about an hour, but I probably intervened for about an hour instead, all told, and I apologise to my colleagues for that. I shall therefore make my speech as short as possible.
The hon. Member for Epping Forest (Mrs Laing) opened her speech by saying that she was she was a proud Unionist. I would describe myself as a proud Unionist as well, but also as a proud devolutionist. I am a Unionist not on the basis of any ideology or fixed arbitrary principle, but in recognition that—as in the old trade union cry, “Unity is strength”—the constituent parts of the United Kingdom together add not only to social cohesion but to economic activity, and to our political clout on the world stage. That should be recognised in today’s debate.
The theme that I want to adopt in my brief speech, and to convey to members of the Silk commission if they hear today’s debate, is that we should not be talking about loosening ties. Instead, we should engage in a mature debate, recognising that there is a positive, welcome tension between our Government and the Governments in Scotland, Wales and Northern Ireland—although I must add, perhaps to the disappointment of my colleagues in the Plaid Cymru camp, that that is not necessarily a recipe for independence. I think that we carry much more clout if we work together. If devolution constituted a settlement, I think that on the basis of today’s debate we can all agree that it is still settling. If it is a process, I think what we have learnt from the debate is that we need to know where it is processing to.
Let me begin by paying tribute, as others have done, to the calibre and quality of the members of the commission—not least the political appointees, but in particular Paul Silk. He will be known to my right hon. Friend the Member for Torfaen (Paul Murphy) and other Members not just because of his extensive experience, but because he was a House of Commons Clerk for nearly 25 years during three different periods. He is also a former Clerk of the Welsh Grand Committee. He has lectured and written extensively on Parliament and the constitution; he co-authored the seminal book, “How Parliament Works”. I think we can all agree, therefore, that no one better appreciates the very sensitive balance of our constitutional settlement.
Professor Nick Bourne was a colleague of mine—not political, but academic—at Swansea Institute in my lecturing days. He was also shadow Minister for Finance and Public Service Delivery, in addition to his role as Leader of the Opposition. I am sure he will also make a good contribution to the Silk commission.
Sue Essex is very well known, and there is a huge amount of cross-party support for her on a number of issues. She is a former Minister for Finance, Local Government and Public Services. She is clearly of high calibre, therefore. Dr Eurfyl ap Gwilym is an economics expert and a long-standing adviser to Plaid Cymru. He has for many years advocated revisiting the Barnett formula. Rob Humphreys has been a strong advocate of devolution for many years, and was also a member of the all Wales convention. The Silk commission is in good hands with them and its other members.
My right hon. Friend the Member for Torfaen gave a warning about a possible Trojan horse. I welcome the fact that we are debating this subject today and that the Silk commission will undertake the work assigned to it, but I suggest to my right hon. Friend that the danger is not so much of a Trojan horse, but of a horse and trap, in that this could lead us into a trap.
The Secretary of State must understand that concern; these are not idle worries. Although there is significant merit in addressing the two matters that the Silk commission will examine—power and fiscal responsibilities—there is a worry that Wales will be done down. To her credit, the Secretary of State has made it clear today that she does not want that to happen, but there is a great deal of concern among Opposition Members that we might end up in that situation, particularly given the coalition’s approach to constitutional affairs since it was formed. The concern is that this process will not be about looking after the best interests of the people of Wales, or even the best interests of the institutions of Wales—that is, in fact, a decidedly secondary consideration—but that instead it will be a way to look as if we are giving with one hand, while in reality taking away with the other. That is a concern, and we must monitor what happens.
Although I welcome today’s debate, it must not be the only one on this topic. We must find opportunities to address it in the Welsh Grand Committee or a different forum, because we need to discuss the burning issues of the day facing Wales, such as the state of the economy and of society and, as I see in my constituency, the attacks on our communities.
My family has not consistently been on the same side in the devolution debate. My late uncle, the Member for Gower for many years, was a strong defender of the status quo back in 1979, along with many other notable people at that time. Times move on, however, and it is right for us to address this issue again as things progress, and we must also acknowledge that it involves not only the Wales question but the England question too. That also needs to be addressed. I should add that I welcome the involvement of England MPs in today’s debate, and that engagement must continue and deepen.
The England question becomes more important the more Scotland considers its powers in respect of fiscal autonomy and other areas, and the more Wales considers such matters too. If we do not address the England question, there will not only be political asymmetry in the old Celtic and Pictish nations; there will also be asymmetry here in England.
Through the years, numerous suggestions have been made as to how to address the England question, and many of them have been rejected out of hand. The idea of having an England-only Parliament has been proposed, as has the idea of restricting the ability of Welsh, Scottish and Northern Ireland MPs to “interfere”, as some would say, in England-only matters. As we have learned in today’s debate however, there appears to be a general consensus that it is pretty hard to identify England-only matters, and it is also hard to identify Wales-only matters. We need to speak loudly in defence of the ability of this place to continue putting its opinions forward strongly on all matters.
Alun Cairns
The hon. Gentleman is making an important point, which I think is recognised on both sides of the House. Does he think that that principle also needs to apply to his colleagues in the Welsh Assembly, and that they should recognise that the decisions that they take affect policy making here? There therefore needs to be dialogue between the Welsh Affairs Committee and Ministers in Wales, between Back Benchers and Ministers, and between Ministers here and Ministers in Wales.
Huw Irranca-Davies
Indeed. People who, like me, are very positive about devolution welcome such maturity and two-way engagement. We should look for ways to enhance that. That is to do with respect and, as I said earlier, that respect goes both ways.
Huw Irranca-Davies
I am sorry, but I will not give way because I need to leave enough time for another person to speak.
I will try to fit in another couple of key points in one minute. We are looking at the reverse of the Boston tea party—the “No representation without taxation” principle. Perhaps that could be called the Bangor tea party, or the Barry tea party. It has been asked what proportion of the fiscal arrangements is needed for financial accountability. Is it a tiny element and just tinkering around the edges, or is it more substantial? I ask the Secretary of State to expand on the timetable. She said something about it in her opening remarks, but it seems to be in the medium grass, if not the long grass. Perhaps she can say something a little more concrete about when the commission will report and when we might see something in Parliament.
A critical factor that has been mentioned several times is the Holtham commission. It has been praised repeatedly by Conservative Members. In that case I say to them, and to the Secretary of State, let us get on with implementing it, regardless of waiting for the Silk commission. We would do a great service to the people of Wales by implementing it right now. The point has been made that Wales is not over-subsidised compared with other parts of the UK. That has long been a myth, but we are not, we are not, we are not. All we are calling for is fair treatment. Implementing the Holtham report would help us to copper-bottom that.
To add an element of caution, what we do not of course want at the end of this commission is what we might refer to as “Silk cuts”. We want an enhancement for Wales, not a diminution of our financial power or democratic clout.
Finally, the Assembly is only just over 10 years old. It is still, by the standards of democratic institutions, something of a stripling. Let us take these decisions wisely, cautiously and with careful consideration. Just as devolution had many fathers, some of whom were in this House, we need to be engaged as this process goes forward.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Before I call the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), I suggest that he can speak until 28 minutes to 6, because of everything that has gone on.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I am very grateful, Mr Deputy Speaker. I have curtailed my speech a fair bit because of the time constraints, but I am not too upset because most of it was trailed in The Western Mail this morning. I have no idea how it got there, but perhaps it was lucky that it did.
This is a timely debate and I congratulate the Secretary of State on securing this time on the Floor of the House, because the nature of the British state is clearly changing. The strength of the yes vote in March has given huge momentum to the growth of the political autonomy of our country. Events in Scotland, with the historic victory of the Scottish National party in May, mean that there will be a referendum in the next three or four years on independence for Scotland. I am not a betting man, but I know where I would put my money if I was. There will be serious repercussions for the British state. We know that it will be a multi-option referendum. Even if the SNP does not win the referendum, and I am increasingly convinced that it will, there will be a devolution-max settlement.
There is currently a dual process on the funding of Wales with the Silk commission and the bilateral negotiations on the reform of the funding formula. It is important that we have progress on the latter as we discuss the former, and that the debate is as open as possible. Three parties are included in the debate on the important issue of Barnett reform: the Labour party, which leads the Welsh Government, and the Lib Dems and the Conservatives, who lead the UK Government. We have been excluded. The information on that debate needs to be open and we need to hear about its progress before we start talking about the fiscal measures that the Silk commission will address.
My party fully agrees with the points made by the Secretary of State and Tory Back Benchers about accountability. Before I came to this place, I served as a town councillor in Carmarthen. We were responsible only for very local matters, but we had taxation powers. For the life of me I cannot understand why anybody would oppose giving the Government of Wales similar powers, as this would, not least, focus the minds of Assembly Members on wealth generation, which is very important. If we are serious about creating a more prosperous and just society, we have to focus on wealth generation, as do the Welsh Government. Giving them tax-raising powers would make them focus more on such issues and on some of the give-away processes that we are seeing at the moment.
Taxation powers and borrowing go hand in hand, and I am grateful that the Silk commission will be able to look at borrowing powers. In a situation where we will have a varying income stream as a result of having taxation powers, borrowing is the best measure for smoothing out those differences, and it is right and proper that the Welsh Government will be able to have those powers if the commission so recommends.
We know that there are two phases to the commission, the first of which will examine taxation powers. We have been scouring the world for best practice in federal states, and I do not think that there is anything new about what is on the agenda. There are many examples from across the world that we could use to best effect in Wales. Any submission that my party gives will be a compromise, because clearly our policy is for the devolution of all taxation matters ultimately. However, we will be trying to engage with this process constructively and we hope that parties from across the spectrum will engage in the same manner.
The second phase of the commission will examine further areas of power. The Parliamentary Voting System and Constituencies Act 2011 has given added momentum to this, because we know that we will lose a quarter of our Members of Parliament. Unless further areas of power are devolved to the Assembly there will be a democratic deficit, because there will be fewer Members scrutinising decisions made on Wales. We argued during consideration of that Bill, with those on the Labour Benches, that it was not proper to cut the number of Welsh seats based on the referendum result. All the referendum did was enshrine sovereignty over current devolved matters. I still hope that Lib Dem colleagues might rebel when the matter comes back to the House and I might be able to keep the constituency of Carmarthen East and Dinefwr. If not, and if my fantastic constituency and the fantastic constituency of Arfon disappear into the annals of history, further fields of power need to be devolved to the Assembly to avoid that democratic deficit.
My last point relates back to my intervention on the Secretary of State. I was grateful to receive a very detailed response, as I did not think I would. If there is a consensus on the commission between the political parties and among civil society, there needs to be a clear process map to make the recommendations become law.
Nia Griffith (Llanelli) (Lab)
We have had a long and full debate, and we have wandered over many subjects. We heard the hon. Member for Monmouth (David T. C. Davies) ensure that we heard a plurality of views. In his own completely inimitable style he told us that the Silk commission should have a remit to consider clawing back powers from the devolved Administration. That view must be unique to him.
Mrs Gillan
The Silk commission can look at the boundaries, and that means adjustments in either direction.
Nia Griffith
I thank the Secretary of State for that clarification.
My right hon. Friend the Member for Torfaen (Paul Murphy), a former Secretary of State for Wales, spoke with passion and conviction, standing up firmly for Wales and pointing out the deep mistrust of the current Government’s attitude to Wales, which is exemplified by the roughshod way in which Ministers are cutting the number of Welsh constituencies from 40 to 30. That fuels deep suspicions about what the Government’s motives are for setting up the Silk commission.
My hon. Friend the Member for Caerphilly (Mr David) stressed the need for a pragmatic approach that brings power nearer to the people but which does the best for the people of Wales. The hon. Member for Arfon (Hywel Williams) referred the Silk commission to his private Member’s Bills, the Bilingual Juries (Wales) Bill and the Jobcentre Plus (Wales) Bill. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who had very little time, unfortunately, urged the Lib Dems to rebel on the constituency boundary issue.
My hon. Friend the Member for Ogmore (Huw Irranca-Davies) stressed the importance of this Parliament in taking decisions for the whole UK and urged that we move forward wisely, cautiously and with careful consideration of the issues. The hon. Member for Brecon and Radnorshire (Roger Williams) pointed out the importance of the Calman commission and stressed the excellent credentials of its members, and his words have been echoed by many hon. Members.
The hon. Member for Aberconwy (Guto Bebb)—I am not sure whether he is listening—stressed the importance of accountability and talked about practicalities. He spoke of the importance of treating businesses across the whole UK equally, but he then talked about different national insurance rates, so I am not sure quite where he was coming from.
The hon. Member for Vale of Glamorgan (Alun Cairns) talked about the need for stability and there being no further changes for a generation. He stressed the need for the Silk commission to consult effectively and to reach out to those who have not been effectively engaged before, pointing out concerns about the volatility of some taxes. The hon. Member for Epping Forest (Mrs Laing) reaffirmed her strong Unionist credentials and welcomed the commission, which she sees as an important step towards accountability.
My hon. Friend the Member for Pontypridd (Owen Smith) referred to the difficulties of having continual change and to the need to take a long-term view. He also stressed the need for economic stimulus, as set out in Labour’s five-point plan, and pointed out the measures that the Assembly Government are taking to implement elements of that in the areas for which they have responsibility, such as with the successor to the future jobs fund—the jobs growth fund—and with some investment in infrastructure, where they are able to do so.
The Opposition very much welcome the establishment of the Silk commission and the important tasks it has to do. Its first task is to review the case for the devolution of fiscal powers and to recommend ways in which the financial accountability of the Welsh Assembly could be improved. It will no doubt refer to the work done by the Holtham commission in its analysis of some of the possible ways of transferring revenue-raising mechanisms to Wales. It can examine the practicalities and the likely consequences of implementing any such measures. We should not underestimate the complexity of this issue or the dangers of people being, quite naturally, tempted to play the system by switching from one side of the border to the other. That issue has been mentioned by several hon. Members, particularly my right hon. Friend the Member for Delyn (Mr Hanson). Most importantly of all, the Silk commission will need to consult and take account of public opinion. It is vital that a move towards any change has the support and backing of the people of Wales.
We are disappointed that the Secretary of State has decided to make setting up the Silk commission a priority over tackling the challenge of delivering a fairer funding system for Wales—an issue that is specifically excluded from the commission’s remit. If her Government were really interested in delivering the best for the people of Wales, they would have made it a priority to introduce the so-called Barnett floor—a concept that was explored in the Holtham reports and adopted by Labour in our 2010 manifesto as the most practical and immediate step to protect funding to Wales.
Roger Williams
Does the hon. Lady agree that the floor has less applicability in these straitened economic times than it would if there were an expanding economy?
Nia Griffith
As the hon. Gentleman will have heard my right hon. Friend the Member for Neath (Mr Hain) explain, we are at a tipping point. Until now, the Barnett formula has served the people of Wales well, but from this year onwards the balance will tip slightly in the other direction. Putting a floor in would offer additional protection and would be a straightforward measure. It could be implemented with the agreement of the Treasury and without having to go into the difficulties of trying to work out a needs-based analysis, which is much more complex but is something that we might wish to see in the long term. So, as Holtham identified, the Barnett formula has served Wales well up to now, but if nothing is done it will begin to disadvantage Wales. The whole point of putting in the Barnett floor is to prevent that from happening and to protect funding. The Holtham commission recommended moving to a needs-based analysis, and it produced evidence of how a needs-based funding system could be made to work in a way that is fair to all parts of the United Kingdom. In its second report, it demonstrated that a needs-based funding formula that is fair to Wales would deliver £117 to Wales for every £100 that is spent in England on devolved activities. It recognised, too, that moving to a needs-based formula would take time but, in the meantime, the Barnett floor could protect Welsh funding. Instead of making that a priority, as it could be implemented quite easily, the Secretary of State has set up a commission that specifically will not consider the issue of funding reform.
Nia Griffith
I hope very much indeed that that bilateral work is progressing quickly and effectively.
It is small wonder, given the Conservatives’ track record on devolution, that many Opposition Members have expressed suspicions about the Government’s motives for setting up the Silk commission. There are suspicions that the Government might be trying to sell Wales short and push through measures that would seriously disadvantage Wales. The concentration of wealth creation in London and south-east England means not only in Wales but in Scotland, Northern Ireland and the other regions of England that public expenditure is greater than the income from those areas, which are all net beneficiaries of the UK tax regime, while London and parts of the south-east and East Anglia are net contributors.
That is for historical reasons, including the early emergence of London as the commercial capital and its importance as a world financial centre, and it is in contrast to other European countries, where the importance of the city state and, much later, unification has produced different patterns of wealth distribution. The disparities have existed in the UK for many years: they are deeply embedded and cannot simply be eliminated by a few years of regional policy or European funding, helpful as that is to compensate for the differences. Nor can they simply be eliminated by substantial growth in the private sector, vital as that is to Wales and across the UK.
With such deep-seated historical differences in wealth distribution, complete financial independence for Wales, as advocated by Plaid Cymru, is an absolute non-starter. With a gap of £14.6 billion between public spending and the revenue raised in Wales, it would mean every man, woman and child in Wales contributing an extra £4,800—nearly £5,000 each a year just to maintain current levels of spending.
Jonathan Evans
The Labour party has been using those figures quite heavily today, and it has based them on the Holtham report, but that is misleading. The report indicates a gap of £6 billion. Will the hon. Lady correct that statement and the statements of the right hon. Member for Neath (Mr Hain)?
Nia Griffith
Those figures were recently provided by the House of Commons Library, on 2 November, and I am sure that it has checked them thoroughly.
We are suspicious about the Government’s motives in setting up the Silk commission, whose remit excludes fair funding. It looks as if the Government might be using it as a back door to cutting funding to Wales, or seeking to adopt measures that could leave Wales subject to fluctuations in funding that would be impossible to cope with. The Labour party will strongly resist any moves that would disadvantage Wales.
Many people have been puzzled by the timing of the debate, as the remit for the Silk commission has already been set, so it did not offer an opportunity to influence its terms of reference. Perhaps, when the commission has had a chance to study the issues, it may wish to seek views or raise questions in an interim report, and that would be a more appropriate time for a debate. Having the debate now, before the commission has even begun its work, but after the terms of reference have been decided, is somewhat bizarre. [Interruption.] I think that the Secretary of State is trying to intervene, but the point was well made by my right hon. Friend the Member for Torfaen that that does make us question the reason for the debate.
Mrs Gillan
I should like to inform the hon. Lady and the House that the terms of reference were agreed with the Labour party in the Assembly.
Nia Griffith
The irony being that today we have discussed the importance of Parliament; many Government Members have referred to the importance of the commission being set up by Parliament.
Nia Griffith
No, I think that I have made my point. Opposition Members felt that they would have had more chance to influence things if the timing of the debate were different.
Up and down Wales, as far as the person in the street is concerned, the Silk commission is set up and can get on with its work. What those people are worrying about today is the empty order book in their company, the shops that are closing in their high street, the cuts in their council services, losing their job or their home, their children not being able to find work, and the daily struggle to make ends meet as prices for essentials such as food, vehicle fuel and energy bills spiral upwards. They understand something that the Government seem to have forgotten—that before the Government can raise any revenue or talk about any formula to distribute it, they need wealth creation. Indeed, what is the point of talking about taxation without wealth creation?
This week the Government have sent completely the wrong message to potential investors in Wales. Only days after the head of Tata Europe told MPs that he has been having serious doubts about future investment in Wales because of this Government’s lack of a long-term manufacturing strategy, the Government confirm his doubts by trying to sneak out in a written statement yet further cuts to the feed-in tariff scheme, with devastating effects on the industry. This is not about feed-in tariffs. This is not just about manufacturing industry. This is about raising the proper revenue and then being able to do something with it. It is about wealth creation, setting the right long-term strategies that will encourage manufacturing to come to Wales, attracting the investment that we need and providing the wealth so that we can talk about what we do with it. [Interruption.] I still have two minutes to go, I believe.
Why do we remain wary of the Government’s motives and suspect that they might be setting up the Silk commission to try to reduce funding to Wales? Because daily we see funding being sucked out of Wales, whether in higher VAT, the change from the retail prices index to the consumer prices index for the calculation of pensions and benefits, or the winter fuel allowance being cruelly cut for the over-80-year-olds from £400 to £300 this month, leaving many worrying about whether they can afford to put the heating on. It is this sucking money out of Wales that worries us considerably.
Although we welcome the Silk commission, wish it well with its work and look forward to debating its findings, in the meantime I again ask the Secretary of State to make it a priority to establish the so-called Barnett floor to protect funding for Wales, and I urge her Government to adopt fiscal policies that will stimulate the economy in Wales.
The Parliamentary Under-Secretary of State for Wales (Mr David Jones)
This has been an important debate and, as it turns out, one that is particularly well timed because the Silk commission will hold its first meeting tomorrow. I am sure right hon. and hon. Members in all parts of the House will wish it well, and that the members of the commission will be grateful for the opportunity to take into account the numerous points that have been made by Members on both sides of the House this afternoon, not only on the commission’s work but on the matters that it should take into consideration when arriving at its conclusions. I am pleased that so many hon. Members were able to contribute to the debate today and make a variety of important points that I am sure the commission will find extremely valuable.
As the Secretary of State pointed out, this is a Government who have delivered for Wales. Despite the doubters and the nay-sayers, we delivered the referendum on primary legislative powers for the Assembly in March and now we are taking that further by delivering on our coalition commitment to establish a commission to consider, first, the question of the financial accountability of the Welsh Government and of the Welsh Assembly, and secondly, the powers of the Assembly, and to recommend modifications to the present constitutional settlement that may enable Welsh devolution to work more effectively within the context of the United Kingdom.
It is timely that the commission should start this work now. The Welsh Government spend some £15 billion of public money each year. They and the Assembly now have considerable powers, which extend to primary law making in the devolved areas. It is widely accepted not only in the Chamber but outside that that level of power should be matched by accountability to the people of Wales for the money that those institutions spend on their behalf. The issue of financial accountability is a hugely important part of the Silk Commission’s remit. Seeking to build consensus around the extent and form of accountability is a challenging aspect of that remit.
The second part of the commission’s task, which will commence towards the end of next year, is also important. By then, Wales will have experienced more than 13 years of devolution. People will have had considerable time to assess whether the suite of powers vested in the Assembly and in the Welsh Government are working as well as they could be in the interests of Wales and, importantly, in the interests of the United Kingdom as a whole. It will be an appropriate time to assess whether modifications to the devolution settlement should at least be considered, so the work of the commission is extremely important. As my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) pointed out, we will need to listen carefully to the views of people across Wales and the United Kingdom and seek to establish a consensus on the way forward. I am sure that Members’ interesting and varied points will be extremely valuable to the commission as it starts its important work.
Huw Irranca-Davies
I am trying to get my head around the idea of the level of financial devolution that will give accountability to the Welsh electorate. In local authorities it is typically up to 20%. Do Ministers envisage such a figure, or 2% or 3%?
Mr Jones
My right hon. Friend the Secretary of State has already indicated the levels of fiscal accountability that are devolved in other parts of Europe. Ultimately, these will be matters for the Silk commission, which, as the hon. Member for Arfon (Hywel Williams) pointed out, will no doubt take into account what prevails in other parts of Europe in arriving at its conclusion, as it should.
In the brief time remaining, I will respond to the various points made. The shadow Secretary of State has explained to me the reasons for his absence, which we fully understand. He was less than enthusiastic about the commission, giving it a “cautious welcome”, which was as cautious as it gets and gave a whole new meaning to “welcome”. Resorting to the oldest rhetorical trick in the book, he set up the straw man of “devo-max”, under which Wales would be responsible for raising all its own revenue. He seemed to suggest that the commission’s recommendations might result in Wales having to raise all its own revenue, as a consequence of which public spending would be halved. I hope that it is unnecessary to point out, but I shall anyway, that the people of Wales should ignore these scare tactics.
Mr Jones
I shall not, as I have very little time left. I am sure my hon. Friend understands.
Fiscal devolution will work only where there is consensus on the powers to be devolved and in circumstances where the transfer of powers does not put unsustainable burdens on either the devolved Administration or the UK as a whole.
The shadow Secretary of State and other hon. Members mentioned Holtham and inquired why it was not being brought within the remit of the Silk commission. Separate bilateral discussions continue between the Government and the Welsh Government on all the Holtham commission’s proposals, including the idea of a funding floor and its wider proposals for reforms—an approach supported by the Welsh Government. The Government and the Welsh Government have started discussions, which will include work to gain a shared understanding of trends in Welsh spending, of previous studies on Welsh needs and of the operation of existing borrowing powers. Once consideration of spending trends and previous needs studies has been completed, and subject to Government and Welsh Government Ministers agreeing that a problem exists, the next step will be to look at options for reform. I put that on the record because of the concerns that right hon. and hon. Members expressed.
I believe that we must rely on the good sense of the commission, which will seek to find consensus—I make no apology for repeating the word because it is crucial to the commission’s work—on the extent to which the Welsh Assembly and Government should become more financially accountable.
I found the shadow Secretary of State’s negativity and tribalism most disappointing, and it was not typical of the debate. He appeared to have little or no faith in the capacity of the people of Wales to run to any extent their own financial affairs and, perhaps more importantly, to decide whether at an election a politician is making an unsustainable promise, which of course is crucial to what it falls to us to consider.
I found the contribution of my hon. Friend the Member for Monmouth (David T. C. Davies) disappointingly and uncharacteristically cynical. [Hon. Members: “Oh!”] I have to say, I found it quite hurtful. He said, almost in terms, that the conclusions of the commission were a fait accompli that would lead inevitably to more powers for the Assembly, but the commission has been asked to consider the boundaries of the devolution settlement and modifications that could work well for the benefit of Wales within the United Kingdom.
I am sorry that the right hon. Member for Delyn (Mr Hanson) is not here, but he made the important point that significant cross-border issues fall to be considered, and it is well within the commission’s remit to decide that in certain cases powers should be repatriated from the Assembly. That is what the Calman commission found in its consideration of the Scottish devolution settlement, and it is quite open to the Silk commission, which has a wide-ranging remit, to do so, too, so I hope that that offers some reassurance to my hon. Friend—who looks very reassured, I am bound to say.
The right hon. Member for Torfaen (Paul Murphy) praised the excellence of the commission members, and I feel it appropriate to echo that praise: we have a very well constituted commission. He raised the spectre of a Trojan horse, however, and doubted whether there was any real consensus on the commission, so I think it fair to point out once again that all the party leaders in the Assembly, including the Labour First Minister, co-operated in agreeing the commission’s terms of reference, and each party has a political appointee on it. I hope that gives the right hon. Gentleman some reassurance that it is not by any means an evil Tory Trojan horse; it is a genuine attempt to see whether it is possible to arrive at a settlement that will benefit the people of Wales in the long run.
The right hon. Gentleman also raised the issue of whether there will be a referendum on additional tax-raising powers, but that very much depends on what the Silk commission itself recommends. I for one find it hard to see how, for example, if there were recommendations on any significant changes to income tax, it would be possible to go forward without consulting the people of Wales as to whether that was what they wanted; after all, that is what happened in Scotland, and I have no doubt that it should happen in Wales.
The hon. Member for Brecon and Radnorshire (Roger Williams) took considerable credit on behalf of our Liberal coalition partners for the establishment of the commission, but I have to point out that it was a joint coalition commitment and one to which the Conservative party is very much wedded. He, too, praised the excellence of the commission members, and he paid tribute to Nick Bourne, the Conservative nominee. I can only echo the hon. Gentleman’s view that Professor Bourne will be an excellent member of the commission.
The hon. Member for Caerphilly (Mr David) did give a welcome, which I believe was genuine, to the commission, and I was very pleased to hear it, but he referred to the terms of reference and queried the reference to the United Kingdom’s wider fiscal objectives, pointing out that we live in a time of stringency that has resulted in spending reductions. Well, of course, it has, and I will not intrude into his private grief by pointing out the reason why we have to cut our public spending, but nevertheless it is quite right that whatever the commission decides should operate within the wider fiscal objectives of the United Kingdom as a whole.
There were excellent contributions also from my hon. Friend the Member for Aberconwy (Guto Bebb), the hon. Member for Arfon, my hon. Friend the Member for Vale of Glamorgan (Alun Cairns), the hon. Member for Pontypridd (Owen Smith) and my hon. Friend the Member for Epping Forest (Mrs Laing), who came up with a memorable toothpaste tube metaphor, which I shall use regularly when talking about the effect of devolution on the United Kingdom. There was also a supportive contribution from the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards).
This has, as I say, been—
Female Genital Mutilation
(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Jane Ellison (Battersea) (Con)
I am grateful for the opportunity to raise this important issue again in the House. Female genital mutilation—FGM—affects millions of girls and women around the world, including here in the UK. My remarks this evening are focused on FGM in the UK, and what we can do to prevent it.
FGM is a gross violation of girls’ human rights, and is nearly always carried out on minors. In the UK, the girls most at risk are usually aged between eight and 12, but are often much younger. We should therefore be clear from the outset that FGM is a form of child abuse. FGM is defined by the World Health Organisation as the full or partial removal of, or injury to, the external female genitalia for non-medical reasons. Although it occurs in countries across the world, it is particularly prevalent in sub-Saharan Africa. There are no benefits to FGM. Indeed, quite the opposite is true. The girl’s health is damaged for ever.
There are various types of FGM, but the most extreme, which is the most common in larger FGM-practising communities settled in this country, is type 3. That is total removal of the victim’s external genitalia. The girl is then infibulated—effectively sewn up. I am sure that hon. Members can imagine the dreadful impact of that on the quality of life and the health of those girls in childhood, and the long-term damage to their sexual and mental well-being.
It is a source of great frustration to those who campaigned against FGM for many years that the UK has in place everything that might reasonably be expected to be needed to end FGM in this country, yet it continues and is apparently a growing problem. The necessary legislation is already on the statute book. FGM has been illegal in the UK for more than a quarter of a century under the Prohibition of Female Circumcision Act 1985, which was strengthened in the Female Genital Mutilation Act 2003 by making it illegal to take a girl abroad for cutting, as FGM is often referred to colloquially. Indeed, new guidelines for prosecuting the perpetrators of FGM were published here only this autumn.
As well as having the right legislation, the UK has a solid child protection framework in place which, on the whole, does a good job of protecting vulnerable children from other forms of abuse. The Government have recently published fresh multi-agency guidelines to aid professionals —for example, teachers, social workers and health workers—to identify children at risk and what steps must be taken to assist them. Despite that, all the anecdotal and medical evidence suggests that FGM is a growing, not a diminishing problem here. Why is it proving so difficult to right this wrong?
First, to meet the challenge, we need to know its scale. As part of the Mayor of London’s strategy to tackle all forms of violence against girls and women, the Greater London authority will shortly publish a policy document on addressing harmful practices in London. It will focus on, among other things, FGM. That report and others identify the fact that the lack of up-to-date figures is a significant stumbling block in efforts to tackle the problem.
Most of the FGM data for the UK that inform most parliamentary speeches, media articles and reports, including that from the Greater London authority, comes from a respected 2007 study by the charity FORWARD—the Foundation for Women’s Health, Research and Development. This report extrapolated data from the 2001 UK census, and its finding were startling, even then. Over 174,000 women residents in the UK had been born in an FGM-practising country. The estimated number of maternities in England and Wales in women with FGM stood at just over 6,000 in 2001 and had increased by 44% to just over 9,000 in 2004. FORWARD estimated that by 2009, that figure would be around 7,000 in London alone. Those are astonishing figures. That study is sound, but it is based on decade-old data.
As the Minister will know, with the trends in migration to this country over the last decade, especially from countries with a high prevalence of FGM, such as Somalia and Ethiopia, one can only conclude that those figures dramatically understate the extent of female genital mutilation in the UK today. We urgently need to update the evidence base.
Another reason the evidence base needs to be updated is that FGM is adding to existing health inequalities for these girls and women. How many women are not attending routine cervical smear testing because they do not want to alert the authorities to what has happened to them? How many parents do not take their children to the local GP when they are unwell because they fear that an examination will reveal that the girls have been cut? If, as the evidence suggests, FGM is a growing problem in the UK, the burden that it puts on the NHS in the long run will grow to match it.
Valerie Vaz (Walsall South) (Lab)
I thank the hon. Lady for bringing this debate to the Chamber. It is an extremely important subject, and she should be congratulated on the stance she has taken nationally and internationally. She is right when she points to the effects on the NHS. A midwife has shown me a video of the effects that FGM will have and what she needs to do when the women and young girls who have, in effect, been abused have to be cut again in order for them to give birth. It is having a huge effect, not only physically but on their mental state.
Jane Ellison
I thank the hon. Lady for that intervention. She is doing marvellous work to highlight this problem as well, and I know that she has seen recent evidence that was quite shocking and brought the problem into stark relief. I ask the Minister to consider, perhaps on a cross-departmental basis, supporting research to update the evidence base better to inform public policy in health, which the hon. Lady mentions, and in other areas. I understand that the FORWARD study cost about £30,000 to put together and that a more in-depth and qualitative report would cost in the region of £120,000.
Another area of major concern is that some professionals, especially teachers, are not confident enough of their role in protecting and supporting girls who are at risk. Although the multi-agency guidelines are excellent and we have a robust child protection framework in place, FGM remains under-reported. Recent feedback from a focus group with young women who had been affected suggested that not all professionals who deal with at-risk girls are clear about what they should do. Perhaps they do not feel that they can rely on the support of senior colleagues or that they have the political cover to step into what they perceive to be a cultural minefield. I very much welcome the current inquiry by the Select Committee on Education into how the child protection framework might be improved. I am pleased that the Committee identified FGM as a particular problem, and I have submitted evidence to its inquiry.
Since I have been speaking about this subject in the media over the past year—including on Radio 4’s “Woman’s Hour” in August—I have received a steady stream of letters and e-mails from around the country, many of them from retired teachers, telling me of their frustrations in reporting their suspicions about a girl who was at risk or had already suffered this abuse, but then finding that their information was not taken any further. This is child abuse, as the hon. Member for Walsall South (Valerie Vaz) says, and our professionals must feel that they can, and indeed must, speak up when they see the signs, and that once reported this information will be followed up swiftly by the relevant authorities.
Members will perhaps be astonished, as I was, to learn that one child who asked her teacher for help, saying that she was frightened that she was to be taken on holiday to be cut, was advised by her teacher to write a letter to an FGM charity. Perhaps some professionals feel that they cannot speak out because they fear that an accusation of racism would damage their career; I think that we, as politicians, can understand that fear. However, my argument is that by not protecting girls at risk of FGM, we are treating these girls less equally. If this abhorrent practice were happening routinely to little white, middle-class girls from long-settled parts of the community, would there not be a greater outcry among professionals, politicians and the media? There would be headlines every week.
While reflecting on the leadership role that we as politicians have, it is incumbent on all of us, as Members, to ask the difficult questions of our contacts in all communities and not to allow issues to be swept under the carpet, because some community leaders have issues that they do not want to talk about. I hope that when the Minister responds she will comment on whether information from front-line workers is being gathered and reviewed centrally to build up a clearer picture of patterns of behaviour—for example, recording school absences of at-risk girls.
On the subject of gathering evidence, I understand that the Crown Prosecution Service is in the process of collecting data on the FGM cases considered for charge. Everyone campaigning on this issue recognises the deterrent impact that just one successful prosecution would have. It remains a source of astonishment that there has not been one prosecution in the UK in the past 25 years, even though, throughout that time, a growing number of African and other European countries have secured convictions.
If we accept that FGM is child abuse, why do we not treat it as such? In other cases of child abuse, arrests are made, people are charged and convictions are secured. It is very difficult territory, but elsewhere, even when witnesses are very young or unwilling to testify, convictions have been secured and vulnerable siblings have been identified and registered as being at risk. Are we really doing enough to protect girls from abuse? Does it make a difference to the police that those girls are overwhelmingly from immigrant communities? In France, compulsory physical checks make the job of the prosecutors easier. That is not part of our tradition here in the UK, but is that hampering the police? Should we at least be challenging and discussing that received wisdom?
Will the Minister tell us more about the work that the Crown Prosecution Service is doing, and whether she feels that a prosecution under FGM legislation is becoming more likely? What does she feel are the main sticking points for the police when it comes to pursuing cases?
Of course, for the girls involved prevention is much better than prosecution, so as well as considering the action that we can take in this country, we have to take more effective action to prevent families from taking girls overseas to be cut. I have learned a lot about FGM over the past year or so from one of the world’s leading experts, Efua Dorkenoo, who is advocacy director on FGM for the charity Equality Now. She has been looking around the world for ideas that work. The Dutch and French Governments use what they call a “health passport” for girls who are at risk. That simple document, carried with them overseas, states clearly that FGM is a criminal offence in the country of residence and a form of child abuse. It details the appropriate criminal penalties, and in the case of Dutch residents, explains that if convicted of having their daughters cut, parents could lose the right to remain in the country if they are not citizens. The parents are then asked to sign the document before they travel to show that they have understood, and accept, their responsibilities.
I believe that such a document could be a powerful tool here. It would send a strong message to families that FGM is not to be tolerated and would empower girls to assert their own human rights. It may also empower parents who have their doubts about FGM. There is some evidence that some parents, perhaps those who have grown up in this country, are having doubts about whether they want it to happen to their daughters. They could show such a document to relatives from the extended family who were putting pressure on them to have a girl cut, and say, “Look, we can’t do it, we’ll be prosecuted.”
Valerie Vaz
Another problem is that the cutters abroad see such things as a loss of their income, so one solution could be that any aid sent out to relevant countries could be linked to retraining the cutters for a somewhat more useful job.
Jane Ellison
That is a very powerful intervention. That is a Department for International Development responsibility, as the hon. Lady knows, and DFID is being urged to do more on the matter. It is doing things, and astonishing grass-roots movements are growing up all over sub-Saharan Africa, with women in the lead. They are going from village to village urging people to stop the practice, and re-educating the cutters to do something else. She is absolutely right to highlight that as one way in which we can help. There is an extraordinary link on this issue between communities in the UK and the diaspora communities around the world.
Does the Minister think the health passport could help prevent FGM from happening to British girls when they are taken overseas? Should we consider whether it could work here?
I do not believe there is any argument about the fact that female genital mutilation is a terrible thing, yet for too long the issue has been talked about at the margins of public life, if at all. If we are to send a clear signal to the girls affected by this abhorrent practice that they are not at the margins of our national life, we in this Parliament must take every opportunity to address the issue. I am grateful for the opportunity to do so this evening, and I thank colleagues for their support and pay tribute to those campaigning outside the House. I very much look forward to hearing from the Minister, who I know has been very supportive of us and feels very strongly about the issue. We must aim to stop FGM in this generation and break the cycle of abuse that blights the lives of so many girls and women in the UK.
The Minister for Equalities (Lynne Featherstone)
I thank my hon. Friend the Member for Battersea (Jane Ellison) and congratulate her on securing this debate on an incredibly important topic for women and girls both in the United Kingdom and internationally. We have to protect girls from this abuse, and we have to ensure that all those living with the consequences of female genital mutilation are given the care and support they deserve.
I want to answer my hon. Friend’s specific points first, so that if time runs out I do not miss answering them. On updating the statistical and quantitative evidence base, she made a powerful point about the fact that the records are outdated. We shall certainly look at what the Greater London authority comes up with. Although £120,000 is small in governmental terms, it is not easy to come by, but we can commit to considering it. I am happy to give her that commitment.
My hon. Friend also mentioned health inequalities, the tackling of which is a Government priority, as part of our wider focus on fairness and social justice. In the Health and Social Care Bill we are proposing the first ever duties, on the Secretary of State, the NHS commissioning board and clinical commissioning groups, to have regard to the need to reduce health inequalities—and of course, victims and survivors of female genital mutilation would fall into that category. We expect there to be action, therefore, under that banner.
My hon. Friend raised the important point that everyone works with the best of intentions, but that perhaps teachers are uncomfortable or do not use the multi-agency guidelines that the Government have published, and she asked what feedback the Government are receiving centrally. Currently, we are not receiving or collating feedback resulting from those guidelines, but there will be a review of the use and effectiveness of the guidelines in February 2012, and we will evaluate their success by examining how extensively they have been used. Depending on the review’s findings, we will consider how we might improve or adapt the guidelines. If front-line workers are not using them properly, there must be another barrier that we have not recognised in dealing with victims of FGM.
My hon. Friend raised the possibility of health passports for at-risk girls. I can undertake to explore and investigate the feasibility of such a measure. I do not know enough about the Dutch system to make a commitment, but I can commit to considering the idea.
The Government have recognised the need for a joined-up approach, co-ordinated by several Departments, to tackle FGM. We are trying to raise awareness of that barbaric practice. We have made progress, but I want to make it clear that the long-term and systemic eradication of FGM in the UK also requires communities affected by the practice to abandon it themselves. I cannot emphasise that point too strongly. We all work hard and are committed, but the pace is slow.
Our key focus is on prevention, and we have undertaken considerable work in the past year, across nine Departments, to take forward our efforts to prevent and tackle FGM. In February, I was pleased to launch the multi-agency practice guidelines for front-line professionals at the Manor Gardens centre, with which my hon. Friend and the hon. Member for Walsall South (Valerie Vaz), who has also contributed to the debate, will be familiar. Both are committed to that agenda. I spoke there to committed and dedicated community practitioners, and I want to commend and thank them publicly for their work.
As I said, the guidelines aim to raise awareness of FGM, highlight the risks of the practice and set out clearly the steps that should be taken to safeguard women and children from this abuse. I remember reading the guidelines myself. We talk about guidelines, and I sometimes wonder whether people know what they are like. I shall give an example for a teacher: if a girl spends half an hour going to the toilet, which is an inordinately long time, the teacher, if it happens more than once, should be alert, because it might be a signal that the girl has been cut, and so signpost and refer it on. The guidance focuses in particular on ensuring a co-ordinated response from all agencies, which is key to ensuring that professionals are able and confident to intervene to protect girls at risk. That is the objective. In addition, we continue to distribute leaflets and posters about FGM, which are key to bringing the issue to more people’s attention. More than 40,000 leaflets and posters have been circulated to schools, health services, charities and community groups around the country. In July, the Metropolitan Police Service’s Project Azure worked alongside Kids Taskforce to produce a film for secondary schools to raise awareness of FGM, which is now available for download on the Kids Taskforce website. Last summer the project also worked at Heathrow airport, talking to families with young girls going to countries where FGM is practised.
Jane Ellison
I watched the film, and I was astonished to see the young teenagers who made it say towards the end, “We want girls to have an informed choice about this.” No one can have an informed choice about a crime that is committed against them. However, those involved in campaigning on the issue are often forced to make such compromises in their language, essentially because of concerns about how they will be dealt with in their communities, which goes exactly to what the Minister said about changing attitudes in communities.
Lynne Featherstone
My hon. Friend makes a powerful point. Some of the attitudes and sensitivities—or perhaps over-sensitivities—associated with this issue have sometimes meant that what needs to be said is not said as directly as it should be.
The Government are frustrated by the lack of prosecutions in the 25 years since the practice became a criminal offence. Indeed, as a Minister, I am intensely frustrated by that, as I stand at the Dispatch Box at Question Time and am asked why there have been no prosecutions under Labour, Conservative or coalition Governments. We have worked to strengthen the current legislation and we keep trying to encourage prosecutions. As my hon. Friend said, in September the Crown Prosecution Service launched FGM legal guidance so that prosecutors can better understand the background of FGM-affected communities and identify evidential challenges, so that they do not work in a vacuum, but understand the issue.
Research suggests that the most likely barrier to prosecution is pressure from the family or wider community, which makes it difficult for girls and women to come forward and notify police about what has happened to them. Victims may be too young, vulnerable or afraid at the time of mutilation to report offences to the police or give evidence in court. There could be other evidential difficulties if cases are reported many years after the event. I had not heard about the compulsory examinations that take place in France, which my hon. Friend mentioned. That is not the way we do things here, but one does sometimes think, “What other way is there to know whether a girl has been cut?”
The aim of the legal guidance is to provide prosecutors with advice on building stronger cases to bring to court. Prosecutors will now work closely with the police to investigate cases and consider evidence from social services, schools or local authorities, which may have crucial information to help build a case. The guidance has not been launched in isolation, but is part of a concerted approach to building prosecutions. The CPS will be monitoring and reviewing every case referred to it by the police for 12 months. That will allow the CPS to identify why cases are failing to proceed to court and what issues need to be addressed in building a successful case. That reflects the CPS’s commitment to taking positive action to address the problem.
I want to talk about abandonment. I recently met representatives from the Orchid project, who introduced me to Tostan, a non-governmental organisation whose mission is to empower African communities to bring about sustainable development and positive social transformation based on respect for human rights. It takes a respectful approach that allows villagers to make their own conclusions about FGM and to lead their own movements for change. By helping to foster collective abandonment, Tostan’s programme allows community members to share the knowledge. Through this process, entire villages and communities—men and women—have decided together to end FGM. This is incredible work, and I am looking into it. I do not know whether it is directly transferrable, because, geographically, such villages are quite different from the communities here, in the midlands or wherever. There must, however, be something to be said for a community making a decision about the value being put on women being cut. If the whole community accedes to that decision, it will be something that has been done collectively.
A couple of months ago, at the conference on FGM at Manor Gardens, religious leaders met for a forum on female cutting. They represented all the religions, although the Jewish representatives could not come, but did send a message of support. What was so amazing was that all the speakers made it clear that religion played no part in FGM. Afterwards, 80% of the people who had attended said that that was beginning to break the link. Somewhere in all this, there is something that we need to look at that is more than all the things that we have been trying to do for so long.
Claire Perry (Devizes) (Con)
I apologise for joining the debate after the start; I was selling poppies in Westminster tube station. I commend my hon. Friend the Member for Battersea (Jane Ellison) for bringing this important topic to the Floor of the House. I hear what the Minister is saying about getting the whole community involved, but I am concerned that this practice, which is illegal in the UK, is an underground practice. We need to give the young women in our communities a safe way to come forward, to understand the problems with the practice and to report it. I fear, however, that those groups of vulnerable young women are not yet being given a voice to raise the issue and express their concerns.
Lynne Featherstone
We are working hard to provide those avenues, and to provide the people to listen to those voices, so that such young women will have the freedom to come forward. We have been trying for a long while to make those things come true. As a Minister, I have to say that we continue to pursue avenues such as the new guidelines and the CPS approach, but it would be wrong of me not to look further and wider when people bring me ideas that might have some value. I am not saying that they do have value or that they do not; I am simply saying that I am open to new ideas as to how we can tackle this intransigent issue. There has been a great deal of work and genuine commitment on both sides of the House, and we are moving forward with that, but we have not really succeeded. In fact, my hon. Friend the Member for Battersea said that the incidence of FGM was growing. In addition, perhaps the diaspora is at a different stage from what is happening in the countries of origin, where people are making moves that are not happening in the diaspora.
Our efforts to prevent the practice continue, and in October we launched the FGM fund, a £25,000 fund for front-line organisations that work to prevent FGM. They have been able to bid for grants of £2,000 to £5,000 to further support their commendable work in strengthening the voice of women to speak about FGM and work to abandon the practice. I thank my hon. Friend for raising the issue and I congratulate her on securing the debate. I hope that my comments have gone some way towards reassuring her that this crucial issue remains on the political agenda in order to ensure that girls and women are protected, and that we are working, united, to eliminate this unacceptable form of abuse.
Question put and agreed to.
Ministerial Corrections
(13 years, 1 month ago)
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Transport
(13 years, 1 month ago)
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Maria Eagle
To ask the Secretary of State for Transport what the projected change is in the number of investigators at the Marine Accident Investigation Branch over the period of the current spending review.
[Official Report, 31 October 2011, Vol. 534, c. 418W.]
Letter of correction from Mike Penning:
An error has been identified in the written answer given to the hon. Member for Garston and Halewood (Maria Eagle) on 31 October 2011.
The full answer given was as follows:
Mike Penning
[holding answer 24 October 2011]: Under plans to reduce its costs in line with the outcome of the October 2010 spending review, the number of MAIB investigators will be reduced from 21 to 16.
The correct answer should have been:
Mike Penning
[holding answer 24 October 2011]: Under plans to reduce its costs in line with the outcome of the October 2010 spending review, the number of MAIB investigators has already been reduced from 21 to 18, and will reduce further to 17 by the end of this month and to 16 by March.
Treasury
(13 years, 1 month ago)
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Fiona Mactaggart (Slough) (Lab)
4. What assessment he has made of the effects of the 2011 Budget on unemployment amongst women.
The Economic Secretary to the Treasury (Miss Chloe Smith)
The Office for Budget Responsibility published its unemployment forecasts in March 2011, taking full account of announcements at Budget 2011, but it does not publish forecasts by gender. The Government are committed to tackling unemployment and helping support women into work. The hon. Lady will be aware that female employment has remained broadly steady since the start of 2008. Employment among women aged 25 to 64 is up more than 100,000 since the start of 2008, and has risen by 15,000 in the last three months.
Fiona Mactaggart
I was welcoming a young woman to the Front Bench, and I am glad to see young people representing people in this Parliament, but I do think it is shocking that we currently have the highest level of unemployment in more than 20 years—
Miss Smith
I have a number of things to say to the hon. Lady, none of which would include any personal questions, of course.
I can assure the hon. Lady that the Government are reducing the deficit fairly, and I would point out in particular that we are taking 1.1 million of the lowest-paid workers out of tax entirely, and the majority of them are women. She will welcome that as much as I do. Furthermore, she should know that unemployment rose to its level of 30% under her party’s Government.
[Official Report, 1 November 2011, Vol. 534, c. 745.]
Letter of correction from Miss Chloe Smith:
Errors have been identified in the oral answers given on 1 November 2011. The correct answers should have been:
The Economic Secretary to the Treasury (Miss Chloe Smith)
The Office for Budget Responsibility published its unemployment forecasts in March 2011, taking full account of announcements at Budget 2011, but it does not publish forecasts by gender. The Government are committed to tackling unemployment and helping support women into work. The hon. Lady will be aware that female employment has remained broadly steady since the start of 2008. Employment among women aged 25 to 64 is up more than 100,000 since the start of 2008, and has risen by 15,000 in the three months to August 2011.
Miss Smith
I have a number of things to say to the hon. Lady, none of which would include any personal questions, of course.
I can assure the hon. Lady that the Government are reducing the deficit fairly, and I would point out in particular that we are taking 1.1 million of the lowest-paid workers out of tax entirely, and the majority of them are women. She will welcome that as much as I do. Furthermore, she should know that female unemployment rose by 30% under her party's Government.
Petition
Port of Falmouth Masterplan
Westminster Hall
(13 years, 1 month ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Shale Gas
(13 years, 1 month ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Roger Gale (in the Chair)
I will explain the process for the debate this afternoon, which is slightly unusual because we have two reports. We have agreed—I hope that Members present will approve—to split the debate in two, although not necessarily into two equal halves. I understand that the first report may attract more comment than the second, and on that basis I am prepared to let the first debate run for slightly longer than might otherwise have been the case. The second debate will therefore be slightly shorter; I hope that is okay. In such cases, the convention that a Member may speak only once falls by the wayside. As we will treat our proceedings as two debates, I am perfectly content for Members who have participated in the first debate to contribute also to the second, should they choose to do so. I trust that whoever takes the Chair at 4 o’clock will feel the same. If that is not clear, hon. Members should ask and I will clarify the matter further.
Mr Tim Yeo (South Suffolk) (Con)
Thank you for that clarification, Mr Gale. I know that it will be welcome to members of the Energy and Climate Change Committee, who regard the reports as separate and would prefer to have two separate debates, and it is helpful of you to accommodate us. I shall begin by drawing attention to my entry in the Register of Members’ Financial Interests regarding a number of businesses that relate to the energy and transport industries.
I am pleased to have this debate; its timing could hardly be better and it is almost prescient in its choice of subject. Since the Committee published its report on shale gas last May, the subject has become even more topical. Potential UK reserves now appear to be much larger than first thought, and the conclusions of the team that investigated the seismic events—what I would think of as earth tremors—were also published this week. This debate gives us the chance to address concerns about the potential impact of shale gas development, and to consider those concerns in the context of the fact that enough shale gas reserves may exist in the UK to make the country self-sufficient in gas supplies once again, possibly for a long time.
Like conventional natural gas, shale gas is mostly methane. In conventional gas exploration, when a well is drilled into the formation in which the gas is held, the gas comes to the surface under pressure. In the case of an unconventional gas such as shale gas, the gas remains trapped in the pores of the rocks. To create a pathway for the gas, the rock is fractured by injecting large volumes of high-pressure fluid—mostly water but with sand to keep the fractures open—and chemicals to reduce the friction of the fluid in the well pipe, and prevent anything from growing in the well. That process is known as hydraulic fracturing and has been going on for many decades, particularly in the United States. There are, however, concerns that the chemicals used in hydraulic fracturing, and the methane released from the shale formation, could get into underground water aquifers—those concerns have been well publicised. The Committee’s report addressed that and other issues directly, and made several recommendations.
In particular, we noted that,
“hydraulic fracturing itself does not pose a direct risk to water aquifers, provided that the well-casing is intact before this commences. Rather, any risks that do arise are related to the integrity of the well, and are no different to issues encountered when exploring for hydrocarbons in conventional geological formations. We recommend that the Health and Safety Executive test the integrity of wells before allowing the licensing of drilling activity.”
We also recommended that,
“the Environment Agency should insist that all companies involved in hydraulic fracturing should declare the type, concentration and volume of all chemicals they are using.”
That practice is not universally followed in the United States.
The report continued:
“We recommend that before the Environment Agency permits any chemicals to be used in hydraulic fracturing fluid, they must ensure that they have the capabilities to monitor for, and potentially detect, these chemicals in local water supplies.”
Finally, we recommended that both the Department of Energy and Climate Change and the Department for Environment, Food and Rural Affairs,
“ensure that the Environment Agency monitors randomly the flowback and produced water from unconventional gas operations for potentially hazardous material that has been released from the shale formation. In order to maintain public confidence in the regulators—and in the shale gas industry—we recommend that both water and air be checked for contamination both before and during shale gas operations.”
Yesterday the Environment Agency published a follow-up to its evidence to my Committee, which included data from samples of flowback fluid—the fluid that returns to the surface through the drilled well—that the agency has taken over the past six months at the Preese Hall site operated by Cuadrilla. It stated: “We have found that the flowback fluid contained high levels of substances dissolved from the rocks such as chloride, sodium, iron and dissolved materials. They also contain very low levels of naturally occurring radioactive minerals, principally radium-226, at levels similar to those found in granite rock. At the levels found, we would not anticipate any threat to human health or the environment. The results of this analysis have to be viewed with caution; they are only indicative of the radioactivity present.”
Maintaining the confidence of the public—again, something that has not been universally achieved in the United States—is absolutely essential if UK shale gas reserves are to be exploited. Cuadrilla is sensitive to that, and I urge it to continue its policy of engagement with the local community, and to be as open as it can about its activities, the materials it uses, the practices it follows and so on. Such an approach is even more necessary in light of the seismic events that have occurred since the Committee visited the site earlier this year.
In connection with those seismic events, members of the Committee also visited Texas and had discussions in Washington DC with regulators, legislators, industry representatives and environmental groups. We discussed the induced seismic events that occurred in Arkansas, which related to the underground injection of waste water generated from shale gas exploration and production elsewhere, rather than from a process of fracking. In evidence from the Geological Society, the Committee was told that induced seismicity is not thought to be a significant risk in the UK. During oral evidence from Professor Richard Selley, a petroleum geologist at Imperial college, we asked whether there is evidence to suggest that mini-earthquakes could happen as a result of fracking. He told us that individual claims often produced what is called the Francis Drake effect; they show something that was already there but the oil company gets the blame.
The tremors near Blackpool on 27 May had a magnitude of 1.5, and those on 1 April a magnitude of 2.3. Cuadrilla responded by postponing any further fracking operations while the British Geological Survey shared seismic data on the events with Keele university and DECC. The British Geological Survey issued a press release and stated that fracking may have been the cause, although it added:
“It is well established that fluid injection can induce small earthquakes…We would not expect earthquakes of these relatively small magnitudes to cause any damage.”
To put that into context, the European microseismic standard classifies a magnitude 1 earthquake as one that is not felt, a magnitude 2 earthquake as scarcely felt, and a magnitude 3 earthquake as weak. A quick inspection of the British Geological Survey’s seismology webpage shows that, in the past month, the following earthquakes have taken place in the United Kingdom: Caernarfon, magnitude 1.2 on 24 October; Shrewsbury, magnitude 1.1 on 22 October; the northern North sea, magnitude 3.5 on 21 October; and Glen Sheil, Highland, magnitude 2.4 on 20 October. There were several others, the details of which I will not bother to read out to the Chamber, but that shows that a range of such events is occurring almost every week.
Small-magnitude earthquakes are by no means uncommon in the British isles. Nevertheless, any potential correlation between one of these events and hydraulic fracturing activity must, of course, be examined carefully. The report published yesterday concluded that Cuadrilla’s activity triggered—the word used was “triggered” rather than “caused”—very low level seismic activity and that that posed no identifiable threat to people or property in the nearby area. The report concluded that it was a unique series of events and circumstances; 850,000 wells have been explored around the world with virtually no similar events recorded.
The seismic activity was caused by a very unusual combination of factors, including the specific geology of the well site, coupled with the pressure exerted by the injection of the hydraulic fracturing fluid. The Preese Hall-1 well encountered a critically stressed fault, requiring just a small energy input to initiate seismic activity. The fault was sufficiently porous to accept a large volume of fluid and brittle enough to be prone to failing seismically. Those conditions existed before the hydraulic fracturing. That combination of factors was rare and is therefore unlikely to be repeated. Cuadrilla’s hydraulic fracturing events take place far below the earth’s surface, reducing the likelihood of a seismic event of less than 3 on the Richter scale having any impact on the surface. The report also concluded that the fluid used in the fracking process cannot escape the rock that is deep underground and therefore cannot contaminate the local environment.
The findings of the study have enabled scientists to establish a system to monitor seismic activity at Cuadrilla’s site, and facilitate the creation of an early-warning system that would allow Cuadrilla to detect the first signs of any seismic activity and to take steps to limit its escalation. The study concludes that even without the early-warning system, the largest seismic event that experts suggest is possible is one of magnitude 3, which is unlikely to be noticeable on the surface if it occurs at a depth of 3 km, where the fracking takes place. The proposed system already operates successfully in Germany and in the Netherlands.
Cuadrilla is, of course, in close contact with the Department, the local council and representatives of the local communities. I realise that my hon. Friend the Minister may want a little more time before deciding what the Department’s view is about continuing drilling on the site. For what it’s worth, my judgment is that on the information available at present, there is no need to impose a moratorium. Any decision about a moratorium must recognise that a degree of risk exists in all operations to explore for and exploit mineral resources, whether that is oil, gas or coal. The judgment for Ministers must be whether that risk is acceptable in the light of each set of circumstances. I believe that the regulatory regime in Britain is robust and effective at assessing risks and enforcing any necessary safety measures.
In this context, it is also important to assess potential benefits to the UK of exploiting our shale gas reserves. On that subject, matters have moved on significantly since our report was published in the spring. In our report, we concluded that
“shale gas resources in the UK could be considerable. However, while they could be sufficient to help the UK increase its security of supply, it is unlikely shale gas will be a ‘game changer’ in the UK to the same extent as it has been in the US.”
During our inquiry, the only calculations available were based on analogies to similar shales in the US. The British Geological Survey’s estimate that UK shale gas reserve potential could be as large as 150 billion cubic metres was the most up to date at that time. For comparison purposes, in 2009, UK total demand for natural gas was approximately 100 billion cubic metres and we imported about 10 billion cubic metres of liquefied natural gas.
On 21 September this year, Cuadrilla released its estimates, based on samples from exploratory drilling, of the gas in place in its area of operations in Lancashire. “Gas in place” refers to the estimated total amount of shale gas in the formation. It is not the same as reserves. The actual amount recoverable depends on a range of factors. Cuadrilla’s results from the first two wells suggest that the gas in place equates to 200 trillion cubic feet. That does not translate directly into 56 years-worth of gas for the UK, because it will not be able to recover all that, but it does mean that a significant amount of gas will be recoverable and it will alter the picture.
During our inquiry, the British Geological Survey told us that the Bowland formation was only part of one of four good plays in the UK, encompassing many areas of the country. On that basis, it seems clear that shale gas has the potential to be a game changer for the UK and to restore the self-sufficiency in gas supplies that we enjoyed in the heyday of the North sea. Of course, the existence of those reserves does not automatically mean that they should be exploited. As our report pointed out,
“in planning to decarbonise the energy sector DECC should generally be cautious in its approach to natural gas”.
That of course includes unconventional gases such as shale. The report continued:
“Although gas emissions are less than coal they are higher than many lower carbon technologies.”
There are five main studies on the greenhouse gas emissions of shale gas. Two say that shale gas emissions could be higher than those of coal, while the three others debunk that analysis and conclude that shale gas is only slightly worse than conventional gas. Either way, the strong probability is that if UK shale gas reserves are exploited, significant new investment in gas-fired power stations will occur. Our report therefore concluded:
“The emergence of shale gas increases the urgency of making carbon capture and storage (CCS) technology work for gas as well as coal.”
Now that negotiations for the first proposed CCS demonstration project at Longannet have failed to reach agreement, the £1 billion set aside in the comprehensive spending review for CCS is available for other projects to be pursued. I strongly urge the Government to apply that to developing CCS for gas.
The decisions taken during this Parliament about energy policy will shape the UK’s energy infrastructure, especially its electricity generating capacity, for decades. The drivers of the policy remain security and independence, lower emissions, and price. Shale gas could help significantly by contributing both to improving our security and independence and to keeping prices down. In the short term, if gas replaced coal, it could also help to lower emissions, although without CCS, gas by itself cannot remain a large component of our energy mix beyond 2030 if we are to achieve the aim set out by the Committee on Climate Change of largely decarbonising the electricity generation industry by then.
I am increasingly sympathetic to the views of Dieter Helm, who suggested that the cost and security advantages, in the short and medium term, of using more gas over the next 15 years are considerable. During that period, the cost of some renewables, such as solar photovoltaics, energy from waste and others, may fall substantially. There is a possibility that new nuclear may also start to make a significant contribution. At a time when consumers are understandably concerned about rising bills, the wisdom of betting the farm on the more expensive and intermittent renewables, such as offshore wind, is increasingly questionable.
It is against that background that decisions about shale gas must be taken. I urge the Government to consider the potential benefits to Britain. There are legitimate concerns, of course, about the environmental impact, and those concerns must not be ignored. However, those who call for fracking to stop completely must produce scientific evidence to justify their demands, and I do not believe that at present such evidence exists.
Dr Alan Whitehead (Southampton, Test) (Lab)
I took part in the Energy and Climate Change Committee inquiry into shale gas, and in the course of that inquiry, I took part in a number of visits, not just to the one site in the UK that is currently being drilled, but to areas where intensive drilling was going on, has been completed, is producing or—in many instances—has been abandoned. What I found particularly useful about those examinations of existing practice was that they not only helped us to consider the overall theoretical picture, but enabled us to see what a shale gas producing economy might look like in the UK, based on what we now know about the in-principle availability of shale gas in the various plays in the UK.
I want to concentrate my remarks on these questions: if we were to proceed with the extraction of a sizeable amount of gas from the reserves that we currently know of, what would be the best, safest and most environmentally prudent way of doing so? If we consider that to be a minimum starting point for extracting shale gas, what will that make the UK’s shale gas market look like? What effect will that have on the overall availability of gas?
Looking at the matter from another end, a number of people have recently made quite wild claims about what the existence of the shale gas reserves means. Some people, in pursuit of particular agendas, have gone so far as to say that all we need to do is extract as much shale gas as possible, run the economy on that gas, and not worry about renewables any more. They say that that would lead to an age of plenty for gas; gas prices would rocket downwards, we would have energy security for the foreseeable future, and we could abandon expensive alternative energy sources forthwith. Some of those statements are partially true; most are not fully true; and some, in my view, are completely off-beam.
On the starting point for shale gas extraction in the UK, the regime under which extraction takes place must be such that the free-for-all drilling taking place in parts of the United States cannot and will not be allowed here. The US’s experience is not comparable, and can never be compared, to what might happen in the UK, for a number of reasons. First, in the areas that the Select Committee looked at, the regulation of mineral rights is entirely separated from the regulation of property rights. One can literally fetch up in a truck outside someone’s front garden and say to them, “I own the mineral rights to the land behind your back garden as far as the eye can see, and I am going to start drilling in your back garden. There is nothing you can do about it. I might give you some money to compensate you, but that will be it.” Consequently, certain plays in the United States, called sweet spots, have gone ahead with intensive drilling. In certain parts of the US, areas literally look like Swiss cheeses, with lots of drilling sites pockmarking the surrounding area. They even extend to urban areas and literally to people’s back gardens.
There is not only intensive drilling, but intensive drilling that goes horizontally out from the pads, which are the size of two football pitches; those are the typical starting points for shale gas drilling. There can perhaps be 16 to 20 wells per pad—intensive drilling indeed. As a result, a large amount of shale gas is produced, but wells continuously deplete, which means that each well is not producing an enormous amount of shale gas. The issue of depletion rates for shale gas wells is addressed in the Select Committee’s report. It is the cumulative effect of a large amount of drilling for multiple wells in particular places that produces the overall volume.
Plays in Texas, Pennsylvania and other parts of the US are infinitely easier—perhaps twice as easy—to extract from than is ever likely to be the case in the UK. We therefore need to treat the reports of overall reserves under the soil in the UK with some caution, because in practice, perhaps not more than 10% to 15% of the gas that is theoretically there will be extractable, even over a long time and with repeated fracking in particular wells.
I completely concur with the caution expressed—caution is the watchword in the Select Committee’s report—regarding the conditions under which drilling may take place. Under a regime with conditions, I think that a substantial amount of shale gas can be extracted over a long time, but probably not a volume that will be the price-reducing game changer that some people talk about. A recent report by Bloomberg looking at, among other things, the likely future effects of shale gas on UK prices suggested that there would not be a significant effect on prices. There may well be a significant effect on energy security; we would replace at least a proportion of the nearly 40% of gas that is imported with gas produced in the UK. That is potentially important, but it seems unlikely to be a price-reducing game changer.
The conditions are important because in the UK it will be necessary to obtain proper licences, maintain the right safety procedures in all wells, and ensure that wells are correctly sheathed, so that there is no danger of the contents of particular geological levels permeating and contaminating other levels. It will also be necessary to be careful about the use, disposal and—I hope—recycling of the large volumes of water that are used in shale gas extraction. That subject is another feature of the Select Committee’s report. There is considerable tension about water in certain parts of the country, so even the use of 1%, 2% or 3% of the water supply could put substantial and increasing pressure on the amount of water available. Keeping a close monitoring eye on the use of water will be important.
David Mowat (Warrington South) (Con)
I am listening carefully to the thrust of the hon. Gentleman’s remarks. I think he will concede that there has been a significant price differential in the US on the Henry hub, for whatever reason. Gas prices have fallen by about 50%, and that has been attributed to shale. I have listened to the logic of his remarks, but I have not heard the specific reason why he does not think that that will happen, not in the UK—the UK is not where the issue is—but in Europe; that is where the issue is.
Dr Whitehead
I think that the reason why that will probably not happen is that the US, as recently as five or six years ago, was in the process of building substantial quantities of liquefied natural gas delivery depots, which were anticipated to take up a substantial shortfall in gas in the US; that shortfall was even greater in the US than in the UK. The US economy was therefore in a position where, as a result of the anticipated introduction of that large amount of LNG, prices reflected the situation regarding indigenous gas in the US, imported gas, investment prospects, and the likely prospect of a need to procure further large amounts of LNG for the US, at a time when there was increased worldwide demand for LNG in various other economies.
Since five or six years ago, that particular metric has been entirely flipped over. The United States is now exporting, rather than importing, LNG. That has had a substantial flip-over effect on prices in the USA. I am not an expert in these matters, but that is my understanding of the situation. The position is not comparable with that in Europe or the United Kingdom. As I say, the production of shale gas will perhaps have some effect on the stabilisation of prices over a period of time, and some effect on the requirement for a secure gas supply within the UK, rather than us importing it through interconnectors or through LNG. We have, of course, fairly efficient gas interconnectors between the UK and the rest of Europe, although whether gas flows down them is another matter. However, the two propositions are entirely different in their likely effect on prices.
The two propositions are similar, however, to the extent that there will be a significant effect on what one might term the energy security front—on what would otherwise be the question of where the UK will source its gas supplies from in future—although the UK interconnectors are pretty secure; they mainly go to Norway and other European destinations. Sourcing that gas from within Europe arguably brings us close to the energy security that we would have if we had an entirely indigenous supply. That is my take on why the price effect will not take off in the way that some people think it will.
I want to emphasise and underline that point, as the Committee’s conclusion is that there is not a case for banning or stopping the exploitation of that shale gas resource through drilling, but that there is a case for ensuring that there are careful, secure environmental guidelines to ensure that it is done in the best way for the protection of the environment. There is also a case for ensuring that, unlike the USA, we have careful continued regulation of not only the drilling but the capture of the gas, and regulation covering the fate of wells as they deplete and go out of commission.
The point about multiple wells is that they do not have long productive lives compared with more conventional forms of drilling. One of the issues in the United States has been that in a number of areas, because wells have often been drilled in a speculative and unorganised way, there are large numbers of abandoned wells scattered across the landscape, some of them well capped, some not capped and some not very well capped. Indeed, the magnificently named Texas Railroad Commission, which regulates the whole business in Texas, is in the process of finding where those abandoned wells are and putting in place a programme for capping them. That is a regime that we cannot afford to have in the UK, because of the implications of gas leakage and the danger of those uncapped and untreated wells from an environmental point of view.
The overall picture is that, with careful regulation, a reasonable contribution can be made to UK energy supplies from shale gas over the next period. We should not, however, run away with the idea that it will solve everything or that it should not be properly and fully environmentally regulated, to ensure that some of the things that we have heard about elsewhere in the world do not, by accident or by negligence, take place in a UK energy environment. I believe that that is a balanced view, and that the Committee has taken a balanced view on the future of shale gas. It is important for future debates on the energy economy that we keep that balanced view of what various elements of the UK energy mix can contribute to the overall welfare of our future energy supplies.
John Pugh (Southport) (LD)
My constituency is right on the edge of the latest find. I have to declare a sort of interest, because when I originally bought my house, under a 999-year lease, I found the local feudal landlords had mineral rights over my front garden. When I bought the freehold, I obviously took over those rights. My house suffers from tremors, but that is only because eight trains an hour from the Northern line go past my front door. None the less, there is a genuine concern in the area about the exploitation and extraction of shale gas. I will be visiting Cuadrilla tomorrow, coincidentally, to put to it some of the questions that will no doubt come up in this debate.
When I read the report, I was delighted by its excellence and balance. It may surprise you to hear this, Mr Gale, but I do not know much about geology and oil exploration. I was extraordinarily well educated by the report. What I understand, however, is politics, which I have been in for a long time. The two motives that move people in politics are greed and fear, and both greed and fear are in play in this particular issue.
On one side, pictures are sketched of a shale bonanza. The Lancashire find is put at 200 trillion cubic feet. I am reliably informed—well, informed—by a Cabinet Minister that that is almost equivalent to half the entire reserves in the USA. One ponders, I guess, why that has not dramatically affected the share value of Cuadrilla in the way that one might expect, but, none the less, it is by all acknowledgment an appreciable find. That offers the possibilities of making the UK energy-secure, of lowering energy prices and of generating wealth, although there could be an argument about how that wealth will be spread and who will benefit the most. There is no doubt that with energy comes wealth. The people buying up our premier league football teams, by and large, tend to be energy barons. That is one side of the equation.
On the other side, there is not the hype, but the fear. There is the fear of environmental destruction, the fear of wells being aborted over a period of time or rather more rapidly and there is the fear of poisoned water supplies. [Interruption.] I am sure that hon. Members have seen the flaming house taps in the USA, although I wonder what the American water authorities are doing in allowing gas to contaminate—
Mr Roger Gale (in the Chair)
Order. I am sorry to interrupt the hon. Gentleman, but someone’s mobile phone is switched on. Can everyone check their phone, including those sitting in the Public Gallery?
John Pugh
I suspect that it was my phone, unfortunately. I am interrupting myself.
There are also arguments about water depletion, tremors, geological instability and so on. Given the degree of hype on one side and of panic on the other, the report is most timely and helpful. I genuinely think it is a good report, which enables us to form a judgment about how and whether to extract. There is, however, one view that the report perhaps does not deal with sufficiently. It is at one extreme of the debate and it goes something like this: even if extraction is safe and profitable, it should not be done, either because it produces a carbon fuel, and we should not get more carbon fuels out of the ground, or because it augments and influences the use of carbon fuels and the carbon fuel market elsewhere. Organisations such as the Tyndall Centre have put that argument very seriously and would still oppose the extraction of shale gas in the UK for the same reasons, even if they found out tomorrow that it was perfectly safe.
People who argue like that believe a range of different things. They might believe that renewables can plug the UK energy gap quickly, that the British public will dramatically and quickly reduce their energy consumption through energy conservation or energy efficiency or that nuclear energy can easily plug the gap and step up to the plate. When we go through those alternative assumptions and the general argument for doing nothing about shale gas, however, it becomes clear that none of them has general support from informed opinion, and I share none of them myself. I do not think renewables will plug the energy gap as quickly as we would like, that the British public will dramatically or rapidly alter their behaviour in the next decade or that nuclear energy can easily fill the gap.
Given that most people believe and accept that gas is part of the mix, the debate can then centre on whether we should have UK gas or imported gas. People can be against natural gas extraction full stop or shale gas extraction full stop, or they can simply be against shale gas extraction in the UK. As I understand it, most people’s anxieties are not about shale gas per se, but about particular propositions in the UK and about whether the process followed here might emulate bad practice elsewhere in the world. Most people are concerned about safety, either because they are not convinced that shale gas extraction is safe or because they are not convinced that all companies can be trusted to make it safe—even where it has the potential to be safe, they think one should be suspicious of oil companies.
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
On safety, does the hon. Gentleman think that it was perhaps a mistake for the report on the seismic activity to have been commissioned by Cuadrilla, given that many residents in the area already have questions about the report’s true independence? There have been press reports today that although the report refers to a few seismic activities, Cuadrilla has now admitted to there having been 50 in just eight months, which undermines the confidence of people in the area.
John Pugh
If one were extraordinarily suspicious, one would expect Cuadrilla simply to produce a whitewash report, because there is no advantage to the company, in the current circumstances, in admitting liability for the tremor—it has not helped Cuadrilla and, in terms of its public relations operation, it has been a disaster. I guess that that leads one to believe that Cuadrilla is prepared, in certain contexts, to admit to some of the flaws that might arise during drilling.
The great thing about the Committee’s report—this is a considerable reassurance—is that it indicates that the process is not, as in America, taking place in the wild west. A series of robust arrangements are in place, and the report refers to
“a suite of environmental legislation”.
There are controls at various stages, and they seem—at first blush, at any rate—to be relatively robust. There is licensing, which is subject to conditions in the first place, and there is drilling permission, which is subject to planning regulations. There are also environmental effects, which are subject to impact assessments and monitoring by the Environment Agency. Similarly, the site is covered by health and safety legislation. Finally, people in the UK—unlike the people with methane in their taps in the USA—presumably have the advantage of water companies that test their water before sending it through the system.
The might, and should, offer a degree of reassurance, although there is an argument about how much reassurance it offers. However, there is a point at which reassurance runs out, because none of these things can totally get rid of the known unknowns, to use Donald Rumsfeld’s splendid expression. I did not realise this before, but there is talk about the effect of extraction or any sort of mining on the mobility of other sorts of gases and minerals that are not directly investigated or extracted from the strata affected. People cannot always say what will happen to those, but, then, they cannot say what putting Crossrail under London will do. Similarly, I have spoken to people in my constituency, and some of them have said, “That reassurance is all very well, but there might be things wrong with the process that we don’t currently know about. There might be some dangers out there we can’t identify.” This is where we get on to Donald Rumsfeld’s unknown unknowns.
There is a rational view of all these things, which goes something like this: if we are to have any conventional extraction, unconventional extraction or even large-scale development, we should do everything reasonable and necessary to ensure that it is as risk free as it can be, but we cannot eliminate risks that we cannot anticipate. There is, therefore, a strong case—particularly where there is genuine public concern—for taking a proactive approach towards monitoring any shale gas extraction process. Such an approach would mean having an open, transparent process, with frequent monitoring, genuinely hard and enforceable regulations and a body that is resourced to enforce those regulations. The Committee’s report makes it clear that the Environment Agency will have more work to do if shale gas takes off in the UK, and it will need to be resourced appropriately, subject to current Government restraints.
Importantly, we also need to be assured that whoever promotes large-scale developments has the public indemnity to act if something goes wrong, and that includes dealing with the unknown unknowns. They should also be in a position to clear up. As the hon. Member for Southampton, Test (Dr Whitehead) has said, wells are simply abandoned in the USA, and people leave their detritus behind them. That simply cannot take place in the UK, where it would be wholly unacceptable.
There is a lot of good advice along those lines in the Committee’s report. Recommendation 14 states:
“We recommend that the Government consider the future funding for the Environment Agency”.
Recommendation 15 states:
“We recommend that the Health and Safety Executive test the integrity of wells before allowing the licensing of drilling activity.”
Recommendation 16 states that
“the Environment Agency should insist that all companies involved in hydraulic fracturing should declare the type, concentration and volume of all chemicals they are using.”
And recommendation 17 states that:
“before the Environment Agency permits any chemicals to be used in hydraulic fracturing fluid, they must ensure that they have the capabilities to monitor for, and potentially detect, these chemicals in local water supplies.”
In other words, the Committee is making a plea for a robust regime to govern what is a new process for many people in the UK. In many of its technological aspects, fracking or shale gas exploitation is not that new, but it is certainly a new concern for many people in my part of the world.
My concern about the Committee’s report relates not to the report itself, but to the fact that the Government’s responses to some of our clear-cut recommendations allow a little more wriggle room than I am comfortable with. There are too many “mays” and “cans”, too many expectations and too many statements to the effect that things might be done, could be done or, optimally, would be done, but there is no assurance that they always will be done. If we are to get any benefit from shale gas in the UK, we must be able to guarantee safety at every stage. Therefore we must have appropriate and effective monitoring and enforcement. Without those things, there will not be public support for shale gas, and there will be much anxiety about it, and we will have to accept that we have an asset perhaps to bequeath but not necessarily to use. The ball is in the Government’s court. If they and the agencies that want to exploit shale gas can show to all and sundry that they will hold the various companies concerned to the fire until they agree to what is appropriate, safe and satisfactory and that it passes all reasonable scientific tests, there may be an answer in shale gas for British energy supplies. If not, the issue will be coupled to an unnecessary degree of anxiety.
Ian Lavery (Wansbeck) (Lab)
As a member of the Select Committee I have been involved in the report and all the stages leading up to it. I am sure that my colleagues agree that the investigation into shale gas has been enlightening.
Shale gas has been declared to be an energy revolution and a game changer in the US, and heralded as a game changer for policy and for energy security. The real question here is whether it can be a game changer in the UK. It is an unconventional gas, and is classified as a fossil fuel. The three main types of unconventional gases are shale gas, tight gas and coal bed methane gas. The reserves of shale gas are known, as has been explained this afternoon, as plays, not fields. They cover a larger geographical area than a field and, because of the way in which the gas is exploited, need many more wells to be drilled than conventional gas, which will present a problem for communities in itself.
Cuadrilla has been the subject of everyone’s discussions this afternoon. It describes itself as an English independent company, and it has completed phase 1 of its exploration at Preese Hall, five miles east of Blackpool. Phase 2 of the exploration commenced in 2011, and on its completion Cuadrilla plans to equip one of its other four approved sites in Lancashire. As has been explained by the hon. Member for South Suffolk (Mr Yeo), the Chair of the Select Committee, the results were divulged today or possibly yesterday, and unfortunately I have not seen them. However, it is alarming that the hydraulic fracking process was paused because of seismic events in Poulton-le-Fylde last year.
We must understand, as politicians on both sides of the House, that people have the right to be frightened of seismic events in their area. Someone may say, “Don’t worry; it’s only a seismic event,” but when people hear things like that they go to the council or their representatives, or they go on the internet, and eventually they go to their MPs’ surgeries wanting answers. We must understand that. What the hon. Member for Southport (John Pugh) has said about fear and greed is right, and it is probably what the issue is all about.
The seventh special report of Session 2010-12 outlines the work of the Select Committee on Energy and Climate Change and the Government’s response. The whole issue of shale gas needs much more detail and clarification on a range of fronts: there are the cost implications; there is the impact of exploration and production on the environment, which is an essential issue; there are the advantages and disadvantages of shale gas production and exploration; there is the carbon footprint; and there are the possible hazards. Having sat in Committee while witness after witness gave very good statements, we heard wide and varied views before we took the view outlined in the report.
The cost of shale gas exploration and production, and the cost to the consumer, are at present relatively unknown. My hon. Friend the Member for Southampton, Test (Dr Whitehead), has explained his view of different costing elements and the potential future costs.
Of the environmental issues, fracking, which leads to seismic events, is the one that people are talking about, and it is one of the most important. In a nutshell, fractures or fissures are created in underground formations to allow natural gas to flow. Water, sand and other chemicals are pumped under high pressure into the shale formation to create such fractures and fissures, and the sand then props them open to allow the gas to flow to the surface and be collected. Interestingly, giving evidence to the Committee, Professor Selley of Imperial college London observed—I would be the first to accept that this is an example of the fear factor, but it was put to the Committee—that hydraulic fracking had been blamed in the United States for the contamination of shallow water aquifers, microseisms, which are faint earth tremors, and flocks of dead blackbirds falling from the sky.
Christopher Pincher (Tamworth) (Con)
The hon. Gentleman has discussed the pollution dangers from fracking. Does he accept that because fracking happens thousands of metres underground, whereas aquifers are probably only a couple of hundred metres below ground, with thick layers of rock between the two, the likely reason for pollution is not seepage of dirty water upwards, but failures in the well head or the bore itself?
Ian Lavery
That was the view of many experts, as well. I am merely highlighting points raised by experts who appeared in Committee. I understand what the hon. Gentleman has said, and it was the view of probably the majority of those experts, but it is important to look at other aspects of the matter. I have read about blackbirds falling from the sky three or four times, and I think it is the fear factor. When that point was raised in America, the response was that blackbirds were falling from the sky long before fracking. I probably agree with that response, but, again, the point was put before the Committee.
The report makes a number of recommendations on the environmental issues. There are still major concerns about the environmental impact of shale gas exploration and production.
We must listen to the general public because we need them onside if we are to succeed in making shale gas a major contributor to the energy requirements of the UK for many years, as people believe can be the case. There is no doubt that we must take the general public with us. If they are not with us, it will be terribly difficult to do anything.
Eric Ollerenshaw
My hon. Friend the Member for Southport (John Pugh) has referred to “fear and greed”, but is there not another concept that relates to what the hon. Gentleman has just said, which is, “What is in it for us?” Many of the people in my local area are too used now to wind farms being built on hills, which are owned by financiers miles away and the local people see no benefit from them, and wind farms being built out at sea, which are driving the fishing fleets away and, again, they are yet to see any benefit themselves. Local people’s fear about shale gas—or their view about, “What’s in it for us?”—is that suddenly these companies will come along, that they will extract the shale gas and that there will be very few job opportunities for the local area. Potentially, millions will be made out of shale gas production, but not for the local area.
Ian Lavery
I think that the hon. Gentleman is right, which is why it is imperative that we try, at all stages, to take the general public in the areas affected along with us.
I think that it was the hon. Member for Southport who said that, whatever new types of energy we come up with, people will automatically oppose them. It does not help when certain people say that they are in love with these new wind turbines and that they are beautiful to watch. Wind turbines are probably beautiful to watch from somebody’s back garden but perhaps not from other people’s back gardens.
The hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) is right that these industries are not labour-intensive. Local people think that there is employment coming to the area with the new energy industries, but it does not really happen, and it has not happened so far. Generally, these new technologies do not create much new employment, but people can see them and wonder why they are being developed. I agree with that point.
The fracking process has been the focus of much consternation. Could the gas from fracking make its way into the general water supply? Could the fracking fluids leak into the shallow water aquifers, an issue which we have already discussed? What type of fluids would be used? The Tyndall Centre has said that, of the 260 substances used in fracking, 58 could be carcinogenic or mutagenic, while other organisations have suggested that all the substances used in fracking are also used in everyday household goods. Those are the varied views that the Committee heard from industry experts, some of whom said that the fluids are carcinogenic, and some of whom said that they are just fluids used in ordinary household goods. We must get much more detail on that subject. Also, could fracking lead to the groundwater contamination that has been experienced elsewhere?
The Energy and Climate Change Committee report tackles all those issues, as has been outlined already this afternoon. However, the World Wide Fund for Nature has clearly stated that shale gas is a fossil fuel and that
“world fossil fuels should stay in the ground and shale gas is likely to increase the net carbon emissions.”
The Campaign to Protect Rural England has drawn on evidence from Canada, which shows that the majority of wells in Quebec leak large doses of methane.
Another issue is the carbon footprint of shale gas production, which is very much unknown, although there are some very interesting and varied views about it. The British Geological Survey has stated:
“The overall greenhouse footprint of shale gas, including direct and indirect emissions of both CO2 and methane is not yet fully understood.”
Representatives from the Select Committee visited Texas in the United States at the end of last year, or possibly at the beginning of this year. One of the first presentations that they saw began by noting that, over a 20-year period, the global warming potential, or GWP, of methane is 72 times that of carbon dioxide, while over a 100-year period the GWP of methane is 21 to 25 times that of CO2. That is because methane and CO2 have different lifetimes in the atmosphere. If the short-term GWP measure of methane, which is 72 times that of CO2, is used, coal emissions would come to 1,154 kg of CO2 per megawatt-hour, while gas emissions would come to 781 kg of CO2 per megawatt-hour. The figure that is usually bandied around as being accurate in most cases is that gas production produces 50% fewer CO2 emissions than coal production, but these figures that I have just cited take the figure for CO2 emissions from gas production up to something like 70% of the figure for CO2 emissions from coal production. Again, we need to consider gas production in terms of the environment.
There is also carbon capture and storage, which has been mentioned. If we are to succeed with shale gas production, because of the problems with the environment and the emission levels, CCS must be pushed forward. We have a massive problem after the cancellation of the Longannet plant just two weeks ago. It has taken about six or seven years for that project to be ready to be signed, but it was cancelled at the eleventh hour. It is important that CCS is put back on the table. We have had excellent discussions with the Minister about CCS, and those discussions are continuing. In addition, experts say that the way in which shale gas is extracted largely depends on the emission levels. We did not get into too much detail on what that actually means, but it was certainly something that the experts said to the Committee.
The report clearly outlines that there are now extensive explorations for shale gas taking place in Poland and it recommends that the UK closely monitors the progress of those explorations, which is the right course of action.
In conclusion, shale gas might be the partial answer to future energy supply problems in the UK, but there are so many imponderables at this point that I think that time will tell. Shale gas production has huge potential, and future development and exploration are imperative. We need to continue with that development and exploration, albeit in an extremely safe fashion, stage by stage, and taking the public with us. However, before the UK ploughs ahead with shale gas production, much more clarification is required, particularly in respect of the fracking issue and of the environmental issues.
Mr Roger Gale (in the Chair)
Order. I propose to call Mr Mowat next. I shall then call the two Front-Bench spokesmen. If other Members wish to participate in the debate after that, there will be an opportunity for them to do so.
David Mowat (Warrington South) (Con)
Thank you, Mr Gale, for calling me to speak.
In several contributions, the term “balanced” has been used, both about the Select Committee’s report and the tone of the speeches. My remarks might be a little less balanced, because I think that shale gas production is a very positive development and that we could be on the verge of something significant.
I apologise in advance for using the term “shale gas” interchangeably with “unconventional gas”. The report does that and several Members have also done it in their contributions. In my constituency, we have a fair bit of coal gas. IGas has found coal gas in Warrington.
I will not talk further about the environmental issues around shale gas production; they are genuine and they need to be sorted out. A number of Members have already spoken well about them. I will just say that there is no form of energy—and no choice that we have for sorting out energy—that does not have some kind of environmental issue. We have to make choices.
I want to talk for a minute or so about gas in general, before I get into shale gas in particular. I want to put into context where we are in our decarbonisation targets. In 2010, 2.5% of the UK’s energy came from renewables and 90% came from fossil fuels. Of that 90%, the majority is still coming from what we would call the “dirty” fossil fuels, which are coal and oil. We have a long way to go. There was a debate on this subject recently and it was pointed out that the UK is 25th out of 27 countries in the EU in uptake of renewables. It is my judgment that gas has a role to play in decarbonising the economy. We may debate the matter later, but I believe that we have wrongly placed some efforts by confusing “decarbonisation” with “renewables”. Decarbonisation is necessary and it is a legal requirement. Some of the renewables targets might not always lead to us making the right decisions about how we decarbonise, and at what rate.
Right now, 50% of the UK’s energy still comes from oil and coal, and although it would not be easy to replace them with gas because that would mean transport being sorted out, if we did so we would have a carbon reduction of 30% or 40%, depending on the precise ratio used.
I have mentioned the decarbonisation of transport, and there is a lot of emphasis on electrification and the need for electric cars. That market is moving ahead in a way that this country might not have noticed, with well in excess of 10 million gas-powered cars in the world. Interestingly, the leading countries are some of the developing ones, such as Pakistan, which is making a big effort to decarbonise.
Probably the single most important observation about shale gas—unconventional gas—is that we do not have much of it in the UK compared with other types of energy. I heard the remarks of my hon. Friend the Member for South Suffolk (Mr Yeo), and I agree that it is a fluid thing. I have here a report by the United States Energy Information Administration, which states that the UK has something like one tenth of 1% of the total technically recoverable reserves of unconventional gas. Although the UK might have a lot—the numbers are significant—it is the impact on the gas market in the world around us that will affect us.
We have talked a little about the US experience. The hon. Member for Southampton, Test (Dr Whitehead) said that five or 10 years ago the US was building liquefied natural gas terminals to import the gas, and it is now talking about applying for licences to change them into export terminals. That is because of shale gas; we have already mentioned that unconventional gas prices in the US are now 50% of gas prices in Europe. There is a great phrase in the Select Committee report: “The tyranny of distance”. Gas prices are regionally based, and what happens in the US does not have to happen in Europe or Asia.
It is worth my giving my perspective on what really drives gas prices. I worked in the industry for a large part of my life and I never wholly understood how gas got priced. Gas used to just come off when the oil came off and was then burnt and sold. The truth is that gas has historically been priced under long-term contracts as a percentage of oil price, which is why the gas and the oil prices are linked in the various regions. Oil has gone up and therefore gas has gone up with it. That relationship needs to be decoupled and, notwithstanding the comments that we heard earlier, I postulate that shale gas provides the opportunity for that to occur, whether or not we exploit the gas in the UK. If such decoupling does occur, there will be a set of impacts. We are at the end of the Russian gas pipeline. Poland and France are the big places for shale gas in Europe, apparently with many times the reserves that we have.
Dr Whitehead
Does the hon. Gentleman accept that notwithstanding what he properly identifies as the relationship between gas and oil prices, and the possibility of decoupling, shale gas—unconventional gas—is a relatively expensive part of the gas extraction spectrum, and will remain so regardless of what its plentifulness suggests? Therefore, if gas prices decouple and go below a certain point, the gas becomes uneconomical to extract and regulates itself to some extent on the basis of its unconventionality.
David Mowat
I certainly accept that the market will determine gas prices and that if the price drops to a point at which it is not viable to take the gas out, it cannot be done. It appears possible, however, for the US to exploit and develop shale gas for $4 per million cubic feet, compared with $10 here. That is the market price, because people are obviously making a profit at that level. I can see absolutely no reason why that would not happen in France and Poland, and indeed in Russia. The report interestingly misses out South Africa—it might just be that things are moving very quickly. The Department of Energy and Climate Change figures for worldwide unconventional gas show that South Africa has one of the larger residues.
The thrust of what I am saying is that we have to be careful with all these environmental issues, and we must, of course, bring people with us. The market will happen anyway, and it could be a significant game changer and a big assistance to the decarbonisation effort that we must make in the shorter—and potentially the longer—term. One reason why unconventional gas has perhaps had a slightly weaker profile than it might otherwise have done is that it has a lot of natural enemies. The green lobby does not like it because it is a fossil fuel, and it is worried that it will take our attention away from renewables, and big oil does not like it because it is not at the forefront of this as it has been west of Shetland, for example. I used to work in the industry, but had not heard of Cuadrilla until a couple of years ago—Cuadrilla and IGas are new companies.
Shale gas is not a panacea—nothing is. But it could make a bigger contribution than is perhaps implied by the tone of the Select Committee report and the remarks that we have heard today. I was taken by a line in paragraph 76 of the report, which sums things up rather well:
“we can’t make the perfect the enemy of the good”.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Gale, and to take part in this important debate after some excellent contributions from members of the Select Committee and other Members with a local or professional interest. I commend the introduction to the debate by the Chair of the Committee, the hon. Member for South Suffolk (Mr Yeo). From the few short months at the start of this Parliament when I was a member of his Committee, I know that he is an excellent Chair and does very good work.
As Members have said, the debate is important and timely, given the shale gas issues that are high profile following the publication yesterday of the Cuadrilla report. In the three weeks since I was appointed shadow Energy Minister, I have heard Lord Lawson describe shale gas as the biggest energy bonanza since the discovery of North sea oil, the hon. Member for Brighton, Pavilion (Caroline Lucas)—I am surprised that she is not here today—say, “So what?” to the estimate of 200 trillion cubic feet of reserves under the Lancashire coast, and others say that we are in danger of encountering an environmental disaster. We are, therefore, not short of opinions on the matter, but there are some fundamental issues raised in the report and the Government’s response that I want briefly to address.
The Chair of the Committee has set out that the report is generally favourable towards onshore shale gas exploration and does not accept the case for a moratorium. Since the publication of the Committee’s report, the report on the unusual seismic activity in the early summer has been published, and I wonder whether the tone of the Committee’s report might have been more cautious had it been published subsequent to that. The conclusion of the Cuadrilla report, that it was highly probably that the tremors were triggered by fracking but that somehow that is unlikely to be repeated with further exploration, was interesting. Those two statements appear, on first examination, to be incompatible at the very least, and it is important that the Government look carefully at that when they take that report and the work by the British Geological Survey into account. During the past 24 hours, I have heard from geologists who take a different view. It is important that we look into it. However, I also accept that, due to their scale, the tremors were not significant and had no structural impact.
[Mr Dai Havard in the Chair]
I know that additional work will be undertaken and reported to the Minister. I broadly support that approach. As the Select Committee report highlights, public confidence is needed in the safety regime attached to the exploration of shale and other unconventional gases. Public confidence is important. Given the scale of the concerns expressed by groups, individuals and people who live in that part of Lancashire, it is important that the Government’s response takes account of those anxieties.
The other, equally valid side of the issue is that the public rightly expect that new developments, technologies and techniques should be used if they can help balance our energy mix, increase a potential indigenous energy source, reduce carbon emissions and address security of supply. The public also have an interest in getting a better energy mix, as it could affect the rate of increase in the prices that they pay.
Many claims have been made that shale gas can make a huge difference to all those issues, although some seem to be the result of a crude extrapolation of the American experience to the UK, which I do not think is valid. My hon. Friend the Member for Southampton, Test (Dr Whitehead) alluded to that in his remarks. The Chair of the Select Committee repeated today something that I have heard him say before: shale is a game changer whose significance has yet to be fully understood. He might be right, but estimates differ as to the amount of shale gas available on and offshore. That requires significant investigation.
As technology develops and techniques become more practised, the economics might also become more attractive. There are plenty of examples of North sea oilfields that have exceeded their claimed lifetime by several years. One particular field has almost doubled its lifetime and is still going strong due to the dual impact of technological and drilling advances and the fact that complex extraction is more economically viable than it was 20 or 25 years ago.
Shale gas involves many unknowns, which is why robust and effective environmental protection and monitoring are important, as the Select Committee report makes clear. I would like reassurance after reading the Minister’s oral evidence in the report. I hesitate to use the word “complacent”, but I am not sure that he demonstrated enough of the urgency required about providing public confidence and ensuring that we can exploit the technology more fully as we learn more about it.
The Select Committee report makes the point that many aspects of protection and monitoring need clarifying. The offshore regime for the North sea is widely accepted as world-leading. That is due at least in part to Piper Alpha. Many improvements in offshore health and safety and environmental protection were introduced as direct results of that tragedy or, indirectly, through inspections and monitoring by the Health and Safety Executive, the Environment Agency and, in Scottish waters, by the Scottish Environment Protection Agency.
I understand the industry’s reluctance to move towards European regulation of offshore activity, particularly when the need is questionable, but onshore fracking involves factors that must be taken into account, such as water use, recycling, the effect on the water table, the toxicity of the chemical mix, the potential for leaching into drinking water supplies and disruption to the landscape. People have concerns about a range of issues, as the Minister will know. That is why public confidence requires detailed work, as well as investor certainty and environmental standards. Those three aspects can be joined to provide reassurance.
Even if shale gas from onshore sites in the UK does not become more significant in the months and years ahead—my hunch is that it probably will—it is likely to do so in other parts of mainland Europe, most notably Poland. Given those concerns and the present moratorium in France, it would be useful to understand whether the Minister has had discussions with his European counterparts about those issues. Also, what progress has he made in discussions with the HSE, the Environment Agency and his counterparts in the Department for Communities and Local Government, which is responsible for planning policy, to discuss how those agencies can work together to provide the right level of reassurance for those with environmental and community concerns? It would also be useful to hear more about the expected time scale for the Government’s response to the report that they received yesterday and the additional geological survey work that I understand will follow from that.
In addition to regulation, I will mention a couple of issues regarding the potential impact of shale gas on other aspects of energy policy. Other Members have referred to its impact on renewable investment in coal-fired power and on the future of carbon capture and storage. It has been argued that shale gas will precipitate a further dash for gas, and that gas with lower levels of carbon emissions than coal will be at the forefront as a bridging energy, as renewable tidal, wave and other technologies develop. However, there are concerns that that might affect renewable developments and disincentivise the necessary continuing investment.
To risk moving into the subject of our second debate, that would have an impact on the Government’s electricity market reform proposals and some of the assumptions underpinning the various features of that policy. Gas emissions might be lower than those of other fossil fuels, but they will always be higher than those of renewables, and the fracking process is energy intensive. If, as the Select Committee report anticipates, the emergence of shale gas leads to a switch from coal to gas for electricity generation, and to new gas power stations being built close to source, the development of CCS for gas will become increasingly urgent.
However, that should not rule out or relegate the importance of CCS for coal following the Longannet decision a couple of weeks ago. Both are important, and there is a pressing need for urgency in Government progress on alternative demonstration projects in both coal and gas. As BP pulled out from the earlier iteration of a potential CCS project in Peterhead, I hope that the amended project, with SSE leading the consortium, will be considered as a viable option for that technology, given its proximity to deep storage sites in the North sea. What impact do the Government anticipate that the move to shale gas will have on the coal industry and the potential for clean coal? That would be interesting to know.
The hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) mentioned community benefit. On offshore wind licensing, I note that, particularly in parts of Scotland, moves are being made towards direct community benefit. Perhaps that could go alongside the potential benefits in terms of jobs. As he or an hon. Member intervening on him remarked, sometimes job figures are projected that are not necessarily matched in reality.
Several other countries around the world are more advanced in their experience and understanding of onshore shale gas and the horizontal drilling techniques required to release its energy. They are still learning, as are we. The small tremors in Lancashire in early summer were a signal to the Government and regulators that there are still unknown environmental consequences from fracking, just as there are still potential wider implications for energy policies developed in the past couple of years, which might become redundant or less relevant as a result. It is important for the Government to take on board those concerns, examine the evidence carefully and perhaps press for additional scientific evidence if initial investigations are not conclusive. A cautious approach is right.
The Select Committee report sets out the potential but balances it with the need for effective regulatory oversight to ensure public confidence. I implore the Government to take those wise messages on board and work quickly to put protections in place, so that if the game is to change, to borrow a phrase, the right kit is laid out by the captain in the changing rooms before taking the wicket. Without that confidence, shale gas might become an opportunity missed rather than realised.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
It is a pleasure to serve under your chairmanship, Mr Havard, and to respond to what has been an excellent debate. It has been extremely balanced, thoughtful and constructive—words that are also applicable to the Chairman of the Energy and Climate Change Committee, my hon. Friend the Member for South Suffolk (Mr Yeo). The way in which he introduced the debate was helpful. As he said, the issue could not be more topical. It is very much in the news this week, and the way in which it has been debated in this House shows that we are all keen to understand the technology’s potential, but to also ensure that it is developed in a way that takes account of the highest standards in both environmental and safety legislation.
I shall begin by explaining how we as a Government believe that shale gas fits into the potential energy mix in the United Kingdom. Even as we move towards a less carbon-intensive future, oil and gas will undoubtedly remain a vital part of our energy system for many years to come. In that context, the Government are committed to ensuring that we maximise economic recovery of UK hydrocarbon resources, both offshore and onshore. I should say in response to my hon. Friend the Member for Southport (John Pugh) that we see it as in our national interest to maximise returns on our indigenous resources. We are moving to a situation where we are net importers of gas, and there is a multi-billion-pound benefit to the UK economy from optimising our resources. We are keen for that to happen.
We have taken a careful approach to unconventional gas resources. We support industry’s endeavours in pursuing such energy sources, as long as they are technically and economically viable, and have regard to the full protection of the environment. The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) implied that the Government have been verging on the complacent and have not shown urgency, before going on to say that we have one of the best regimes in the world in terms of offshore regulation. It is that exact same regime that will apply to onshore developments and shale gas developments. There will be no difference between the standards that will have to be met by any company wishing to have a licence to explore onshore for shale gas, and those that would have to be met if they were looking for oil and gas resources elsewhere in our territorial waters. That consistency and absoluteness in standards is important.
The hon. Gentleman also asked about our discussions with European Ministers. It is clear that there are different views across the European Union about the role that shale gas can play. Moratoriums have been introduced in France and in other countries, and Poland is actively looking at how shale gas can be explored, but we are in no doubt about the importance of having national regulation rather than EU regulation, because we believe that our standards would only be diminished—this has been shown to be the case in relation to North sea regulation—if we changed to an international approach to regulation.
All onshore oil and gas projects, including shale gas exploration, require planning permission from the appropriate planning authority. The hon. Gentleman listed a number of issues about which he has concerns, but they are all already taken into account by the environmental consents that are necessary. He also asked about our contact with the Health and Safety Executive. The most important thing of all about the relationship with the HSE is that it is not accountable to me. The Department of Energy and Climate Change and I issue the licences, but we do not control the health and safety legislation; that is independent. It is a core part of our safety approach in the United Kingdom, and it comes under a different Department. We have a good working relationship with the HSE and need to understand its concerns, but I am not in a position to put any pressure on it—nor would I seek to—to meet other objectives.
Any applications are subject to environmental regulation by the relevant environmental agency—the Environment Agency in England and Wales, or the equivalent bodies in Scotland and Northern Ireland—and are subject to safety regulation by the HSE or its Northern Ireland equivalent. They also require specific consent from the Department of Energy and Climate Change before drilling activities can commence. My hon. Friend the Member for Southport expressed concern about the use in our response of the words “may” or “might”. The reason for that is that we do not take a cast-iron approach to every single application. Every single application will be judged on its merits, and if there are issues that require us to go further, we will of course do so. For every single licence application, we will be certain that the most stringent environmental applications and measures can be put in place.
The hon. Member for Southampton, Test (Dr Whitehead) and my hon. Friend the Member for Southport have asked about the abandonment of wells. In the granting of a licence, the local authority, which is also involved in the process, can require a provision to be made for restoration if a project is abandoned.
Grahame M. Morris (Easington) (Lab)
The Minister is always generous in giving way, and I appreciate that. Will he offer a clarification on environmental controls? The hon. Member for Tamworth (Christopher Pincher) raised a point about the depth of the fracking compared with the depth of the water table, and said that there was no prospect of contamination. I understand the point that the hon. Member for South Suffolk (Mr Yeo) made about the integrity of the wells, but in the north-east we have had huge problems with mine water pollution and contamination. Will that be a consideration for the Environment Agency in determining licences?
Charles Hendry
The hon. Gentleman raises an important point. One thing that struck both the Select Committee and me when we visited Cuadrilla’s site in Lancashire was the immense separation distance—it is thousands of feet—between the water table and the area where the shale gas was being sought. The company drills below the level of the water table, and then encases it in concrete. Only then, when it has been sealed, do they drill further down to where the shale gas is. The point has been made clearly that, as long as the well retains its integrity, it is very difficult to see how there can be any contamination of the water supplies. The way in which the operation will be carried out and the standards that will be used will be an absolutely integral part of deciding whether a licence should be issued. We do not just look at the application in itself; the company must have the technical and economic expertise to carry out the work to the required standards. There is no question of cutting corners. We are adamant that the highest environmental standards must be applied as the technology progresses.
These are early days for shale gas in the United Kingdom. The pattern of development in a new basin in the US has shown that there are roughly three phases. The first is the initial discovery and the appraisal wells to prove the presence of the gas and the size of the resource. The second is an experimental phase, in which explorers work out the best techniques for obtaining production from the particular shale, which may take some time. The third is the production phase, in which an efficient pattern of production wells can be drilled to extract the gas on a commercial basis. Clearly, we in the United Kingdom are right at the beginning of the process. Only a handful of wells have been drilled, and their production potential has yet to be quantified.
Although it is encouraging that Cuadrilla believes that it has good quantities of shale gas in the rocks underlying its licence area in Lancashire, it is, as I have said, still very early days for shale gas in the UK, and I think that it is too early to know how significant shale gas may prove to be as a contributor to future UK energy supplies.
When he opened the debate, my hon. Friend the Member for South Suffolk talked about the reserves in place. At this stage, we should recognise that these are not reserves but gas in place. The recoverable amount is a small proportion—often about 10%—of the total reserves. Nevertheless, even with a large estimate of gas in place, the reserves could still be significant.
Comparisons have been made with the United States. It is right to recognise that there are significant differences in the United Kingdom that will determine the pace at which things progress here. As the hon. Member for Southampton, Test, has said, there are differences in the ownership of mineral rights, which is a critical issue for development. There are some 30,000 operational shale gas wells in the United States, so the scale is of an entirely different magnitude from anything that we can foresee happening in the United Kingdom.
That leads us to the issue of price separation, to which my hon. Friend the Member for Warrington South (David Mowat) referred. We have seen the separation of gas and oil prices in the United States. My assessment is that that will happen gradually over time in Europe, probably in the middle of this decade. Shale gas in the UK will not be a driver of that. We will look at developments with great interest, but at the moment we should be cautious. We are in no doubt that gas and shale gas can be part of the mix as we progress.
We are aware of reports from the United States of issues linked to some shale gas projects. There have been reports of contamination of water supplies with either methane or fracking fluids, and of explosions, and there is dramatic footage of householders setting light to their kitchen taps, as has been mentioned. I had not heard about the blackbirds tumbling from the sky, but we will, of course, set up a taskforce immediately to assess whether that needs further consideration—actually, we will not. If there is clear evidence that that is a problem—
Mr Dai Havard (in the Chair)
Joy and disappointment for the Royal Society for the Protection of Birds, all in one sentence.
Charles Hendry
All in one sentence. There is certainly joy for the Treasury at the end of that sentence, when I did not commit to setting up a massive taskforce to investigate something that is as yet unproven.
Where those reports have been investigated by the relevant US regulators, the evidence so far is that no incident of water contamination by methane has been attributed to fracking operations, and that the few incidents of contamination of water resources with fracking fluids were caused by accidents on the surface, rather than underground leaks of any kind. Also, some incidents of methane contamination of water were not attributable to oil or gas operations at all; they were caused by methane of recent biological origin.
However, there were cases in which gas leaks had occurred. That was attributed to unsatisfactory well construction or cementing. That confirms, if any confirmation were needed, that drilling for shale gas—like drilling for any other kind of oil or gas—is a hazardous operation that requires careful and consistent regulation. However, that also supports the Committee’s conclusions that there is no evidence that the fracking process itself poses a direct risk to underground water resources, and that the risks are related to the integrity of the well and are not different from those encountered in conventional oil and gas extraction.
The Government and their regulatory agencies will continue to study the experience already gained in north America and its relevance to shale gas activities in the UK. It is, of course, necessary to make the point that UK conditions, including its geology and its regulatory framework, are different, and there will not necessarily be any straightforward read-across. However, it is clearly important that we learn from the US experience, as the Committee recommended.
The UK has a long history of onshore gas exploration, and the range of techniques employed in shale gas drilling and testing operations are broadly similar to those used for orthodox gas production. We have a strong regulatory safety and environmental regime in place, administered by the HSE, the relevant environmental agencies and my Department, to ensure that potential risks to safety or the environment are properly managed. There is scrutiny by the regulators, and that is why we believe that shale operations, as permitted in the UK, are safe, and that there is currently no justification for a moratorium. Again, we welcome the support of the Committee on that point.
I can confirm that, as the Committee recommended, current shale gas operations in the UK are being carefully monitored by the HSE, the Environment Agency and my Department. The three regulators are regularly in touch to exchange information and to ensure effective co-ordination. According to present information, the Environment Agency does not consider that current operations pose a risk to the environment, including water resources. Of course, that has been an important theme of the debate. Some 99.7% of the fluid used in fracking operations is water. If anyone wished to use additives in that process, they would need to be absolutely clear about what those additives were. They would also have to satisfy us on how those water resources will be handled when they are brought back up to the surface. Stringent measures are in place to ensure that they cannot be disposed of without being taken through a proper process. If there is any spillage, a plastic membrane is on the ground to ensure that the fluid cannot leak back into the ground.
The debate has also focused on the seismic tremors experienced near Blackpool in April and May. Following those tremors, DECC had discussions with Cuadrilla and agreed that a pause in hydraulic fracture operations would be appropriate, so that a better understanding can be gained of the cause of the seismic events.
The hon. Member for Wansbeck (Ian Lavery) is an absolute expert when it comes to understanding the nature of the issues. He has spent his entire career in an industry that is involved in underground development. There is much expertise that we can transfer from the coal industry in order to understand the impact of different underground activities. However, I assure the hon. Gentleman that there is often a strong connection between coal mining and seismic activity—much greater than there is in relation to fracking. Of course, those processes take place at different levels. Shale gas development normally takes place thousands of feet further below the surface than coal mining, so there are additional reasons for believing that such operations can be done in a safe and proper way.
A geo-mechanical study undertaken by the company was delivered to my Department yesterday. The implications of that report will be reviewed very carefully in consultation with the British Geological Survey, independent experts and the other key regulators before any decision on the resumption of hydraulic fracture operations is made. I reassure the Committee and others that the highest environmental standards and measures, which we believe will carry public support, will be part of that process. I pay tribute to my Parliamentary Private Secretary, my hon. Friend the Member for Fylde (Mark Menzies), who has been assiduous in understanding the issues. The approach that he has called for—the close monitoring of operations and a gradual progression of shale development—is the right way forward.
In conclusion, this has been a very useful discussion of the issues raised by the Committee’s report. I stress that we have a robust system in place in the United Kingdom to ensure that shale gas activities—and other oil and gas activities—are conducted safely and with proper protection of the environment. When significant new issues such as seismic tremors arise, we must ensure that we have the capacity to deal with them effectively. I assure hon. Members that we will continue to maintain that rigorous approach.
Mr Dai Havard (in the Chair)
Before I call Mr Yeo, I should explain that Mr Gale and I have taken an innovative approach today. The reports under consideration come from the same Select Committee, and there is clearly an interrelationship between them, so Mr Yeo will now be asked to do a very interesting thing: make his summary remarks on the last debate and coincidentally introduce the next subject. I call Mr Yeo.
Mr Yeo
I welcome you to the Chair, Mr Havard. I am grateful for the flexibility that Mr Gale and you have shown in guiding us on how to proceed with the debate. If those hon. Members who were unable to speak during the shale gas debate catch your eye later, they might be able to mention shale gas in relation to electricity market reform.
This debate has shown Parliament absolutely at its best, which is probably why not a single word will be reported in the press or by the electronic media. Hon. Members of all parties have made a genuine effort, and have come to the issue from very different standpoints. Some have a long professional background in the industries, some have a constituency interest, and others are Committee members. Everyone has been trying to find the right solution to a new and interesting but complex issue. If we get the right outcome, it could be very beneficial for Britain. I hope that it might also be economically beneficial to areas where shale gas can be recovered. There could be some benefits in terms of employment, although it is easy for those to be exaggerated. That is all extremely good news.
I pay tribute to my Select Committee colleagues, who are a hard-working bunch. They have taken a thoughtful approach, and I am pleased that we have mostly managed to achieve a bipartisan outcome. We have shown that a bipartisan approach can be achieved on such very important issues—even between colleagues who have slightly different views. The issues have long-term consequences, which makes that approach particularly valuable.
On shale gas, the differences of opinion are more of emphasis than of principle. This is very much a work in progress for the Government, the industry and probably the Committee. I am sure that we will want to return to the matter. I am grateful to colleagues who have praised the Committee’s work and the report. I hope that those comments will be noted by the staff who have assisted us in our endeavours.
I welcome the Minister’s reference to the fact that seismic events also occur as a result of coal-mining operations, and not just because of fracking. We must consider the issues in a general context. I am grateful to him for reminding me of the difference between gas in place and actual reserves. I may have loosely confused the terms when I was speaking. I did not mean to; I understand the difference, which is very important.
I am grateful to my hon. Friend the Member for Warrington South (David Mowat) for rightly distinguishing between the low-carbon and renewables objectives, which also, rather unhelpfully, sometimes get confused. I would like more emphasis on low-carbon targets, and perhaps less emphasis on renewables, because we must focus on emissions reduction.
Electricity Market Reform
(13 years, 1 month ago)
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Mr Tim Yeo (South Suffolk) (Con)
I remind hon. Members of my entry in the Register of Members’ Financial Interests, which relates to a number of businesses in the energy and transport industry.
This debate is also timely. Electricity market reform is very much on the agenda of policy makers, industries, non-governmental organisations and even consumers. We are in a crucial period for energy policy decisions. As I mentioned in the previous debate, the three drivers—independence and security, emissions reductions and price—will be uppermost in our minds. In addition, the consequences of the decisions taken during this Parliament will be far-reaching and long-lasting. With that in mind, I believe that the principles of EMR are right, and I congratulate the Government on moving substantially in the right direction after a period when energy policy was at a bit of a standstill in the UK and time was lost unnecessarily.
With a quarter of our electricity-generating capacity shutting down in the next decade as old coal and nuclear power stations close, more than £100 billion of investment will be needed to build the equivalent of 20 large power stations and to create a new low-carbon energy infrastructure. In the longer term, by 2050, electricity demand is likely to double as more transport and heating is shifted on to the electricity grid.
Let me straight away address emissions reductions, which are the second driver of policy. A clear target for decarbonisation would increase certainty. The Government’s goal to largely decarbonise the power sector by 2030 is a bit too vague for my liking. The Energy and Climate Change Committee’s report recommends that the Government should set a specific target of 50 grams of carbon dioxide emissions per kilowatt-hour by 2030, and should also set out a clear trajectory on how Britain should reach that target. I regret that the Government have so far not accepted those recommendations, but merely reiterated their intention that the sector be largely decarbonised by 2030.
As important as a clear target for decarbonisation is the need for a stable policy framework. Another priority for Government must now be to create confidence for investors quickly, but without setting the level of renewables obligation certificates, feed-in tariffs and other incentives for low-carbon energy at levels that are so generous that the subsidies become unaffordable. The huge spend of more than £100 billion may be beyond the resources of the big six energy companies, so Britain must compete for energy investment in a global financial market at a time when many other countries are also seeking huge funds to increase their electricity-generating capacity. For many years, the major utilities have financed renewable projects as well, but their balance sheets are now being loaded up with increasing levels of debt at a time when there are competing investment opportunities and when prices are under pressure. The challenges of financing the new investment that is needed, especially in low-carbon technologies, are formidable.
The main mechanism for creating certain returns for low-carbon electricity generators in the long term will be feed-in tariffs. The White Paper has improved the proposals for feed-in tariffs, again reflecting the recommendations from the Committee:
“different levels of Feed-in Tariff…are required to support technologies at different levels of maturity and with different financing needs.”
We also said that the Government
“should set out conditions under which it would shift to an auction-based process in the future.”
The White Paper suggests a move to an auction-based approach. It accepts the need to begin with technology-specific auctions before moving to a general low-carbon option in the longer term. It suggests that technology-specific auctions or tenders will start by 2017, and that greater competition between the technologies will be introduced in the 2020s. Again, I support that approach and look forward to learning more details in due course. I invite the Minister to set out the thinking behind those dates if he can. For flexible and base load carbon generation, feed-in tariffs with contracts for difference will be used on a reference price, such as the annual electricity price.
Detail about how that reference price will be calculated is very important and eagerly awaited. For intermittent low-carbon generation, average prices are generally a problem, because when they are generating wholesale prices tend to be low. The best prices are clearly likely to be when the wind is not blowing. Basing the top-up for intermittent generators on the market price they actually receive, rather than an average, would give more certainty, although that might also have cost implications. In the meantime, against the background of rising concern about consumer prices, I invite the Minister to explain how he hopes to ensure that the levels of support offered by the feed-in tariffs will also be economically efficient and affordable.
It is important that lessons are learned from recent experience with ROCs and small scale feed-in tariffs. The Committee’s report recommends that the process of setting subsidies should be transparent. Levels must be set for a defined period, with clear triggers that would activate a review if levels need to be reassessed so that investors are not taken by surprise. The report also states that there must be a clear mechanism to allow levels of subsidy to shift automatically in response to changes in the cost of low-carbon technologies. The contracts for difference regime provides an umbrella mechanism, under which the levels of support for each technology can be set. This makes it possible to stimulate the deployment of different low-carbon technologies by adjusting the strike price. However, I hope that Ministers avoid the temptation to tinker with the regime too often early in the process through too many early reviews of support levels. The regime is open to that, but I hope that that temptation will be avoided. I therefore invite the Minister to put in place an automatic mechanism for feed-in tariff strike prices to respond to changes in cost and thus avoid the problems seen recently with the solar PV feed-in tariffs.
Will the Minister set out in advance the dates when the Government will review the feed-in tariff levels and make a commitment to avoid early reviews? We also need the right kind of institution to implement the feed-in tariffs. The report concludes that the Department of Energy and Climate Change must identify which institution will be given the power to create appropriate contracts and set this up as quickly as possible. If that role is not taken on by Ofgem, a shadow body should be set up in advance of legislation. The agency must be totally independent and not susceptible to political influence.
The Government appear to have agreed to this recommendation, however the details of the kind of institution that will be counterparty for the feed-in tariffs are still rather scarce. Will the Minister shed more light on the details of this institution, and on how responsibility will be divided between the feed-in tariffs institution and the Government? Who will actually decide the levels of support for different low-carbon technologies and the overall energy mix?
On the assumption that substantial investment in low-carbon generation will take place, the problem of intermittency must also be addressed. New capacity is required to fill the gap when generation shuts down, but the capacity mechanism proposed may not be available soon enough to achieve that. In future, however, we are likely to have more inflexible and intermittent generation. Some premium payment may be needed to ensure that enough flexible generation is available to meet demand. The White Paper does not present a finished design for a capacity mechanism, but it sets out two options: a “targeted mechanism” in which a central body would procure a strategic reserve that would not participate in the electricity market and would only be used under “exceptional circumstances”; and the introduction of a “reliability market” to operate alongside the electricity market, in which generators would receive a payment for the availability of capacity, as well as for the actual electricity that they generate. Prices would effectively be capped so that generators receive a predictable but low-level payment from the capacity market in exchange for forgoing very high prices in the electricity market at times of peak demand. Both the targeted mechanism and the capacity market would also be open to demand-side response.
Will the Minister clarify what kind of plant will fill the capacity gap, which could influence the kind of capacity mechanism that is needed? If an existing high-emission plant is expected to run for very short periods—for example, oil-fired generators—an early signal will be needed before these plants shut down. Otherwise, there is a danger that some serviceable plants that could run for a few hours a year will close down and leave us needing new reserve capacity.
I have previously expressed my support for the principle of emissions performance standards. However, the EPS proposed in the White Paper will not have any material impact. An EPS set at 450 grams of carbon dioxide per kilowatt-hour, with exemptions for carbon capture and storage demonstration plants, does not provide any additional environmental benefits beyond existing planning requirements. I note that the Government plan to review the EPS level and the grandfathering arrangements in 2015. I hope that the Minister will recognise the advantages of setting out well in advance how the EPS may become much tighter. Unexpected changes are obviously potentially harmful and a deterrent to investment.
The Government have proposed that the EPS would be grandfathered for a predetermined period—for example, 20 years—rather than for the economic lifetime of a particular plant, as previously suggested. However, even a 20-year period would allow gas-fired power stations built before the 2015 review to operate unabated into the 2030s, which could make achieving our long-term climate goals much more difficult. Some of what was said in the previous debate is also relevant to that point. Will the Minister say how often he expects the EPS level to be reviewed, and whether he would consider setting a long-term trajectory based on the carbon targets set in the fourth carbon budget?
Let me turn briefly to the carbon price floor. In Brussels last week, Commission officials seemed rather baffled by this. They felt that it would do nothing to reduce EU emissions, because any reductions would be soaked up under the cap in the trading sector. In effect, there is a danger that it will mean that the UK pays more for its emissions reductions, provides a subsidy to other member states and reduces the economic efficiency of the emissions trading system. Our report recommends that the Government should explain how they plan to deal with the problem of potential windfall profits arising from the introduction of the carbon price support, as set out in the White Paper. We suggest that the White Paper should set out in what circumstances the Government would take action to address any resulting windfall profits. If such measures were to involve a tax, what would happen to the revenues? Would it be matched by an increase in the support for a green investment bank?
In the event, the White Paper left the issue of windfall profits arising from carbon price support untouched, but the Committee believes that such profits could accrue from the increase in electricity prices resulting from the price floor and that they will be enjoyed by current low-carbon generators without any effect on the proportion of low-carbon generation in the short term. Can the Minister comment on the possibility that the carbon price floor would raise electricity bills until the 2020s without stimulating additional emissions reductions?
The dominance of the big six is another topic much in people’s minds. Reform of the wholesale electricity market is now widely regarded as essential. The big six generate around 80% of the electricity in the UK and supply 99% of electricity to retail customers. Does the Minister agree that real competition is needed in the wholesale and supply markets, so that consumers can be confident that the path to a low-carbon economy is being followed in the most efficient way possible? Does he agree that competition is vital to ensure that consumers get a fair deal? The big six are almost unchallenged in the sector, as they dominate both generation and supply, and little room is left for independent or decentralised generation.
The lack of liquidity in the market makes it hard for potential investors to have confidence in the prices that they will receive. Currently, our electricity market—for GB day ahead—trades volumes of around 40 GWh per day, with a further 200 GWh traded through the brokered markets, compared with markets such as Germany and Nordpool, which clear between 500 GWh and 750 GWh each day. An illiquid and opaque wholesale market poses difficulties for new entrants and can weaken the effectiveness of the feed-in tariffs proposed by the Government. Is the Minister contemplating a more thorough plan for reform of the wholesale and balancing markets—in other words, real electricity market reform?
In that context, the Committee recommended that the Government incorporate a review of the present trading arrangements and of liquidity in their White Paper, but the Government largely delegated the responsibility to Ofgem, which has subsequently proposed that utilities must auction 20% of their electricity by 2013 in a range of products including near-term supply. It is not clear, however, that the 20% will make a sufficiently big difference. Scottish and Southern’s pledge to sell 100% of its electricity in the spot market is welcome, but the details about how SSE will deal with its futures contracts still need to be spelled out if we are to see what benefit will be achieved.
I entirely share the Government’s reluctance to consider a reference to the Competition Commission because of the delay involved in a report and any conclusions. Ofgem has for a long time been responsible for tackling the problem, but we need to do more to ensure real competition by the time that the EMR proposals are finally implemented in two or three years. The White Paper acknowledged:
“To the extent that there are continued barriers to entry that are not addressed through Ofgem’s actions, the Government will work with all stakeholders to identify appropriate solutions.”
That seems to emphasise the option of more Government intervention if Ofgem’s liquidity reforms are insufficient.
My Committee also argued that the EMR proposals could be jeopardised by the lack of competition. A liquid market with clear price transparency is particularly important for small suppliers and generators, and we argued that a strong reference price would need to be given by the market to give confidence to small suppliers wishing to invest, and to give a credible strike price for the contracts for difference. We were glad to hear that the Secretary of State has taken up our call to break up the dominance of the big six. However, leaving the responsibility for improving the sector to Ofgem does not guarantee that that will happen. The Government’s response stated:
“To the extent that there are continued barriers to entry that are not addressed through Ofgem’s actions, the Government will work with all stakeholders to identify appropriate solutions.”
Can Ministers explain when they will judge whether Ofgem has been successful in addressing the barriers to entry, and on what basis they will make that judgment?
Recently, the energy sector has been delivering investment of only £6 billion or £7 billion each year, according to Ernst and Young, and uncertainty about or delays in implementing EMR might even reduce that figure. Will the Minister tell us how much investment there has been in the past year, since the EMR proposals were first mooted? Does he believe that we are on track to achieve the £200 billion figure widely quoted as necessary? If we continue to attract less than £10 billion a year through till 2014, that will leave quite a big burden for the remainder of the 2010s.
Time is short and several of my colleagues wish to contribute to the debate, so I shall conclude. I hope that the Government recognise the urgency of reaching conclusions in the EMR debate, because we are in danger of creating a period of hiatus for investment. I am disappointed that the timetable for publishing the new energy Bill, on which my Committee has been invited to conduct pre-legislative scrutiny, appears to be slipping a bit, and important chunks of the Bill might not even be available in time to scrutinise. However, I look forward to what my colleagues and the Minister have to say.
Mr Dai Havard (in the Chair)
In my estimation, we probably have about 25 minutes for a general debate to leave enough time for the Opposition spokesman and the Minister to speak and for Mr Yeo to reply, should he wish to have a few minutes at the end. Perhaps hon. Members will take that into consideration.
Barry Gardiner (Brent North) (Lab)
My pleasure at speaking under you as Chair, Mr Havard, is exceeded only by my awe at having to follow my own Chairman of the Select Committee, the hon. Member for South Suffolk (Mr Yeo), who in his 16 or 17 minutes did not canter but gallop through the entire report in the most comprehensive fashion.
I often think of the Minister, for whom I have the greatest respect, as sitting in his Department twiddling a Rubik’s cube. The trouble is that someone has peeled one of the colours off this particular Rubik’s cube and put the wrong colour in its place. No matter how hard he tries to get the six sides all looking as they should, the task is pretty impossible. I do not underestimate the challenge faced by the Minister.
We need to replace 25% of our existing generating plant by 2020 merely to keep the lights on—that is one side of the Rubik’s cube. We are obliged by the European Union to have 30% of our electricity come from renewable sources by 2020—currently it is only 7%—and that is another side of the cube, as is energy consumption in the UK being set to double by 2050 if we continue with business as usual. We also need to tackle fuel poverty and to keep prices low, and that is a big side of the Rubik’s cube. We need to decarbonise our economy to combat climate change—yet another side. The sixth side is that we need to incentivise £200 billion of investment in new capacity and infrastructure in the space of only nine years. The puzzle is intractable indeed.
Take any two of those sides at random, such as the renewables obligation and low fuel prices. Professor Dieter Helm, in his evidence to the Committee, dismissed the Government’s projection of only minimal rises in customers’ bills by 2020. He told the Select Committee that to think that energy efficiency and other demand reduction measures could balance the increased costs of low-carbon supply to the extent that the effect on consumers’ bills would be only 2%,
“is again really stretching one’s imagination.”
Let us pick another two sides of the cube: what of delivering £200 billion-worth of infrastructure and of decarbonising our economy? Investment analyst Peter Atherton told the Committee that
“it is going to be extraordinarily difficult to get non-recourse debt into new nuclear in the UK. That basically means that it all has to be done on balance sheet.”
The Government’s strategy is market driven. It is predicated on getting the right incentives and believing that the market will then arrive at the correct solutions.
There are four pillars. Feed-in tariffs will incentivise at two levels. First, by encouraging microgeneration and paying people for the energy they feed into the grid through their solar panels and domestic wind turbines. No doubt we will come back to solar panels later. Secondly, by giving a long-term contract to large-scale low-carbon generators like offshore wind farms. This will guarantee a better price to them in comparison with carbon-intensive generators such as coal or gas-fired power stations. Those are the “FITs”.
Carbon price support is like a tax on carbon, as the Chairman of the Energy and Climate Change Committee said. It simply makes the cost of generating electricity from fossil fuels more expensive, and that means that carbon-free generation like wind becomes relatively more attractive the higher the Government set the carbon price.
Capacity payments, the third of the four pillars, are the price the Government are willing to pay to ensure that back-up is always available. The system needs flexible generation that can respond to the peaks of demand and any gaps in supply. They propose payments to generators that will give them increased certainty of revenues if they guarantee to be available when other supply is not—for instance, when the wind does not blow.
Emissions performance standards is the fourth of the pillars: the final tool in the Government’s incentives box. In reality, the EPS is more a disincentive, because it simply proposes a ban on any generator emitting more than a certain level of CO2 per kWh. The Government want to set that limit at 600 grams of CO2 per kWh. In practice, this would stop only unabated coal—the coal-fired power stations that did not have CCS fitted to reduce their emissions. It would still be enough to allow gas-fired stations. That is not good enough, given the Committee Chairman’s earlier remarks about adopting the Committee’s fourth carbon budget with targets of between 40 grams and 60 grams per kWh.
If the banking crisis should have told politicians anything, it is this: a strategy of “incentivise and then sit back” ignores the fact that markets need more than incentives. Markets need certainty, capacity and regulation. Peter Atherton put it nicely when he told the Committee:
“I warn you that it is not a question of making the rewards more and more, because the more you make the rewards, the less trust investors will have that those rewards are going to be sustainable.”
He went on:
“There are really five big risks: planning, construction, power price, operation and decommissioning.”
The mistake that the Government appear to be making is to think that by putting greater and greater incentives on power price, they can resolve all the problems that need to come within electricity market reform.
The EMR set out three high-level objectives: decarbonisation of the electricity sector, energy security and affordability. I wish to focus for a moment on affordability, because it is becoming—certainly for my colleagues—one of the biggest issues that we find on the doorstep. One in every four households in the UK is now classed as fuel-poor. A fuel-poor household is defined as one where the expenditure required to maintain adequate warmth exceeds 10% of household income. It is a measure of the number of households needing to make impossible decisions on expenditure just to meet their basic human needs.
If we look across Europe, there is no pan-European definition of fuel poverty. In other countries, fuel poverty might fall within general poverty alleviation programmes, or it may simply not be recognised as a major problem. Cross-country comparisons therefore are difficult and they need to employ indicators such as the winter variation in mortality levels or the number of people in arrears with their utility bill payments.
The Labour Government brought in winter fuel payments for the elderly to tackle fuel poverty, and no doubt my colleagues will point to figures that show that excess winter deaths plummeted from almost 50,000 in 1999-2000 to 25,000 in 2009-10. The truth is that while Labour can claim real success by acting to increase household income, if we look at the figures over an extended period, it becomes evident that the net effect of our winter payments strategy was only to hold winter deaths broadly static when otherwise they might have increased. If one goes back to 1993-94, one sees that excess winter deaths were again 28,630. In 1994-95, the figure was 29,720. It rose to a peak in 1999-2000, but in 2007-08 it came down to 27,480. That shows the danger of focusing on just one aspect of a problem.
Winter mortality in other European countries reveals some surprising trends. The countries with the highest winter death rate are Portugal and Spain. That is counter-intuitive, but easy to explain when one considers the low level of home insulation. What emerges clearly from such comparisons is that there is a strong correlation between thermal standards in housing and excess winter deaths. That excess winter mortality is almost twice as high in England as in Finland or Germany cannot be directly attributed to weather. However, precisely because of its cold climate, Finland already has very demanding thermal insulation requirements.
By contrast, the coalition Government have just introduced their warm home discount scheme where energy suppliers will be obliged to give rebates of £250 million in 2011-12, rising to £310 million in 2014-15, to vulnerable customers. It is astonishing that the UK continues to focus on financial solutions to what is essentially a technical problem of building standards. On the Minister’s overview of the industry, I urge him not to repeat the mistake of which I have already accused him once this afternoon by adopting a single focus solution to a problem. I fear that is what happens.
The Government have also failed to control the soaring costs of energy charged by the big six utility companies. Again, the Chairman of the Committee made strong reference to this in his remarks, because it is a major focus of our report. Household bills have increased on average by 71% in just five years. The latest attempts by Government to reform the electricity market once again let those companies off the hook by failing to break up the vertical integration of the companies.
Vertical integration allows a utility company to generate the electricity under one arm of the company, which it sells through an intermediary—often offshore—which they also own, and then on-sells to another arm of the corporation, which supplies it to us as the consumer. The result is a total lack of transparency in the true cost of electricity. All the big six operate similar structures, which prevent real competition and stop new entrants coming into the market.
When the Committee Chairman mentioned the big six and the break-up of the vertical integration of the market, he alluded to the announcement by Scottish and Southern. It is important to try to appreciate why what sounded like a major announcement from Scottish and Southern to auction all its electricity to household suppliers on a wholesale market is perhaps not the concession or big move that might have at first been perceived. One small supplier that it was supposed to help said that the move was “cosmetic” and will do little to help small suppliers gain market share. That is because the Scottish and Southern Energy Group is freeing up only short-term energy and not the long-term market on which small suppliers rely.
The big six gas and electricity firms buy and sell energy on the wholesale market, but energy is traded in two ways—first on the day-ahead price, which is where SSE said it will auction all its energy, and secondly, by smaller energy firms that trade with a longer view, buying up enough energy for up to two years so that they can guarantee a price for customers. The markets are complex and subject to many external factors that can affect price. First Utility, a small company, says that it buys less than 1% of its wholesale energy on the day-ahead market, and claims that smaller, newer suppliers buy wholesale energy on a much longer-term basis. That is why the move from SSE that the Chairman of the Committee mentioned will not free up the market and help liquidity in the way suggested.
Lack of skills is a problem in driving the investment that we need in industry. It is one thing to get £200 billion of investment, but providing the skills to deliver that is a much greater challenge. The Minister must respond clearly and tell the Chamber how he proposes to make skills available to meet the demand should such investment be obtained.
Mr Dai Havard (in the Chair)
Order. I would like to start the winding-up speeches at about five past five and other hon. Members wish to speak. I appreciate that it is a complex report and that huge areas need to be discussed, but I appeal to the hon. Gentleman’s internal discipline.
Barry Gardiner
I apologise, Mr Havard; I thought that we were working to a slightly different time scale than that outlined, so I will rapidly bring my remarks to a close. I must, however, focus on this week’s events and the change in regulation. I do not suggest that the Government are wrong to change the tariff structure and bring it in line with the levy, but they should do it at the end of March next year when the review was originally planned. By bringing the move forward by a meagre four months, the Government have reinforced a perception in the markets and business that they cannot be trusted to deliver a stable regulatory framework. The Minister shakes his head but he knows that to be true. He also knows that he will be subject to judicial review. Some companies are losing up to 45,000 workers, and many will “JR” the Government’s decision because there is a consultation period that extends 11 days beyond the deadline at which the change of tariffs will come into effect. That is dishonest and the Government are wrong to go down that route.
David Mowat (Warrington South) (Con)
I have already spoken this afternoon, so I will be brief to let the hon. Member for Southampton, Test (Dr Whitehead) contribute to the debate. I liked the Rubik’s cube analogy that we have just heard; I will not add to that although I want to raise a couple of points that have not yet been discussed. We have spoken a little about fuel poverty, but we have not specifically mentioned energy-intensive industries. I know that proposals on that are to be published and I await them with interest. It is a major problem. I was recently told that INEOS in Runcorn uses about as much electricity as Liverpool. That is a continuum; it is not a discrete industry, and to a greater or lesser extent, all industry uses electricity. At a time when we are rebalancing our economy, it is worth noting that a unit of GDP obtained from manufacturing will always require more energy than one obtained from services.
I have two specific points. First, paragraph 37 on page 15 of the report states:
“It is important that the Electricity Market Reform package is geared to deliver our renewables targets as well as our decarbonisation objectives.”
The Government agreed with that conclusion and although I looked carefully at the logic behind it to try to find evidence for it, I could not. Cutting 80% of our carbon emissions by 2050 is a difficult challenge, and I am concerned that we are introducing subsidiary targets that will make it harder. Of course renewables are part of the solution, and nothing in my remarks should imply otherwise, but if we elevate renewables over and above other methods of reducing carbon, including nuclear power and a little bit of gas, we could be driven to make wrong decisions. I think that to an extent we are doing just that.
We have just heard an exchange about the cost of solar power, which is still high. A finding by the Parliamentary Office of Science and Technology and Cambridge university suggested that, over its lifecycle, solar power uses three times as much carbon as nuclear power, including the manufacturing cost of PV cells. I support the objectives of decarbonisation, but I wonder whether some of the renewables objectives could be a distraction.
My second comment on the report links to the previous point about fuel poverty. We have a problem with cost, which we are ducking. The danger of doing that is that it could become a cumulative issue, meaning that we will never address head-on the question of why the costs involved may be a price worth paying. We have heard in previous debates about the numbers of people who are dying in our country from fuel-related issues such as hypothermia—I think I heard the figure of 2,500 a year. Page 61 of the report implies that the EMR reforms, which I broadly support as a sensible way of achieving our objective, will have a maximum impact on energy prices over three decades of 7%—that is the highest number on the chart. That figure is based on a set of assumptions that I could not find and that I am not sure have been published. Unless we take seriously the extra costs associated with some of our actions in terms of interfering with the market, we will lose popular support for some of the things we are rightly trying to do.
Dr Alan Whitehead (Southampton, Test) (Lab)
I will limit my remarks to one or two points. One disadvantage of having such a knowledgeable, far-sighted and competent Committee Chair is that after he has spoken there are few sensible contributions left to make. I will, therefore, confine my remarks to one or two less sensible points, which I hope will add something to the debate.
In the Green Paper, and certainly in the subsequent White Paper published after the Committee’s report, one must look a long way to find comments on electricity market reform. Although the White Paper addresses a range of topics, such as capacity, the carbon floor price and energy performance standards, its central oddity is that it leaves the electricity markets as they were designed 10 years ago under NETA—the new electricity trading arrangements. It leaves the electricity markets in pretty much the same place, with the same assumptions and mechanisms. However, it countenances a very different landscape as far as electricity trading is concerned.
When NETA was set up, there was a substantial number of wholesalers selling and retailers buying. That is no longer remotely the case—not by conspiracy, but through the accretion of suppliers, generators and retailers into the big six. By accident, what has come about is, in effect, a cartel—we have to say that—that essentially hedges, using the strategies that my hon. Friend the Member for Brent North (Barry Gardiner) mentioned: it buys on the futures market and sells to itself, using the same market mechanisms, and therefore pretty much bypasses most of the things that NETA was originally set up to do.
When NETA was set up 10 years ago, it was carbon-blind. Its purpose was to secure, among other things, the cheapest price between wholesale and retail. In the early stages, it looked as though it was substantially succeeding in doing that, until other factors took over. However, there was the emergence of what one might call the other things that are central to the electricity market reform White Paper. To some extent, they were mechanisms that mediated that central electricity market. The renewables obligation, for example, was a mechanism attached to the original NETA/BETTA system to bring renewables to market; to underpin emerging technologies; and, in an echo of the recent debate on feed-in tariffs for solar photovoltaics, to recognise that over time the obligations may change as the technologies come to market. Nevertheless, the aim was to underpin those technologies in the first place.
Now, as hon. Members have said, we need to decarbonise our electricity market rapidly and invest substantially, not just in replacing capacity but in providing additional capacity, because of the nature of the capacity that we are bringing on board as far as the low-carbon market is concerned. We are talking about perhaps £200 billion in investment. All but two of the big six companies have pretty much borrowed up to the limit of their balance sheets, so we need important mechanisms to secure not just the good running of the market, but low-carbon investment on the basis of good value for customers. I do not underestimate at all the breadth of the challenge implied by the electricity market reforms.
There are various things in the reform. The central electricity market remaining must have a substantial question mark against it, with regard to whether it is fit for purpose as one of the central mechanisms driving all the demands forward. I think—evidence was submitted to the Select Committee on this—that a single purchaser pool of some description is a necessary way of dealing with the issues of cartelisation and the lack of transparency in the wholesale market that has emerged. There must also be a question mark against the contract for difference as set out in the White Paper.
Barry Gardiner
I absolutely agree with what my hon. Friend is saying. Will he say something about liquidity and the ability of smaller companies to enter the market with regard to the changes that he is discussing?
Dr Whitehead
My hon. Friend has just stressed that point. Given that I have about one minute left, expatiating on liquidity to any great extent is probably beyond my abilities. However, he is absolutely right to raise the question of liquidity in the market and the fact that as a result of the lack of liquidity, small companies are pretty much shut out from gaining a foothold in the market. Whatever is done about the big six, that is a very important issue.
Finally, I want to emphasise two things. First, the contract for difference as currently proposed conflates mature technology, the overall costs of which will not change, with emerging technology, where costs may well change. That is to say, it rewards, and particularly in the future will reward, old nuclear technology, as well as new nuclear power stations, for their output. That seems—the Committee alluded to this—a considerable concern, given the pronouncements that continue to be made that the Government are in favour of new nuclear but with no public subsidy. It is necessary at this stage to say either that there will be no public subsidy—that nuclear will not be rewarded for being a mature technology in the way that emerging technologies are, but will take its chance in the market—or that we need to do something about public subsidies for nuclear, for reasons that may be perfectly honourable to consider, and we must be up front and deal with that. Electricity market reform continues to fudge that essential choice that we have to make.
Secondly, we have to enter into capacity payments with a clear understanding of demand-side analysis, which is substantially missing from the proposals in the electricity market reform White Paper. We need to consider capacity payments for energy efficiency and reduction in output, and in relation to things such as interconnectors and electricity storage, which will be an essential part of a balanced, very low carbon economy that takes serious account of the demand side as well as the supply side.
Trying to deal with the entire landscape of electricity market reform in eight minutes flat was a difficult challenge. I hope that I have contributed a few thoughts to the debate, and I look forward to the Minister’s response to a number of issues that hon. Members and I have raised.
Mr Dai Havard (in the Chair)
I hope that we can give the Minister and Mr Yeo sufficient time to respond to the debate.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
I will endeavour to be brief to provide that time, but I want to say a few things. I welcome the report and the clarity that it brings, because it puts very technical issues into relatively plain English. I congratulate the Select Committee on doing that. I am conscious that in coming months, when the energy Bill is published, the Minister and I will have plenty of opportunities to get into the weeds of these issues, so I do not intend to speak for long.
My hon. Friend the Member for Brent North (Barry Gardiner) outlined a number of the issues arising from the EMR process, as well as some of the omissions from the EMR proposals. I will touch on a couple of issues. I want to re-emphasise the most glaring issue, which has been referred to by the Chair of the Committee, the hon. Member for South Suffolk (Mr Yeo), and by other hon. Members—the omission from the EMR proposals of reform of the wholesale electricity market. I hope that between the White Paper and the Bill, the Government will look to deal with that, or others may well do so, because it is a pressing issue. It has come to the fore in recent weeks, and we know the reasons why. Those reasons have been acknowledged by some of the energy companies themselves. In particular, Ian Marchant of SSE has been candid in acknowledging that there is a trust issue. They have a trust issue because the market in which they are operating and the behaviours that go alongside it bear the hallmarks, in some respects, of a cartel. That is unsatisfactory and needs to be dealt with. The Committee report rightly highlights the proposals from Ofgem in relation to the 20% figure as relatively timid, and much more substantial work can be done on that. I am sure that the Minister will appreciate the support from the Opposition if he attempts to deal with some of those issues or, if not, we will find a way of giving him the opportunity to address those issues in the next few weeks.
I want briefly to touch on carbon price support, which the report is critical of. As my hon. Friend the Member for Southampton, Test (Dr Whitehead) has noted, the report reflects on the issues regarding the encouragement of new as opposed to older development. The report states that carbon price support
“will not influence investment decisions until 2018 at the earliest…Until then, the Carbon Price Support represents little more than an additional energy tax, which will be passed on to consumers.”
The hon. Member for Warrington South (David Mowat) has referred to energy-intensive industries. That is an important issue, particularly with the impact that the carbon floor price could have on some of those industries. I have a constituency interest in the issue, as do many other hon. Members. It is important to ensure, as the Select Committee warns, that UK companies are not disadvantaged in the long term compared with their counterparts in the EU and more widely across the world. I know that the Chancellor is seeking to address that issue in his growth statement at the end of the month, and I implore the Government to look seriously at the impact. I know of energy-intensive companies in my constituency that contribute to other objectives set out in the report and in the EMR process—for example, manufacturers of offshore wind turbine parts—and those companies might end up going to other parts of the world, causing the UK to lose growth and jobs.
Other aspects of energy policy will need to change and feed into the time scale of the reform. The Minister touched on one of them when we debated the potential changes regarding shale gas, and I want to refer to another, transmission charging. I know that the Minister now knows the arguments well. The Select Committee report points out that the TransmiT review will have an impact on the development of renewables, the siting of such developments and their attraction in association with the ROCs regime.
I know that the Minister is aware of the way in which such arguments are sometimes used to support a particular political agenda. The issue is not necessarily about discriminating against one part of the country, but it is a fact that the transmission charging regime was established in a pre-renewables world. That needs to change. I hope that if the outcome of Ofgem’s review is too timid, the Minister will use his powers to ensure that that is addressed to provide the right signals and basis for the market.
Finally, the Select Committee report notes:
“‘Affordable’ electricity in the short term cannot be achieved at the expense of meeting the other objectives of Electricity Market Reform. Lower prices cannot be a primary driver of energy policy, but developing greener and more secure sources of electricity needs to be accompanied by sound social policy to protect vulnerable consumers.”
We have seen a change in recent months that perhaps calls some of the sentiments behind that statement into question. While it is important to consider the security of supply and decarbonisation, we must always keep the people across the country who are struggling to meet energy bills at the forefront of our minds. The issue is not about a small number of people in fuel poverty, because it affects families and businesses up and down the country. Too often, in some of our discussions, we overlook the impact on consumers. We must ensure that we do not do that when reforming the electricity market and as the Bill progresses in the next Session.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
We have had an interesting debate. This is one of the rare occasions where one can say that we should have had more time to have a debate on energy; we would happily fill a much longer time scale. That says a great deal about the complexity of the issues, the knowledge of many Members on both sides of the House and our joint determination to try to reach the right conclusions.
Mr Dai Havard (in the Chair)
At one point, Minister, I seemed to have managed to stop time, but I cannot stretch time. Carry on.
Charles Hendry
I know that you, Mr Havard, are capable of so many miracles and magical things that we thought that nothing was beyond your capabilities.
The hon. Member for Brent North (Barry Gardiner) made an interesting comparison to a Rubik’s cube, but I think of the issue as more of a complicated jigsaw. With a Rubik’s cube one makes a move and moves everything else out of place, whereas with a jigsaw, one gradually puts in place the elements that build up the whole picture. One has to do that in a structured and sensible way, because some parts are more complicated than others. Nevertheless, we are keen to take forward the challenge.
What we are about here is securing £110 billion of investment over this decade. The £200 billion includes investment in gas infrastructure, the wires and the pipes, but it is still an enormous investment. It is twice the rate of investment every year of this decade than has happened in the past decade. We need to recognise that the old market structure did not bring forward the necessary investment—it sweated assets to try to keep costs down—and could not price in the cost of carbon, which is one of the big issues that we have had to address. Therefore, I do not see market reform as being about subsidising nuclear, but about how we make all forms of low carbon feasible, affordable and economically attractive.
The Chair of the Select Committee on Energy and Climate Change, my hon. Friend the Member for South Suffolk (Mr Yeo), asked a number of questions when introducing the debate—it was like a bullet train going through the energy terrain. A comprehensive range of issues and questions were raised. He asked how much investment we have seen in the past year. Just in the renewables sector, in six weeks between 1 September and early October, we saw £800 million of new investment, offering nearly 2,000 new jobs, and we expect that to pick up. However, he has had to accept that much of the investment is lumpy—a nuclear power station needs £5 billion or £6 billion of investment, and an offshore wind farm needs billions of pounds of investment. Therefore, there will not be a straightforward progression to 2020, but we will have big steps up over time. We are quite clear that without the measures we are putting in place, it will not be achievable.
My hon. Friend also asked why we had not gone for a target such as 50 grams per kilowatt-hour for the electricity sector by 2030. We will set out our formal response to the Energy and Climate Change Committee later in the year. We recognise, through the work that we have done, that there are a number of ways to reach our 2050 requirement, which is that we need to have reduced our carbon emissions by 80%. There is not just one way to do that, and we need to look at what is the best way. At the end of the day, we need to do it in a way that is cheapest for consumers. A common theme in this brief debate has been to ask how we deliver that in a way that will protect consumers, both industrial consumers and people in their own homes.
We have covered a number of measures regarding market reform, and I want to address each of them briefly. We have adopted a system of feed-in tariffs with contracts for difference, because we believe that that is the best way of getting the best deal for consumers and giving the greatest certainty to investors. By clawing back when the wholesale price is high and paying more when it is low, the system is more predictable, and it is easier to bring in investors from outside.
One of the things that Mr Atherton from Citi, who has been referred to, has not fully taken account of is that we are trying to take the system closer to a regulated rate of return. Many institutional investors, such as sovereign wealth funds around the world, are now looking at the opportunities to invest in the UK energy sector precisely because of the structure that is being put in place and the fact that we think that the CFD mechanism delivers the policy more securely than any other mechanism.
My hon. Friend the Member for South Suffolk asked us not to tinker with the policy as it progresses. The history of previous Energy Ministers suggests that I will most certainly be long gone by the time anyone gets a chance to tinker, but if I am still in the position at the time, I guarantee to him that the whole system is designed to stop tinkering. It is not just an agreement or Government policy, but a long-term contract that tells investors over 20, 30 and more years how much they will be paid for each unit of electricity generated by a certain technology. That means that we need to build a system that is as close to automatic as possible in order to recognise how the costs are coming down, so that new entrants coming in beyond a certain point understand how they will be remunerated in the process. The policy will also deliver investment, particularly in renewable energy, at a cost lower than that of the existing renewable obligation. As the policy supports all low-carbon technologies, it will make a greater contribution to our decarbonisation targets than is otherwise possible.
The discussions, particularly my hon. Friend’s remarks, also focused on the emissions performance standard. My intention with such a standard will be to give a long-term signal for what we believe is acceptable and to start to set out how that degression might take place when it is considered. Above all, it has to be a driver for investment. It is easy to set it in place in a way that kills off investment decisions. How we have done it, which is to say that it will not be reconsidered before 2015 and that investments happening before that will have perhaps 20 years of assured production on a certain emissions level, will strike the right balance.
I was intrigued by the comments my hon. Friend the Member for South Suffolk made in the earlier part of the debate. He sees the role for shale gas as having been underestimated. He said that we should be having much more shale gas and gas in general in the mix, with perhaps less energy from renewables, offset by the structure that he was calling for in the second part of the debate, which would be subject to an emissions performance standard. We will not get the investment that he wants to see in new gas generation if there is a much tighter emissions performance standard biting at an earlier stage on gas generation.
We have also said that the capacity mechanism should be part of this process, because we recognise that we need to know exactly how we will keep the lights on at all times of the year, as well as ensuring that there is back-up capacity and, critically, building in that demand-side response, to see whether we can find cleverer ways of dealing with this than building new power stations that will only be used for a small part of the year. If we can find ways of taking demand out of the system during times of particular demand, it will be a big gain for the consumer and save £1 billion on new plant. Clearly, whether that is a new plant or an old plant going for a few hours a day will depend on how that capacity mechanism is structured. We are determined, however, that that demand-side response element should be part of the structure as well.
The final element of the package is the carbon floor price. The carbon floor price is important for giving investors confidence. Currently, if one looks at the history of the European emissions trading scheme, it has been impossible to guess where it will be in a few months’ time, let alone in nine years’ time. The people who are making investment decisions that will not come to fruition until the end of the decade need greater clarity. Putting in place a carbon floor price is all part of that process.
The trajectory that we have taken is to show them that we are serious. If we had said, “Yes, there will be a carbon floor price, and it will be introduced by the next Government after the next election, at a level to be established,” nobody would have taken that seriously. The way in which that has been done shows a much greater commitment to giving the industry the clarity that is necessary. A measure of success in this will be whether we can bring new entrants into the market. Improved liquidity will be one of the benchmarks by which we can test whether market reform is working. Undoubtedly, we want to see more liquidity and more players. That is primarily the responsibility of Ofgem, and we know that Ofgem will look at this further if that proves to be necessary. The Government have said that they will act, if necessary, to address those structural barriers.
My final point is on fuel poverty and feed-in tariffs. One cannot, on the one hand, talk about concern for those suffering from higher fuel bills and, on the other, baulk at every measure that is designed to take pressure off their bills. The cost of solar technology has come down by around half since 2008. Degression was always built into it, from the very first brochure, signed off by the right hon. Member for Doncaster North (Edward Miliband), who is now the leader of the Labour party. He said that degression should be part of that process. As the prices have gone down much faster than anyone anticipated, it was right to do that. We know that a domestic installation can be done in a few weeks and had we not acted quickly—if it had been announced that it will come into place in the spring—there would have been a complete explosion in demand and installations, which would have completely destroyed the budget that has been set for this and led to the complete collapse of the industry, because anything after that would have been much more draconian.
Charles Hendry
I fear that this is not an integral part of the debate on market reform and, while I want to respond to the hon. Member for Brent North, we owe it to the Chair of the Select Committee to give him time to come back.
I do not think that, on the one hand, someone can argue on fuel poverty that they want to take pressure off consumers while, on the other hand, opposing the decisions we take to help consumers, such as the billions of pounds taken off the feed-in tariff costs out to 2020. It is not possible to do both.
Charles Hendry
I am not going to give way, because I want to give time to the Select Committee Chair. I have spoken for less time than the hon. Member for Brent North, so I hope that he will understand if I do not give way. I am grateful for the advice and input of the Select Committee, and I hope that we can put in place a structure that recognises the scale of the challenge, the need to decarbonise and the need to rebuild our energy infrastructure, while doing it at the lowest cost to consumers.
Mr Yeo
With your permission, Mr Havard, I will comment briefly on what has been said. As the Minister has said, it has been another debate that could easily have gone on for longer, which is a tribute to the well-informed contributions. I want to thank my Select Committee colleagues, the hon. Members for Southampton, Test (Dr Whitehead) and for Brent North (Barry Gardiner), who have made useful comments this afternoon. They are also both exceptionally knowledgeable and experienced in these issues. As far as I am concerned, it makes the work of the Committee a pleasure, as well as often being intellectually stimulating. I think that we can continue to prosper together in addressing these issues.
I was also grateful to my hon. Friend the Member for Warrington South (David Mowat) for mentioning the position of energy-intensive industries, which is a real issue. I know that Ministers have confirmed on this and other occasions that it is very much in their minds. One of the things that we do not want to do in our determination to make Britain one of the leaders in moving towards a lower carbon economy is to destroy the competitive position of successful British businesses. That is a tricky balance to strike, and it will need continued attention.
Many points have been raised, and I will not comment on them all. I fully accept what the Minister has said about the potential conflict between a long-term tightening emissions performance standard and my suggestion that we might see significant investment in gas-fired capacity in the short term. We have to find a way of doing that. Obviously, emissions performance standards, which are applied on a per plant basis, would run into that conflict. If the emissions performance standard was applied to a country’s whole portfolio of generating capacity, that might offer the chance for a mix. It might also be an incentive for some companies that wanted to expand their gas-fired capacity to invest in some low-carbon alternatives. There needs to be a bit of imagination applied to how the EPSs could operate in this way, without ruling out the prospect in the near term of some new investment in gas. Of course, the pre-2015 investments will, in any case, be grandfathered for a sufficiently long period for investors to have a return.
I was glad that the Minister confirmed that the Government are keen to see barriers to entry in the market minimised. That is a work in progress. We have to see how Ofgem’s measures apply and whether they are successful. If they are not, we will have to return to that issue urgently, because it is one of the real difficulties, which has blind consequences for consumers as well.
I accept the Minister’s concern about the impact on consumer prices of the cost of various forms of incentive for low-carbon energy. Again, there is a trade-off that we have to reach the right judgment about. We all want to see a substantial, rapid increase in low-carbon electricity generation, but many of those low-carbon technologies require an incentive, which will be either at the cost of taxpayers or, in the present situation, consumers. Those categories are ones that in any case largely overlap.
I want to congratulate the Minister. He has displayed a remarkable grasp of very complex issues in his period as Minister. It is a pleasure to have him before the Select Committee and to hear him on other occasions in the House. He has a real grip, and we get thoughtful and well-informed responses to the questions that we put to him. For that reason, I hope that he will remain in his job for much longer than most of his predecessors, perhaps indeed for the rest of this Parliament. That will enable the Committee to go on engaging with him and means that we can hold him to account for some of the things that he is telling us now in three and a half years’ time.
I am grateful to everyone who has taken part this afternoon. I hope that we have a chance to return to these issues either on the Floor of the House or in another debate in Westminster Hall.
Question put and agreed to.
Written Ministerial Statements
(13 years, 1 month ago)
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Education Capital
(13 years, 1 month ago)
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The Secretary of State for Education (Michael Gove)
I would like to update the House on my Department’s work to address the shortage in pupil places being experienced by some local authorities, and reduce the level of prescription and unnecessary guidance which are a feature of the school premises regulations and hamper the development of new schools.
I would also like to inform members of my final decisions on the Building Schools for the Future (BSF) programme in the six authorities which mounted judicial reviews.
In July, I announced that an extra £500 million would be made available, this year, to local authorities experiencing the greatest need in managing shortfalls in providing pupil places. This additional funding has been made available from efficiencies and savings identified in BSF projects that are continuing.
I can announce today that over 100 local authorities will receive a share of the funding. The allocations have been calculated using figures provided to the Department for Education by local authorities through the 2011 School Capacity and Forecast Information returns. By using the most up-to-date information available we are making sure the savings identified are being targeted to local authorities experiencing the most severe need.
I understand the economic situation means difficult choices need to be made about how to direct funding but I urge local authorities to target resources at managing the shortfalls in pupil places wherever they are most needed, and taking into account the views of parents. This is especially pertinent in light of the data released last week by the Office for National Statistics (ONS) showing that previous projections for population growth were underestimated and by 2020 there will be around 21% more primary age children than in 2010.
Today’s extra funding means that in 2011-12, a total of £1.3 billion will have been allocated to fund additional school places. The Government already announced an allocation of £800 million funding in December 2010, twice the previous annual level of support. The nature of this funding, (capital grant which is not ring fenced) the nature of the projects it will fund, (mainly small primary school projects) and the readiness of local authorities to get projects under way, means that this money will be spent efficiently. Further, I expect much of it to benefit small and medium-sized enterprises and to stimulate local economic activity across the country.
I would like to reassure those local authorities whose needs were not as severe as others—and which, therefore, did not receive a share of this extra £500 million—that future capital allocations for basic need and maintenance pressures will be announced later in the year.
I am also launching a 12-week consultation on the revision of school premises regulations. The consultation document sets out how the Government intend to deregulate and end the confusion and unnecessary bureaucracy surrounding the current requirements. A copy of the consultation document will be placed in the Libraries of both Houses.
I am proposing to make the requirements for independent and maintained schools identical and to reduce the overall number of regulations. Some regulations are duplicated in other pieces of legislation or are simply unnecessary and I propose to remove these regulations completely. I also think that other regulations can be simplified to remove unnecessary bureaucracy and make requirements proportionate, without reducing the quality of buildings. I would welcome views on my proposals, further details of which can be found on the Department for Education’s website.
Finally, today I am announcing my decision on the schools that are subject to the BSF judicial review proceedings, brought by Luton borough council; Nottingham city council; Waltham Forest London borough council; Newham London borough council; Kent county council; and Sandwell metropolitan borough council.
I announced what I was minded to do in July and have received further representations from each of the claimant authorities. I considered these carefully but I am not persuaded that I should depart from the decision which I announced I was minded to take. My final decision is, therefore, not to fund the schools in the claim but, instead, to fund, in capital grant, the value of the claimant authorities’ proven contractual liabilities.
Further information on all aspects of today’s announcements, including a complete list of local authorities receiving extra funding for shortfalls in pupil places, can be found on the Department for Education’s website at www.education.gov.uk.
Farming Regulation Task Force Report
(13 years, 1 month ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)
I am pleased to announce that the Government published the interim response to the farming regulation taskforce report today.
I established the taskforce in June 2010, asking its members to advise the Government on a new approach to regulation in England, from the point of view of a farmer or food processor, and on how best to achieve a risk-based system of enforcement while maintaining high environmental, welfare and safety standards. Following an extensive review, the taskforce published its report on 17 May 2011.
The taskforce made over 200 recommendations, covering the full range of the regulatory landscape that affects farming. The key messages are that DEFRA, its agencies and delivery partners need to establish an entirely new approach to regulation, strengthen ties with the farming and food processing industry and work in partnership to achieve outcomes, and move to a risk-based approach to regulation, rewarding good practice with less frequent inspection.
The report was bold and ambitious. Government will also be bold and ambitious in finding solutions. I am pleased to announce that the interim response is very positive about our progress to date. It sets out a narrative of the work that is being done, and highlights examples of how the Department and its delivery agents have already started to apply the principles the taskforce set out. We are particularly keen to take forward the principle of earned recognition and to make progress on simplifying and integrating environmental messages for farmers and we are working in partnership with delivery bodies and industry organisations to develop these ideas. I intend to respond positively to as many of the recommendations as possible and will give full details of this, setting out a clear agenda for implementation, in our final response, which is due to be published in the new year.
The interim response is now available on the DEFRA website: www.defra.gov.uk
Thames Tunnel
(13 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
On 7 September 2010, I outlined in a written statement, Official Report, column 9WS the Government’s support for Thames Water’s plans for a tunnel to reduce the amount of untreated waste water being discharged into the River Thames. I presented an estimate of the costs and impact on customers’ bills, which I said we would continue to scrutinise with Ofwat to ensure value for money. I said DEFRA would update the 2007 impact assessment and that I was minded to consider development consent for the tunnel under the regime for nationally significant infrastructure projects established by the Planning Act 2008.
My statement today reaffirms the Government’s support for Thames Water’s plans and reports on progress we have made since my last update. In particular, it provides an updated estimate for the overall cost and the likely completion date for a project of this size and complexity.
The need to upgrade the sewerage system in London which in places is running out of capacity even in dry weather, and for a solution to the resulting environmental challenges in the Thames Tideway remains persuasive. I will today place in the Libraries of both Houses a paper “Creating a River Thames fit for our future” summarising the strategic and economic case for the Thames tunnel. This builds on the impact assessment produced in 2007. It explains why we continue to believe that a tunnel represents the preferred solution for dealing with the untreated sewage that is polluting the River Thames.
Last year I reported the project costs for the Thames tunnel as £3.6 billion at 2008 prices. This was the cost of the project reported at what is known as the P80 level—that is, there is an 80% probability the project costs will be less than this figure based on probability modelling of cost risks. This figure excluded financing costs. Since then development of the construction plans has continued, more allowance has been made for a later completion date and in response to the first phase of public consultation by Thames Water, greater use of brown-field sites and river transport have been allowed for. The cost base has also been updated to 2011 prices and on this basis the estimates for the project costs are now £4.1 billion. They include £0.9 billion of risk allowance and optimism bias. These estimates have been examined by independent advisers on behalf of Ofwat and confirmed to reflect best practice in the industry. At this stage some uncertainties remain and the estimates will continue to be refined going forward.
Last year I also reported that the estimated average peak impact on annual customer bills was likely to be £60 to £65 in 2008 prices. This figure was based on the then estimate of project costs plus modelling of likely financing costs. Since then, in addition to the revised project cost outlined above, Thames Water has with Ofwat and my Department, made progress in developing the delivery route, risk management processes, and likely financing costs. They have also developed the modelling of the likely impacts on customer bills. This gives a central range for an average maximum annual customer bill impact of £70 to £80 at 2011 prices. The considerably uncertainty in this range reflects the impact that financing costs will have on bills and the difficulty in estimating these for a project of this nature and duration. Relatively small changes in the cost of capital for the project could have a significant impact on bills.
I understand the concern that Thames Water customers may have over this increase in their bills. DEFRA, with Ofwat, IUK, EA and Treasury, has been working closely with Thames Water to ensure that the engineering costs are minimised through value engineering, and that the project is delivered efficiently with a structure and financing mechanism that delivers value for money for customers. We will continue to do this and to ensure that there are no better value solutions that meet the need.
Financing a tunnel of this size at a cost that is value for money for customers is a challenge. The Government believe that the private sector can and should finance this project but accept that there are some risks that are not likely to be borne by the private sector at an acceptable cost. It is willing in principle to provide contingent financial support for exceptional project risks where this offers best value for money for customers and taxpayers. However, I will want to be assured that when offering this contingent support taxpayers interests remain a top priority and that the taxpayer is appropriately protected by measures that minimise the likelihood and impact of these exceptional risks.
On planning, we have completed a 12-week public consultation on proposed secondary legislation (Section 14 Order) which would classify proposed major sewer projects such as the Thames tunnel as nationally significant infrastructure projects (NSIPs). We are currently analysing responses. It will then undergo parliamentary scrutiny and an affirmative approval process. Following such approval, I would anticipate that a Section 14 Order could come into effect in the spring of 2012.
We have revised the draft waste water national policy statement in the light of responses to the public consultation and recommendations from the EFRA Committee. The NPS is to be used by the Infrastructure Planning Commission, or its successor, to guide its examination of development consent applications for waste water projects of national significance. We anticipate that the NPS will be laid before Parliament for approval later this year.
I am very conscious of the impact construction of the tunnel will have on local communities. Thames Water completed their first phase of consultation on the preferred route earlier this year and have amended some of their proposals in response. Tomorrow they launch the phase 2 consultation, which will be further opportunity for people to let their views be known. This consultation is with a view to submitting a planning application to the Infrastructure Planning Commission (or its successor body) in autumn 2012 and construction starting by 2016.
The initial time line for completion of the tunnel was 2020. However, as the parties have worked through the issues relating to planning, financing, procurement and regulation of the project it has become clear while construction time remains at six years, the 2020 date is unrealistic. On the basis of what is now known, and depending on the choices made as we go forward, completion of the construction of the tunnel is now expected to be between 2022 and 2023. We continue with Thames Water to explore how we can minimise the overall time scale.
I propose to provide a further update when we have agreed a delivery route with Thames Water and before they apply for development consent in the second half of 2012.
UK Forestry Standard
(13 years, 1 month ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)
I informed the House in February, Official Report, column 791W, that I expected the revised edition of the UK Forestry Standard to be published later this year.
I am delighted to say that we have published the new Standard and its suite of supporting guidelines today. Copies are available on the Forestry Commission’s website at: www.forestry.gov.uk/ukfs.
The documents, prepared by the Forestry Commission and Northern Ireland Forest Service, set out how we must manage our forests in a truly sustainable way. They form the practice code for forest management and detail the conditions that must be met when felling trees, carrying out woodland operations, and receiving grants. They apply to all woodland, irrespective of who owns or manages it.
The Standard ensures that international agreements and conventions on areas such as sustainable forest management, climate change, biodiversity and the protection of water resources are robustly applied here in the UK.
For forest managers, the new Standard encapsulates all the various requirements of sustainable forest management and spells out what they mean in practice. For the first time it includes principles of forest management for carbon benefits, which is a UK Government carbon plan commitment. The UKFS also provides the basis for the new woodland carbon code that gives assurance that woodland projects for carbon capture provide the benefits claimed for them.
For many years the UK has been at the forefront of international moves to protect the world’s forests. The new Standard provides an excellent and up-to-date example of our approach. It is most appropriate that we are doing this in international year of forests.
The Standard will help us strike that vital balance between the economic, social and environmental benefits of forestry. To that end, I am pleased to note the forestry regulation taskforce’s support of the Standard as the cornerstone of long-term sustainable forest management.
I want to thank all the forestry and environmental organisations who have worked with us to bring the Standard together.
Kimberley Process (Zimbabwe Diamonds)
(13 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr Henry Bellingham)
On 1 November the Kimberley Process (KP) plenary meeting in Kinshasa reached an agreement to ensure credible and effective safeguards and monitoring of the diamond mines in the Marange region of Zimbabwe. A copy of the agreement has been placed in the Library of the House.
Following almost a year of intensive discussions amongst KP participants, a robust but fair agreement has been reached which only allows exports from mining sites in the Marange region deemed to be compliant with KP standards. Exports from other mining sites can only take place once those sites are judged to be KP compliant by independent experts. This agreement establishes a credible independent monitoring mechanism, including a role for civil society and independent experts, to ensure ongoing compliance with KP standards and to prevent non-compliant Marange diamonds from being traded under the KP. The agreement also commits Zimbabwe to take action to bring all mining in Marange into compliance with the KP.
Allowing rough diamond exports only from KP-compliant mines in Marange ensures that the credibility of the KP is maintained and guards against the risk of non-compliant mines exporting to international markets because of the lack of any agreement. In addition it means that there is some transparency of revenue flows. This will help the Zimbabwean Finance Ministry to collect tax and royalties owed to it, and thereby ensure the financial benefits of the diamond sales can reach the Zimbabwean people.
We will continue to monitor the situation closely and respond appropriately to any future developments. As the agreement makes clear, the KP will constantly review progress towards KP compliance in the Marange region. We urge Zimbabwe to make every effort to overcome the outstanding shortcomings so that next year the KP plenary will be in a position to declare Marange fully compliant with KP minimum standards. If this is not the case, the KP plenary will have to discuss whether to renew the present agreement or alternatively what other measures are appropriate to address any remaining obstacles.
The Kimberley Process remains an important conflict prevention mechanism. This agreement upholds the credibility of the KP and signals the determination of all Kimberley Process participants, including Zimbabwe, to work together to uphold Kimberley Process principles and standards in the future.
Terrorism Legislation (Anderson Report)
(13 years, 1 month ago)
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The Secretary of State for the Home Department (Mrs Theresa May)
I am pleased to announce the publication today of the Government’s response to Mr David Anderson QC’s report on the operation in 2010 of the Terrorism Act 2000 and part 1 of the Terrorism Act 2006, which will be laid before the House today.
I am grateful to David Anderson QC for his detailed report and I have considered his recommendations fully. Following consultation within my Department and with other relevant Departments and agencies, I am pleased to lay my response to David Anderson’s recommendations before the House today. Copies will be available in the Vote Office.
Justice and Home Affairs Post-Council Statement
(13 years, 1 month ago)
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The Minister for Immigration (Damian Green)
The Justice and Home Affairs Council was held on the 27 and 28 October in Luxembourg. My right hon. Friend, the Secretary of State for Justice, the Scottish Lord Advocate Frank Mulholland and I attended on behalf of the United Kingdom. The following items were discussed:
The Council began in Mixed Committee with Norway, Iceland, Liechtenstein and Switzerland (non-EU Schengen states). The Commission updated on the implementation of the second generation Schengen Information System (SIS II), noting that progress remained in line with the previously agreed Council conclusions. The central system was still expected to go live in the first quarter of 2013. The second milestone test was planned for the second quarter of 2012. The Commission undertook to keep the Council informed.
Next the Commission congratulated member states on the successful rollout of the visa information system (VIS) to north Africa. The UK is not bound by the VIS regulation because it does not participate in the common visa element of the Schengen acquis.
The presidency, supported by the Commission, stressed the importance to local populations of the proposal to extend the local border traffic regulation to the whole of the Kaliningrad region and corresponding Polish oblasts. Insisting it would not create a precedent, they proposed the Council and Commission submit a declaration to the proposal reiterating this. The presidency concluded that a first reading deal could be reached with the European Parliament, whose Committee had accepted the proposal without amendments. The UK is not bound by this legislative proposal since it builds on that part of Schengen in which we do not participate.
The Commission presented its Communication on smart borders, which addressed the possibility of an entry-exit system (EES) and registered traveller programme (RTP) for the Schengen area. Before bringing out legislative proposals next year, they wished to secure the clear support of both member states and the European Parliament on the best way forward. The smart borders package would require time and investment and there were important data protection issues to address. Member states expressed broad support for the communication and highlighted the potential benefits for enhancing internal security, combating organised crime, identifying visa overstayers and reducing border crossing time for regular travellers. However, given the required investment. member states called for a thorough cost-benefit analysis before proceeding. The UK is excluded from these arrangements measures since it builds on that part of Schengen in which we do not participate.
Under AOB, France raised the increasing problem of itinerant crime and called for a debate at the next JHA Council.
The EMCDDA (European Monitoring Centre For Drugs And Drug Addiction) presented the findings from its 2011 annual report on state of the drug problems in Europe, which will be published on the 15 November. Heroin and opiates remained at the heart of the problem. Commissioner Malmström welcomed the report and said that there was a need for further EU action in this area. Commissioner Reding then presented the Commission’s new communication on “Towards a stronger European response to drugs”. It offered a future legislative package and practical action to build a strong framework for combating illicit drugs. The Council also agreed the synthetic drugs pact. The UK welcomed the EMCDDA report and the Commission’s communication. The UK also endorsed the views of delegations who had called for a civil approach to the confiscation of criminal assets and welcomed the presidency’s focus on synthetic drugs, and in particular on precursors used to tackle these drugs.
The Commission provided an update on the negotiations with the United States regarding an EU-US agreement on data protection.
During a discussion on passenger name records (PNR) Commissioner Malmström noted that the European Parliament would vote on the EU-Australia agreement that day. She also reported that discussions with the US had reached an advanced stage, and a political understanding had been reached. Retention periods would be 15 years for terrorism and 10 years for other serious crime, where the latter would apply to crimes punishable by three years under US law. The “push” method would be the norm, but “pull” could be used in very limited cases. There would also be a reference to the EU-US data protection negotiations. The Commission added that on third country transfer they were considering a solution similar to the Australia agreement. The agreement now needed to be transformed into a legal text. They hoped to finalise this in the coming weeks. The UK supported the idea of an EU-US agreement, and was pleased that a political agreement had almost been reached. The UK supported the Commission’s view that security and data protection could both be improved at the same time. PNR data were an absolutely vital tool in the fight against terrorism and organised crime, and we should continue to co-operate with the US for the security of all our citizens.
The presidency invited Greece to update Ministers on progress with the Greek action plan (GAP) on asylum and migration management, on which there were some notable improvements: a reduction in the asylum backlog from 46,000 to 33,000; a rise to an average of 12% in international protection recognition rates and ongoing recruitment of operational staff. The European Asylum Support Office (EASO) referred to their operating plan for Greece, and provided an update on deployment of asylum support teams made up of experts from member states. Frontex gave a brief update on the areas in which they were also supporting the GAP. The conditions in detention centres were very troubling, and the Commission urged the Greek authorities to address the issues at the Greek—Turkish border as a priority. The Commission highlighted that the economic situation in Greece was well understood by member states, but the EU had made significant funding resources available; these resources had to be used. Others agreed. Finally, the Commission stated that co-operation with Turkey was vital, and that agreement with Turkey on readmission would not be forthcoming without a deal on visas and mobility. Greece said that EASO and Frontex, as well as member states, had provided pivotal support but noted that this was not a long term solution and Greece was dedicated to strengthening its own resources.
Discussions on the Greek action plan continued during a closed lunchtime session on wider issues of illegal migration and the impact of visa liberalisation, during which the UK stressed the importance of strong external borders, supporting those who had raised concerns about migration flows from the south-east and across the Mediterranean and about trafficking. A clear focus on upstream migration work in our dialogue with neighbouring regions and countries of origin was essential, while EU action, under the global approach to migration, needed to tackle the key drivers, namely economic instability and political insecurity. The UK also shared the concerns of others about the activities of organised criminal groups in facilitating immigration crime, noting that there were strong links here to the abuse of free movement rights. Forged documents were used to get around the rules and gain access to rights they would otherwise not be entitled to. It was wrong that criminals profited from free movement, while those who upheld its responsibilities suffered.
The presidency summarised the state of play on the asylum package: negotiations on procedures and reception conditions directives continued steadily at expert level; The European Parliament voted for adoption on the qualification directive, solutions for moving forward with Eurodac continued to be scoped; and an early warning and preparedness system continued to develop as a solution to unblocking the negotiations on Dublin. The latter proposal would be discussed in more detail at the forthcoming Strategic Committee on Immigration, Frontiers and Asylum (SCIFA). The Commission congratulated the presidency on the headway being made on the package, and encouraged the Council to continue to look for solutions, while remaining mindful of the views of the European Parliament.
The presidency noted political agreement had been reached on the outstanding issue of correlation tables relating to both the single permit directive and qualifications directive. The UK had not opted into either of these instruments.
The Commission presented their communication on integration of migrants, highlighting the importance of integration and recognising that responsibility for integration rested at a local level. The presidency noted that Council conclusions would be prepared on this issue for the December JHA Council, with work continuing under future presidencies. Cyprus said this would be a priority during its 2012 presidency and informed Ministers that they would organise a conference on integration.
The Commission introduced its communication on co-operation in the area of the JHA within the Eastern Partnership (EaP). Member states noted that clear actions should be in the roadmap which was being developed, co-operation between eastern partners and Eurojust should be further encouraged and the principle of the rule of law was vital to the Eastern Partnership. The presidency announced that on 4 November there would be a conference on the Prague process, which would take forward the Eastern Partnership.
Spain noted that ETA had ceased its campaign of violence. They thanked the EU for its support and noted that the UK had also helped. The Commission was keen to hear views on a possible EU terrorism finance tracking system (TFTS). The main question was whether we needed such a system. The EU counter-terrorism co-ordinator and Europol supported such a system, but it was noted that the EP was divided. Member states noted the need to ensure data protection given the current transfer of bulk data under the EU-US agreement, but expressed concerns about whether the proposal would be cost effective. In addition to the Commissions’ proposals, one delegation wondered if the solution was rather to improve the EU-US agreement. The UK asked for more detail about the added value of the proposals and what the options and costs would look like. The Commission agreed to undertake an impact assessment and consult further with the EP before returning to the Council with proposals.
The justice day began with the Commission introducing its recently published proposal for a directive on minimum criminal offences and penalties for insider dealing and market manipulation. The aim of the proposal is to secure full implementation of legislation on financial services and protection for the financial markets. This directive accompanies a wider Commission proposal for a new regulation, introduced to create a stronger EU framework for tackling insider dealing and market manipulation. The UK noted the presentation.
Next the presidency provided an update on discussions in the Council on the directive on the right of access to a lawyer in criminal proceedings and on the right to communicate upon arrest. This is the third measure on the roadmap to strengthen criminal procedural rights. The UK has not opted into this directive, at the initial stage of the negotiations, because the Government are of the view that the directive as published by the Commission is not proportionate and could have an adverse effect on our ability to investigate and prosecute offences effectively. The presidency reported that progress had been made on many aspects of the instrument, however further discussions are required in the working group in relation to the scope of the instrument and on the admissibility of evidence obtained in breach of or derogation from the rights in the directive. There was no discussion.
The presidency then held a discussion on the draft directive on establishing minimum standards on the rights, support and protection of victims of crime. The UK and other member states supported the presidency’s approach on clarifying the scope of victims’ rights in relation to the role of victims in criminal proceedings and that the vulnerability of victims should be determined on a case by case basis. The presidency expressed the hope that a general approach could be agreed at the December JPIA Council.
The presidency then provided an update on the draft directive on combating sexual abuse and exploitation of children and child pornography. This directive seeks to ensure that criminal activities to sexually exploit children, including misuse of the internet, are more fully covered than in the existing framework decision (2004). They reported that on 27 October the European Parliament had adopted the text agreed by the Council, following agreement between the Council, the European Parliament and the Commission. The UK noted the update.
The presidency and Commission introduced the proposal on an EU common sales law. The Commission confirmed it would be an optional instrument sitting alongside national law that did not harmonise national systems. This was also discussed during the ministerial lunch, the presidency concluded they would analyse the proposal further.
During any other business the presidency informed the Council on the outcomes of the EU-Western Balkans ministerial forum held in Ohrid on 3-4 October and the EU-Russia Ministerial Permanent Partnership Council held in Warsaw on 10-11 October.
The Council also adopted a report on the application of the resolution which establishes the network for legislative cooperation between the ministries of justice of the European Union. The objective of the network is to promote better understanding of the laws of other member states, thus enhancing mutual trust and promoting the application of the principle of mutual recognition.
Police and Crime Commissioners Salaries
(13 years, 1 month ago)
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The Secretary of State for the Home Department (Mrs Theresa May)
I have received the Senior Salaries Review Body report and recommendations on police and crime commissioners pay.
On 20 January 2011 I wrote to the chair of the Senior Salaries Review Body requesting that he consider the role and functions of police and crime commissioners and make an independent recommendation to me as to what the SSRB considers to be a suitable salary, or salary range, for this new office. The report, which today I am placing in the House Library and is available to the general public through the Senior Salary Review Body’s website, sets out clearly the important and powerful role that PCCs will play in delivering policing services from November next year when they will be first elected.
I am grateful for the work undertaken by the SSRB and will reflect on its advice and recommendations. The SSRB has recommended a salary scale for PCCs of £65,000 to £100,000 with each police force area within England and Wales being weighted against this scale. I intend to give this and the other recommendations thorough consideration and report my final decision in due course and in good time to allow potential candidates to be clear on what they can expect their salary to be.
PCCs are established in the Police Reform and Social Responsibility Act 2011 within each force area as powerful individuals, and charged with responsibility for the totality of policing within that area; each force area faces a huge range of policing and social challenges which vary from force area to force area and each PCC will seek to ensure that these challenges are met in the interests of the our local communities.
PCCs will need to be highly motivated, determined to deliver the best for the communities that they serve, and above all be focused on making our communities safe. How PCCs work with and interact with chief constables, police and crime panels and local partners will be crucial to achieving success.
The election of police and crime commissioners will further strengthen the relationship between the public and the police, and allow us to replace bureaucratic accountability to Whitehall with democratic accountability to local communities. As a result the police will have greater freedom and discretion to fight crime as they see fit within a rebalanced and strengthened governance structure. I am keen to ensure that suitable and proportionate remuneration is achieved for such a challenging and rewarding role.
St Helena
(13 years, 1 month ago)
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The Secretary of State for International Development (Mr Andrew Mitchell)
In my statement of 22 July 2010 I confirmed the Government’s willingness to finance an airport for St Helena on condition that:
an acceptable contract price is achieved;
the risk of cost and time overruns after the award of the contract is addressed;
the airport design using engineered material arresting system (EMAS) is approved by air safety support international; and
the St Helena Government undertake to implement the reforms needed to open the island’s economy to inward investment and increased tourism.
I am pleased to announce that these conditions have now been met. A design build and operate (DBO) contract for the St Helena airport will be signed with Basil Read (Pty) Ltd today.
The airport will end five centuries of isolation for this UK overseas territory, which to date has been accessible only by sea. It will provide its British population with the means to build a future which, in the long term, is expected to lead to financial self-sustainability and an end to UK budgetary aid. This vision of a more vibrant, self-sufficient territory would not be possible if we were to provide a replacement ship. Continued sea access as the only way to get to and from St Helena would consign the island to a bleak future of further emigration and economic decline.
The contract will be in the amount of £201.5 million for the design and construction of the airport, with an additional amount of up to £10 million in shared risk contingency, and £35.1 million for 10 years of operation. We are confident that both the negotiated price and the allocation of risk represent value for money for the British taxpayer. In the long run. and including the investment cost, the decision to proceed with the airport is expected to save money for the UK taxpayer.
The contract represents a better deal for the taxpayer than that negotiated in 2008, a saving of more than 20% in real terms, taking into account inflation and the value of the pound.
Historic Vehicles (MOT Exemption)
(13 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
The Department for Transport has today published a consultation on a proposal to exempt vehicles of historic interest (vehicles manufactured prior to 1 January 1960) in Great Britain (GB) from the statutory MOT test, as allowed under article 4(2) of the EU Directive 2009/40/EC.
The EU directive of the European Parliament and of the Council, Chapter II, Exceptions, Article 4 states:
“Member States may, after consulting the Commission, exclude from the scope of this Directive, or subject to special provisions, certain vehicles operated or used in exceptional conditions and vehicles which are never, or hardly ever, used on public highways, including vehicles of historic interest which were manufactured before 1 January 1960 or which are temporarily withdrawn from circulation. Member States may, after consulting the Commission, set their own testing standards for vehicles considered to be of historic interest.'”
Sections 45 to 48 of the Road Traffic Act 1988 provide the legislative basis for MOT testing. The purpose of the MOT test is to ensure that cars, other light vehicles (including some light goods vehicles), private buses and motorcycles over a prescribed age are checked at least once a year to see that they comply with key roadworthiness and environmental requirements in the Road Vehicle Construction and Use Regulations 1986 and the Road Vehicle Lighting Regulations 1989 (both as amended).
While it is important to ensure that vehicles are safe to use on the highway, it is also important to ensure that regulations imposed are not excessive. Currently, both the age and the categories of vehicles requiring the MOT test in GB go further than the EU directive on roadworthiness test 2009/40/EC, which only subjects post-1960 registered vehicles to a compulsory roadworthiness test and does not require motorcycles of any age to do a statutory roadworthiness test.
The Government believe that the proposed exemption will reduce regulatory burden on owners of historic vehicles, meet its reducing regulation agenda and the desire to remove unnecessary burdens. It will also bring the age of vehicles requiring the statutory MOT test in line with the Goods Vehicles (Plating and Testing) Regulations 1988, which already exempts unladen pre-1960 manufactured heavy goods vehicles from the roadworthiness test.
Two thirds of pre-1960 licensed vehicles (vehicles manufactured prior to 1 January 1960) are driven less than 500 miles each year. This is significantly less than the 9,000 miles driven on average by all licensed vehicles.
While the pre-1960 licensed vehicles made up about 0.6% of the approximately 35.2 million licensed vehicles in GB in 2010, they were involved in just 0.03% of road casualties and accidents. The pre-1960 licensed vehicles are largely well maintained by their owners. The initial MOT test failure rate for these vehicles in 2009 was less than 10%, while the initial MOT test failure rate for post-1960 licensed vehicles was over 30%.
The purpose of the consultation is to invite views on proposals to exempt vehicles of historic interest from the statutory MOT test in GB. In addition to no change, the consultation offers three options based on vehicle manufactured date—that is, it seeks respondents’ views on whether the Government should exempt from the statutory MOT test pre-1960, pre-1945 or pre-1920 manufactured vehicles.
The consultation also seeks respondents’ views (in all three options) on whether all vehicle categories and vehicles used for commercial purposes should be included in the exemption review.
The consultation will run until 26 January 2012. Copies of the consultation document have been placed on the Library of the House. Further copies are available on the DFT website at: www.dft.gov.uk/consultations/dft-2011-27. Depending on comments received and the Department’s response, amendments may be made to regulations.
Personal Independence Payment
(13 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
Personal independence payment will replace disability living allowance for people of working age from April 2013. The coalition Government are committed to supporting disabled people to lead independent lives and exercise choice and control. Personal independence payment will focus support to those individuals experiencing the greatest barriers to living an independent life, while ensuring the benefit remains sustainable.
Parliamentary approval for resource and capital of £0.65 billion for this new service has been sought in the main estimate 2011-12 for the Department for Work and Pensions. Pending approval of the Welfare Reform Bill, urgent expenditure estimated at £5,014,000 will be met by repayable cash advances from the Contingencies Fund. The advance will be repaid at the earliest opportunity following Royal Assent to the Welfare Reform Bill.
Universal Credit
(13 years, 1 month ago)
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The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
The Department for Work and Pensions has obtained approval for an advance from the contingencies fund of £46 million to allow for the continued development of IT for universal credit before Royal Assent. This is a second advance; an earlier advance of £18 million was approved for the same purpose in April.
Parliamentary approval for resource and capital of £80 million for this new service has been sought in the main estimate 2011-12 for the Department of Work and Pensions. Pending approval of the Welfare Reform Bill, urgent expenditure estimated at £46 million will be met by repayable cash advances from the Contingencies Fund.
The universal credit programme has successfully completed the second stage of IT delivery on time. This is a major achievement given the demanding timetable and relatively new “agile” way of working. The second advance will allow the programme to continue to work to its current design and development timetable and enable continuity of third-party supplier engagement. This will support an earlier move to the new simplified benefit than could be achieved without it and achieve better value for money by enabling a more rapid take-up of online claims with lower operational delivery costs.
The amount covered by the advance is part of the proposed £2 billion investment in universal credit agreed at the time of the spending review. The advance will be repaid at the earliest opportunity following Royal Assent.
Grand Committee
(13 years, 1 month ago)
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Arrangement of Business
(13 years, 1 month ago)
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The Deputy Chairman of Committees (Lord Brougham and Vaux)
Good afternoon, my Lords. Welcome to the 10th day of the Committee on the Welfare Reform Bill. I have been asked to remind noble Lords to speak up a bit because the microphones are not what they are in the Moses Room. Please do not touch them.
Welfare Reform Bill
(13 years, 1 month ago)
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“( ) In the case of joint claimants, regulations under this paragraph must specify that a particular amount of the earned income of a second earner should be disregarded.”
Baroness Lister of Burtersett
My Lords, the purpose of the amendment is write into the Bill a requirement to provide an earnings disregard for second earners, the majority of whom are women. The Minister will no doubt say that this is not necessary because, as the Minister of State confirmed in the other place and the Minister here confirmed at our previous sitting, the Bill’s regulation-making powers enable this or a future Government to introduce a disregard for second earners at a future date, if they so wish. I welcome that flexibility.
Nevertheless, there are important issues of principle here that need to be debated—not all of which were covered in our initial skirmish in the previous sitting. I once again apologise for the length of my remarks but there are important points to be made. However, the Minister can relax because I will not this time quote any e-mails from Conservative supporters.
The treatment of second earners is an important question that has caused concern among anti-poverty organisations such as Save the Children and women’s organisations such as the Women’s Budget Group that thinks that this is one of the most important issues in the Bill that affect women. I am grateful to members of the group, of which I am a member, for helping me to think through some of these issues. The treatment of second earners also threatens to undermine the Government’s claims to be substantially improving work incentives. The Government have sent out rather mixed messages on incentives for second earners and we would welcome a clear statement of the position. I hope that having listened to the arguments the Minister might go a little further than what he said in our previous sitting.
It is true that second earners are now the only group whose earnings will be subject to the taper from the first pound when the disregard for the couple has been exhausted by the first earner. In a means-tested system based on the joint resources of a couple, some disincentive for second earners is inevitable, and I accept that this is a long-standing problem and is one reason why some of us would like there to be less reliance on means-testing. However, the problem is being made worse under universal credit, and the judicious use of disregards could mitigate it.
A second earner’s disregard would enhance the architecture of universal credit by addressing the increased disincentive that most—not all, I acknowledge—second earners within the universal credit system will face. This is primarily because of the higher taper rate for those whose household income disqualifies them from housing benefit and council tax benefit under the present system. On top of that, those with childcare costs who are working more than 16 hours a week or more will, as a result of the reduction in the limit from 80 per cent to 70 per cent, have to pay more towards their childcare costs than previously. The reduction is already in force, although I welcome the fact that those working fewer than 16 hours a week will benefit from the extension of help with childcare costs. Because even small changes can tilt the balance of advantage of working for second earners, the introduction of a separate disregard for them could prove to be a cost-effective innovation.
Policy briefing note 5 analyses participation tax rates—or PTRs, which measure the incentive to enter paid work—and marginal deduction rates, or MDRs, which calculate how much of a small increase in earnings is lost through a combination of benefit withdrawal and taxation, and therefore measure the incentive to increase earnings once in paid work. In both cases, the lower the rate the higher the incentive. The briefing note shows that around 900,000 or three-quarters of potential second earners whose householders qualify for means-tested support under universal credit will face a lower incentive to take employment than under the current system, with an increase in their average PTR from 35 per cent to 65 per cent.
It appears that all the nearly 1.5 million existing second earners will see an increase in their PTR from 30 per cent to 45 per cent on average. The note concedes that this may reduce some existing second earners’ incentive to work. Where this leads to a withdrawal from the labour market will presumably increase the amount paid out under universal credit. With regard to incentives to earn more when in work, approximately 300,000, or three-quarters, will face an increase in their MDR and, therefore, reduced incentives. According to a Written Answer in the other place, five out of six of these have children.
These calculations, and the worked example we have been given, take no account of childcare costs, although we are promised that these will be factored in at some future point—I trust before Report. Will the new calculations take account of the reduction from 80 per cent to 70 per cent on the debit side, as well as the extension to parents doing mini-jobs on the credit side? I suspect not, because this is one of the cuts already implemented, which can conveniently be ignored in impact statements.
Fortunately my colleague Donald Hirsch, of the Centre for Research in Social Policy, has done some calculations for the Resolution Foundation and Gingerbread which take account of the cut already made in support for childcare, as well as the policy announced recently. He has kindly allowed me to use them, even though I do not believe that they are yet in the public domain. One example illustrates well the nature of the disincentives faced by some second earners. He calls it the “hours trap”. He gives the example of a parent with a low-paid partner. She takes a job at the minimum wage of £6.08 an hour for 16 hours a week to supplement the family income. In 2010, of the £97.28 she earned, she retained £46.19 after taking account of deductions and net childcare costs of £11.20. This represented a withdrawal rate of 53 per cent. Under universal credit, the much faster withdrawal of support for second earners, together with the recent cut in childcare support, means that much more of the extra income will be lost—she will retain only £17.25 of the £97.28, i.e. an 82 per cent withdrawal rate.
Admittedly, for those working fewer than 16 hours a week, an 82 per cent withdrawal rate is an improvement on the current situation, because of the extension of help with childcare—but, as Donald Hirsch observes, it is not an improvement that is likely to get many second earners out to work.
There are three main reasons why I believe we should do what we can to maximise work incentives for second earners. The first concerns the Government’s own anti-child-poverty strategy. It is clear from the statistics that two-earner families with children are much less likely to be in poverty than single-earner families. Without a separate disregard, it will be very difficult for second earnings to fulfil their potential as a route out of poverty. The latest analysis of the official statistics by the Institute for Fiscal Studies shows that the child poverty rate after housing costs drops from 18.9 per cent in couples with one full-time worker to only 5.1 per cent in couples where there is also a part-time earner, and 2.1 per cent where there is a second full-time earner. Moreover, if we take a dynamic perspective, as Ministers encourage us to do, it underlines the potentially protective function that second earners can play in two main ways. If the first earner—usually, still, a man—loses his job, a partner’s earnings can help the household cope while he looks for another job. When the mother is in paid work when living with a partner, she is better equipped to remain in the labour market should that relationship break down and should she then form a lone-parent family household—that family is then less likely to be in poverty. She is also better equipped to respond positively to the extension of conditionality to lone parents with young children. A second earner disregard could thus help achieve the Government’s aim of reducing so-called welfare dependency among both two-parent and lone-parent families, because ultimately it offers a potential route out of universal credit as well as out of poverty.
Secondly, there is the question of implications for shared parenting, a Government goal articulated in their consultation on modern workplaces, which I very much welcome, even if its recommendations on parental leave look to be under threat according to recent newspaper reports. The equality impact assessment acknowledges that,
“it is possible that in some families, second earners may choose to reduce or rebalance their hours or leave work”.
However, it reassures us:
“In these cases, the improved ability of the main earner to support his or her family will increase the options available for families to strike their preferred work/life balance”.
This, it suggests, could be a “dynamic result” that improves family life.
It appears that what exponents of nudge like to call the architecture of choice is being tilted towards a more traditional male-breadwinner model, which may not necessarily reflect the preferred work-life balance of both members of a couple and could weaken women’s labour market positions. According to the equality impact assessment, this traditional male-breadwinner model apparently improves family life. Indeed, at a Social Security Advisory Committee stakeholder event, held at around this time last year, I questioned the Secretary of State about this. He answered in terms that suggested he regarded a return to such a model as a good thing, although I accept that this may not be the Minister’s view.
Moreover, I question the impact assessment’s assertion, made in this context, that universal credit policy is gender-neutral. It states:
“Where men and women are in the same circumstances they are treated equally under Universal Credit”.
We should hope so but in a gender-unequal world men and women are often not in the same circumstances in either the family or the labour market, so the effects of denying second earners a disregard are not gender-neutral. Therefore, I am not convinced that the Government are fulfilling their legal duty to promote gender equality here. Perhaps the Minister will tell us what advice the department has taken on this.
Thirdly, the Government nevertheless seem quite sanguine about the position of second earners as they consider any such risk of decreased work incentives to be justified. The Government are concerned only with incentives at the level of the household, rather than the individual. Indeed, they tend to conflate the two. In an Oral Answer in the other place, the Secretary of State stated that,
“universal credit will provide much better incentives for the first earner, giving a greater choice to the household about how it wishes to spread its income”.—[Official Report, Commons, 28/3/11; col. 2.]
This, together with the quotation that I read from the equality impact assessment is an example of what some economists called a unitary household perspective. It ignores the fact that couples are made up of two people and that the autonomy of each is important. Improving incentives for a first earner, even if on behalf of the couple, does not compensate for worsening them for a second. The choice of one partner is being enhanced at the expense of the other. In an earlier sitting, the Minister observed astutely:
“Effective choice exists only when the balance of power is equal between tenants and landlords”.—[Official Report, 20/10/11; col. GC 169.]
The same is true within those households where an imbalance of power exists, often reflecting the economic power of each partner.
A study of BME maternal poverty conducted for Oxfam found that the women interviewed were keen to take paid work as it is the best way to improve their household finances. However, in addition to the usual barriers, such as childcare, some of them faced their husbands’ attitudes. For the women who were in work, their jobs were an important source of self-esteem and independence, and they often had greater access to household resources than those without paid work. Although more traditional attitudes to gender roles might be more common in some BME households, they are not confined to them.
Consider the situation of a couple where the man is in low-paid work and receiving universal credit. He prefers his partner to be at home, looking after the house, the children and him. She would like a part-time job, perhaps to achieve a modicum of financial autonomy, to enjoy the sociality of paid work or to improve the household finances. Her bargaining position is not strong if taking paid work will reduce his universal credit and he can point out that her earnings will not bring much extra money into the household. If she could say that she and the household can keep a chunk of her earnings before they are affected by the taper, it would increase her bargaining power and make her choice to take paid work more effective, following the logic of the Minister’s own argument about choice and power imbalances.
Finally, there appears to be something of a tension between the Government’s apparent lack of concern about the reduced incentives faced by second earners and the treatment of this group in the new conditionality rules, which we have discussed. In particular, the in-work conditionality rules will require a couple to earn twice as much between them as a single person in order to escape sanctions. Yet if the first earner is unable to earn enough to do so alone, a second earner’s wages could be the most viable means of complying.
In short, whether looking at it from the point of view of the universal credit architecture, the Government’s child poverty strategy and its ambitions for shared parenting, or of financial autonomy for women and effective exercise of choice for them with regard to paid work, a second earner disregard represents a cost-effective enhancement to universal credit which, arguably, could eventually pay for itself. In a previous sitting, the Minister gave some costings for a second earner disregard. Are these gross or net costings? In other words, do they take account of the increased tax and national insurance and reduced universal credit payments that could flow from more second earners moving into paid work?
The Minister also said that this is a matter not of principle, but affordability. I hope that I have convinced him and the Committee that there are important principles at stake and that he will therefore go further than before in accepting the case that has been made in principle and assure the Committee that he would look favourably on such a disregard as and when the resources are available, taking into account the point about net and gross costs. I beg to move.
Baroness Howe of Idlicote
My Lords, I congratulate the noble Baroness on the detailed and effective way in which she has presented the case for her amendment. I spoke firmly on the equality issue at Second Reading. I am most concerned about the extent to which the majority of second earners are women. Their very delicate position may be fine if they have a fully understanding husband, but we know that some families face situations that are far removed from this. I understand the point about mutual parenting, but if the Government put more emphasis on companies providing enough flexible working for both sexes, this situation would be much easier for families. My main concern is the vulnerability of the woman at home who, as we have heard, does not have a very good argument if she is not going to earn, as a result of her extra hours, enough to make any difference at all to the joint income. I therefore support what has been said.
Baroness Hayter of Kentish Town
My Lords, this amendment seeks to tackle the introduction, under UC, of a poor work incentive for second earners who, as the noble Baroness, Lady Howe, has said, are mostly women. As my noble friend Lady Lister said, 300,000 second earners will see increased marginal deduction rates as opposed to only one-third of those who will see reduced MDRs. The policy to make work pay does not appear to extend, therefore, to a third of these affected second earners. According to the impact assessment:
“It is possible that in some families, second earners may choose to reduce or rebalance their hours or to leave work. In these cases, the improved ability of the main earner to support his or her family will increase options available for families to strike their preferred work/life balance”.
As my noble friend Lady Lister has said, it is not clear how this will improve options for families who prefer to have a more equal working relationship, where both partners combine work and child rearing. It also seems to be in conflict with other bits of coalition policy, such as the BIS modern workplace consultation, which sets out options for families to share parental leave more evenly between men and women. Perhaps, in responding, the Minister can let us know what discussions he has had with BIS about whether the incentives within universal credit support the BIS policy.
The reduced incentives for second earners to work come on the heels of the April cuts in childcare and therefore, as has been said, further reduce the incentive for anyone with a child to take a job, not to mention other little things such as cuts to the baby element of the child tax credit, the health in pregnancy grant, the Sure Start maternity grant and the freeze in child benefit.
As my noble friend Lady Lister said, the pay of second earners is crucial in keeping families out of poverty. If I may be forgiven for repeating her figures, which I hope I have right, child poverty is at 19 per cent where there is one full-time earner but it drops to 5 per cent with two earners and down to 2 per cent with two full-time earners. Therefore, second earnings are absolutely key to the Government’s objective of reducing joblessness, child poverty, dependence on universal credit and increasing the tax take. I look forward to the Minister’s answer to whether it was the gross cost after taking account of tax take which led to the projected cost of this.
Childcare has already been mentioned and is clearly particularly important in two sorts of families. One is obviously lone-parent families, and the other is where there is a second earner, with both parents tending to be out of the house at certain times. The disincentive to work increases where there are child costs to be met. As has already been said, childcare will cover only 70 per cent of costs, and that leaves 30 per cent to be found from earnings, which is already a high enough take from the second earner’s pay. Therefore, without an earning disregard of their own, the second earner has a very high deduction rate where there are child costs to be met, effectively making the taking of a job financially unviable. Yet, as I have said, second earnings are crucial in keeping households out of poverty. They will be even more important if, as we read today in the Financial Times, there is any truth in the rumour that when times get tough it is the poor whom this Government will seek to make pay. According to these press reports, the Chancellor is looking at cutting further billions from benefits by scrapping inflation-linked uprates, even—this beggars belief—freezing some payments. We read in the same article:
“The Liberal Democrats will oppose anything that suggests the coalition is unfairly passing the burden of deficit reduction on to struggling families”.
We look forward to hearing whether the Minister can say whether the Financial Times is accurate. Perhaps he can also ask those sitting alongside him—maybe they could pass him a note—whether they would like to place on record their opposition to any attempt to pass on any cutbacks to struggling families. They must know that the rich can pay far easier than the poor. Are they going to use their bargaining power, such as it is, in the coalition to protect the very weakest in society?
These amendments are about reducing poverty and increasing the take-up of work, and it would be useful to know on which side the Lib Dem/Tory coalition sits on this. Later today, we shall reach Amendment 75A to Clause 51 standing in the names of the noble Lords, Lord German, Lord Stoneham and Lord Kirkwood, and the noble Baroness, Lady Thomas, which effectively asks for an earnings disregard from the second earner where the first earner is now too ill to work. We very much welcome that amendment, but it would useful to know whether the same principle could be more widely adopted, as this amendment seeks to do.
The Minister may well be forgiven for wanting to reduce the number of working women on this side of the Committee but perhaps he would make it clear that that is not the intention with universal credit by ensuring that second earners really will be better off in work.
Lord Freud
My Lords, I have enjoyed what we are calling the bevy of ladies on the other side. Their intellectual prowess has left me stunned on my heels. Let me go into this amendment, which proposes that we create a disregard for the second earner in a joint claim. This proposal was raised in Amendment 52DB, which we have already debated, so I am going to be reasonably brief.
First, this is not a matter of principle. We acknowledge that it would be desirable to incentivise both members of a couple to work. However, we have limited funding and we have chosen to focus that on creating a strong incentive for at least one member of each couple to work, in order to limit the number of workless households. This is clearly a difficult choice. We have discussed these choices, in response to the noble Baroness, Lady Lister, with other departments on a regular basis, and we are very aware of links to other programmes.
Clearly, this is something that, if we had some money, we could revisit at a future point, but let me give noble Lords the figures. If couples who were both in work were entitled to an additional disregard of £700 a year, for example, the cost would be £240 million.
Baroness Hollis of Heigham
Could the Minister be very detailed in his costings? When he says an additional £750—
Lord Freud
There was a question around that, so I will endeavour to supply all the information I possibly can. A sum of £700 a year in addition would cost £240 million; if the disregard were £1,000 a year, the cost would be £350 million. We simply do not have the money in our present envelope. There is no real difference between gross and net in those figures because they are below the personal tax threshold, so there is no tax effect to set off. We are doing all sums on a non-dynamic basis anyway, so there is not a dynamic effect. From the point of view of the architects of the universal credit, we would have liked to incorporate more dynamic effects, but there are certain other interests in the Government that take a very straightforward view of money.
Let me deal with the other issue—that making the lack of a disregard for second earners makes the universal credit bad for women. That is the underlying argument here and clearly one that would concern us very greatly. But it is clearly not the case. Universal credit has many features that will improve the position of women, most obviously in support for mini-jobs and childcare. We have a duty, as the noble Baroness, Lady Lister, asked, to look at the impacts of policy changes on a range of particular groups, including the impact on men and women, and we are satisfied that our policy here is the right approach and that we can justify the impact. That is why I was able to sign the ECHR statement for this Bill.
Our impact assessments and equality impact assessments show that women in general are more likely to gain than to lose from universal credit, that this is also true for lone parents and couples with children and that lone parents benefit the most in both absolute and relative terms from the likely increase in take-up.
Baroness Hollis of Heigham
My Lords, I deliberately did not follow my noble friend after such a full, strong and powerful speech; however, my name is also on the amendment. I appreciate the dilemma that the Minister is in: there is a cash constraint and he is making policy choices. The last thing I would wish to see is a diminution in the earnings disregard for the first earner in order to vire it across to a second earner because you are trying to see which poor people would be most hurt in that situation. It is a dilemma and I would not wish to go down that road.
The Minister is right to say that under universal credit the position of women improves for the most part. However, the position of partnered women does not. The distinction my noble friend was drawing was about the situation of partnered women, not women overall. All the moves between in-work and out-of-work benefits, the 16 hours and the extra disregards for lone parents are welcomed, but we are now talking about partnered women and much of the noble Lord’s response dealt with questions that we did not raise.
Let me refer the Minister to page 6 of his own document. This is what happens if Bhavna also starts work for 10 hours a week at the national minimum wage of £6 an hour: she brings in an income of just over £60 a week, and the household has a net gain of just over £20 a week. So she earns £60 and the two specific examples given by the Minister show that she has a gain of £20. As my noble friend emphasised repeatedly, this excludes any childcare costs. I have been doing some sums. If her children are not of school age and she is using a child minder at £2.40 an hour per child—which she may well do—and allowing an hour for travel at each end of the 10 hours that she is working part time over the course of two days, I reckon that, out of that £20 gain—her 30 per cent—her childcare costs would take up £19. So she is left with £1, out of which she has to pay her travel costs, let alone extras such as lunches, food at work, different clothes and so on. Some £19 of that £20 could go on the existing childcare costs, leaving £1 for travel—in other words, she would be out of pocket if she worked. That is based on the Minister’s own figures, and that is what concerns us.
My noble friend was surely spot on when she said that to have a second earner in the family is protective of all family forms. This is what matters; it protects the existing family. We know a larger family will still remain below the poverty line on minimum wage unless you have a second earner in play—and it is the second earner who takes a working family out of poverty. It protects the family and it also protects the woman, should anything happen to her in future.
While I accept the fact that the Minister is up against cost ceilings—I certainly do not wish him to stop viring earnings disregards between the two members of the family—it would help the Committee if he was able to give an undertaking that this will be a priority and that any additional resource would be aimed towards readdressing the issue of the earnings disregard for the second earner. Believe me, all the gains that he is offering, in terms of mini-jobs and so on, are going to be wiped out because of the tougher treatment of childcare costs and the fact that, as a result, it will not be worth your working, even though the Government claim it is.
Baroness Sherlock
My Lords, I want to save the Minister getting up twice, as I want to ask him a question on a similar point. I have been trying to wrestle with some of the briefing that has come in on this issue. Can he answer two simple questions? Is it possible for somebody to face MDRs of higher than 100 per cent if they are, for example, a second earner with childcare costs? Secondly, if somebody would actually be worse off in work, would they still be sanctioned for failing to do it?
Lord Beecham
My Lords, may I ask what I hope is a final question? The Minister rightly referred to the fact that there would be no income tax income to the Treasury to offset the cost. However, has the Minister considered the likelihood of much of the income of a second earner being spent in a way which would incur VAT? Is that not a material consideration in terms of what would be offset against the cost?
Baroness Hayter of Kentish Town
Before the Minister stands up, as I think he might like to get everything together, there were two questions posed that he did not respond to. One was whether he had had discussions with BIS. I had also given him the opportunity to refute the story in the Financial Times. I hope he might use this moment to do that.
Lord Freud
My Lords, let me try to pick up some of those points. Picking up the point of the noble Baroness, Lady Hollis, I hope that she is hearing that I am sympathetic to this point. I hope that noble Lords have heard that this is about money. We do not have this money. We have a very sharp choice to make, about whether to reduce workless households or to look after second earners with a disregard. We have taken this decision, and we have also taken a decision, when we do find some more money, to do something about childcare, which is another issue that I know greatly concerns noble Lords.
There are two clear issues when we look to improve this system, as we see dynamic effects coming through which are provable. We had a debate the other day on why we need to test things. Two of the obvious things to test will be second earner disregards and taper. Those are the first two things that everyone in this Room, I think, would like to know about as we get the system under way. Therefore, to the extent to which I am being asked “Will we look at it?”, yes, we will be looking at this. I am not going to make any assurances, because we should find the answers, but that is exactly the kind of question we want to have answered.
I shall take up the points of the noble Baroness, Lady Sherlock, on MDRs. You can freight all kinds of things on to MDRs if you want to, with different costs, and I am sure that you can create a position where the overall costs come up to high MDRs. The simple point that I would like to make is that with the universal credit itself, the MDRs come down.
On whether we will force people to take a job which leaves the household poorer, we made the point when we discussed this that we take these things into account when we set up the obligations of claimants.
Baroness Sherlock
My Lords, I am grateful to the Minister. I hear very clearly his sympathy for this issue. If it is simply a question of money and therefore timing, one of the things he could do, to put everyone’s minds at ease, is to say, “Until we can afford it, we will not force a household to be worse off by forcing them into work or sanctioning them”. He could then review the situation when he found the money down the back of the sofa next time.
Lord Freud
I will not give that kind of assurance to noble Lords. This is clearly—
Lord Freud
Stop teasing me. The noble Lord, Lord Beecham, made the point about VAT; there is clearly a missing element there, and I acknowledge that there is a difference between the gross and the net.
I thought I had answered the point made by the noble Baroness, Lady Hayter, on talking to other departments. Yes, we are talking to BIS. As to the FT story: as you would expect me to say—it is something between, “Pick the normal stuff”, “I do not comment on press articles” and, “It is a matter for the uprating Statement”. Pick any one of those you want. I am not answering the question. [Laughter.]
Baroness Hollis of Heigham
I congratulate the Minister on his nimble footwork; it was very impressive. However, what happens to Bhavna in this situation, where her childcare completely mops up £19 out of her £20 addition to the family earnings?
Lord Freud
In this example, there is a 65 per cent taper. Thereby, extra earnings produce an increased income of about £20. The effect of childcare costs would depend on the amount of the childcare costs. Under our current proposals, the parent is clearly expected to meet 70 per cent of allowable costs, and the state will cover the rest.
Baroness Hollis of Heigham
I understand that. I thought that that was exactly the point I made. The question was regarding the result of that calculation. She earns £60 and adds £20 net after universal credit, and £19 of that will, on any reasonable estimate, go on her share of childcare costs. That is before you take travel costs into account. Why work?
Lord Freud
We are going round in circles. We all know the point that is being made. We all know the reality of the iron triangle. We are wrestling with it. This is what we can afford to do right now. Some people may be caught in such a position and we make the point that some people will have higher MDRs—a lot will not. As we improve the position when we have funding, and have proof of the dynamic benefits that may free up main funding, we will be able to apply them. However, this is the best we can do right now. I would love to do more, but I cannot find any more money.
Baroness Lister of Burtersett
My Lords, I thank noble Lords who have supported the amendment with some helpful additions to the argument. I do not know whether any other noble Lords spotted it, but the Minister asked the “noble Lord” to withdraw the amendment. I do not know if he was making a Freudian slip and trying to reduce the bevy of Baronesses opposite him.
I should like to make a couple of more critical points before I come to a more positive one. I can understand the Minister’s frustrations that there are other parts of government that will not allow the department to do its calculations on a dynamic basis, but I was a bit disappointed that the department’s thinking was not dynamic in relation to this matter and it was not prepared to acknowledge that there could actually be positive dynamic effects through a second-earner disregard—whether they be anti-poverty or paid work effects, and all the things that the department is in favour of. I do not know whether these are just the noble Lord’s own arguments or those that are simply in the brief that comes from the various documents we have been given, but it seemed to me that there was still the unitary-household approach and an inability to understand that while couples are couples, they are also individuals within couples. I ask the noble Lord to go away and think about that a bit more and about the importance of individual autonomy within the context of coupledom. I would have been even happier if he had been able to go one step further and commit himself on the second-earner disregard in the longer term.
We have, however, made progress today. What the Minister has said takes us beyond some of the other things which have been said. I now take it as the official departmental view that it will, in the fullness of time, consider improving incentives for second earners, either through a second disregard or through the taper, as and when resources permit. I therefore beg leave to withdraw the amendment.
Baroness Drake
“( ) Regulations may specify that the pension contributions of single or either of joint claimants are to be disregarded in calculating their income.”
Baroness Drake
My Lords, the purpose of this amendment is to allow regulations to specify that pension contributions made by single or either of joint claimants are disregarded in full in calculating their income for the purposes of calculating entitlement to universal credit: in effect, that 100 per cent of contributions made to an Inland Revenue approved pension are deducted from earnings that are brought to account in the calculation. The current tax credit rules disregard the whole of any pension contribution, and housing benefit takes half of that contribution into account.
Briefing note 3, which I read again this morning, states that only 50 per cent of pension contributions will be deducted from income under universal credit. I find this decision to allow only 50 per cent of pension contribution to be deducted—as against the current 100 per cent—quite disturbing when we are on the eve of beginning to auto-enrol millions of people into a workplace pension, many of whom will be modest-income earners and many of whom will be in receipt of universal credit. I find it disturbing for three reasons. First, it will undermine the incentive to save—I will come back to this. Secondly, it will impact those on lower incomes. Thirdly—and this is an argument to which I will return on another occasion—it is another example of a government policy measure, of which there have been several over a short period, which results in little or no asset accumulation strategy for low to moderate income earners.
The arguments for auto-enrolment and the 8 per cent base load of contribution included an analysis of financial incentives to save. It included the fact that this 100 per cent of contributions was allowed in the deduction under working tax credit. That analysis was carried out in three instances: once by the Pensions Commission—we were aware of it and it influenced our thinking—and twice by the DWP in its research report 403 Financial Incentives to Save for Retirement, and its report on the savings incentive work programme. The latter report was a very high-profile event; it was carried out in a rather heated environment around incentives to save and means-tested traps. The DWP was full and transparent in its engagement with all relevant stakeholders, sharing data and analysis. The report was widely accepted at the time. In all of these reports it was clear that the way in which pension contributions were treated under the tax credit system was part of the incentive to save and the payback analysis on every pound saved for low to moderate-income earners.
I cannot do justice to the reports in moving an amendment, but I refer to one or two selected examples. Looking at £1 of saving by a low earner under current benefit and tax credit rules, paragraph 4.5 of the DWP Research Report 403 advises;
“the expected payback for a low earner per £1 contribution net of any offsetting benefit effect is £2.81, compared to £2.52 with no such offset”.
The same paragraph, in brief, goes on to illustrate, admittedly for a very stylised individual, how receipt of working tax credit throughout working life by someone on a lower level of income can increase the return on their savings to 4.1 per cent from 3.2 per cent after all the effects of these offsets. Even if tax credits are received only at certain points and not throughout the whole working life, they still boost the net return on savings. If one were to take the difference between 3.2 per cent and 4.1 per cent and express it in terms of a percentage difference in a rate of return over 30 to 40 years, what would that mean? It would mean a pension pot of the order of 20 per cent or perhaps 25 per cent less than it would otherwise be.
Then we come to those on the lowest incomes who are hit hardest. I come back to a point that I made in a previous amendment about the purpose of the tax credit, which was to make work pay. It made it easier for people to get a real return from being in work and accept responsibility. This is very important to those on lower incomes. Clearly, a very strong incentive to save will be lost by changing the rules on pension credit and, inevitably, it is going to trail through to a gender dimension. I always get very stressed when I look at these things in terms of the gender impact.
Referring back to Appendix D of the DWP report on the savings incentive work programme, again this shows that those on modest incomes in receipt of tax credits and housing benefit effectively pay 52p for an individual contribution of £1, which, with the employer match, means that £2 is contributed to their pension. That clearly enhances the payback from saving for these individuals. I know that there will be instances where some people whose incomes are below the earnings limit at which withdrawal begins will not get that benefit. None the less, for significant numbers of people— and that number will increase in an auto-enrolled world—under the current arrangements the payback would be much higher by allowing the 100 per cent.
I come on to the broader point. It is very easy to look at a piece of policy incrementally and say, “We have to make difficult choices. We can do this and save that”, but I am always really concerned when I see a series of incremental policy decisions. When you look at their cumulative effect, they are quite exponential in their impact and much greater than the people who made the individual incremental decisions thought they would be. This is almost disassembling asset accumulation strategy. Policies focused on improving the benefits system and policies directed at asset-building by lower income groups are not alternatives. I get a feeling that there is a debate that says that they are. Certainly when I participated in the debate that led to the scrapping of the savings gateway, that was the debate that was running at that time.
It is not a matter of either/or; you address the low income policy and income redistribution or you address the asset accumulation strategy, but recognising that addressing inequality and enabling people to take responsibility, stay in control and be empowered, and everything that we aspire to for people to achieve, have and be, requires both sets of policies. Yet we see in this Bill and elsewhere other measures by the Government that have the effect of disassembling asset accumulation strategies. We have the one that I am talking about, where the amount of pension contribution deductions that can be made is now to be halved. We saw the removal of the savings gateway. We are seeing the application of quite aggressive capital rules to the savings of those in work under universal credit. We are seeing the application of aggressive capital rules where one partner has reached pension credit age and the other has not. We have seen the aggressive taking into account of ISAs and assumptions about income flow from ISAs, which were a product that was supposed to be targeted at lower to moderate-income earners. It was a high-advantage, simple, cash savings product.
Therefore, when one stands back, I have a general concern about the impact of a series of measures on the asset accumulation strategy for people on low-to-moderate incomes. I honestly do not know how one expects people to embrace responsibility and long-term saving, and think about preparing for retirement, when one of the significant things that contributed to the payback on your savings, apart from the employer contribution, was the way in which your pension contribution interfaced with the benefits system. It is unfair and it is certainly inefficient as a piece of policy, either as pension policy or in helping people to exercise more control and responsibility.
May I also ask about some operational issues that flow from this? It is not clear how personal pensions that are not paid through the employer will be handled when someone says, “I am not engaged in the auto-enrolment arrangements with the employer but I am paying into a personal pension, so how do I get account taken of that?”. Secondly, it strikes me that this will be quite a complicated procedure. If someone is on universal credit and paying a contribution, only 50 per cent of which is taken into account, you cannot take the gross earnings figure and you cannot take the net earnings figure because the Inland Revenue would have given a more generous allowance for that pension contribution. Therefore, you have to create another figure for the 50 per cent allowance that you are going to give on pension contributions. It just struck me as a rather complicated calculation or procedure, so I should like to understand how that will be done. I also dislike and disagree with the intention to reduce it from 100 per cent to 50 per cent. I beg to move.
Lord McKenzie of Luton
My Lords, I do not want to add anything to the very full argument around the policy that my noble friend has laid out. I just re-emphasise the issues about the practicalities and how they will work. I understand that employer contributions will not be treated as income for universal credit purposes but only 50 per cent of the employee contribution will be deductible. As my noble friend says, the data that come from the system would be net of tax, net of national insurance and net of occupational pension contributions, not the full contribution. Therefore, some adjustment would have to be made to that. How does that sit with the collection through real-time income and the related point that my noble friend made about when those contributions are made directly to personal pensions? Presumably there will need to be some additional reporting requirement. I guess this just emphasises that, in the world of universal credit, all is not as simple as we would wish and sometimes portray.
Lord Freud
My Lords, Amendment 52D would take a power to disregard the full amount of any pension contributions from the assessment of both single and joint claimants’ income. In the universal credit White Paper, we set out our intention to disregard 50 per cent of contributions to an occupational private pension from the income assessment. This balances our commitment to encourage pension saving with fairness to the taxpayer and it is the current treatment in the benefits system. It is true that in tax credits 100 per cent of pension contributions are ignored, but tax credits are based on gross income. This is not therefore directly comparable with the 50 per cent disregard in the benefits system.
In addition to the disregard, universal credit claimants will also have tax relief on their pension contributions. This means that for each pound that goes into the pension pot of an employee who is a basic rate taxpayer and in receipt of universal credit, the take-home income is reduced by only 34 pence after minimum employer contributions, tax relief and increased universal credit payments are taken into account. It would cost approximately an additional £200 million a year to move from 50 per cent to a full disregard. While this would no doubt be welcomed by claimants on low incomes, not all taxpayers who do not claim benefits have the advantage of a private or occupational pension. We must therefore take a balanced approach to the disregard of pension contributions, and we believe that 50 per cent is the appropriate level.
Pension contributions are disregarded from the income assessment in tax credits. We have taken the view that this is one of several areas in which tax credits have been excessively generous to claimants when the position of the average taxpayer is taken into account.
On the operational point, we are already operating a 50 per cent disregard, including a payment towards personal pensions. The rules will operate in a similar way to the way that they do now, but clearly we will not be able to do all this through RTI, so there will need to be some direct reporting.
Picking up the point that the noble Baroness, Lady Drake, made about what we are doing for asset accumulation, I can point to a series of measures that the Government are taking in that area, not least the support being provided to lower-income houses to purchase a home. In universal credit, households are able to save up to £6,000 with no impact on the universal credit award. I should point out that an average household with a working-age adult has average savings of £300.
The convention is that “two Baronesses” makes “noble Lords”. If I made a mistake during debate on the previous amendment, I was possibly slurring my “s”. In this case, I can ask the noble Baroness to withdraw her amendment.
Baroness Hollis of Heigham
I was slightly taken aback by the Minister saying that he thought 100 per cent disregards in tax credits were regarded as overgenerous, when at the same time no mention is made of what we are paying in higher-rate tax relief. Currently, out of the £26 billion we spend on tax relief, some £8 billion to £10 billion is going to higher-rate tax relief. If we follow the Minister’s line, apparently we need only to incentivise the rich to save; the poor are being overincentivised and we are being overgenerous.
Lord Freud
My Lords, I think I am caught being slightly puzzled. I was strongly under the impression that pensions were removed from the higher rates of tax relief. I hope I am not wrong on that.
Lord Freud
On that basis, I am probably the wrong person to interrogate on this matter.
Baroness Hollis of Heigham
There is a limit on how much of your pot can attract higher-rate tax rates, which is the £50,000 figure. There have been some changes, but £50,000 of pension contributions is still tax free.
Lord Freud
I think we are now into the realms of minutiae. This has been subject to a substantial change. It was unlimited. Noble Lords can see that my personal interest in this is not as great as it might be. One can make comparisons and political points all over the place; let us stay with the business in hand.
Lord McKenzie of Luton
Can the Minister help us on one point? I am interested in the practicalities and operation. He said that we could not do all this through the RTI system. I am trying to understand how much of it can be done, given that the RTI system is going to produce either a gross income figure or a net of tax and national insurance figure.
Lord Freud
My Lords, we had a session earlier today trying to go through what the universal credit shows. Without being overprecise, a lot more information is available but effectively you need the net and the gross figures. Clearly, the personal pensions are not captured on that payslip, but the pension contributions through auto-enrolment, for example, would be captured.
Lord McKenzie of Luton
I accept that you might have the net and the gross figures, but do you not now need another figure, which is half the occupational pension payment? That is not readily thrown up in the pay-as-you-earn system or any other system.
Baroness Drake
I appreciate that the Minister has to give the Government’s reasoning behind this decision, but I am absolutely aghast at the argument that it will cost £200 million to restore 50 to 100 per cent of the pension contributions being deducted. There was a pension settlement, which said that the state pension age had to go up but the earnings-related element would be removed from the state system and go flat rate, and that individuals, supported by their employer, would have to take on greater responsibility for personal saving. They would be auto-enrolled, and that was part of them taking responsibility for a sustainable pension system over the long term. As part of that, the incentive to save had to be right; that was a huge debate. In the third leg, between the state pension age going up, flat-rating the state system and moving private savings up and earnings-related out of the state system, the incentive to save had to be right.
At the time, there was a huge debate and a huge argument that it would not work unless you got the incentives to save right. At the lower end, how the benefit system interfaced with the pensions savings system was a very important part of the payback. It was also a very important part of the explanation to people—including shadow Conservative Ministers at the time, who were very vocal on this issue—that this was what the payback would look like, with incentivisations to saving that came through the tax credit system. This is what I mean about incremental decisions. Now somebody says, “Well, we can just remove a chunk of the payback for a particular group of people and save £200 million by reducing the figure from 100 to 50 per cent”. I really struggle with that because it is saying, “Never mind what the strategic analysis was or where we are trying to go; this convenient incremental policy will save us £200 million”—and somehow it is a fairer deal for the taxpayer. Maybe in 30 years’ time it will not be a fairer deal for the taxpayer if more people present themselves for benefits. I struggle with that line of reasoning for doing this for that group of people. Okay, it is £200 million. I am not avoiding the need to make tough decisions, but again one stands back and looks at the contribution that the taxpayer makes to the incentive to save across the piece.
My noble friend Lady Hollis is right. You can get £50,000 per annum incentivised right up to 50 per cent tax relief. I know that the noble Lord is going to shout at me that this will allow more people to keep their income and that it is a different analysis, but I do not accept that, particularly in the context of a sustainable pension strategy. We have all sorts of tax advantage savings arrangements that the well-off can take advantage of. You can fund a tax advantage stakeholder account for your child. You can fund a tax advantage ISA for your child or your non-waged spouse. I have taken advantage of some of these for my children. However, I struggle against the decisions on the incentive to save for low-to-moderate-income groups, which was inextricably linked to the in-work benefit system, when somebody says, “It saves £200 million. Just undermine the incentive to save and the payback for this arrangement”. It just does not stack up intellectually. It does not stack up when there is a consensus which says that everyone should buy into a pension solution that holds over the very long term. We have just taken £10 billion from a group of women who should not be bearing that level of savings, and we are now going to take £200 million out of low-to-moderate-income earners. My argument is losing subtlety because the quality of what I am pushing back on is unsustainable. It is £200 million for an irrational reason. Extremely reluctantly, I beg leave to withdraw the amendment, although I am sure I shall be coming back to this.
“( ) For the purposes of introducing Regulations under this section —
(a) earnings shall not include any payment in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment.(b) notional income shall not apply in respect of any amount of income other than earnings, or earnings derived from employment as an employed earner, arising out of the claimant’s participation in a service user group;(c) “service user group” means a group of individuals that is consulted by or on behalf of—(i) a Health Board, Special Health Board or the Agency in consequence of a function under section 2B of the National Health Service (Scotland) Act 1978;(ii) a landlord authority in consequence of a function under section 105 of the Housing Act 1985;(iii) a public authority in consequence of a function under section 49A of the Disability Discrimination Act 1995;(iv) a best value authority in consequence of a function under section 3 of the Local Government Act 1999; (v) a local authority landlord or registered social landlord in consequence of a function under section 53 of the Housing (Scotland) Act 2001;(vi) a relevant English body or a relevant Welsh body in consequence of a function under section 242 of the National Health Service Act 2006;(vii) a Local Health Board in consequence of a function under section 183 of the National Health Service (Wales) Act 2006;(viii) the Commission or the Office of the Health Professions Adjudicator in consequence of a function under sections 4, 5 or 108 of the Health and Social Care Act 2008;(ix) the regulator or a registered provider in consequence of a function under sections 98, 193 or 196 of the Housing and Regeneration Act 2008;(x) the National Institute for Health Research and Department of Health commissioning programmes;(xi) the National Institute for Health infrastructure organisations including research networks, Research Design Services, Collaborations for Leadership and Applied Health Research and Care, University Research Institutes and groups and other higher education institutions, individual research studies, social care bodies, charities and other not for profit organisations; or(xii) a public or local authority in Great Britain in consequence of a function conferred under any other enactment for the purposes of monitoring and advising on a policy of that body or authority which affects or may affect persons in the group or monitoring or advising on services provided by that body or authority which are used (or may potentially be used) by those persons.”
Baroness Thomas of Winchester
My Lords, the wording of my amendment is taken straight from Statutory Instrument 2678, the Social Security Benefit (Computation of Earnings) Regulations 2009, with the additions of subsections 10 and 11. The reason I have copied the wording of this SI will become clear in a moment.
Old welfare reform hands may find my speech strangely familiar because I have been on this particular soap box since 2006. The amendment is about the way benefits are treated for service user involvement, specifically the unresolved problem of those disabled people on benefits who help with NHS research, public health research and social care research. The unresolved problem is the impact on their benefits of out-of-pocket expenses and, possibly, a small emolument paid by the organising body. Disabled people are asked to take part in research studies in these fields not just as subjects but as active partners in the research process. For many severely disabled people, this activity is the most important thing that they do, as they are uniquely placed to take part and they know that their participation may lead to better outcomes, both in the immediate future and for future generations.
Plans set out in the health Bill require clinical commissioning groups to base decision-making on evidence-based research. However, unless the universal credit rule on the treatment of certain reimbursed expenses as earnings is amended and the application of the notional earnings rule is removed, disabled people on benefits will continue to be prevented from offering their assistance. Research in health and social care will be used to commission our future healthcare but, as matters stand, two nonsensical bits of red tape in the benefits system will prevent the involvement of many patients. The two obstructive benefit rules were designed for employment and are entirely inappropriate for involvement. The first is the treatment of reimbursed expenses for involvement in research.
At this point, I should define what I mean by research. I am not talking about patients who are entered into clinical trials as part of their treatment. I am talking about those who, in the words of the relevant HMRC circular, are,
“invited to attend meetings to give their views on various matters to inform the research process and direction”.
Where people are paid a small fee for their help with this research and their expenses are reimbursed by the organising body, both amounts are totalled and treated as earnings. Where the total is above the benefit-earnings disregard, the excess is deducted from their benefits. This is because, as I said, the reimbursement of out-of-pocket expenses is treated as earnings. People may end up with less money the following week or with no money at all for living costs for several weeks. If this happens, they promptly and understandably withdraw their help.
Baroness Wilkins
My Lords, I support the amendment which has been so comprehensively introduced by the noble Baroness, Lady Thomas of Winchester. I wish to make one additional point, which is that one of the very dispiriting elements of having a long-term health condition or a disability is the fact that you are so often on the receiving end of help. It can almost get to the point where you are not expected to be able to do things for other people. For example, I very rarely get leafleted in the street by charity workers. If I go to the door to a charity worker, they apologise that they have bothered me. It is as if you are not expected to be able to contribute to society in any way. However, one very obvious way in which we can contribute is by sharing the experience of our condition, making some value out of it and aiding research in this way. That can surely only be beneficial for future generations, for medical professionals and for ourselves and our self-esteem. It seems nonsensical that red tape in the benefits system should stand in the way.
Lord McKenzie of Luton
My Lords, I support the thrust of the noble Baroness’s amendment. I do not think that there was much that I ever did as Minister which was the cause of great rejoicing, but I was grateful for at least one memory. I recall several meetings that we had together, trying to see that we ended up in a situation where amounts paid to service users did not inadvertently affect their benefits. I have been trying to recall all of the detail of that. I am not sure that I can, but I am sure that the Minister will be able to bring us up to date or remind us.
Part of what we were trying to do then was to see if a sensible application of the current rules, by way of clear guidance across Jobcentre Plus, would be a route to tackling it. It was in part, but it did not deal with the whole of the situation. There can be no doubt that engagement of those who actually use our services in shaping how they are organised and delivered can be of enormous public benefit. This particularly applies to the multiplicity of research projects which can underpin innovation and vital developments in services. Service user engagement is to be strongly encouraged. We are thoroughly supportive of this.
As the noble Baroness has said, it seems entirely reasonable, as we reflect on the introduction of universal credit, to see how far a legislative solution will cover the situation, rather than perhaps just relying upon practice and guidance, as happens in part at the moment. However, as we have heard, that does not cover all of the gaps, and there are a range of issues about whether payment just covers actual outgoings, about whether there is an excess or profit, about the frequency of activity and about whether any spreading or averaging rules would apply—we went down that avenue at one stage. There is also the issue of protecting those who decline a payment from the notional income rules. It may be that the disregard regime in universal credit could help or could be made to help. On the basis of the noble Baroness’s figure, that may not be the case.
Turning to the specifics of the amendment, I have an issue about terminology. It refers to expenses,
“wholly, exclusively and necessarily incurred in the performance of the duties of the employment”.
It is an interesting point to distinguish employment and involvement. It is certainly the case in tax legislation, and I think in benefits legislation also, that the phrase “wholly, exclusively and necessarily” precludes taking the costs of travel from home to work out of the arrangements. There has always been a distinction between the cost of undertaking travel as part of your work or involvement and putting yourself in a position to do that, which is travel from home to work. Therefore I am not sure that the formulation is necessarily the right one.
This has been going on for a number of years. Progress has been made, but it clearly has not solved the problem, as we have heard. It would not have a huge price tag, if any, to use this opportunity with universal credit to deal with it absolutely.
Lord Freud
My Lords, I am well aware of the work of my noble friend Lady Thomas on this, although perhaps not quite as well aware of it as the noble Lord, Lord McKenzie. Clearly, the amendment is intended to improve the position of disabled people on benefits who participate in service user groups. Changes in the regulations to do just that were made towards the end of the last Parliament, and universal credit will carry these forward. Nothing in universal credit will worsen the position of participants in service user groups.
Looking purely at the earnings element—the fee element, not the expenses element—the structure of universal credit will improve the general position for participants. The earnings taper will ensure that any fees which are beyond the claimant’s earnings disregard will still make the claimant better off overall. The removal of the 16-hour permitted work rule and the personalised conditionality regime will see to it that the claimant will not fall out of the benefit if they undertake a modest amount of voluntary or paid activity. That is as far as the earnings element is concerned.
The amendments to the social security regulations made in 2009 exempted individuals covered by the definition of service user from the notional income rules and ensured that any expenses they received would be disregarded in the benefit calculation. I think that all parties welcomed these improvements when they were introduced. Therefore, my noble friend’s amendment seeks simply to build on those 2009 changes.
This is a matter for regulations, and there will always be scope to make further changes where these are needed. However, we need to ensure that any definition is clear and can easily be applied by administrators. The current definition was drafted on that basis. Like the noble Lord, Lord McKenzie, I am not convinced that it will be feasible to broaden the current definition in the way proposed by the amendment, but I am very pleased to meet my noble friend on this, as she requested, and I think that we shall be able to get this right.
In the current regulations, the definition of service user is limited to consultation for specified purposes. In all cases, the consultation with service users is required by law. The intention here was to avoid extending the easements to the activities of commercial enterprises. We also need to ensure that benefit claimants are not able to deprive themselves of regular earnings and so remain on benefit while operating as consultants to research bodies. These protections remain valid from the Government’s point of view, so any new regulations need to protect the Government in some of these areas.
On the general question of expenses, we will apply the same disregards in universal credit as in the existing benefits. We would not want claimants in work to see their universal credit fall as a result of their receiving payments as reimbursement for expenses that they have incurred solely in carrying out their job. To do so would reduce the incentive to take a job, which would undermine the core purpose of universal credit. Briefing note number 9 was intended to clarify that work-related expenses could continue to be disregarded in the same circumstances as apply now.
We also intend, as now, to exempt reimbursement of expenses made to volunteers who give their time to charities and voluntary organisations from the calculation of claimants’ unearned income.
I hope that this account will reassure noble Lords about our intentions for the treatment of expenses in universal credit generally. I think that there can now be a process of refining and enabling service user groups to make their valuable contribution in the fullest possible way, and that is what I shall be aiming to do with my noble friend when we meet. However, these are not matters for primary legislation; they are matters to get right in regulations. That is what we will be aiming to do and I hope that, on that basis, my noble friend will be content to withdraw the amendment.
Baroness Hollis of Heigham
My Lords, perhaps I may ask the Minister a question. I chair a housing association, as I have declared previously, and we pay a very modest sum per year to our tenant board members. One of them was on disability benefits and preferred not to take the very modest emolument because of the interaction with his disability benefits and the problem that he would have of resuming them as and when the emoluments ended. However, because he could have drawn that emolument, it was assumed under benefit rules that he had done so and he could not make that move. I ask the Minister to look at this point. This was, after all, a sort of charitable housing association and he was stuck.
Lord Freud
My Lords, I will look at it, but I am not sure I need to study it very hard. As I understand it, the fear of that individual is that if they earn too much money they get taken off their benefit structure entirely. Because they are earning too much, they are outside the disability benefit structure and they must therefore get on another one and they then have a terrible problem. That does not apply under the universal credit. The worst that could happen is that the universal credit goes down in the period, reflecting the emolument, but they are better off overall. That acute fear of being left stranded goes. In that particular case, and many others like it, the desperate cliff-edge position which currently exists is not there under universal credit.
Baroness Thomas of Winchester
I thank the noble Lord, Lord McKenzie, for his support, as does my noble friend Lady Wilkins. I would like to take up my noble friend’s offer of a meeting before the Bill reaches the next stage, because we were told specifically by the officials of the noble Lord, Lord McKenzie, when he was Minister, that they could not extend this to bona fide NHS research—nothing to do with commercial interests—unless there was a peg in legislation on which to hang the regulations. I therefore do not accept my noble friend’s statement that everything can be done by regulations, because we found that this particular matter could not be done. We are not talking about people who can get a job; we are talking about severely disabled people, who are a million miles from the job market, but they have specific conditions which are needed for vital research. I hope this can be sorted out before the Bill goes any further. We need this peg, and it is not too late to put it in this Bill. I will take up the offer of a meeting, which I have done on many occasions when I have withdrawn this sort of amendment—and, of course, it finally bore fruit.
Lord Freud
We do not need a legislative peg in primary legislation to make changes here. That was a reference to NHS legislation. How we define and work through the different types of income is something which we are going to do in regulation. I can assure my noble friend that, although this is something which is slightly complicated to do, it does not have the desperate urgency that requires it to be done in the next couple of weeks.
Baroness Thomas of Winchester
I am caught between two pieces of advice: one is that we do need legislation and one is that we do not. I am somewhat conflicted, and I would like to get this sorted out before Third Reading. We have been told that for the rules that I read out from the statutory instrument, there was a peg on which to hang it, and that is why they were there. We were told that because there is nothing for NHS research we could not extend it. I shall withdraw the amendment now, but hope that we can resolve this before Third Reading, if not Report.
Lord McKenzie of Luton
Could the noble Lord arrange to send us copies of the earlier advice, because there is some confusion and I am not clear in my mind?
Lord Freud
My Lords, I will have an early meeting with my noble friend on this, and we will take it from there. Subject to that meeting, I will provide that particular advice, otherwise we may go round the houses on this very technical matter. I hope it is one we can resolve pretty fast, with a letter.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, this is a probing amendment to seek the best understanding we can about how support for housing will work for someone on pension credit. Because housing benefit is to be abolished, housing support for those on pension credit, and thereafter outside universal credit, will be by way of a housing credit. It is accepted that there will be a lot of detail to work through, but perhaps the Minister can give us an update on progress.
The system will also provide support for children via a similar route, where this is applicable for those on pension credit. This will often be in circumstances where grandparents have responsibility for their grandchildren. Assurance was given in the other place that the Bill does not need to make special provision for this, because existing powers are sufficient. We accept that position. Therefore, the prospect of there being three strands or components of payments in these circumstances will flow from the Bill.
The points that arise are as follows: will the basic housing allowance follow the local housing allowance regime as for universal credit claimants? Will the 30 per cent percentile, the local housing allowance caps and non-dependant deduction increases be applied to this regime? Will those on guaranteed credit be able to access support for mortgage interest? Is it envisaged that there will be a composite and interlocking calculation of the pension credit, housing and possible child credit components, or will these be calculated separately? What is envisaged in respect of tapers, and will these be aligned? What will this mean for direct payments to landlords? Do the Government envisage any arrangements for pensioners different from those for universal credit claimants? Can we hear what the proposals are for support for mortgage interest—both for those in receipt of pension credit and universal credit? We have an outstanding question on that. What does this mean for the treatment of capital? We previously discussed how these differ between housing benefit and pension credit systems. The former has the £16,000 cut-off and the latter has no maximum, but income is taken into account. Will these two regimes sit side by side, or will they be rationalised? If they are going to be rationalised, on what basis will that happen? What arrangements will operate for uprating purposes? Will CPI be applied to the housing component? What about the uprating of pension credit? I beg to move.
Lord Freud
My Lords, the intention is that the housing credit will broadly follow the current rules that apply in housing benefit. For someone to be entitled to the housing credit element of pension credit they will need to live in Great Britain, have reached the pension credit qualifying age and be liable for housing costs that relate to the accommodation they live in. The extent to which a person is liable for the housing costs, what constitutes the accommodation, how we treat temporary absences from home and how we calculate the amount of the housing credit will also be included in regulations.
A person may be entitled to the housing credit whether or not they receive the guarantee credit or saving credit element of pension credit. This schedule also enables us to specify that rates of support may differ by area. So, for example, different housing allowance rates can apply in different parts of the country.
In introducing the new housing credit we will, however, look for opportunities to streamline the benefit and align rules wherever possible. This includes extending pension credit provisions to the housing credit wherever possible. One such area includes assessed income periods. These are specified periods during which a customer is not required to report any changes in their requirement provision—namely, their occupational pensions and capital.
The schedule provides us with the flexibility to determine in what circumstances retirement provision will not be fixed in relation to the housing credit regulations, which will be subject to the appropriate level of scrutiny. The schedule also contains the consequential amendments to other legislation needed as a result of the abolition of housing benefit and the introduction of the housing credit.
This probing amendment would remove flexibility and would work to the detriment of those who, through no fault of their own, require assistance with their housing costs while at the same time making the system vulnerable to manipulation.
The noble Lord asked a large number of detailed questions on this matter. I can deal with some of them but I will answer most by way of a letter. On direct payments to landlords, it is not our intention that pensioners would be part of that regime, which is for working-age people. We are not planning to change the SMI arrangements for pensioners. Uprating will be done by CPI, as it will be with working age. We need capital limits in the system overall, clearly, and we need to determine what the right rates should be. They should be at a level where we do not see a substantial change in practice. As the noble Lord pointed out, this is now done by a tariff income process and, as we move towards an overall position in the housing credit, we need to get the equivalence.
I think that deals with the bulk of the questions. There are one or two more, which I will answer by letter, but, given the assurances about how we intend to use these powers, I urge the noble Lord to withdraw the amendment.
Baroness Lister of Burtersett
My Lords, will the Minister make sure that that letter includes the answer to a question which was asked a few sessions ago but to which the Committee never received an answer? It was not specifically about pensioners but was a more general question about whether mortgage interest will be paid as part of the universal credit or to the lender.
Lord Freud
We are looking very closely at the support for mortgage interest. I can let the Committee know that we are planning to consult on how we do that. Rather than include that point in the letter, I will make sure that noble Lords are informed when that consultation paper comes out.
Lord McKenzie of Luton
I am most grateful to the noble Lord for a number of detailed replies, with some follow-up, but can he just be a little more specific around the capital rules? From his answer, it was very unclear what is intended. We have two systems for housing benefit: we have the cut-off at £16,000, whereas for the pension credit we do not. I am not sure whether those two systems will sit side by side in the new arrangements, or whether there will be some common approach to capital, and whether that will adopt the pension credit approach or the current housing benefit approach.
Lord Freud
My Lords, it will go somewhere in between. It will be a capital limit as opposed to a tariff income approach, but it will be a higher capital limit than that for working-age claimants.
Lord McKenzie of Luton
As I understand it, that will operate for pension credit as well as the housing component.
Lord McKenzie of Luton
I am grateful for that—well, I am grateful for the answer, not necessarily the information. It is the lowest common denominator again. I beg leave to withdraw the amendment.
Baroness Howe of Idlicote
“(6A) Regulations under this section must provide that, for a claimant to be treated as not having limited capability for work, the claimant must be able to—
(a) reliably perform their work on a sustainable basis, for at least 26 weeks, without requiring excessive leave or absences; (b) work in open unsupported employment without requiring excessive support to perform their work.(6B) For the purposes of regulations made under this section—
“work” means work—
(a) that is for at least 16 hours per week on wages that are at or above the relevant minimum wage; and(b) that exists in the United Kingdom;“excessive support” means more than what is usually considered to be reasonable adjustments or normal supervision (or both).”
Baroness Howe of Idlicote
I present the sincere apologies of my noble friend Lady Mar. She had very much hoped that this amendment would come up on Tuesday, but alas, she has an engagement that she could not possibly break. So I will inadequately move it on her behalf.
Under the Bill, a person will be deemed to have limited capacity for work if the claimant’s capacity for work is limited by their physical or mental condition and if the limitation is such that it is not reasonable to require the claimant to work. The work capability assessment is designed to assess whether a claimant has limited capacity for work or limited capability for work-related activity, but there is no definition of work either on the face of the Bill or in regulations. A group of charities that includes the MS Society, Parkinson’s UK, Arthritis Care and Forward-ME have indicated that this is a significant omission, and it is one that I certainly agree with my noble friend Lady Mar should be rectified.
Individuals must not only be capable of some very limited work; they must be capable of obtaining realistic and sustainable employment. I am sure that the Minister will acknowledge that capability for work is not a clear-cut issue. Many disabled people fit neither the “completely fit for work” nor the “completely incapable of work” categories. As the Minister knows, the main interest is in those with a fluctuating condition—an area where my noble friend Lady Mar has both experience and, indeed, considerable knowledge. They can unpredictably veer between both categories and, however much they may want to work, this group finds it particularly difficult to obtain and retain sustainable employment.
My noble friend and I strongly support the principle that all those who are able to work should be supported through the work-related activity group in ESA, which is designed particularly to identify those who have a limited capacity for work. However, those who face significant barriers to returning to the workplace require extra time and support to move back into the work environment. The WRAG is a very important provision for those with fluctuating conditions, as it asks them to undertake work-related activities that are personalised and appropriate to their needs and abilities. However, the group believes that the current work capability assessment sets too high a bar for the test of limited capability for work—the test that admits people to the WRAG. The test fails to take into account the reality of the claimant’s abilities not just to take on work but to retain and manage unsupported sustainable employment.
The Australian Social Security Act 1991 and the Australian assessment of work-related impairment for disability support pension criteria supply a sensible definition of what could be meant by the ability to carry out meaningful work. Slightly amended for the UK, as is proposed in my amendment, this could provide an important aid in determining whether a claimant actually has limited capability for work. Broadly, the amendment would specify that, in order to be capable of work, the claimant should be able to: work for at least 15 or 16 hours each week in meaningful work that pays at least the national minimum wage; reliably perform their work on a sustainable basis without requiring excessive leave or absences—the Australian system takes this to be at least 26 weeks; and, lastly, work in unsupported employment without requiring excessive support to perform their work. I beg to move.
Lord Wigley
My Lords, I am very pleased to support this amendment. One is very aware of the tremendous work that the noble Countess, Lady Mar, has undertaken in this area and of her expertise. There is no doubt that the fluctuating condition of many people with disabilities can be a difficult factor from whichever end you look at it: from the point of view of the disabled person, who may want to work but is uncertain whether they can carry out the work, or from the point of view of the state and the way in which these regulations apply to such people.
The one element in this amendment that I am not entirely certain about is the question of “unsupported employment”. There are times when, if a disabled person is given adequate support, they can be in full-time meaningful work on a continuous basis. I would not want this amendment to undermine that dimension, which is very important.
Turning to new subsection (6B) proposed by the amendment, can the Minister comment on paragraph (b), which refers to work,
“which exists in the United Kingdom”?
This raises some interesting questions. Is it in the Government’s mind that there might be work outside the United Kingdom, the availability of which could, if it were not taken up, lead to people being debarred from their benefits? One thinks of people living in Dover: an hour’s journey puts them into the French catchment area. If one lives in Holyhead, if the fast boats are running one could quickly be in Dublin—presuming that there is any work in Dublin these days. The Government’s intention in this matter certainly needs to be probed. If paragraph (b) is necessary, I would be interested to know what the Government’s explanation is.
Baroness Wilkins
My Lords, I strongly support this amendment in the hope that it will go some way to meeting the fears of the thousands of disabled people facing their work capacity assessment, especially those who have a fluctuating condition such as multiple sclerosis or an ill understood condition such as ME. Members of the Committee will have been inundated with letters from people who have been given every reason to mistrust the assessment process as carried out by Atos, and I know that the Minister has been made very aware of the stress and anxiety this is causing.
Broadly, this amendment sets out that, in order to be deemed capable of work, the claimant should be able to work for at least 16 hours each week in meaningful work that pays the national minimum wage or above and, most importantly, that they can reliably perform their work on a sustainable basis of at least 26 weeks without requiring excessive leave or absences. This would do much to rectify the current situation. What happens now is that at the end of an Atos report on a claimant, which goes to DWP decision-makers following the completion of the work capability assessment, there is usually a prognosis which says, “This claimant should be able to return to work within x months”. However, the WCA is not currently designed to offer any concrete evidence of a person’s realistic capability to find employment. The content of the WCA is designed purely to assess a person’s physical and mental functionality, not their ability to find employment, how long this may take or what support an individual may need to do so in the light of the barriers to work that their condition presents.
The WCA test focuses largely on a claimant’s typical day. Yet there is no such thing as a typical day for someone with a fluctuating condition. For example, a woman with MS in her early 30s told the MS Society that on one day she may feel well enough to participate in voluntary work and have a busy and active lifestyle, yet during a recent lapse she was rendered completely blind for a period of weeks and found that on many days she was unable to get out of bed due to disabling fatigue.
The typical-day history taken in the WCA refers to a typical day out of work. However, a typical day out of work for someone with a long-term condition could be very different from a typical day if they had to travel and complete a full day’s work. One person with multiple sclerosis told the society, “Nothing done in the interview related to my ability or my lack of ability to work. I answered the questions as honestly as I was able, but was not able to stress the fluctuating nature of the symptoms, i.e. yes, I can read, but not for more than a few minutes and then I have to rest”. Another person said, “They have no idea what day with MS is like. They do not know how work would go if one day you can walk but the next you cannot, if one day you pee yourself continually and the next you are okay. Who would employ me? I am constantly fatigued, yet of course the WCA found me fit for work.”
I do not doubt the Minister’s sincerity when he says that his whole motivation is to support and enable people to take their place in the world of work, but how can he hope for this to succeed when the assessment for determining eligibility for universal credit is based on such a flawed, unjust and mistrusted system? As we have heard too many times, 40 per cent of those wrongly found fit for work win on appeal of the decision, and in some areas I am told that the figure increases to 90 per cent if people are represented at tribunal.
Baroness Grey-Thompson
My Lords, I, too, support this amendment and I, too, wish to speak about the assessment process. A number of people have contacted me just on this amendment alone—around 45 at the last count, and the figure is increasing daily. They want to express their concerns in this area and they are using very strong words. People are telling me every single day that they are terrified by the process they are being asked to go through. I accept that it is a difficult process. We demand that through the system we should grade impairment, which is a necessary part of the process, and we try to put people in boxes. However, disability and impairment affect people in such different ways. The process expects yes and no answers and that is almost impossible when we are considering a static condition, let alone fluctuating ones. Many people writing to me say that there is little room to give medical evidence or provide supplementary data and that every step of the process feels very confrontational. It is essential that the test is appropriate for disabled people.
I am also concerned about the number of people who tell me that the facilities used for the assessments are simply not accessible. One example is the Croydon assessment centre; it has a lift for wheelchair users but wheelchair users are not allowed to use the lift due to health and safety reasons. To enter the centre, you have to navigate 46 steps. If you cannot do that, the nearest centre is a 14-mile round trip away, which is very challenging for a number of people.
I have also received a number of e-mails saying that there is a yo-yo process going on. One ex-serviceman was assessed in 2003 as being 30 per cent disabled and yo-yoed eight times in the next five years or so between being 30 per cent and 70 per cent disabled. These various reassessments and appeals were carried out at significant expense to the public purse and distress to the individual. When he questioned the process, this man was told by the assessor that he was moved back and forth so many times because they did not really understand trauma.
As the noble Baroness, Lady Wilkins, has said, disabled people are constantly being labelled in the media as benefit scroungers. The rise in the amount of hate crime is a real concern. Could the Minister reassure disabled people who are feeling vulnerable and afraid, who see no light at the end of the tunnel and no improvement in the process? They want to work and be part of society but they feel themselves to be victims of what is happening.
Baroness Hayter of Kentish Town
My Lords, I support this amendment. As has been stated, the WCA is about deciding whether a claimant has limited capability, either for work or work-related activity. As the noble Baroness, Lady Howe, said, there is no definition in the Bill, nor indeed in regulation, about what is meant by “work”. This is particularly important for those with fluctuating conditions, who are, at different times, both fit for work and incapable of work within the same month. We already know that, apart from any assessment, people with unpredictable fluctuations find it difficult to obtain employment or to keep it. This is partly because of their previous work records, partly if any of these fluctuations occurred during a probation period, and partly if they are honest and open with a potential employer.
It goes without saying that we support the principle of helping all those who are able to work to do so, but I am concerned about the apparent drop-off in the number of new customers helped by the Access to Work scheme, which has gone down to 13,240 compared with 16,520 in the previous year—a fall of nearly a quarter. It would be interesting to know what is thought to be the reason behind that, because it is an important way of helping people into work.
The really important word in this amendment is “sustainable”. Sustainable employment is defined as 15 or 16 hours a week and on a basis probably of 26 weeks. This amendment is particularly important, as the Government are proposing that regulations about defining capability for work or work-related activity are to be subject only to negative resolution procedure and thus with no opportunity for debate.
We have had a note which states that the Government’s intention is that regulations made under subsection (3) will set out the detailed circumstances and descriptors used to determine limited capability for work and limited capability for work-related activity. These regulations will be based on the Employment and Support Allowance Regulations 2008 and the subsequent amendments contained in the Employment and Support Allowance (Limited Capability for Work and Limited Capability for Work-related Activity) (Amendment) Regulations 2011 and any other changes to the ESA provisions before the introduction of UC in 2013.
We understand that the Government are undertaking further work to develop a supplement to the assessment to accurately identify individuals with enduring health conditions that limit their long-term ability to fully provide for themselves through work. However, regulations under Clause 41, which are also subject to the negative resolution procedure, will define the meaning of “work”. Given that this is another area where we remain unclear of the Government’s plan, it will be particularly important to have assurances about how people with fluctuating conditions are to be protected.
Lord McAvoy
My Lords, as a former Member of the other House with experience of constituency cases and organisations, I could not sit silent during this debate. I fully support the point outlined by the noble Baronesses, Lady Howe, Lady Wilkins and Lady Grey-Thompson.
Not referring to a GP when there is a fluctuating illness results in Atos taking a hard line. As I have said before, I am not one of life’s social liberals, but the line taken by Atos on too many occasions has been unfair and there has often been a bit of bother in trying to sort it out. This causes fear and apprehension, not only among the less able bodied but also among the able bodied who are not particularly articulate when they face Atos and its people. I hope notice is taken of the circumstances illustrated by my colleagues today because it is wrong that there should be that fear.
I know that the media, as is their wont, take some cases, pile into them and get stuck into government and organisations such as Atos to highlight obvious unfairness, but there is enough experience in the department and among Ministers to counteract that. However, there is something in the amendment. The Minister can take it away, look at it, amend it or alter it, but I sincerely hope that he takes notice of it and does not dismiss it.
Lord McKenzie of Luton
My Lords, this is an interesting and challenging amendment and the debate has been deeply concerning. We have heard from the noble Baroness, Lady Grey-Thompson, that people are terrified and scared about facilities not being available; we have heard from my noble friend Lady Wilkins about the mistrust of the WCA and the profound mistrust of Atos and some challenging questions about how they are regulated; and we have heard from my noble friend Lord McAvoy and the noble Baroness, Lady Howe, about fluctuating conditions.
I understand that the system works at present by seeking to establish if someone has limited capability for work, and that this is determined by a range of descriptors which seek to establish how someone’s physical and mental health affects their functioning. Someone not reaching a sufficient points total would not be classified as having limited capability for work and would therefore—in essence by default—be deemed fit for work. The point was pressed that the assessment does not look at whether someone having not been deemed to have limited capability for work is therefore fit for work in any practical or coherent way. Actually, that gives food for thought. Somebody who has been deemed fit for work would seem to claim JSA and be subject to relevant conditionality and in the world of universal credit be subject to all work-related requirements. There have been ongoing debates about how appropriate the descriptors are and, perhaps more fundamentally, how they are applied in practice. We have certainly heard some of that today. This is of particular interest to us, because we were in government when the system was introduced; I remember all the policy staff and all the work that was done to introduce the ESA and the WCA. Given the fact that it is not working as it should, maybe the judgment was that it is not capable of working in any event, and that is of some concern.
The Harrington review has published its first considerations and the recommendations have been accepted. It is understood that the second review was completed in July and is still under consideration. Perhaps the Minister can give us an update.
A key question that the amendment poses is whether the WCA, properly applied, would mean that the outcome sought by Amendment 55C would inevitably follow, assuming that it was the outcome that was wanted. I think probably not. On making a judgment about somebody having limited capability for work, there is a prognosis also about how long they would remain so assessed—that is to say, a determination about when they would be fit for work. The noble Baroness, Lady Wilkins, again made this point. When making that determination, to what extent would those judgments reflect the criteria that this amendment seeks to set out? Again, I suspect not—but perhaps the Minister can help us by telling us the criteria applied when someone is making a judgment after a while whether somebody is fit to go back to work and fit for the JSA regime or the full work conditionality. Is it just the absence of failure of work-related activities requirements, or is it something more positive in trying to see what they are actually capable of and what the definition is of work? I am not being very clear on this issue, but my concern when I think about it—and I had not thought about it in this way before—is that the WCA assessment puts somebody in a category. If they fail, although fail is perhaps not the right term, they go by default into a category that assumes they are fit for work. Should that judgment inevitably follow from that process?
There is a sense of cliff edge about the system. On one side of it, there are full conditionalities and harsher sanctions, and the full work-related requirements; on the other side, there is lesser conditionality and requirements only in respect of work-related activity, no prospect of higher level sanctions and higher benefit levels. Of course, all of this rests on the judgment under the WCA, subject to reconsideration and appeals and so on. So much hinges not only on the descriptors and how they are set out and whether they are appropriate but on how they are applied. Universal credit does not particularly smooth that particular cliff edge, although it deals with other cliff edges about going in and out of work. But with regard to the analysis and judgment of where people sit in the categories, it does not particularly help. A lot of this is to do with the support that people should have.
Lord Wigley
I invite the noble Lord to comment on the relevance of assistance in work. If people are available to help someone who is disabled to undertake their work, it is possible for them to fulfil some of these requirements. If that person is not available, it is the failure of the state to make that person available that is creating the handicap for the person who is disabled. In applying the social definition, there could not be a clearer example than that.
Lord McKenzie of Luton
I very much agree with the noble Lord, Lord Wigley. He is absolutely right about that. I imagine that the Minister will reply that this is too narrow a definition of work but I do not want to anticipate what he wants to say. The more I think about it—this is not a formal Front-Bench view—the more I believe that we ought to be thinking about smoothing the path so that we do not have that cliff-edge, as we are doing away with cliff-edges for in-work and out-of-work benefits. Is there not something that we could do to create more of a continuum, so that these very difficult judgments would not have to be made?
Lord McKenzie of Luton
Indeed. Perhaps I may finish off with a question. I think that earlier in our deliberations we touched on what would happen if someone sought to challenge the WCA determination, as well as concerns about the fact that their benefit would be withheld during that process. I do not know whether the Minister has anything further to say on that. I think that there was an exchange in the Commons on which I had a note on a piece of paper, which I have lost, but it seemed to give some credence to press reports that people were being actively discouraged from going to appeal. If that were the case, it would be an absolute disgrace.
I think that there is great merit in the amendment. Like the noble Lord, Lord Wigley, and perhaps some other noble Lords, I would not accept it quite as it says. However, when someone says that a person should be in the WRAG group but they should be capable of coming out of it in three months or six months, there ought to be a test of what they would be capable of at that point and whether that would amount to work under this sort of description. I should be interested in the noble Lord’s comments on that.
Lord Freud
My Lords, I should start by making a point about the overall attitude of the Government to people who are disabled or who have difficult medical conditions. We are committed to unequivocal support for those people, and that is what the support group is about. There is extra funding for the group and we are absolutely determined to provide that support. In the midst of the concerns about particular things, and as we try to make sure that the gateway works and that we can find the people who really need our support, that fact can be lost. However, I want noble Lords in this Committee Room to be under no illusion that we want to support the people who need our support. I have already expressed my concern about the fear factor, which I find very disturbing. I also acknowledge that the press in this country sometimes writes articles that none of us in this room find appropriate. I certainly do not find them appropriate and my colleagues in the department find them deeply disturbing. We do not control the press, regrettably, and things are written that we do not like to see. However, I am pleased to put on the record where we stand.
We debate the WCA a lot. We have debated it in this Committee and elsewhere, but, if noble Lords will forgive me, on this occasion I want to try to keep the debate in the context of the Bill.
The work capability assessment uses a number of specific, measurable criteria, covering all types of disability and health conditions, to provide an assessment of whether an individual has limited capability for work. The assessment was designed to take account of chronic and fluctuating conditions. It is not intended to be a snapshot but looks at what someone can do reliably, repeatedly and safely. It takes account of the effects of pain and fatigue. The healthcare professionals conducting the assessment are fully trained in understanding fluctuating conditions. Claimants get a full opportunity to explain how their condition varies over time.
The criteria were developed in conjunction with disability experts, medical professionals and a significant number of disability representative groups. They focus on physical and mental function. Examples of criteria include whether someone can stand or sit for periods of time, their ability to lift and reach, how they learn new tasks and whether they have problems engaging socially. The criteria fully take account of the fluctuating nature of many conditions. The training and guidance for the assessment is clear that where an individual is unable to complete an activity repeatedly or reliably, they will score points against the relevant criteria.
Baroness Wilkins
Does the Minister accept that he has not yet received the report of Professor Harrington’s working party on fluctuating conditions? There may well be recommendations that he has to make in that regard.
Lord Freud
Yes, Professor Harrington is currently looking at two areas: mental health conditions and fluctuating conditions. We have received one but not the other. We will clearly take those into account and look at them closely when they come in. To that extent, the debate today is slightly premature. It may not be later in the process of the Bill.
To pick up on the point of the noble Baroness, Lady Wilkins, on the medical evidence used, all available evidence, including that from GPs or specialists, is fully considered by the department’s decision-makers. The final decision is with the department. It gets a recommendation from Atos and takes that into account with all this other information. Following recommendations by Professor Harrington, decision-makers are now phoning claimants to ensure that they understand the process and can submit any additional medical evidence that they feel is relevant. However, GPs and specialists are not experts in disability assessment. Often, as advocates for their patients, they are not best placed to make a decision that affects benefit entitlement. We would not want to undermine the role of GPs as advocates for their patients.
As a result, the criteria provide a reliable, nuanced and measurable way of assessing limited capability for work. This ensures that a full understanding is gained of an individual’s disability or health condition, the effects of that disability or health condition, how these effects may vary over time and whether it would be reasonable for that person to work or not.
The amendment suggests that an additional test with additional criteria is added to the assessment of limited capability for work. However, the criteria suggested are not readily measurable or nuanced. It would, for instance, be impossible to measure the potential excessiveness of any workplace adjustments because they will vary depending on the size and capacity of the employer concerned.
An additional test would also not provide an objective or more accurate assessment of an individual’s limitations—and in some instances could hinder it. For instance, it would be difficult to provide strong evidence of whether someone currently out of work could work for 26 weeks without significant time off without knowing the type of job they would be in and their health circumstances at the time. Such judgements are difficult to make and, as a result, the criteria would risk being inconsistently applied.
Lord Wigley
May I press the Minister a little further on the position of people who might be capable of work if they have assistance? To the extent that the assistance is not available, would that be a definitive reason why they should not lose their benefits?
Lord Freud
It is clear that a lot of changes are going on and I am not surprised that people do not understand them all. One of the things that we have done means that claimants in the support group can volunteer to go straight on to the work programme, where there is substantial help for them to get back into work. That is one way in which we are helping people who may find themselves in the worst possible position to get into work. We have made a very straightforward mechanism.
I pick up the point of the noble Lord, Lord McKenzie. We are instigating a process whereby people, if they are in the WRAG with a prognosis, are asked by work providers whether they would like to come in at any point—I think at six months. They are then encouraged to volunteer for the process early. They do not move from the WRAG to JSA until there is another WCA. We are talking about a process here; it is a dial for these people, as the noble Lord said, but it has to be understood in the context of how the work programme operates as well as how the WCA operates.
Baroness Hollis of Heigham
My Lords, may I ask the Minister a couple of questions? The first is about Atos. I was slightly taken aback by his statement that he did not want GPs’ and consultants’ evidence going to Atos because they were the patients’ advocates and this was the proper role of the decision-maker. Behind this and other remarks that the noble Lord has made when talking about DLA, for example, is the belief that somehow there is an objective assessment that is to be much preferred to a “subjective” assessment—for example, the sort of diaries that disabled people are encouraged to keep when trying to determine what level of award they would get on DLA. Does the Minister accept the point that two people can have identical physical conditions but very different capacities for work by virtue of their education, mental health, family support networks and, frankly, the savings and income that they have behind them? That dowry of resource would allow someone in an identical physical situation to someone else to go into work when the other person could not.
The Minister seems to believe that there is something objective about this and that it must therefore be left with Atos because there is a sort of box-ticking going on here that is reliable. He believes that the GP, who has extended knowledge of the patient or applicant concerned, is somehow on the patient’s side and is a subjective advocate whose view should not be taken into account. I find that approach wrong. Why, given that Atos is medically qualified, should it not receive advice from other medically qualified practitioners who know the patient’s ability in certain situations of stress?
My second question has nothing to do with that and is about Croydon. From the sound of it, the Government’s Croydon centre is breaking the law of the DDA. Could the Minister follow that up?
Lord Freud
My Lords, I will follow up the Croydon situation. I was not aware of it, even though I was brought up in south Croydon.
Let me try to make this absolutely clear. The whole point of the assessment is to judge whether someone is functionally able to do the job, which is exactly what the noble Baroness was asking for. The point is that it can be done coherently and consistently by people who are experts in that function, whereas GPs and specialists are trained in diagnosis and treatments which are entirely different; it is not their job to see people and make those judgments day in, day out on a consistent basis. But that is what we are looking for. Atos Healthcare professionals are trained in disability assessment, which is assessing the functional effects of a person’s condition or disability. That is exactly what the noble Baroness is asking for.
Baroness Howe of Idlicote
My Lords, this has certainly been a very wide-ranging and passionate debate on these issues, with good reason. I am certain that my noble friend Lady Mar will read it with considerable interest and will no doubt have plenty of issues to raise at a later stage of the Bill, when I hope she will be available. We obviously have to wait for Professor Harrington’s final report, which will be extremely helpful. The various questions that were raised makes one realise how complicated the way through these things will be. Above all, we will need to reassure people with these fluctuating conditions that they will be treated fairly. On my noble friend’s behalf, I thank all noble Lords who have taken part in the debate and beg leave to withdraw the amendment.
Lord Wigley
“Effect on devolved administrations
Where the implementation of any sections in Part 1 of this Act may have an implication for other services which are the responsibilities of devolved administrations in Wales and Scotland, there shall not be a commencement of such sections until the impact of such provisions has been discussed with the relevant ministers of the devolved administrations.”
Lord Wigley
My Lords, the Minister will not be entirely surprised that I raise the question of the possible knock-on effects of the Bill on the services provided by the devolved Administrations. It could no doubt be argued that there is an equivalent or parallel question arising with regard to the consequences for local government in England, which I shall touch on a little later.
I tabled the amendment at this stage, towards the end of Part 1, because several of its provisions relating to disability, housing benefit and children have an impact on matters that are partly or wholly devolved. I could well have raised this question in different parts of the Bill but I shall content myself with just raising the issues at this stage if that is acceptable.
I remind the Committee that for both Wales and Scotland housing, social services, education, children’s policy and local government are totally devolved. It is the responsibility of the Government of Wales to provide the finance needed for those responsibilities within Wales. On numerous occasions during the past four weeks we have heard the Minister repeatedly resort to the discretionary payments and provisions that may be made by local authorities in some circumstances to make up for any cash or support losses suffered by vulnerable individuals who may lose out under the changes in this legislation. Someone has to pay for that at the end of the day, whether it is for emergency housing, social workers’ time or effort, or for the care bill needed for children or whoever.
The amendment is a modest one. It calls merely for the impact of legislation on devolved services to be discussed with relevant Ministers in Cardiff and Edinburgh before the provisions of Part 1 are implemented, which presumes that an impact assessment would have been made to enable that discussion to take place. The Minister may say that we are already having a dialogue with the devolved Administrations on these matters—I see him nodding, surprise, surprise—but I can assure him that Ministers in Wales have not so far received responses to their concerns that have put their minds at rest on a number of these points. For example, Welsh Ministers have expressed concern that changes to DLA rules will have a seriously greater effect in Wales than in England. There are 126,000 DLA claimants of working age in Wales, compared to less than 1.5 million in England. Wales has 5 per cent of the relevant population but 8 per cent of the claimants.
Welsh Ministers have expressed in writing, and made representations to Her Majesty’s Government about, their fear that these legislative changes will make disproportionate additional demands on social services departments in Wales and on the budgets of those service providers, and have disproportionate consequences for devolved budgets.
Lord German
My Lords, I am not able to support the amendment in the format in which the noble Lord has presented it. The wording states that matters should be discussed with relevant Ministers. The problem is that there are relevant Ministers—the noble Lord will know some of the people I refer to—who would probably say, “I am not going to discuss this with you”, and that would be the end of the game. The amendment, of course, is about consultation.
I should like to make two additional points. Much of what is in this Bill requires action by local authorities which, as I have said before, cannot be undertaken by this Government and this Parliament. This means that the actions necessary to enact many parts of the Bill will be requirements on others.
There is also a two-way dialogue in this. Let us take, for example, the housing issue, which was debated in earlier clauses, and the need for appropriate housing stock and its reshaping to match the changes that are about to take place in housing benefit, and the underoccupancy rules in particular. This will mean that the Government will not have any control over the level of investment in housing stock, the shaping of it or even, in a sense, the policy that will drive it forward.
It is crucial that, in the one direction, if this policy is to be implemented, there is a successful negotiation, not only with Northern Ireland—about which we heard earlier—but with the other parts of the United Kingdom. However, if you look at it the other way round, you may find issues where the legislative competence may not exist at the moment to undertake all the tasks being given to the devolved Administrations. Has any consideration been given to the legislative consequences? It may mean consent Motions being passed in other Parliaments to give action to some of the work that is going on.
We have now a very complex arrangement in the United Kingdom. I have already declared my hand— I think that social security is one of the pieces of glue that holds the United Kingdom together—but to make it work we must work together, closely align ourselves and understand the competencies which are not with this Parliament. We need an update on where we are with the current level of negotiation with both Scotland and Wales, which I suspect is different at present.
Lord McKenzie of Luton
My Lords, we should thank the noble Lord, Lord Wigley, for reminding us of the scope there is in the Bill and the profound consequences that it may have, not only for the universal credit but for all the other parts that are before us today and will be before us in subsequent Committees. I thought the noble Lord, Lord German, was on the point of distinguishing between relevant Ministers and irrelevant Ministers, but he did not quite go there.
We saw today—I am afraid I did not see it all—some of the detailed work that has gone on in preparation for, certainly, a big part of what is in the Bill. However, the point has been made by both previous speakers that it is not only about DWP and England; there is lots of work for others to do, particularly local authorities, who are about to reel under the impact of the Localism Bill and all that Mr Pickles has sought to visit on them.
Questions were raised about new burdens and how they work. It is important that that is factored in and that there is fairness and equity in how these matters are rolled out.
I acknowledge receipt of the Low review. Unlike the noble Lord, Lord Wigley, I have not had a chance to read it yet or to quote from it, but it looks to be a particularly valuable document. I hope I have a chance to read it before we get to DLA later in the Bill.
Lord Freud
My Lords, I am also looking forward to reading the Low review but I have been listening with great intensity to everything said in this Committee today. Social security is a reserved matter, although it will clearly have a limited, tangential impact on areas of policy where the Welsh Assembly and Scottish Parliament have competence, the obvious examples being childcare and housing. It does not, however, include DLA, which was one of the issues raised by the noble Lord, Lord Wigley.
I can reassure noble Lords that we have held, and will continue to hold, regular discussions with Ministers in the devolved Administrations and their officials. We are committed to the smooth and successful implementation of universal credit. To achieve that we are working closely with devolved Administrations and relevant local authorities to help them identify and address the impact that the introduction of universal credit will have on any services that they deliver. We are doing so in line with devolution guidance. My department is continuing to work through the detailed design aspects of universal credit which will be covered in regulations. Throughout this process they will continue to have discussions with the devolved Administrations, as appropriate, on these provisions and on others in the Bill. I can assure the noble Lord, Lord Wigley, that whatever I am saying here is relevant to the whole of the Bill.
I am concerned that this amendment would introduce a new and unnecessary level of bureaucracy. My noble friend Lord German hinted at some of the problems that it would result in. In practice, that would hamper progress and potentially delay the introduction of universal credit, let alone other aspects of the Bill.
Lord Freud
The issue is that if there is an additional, formal process, requiring a formal level of discussion at a formal time before you can clear particular things, that is another element of delay to negotiate when we already have a huge number. We are on a very precise plan of implementation here. Those noble Lords who were able to see the presentation of how we are introducing and implementing universal credit will be aware of the importance of a smooth process. I am concerned to avoid delays due to artificial elements of bureaucracy. Our ongoing discussions with devolved Administrations are the best way to address any impact on devolved services and achieve the successful implementation of these reforms. With that reassurance, I beg the noble Lord to withdraw his amendment.
Lord Wigley
I am grateful to the Minister for his response. I am intrigued by the way in which this bureaucracy is going to be such an imposition. If there are meaningful, ongoing discussions with the Administrations in Cardiff and Edinburgh involving a two-way flow of discussion, after which there is either a meeting of minds or not, that is not an extra level of bureaucracy. If that is not happening and it would be an extra imposition, I would be very concerned because the reassurances we are getting would be insufficient.
Lord Freud
My Lords, let me make myself utterly clear. If we had a statutory duty to discuss and if a devolved Minister were, for any particular reason, unavailable—my noble friend Lord German made my point here—our progress could be slowed. That unavailability could, potentially, be deliberate. We do not want another problem to negotiate when we already have a formal set of agreements on how we relate to devolved Administrations. We are sticking to those and we are talking regularly and informally on how best to get this through.
Lord Wigley
I note what the Minister says. He suggests that there could be some deliberate refusal to engage in such discussions. Does he seriously have examples of that happening that he could cite to the Committee, or is it something that he is imagining?
Lord Freud
My Lords, I could not reveal any confidences about the discussions that I have had with Ministers in devolved Administrations. Therefore, regrettably, I cannot answer that question.
Lord Wigley
I understand where the Minister is coming from. However, the point is that there may well be a difference of opinion between what is perceived as good public policy in Cardiff and Edinburgh and what is perceived as good public policy in his department under his Government. After all, they are different Governments of different political complexion, which will have different priorities. That is true of the current Government in Cardiff and the coalition Government who were there before them. The whole point is that we need some understanding on this.
Lord McAvoy
Is the noble Lord, Lord Wigley, perhaps interested in asking the Minister whether these confidential discussions are subject to freedom of information requests?
Lord Wigley
That would indeed be interesting. No doubt we will hear if that is the case. However, on this amendment I was also pressing for assurances—it may well be that the Minister was giving them in the words that he used—with regard to the application of the concordat. I assume from his words that the concordat—I quoted from paragraph 17—is fully applicable and will be in the context of these negotiations; and, likewise, that the assurances of “no surprises” that have been given to local government will also be applied. If there are any direct relationships between his department and local government in Wales, which there could be in the context of housing benefit because there is a direct relationship, will those assurances apply equally? I am sure that the Minister is about to nod that that is his understanding, but I should be grateful if that could be put in writing.
Lord Freud
I repeat my point: we are absolutely moving in line with devolution guidance. We have no intention of doing anything other than that.
Lord Wigley
I have probably got as far as I will get by rattling around this set of bones but this is clearly a matter of some concern. We will not know for certain until the Bill becomes an Act and how this works is turned into reality. However, I very much hope that if, in that reality, it transpires that significant additional costs are landing on local government in England or the devolved Administrations in Wales and Scotland, the Government will pick up the bill in the spirit of the concordat and the other devices that they have if it is their actions that are causing those additional costs. On that basis, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, I shall speak also to our other amendments in this group, Amendments 55G, 56B and 69ZA. These amendments relate to the desirability of making a greater number of regulations under the Bill subject to the affirmative resolution procedure to facilitate better scrutiny of any changes that affect claimants and future claimants of the benefits system. In particular, future attempts by regulation to define the meaning of the terms “disabled”, “severely disabled” and “work” should be submitted to both Houses of Parliament for approval. There are several other amendments in this group, which I might speak or respond to after others have spoken to them. I beg to move.
Lord German
My Lords, I shall speak to the amendments in my name, Amendments 59, 61, 63, 64, 65, 66, 67, 68, 69, 70, 77, 96, 99, 101 and 106, and to whether Clause 47 should stand part of the Bill. It will not take a wizard to note that these recommendations are based on the report to this House of the Delegated Powers and Regulatory Reform Committee. Before I give a general perspective on why I have tabled these amendments and my response to individual amendments, I shall simply look at the rationale that runs through the Delegated Powers and Regulatory Reform Committee’s reasoning for these recommendations.
The first thing it says—and I think we all agree with this—is that this is a detailed and complex piece of legislation and that it needs to make provision for as wide a range of personal circumstances as is practicable, but it has a perceived need for adaptability. That is fundamental. It comments that this is a significant revision of social security means-tested benefits since at least 1986. It also comments on the way in which there has to be an opportunity for subsequent amendment and for views on the way in which this is being implemented. Clearly, as we all know, this is a skeleton Bill, and the regulations put the flesh on the bones. That is why it is very important that we get the arrangements right, particularly bearing in mind those key principles that I have just outlined.
The Government have accepted some of the amendments, so I will not dwell on them. They have accepted Amendment 59. Amendment 63 proposes the removal of claimants subject to no work-related requirements. This was an issue that came up earlier this afternoon. This amendment removes the requirement from the affirmative procedure only for the first set of regulations and later puts it back into affirmative every time it occurs. I notice that the Government have not yet responded to this amendment, and I hope that they will deal later with the question of whether it should be affirmative throughout. It falls into the category where we may wish subsequent amendments to be dealt with by the affirmative process because they have such a substantial impact on the clients who fall under these no work-related requirements.
Similarly, there is the issue of hardship, and I have done the same thing there. I have taken that from being affirmative for the first occasion only, and in a later amendment I suggest that it should be wholly affirmative. Amendment 65 proposes that the basic conditions be subject to the affirmative procedure throughout. These basic conditions set out by Section 4 and the regulations beyond it specify certain circumstances in which a person has been treated as having accepted the claimant commitment. The basic conditions are laid out in Section 4(1). These are the bare bones of universal credit and should be subject to the affirmative procedure because they are part of the fundamental structure of the Bill. These basic conditions may well change. There will be a requirement for some flexibility, knowing how the system will pan out over time. As the people who are going to be affected by this will be the more vulnerable, it seems to me that we should have an affirmative resolution for those regulations throughout.
On Amendment 66, the Delegated Powers Committee—whose report I read very carefully—said that if the Government could convince it that the negative procedure would satisfy it, that would be sufficient. In their response, the Government said that they would seek to reassure the committee that the negative procedure would be sufficient. I wait to be convinced, as I suppose do many other noble Lords. I am grateful that the Government have changed from a negative to a first-time affirmative procedure, but the amendment questions whether that is significant. I believe that the powers are significant, and the Delegated Powers Committee worried about the restrictions put on claimants and about whether they would be suitable for differing personal circumstances. The Bill and the documents that we already have seem to allude to using these measures in a positive way—something that I support—suggesting that restrictions on types of work will allow claimants to look for work in sectors in which they are interested or for hours that are appropriate for them. Quite clearly, it is an area with significant and changeable circumstances. If it is the view that the negative procedure should be used for routine matters, then, when these policies proceed, there should be an affirmative process.
Amendment 68 relates to the claimants who are subject to no work-related requirements. The Government said that they would make that subject to the affirmative procedure for the first regulations. Once again, the Regulatory Reform Committee asked whether the Government would confirm that there would be only minor adjustments after that first set, and I think that we might be content with that.
With Amendment 69, it is exactly the same process. The Government have put in the affirmative procedure for the first time. If they can assure us that the regulations set out in the first instance are unlikely to change a great deal thereafter, I think that that will be satisfactory as well.
Amendments 70 and 99 would remove the words “Scottish Ministers”. That would not only create equality between the rest of the country and Scotland but ensure that, because Scotland would be doing these regulations by affirmative procedure, the rest of the country would be doing them that way as well. I did not understand why it was not.
Clause 47 provides that regulations under Sections 6 and 7 of the Jobseekers Act 1995 should require only the negative procedure. As of now, they have the affirmative procedure, and the regulations concern claimant conditionality and the requirements for claimants to be available for and actively seeking work on which their jobseeker’s allowance is dependent. The predecessor committee that looked at the matter in 1995 for the Jobseekers Bill considered the provisions concerning availability for work and actively seeking work to be of fundamental importance to the Bill and recommended that regulations about them should require the affirmative procedure whenever made. The DWP memorandum on this topic says:
“Regulations such as this are generally advantageous to JSA claimants. The Department has increasingly found that having to use the affirmative procedure makes implementing the changes more onerous than it needs to be”.
Can the Minister say what “more onerous” means? Does it mean that you have to have open consultation, which seems to me important? The Government rejected the recommendation from the Delegated Powers Committee, saying that moving to the negative procedure was absolutely necessary. I think we would like to know a bit more about what was absolutely necessary.
With the introduction of universal credit, there are bound to be uncertainties that really should not be left to the negative procedure in this matter. Some changes are envisaged in the regulations using the negative procedure, meaning that the Secretary of State can restrict the conditions on a claimant so that they are searching for a job that they want or may not want or one that is near them or is paying well. The precedent set by the previous legislation in this area—in fact, all legislative matters in this area in the past—has required the affirmative procedure to be used for issues of this kind. I wonder whether the Minister can convince us that we need to move in a different direction.
The Government have accepted Amendments 77 and 96, while they have put down an amendment to the part of the Bill covered by Amendment 101, and they have also agreed to Amendment 106.
With a Bill of this magnitude, which has such importance for a great number of people, over the years to come we should be absolutely clear that we are going to have a fully transparent process to allow the debate to occur, not just this year or next year but for the length of time that this Bill survives before changes are made and whenever these matters become important to the public. We need to have that public debate, and I think that Parliament deserves the affirmative resolution in the areas that I have outlined.
Lord Kirkwood of Kirkhope
My Lords, I find to my surprise that I have an amendment in the middle of this group, Amendment 71, which I am sure I conceived of in a reflective moment in my bath a long time ago. The amendment proposes a new clause entitled “Universal credit: requirement for simplicity”. It says:
“Nothing in the regulations giving effect to this Part shall introduce avoidable complexity to the claiming, calculation or payment of universal credit.”
I do not think that anyone in the Room is in favour of avoidable complexity. However, the point that I wanted to make, as we come to the end of the universal credit part of the Bill, was that, with a bit of determination, for the first time you can achieve simplicity. Even if unavoidable complexity were engrained in the legacy systems and the rest of it, perhaps it would be positive to have a statutory duty. There might be another Government in due course—you never know what might happen—and you could foresee circumstances in which there might be some back-sliding in terms of some of the gains that we have made with universal credit. If it is possible to do it—and I think that there have been signal successes in this direction, and they are demonstrated in the legislation that we have in front of us—maybe it would help to put in perpetuity for future Ministers a duty to avoid unnecessary complexity. It is something that could always be argued if future Governments came up with other unnecessarily complex systems. Perhaps I am talking to myself here, but the point is at least worth considering.
This is, rather obviously, a probing amendment, but I would like to hear the Minister’s thoughts: is it a completely daft idea, or might there be some merit in trying to get Ministers—the noble Lord’s heirs and successors—always to think carefully about unavoidable complexity in future iterations and reforms, particularly of the universal credit? It would be so easy to lose a lot of the advantages if we started making it—as we always have done, for the past 30 years—piecemeal and patchwork, with special pleading for special cases. We end up with incoherence, which is avoidable.
Lord McKenzie of Luton
How does the noble Lord envisage definitions of avoidable complexity being built in to the legislation—by regulation, perhaps, or a bit of guidance here and there, or perhaps even something in primary legislation?
Lord Kirkwood of Kirkhope
I have no idea—it was a thought in my bath. I confessed that at the beginning. However, it is worth reflecting on. Of course the noble Lord is absolutely right—as soon you start thinking about it, you start putting in layers of complexity. I think a challenge to Ministers is not a bad idea, even if it was just on the wall or behind the desk—I would settle for that. I beg to move.
Lord Freud
My Lords, in some areas I broadly agree with the Delegated Powers and Regulatory Reform Committee’s suggestions, and the Government have brought forward amendments to make these changes. Where key principles are established the first time the powers are used, these amendments will make the regulations subject to the affirmative procedure in the first instance. As to Amendment 66, Clause 6(1)(a) allows for regulations to set out circumstances in which a claimant will not be entitled to universal credit even though they meet the conditions of entitlement. I am grateful for the opportunity to reassure the Committee that the negative procedure will afford Parliament adequate control over the use of this power.
As I set out during our debate on Clause 6, there will be a number of specific groups who will not be able to access universal credit. These may include certain prisoners and children leaving full-time care who remain the responsibility of the local authority where payment of universal credit would lead to duplication of provision. This will broadly reflect similar rules in current benefits.
Similarly, I would like to reassure noble Lords that it is appropriate for the regulations on hardship and claimants falling into the no work-related requirements group to be subject to the affirmative procedure only in the first instance. In both cases, our intention is that the initial set of regulations will clearly establish the key principles of the new system. We have already provided noble Lords with a draft of the regulations to be made under Clause 19(2)(d). We have also published a briefing note on the conditionality threshold. We have debated these matters at some length earlier in Committee. Once the system that we have set out is in place, it is unlikely that the regulations will change significantly, and I hope that is the assurance that my noble friend Lord German was looking for.
There are three areas where I am unable to accept the committee’s recommendations or the noble Lord’s amendments. First, the committee and the noble Lord have suggested that Clause 47 should be removed from the Bill. Clause 47 relates to the parliamentary procedure for regulations relating to the requirements on jobseeker’s allowance claimants to be actively seeking, and available for, work. These powers are currently subject to the affirmative procedure. The clause makes them subject to the negative procedure.
These powers were groundbreaking when first introduced in 1995, as the noble Lord pointed out. However, the House now has had more than 15 years experience of how these powers are used. There is a wide understanding of what the phrases “actively seeking” and “available for work” mean; in fact, it fundamentally underpins our active labour market approach. We believe that this experience means that it is now far more appropriate that this power is subject to the negative procedure. Their use is now well established and we have no intention of departing from that precedent.
Secondly, Clauses 33 and 89 allow for supplementary, incidental, transitional and consequential amendments to other legislation to be made through regulations. To pick up on the point that my noble friend made about the Scottish Government, who have powers under Clause 33 to make consequential amendments in their area of remit, they specifically requested that these regulations be made by affirmative procedure in the Scottish Parliament. This was the result of one of our helpful non-statutory discussions, which I am sure an FOI request will show in all its glory. Amendments 70 and 99 would make any regulations that amend primary legislation subject to the affirmative procedure.
It is likely that a large number of minor amendments to other legislation will be necessary as a result of the importance and scale of the changes that the Bill introduces. It is not unusual for some of these changes to be made through secondary legislation, and such consequential powers are usually subject to the negative procedure. Moving away from this precedent would take up a very significant amount of parliamentary time and could pose a risk to the timetables for both universal credit and personal independence payment. We therefore feel that the negative procedure remains appropriate.
Amendments 55E to 55G and 69ZA seek to make regulations that contain definitions of “disabled”, “severely disabled” or “work” subject to the affirmative resolution procedure. It inserts a new subsection into Clause 43 and consequential amendments to the terms where they arise in Clause 41. I can reassure the noble Lord that these amendments are not necessary. Clause 43(3) already provides that a wide range of regulations will be subject to the affirmative procedure the first time that the power is exercised. This includes the regulations to be made under Clause 12 providing for additional amounts that will include the definitions of the terms mentioned in the amendment. Noble Lords may recall that the illustrative draft regulations on elements provided to your Lordships already contain a draft definition of “disabled” and “severely disabled”.
Under Amendment 69ZA, the noble Lord seeks to significantly widen the scope of regulations subject to debate in both Houses, covering consequential amendments and changes to working age benefits and pension credit. It would be completely impractical for this House to debate the numerous consequential amendments being made to both primary and secondary legislation, and a poor use of parliamentary time. I have already explained why it is more appropriate that Clause 33 should remain subject to negative procedures, but none of the other provisions identified by this amendment was covered by the report of the Delegated Powers and Regulatory Reform Committee. We are therefore satisfied that the negative procedure is appropriate.
With regard to universal credit, I should also point out that all the regulations on entitlement, awards and claimant responsibilities will be in a single set of regulations. They will necessarily be affirmative in the first instance because if any regulations within a set are affirmative they all are. So, even if the Bill does not require the affirmative procedure for specific points, it will apply in practice.
Amendment 71 would introduce a different form of scrutiny for universal credit regulations requiring the Secretary of State to avoid creating any unnecessary complexity into the system. I strongly support the spirit of the amendment in the name of the noble Lord, Lord Kirkwood. A key aim of universal credit is to simplify the benefit system. Simplification is a publicly stated, fundamental principle that has guided the design of the new system. Any requirement for simplicity would have to be finely balanced against other considerations, such as affordability or easing the transition to work. I acknowledge that this is a probing amendment, but perhaps a duty to consider the simplicity of any changes, as suggested by the noble Lord, would be a better approach than that in the amendment. However, any Government would clearly have to be concerned about the detailed interpretation of simplicity, which, as the noble Lord, Lord McKenzie, took delight in pointing out, is a subjective term.
Nevertheless, I will look at this idea very closely. I can assure the noble Lord that we will put in place a number of non-legislative safeguards to protect universal credit from unnecessary complexity. These include governance processes to ensure simplification and consistency in policy design, and working with claimants to ensure that universal credit is simple to understand and administer.
Given these explanations, I urge noble Lords to withdraw or not move their amendments.
Lord McKenzie of Luton
My Lords, I am happy to do so. However, I should like to comment on the issue of avoidable complexity. The Minister said that he had to balance that against issues of affordability and ease in transition. I accept that, but you also have to strike a balance around issues of fairness. One of the problems of simplicity and standard systems is that they do not necessarily take account of some of the individual circumstances that have to be addressed. You see it perhaps more acutely in the tax system, but it applies equally to the benefits system. Although I clearly support getting things as simple and straightforward as they can be, fairness should also be one of the balancing factors. I beg leave to withdraw the amendment.
Lord Kirkwood of Kirkhope
“Benefit regulator
Nothing in this Part shall be introduced until a claimant regulatory authority is established to oversee the professional standards being observed by those government departments and other agencies delivering universal credit and other benefits.”
Lord Kirkwood of Kirkhope
My Lords, I hope that in the remaining few minutes before the Committee considers wrapping up for the day we can deal with my two amendments in this group, which are quintessentially simple ideas. Amendment 56 suggests having a benefit regulator, and Amendment 113 proposes an office for social protection. I freely confess that these ideas can be criticised for increasing quangocracy, but before the noble Lord, Lord McKenzie, attacks me for creating new quangos, it is certainly not my intention to do that. These are very simple quangos.
I have tabled Amendment 56 because we are coming to the end of an important piece of Committee work that will transform the way that people think about benefit delivery in the future. I see in other aspects of my work that there has been a general increase in public discontent with the services that they are getting across the public waterfront. Complaints against doctors and public servants are increasing. That may be for the beneficial reason that people are more active in demanding a proper service. If you look at the changes that we are making—and the Government argue rightly that this is a culture change if it is to be successful—perhaps we should be looking at the provision of public services delivered by professionals within the Civil Service, in government departments and in the plethora of government agencies. It applies not merely to the DWP or the Child Support Agency, but to prime providers in the Work Programme. There is a very complicated set of hierarchies, which I am sure are doing their best, but they all need to be invested with a culture that underpins the ethic of good service to the public. A regulator may not be the right word and an office or new organisation may not be necessary, but I feel strongly that we should be looking to the Government and the department to set clearly some new paradigms about how they will deliver universal credit as we go forward.
If I thought that previously, I was reinforced in that view by looking at the recent White Paper, Open Public Services, which contains some of the principles of good complaint handling in terms of the need for public services to be accountable to users and taxpayers, and to be responsive to the people whom they serve. That White Paper sets out the principles clearly for all to see and sets the high standard that we should all aim for. I also carefully considered the work of Ann Abraham—the Parliamentary and Health Service Ombudsman—of whom I am a fan. Last month, she produced a very interesting report, Responsible and Accountable? It repays careful study for some departmental Ministers in the DWP because Work and Pensions and the subsequent agencies are at the high end of most of the complaints.
Baroness Lister of Burtersett
My Lords, I shall speak briefly in support of Amendment 113. I do not know whether this was another amendment cooked up in the noble Lord’s bath—I forgive him for “going forward”—but I like the idea of an office for social protection. The notion of social protection is one that we do not use enough in this country; it is very much a continental, European concept, and a very important one. I am not arguing for a new quango either but the spirit of noble Lord’s amendment is very important. I have lived through more fundamental reforms of social security than I care to remember, and not one of them has addressed the points made in this amendment about the adequacy and the sustainability of the different parts of the system. If nothing else, there should be a requirement on the Government that when they bring forward reforms of social security they should consider these fundamental questions.
We have touched on these points in Committee already. One noble Lord asked questions about the principles underlying social security. I intend to come back to them under an amendment to Clause 51, when I will to talk about a contributory principle. I am slightly reluctant to think about this as being part of the responsibility of the Social Mobility and Child Poverty Commission because social security is not just about poverty. The whole point about social protection is that it broadens it out beyond poverty—a group “over there”. One possibility to think about is whether to broaden the remit of the Social Security Advisory Committee so that periodically it reports on the adequacy and sustainability of the different parts of the system.
Baroness Hayter of Kentish Town
My Lords, I declare an interest in regulatory and professional services, having chaired the Legal Services Consumer Panel, sat on the Board for Actuarial Standards, overseen insolvency practices and sat on the Bar Standards Board, the Pension Regulator and the Property Standards Board. So I have a long involvement with non-economic regulators who oversee the professional delivery of services. These kinds of regulators have a large role to play as they are very much about what we called raising standards—although the words used by the noble Lord, Lord Kirkwood, when he talked about “driving up” standards may be even better. This goes beyond public services. That may be what is in front of us now but consumers are demanding this from a whole range of service providers. It has shaken some of the barristers who do not really like the fact that they have to conform to new consumer-set standards. But that is what the users of all services now want and that is what this kind of regulator provides.
I am less afraid of the idea of quangos—although I am sure that that is not a general view—but what these kinds of regulators do is to adopt codes of conduct; set good practice guidelines and minimum service standards; and then ensure that quality assurance by way of setting minimum training or entry qualifications, CPD requirements and the monitoring of services. That monitoring is not just about compliance, important though that is, but also provides a feedback loop so that lessons are learned, either for standards and the way they are defined and set, or for the way staff are trained, or, as was discussed this morning, to allow systems to continue to be developed in the light of the way the service is delivered.
This kind of standard-setting is particularly important in view of the ending of legal aid to assist complainants and users because the only other monitoring will be via this kind of organisation. This kind of regulator—for want of a better word—can identify whether particular groups are underrepresented in any category and whether all groups are being properly serviced and properly served. As the Minister has stated on a number of occasions, some decisions must be taken on a case-by-case basis—in-work conditionality is a particular example. This will involve tremendous discretion in the hands of thousands of decision-makers across the country, so clear guidance, good and consistent training and ongoing monitoring of decisions by some kind of regulator with authority will be crucial to ensure that the service is fit for purpose.
Unfortunately, the Government refused to accept our earlier amendment that the Jobcentre Plus side of the claimant commitment should be laid down. It is therefore even more important that this standard-setting will be open, transparent, raise standards and, most importantly, create confidence in the new system. This proposal has some merit. I am not sure whether or not the formula will achieve it, but we look forward to hearing the Minister’s response.
Lord Freud
My Lords, I share the noble Lord’s concern that the benefits system must be fair, efficient and affordable, which is indeed why this Bill is before the Committee today—to ensure that benefits are well targeted and fair and the system is simple to understand and simple to administer.
The first of these amendments would introduce a claimant regulatory body for universal credit. We are committed to involving claimants throughout the development of universal credit. This involvement will ensure that issues are known, understood and mitigated as universal credit is being built. As part of this, we are already conducting a programme of research among a broad range of future claimants and are testing the design of the claimant commitment with claimants, front-line staff and stakeholders. This process will continue over the coming months to ensure that claimants have real and sustained input into the creation of the new benefit.
The other amendment in this group would create a wider office for social protection, looking at the benefits system as a whole. There are already a number of other bodies with oversight of the benefits system and any changes made, not least the Social Security Advisory Committee. As well as scrutinising regulations, the committee comments on a range of operational matters, especially in relation to claimants’ interests. While I am grateful for the contributions of the noble Baroness, Lady Lister, and my noble friend Lord Kirkwood, I am not convinced that another body is needed. The coalition Government are committed to reducing the number and cost of quangos, and increasing accountability by transferring the responsibility for key decisions on public policy back to Ministers. Ministers are held to account in Parliament, including by powerful committees such as the Public Accounts Committee and the Work and Pensions Select Committee, not to say the Chamber of the House itself.
I do not intend to reverse this direction of travel, and I would urge the noble Lord to withdraw his amendments.
Baroness Lister of Burtersett
My Lords, before the Minister sits down I would like to make clear that I was not arguing for a separate body. I was arguing that Social Security Advisory Committee could perhaps be asked specifically to consider, on a regular basis, the issues contained in the noble Lord’s amendment—possibly in its annual report—namely the adequacy of the different elements of the system, the sustainability and the way the different elements of the system fit together. It would be very helpful to have that kind of annual overview. Perhaps the Minister can take that away and consider it.
Lord Freud
My Lords, I know it is not our House, but I point out that the Work and Pensions Select Committee has that remit—a very direct remit to look at the system overall. If you are looking at how individual claimants are treated, we have a process of tribunal and independent review. There are a whole number of different processes.
Baroness Morgan of Drefelin
Can the noble Lord tell us who would be responsible for promoting and funding research into these questions? If there is not a body which is taking an interest in evaluating the impact of changes in social security, who will be funding, gathering and evaluating independent evidence looking at the impact of these changes or changes like this?
Lord Freud
My Lords, how we research changing universal credit is something that I am taking an active interest in getting on top of now, as I discussed on a previous day. Clearly there is a lot of research. The department puts out an enormous amount of research every year. Huge tomes come out monthly, and I know noble Lords enjoy reading them all. There is no lack of adequacy of independent research on DWP matters.
Lord Kirkwood of Kirkhope
My Lords, my main priority is to get back to my bath as soon as possible. If I do not get my 7 pm train I will not do that, so I thank the Minister for his reply, and I am happy to withdraw the amendment.
Lord Freud
“Pilot schemes
(1) Any power to make—
(a) regulations under this Part,(b) regulations under the Social Security Administration Act 1992 relating to universal credit, or(c) regulations under the Social Security Act 1998 relating to universal credit,may be exercised so as to make provision for piloting purposes. (2) In subsection (1), “piloting purposes”, in relation to any provision, means the purposes of testing—
(a) the extent to which the provision is likely to make universal credit simpler to understand or to administer,(b) the extent to which the provision is likely to promote—(i) people remaining in work, or(ii) people obtaining or being able to obtain work (or more work or better-paid work), or(c) the extent to which, and how, the provision is likely to affect the conduct of claimants or other people in any other way.(3) Regulations made by virtue of this section are in the remainder of this section referred to as a “pilot scheme”.
(4) A pilot scheme may be limited in its application to—
(a) one or more areas;(b) one or more classes of person;(c) persons selected—(i) by reference to prescribed criteria, or(ii) on a sampling basis.(5) A pilot scheme may not have effect for a period exceeding three years, but—
(a) the Secretary of State may by order made by statutory instrument provide that the pilot scheme is to continue to have effect after the time when it would otherwise expire for a period not exceeding twelve months (and may make more than one such order);(b) a pilot scheme may be replaced by a further pilot scheme making the same or similar provision. (6) A pilot scheme may include consequential or transitional provision in relation to its expiry.”
Lord Freud
“( ) section 4(7) (acceptance of claimant commitment);”
Lord Freud
Lord Freud
“( ) section 18(3) and (5) (work availability requirement);”
Lord Freud
Lord De Mauley
My Lords, this may be a convenient moment for the Committee to adjourn until Tuesday at 3.30 pm.
House of Lords
Royal Assent
UK: Union
(13 years, 1 month ago)
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Lord Soley
To ask Her Majesty’s Government whether they have any proposals to inform the public about the advantages of maintaining the union of the United Kingdom.
The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, the noble Lord, Lord Soley, said at Second Reading of the Scotland Bill that the United Kingdom,
“is one of the most effective political and economic unions that the world has ever seen”.—[Official Report, 6/9/11; col. 234.]
The Government wholeheartedly agree, and my ministerial colleagues and I will do all that we can to make the case for the United Kingdom. I also urge those who support this unique partnership to join the debate and promote its benefits.
Lord Soley
I am very grateful for that Answer. Does the noble and learned Lord agree that this message needs to go out not just in Scotland but in England too? There is a very real danger to our nationalism and we need to get out the message that many states around the world envy our stable system, which has brought peace and prosperity to the United Kingdom and is a model for other countries. Does he also agree that this issue is not for any one party or any one part of the United Kingdom?
Lord Wallace of Tankerness
My Lords, I certainly agree that this is not for any one party or any one part of the United Kingdom. Judging by the response to my Answer and to the noble Lord’s Question, we all share a common interest in spelling out the merits for the union, which is of 304 years’ duration. I think the question the separatists have to answer is: why separate?
Lord Lang of Monkton
My Lords, if the Greeks can organise a referendum in four weeks, why should it take four years to organise one in Scotland? Is not the idea of the Scottish national Administration in Edinburgh organising a referendum on independence a bit like a plaintiff presiding over their own case in court when seeking a divorce? Would it not be more appropriate for the British Government and the British Parliament to take hold of this issue and to hold the referendum soon with one simple question: do you want Scotland to leave the United Kingdom?
Lord Wallace of Tankerness
My Lords, I certainly think that one simple question that focuses on whether Scotland should or should not be a part of the United Kingdom is key. We should avoid any attempt to muddy the waters—as I think one rather influential academic put it last week—in suggesting a second question. That is spot on. I do not think that that would bring the clarity that we need on an issue such as this. I assure my noble friend that United Kingdom government Ministers have been pressing the Scottish Government to come clean as to their timings and, more specifically, what they mean by independence. My right honourable friend the Secretary of State for Scotland has posed a number of questions and we are still waiting for answers.
Lord Empey
My Lords, does the noble and learned Lord accept that a point will come shortly where the uncertainty created by the Scottish situation will impact negatively on investment opportunities in Scotland? When will a proper pro-union argument be put firmly not only to people in Scotland but to people throughout the rest of the United Kingdom?
Lord Wallace of Tankerness
It is interesting that the noble Lord should mention the economic impact of the uncertainty. He may have seen a report published earlier this week by Citigroup on the very important issue of renewable energy, which made the point about the dangers of investing in Scotland while there is uncertainty about the future of the constitutional position of Scotland. The other side of that coin is that there are considerable benefits of a united kingdom in taking forward that agenda to ensure that we meet our climate change targets. It is not often that I have the opportunity to quote with approval a Daily Record editorial, but today it says:
“In the meantime, it's hard to disagree with pro-UK politicians who claim green energy is a great example of Scotland and the rest of the Britain working together”.
Lord McConnell of Glenscorrodale
Does the Minister accept that one of the great strengths of the union of the United Kingdom is the way in which the Scots, the English, the Welsh and the Northern Irish have moved throughout that kingdom over the last three centuries? Do the Government take a position on Scots who do not currently live inside the boundaries of Scotland but may have an interest in a referendum that will determine their country’s future?
Lord Wallace of Tankerness
My Lords, the noble Lord is absolutely right to indicate that the flow of people throughout the United Kingdom is important. Many families in England have relations in Scotland and vice versa. That only underlines the important cultural and social ties as well as the economic and social benefits that flow from our United Kingdom. However, we have made it clear in the past that a referendum would be on the basis of the people living in Scotland at the time of that referendum.
Lord Stephen
Does my noble and learned friend agree that rather than being for the UK Government it should be for Alex Salmond and the SNP to spend some of their own time and money explaining what full independence really means? For example, is it not time that Alex Salmond told us how many military bases would remain in Scotland? How would he split the Scottish pension system from the UK system? Would he create an entirely new tax and benefits system for Scotland; and if, as he says, he wishes to retain sterling as Scotland’s currency, would EU membership allow this? If it would, what powers would he intend to have to instruct Mervyn King and the Bank of England on monetary issues, or would he just leave that to George Osborne?
Lord Wallace of Tankerness
By asking that question, my noble friend makes it very clear that the First Minister of Scotland and his party have a host of questions to answer, not least on the currency because there are even those who think that if Scotland wished to join the European Union it would be obliged to adopt the euro. Andrew Hughes Hallett, who is on the First Minister’s Council of Economic Advisers, indicated that, as was reported earlier this week. It would be rather odd. Some countries, but not many, adopt the currency of a foreign country but have no powers. It just underlines what a weak position Scotland would be in.
Lord Forsyth of Drumlean
Could my noble and learned friend consider the idea of establishing an independent commission to look at the benefits of the union to the United Kingdom as a whole and the consequences of separation, given that the nationalists are determined to hold a referendum on independence, so that everyone can see what the consequences could be and what the facts are?
Lord Wallace of Tankerness
My noble friend makes a very interesting and very constructive suggestion. He will understand that I am not in a position to accede to it from this Dispatch Box, although I will consider it. In the mean time we will not wait for the setting up of any commission that might come along. We will continue to make the case for the United Kingdom.
Lord Wigley
My Lords, I can see that I am in a minority in this House. I want to press the Minister on the reply he gave a little earlier that he was fully in support of a single-question referendum in Scotland. If that was the case and there were a single-question referendum in Scotland and the people of Scotland voted yes, would his Government accept that as the outcome?
Lord Wallace of Tankerness
Well, my Lords, it would depend on what the question was. It is important that we have clarity on this. There is an idea that you could have two questions. For example, the First Minister has indicated that if what he describes as “devo max”—perhaps even less defined than independence—was to get 98 per cent of the vote and “independence” got 51 per cent, independence would trump devo max. I do not think that that is the sort of basis on which we should go into any referendum campaign.
Loan Companies: Interest Rates
(13 years, 1 month ago)
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Lord Kennedy of Southwark
To ask Her Majesty’s Government what measures they propose to deal with high street lenders who charge excessive rates of interest, particularly to those on the lowest incomes.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Government recognise that it is often the most vulnerable who have to pay the highest costs when accessing credit. We are commissioning research into the impact of introducing a cap on the total cost of credit that these lenders can charge. We are also looking at the high cost credit market as part of our consumer credit review and we will publish our final response before the end of this year.
Lord Kennedy of Southwark
I thank the noble Baroness, Lady Wilcox, for her response. Does she agree that companies which charge 2,000, 3,000 or even 4,000 per cent are legalised loan sharks? Will the Government look at requiring these companies to put a health warning on their advertisements in highly visible, large type explaining clearly the costs of their services and advising people that their local credit union would offer better value for money?
Baroness Wilcox
The noble Lord, Lord Kennedy, has covered three big items. I know what an expert he is on the last one, so I will leave that for the moment. This Government and the previous Government have looked again and again at capping interest rates, but our worry has always been that that would push people towards illegal money lending. We then do not know when they are in trouble and they can be treated very violently. Even looking to see whether we should be changing this in any way is a new venture for us. The noble Lord is absolutely right in his second point. People should have the right information on which to base their choices.
Lord Alton of Liverpool
Has the Minister seen the latest figures for personal debt, showing that a staggering £1,450 billion is owed in personal debt by the nation at the present time? If it is right—and it is—to reduce national debt, should we not be doing far more to help families who are massively in debt in Britain today, especially through the promotion of credit unions?
Baroness Wilcox
We have tried and continue to try to see how we can get people to set up credit unions. They are so popular in America, Australia, Canada and Ireland, but we just do not seem to like them in this country. However, we are continuing to struggle to do that. The noble Lord is right about total household debt: £1.45 trillion is an enormous figure, but of that £1.24 trillion is owed on mortgages. We are a real country for buying our own houses and taking out mortgages. The amount left over is the money owed on personal loans, credit cards and high-cost credit. For this, we must make absolutely sure that people have the right information before they get themselves into difficult situations.
Lord Razzall
My Lords, taking the last point made by the noble Baroness in response to the previous question, is she satisfied that the review the Government are carrying out will ensure absolutely that the result does not force the very poor into the hands of loan sharks, whose method of collection involves violence?
Baroness Wilcox
When the consumer credit review report comes out, we will know its findings, so I cannot comment on them for the moment. However, it is always the most vulnerable who we must worry about because they are the least likely to ask for help until it is too late. We will continue, as we would always continue, to make sure that the disadvantaged really are a priority for us.
Lord Young of Norwood Green
My Lords, can the Minister advise the House on whether the Government have any plans for regulating commercial providers of debt management plans, which have never been regulated and under which consumers pay upfront fees and take longer to pay off their debts? Does the Minister agree that there is a real need for free and impartial debt advice such as that provided by the Consumer Credit Counselling Service?
Baroness Wilcox
We certainly agree that there should be free debt advice and we will continue to provide it. I think the noble Lord also asked about debt management companies. We are concerned about these. The Office of Fair Trading has recently taken action in this area and we are working with the industry itself on how we can resolve these issues. Good people in the industry do not want the bad people in it because they give them all a bad name.
Lord Marlesford
My Lords, are the Government at all concerned about the fact that there is some £60 billion of outstanding credit card debt on which interest rates of 17 per cent or more are being charged? Much of this is non-performing. Does that not cast something of a shadow over the balance sheets of the banks?
Baroness Wilcox
We are working hard to bring under control unsustainable borrowing and irresponsible lending—between which lots of bad things happen. There is no doubt that good information is terribly important for people to be able to make decisions. However, the Government are not risk averse to the freedom for our people to make decisions and take risks—and fail. We want our people to be free to succeed and that means that some of them will fail.
Lord Elystan-Morgan
My Lords, would the Minister accept that in many credit contracts, judges in a civil capacity have a considerable jurisdiction to strike out and amend their unconscionable terms? Will she see to it that the greatest publicity is given to this power which has long been vested in civil judges?
Lord McNally
I think that the House should hear from my noble friend Lady Gardner.
Baroness Gardner of Parkes
My Lords, is the Minister aware that many of us now get six or more phone calls every week? It is not just a high street issue but has become an absolute telephone menace. People are phoning all the time, stating that this is an official announcement and under the new law they can clear all your debts in no time at all. This is absolutely wrong. I have asked this question previously and the Minister told me that there was nothing the Government could do. I understand now that there is a blocking system. Will the Government publicise how to block these calls so that these poor people are not imposed upon again?
Baroness Wilcox
People are most vulnerable to receiving these calls in their homes. We have all received them. I will take that question away, see whether there is anything further that we are doing and write to my noble friend.
Lord Dykes
Will the Minister also look into another serious abuse: the amount of money that currency exchange bureaux charge to customers travelling overseas for very small transactions in value, often with margins of 15 per cent either side? This is a serious abuse because they quote zero commission but charge a huge margin on those exchanges.
Baroness Wilcox
If they collect money that way, I suppose the Post Office would be their first stop. I will look into this but do not think that there is any intervention that we can make at the moment.
Shipping: Towing Vessels
(13 years, 1 month ago)
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Viscount Younger of Leckie
To ask Her Majesty’s Government why they have decided to withdraw funding from emergency towing vessels; why funding has been arranged for an interim replacement project only in Scottish waters; and what provision they have made to protect the English coastline from oil spills.
Earl Attlee
My Lords, the Government believe that ship salvage should be a commercial matter and that there are sufficient tugs around the majority of the UK coast to respond to ships in difficulty. There are fewer commercial tugs available in the waters off north and western Scotland so the Government have funded two tugs for an interim period to allow locally interested parties time to develop plans for sustainable provision without recourse to taxpayers’ money.
Viscount Younger of Leckie
I thank the Minister for that reply. He will recall the “Sea Empress” disaster in 1996 when 73,000 tonnes of crude oil spilt along the south Wales coast, and also the foundering of HMS “Astute” last year. Is he aware that the withdrawal of these tugs means that there are simply no replacement tugs with the bollard-pulling power to effect a rescue? How comfortable is he with the responsibility being passed to ship owners, given that ownership is usually as clear as mud?
Earl Attlee
My Lords, the world has moved on since the report of Lord Donaldson. We have port state control and inspection of ships, the integrated safety management code of ships, much more reliable ships and much better situational awareness for the coastguard, coupled with the SOSREP system. Finally, most tankers are double-hulled. Single-hulled tankers are not allowed in UK waters except in exceptional circumstances.
Lord West of Spithead
My Lords, is the Minister aware that there is a growing perception that the coalition Government are suffering from collective sea blindness? We have just discovered that over the last few weeks we have no ship at immediate readiness for counterterrorism or disasters around the UK—no Royal Navy ship at all. We have got rid of our broad area surveillance in the SDSR. We have just heard about the tug towing, and I have to say there are still a lot of single-hull tankers around, not least in the Royal Fleet Auxiliary because there has been no money to replace them. The National Maritime Intelligence Centre, which he referred to, is not up and running at full speed, which it should be. I can go on and on.
I am sure these perceptions are not right, but could the Minister confirm that the Government are looking at this in a co-ordinated way because there is very real worry? Perceptions often seem more real than reality, and there is a very real perception that this is not being pulled together.
Earl Attlee
The noble Lord is right, he has gone on—he has gone on about defence matters. This is a commercial matter. One of the impacts of the Government funding an emergency towing vessel, say at Falmouth, is that it prevents commercial operators from stationing an ETV at Falmouth because there is no work for them.
The Earl of Mar and Kellie
My Lords, can I ask my noble friend what he believes to be the maximum acceptable steaming time to effect a rescue after the contracting process has been completed?
Lord Kinnock
My Lords, that was about the most articulate ministerial answer I have heard in this House. While the Minister is right to draw attention to great advances such as port state control, the ISM code and double hulling, even cumulatively they are not enough when a ship has foundered. Is the Minister aware, when he puts an emphasis on commercial tug companies, that they can be expected to act commercially? This is why it is necessary for government support to ensure that in any and all conditions—however unprofitable they may initially seem commercially—those tugs are available right round the British coast.
Earl Attlee
The noble Lord makes some quite sensible points. However, it is important to understand that one of the recommendations of the Donaldson report was the SOSREP, the Secretary of State’s representative, and he has extensive powers to direct that ships will assist other ships in difficulties. It is also worth pointing out that the emergency towing vessels have not yet been decisive in rescuing any super-tanker because none has come to grief.
Lord Greenway
My Lords, would the Minister agree that the greatest risk occurs in the Dover Strait, which is one of the most heavily trafficked maritime areas in the world? The French have somewhat reluctantly moved one of their two large ETVs up from La Rochelle to cover the gap left by the withdrawal of our “Anglian Monarch”. Would he also agree that the Dover Strait is special because many of the ships transiting are deep draft vessels operating in comparatively shallow water? This leads to the danger that, if there were an accident, there would be a motorway pile-up situation—as last happened with the Norwegian car carrier “Tricolor”, which was run into by two other ships after she had sunk, and over 100 other ships passed within the clearly marked exclusion zone.
Earl Attlee
The noble Lord makes an extremely important point and his analysis is correct. However, although the Dover Strait is an area of higher likelihood because of the concentration of ships in the area, experience indicates that the consequences of a grounding are likely to be lower because the seabed is flat and sandy rather than rocky. Regarding his point about the motorway pile-up, the coastguard, with automatic monitoring of ship movements, will be aware immediately a ship stops moving and can warn other ships of the difficulties.
Lord Davies of Oldham
My Lords, is it not the case that the Government are not prepared to pay the relatively modest insurance policy to guarantee that we have adequate towing tug capacity in British waters? If a major disaster occurs, we will be dependent upon Rotterdam or other foreign ports to produce the necessary towing and tug equipment. Is that not a dereliction of duty on the part of the Government?
Earl Attlee
My Lords, the noble Lord makes an important point about Rotterdam. Rotterdam and the Dutch have great experience in salvage operations. There are lots of tugs operating out of there. If we withdrew the funding, which we have, from the Falmouth tug, someone will probably station a tug in Falmouth in order to pick up the market. Currently, however, we are distorting the market by paying out large sums of taxpayers’ money to no good effect.
Protests: Tent Pitching
Lord Cormack
To ask Her Majesty’s Government whether they will introduce emergency legislation to make pitching a tent in a non-designated public space, or on a public thoroughfare, a criminal offence.
Baroness Stowell of Beeston
My Lords, the Government brought forward provisions in the Police Reform and Social Responsibility Act 2011 which allow local authorities to attach the power of seizure to their by-laws for encampments on local authority land. These provisions will be commenced shortly. It is therefore not necessary to introduce emergency legislation. Protests on private land are the landowner’s responsibility but the Government are looking at existing laws to consider whether any additional measures are needed to deal with such encampments.
Lord Cormack
My Lords, in thanking my noble friend for replying, I welcome her to the Dispatch Box and wish her many happy and successful years there. But perhaps I may also ask her if she will rethink part of that Answer. Will she impress upon the Government that we are facing a potentially disastrous situation? Next year, extra millions of people will come to this country for the Olympics and the Cultural Olympiad. They will come to admire our great public buildings and open spaces, not to see squalid encampments. It is essential that the Government take effective action to prevent what happened at St Paul’s three weeks ago happening in other places, thereby defacing the very image of this country next year.
Baroness Stowell of Beeston
My Lords, I am grateful to my noble friend for his remarks; he has for many years been a leading figure in debates on matters such as this, both in the other place and in this House. The point that has to be made—my noble friend the Minister made it last week when answering a similar Question—is that protests on private land are the responsibility of the landowner. However, as my noble friend the Minister also said last week, and as I said in my original Answer to the noble Lord, the Government are looking at existing laws and considering whether any additional measures are needed.
Lord Campbell-Savours
My Lords, is it not somewhat perverse that Parliament spends its time criticising people for putting up tents in protest when those who are responsible for the crisis in the City and in the banking institutions are walking away into the sunset with their millions? Should we not get our priorities right?
Baroness Stowell of Beeston
My Lords, I am responding to a Question about whether there should be emergency legislation to prevent people pitching tents in non-designated public spaces, but I understand the noble Lord’s point. The Government are very clear that people in all parts of the country are having to deal with wage freezes and wage cuts and that some are having to look for a new job. Those people are dealing with these difficulties and shouldering their share of responsibility and they are right to expect big banks and the big bosses in companies to take their fair share of responsibility as well.
Lord Tyler
My Lords, in congratulating my noble friend perhaps I may ask her to reiterate the Government’s decision to avoid a knee-jerk, piecemeal and authoritarian response on this issue. Given that the wisdom of our mutual friend Lord Cormack clearly trumps that of the Archbishop, the Bishop of London and the clergy of St Paul’s, perhaps I may also ask her to look particularly at the issue of Parliament Square. She will see some very sensible proposals which have come forward this very month from the Hansard Society—in a report entitled A Place for People: Proposals for Enhancing Visitor Engagement with Parliament’s Environs—that would enable us to take a sensible, long-range view and to deal comprehensively with the problems referred to.
Baroness Stowell of Beeston
Of course we will look carefully at the report to which my noble friend refers. However, I stress that we passed an Act in July of this year that introduced new measures that will put an end to the encampments in Parliament Square. These measures will be commenced shortly and at that time we will, thankfully, bring an end to the disruption that so many people have criticised and rightly complained about over many years.
The Lord Bishop of Bath and Wells
My Lords, from these Benches I congratulate the Minister on her appointment. The Church of England maintains a presence in every community in the land. It is a broad church—it is perhaps the original big tent. Is the Minister aware that St Paul was a tent-maker and that St John records that Jesus pitched his tent among us, in a non-designated public space, to rescue us?
Baroness Stowell of Beeston
I am very grateful to the right reverend Prelate for his question. Thank you.
Lord Hunt of Kings Heath
My Lords, I, too, welcome the Minister to her position at the Dispatch Box today. Could the Minister comment on the original suggestion made by the noble Lord, Lord Cormack? I would ask that the review is undertaken very carefully indeed and that there is the widest possible consultation. In terms of what overseas visitors will see next year, would it not be better that they saw an example of a vibrant democracy in action?
Baroness Stowell of Beeston
I agree with the noble Lord. We are expecting many people here next year and want to present a thriving London to everybody who visits. I will certainly take on board the points that he made, but I can only repeat that the department is considering this matter at this time and taking it very seriously.
Legal Aid, Sentencing and Punishment of Offenders Bill
Business of the House
(13 years, 1 month ago)
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Lord Strathclyde
That the debate on the motion in the name of Baroness Bonham-Carter of Yarnbury set down for today shall be limited to three hours and that in the name of Lord Newby to two hours.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Lord Higgins
My Lords, parliamentary-related business will prevent me being present for the second debate this afternoon, which in any case is very limited in both scope and time. Would my noble friend consider very carefully the need for us to have a major debate on the crisis in the eurozone?
Lord Strathclyde
My Lords, I was present in the House when my noble friend raised this point yesterday. I am very sorry, as I suspect many noble Lords are, that they will not be able to hear my noble friend speak, with all his experience and knowledge on this subject. This is of course a matter for the usual channels and we shall give it the most urgent consideration.
Creative Industries
Baroness Bonham-Carter of Yarnbury
To call attention to the importance of the creative industries in the United Kingdom; and to move for papers.
Baroness Bonham-Carter of Yarnbury
My Lords, I am privileged and pleased to introduce this debate on the importance of the creative industries. The gratifyingly large number of people who are taking part in the debate demonstrates that there is consensus in this House, at least on the title. I also express my pleasure that my old friend and colleague from BBC “Newsnight”, the noble Viscount, Lord Colville, has chosen this debate to make his maiden speech. I believe this brings the tally of “Newsnight” alumni in this House to four. Perhaps we should start our own party. I declare an interest as I sit on the boards of the National Campaign for the Arts and the Lowry.
As a country we have always been blessed with a wealth of creative talents, which have shaped and illuminated our history and national identity. Creativity is part of what makes our society vibrant, unique and modern. It helps us to understand the world around us and forms our individual and collective identities. The journalist Matthew Parris recently referred to the culture of a country as its heartbeat—a fitting image as from cultural activities flow into the body politic considerable economic benefits. The UK creative industries are the fastest growing sector of our economy and as such are a critical driver for our recovery. In particular, I argue that, properly encouraged and harnessed, they can be part of the solution to the problems our young people are facing in finding employment.
As Eric Schmidt, chairman of Google, pointed out in his MacTaggart lecture, the UK is the home of so many creative inventions: photography, television, computers—apparently in both concept and practice. According to him, the world’s first office computer was built by the Lyons chain of corner shops. I thought that its only creative contribution was tea, cakes and a few Muriel Spark characters. However, Mr Schmidt went on to point out that today none of the world’s leading exponents in these fields is from the UK. The message from UK business is clear: we are struggling to maintain our position as world leaders in creativity.
A report entitled Next Gen., commissioned by my honourable friend Ed Vaizey—Minister for the Creative Industries, among other things—to look into the needs of the video games and special effects industries, discovered that in the past two years the video games industry has fallen from third to sixth place in the global development ratings, UK companies are having to go abroad to find talent because of the skills shortage at home and are,
“turning away millions of pounds of work every year for one reason: they can’t find the skilled people they need. This means job opportunities and potential tax revenues are being lost”.
The findings are backed by Aardman Animations, which makes the Wallace and Gromit series, among other things. An executive told the Communications Committee, on which I used to sit last year,
“We probably take more graduates from … France”
and from Germany,
“than we do from the UWE, which I could walk to from my office”.
Moreover, this is happening at a time when employment prospects at home are so bad.
The essential need is for a skills base, and that starts with education. The creative industries need creative people, but creativity needs to be taught and nurtured. The new EBacc is to be welcomed in that it broadens the exam base. However, what it does not do is include those subjects that develop creative skills. It consists of maths, science, English, a humanity subject and a language. There is no art or design and no computer science. Because it will be possible to rank schools on their attainment in the EBacc subjects, schools are already starting to emphasise them at the expense of creative subjects. Does my noble friend the Minister not share my concern over a recent survey by the National Society for Education in Art and Design, in which 60 per cent of the schools that responded said that they will stop teaching art and design at GCSE level as a result of the introduction of the English baccalaureate as they feel that they have to concentrate on the subjects that it encompasses?
We should listen to such successful and highly respected individuals as Sir James Dyson and Sir John Sorrell, who argue that we should invest more in creative education and design. We should listen to Ian Livingstone and Alex Hope, authors of the Next Gen. report and leaders in their world of video games and visual effects, who recommend that art and computer science should be included in the EBacc. And we should look to the international baccalaureate, which does include art and has computer science as an elective part of its maths qualification, and follow its example.
Finally on this point, schools need to be encouraged to promote an arts-science crossover. The success of those in the creative industries lies in the fusion of technology and creative skills. Look at Steve Jobs. His genius lay in being able to bring together exactly such a fusion, connecting aesthetics with function. Jobs was obsessed with design, calling it,
“the fundamental soul of a man-made creation”.
And guess what? The senior vice-president of industrial design at Apple, the leading designer behind the iMac, the iPhone and the iPad, is a Brit called Jonathan Ive.
Then there are the connections between educational institutions and business. The University of Abertay in Dundee is providing grants of up to £25,000 for small companies which develop video games and other forms of interactive digital content. It also provides digital space and equipment. This has resulted in a cluster of creative businesses in Dundee, providing employment and prosperity. The relationship between university and entrepreneur is clearly mutually beneficial. The former ensures it is equipping its students with the skills they will actually need when they enter the job market; the latter gets access to cutting-edge research and the brightest talent pool. We need more of this and we support the work being done by Skillset in this area.
A different snapshot of how creative industries foster productivity can be seen in the phenomenon of Harry Potter. It crosses my mind that the books were written in a tea shop so maybe what we need are more tea shops. The films were made at Leavesden aerodrome where Rolls-Royce used to manufacture helicopter engines. It now employs vast numbers of people from across the creative spectrum, from writers, actors and those adept at highly technical special effects to practitioners of crafts such as carpenters, model makers and painters. Happily, this is set to continue because, despite the end of the Harry Potter franchise, Warner Bros has bought the studios, although it seems sad that the profits will be going to the US rather than here.
The contribution our creative sector makes is not simply economic. Our cultural exports are a key source of soft power, strengthening Britain’s influence and prestige around the world. At home the cultural and creative industries are central to the well-being of the country. As I mentioned at the start of this speech, I sit on the board of the Lowry in Salford. The idea behind it was to build a major arts complex as a trigger for the regeneration of the area. The result is a building of global architectural significance in which you can experience a wide-ranging programme of the performing and visual arts. Central to its ethos is interaction with the local population through a community and education programme. An example is its Walkabout project in which a member of the Lowry team and a range of artists spend 14 months with a specified community. A report commissioned following a recent Walkabout showed that, of the 2,340 people who took part, 34 per cent said it improved their quality of life, 71 per cent said it helped them develop skills which would be useful in future jobs, 76 per cent said they were more interested as a result in doing creative activities, 81 per cent said participation made them feel part of their local community and 93 per cent said it created better understanding between young and old. What more ringing endorsement could there be of the power of cultural activity?
Within our Department for Culture, Media and Sport I believe there is recognition of the importance of the creative industries. My honourable friend Ed Vaizey has commissioned two reviews from Darren Henley, managing director of Classic FM. The first is a review into music education, out of which I believe will emerge the first ever national plan for music education. The second is a cultural education review, which is due to be published before the end of 2011, and I hope that the Minister can confirm that out of this there will emerge a national plan for cultural education. This plan should cover formal but also informal education, and I hope my noble friend shares the enthusiasm felt on these Benches and by Mr Henley for the Sorrell Foundation’s National Art&Design Saturday Club, which runs free Saturday morning art and design classes for school children at local colleges and universities. At present there are 14, but a further 100 FE colleges and universities have indicated that they would get involved if funding were available.
Another example is the Roundhouse. Last night I attended a fifth birthday celebration of its reopening. Every year it works with 3,000 11 to 25 year-olds offering them the opportunity to get involved in creative projects, from the performing arts through to new media. Part of its funding comes from Arts Council England and I am delighted that one of ACE’s priorities over the period 2011-15 is that every child and young person will have the opportunity to experience the richness of the arts. Ten bridge organisations have been established that liberates young people’s strategy but ACE must now ensure that these organisations receive a clear brief as to their function.
One threat to the growth of this sector, to which there has been a response, is the knotty problem of protecting intellectual property rights in our digital age, and the ease with which property rights can and are flouted by online piracy and peer-to-peer file-sharing. The coalition Government have accepted and are implementing the Hargreaves recommendation, which it is estimated could add £750 million a year to the UK economy.
Finally, and in my view most importantly, a Creative Industries Council has been established, chaired jointly by the Business Secretary, Vince Cable, and the Minister for Communication and Creative Industries, Ed Vaizey. Its remit is to engage with the industry in—this is crucial, and here I steal a new Labour term—a joined-up way. I am sure that my noble friend the Minister agrees that we must ensure that its recommendations are implemented. The creative industries make a significant contribution to the UK’s economic growth. NESTA argues that this contribution could grow to £85 billion by 2013 creating 150,000 jobs. Let us prove it right. The creativity is here. Let us provide the skill and the will.
Lord Fowler
My Lords, first I congratulate my noble friend on her speech and on securing this debate. In the glory days of the Communications Select Committee—that was when I was chairman and she was a member of it—we worked very closely together. Of course, we did carry out an inquiry into the creative industries as one of our last works. I also look forward very much to the maiden speech of the noble Viscount, Lord Colville. We all remember his father with enormous affection. His own career has been with the BBC, and he will find in this House that most of us regard that as being a very high recommendation indeed. In particular, in these years of phone hacking, the BBC has managed generally to preserve standards that are the envy of the world. Not all my later remarks will necessarily be as obliging to the BBC, but we very much look forward to his speech.
As my noble friend said, there is an enormous opportunity here. We already have a position where, in terms of jobs, the television, film and games industries are of vast importance. Of course, added to that is the revenue that is being earned, the taxes paid and the national reputation which has increased in areas such as theatre and music. We have truly important industries by any measure. The aim should now be to see where government policy can aid in future development. My noble friend highlighted education and training—and rightly so. She is absolutely right to stress the point that there are good careers for men and women with skills in these industries.
I should like to add one or two other essentials. On financial support from the Government, the great issue is consistency. The film production tax credit introduced in 2006 has been a great success and is absolutely essential. For those who argue that no government support is necessary, I would say that we need to recognise one central point about the film industry. There is intense competition in seeking to bring film-makers to individual countries from around the world: an array of financial incentives is offered. Germany offers them; Canada offers them; and even some individual states in the United States offer them. We all recognise the dominating importance of American studios and distributors and therefore compete for their investment. If Britain was not to do that, we would be removing ourselves from the market altogether.
There are a range of areas that the Government should examine to see what further practical help can be given: encouragement for independent British film-makers and animation companies, where we already do very well and could potentially do even better; an examination of the video games industry, which competes internationally with countries that give tax incentives; and in television I strongly support those who argue for exploring ways to help British children’s programmes.
There is a temptation in these debates simply to set out a shopping list for government aid, which is not currently a hopeful area in any event. Not everything needs to be government money, and television is an example of how progress can be made by taking off restrictions, promoting change and creating more jobs and revenue. We are fortunate in this country in having a range of excellent television companies: BBC, ITV, Channel 4 and, to be fair, BSkyB, which now makes some excellent programmes. The choice was illustrated a couple of weeks ago when, on Sunday night, you had to choose between “Spooks” and “Downton Abbey”. Programmes like these are sold around the world—that is the point.
BBC Worldwide is far and away the largest British distributor. It has built up sales of more than £1 billion a year, and a profit of more than £150 million a year. It has been an enormous success—there is no doubt about that—and the question is whether that success can be further improved. It is a company that is capable of being a truly global brand. It can expand further, increase revenue and create more jobs but it is held back because, basically, it is in the public sector. It has to fund its expansion from its own internal resources; it cannot borrow on the market. The BBC Trust is in the background, saying that it should not expand too much in any event. It is a typically British position. A company capable of being a world leader held back by a lack of ambition, not from within the organisation, but by the corporation that owns it. There is an overwhelming case for a public/private partnership. For those who think this is the view of some way out, right-wing think tank, the final report from Digital Britain, signed by two Secretaries of State from the last Government, said:
“BBC Worldwide has the potential to be a very significant global rights business for Britain and the Government believes it would be a missed opportunity to limit BBC Worldwide to a narrow supporting role to the BBC”.
That is entirely my case.
However, what has happened is, like in the worst of nationalised industries, that the corporation has replied that BBC Worldwide is not for sale and has made other remarks of that kind. We should remember that the BBC is not a corporation owned by a set of directors or executives; it is owned by the licence fee payers, who have provided the finance whereby it has developed. The question is not whether it is just in the interest of the BBC; it is what is in the national interest, the British interest and the interest of the creative industries. The decision here is an acid test of our intention and policy and whether we are truly serious about improving our creative industries.
Baroness Garden of Frognal
My Lords, I remind your Lordships that this is a timed debate and when the clock reaches six you have completed your six minutes.
Baroness McIntosh of Hudnall
My Lords, I shall endeavour to take that to heart. I start by thanking the noble Baroness, Lady Bonham-Carter, for securing the debate. She is extremely assiduous in keeping the importance of the creative industries before the House. I, too, look forward to the maiden speech of the noble Viscount, Lord Colville. I have no doubt that his experience will be of enormous value to the House as time goes on.
I should also like to mention the excellent note generated by the House of Lords Library for the debate. It is full of useful information and statistics that remind us of the economic and social importance of creative enterprise. It is a really good read. However, it tells us only what most of us already knew and have shared with each other and with successive Governments many times, contributing—I hope that the noble Baroness will forgive me for putting it this way—to a slight groundhog day feeling to the debate. But some things bear repeating—and I am sure that they will be repeated as the morning goes on.
I have knocked around the creative industries—mostly the performing arts—for a very long time, initially in executive roles but now exclusively in non-executive ones. I am currently a board member at the Royal Shakespeare Company, the Roundhouse, the National Opera Studio and the Southbank Sinfonia. I am also a director of Artis Education. I will explain what these organisations have in common; that is what I want to talk about. They are all committed, wholly or in part, to education through developing the most talented young performers and/or by helping to develop in children and young people, often using trained, professional performing artists, the confidence and skills—for example, communication and teamwork skills—that all employers, not just those in the creative industries, say that they need.
In my nearly 40 years in the performing arts there have been some tough times—but none as tough as now. First, I want to say how proud I am of the arts sector as a whole, and in particular the organisations that I work with—for which I take absolutely no credit—for the mature, imaginative and, I have to say, creative way in which they are facing up to the combined challenge of shrinking funding from all sources and audiences with significantly less money in their pockets. Although this week Arts Council England announced a new strand of strategic funding, which is of course very welcome, it had to take some very difficult decisions earlier this year. It did not shirk them, but their impact on the sector will be felt in earnest next year and beyond. ACE itself is being forced to make a 50 per cent cut in its own costs, which cannot fail to reduce its capacity to provide the leadership and support that, as the noble Baroness, Lady Bonham-Carter, pointed out, it exists to provide.
All in all, it is easy to be gloomy, but I have faith in the resilience of the arts. They will find a way to survive and thrive. I am not shroud-waving or special pleading. People in the cultural sector understand that in dire economic times everyone has to take a hit. I will talk not about what we spend on our creative industries but about how we value them. How often do we pat ourselves on the back about the worldwide reputation of our artists and arts organisations? We all feel entitled to glow when the peerless Mark Rylance in “Jerusalem” or the National Theatre’s “War Horse” triumph on Broadway, or when Colin Firth or Helen Mirren wins an Oscar. However, we should remember that truly great artists, be they actors, puppeteers, musicians or fashion designers, do not spring fully formed from television competitions. They are rare and wonderful creatures whose skills take years to hone, and more often than not their talent and enthusiasm have been nurtured first in school and then through universities and specialist training institutions such as arts colleges, drama schools and music conservatoires.
That is why it is so profoundly depressing that the higher education teaching grant has been removed from arts, humanities and social science subjects; that the much vaunted EBacc, which the noble Baroness, Lady Bonham Carter, mentioned, and which many schools will feel they have to prioritise, does not include any mention of music, design or drama; and that an artificial divide has thereby been created between the so-called STEM subjects and everything else. The message from the Government appears to be: creative education, and by extension the industries that flow from it, is not important but is a luxury and an add-on that is not central to our lives.
As I know from reading the right honourable David Willetts’s speech to the British Academy earlier this year, the Government will protest that such an inference should not be drawn from what they have done to higher education funding and to the school curriculum. I think it is hard to sustain that position. Mr Willetts is an honourable man and I have no doubt that he meant to give comfort when he suggested that taking away the teaching grant from those in the arts and humanities was going to improve the position of higher education courses in those subjects. However, that is not how it feels to all those who have worked so hard and for so long to build our creative industries into the vibrant, economic and social force that they are today. It feels like a slap in the face or, worse, indifference.
The world faces a huge array of challenges at the moment. Some we hope are short term, but most are long term, centring on issues such as climate change, population growth, migration and scarcity of natural resources. We will have to apply every ounce of creative energy that we can summon up to meet them. Solutions will not come, nor have they historically come, just from scientists, engineers and mathematicians, much as we need them and creative as they are. They will come from the boldness of those whose imaginations have been shaped and stimulated by a richly creative education.
I hope that the Government understand this, but it is not clear to me from their policies that they do.
Lord Clement-Jones
My Lords, I warmly congratulate my noble friend, not only on initiating this debate, but on her tremendous opening speech. We need to recognise that our creativity, ideas and intellectual capital are what will increasingly drive our future prosperity. Increasingly, technologies are converging, and technology and content are aligning, so it is possible to draw the description of creative industry extremely widely, even to include industrial design in areas such as aerospace, automotive and advanced engineering.
We are pre-eminent in so many areas: in computer games and new media, architecture, design, fashion, animation, music, film, radio, television and advertising. Just take music: in per capita terms, we are one of the top three recorded music markets in the world. UK artists’ share of global sales is estimated to have been nearly 12 per cent in 2010, with one in 10 sales in the US being a UK act. However, the fact is that other countries are making substantial investment in their creative industries. So today I hope that we can celebrate some of the considerable achievements taking place to develop our creative industries, while at the same time combining this with further suggestions for action.
Like my noble friend, I welcome the formation of the Creative Industries Council, co-chaired by the Secretaries of State for Business, Innovation and Skills and for DCMS, which, I think, has met once so far. Last year the Liberal Democrat policy document The Power of Creativity emphasised the need for assistance with start-ups for many young creative industry companies by setting up a creative enterprise fund. Earlier this year, Dr Stuart Fraser, in his report Access to Finance for Creative Industry Businesses, commissioned by the DCMS, identified that finance was much slower coming forward for creative industry business than in other sectors. The Treasury Plan for Growth in March this year accepted this and the recent Demos report Risky Business confirmed it.
With this evidence, I hope that the Creative Industries Council will press for more assistance and will spur the Government to improve the enterprise finance guarantee scheme so that it can support new businesses in the creative industries and take other steps proposed by the CBI to ensure that other schemes, such as the R&D tax credit and the enterprise investment scheme, can be accessed. What plans are there to solve some of these financing issues for the creative industries?
Moving on to education and skills, we have some great higher and further education institutions. Indeed, overseas students beat a path to our door. As the UUK report Creating Prosperity at the end of last year makes clear, our higher and further education sector makes a major contribution to the development of skill and talent for the creative economy. It represents hubs for innovation and centres for research. Some 16 per cent of our students are engaged in courses relevant to the creative economy. However, as Fintan Donohue, the principal of North Hertfordshire College was recently describing, it needs to make sure that, as well as the formal academic aspect, it develops the enterprise and entrepreneurial skills of students in the creative arts sector.
I commend the work of Skillset, the sector skills council for some of the creative industries, such as advertising, animation, computer games, fashion, film and TV, and Creative & Cultural Skills, which represents design, literature, music and performing and visual arts. Both have identified that there is a significant shortage of skills in their sector, and both are tasked with ensuring that skills issues across the sector are properly tackled in a strategic way. However, there are still major issues, as the recent NESTA report on video games and visual effects, which was referred to by my noble friend, shows. We need to make sure that we have the right computer skills in particular. We have a positive story in some respects, but I am baffled why we have two skills councils for the creative industries. Should they not be doing more than simply working together? Should they not be a single body rolling out programmes right across the sector?
Then, of course, there is the vital question of intellectual property protection through copyright, a subject of increasing importance in the digital age. Combating piracy should not simply be a crime and punishment approach. We need to combat through education the idea that copyright infringement is socially acceptable, and we need to make sure that there are legal ways of accessing copyright works. I was nominated for an Internet Villain award last year for my efforts on the Digital Economy Act, but I am unrepentant about the need to protect intellectual property over the internet and to ensure that creative artists and the creative industries can enforce their copyright. It is all very well to talk about developing new models for exploitation of new work, but without the underpinning of copyright, creative artists cannot receive the proper reward for their efforts. There are some 50 different services giving legitimate access to recorded music, so there is no excuse for piracy.
The Hargreaves report, commissioned by this Government, has some good aspects, but it seems to think that some creators’ rights should be weakened. However, as pointed out by UK Music, its economic impact assessment of the growth impact of its recommendations is laughable and certainly a great deal more speculative than the cost of piracy estimates that Hargreaves criticised. For instance, how can format shifting add up to £2 billion to the economy? In reality, format shifting has been rife for years. MP3 players have already been invented, and very few of them are made in the UK.
In that light, the Government's commitment to strengthen the IPO's economics team and the fact that it has begun an ambitious programme of economic research are very welcome. In the limited time available to me, I welcome the Technology Strategy Board and its research on metadata development, which may prove an extremely important development. I also mention the impressive story of how some of our major cities are becoming hubs. We have the East London Tech City, and Liverpool’s city of culture year resulted in an addition of £800 million to the economy of that city.
Finally, I cannot forbear to mention live music. I very much hope that the Government will give a fair wind to my Private Member's Bill in the House of Commons.
Lord Bilimoria
My Lords, if I were to list the areas in which we are the best of the best in the world, it is actually quite a long list for this tiny country of 60 million people compared with, say, the United States with 300 million. I could go for higher education, advanced engineering and the creative industries, where we are right up there among the best of the best in the world. I thank and congratulate the noble Baroness, Lady Bonham-Carter, on initiating this debate. It is crucial. Whichever area of the creative industries you look at, we are world class—whether it is film, theatre, art, design or advertising. The list goes on.
It struck me when I was taken on a private tour of the Reichstag in Berlin that it was redesigned by none other than our very own British architect, the noble Lord, Lord Foster. In 2004, the Royal Society of Arts’ 250th anniversary year, I was privileged to receive its Albert medal, which was presented by His Royal Highness the Duke of Edinburgh. The other medal winner was Jonathan Ive, the Apple designer, who won the Benjamin Franklin medal. The noble Baroness, Lady Bonham-Carter, spoke about him. He was Steve Jobs’s right-hand person.
Why are we so brilliant in creative arenas and how can we continue to remain the best? The question I ask the Minister is: are the creative industries really a top priority for this Government? The creative industries make up 5.6 per cent of the gross value added to our economy; they contribute £17 billion of exports and services and almost 9 per cent of companies in this country in some way or another fall under the creative industries umbrella. They make such a substantial contribution. Are the Government doing enough to support them? On the other hand, the huge Department for Work and Pensions has £200 billion of spending. Surely the Government should prioritise creative industries to help them to grow and to receive even a fraction of that £200 billion of funding.
We all agree that the cuts the Government are making need to be made, but I just do not understand slashing higher education funding by 80 per cent when there is a shortage of skilled and trained people in the creative industries. Will the Government wake up to this? This is our core competence. We need the brightest and the best academics and students from around the world to come to our universities. Ten per cent of academics in our universities are foreign; at Oxford and Cambridge it is 30 per cent. Foreign students bring in £8 billion to the UK and yet we have this crude immigration cap dissuading the brightest and the best from coming to our country. I know that from India applications have plummeted. As we rely on brain power in the creative industries, we are being affected by these nonsensical policies. Will the Minister tell us whether the Government are going to wake up to this?
The creative industries are open; they are flexible. They are tiny microbusinesses on the one hand and giants like WPP on the other hand. With today’s technology and communications, this industry is full of companies that are really mobile. Britain is one of the least competitive countries in the world when it comes to taxation, with our top rate of 50 per cent. In 1997, we were the fifth most competitive country in the world in terms of taxation; now we are 94th. Not only is this a disincentive for our home-grown creative talent, it is also a disincentive to the brightest from around the world to come and work in our creative industries.
I was taught at a very young age that I was not creative because I was useless at art and drawing. I still am, but I have realised that in building a business, being an entrepreneur, one of the greatest strengths you need is creativity. What are the Government doing to encourage creativity in our schools to give children the confidence that we all have the latent, untapped potential to be creative? Britain is so good in this area is because we are an open economy, we have open minds and we are always willing to question, to challenge, to push the boundaries. I was proud to write the foreword for Big Ideas for the Future, a report published by Universities UK and Research Councils UK, which has 200 world-changing ideas coming out of our universities. Many of those are in the creative industries. The noble Baroness, Lady Bonham-Carter, spoke about the link between universities and business.
In building a business you need the four Ps of marketing: promotion, price, place and product. I have three more Ps: people, passion and “phinance”. Without the money you cannot do anything. What are the Government doing to help supply finance for the creative industries? Unlike manufacturing, where you can provide bricks and mortar as collateral, creative industries can only provide brain power as collateral. What are the Government doing to help finance things like the small firms loan guarantee scheme, which helped my company, Cobra Beer, in its early days? Two of those loans helped us get off the ground. Why are the Government not doing more to greatly enhance this scheme, which would be particularly useful for the creative industries?
I conclude by saying that today we are among the best in the world in the creative industries, but unless we address these issues of uncompetitive taxation, short-sighted cutting of funding for higher education, the introduction of a crude, self-destructing and self-defeating immigration cap and not doing enough to provide access to finance, how will our creative industries be able to add value and stay ahead, with the emerging giants of China and India galloping ahead? We need to be partners with these giants in the decades ahead with our creative brilliance but we can do this only if we have the support. For centuries we have provided many of the world’s greatest, most innovative and most creative minds, and I am very proud of that.
Lord Razzall
My Lords, I think it is common ground among all of us that the creative industries now represent a significant part of our industrial effort. If you add together software development, film, music, theatre, broadcasting, architecture, industrial design, the creative arts and video games, it is quite likely that, in some statistics, the creative industries have passed manufacturing in their contribution to Britain’s GDP and are fast pushing the declining financial services sector. This is an extremely important debate.
First, my noble friend Lady Bonham-Carter indicated some of the problems faced by some of these industries, but we ought to take a moment to reflect on some of the triumphs. Let us look, for example, at the acquisition of Autonomy by Hewlett Packard, one of the major worldwide computer companies. The sale was significant but, more significantly, Hewlett Packard will base the whole of its software development programme in Cambridge, based around the Autonomy structure. That is a huge triumph for Britain’s software industry. Look also at what has happened at Pinewood. No doubt my noble friend Lord Grade of Yarmouth will share with us the secrets of how he did it. As the noble Baroness, Lady Bonham-Carter, indicated, Warner Bros’ investment is a huge triumph for the British film industry. My noble friend Lord Clement-Jones spoke about the record industry, which now represents 12 per cent of global sales, notwithstanding the problems about copyright infringement, to which other people have referred. As my noble friend Lord Fowler indicated, we have a hugely successful television production industry, ranging from the BBC through to the independent sector, to Channel 4 and ITV, and even BSkyB is now making independent programmes. As this morning’s Times editorial indicated, the television industry in the UK, contrary to fears, has,
“dumbed us up, not down”.
The noble Lord, Lord Fowler indicated that, no doubt, a number of your Lordships would have a shopping list, which should be avoided. I have a shopping list of three things that I think the Government ought to be doing. First, on subsidies, I take the point put forward by the noble Lord, Lord Bilimoria, that the Government already provide significant subsidies for the creative industries. There is the grant, which no one has yet mentioned, for people involved in research and development through which companies can recover, from HMRC, the PAYE paid on such people’s salaries That is a very significant contribution towards the development of small software companies and that must be retained. I was very pleased that the coalition Government, notwithstanding one or two blandishments from my side of the political parties, have retained that R&D grant.
Secondly, there is the film grant, the EADY money which was replaced by the current film grant: as long as a film contains sufficient UK content, there is a cash grant which comes back to the makers of the film from HMRC. That must be retained.
Thirdly, there is the Arts Council. As we know, the Arts Council suffered a cutback in the amount of money that it could make available to the arts this year. Presumably, next year, once the Olympics are over, there will be more money available from the National Lottery Fund and it is important that, when that happens, the Government do not use the opportunity to take back the contribution that has been made from the Treasury, so that the Arts Council funding can be maintained at least at the same level as it is today. There must be no change in that.
Another area where I think the Government need to take some action is on immigration. There is internecine warfare, as noble Lords will appreciate, between the Home Office and DBIS with regard to how we get clever, talented people, who are necessary for the creative industries, into this country, often on a temporary basis. A company like BlackBerry, for example, is thinking of moving its European headquarters away from the UK into continental Europe because the Home Office will not allow it to bring in the sufficiently talented people that it needs to maintain that important centre for British industry. In my view, DBIS must carry on that battle with the Home Office, which I hope it wins, so that that can continue.
The third area, as my noble friend indicated, is, of course, education. As Eric Schmidt said in his famous speech in Edinburgh earlier this year, it is slightly ludicrous that we are teaching our 15 year-olds to plug things into computers but not how to program them. As the noble Baroness, Lady Bonham-Carter, indicated, we really need to change the educational structure in this country to ensure that computer science is in every student’s DNA.
In conclusion, as I indicated at the beginning, this is now a very serious industry. When the DCMS was started, it was termed “the Ministry for fun” and that was not only because David Mellor was the first Minister but because it was thought that that was all that it dealt with. That is not so. The DCMS is now responsible for a significant element of our industry.
Viscount Colville of Culross
My Lords, I thank noble Lords for their kind words and I look forward to the establishment of the “Newsnight” party. It sounds like fun. I of course declare an interest: I work for the BBC as a producer in the science and history departments. I am very grateful for the honour bestowed on me by the noble Lords who elected me to these Benches. My father loved this place and talked frequently of his many friends here, which included both staff and noble Lords. Since I arrived, I have been very touched by the many people who have spoken so warmly about him. I hope that I will be able to make my own small contribution to the life of this place. I should like to take this opportunity to thank everyone for making me feel so very welcome; in particular, as every noble Lord knows, we in this House are very well served by the tremendous team of staff who look after us so assiduously. I thank them for helping and advising me in their wonderful, courteous way.
In 1989, I went to the Soviet Union to work on the first live television programme to be broadcast from Moscow by the BBC. My translator and fixer was an amazing woman called Masha Slonim. She had been a dissident in Moscow in the 1960s and was taken to the West by Dr Henry Kissinger. From there, she broadcast on the English and Russian language services of the BBC World Service and, for two decades, she talked into the ether. The Cold War meant that that she never heard any reply from her audience and did not even know whether there was an audience.
Finally, in 1989, she returned to her home country for the first time with us. As part of the programme we filmed in the small city of Yaroslavl, a few hundred kilometres north of Moscow. We met a priest and Masha introduced herself. When he heard her name, he fell to his knees, kissed her hand and wept. When he had composed himself, he said, “Your broadcasts have kept my mind and heart alive for these many dark years. I can’t imagine what my life would have been without the sound of your voice and the information you gave me. Thank you, Masha. Thank you Britain”.
The noble Baroness, Lady Bonham-Carter, and the noble Lord, Lord Fowler, have spoken of the huge contribution that the British creative industries make to our economy, and they are right. But I know that the creative industries are so much more than just a business opportunity. They also have the power to shine a light into the darkness—not just for audiences and authoritarian regimes but into the darker places of our own minds. However, I am concerned that this extraordinary part of our economy is under threat. The creativity of these industries depends entirely on the talents of those they recruit, but I fear that these industries are increasingly restricting the range of new entrants.
So many of these companies depend on unpaid internships for their pool of new talent. For a week or even a month, they are a wonderful way to introduce new recruits to the incredible opportunities promised by a career in the creative industries. But in recent years there has been an explosion of long-term unpaid internships. I fear that these are not only replacing paid jobs but are driving many would-be recruits, who are not just from poorer backgrounds but from the middle classes, away from the industry. As Tanya de Grunwald, who runs Graduate Fog, one of the many websites campaigning on this issue, told me, people can manage for three months, six months is quite difficult, but nine months is not an option. They run out of money and many give up their dream.
In preparing for this speech, I spoke to many interns. One particularly struck me; she was a young graduate from Cambridge with a good 2:1 in English who wanted to work in journalism. She completed more than 18 months of unpaid internships at three companies in the creative industries. She was doing proper work, such as writing press releases and proof reading. Eventually, she decided that she could not go on working for nothing. She has given up her hope of being a journalist and has gone elsewhere. She told me that many of her friends who had also thought of going into the creative industries had decided that they could not work for so long without pay. They, too, have gone to other professions.
The concerns are not just among graduates themselves; at the very top of the industry, people are worried. Jo Taylor, who runs 4Talent, which sets up paid internships through Channel 4, told me that not paying people for work devalues the opportunities being offered and limits new recruits to a small homogenous pool.
In September, the Department for Business, Innovation and Skills brought out guidelines called Common Best Practice Code for High-Quality Internships. These specify that high-quality internships should last no longer than 12 months, although they say the internships last typically for three months. There are no recommendations about whether the interns should be paid or not.
The present economic climate is putting greater pressure on small creative companies. The temptation to take young people on as unpaid interns as part of the companies’ business model has never been greater. However, the industry must take note. It is endangering its future vitality and the creativity of one our greatest exports by not recruiting as widely as possible from the very best talent from across our country and across society.
Will the Minister say what the Government propose to do to collect data on the number of internships, both paid and unpaid, and whether she is happy that the best practice guidelines seem to give little guidance on long-term unpaid internships?
Lord Black of Brentwood
My Lords, it is a privilege to be able to follow the noble Viscount, Lord Colville of Culross, and to congratulate him on such an elegant, graceful and moving maiden speech. We have seen in his contribution today a glimpse of the wisdom, expertise and passion that he will bring to our proceedings. It is a particular delight to me that in the noble Viscount we have another colleague, along with many speaking today, with great expertise in the media.
As I am going to speak in a few moments about local newspapers, it was splendid to discover that the noble Viscount was once a reporter in the local press on those great publications the Ludlow Advertiser and the Worcester Evening News. From there he joined the BBC on “Newsnight”—a programme that has no doubt caused many a vexed moment for Members of this House, as he said—at the time of the fall of the Soviet Union. He stayed on that flagship programme for many years before branching out to make his own science and history documentaries for the BBC. One of them was called “The Incredible Journey”, a title that might reverberate with many noble Lords privileged enough to be here. The noble Viscount has an exceptional bank of learning and understanding on which we can draw, particularly in this vital area of the creative industries. We all look forward greatly to his part in our deliberations.
I want to speak about one of the jewels in the crown of the UK’s creative industries—the local and regional press. I declare an interest as director of the Telegraph Media Group, accordingly. The local press, comprising some 1,200 newspapers, employs more than 30,000 people, including 10,000 local journalists—more reporters on the ground than any other medium. It delivers reliable local news to 33 million newspaper readers a week, and 42 million online readers each month who consume local news from 1,600 websites.
Despite the difficult commercial background, local newspapers are doing their utmost to invest in new platforms and converged multimedia newsrooms and to utilise digital technology to find new ways to open up public bodies to the scrutiny that is vital to local democracy. That remains the most vital role of the local press: holding local politicians and public services to account and ensuring that the justice system is transparent. They provide in a fiercely independent fashion a watchdog role no other medium matches.
However, the local press is under serious commercial pressure. New revenue streams are not growing as fast as old ones decline. A punishing, prolonged structural downturn in advertising, with once lucrative classified ads migrating to the web, and significant rises in newsprint prices have produced a perfect storm of commercial challenges that is threatening the viability of many local titles. To survive this storm the local press needs to make significant investments in services and content, product quality, training and digital. For an industry in real difficulty that is a tall order, especially because the local press has such remarkably diverse ownership structures.
There are in fact 87 separate publishing group owners, many of them family businesses that may never be able to make the significant investment in new media that is essential for their future. On their own they are unable to capture economies of scale in management, distribution, printing and sales that would allow them radically to overhaul their businesses. Local publishing businesses must therefore consolidate to survive. If we value the local press, we are going to have to ensure that such consolidation can happen.
However, it is now clear, following what can only be described a dinosaur decision from the Office of Fair Trading last month that torpedoed the sale of Northcliffe Media’s Kent newspapers to the family-run KM Group, that local publishers are not being given such essential commercial freedom. KM Group is the sort of family business that needs to acquire other newspapers to ensure that it can invest in the future. To help it do so, it proposed to acquire just seven titles from Northcliffe. Ignoring the expert advice of Ofcom, which had rightly said that,
“a merger may provide … a sounder commercial base from which to address long-term structural change”,
the OFT decided, in a manner which the Independent rightly said made it,
“hard not to laugh out loud”,
that the deal must go to the Competition Commission. It said that such consolidation risked,
“costlier advertising for businesses and higher cover prices for readers”.
The OFT, which appears to be living in the last century, had failed to appreciate that digital media had fundamentally changed the way local business and advertising works and the way local people consume news. The result of this decision was that the proposal was withdrawn because the costs of a Competition Commission inquiry were too high to bear.
The same thing happened a few years ago when Trinity Mirror proposed to sell eight free weekly newspapers in Northampton and Peterborough to Johnson Press. A ruling from the competition authorities meant the sale had to be abandoned. The shocking fact is that seven of those eight titles have now closed. I very much fear that the same will happen to those seven Northcliffe titles in east Kent. The OFT is preventing the changes in the local newspaper industry that will allow it to survive, undermining local democracy in the process. Enough is enough.
I believe that the Government understand the issues here and are sympathetic. The relaxation of local cross-media controls has been an important step, but it means nothing without a more realistic approach to local media mergers and to the assessment of competition in local markets by the competition authorities. Swift reforms to the merger regime are needed if further deeply damaging decisions are to be avoided. They must ensure the OFT takes account of three factors: first, the changes that have taken place in the highly competitive local advertising markets as the result of the growth of digital media; secondly, the changes that have happened in the way people consume news, which means that it is now impossible to exercise a local news monopoly; and, thirdly, that the creation of publishing organisations with scale and the ability to invest is the only effective way to protect the viability of local titles and maintain plurality of voice.
We all want local papers to survive and flourish, for they are at the very heart of our creative industries at local level, but in order for that to happen it is no good just talking about it; we have to will the means, not just the ends. Change to the merger regime is essential. Let history not damn us with those dread words, “Too late”. Let us act instead to show that we understand the importance of our local press in the creative economy and in local democracy and set publishers free to renew their businesses for a new age.
Lord Hollick
I congratulate the noble Viscount, Lord Colville, on his impressive maiden speech. He reminded us of the important democratic role that the media can play. He also shone important light on what is happening with internships.
I declare an interest as an investor in and director of companies involved in broadcasting, television and film production, music publishing and digital media, all of which are listed in the Register of Members’ Interests. All these companies, whether they operate here, in Europe or the United States, benefit hugely from the great pool of creative and entrepreneurial talent that we have in the UK. This pool is not part of a natural order of things. It must be replenished and nourished by extensive provision of education and training, and there are several areas, some of which have already been referenced, where that essential nourishment is under pressure.
To succeed in the digital economy, particularly in digital media and digital games, where I also have some interests, we need a strong supply of people who are skilled at writing computer code. As Eric Schmidt pointed out, that is not a part of the curriculum in this country any more. That is an absolutely essential change that must be made, because we desperately need to regain our position in the computer games industry.
Our art colleges, which are now universities, have a long track record of nurturing home-grown talent, be they James Dyson, Ridley Scott, Paul Smith or Keith Richards. Today’s students, many of whom come from disadvantaged backgrounds, have to take on very significant debts to fund their fees and may be reluctant to do so because of the high level of risk in the creative industries. In the past, the BBC, independent television, the regional and national newspapers and news organisations have provided training schemes for aspiring journalists and programme makers. Today, unfortunately, only the BBC continues to provide training of any significant nature, and the director-general made it clear yesterday that the training budget was not immune to cuts. He added that he was hopeful that the reduced level of funding could be stretched further. We shall see. Against this background, it is vital that the media industry, academia and the Government work together to ensure that there is adequate and affordable provision of training at universities, specialist institutions and in the workplace in order to maintain the flow of talent.
The development of great content and the ability to own and exploit its value over time is the cornerstone of many creative businesses, and that requires a steady supply of risk capital and investment. The TV programming business is coping with an uncertain advertising market and a declining spend by the BBC. Sky’s welcome decision to increase its spend on original UK content and the growing importance of BBC Worldwide as a funder, which was referenced by the noble Lord, Lord Fowler, has helped to sustain programming investment. BBC Worldwide is one of the few genuine international players that we have in the UK. It has unrivalled power in global distribution and a growing and impressive track record in investing in successful and original programmes. It has invested over £1 billion over the past five years, working with both the BBC itself and over 200 independent production companies. It needs to increase its investment firepower if it is to provide the required level of funding to support broadcasters and independent programming investment.
An increase in the flow of risk capital to the TV and film production industries, and to digital media development, is of critical importance to the health of our creative sector. Our tax system generally prioritises the use of debt financing, and we are living with the consequences of that today. The interest on debt financing is fully offsettable against taxable profits, and of course that makes it more attractive than equity. But it is risk capital that is required, and that needs to be equally encouraged by the tax system. The Government’s welcome increase in the level of enterprise investment scheme investment that can be offset against personal tax is a step in the right direction, but a much more significant and bolder increase is required if the creative industries are to raise the level of risk capital they need and can successfully deploy.
Baroness Benjamin
My Lords, I cannot congratulate my noble friend Lady Bonham-Carter enough on securing this important debate. I also congratulate the noble Viscount on his excellent maiden speech, and I look forward to working with him as he has already volunteered to be a part of the All-Party Parliamentary Group for Children’s Media and the Arts. I welcome him.
Creativity is one of the key attributes that defines humanity. Since Stone Age people painted visions of their world on the walls of their caves, sang laments to the moon and the stars to express wonder and fear, or danced joyfully in the flickering orange glow of their campfires, there has been creativity. Through the ages such acts have provided nourishment and hope for the souls of humans. Art, music, dance, literature as well as theatre have defined civilisation and human progress. Today, of course, we have television, which is probably the primary creative portal through which the vast majority of people see the world around them. So it is vital that television reflects Britain’s culturally diverse society and communicates accurately the views and perceptions of all communities. This can only be achieved if the workforce that makes the products is drawn from all communities and not limited to just one sector of the population.
For example, there is a huge diversity problem in employment in the film and television industry, both in front of and behind the camera, and the ones who are lucky enough to get the opportunity of employment often get pigeonholed and have little job advancement prospects. The BBC and Channel 4 have made outstanding efforts to correct this and should be applauded, but the rest of broadcasting industry is lagging far behind. Often the adverts on commercial channels contain more diversity than the programmes themselves. In the past, the UK Film Council actively promoted equality and diversity within the film industry through its training and employment schemes, but I am still waiting to hear what plans the BFI has to make sure that people from culturally diverse backgrounds get a fair and equal chance to actively participate in all aspects of the film creative industries.
Transparency and accountability are essential, especially when companies are in receipt of public funding—and that includes art galleries, museums and theatres. So I would like to ask my noble friend the Minister this. What are the Government proposing to do to ensure that we have transparency and accountability when it comes to equality and diversity in employment in the creative industries, so that the public can see for themselves how well we are being served and how organisations are implementing diversity and inclusion?
As noble Lords know, I am passionate about the well-being of children and young people and I cannot help but draw attention to the need for children, especially those from poor backgrounds, to be included in all aspects of the creative landscape. We must provide them with every opportunity to take part in, be exposed to and develop a love for all things creative, so that they can achieve to their full potential. But the cuts in the arts are threatening this. Many of our young people feel disconnected from society, from the world of politics and finance. They are surrounded by war and conflict and overwhelming doom and gloom. No wonder they lash out at society. It is the role and duty of the creative industries to reflect the changes and moods of society and include everyone in that process. This is so important.
However, young people themselves are redefining creativity as modern technology changes the way they create. Graffiti and rap music have become art forms in their own right. Online sites such as YouTube allow them to participate in creative projects independently and reach millions across the globe. Computer games are now also part of the modern creative landscape, spawning an entirely new creative industry that young people are exploring and taking advantage of. However, more needs to be done.
Before I finish I must refer to the decline in children’s UK television production. I believe that childhood lasts a lifetime and that exposure to television programmes, which stimulate creativity in young children, especially as early as possible, is critical. But, sadly, the percentage of home-produced children’s programmes is shamefully low, at around 1 per cent according to Ofcom figures. This is simply not good enough. The BBC is virtually the sole provider of PSB children’s programmes but there are only so many writers, performers and directors that the BBC can employ. If we do not sustain a vibrant children’s television sector producing dramas and factual programming rather than importing cartoons, we will be squandering the talents of our creative people and denying our children high-quality, relevant programmes reflecting their world.
The whole of our creative landscape is linked together like a shimmering spider’s web of interaction, each thread supporting and enhancing the other, giving us relief from tedium, acting as food for the soul and often bringing joy and happiness into our lives. So, in these days of austerity and economic fear, the creative industries and those who work in them are vital to the well-being and spiritual health of our nation. Can the Minister assure the House that the Government will be creative in their thinking in finding ways to ensure that we sustain and celebrate our creative industries?
Lord Rowe-Beddoe
My Lords, I declare my non-pecuniary interests as president of the Royal Welsh College of Music & Drama, which has some 600 students, 15 per cent of them from overseas, and as president of the Wales Millennium Centre—a workplace of 1,000 people.
It is apparent from the interest displayed this afternoon that many of your Lordships fully appreciate the significance of the cultural industries in the UK, measured in terms of economics, employment, education, cultural impact and social well-being. It is also pleasing to note some of the supportive activities that have taken place since our last debate on the topic in your Lordships’ House over two years ago. One example has already been mentioned—the Government’s establishment of the Creative Industries Council in September. The economic impact of the creative industries has been clearly recognised in that council through the joint chairmanship of the Secretary of State for Business, Innovation and Skills and a Minister from the Department for Culture, Media and Sport.
DCMS figures relating to the third quarter of 2010 state that some 1.3 million jobs are to be found directly within the creative industries. We also know that the export of services in 2008 totalled £17.3 billion—some 4.1 per cent of all goods and services exported from the UK that year. In a 2009 UK Trade & Investment survey, business leaders cited the provision of arts and culture as a critical determinant in investment location decisions—even more important than a favourable tax regime.
I am pleased to refer to some recently published NESTA work which is the outcome of a two-year collaboration between the Universities of Birmingham and Cardiff. This work seeks to identify and understand the dynamic of regional hotspots in creative excellence and activity. NESTA reinforces the contribution that the creative industries make of more than £50 billion to the economy each year. NESTA identified a special case for media production in Cardiff and states:
“Cardiff should … be seen as the locus of a Media Production cluster where production for broadcasting is tightly integrated with digital media services”.
Such recommendations dovetail in a most helpful way with the review of the creative industries, The Heart of Digital Wales, led by Professor Ian Hargreaves for the Welsh Assembly Government in March last year.
HSBC’s report, The Future of Business 2011, has independently identified Cardiff as a possible hub for Britain’s creative industries. This report also claimed that the UK’s creative industries now represent 6.2 per cent of the total economy, a sector which, it states, is proportionally the largest of any in the world, with 2 million people employed across a broad range of activities from video games to the performing arts. Britain’s leading position is reflected in the fact that over two-thirds of international advertising and branding agencies have their European headquarters in London.
I am happy to join the commendations made earlier about the BBC. The BBC has taken an important step in Cardiff by completing construction in September of 175,000 square feet of HD-ready film studios, which will provide a permanent, purpose-built home for four of its flagship dramas—“Casualty”, “Doctor Who”, “Upstairs, Downstairs” and “Pobol y Cwm”. Some 500 or more people will be working on site, of which some 20 per cent are new jobs.
Equally exciting in these times of very high youth unemployment is the BBC’s commitment to start an apprenticeship scheme in the next month, in partnership with the independent sector and Skillset Cymru. The BBC will select 24 apprentices and provide on-the-job practical training and experience as well as classroom-based college learning leading to a level 3 certificate in creative and digital media. Twelve-month work placements will also be available with BBC Cymru Wales and with independent film companies.
Finally, perhaps I may say a brief word on Conservatoires UK, another vital factor for employment within the creative industries. The eight members across the United Kingdom provide world-class training in music, and two or three of them in drama and dance as well. I mention it because a key objective of these conservatoires is to produce performers and other professionals across the sector, which is vital to the continuing global recognition of the quality and reputation of the UK’s creative skills. Their work is not only to be applauded but measured by their importance in terms of employability. Graduates from these special institutions are among the most successful in terms of their professional engagement. The continued level of funding by both central and devolved governments is vital to the ongoing extraordinary contribution made by this small sector.
Lord Grade of Yarmouth
My Lords, the noble Lord, Lord Rowe-Beddoe, is to be congratulated on cramming so much into two-and-a-half minutes. Because time is so limited and my interests both past and present so numerous and duly disclosed, I hope that noble Lords will allow me to proceed by taking them all as read. Thank you.
In a period of seemingly relentless bad news, my noble friend Lady Bonham-Carter is to be congratulated on securing time for the House to discuss, or celebrate, one precious good news story for our time: Britain’s creative industries. If the Chancellor of the Exchequer is looking for the elusive G-word—growth—he need look no further. As we have heard this afternoon, Britain is enjoying a golden period of creativity and commerce both at home and abroad and in every single one of the creative disciplines.
British television is enjoying the most sustained success. Our programmes, programme makers and ideas and formats are in demand throughout the world as never before in my lifetime. This success is the direct result of the investment made by both the public and private sector public service broadcasters: BBC, ITV and Channel 4 and Five. The licence fee and the advertising revenues collected or earned by these channels are invested into British content to the tune of some £3.5 billion annually. I will restrict my remarks today to some areas of nonsense regulation that threaten and erode this investment.
First, a few facts: British television employs more than 130,000 people and has grown consistently by 4 to 5 per cent in each year of the past decade. A recent report concluded that Britain spends more per capita on original programming than any other country in the world. According to Ofcom, public service, free-to-air channels contribute 90 per cent of the whole industry’s £4 billion total annual investment in UK production. This investment is declining, and that must in part be due to the depressed advertising market and BBC licence fee pressures. These factors are unlikely to reverse, so we must do whatever we can, short of further public intervention, to maximise this annual investment and maintain our world lead. This certainly calls for ever greater efficiency, particularly at the BBC, but also means plugging those leaks in the revenue stream caused directly by damaging regulation.
There are leaks in the investment bucket that are easily within government’s power to plug. As we heard from my noble friend Lord Black, the first is the competition regime that regulates, in particular, my former employer ITV. When ITV recently sought to be released from the stranglehold of the airtime sales remedy imposed by the Competition Commission as the price for its consolidation in 2003, the CC found against it. In the course of the inquiry, I found it profoundly depressing that the commission felt unable to engage with the argument that there is any public interest in ITV being free to charge even a fair market price for its airtime in order to sustain and increase its investment in original British production. The commission refused to acknowledge that there is any public interest in programme investment.
So long as advertisers can continue to enjoy the cheapest airtime in Europe, through the artificial deflationary remedy imposed 10 years ago, all is well in the rarefied world of economic market theory inhabited by the people at the Competition Commission. By the way, they also chose to ignore the fact that the Google-dominated internet is now a fully grown, head-to-head competitor for advertiser-supported television. Nor did it occur to them that sustained investment in British content is also in the advertisers’ long-term interests. Could the CC have got it more wrong? The Government must look at the CC’s terms of reference in this market and require that they take account of the public interest in programming investment, and the new wider online market. Recalibrating the competition authority’s outdated remit will pay handsome dividends in jobs and exports. Please spare us one of those ludicrously long three-year market review solutions beloved of economic regulators.
The other leak in the investment bucket comes with a health warning: it is not for those of a nervous disposition and may come as a shock to some listeners. All of the free-to-air public service broadcasters currently have to pay Sky to transmit their billions of pounds worth of British hit programmes each year. There is not time today to explain how this comes about, suffice it to say that a lethal cocktail of statute, competition law and regulation, both UK and European, and political and regulatory apathy is ensuring that an estimated £15 million a year currently flows out of UK production jobs and exports and into the coffers of Sky. In no remotely comparable television market anywhere in the world is this allowed to happen.
Since these arrangements were put in place, I estimate hundreds—yes, hundreds—of millions of pounds have been drained out of UK public service programming investment and across to Sky. Clearly there is an importance to Sky viewers in being able to watch “Coronation Street” and “EastEnders”, and clearly there is an interest for the PSBs in reaching the Sky audience. So, the simple question for the Minister is: why does any money need to pass between two mutually dependent media sectors? I suspect the economists’ answer would be that it is all very well in practice, but it does not work in theory.
Fairness demands that this arrangement should be neutralised as a matter of urgency so more jobs can be created, more exports earned, more economic activity generated and more wonderful home-grown programmes enjoyed by everyone—everyone except, that is, the competition commissioners. Both of the issues to which I have drawn your Lordships' attention today, belong to that file of free market economic theory that I have labelled “Ongar” which, as your Lordships well know, is the station on the Central line just beyond Barking.
Baroness Jones of Whitchurch
My Lords, I thank the noble Baroness, Lady Bonham-Carter, for initiating this debate. She has been a tireless and vocal agitator for greater prominence for the arts and has once again made a compelling case today. I would also like to add my welcome and congratulations to the noble Viscount, Lord Colville, who has demonstrated today that he is going to be a talented and effective new recruit to the growing band of us who care about the arts.
As I reflected on what I might say today, it occurred to me that I had not read or heard much from Jeremy Hunt on this issue for a while, so I thought that I ought to check. I looked on the DCMS website under the creative industry section and there was nothing. There were no speeches or press releases from the Secretary of State celebrating the arts, no messages of congratulation to our film-makers, our actors, our playwrights, our authors or our artists for their recent successes. There was nothing to welcome the blockbuster achievements of exhibitions at our great museums and galleries, no words of encouragement and nothing to thank the sector for the continuing contribution being made to the economy at this difficult time.
To be honest, I was not surprised because that is what it feels like on the ground to those of us that take an interest in, and support, the arts. The sector feels unappreciated and unloved. Regrettably, the Secretary of State has pursued a single-minded agenda of cuts at the expense of any other considerations. He was, of course, one of the first Cabinet Ministers to seek the favour of the Chancellor by offering up cuts in his own department of 20 per cent. This has been followed up by a rushed financial squeeze on the BBC, the axing of the much respected UK Film Council and the closure of hundreds of libraries around the country. As we know, he wants the sector to stand on its own feet, backed up by private giving where necessary, without fully understanding how central the arts are to the future growth of the economy.
The noble Baroness, in her opening speech, quoted some figures on the creative industries’ economic contribution. There are a number of ways of calculating this, but even the DCMS website acknowledges that they contributed 5.6 per cent of the UK's gross value added in 2008 and exported over 4 per cent of the total goods and services. Under the previous Government these figures continued to rise. In addition, undoubtedly the main motivation for many overseas visitors coming to Britain is the theatres, concert halls, museums, country houses, festivals and historic buildings. These visitors bolster our economy and create jobs, not only for those employed directly in the sector, but for the hundreds of thousands working in hotels, restaurants, transport and retail outlets.
However, this is not just a debate about visitor numbers and export successes; it also raises issues about the sort of country we want to inhabit. We are all rightly proud of our cultural history, but a vibrant culture is more than just history—it is about the way we live now. Our lives are enriched by the artists, designers, writers and composers who are working today. As my noble friend Lady McIntosh highlighted, these are not born successes but need opportunities to build and develop from small-scale local theatres, galleries, studios and publishers. They often need grants or loans or funds to help them break into the sector, and they need encouragement from a young age to develop their imagination and creativity.
A number of noble Lords have referred to education in the debate. There is nothing I have read in the Government's education plans that leads me to believe they understand the need for creativity in education. Michael Gove prefers formal teaching and a concentration on learning facts and dates. As several noble Lords have said, the English baccalaureate does not include one creative subject: art, design and music studies are sidelined. It was reported in the press at the weekend that applications to do creative art and design courses are down 27 per cent, and universities report that many of their humanities courses are under threat of closure. We are in danger of squeezing out the creative forces that make Britain unique.
It is time that we took a cold hard look at what the UK economy will look like in 10 or 20 years’ time. What will be our unique selling point? What will be our fields of excellence in the global economy? Many of our industries and services can no longer compete with the continuing expansion of the Asian economies. What will we have left to sell? We cannot assume that the UK will always maintain its reputation for creative excellence in the world. Other countries are waking up to the need to invest in the creative industries, particularly around design and innovation. It would be all too easy to lose our edge in the global market, and we will not be able to retrieve it.
Meanwhile, for example, we know that the Chinese look upon our culture with respect and admire our heritage and our artistic tradition. Over 100 million students are learning English in Chinese schools. A colleague who is a second-hand book dealer says there is now a vast demand for English textbooks in China. Meanwhile, India has the second-highest number of English speakers of any country in the world. We need to capitalise on these trends so that we have something of value to exchange in the global marketplace of the future. I hope the Government wake up to these needs and demands.
A number of noble Lords talked about needing to avoid shopping lists in the debate, so I have a simple request—a simple expectation—which is that I hope the Minister will agree to have a word with her boss about how he might signal to the arts in this country that, belatedly, they are loved and valued again.
The Earl of Glasgow
My Lords, I too congratulate my noble friend Lady Bonham-Carter on not only setting up the debate but also her important speech, which I hope will be followed up or taken very seriously by the Government. I also congratulate the noble Viscount, Lord Colville, who is not in his seat at the moment, on his maiden speech. It looks as if he is going to be a great credit to we rather sad number of beleaguered hereditary peers—there are not many of us.
I want to say a few words about the British film industry, particularly because I bring tidings of good news at a time when there seems to be a diet of bad news. The British film industry is bucking the trend. In fact, 2011 could be the British film industry’s most successful year of all time. Already this year, $3.3 million of foreign sales have been achieved, and £311 million in domestic sales. This has been caused by a certain number of films that have come out this year. Practically everybody has seen “The King’s Speech”, which was very successful: it won 65 awards, including four Oscars and seven BAFTAs. It was only beaten by another British film three years ago, “Slumdog Millionaire”, which got eight Oscars and 104 awards. Rather surprisingly to some of us, “Tinker Tailor Solider Spy” is becoming a very successful film. It is surprising to me because I thought that people under 40 would not understand or be interested in the Cold War, but apparently it is appealing to them.
The most successful British film in Britain this year is something that I doubt any of us here will have seen, called “The Inbetweeners Movie”. It is about a whole lot of young people behaving very badly. It is what is sometimes called—oh dear, I have forgotten the name now, but there is a certain type of word for that particular type of film. It tends to be all about people behaving badly. What is the word for it? I cannot remember now.
The Earl of Glasgow
No. There is a word for it. Damn it; I should have written it down on my bit of paper but I did not.
Anyway, “The Inbetweeners Movie” has made £45 million at the British box office, which is an extraordinary achievement. Another film, which got very bad reviews and has been running for two weeks—I doubt whether any of your Lordships have seen it—is called “Johnny English Reborn” and, of course, stars Rowan Atkinson, who is incredibly popular. That may be one of the reasons it has already got £17.5 million in two weeks. These are quite extraordinary amounts. It is rare that the British film industry does as well as this.
There is also what they call an art film, which is very depressing and gloomy but very good, called “We Need to Talk About Kevin”, which came out two weeks ago. That has already taken £1.5 million in Britain. It is strange and surprising for an art film to achieve that.
The most extraordinary film this year is the documentary “Senna”. I am told that it has made more money than any other feature documentary in British history. It has already made $3 million, which is amazing for a documentary.
Noble Lords have already heard, so I am not going to talk much about it, that British film studios have never been busier; they are doing very well indeed. Also, of course, a lot of foreign companies are coming over to Britain to make films in this country. An interesting one with Brad Pitt was happening up in Glasgow, which for one weekend suddenly was made into Detroit, which was very strange. Glasgow was completely closed down. In 2012, £935 million will be spent in Britain.
Film can be judged in three different ways. It can be judged as an art form, it can be judged as entertainment, and it can be judged as an industry. As an art form is how I judge it most, as the French have always done. As an entertainment is probably how most noble Lords will think of film. As an industry, of course, it is very important to our economy, which is one reason that we are talking about these things at the moment. It employs many people. British technicians are widely regarded as the best in the word. However, can this present success really be maintained? That is the important thing. There have been many false dawns. There was a time when Colin Welland announced that, “The British are coming!” after the success of “Gandhi” and one or two other very good films. But then it all went pear-shaped with Goldcrest Films, which was once thought of as the flagship of British cinema.
This time, the BFI believes that a successful British film industry is sustainable. After the Olympics, more lottery money will be invested in British films. Traditionally and historically, the film industry always does better in a time of recession. It is currently a success story. When there are so few other silver linings on the horizon, the Government should get behind the film industry, as the French Government have always done with theirs.
Lord Bichard
My Lords, I, too, thank the noble Baroness, Lady Bonham-Carter, for allowing and enabling this debate, and congratulate the noble Viscount, Lord Colville, on his excellent maiden speech.
My early encounters with creativity were no more successful than those of the noble Lord, Lord Bilimoria. My art teacher said that I was the most boring pupil he had ever had; I thought that that was a bit excessive at the time. He went on to describe some of my work as “derivative”; I now realise that that is the biggest insult you can pay to any artist. So it took some recovery from that, but I went on to spend several wonderful years as vice-chancellor of the University of the Arts London, and as chairman of the Design Council. I learnt a lot from that experience. I learnt, of course, about the economic importance of our creative industries, not least in London, which is now vying with financial services as they most important economic sector.
I also came to understand the sheer excellence of our creative industries, which are quite simply world leaders. Since we rarely mention fashion in this House, let me mention it as an example. Fashion designers like Hussein Chalayan, Paul Smith, Vivienne Westwood, the late, lamented, Lee McQueen, Stella McCartney and Phoebe Philo dominate the world of fashion.
I also began to appreciate the way in which our creative industries define the UK in the eyes of the world. For many overseas, it is what we stand for. I came to understand the huge impact which our creative industries can have on individuals. I often say that the film which changes my professional life was Ken Loach’s fantastic “Kes”. I vowed, having watched “Kes” and the way in which Billy Casper was dealt with by public services, that I would never want to lead a public service that dealt with anyone like that. Of course, we all understand, and I learnt, the huge impact that the creative industries can have on the quality of people’s lives, transporting them from the mundane to the magnificent. In every possible way, the UK would be poorer if it failed to sustain the success and the quality of its creative industries. Our competitors and those who admire our country and culture would be astonished if we allowed that to happen.
Yet that is exactly what is now in danger of happening. Art and design education, on which the success of our creative industries is in many respects built, faces a perfect storm of initiatives and policies which threaten its future and, therefore, the future of our creative industries. It is there that I want to focus my attention. I make no apologies for doing that; it has been mentioned by several other noble Lords today, but is so important that it bears repeating. If we are honest, in our schools, the development of creative skills and the appreciation of the creative arts have had a chequered history. Currently, the renewed emphasis on the traditional academic subjects and knowledge sometimes seems to be at the expense of the creative subjects. As others have mentioned, the introduction of the EBacc has caused many schools to rethink their curriculum, and they no longer see the creative arts as having a pre-eminent place. Why is it that, in the recently introduced Scottish Curriculum for Excellence, the expressive arts are seen as one of its eight curriculum areas? In contrast, in England I have heard few Ministers for Education since the election even advocate the importance of creative art education. The review of the curriculum may well see design and technology lose its status as a compulsory subject.
The position is even more grievous in higher education, in which hitherto Britain has undoubtedly led the world. A series of policy initiatives, which individually might be justified, together pose very serious threats for the future of art and design in higher education. Higher fees for students may be unavoidable, but they hit art and design students particularly hard. Many who come from state schools and working-class backgrounds, in addition to the fees, have to bear the cost of making artefacts for assessment or funding their final shows. The loss of teaching grants means that all costs have to be met from tuition fees, which barely meet the cost of course delivery let alone provide investment for the expensive kit that is now needed, such as body scanners for fashion schools and foundries, and rapid prototyping equipment.
Finally, the fact that international postgraduate students are no longer able to work for two years after completing their master’s course means that Britain is now a much less attractive destination. Art and design colleges need those students not just for the money but because they bring the rich cultural mix that is so important to successful art and design education. Is it not ironic that all this is happening just at the time when our global competition has realised the critical importance of art and design education and is investing so heavily in those subjects?
The problem with success is that you can begin to think that it is inevitable; but it is not. Our creative industries matter, they depend on the quality of our creative education, and we are in danger of seriously damaging that.
Lord Shipley
My Lords, I, too, thank my noble friend Lady Bonham-Carter for initiating this debate, in part because it gives me an opportunity to speak about the impact of creative industries on north-east England; and here I declare my board membership of One North East, which pump-primed quite a bit of it.
Last Friday, Radio 4’s “Any Questions?” was broadcast from Hoults Yard in the Ouseburn Valley, on a tributary of the River Tyne in the centre of Newcastle. It used to be the home of Maling pottery, it then housed the Hoults family removal business, and now it is the heart of a major renaissance in the creative industries, with 50 businesses generating some 400 jobs. The Ouseburn Valley and Hoults Yard are living testament to the potential of creative industries to regenerate old industrial areas. Hoults Yard, of course, is part of a more buoyant general growth in the north-east’s creative industries which recorded a 37 per cent increase in gross value-added in the five years from 2005 to 2010 and now contribute £90 million to the north-east’s economy. The core creative sector’s growing importance is reflected in the fact that there are 25 per cent more companies and 15 per cent more people employed in the sector than there were in 2005. Overall, there are some 6,000 companies in the creative sector in the region, with 1,000 now in the core creative sector.
How can this be built on? A good example is based in the Ouseburn Valley: Northern Film & Media, a creative industry development agency with the vision to create a strong commercial creative economy in the north-east by commercialising talent and ideas. To date, it has generated £4 for every £1 of public money invested, and aims to provide the link between talent, experts and the market using seed investment, leverage, industry expertise and partnership working to make an impact in film, television, games, web, mobile and music. I hope that experience and expertise, and that of similar organisations elsewhere in the country, can be built on, given the establishment of the Creative Industries Council and the Creative Industries Network and their aim to boost growth.
The creative sector in the north-east is part of a much wider cultural renaissance. I pay tribute to the vision of Gateshead, the Sage Gateshead and the Baltic art gallery, where recently many thousands of people queued on the first five days to see the Turner Prize exhibition. On the Newcastle side of the river, there has been major capital investment in theatres, dance, film, the centre for children’s books, and museums, all of which have contributed enormously to changing the image of Tyneside and its industrial heritage and generate wealth both directly and indirectly.
What do we need to do now to increase the potential of our creative industries? First, to grow, some firms need more help and advice to overcome barriers to growth—how to win contracts, how to secure skilled workers and how to access finance, particularly bank loans and venture capital.
Secondly, there is the role of the BBC from Manchester as it moves increasingly north. There is clear research evidence that the growth of creative and cultural industries in Bristol and Manchester has been supported by the extent of commissioning by the BBC. I hope we can ensure that the move to Salford Quays is genuinely accompanied by an increase in commissioning across the whole of the north of England, because it could make a very significant difference indeed.
Finally, I turn to the importance of the universities because they create a strong pool of potential talent. Joining the needs of companies, particularly those requiring high-level skills, with the courses that are being followed at those universities is extremely important, because working together they help to drive commercialisation and expansion. Of course, many northern cities have large numbers of incoming students. Indeed, one of the causes of successful regeneration of cities across the north of England has been the large number of students who come to undertake courses and then stay on. Getting them to stay in those cities on graduation, to set up businesses or to join other businesses makes an enormous difference to the speed and extent of growth in those cities.
Creative industries account for some 5 per cent of the UK’s economy. The figure is broadly similar in parts of the north. It is a bit lower than 5 per cent across the north-east as a whole, but it is rising. However, it is clear to me that, with proper nurturing, our creative industries sector, both across the UK and in my region, can grow so much further.
Lord Colwyn
My Lords, I, too, thank my noble friend Lady Bonham-Carter for initiating this debate. I take this opportunity to remind your Lordships of the significant contribution of jazz to economic, educational and cultural life at all levels. I declare an interest as co-chairman of the All-Party Jazz Appreciation Group. We are hosting the start of the London Jazz Festival with some live music on the Terrace next Wednesday. I am also a very occasional player, a patron of the National Youth Jazz Orchestra and a member of the Musicians Union.
There is an active jazz scene in all major UK cities. Musicians with established reputations and young musicians, many with great flair and originality, seek a serious audience that can understand and enjoy their music. They perform in a variety of settings, from pubs, clubs, arts centres, hotels, ballrooms, village halls, restaurants and local arts festivals to high-profile events at the nation's most prestigious concert venues. Many UK jazz musicians have developed international reputations for live performance and have recordings that are seen and bought by a worldwide audience. Every year there are jazz festivals all over the country, many featuring some of the finest jazz musicians in the world. More than 3 million people patronise these events, with five times that number expressing a definable interest in jazz.
While jazz continues to attract these audiences, 80 per cent of jazz musicians earn less than £25,000 a year. This is not helped now by the current economic climate, when there seems to be an increasing public reluctance to pay for music. Yet falling CD sales in a download culture are having a smaller impact on jazz income than might have been expected, and ticket sales and public and private subsidy have all showed modest but significant increases.
There is a thriving small-scale recording scene among British jazz musicians with widespread and growing use of the internet to sell recorded music. A different kind of jazz venue has emerged, located in a church, library, museum or community centre in response to the red tape challenge to pub gigs imposed by the new licensing laws. Jazz festivals have also expanded and brought new money.
My noble friend Lord Clement-Jones has been successful with his Live Music Bill, which has completed its passage in this House, but the current situation over the licensing of live music, which has such a detrimental effect on young musicians, is utterly confusing. Licensing Minister, John Penrose, has described live music restrictions as “mostly bonkers red tape” and suggested that plans to cut red tape for live music are essential but out of his hands and dependent on consent from the Department for Work and Pensions and the Home Office.
The only arguable justification for a licensing regime pre-emptively criminalising the provision of live music, subject to prior consent from the public or the local authority, or both, is where there is the potential for a significant negative impact on the local community that cannot be adequately regulated by existing legislation. This is clearly not the case for the vast majority of small gigs taking place within reasonable hours. It is gradually becoming clear that the red tape is being retained for small gigs in bars and restaurants under the Government’s sweeping “deregulation” proposals published in September.
It would be helpful to have a definitive statement on licensing and small venue exemption. Even if the entertainment licensing requirement is abolished, it seems to me that live music licence conditions will in fact remain in pubs, bars, restaurants and any other premises with an alcohol licence, however small. Such conditions often include restrictions on performer numbers, genres, times or days of performance, with the onus on the licensee to pay to apply to have these removed. It can cost £89 for a minor variation or several hundred pounds for a full variation, with the final decision remaining with the council. The promise is to get rid of the red tape. The Live Music Bill of my noble friend Lord Clement-Jones represents the only genuine deregulatory measure in the legislative pipeline for small-scale performances of live music. Earlier this year, I asked my noble friend the Minister whether she could clarify this situation. May I repeat my request for clarification?
The annual turnover of the jazz sector of the British music industry is in excess of £88 million. The report by Jazz Services, as part of its Arts Council development project, found that sales of CDs through shops, websites and at gigs reached almost £40 million, while ticket sales for jazz concerts and festivals were worth £22.5 million. That makes it an important creative industry and one that would benefit from an understandable licensing policy.
Lord Macdonald of Tradeston
My Lords, as I recall, the term “creative industries” was first coined by the new Labour Government back in 1997 to define activities that deserved strong support. The subsequent growth over the years until 2010 was, I believe, among the finest achievements of Labour in power. No doubt this debate—I congratulate the noble Baroness, Lady Bonham-Carter, on initiating it—will help make the measure of Labour’s success more familiar to your Lordships.
The creative industries now provide more than 2 million jobs and their growth rate over the past decade has been nearly twice that of the economy as a whole. Indeed, Labour’s legacy is that the UK now has the largest creative sector in Europe, and perhaps the largest of any country in the world relative to GDP. Yet what we see now is that success being threatened by cuts across our creative industries: witness the 20 per cent cuts imposed on the budget of the world’s most respected broadcaster, the BBC; the abolition of the UK Film Council; the failure to incentivise the video games sector; the cuts suffered by the Arts Council and the lack of progress on the protection of intellectual property in our creative industries.
Like the noble Baroness, Lady Jones, and other noble Lords, I fear that the foundations of creativity are being undermined in our schools. In schools the Conservative focus on so-called traditional subjects will be at the expense of more socially useful, creative and cultural subjects. Does the Minister recognise the transforming role of creative activities in encouraging the assimilation of many young people from disadvantaged communities into the mainstream of British life and culture? This educational process has brought great vitality, breadth and diversity to our hugely successful cultural sector, yet in higher education government reforms will hit the arts and humanities hardest. Design and media courses will suffer, especially in those universities in deprived areas which recruit from lower-income families. These are not policies that encourage our creative industries.
However, the Government deserve credit for investing in success in one sector of great significance—the digital economy. We know the astonishing success of the digital cluster in California’s Silicon Valley. Now Britain’s digital businesses are being encouraged to cluster just next door to London’s most famous existing cluster—that of financial services in the City of London, which is beleaguered at present but still of great importance to the UK economy and world markets. As befits a truly global city, London also has other creative clusters of international renown in television, journalism, publishing, advertising, marketing, performing arts, fashion, video, software and digital companies—a cluster of creative clusters.
The Government’s commitment to the capital’s digital economy is through its East London Tech City initiative, whose hub is Old Street “Silicon Roundabout” in Shoreditch. The initial signs are positive for Tech City, with 170 start-up companies attracted last year, 340 start-ups forecast for this year and a new Google headquarters planned at its heart. Oddly enough, as Chancellor of Glasgow Caledonian University, I take a particular interest in Tech City and its adjacent creative clusters. Indeed, we have our own start-up in Tech City. Yesterday, Her Royal Highness the Princess Royal launched our new London campus in Spitalfields. Glasgow Caledonian University is the first Scottish university to open a campus in London. Our postgraduate applicants told us that they liked the creative courses that we offer in fashion, marketing and finance but that they were also irresistibly attracted by the lure of London, with its unique cluster of creative opportunities. Already our overseas applications surpass all expectations. That is a small, benign example of the convergence of universities and creative companies in the digital economy promoted by my noble friend Lord Hollick.
I hope the Government come to appreciate all the complex factors that have helped make the UK’s creative industries so successful. I urge the Minister to ask the Government’s Creative Industries Council to move to repair the damage being done across so many areas of cultural activity. My concern is not just for growth and jobs but for the enrichment that has made life for ordinary people so much more stimulating and enjoyable than it once was in that rather dreary Britain in which so many of us grew up.
Baroness Randerson
My Lords, we should do this more often; that is, spend three hours talking about the creative industries. Indeed, we could spend three hours speaking about each of those creative industries given their importance to our economy. Many noble Lords have talked about the economic importance of the sector. It is worth pointing out that the CBI predicts that by 2013 the sector will employ more people than the financial services industries, although I imagine that the average rate of pay might be slightly lower.
The term “creative industries” came to prominence at the time of the Tony Blair premiership. I am pleased that the noble Lord, Lord Smith of Finsbury, will speak in the debate given the contribution that he made to this sector at that time. Creative industries are a very broad church. It is the strength of the creative industries that they are such. From advertising to fashion and design, and from publishing to the arts and music, the contrasts within the sector are unlike any other sector of industry and that is its strength. It means that when one sector is not doing so well, another industry will still be motoring on very well indeed.
One of the advantages of the creative industries is that they are often not capital intensive and it is therefore relatively easy to establish a new business. Indeed, the sector is dominated by SMEs, although some sub-sectors are the exception to that. Publishing, for example, involves very large businesses. Creative companies of similar types tend to cluster together to feed from each other and to establish concentrations of specialised skills. When I was Minister for Culture in Wales for three years, I recognised the immense potential of the creative industries in a country which continues to suffer from the decline of its manufacturing. As a result I produced the first strategy for Welsh culture and the creative industries called Creative Future. That was as much about economic development as national cultural identity. I wish to pay tribute to the tremendous contribution of the noble Lord, Lord Rowe-Beddoe, to the achievements that we had following that strategy. The noble Lord, Lord Rowe-Beddoe, has spoken about the importance of the creative industries to Cardiff but it is important to emphasise that Cardiff has the largest concentration of media employment outside London with the big broadcasters, BBC, ITV and S4C, of which your Lordships have heard a great deal recently. We also have a cluster of content-driven providers, including in animation, design, gaming, TV production, film and music. The Drama Village has been mentioned. It is one of the interesting pastimes of citizens of Cardiff to watch “Doctor Who” in order to spot the streets they know masquerading as being from another world. The important thing is that there are 7,000 workers in Cardiff engaged in the media sector. That is 3.5 per cent of the workforce and it is growing rapidly.
With so many of the creative industries heavily dependent on IT, it is a major problem in Wales that broadband speeds are still so poor across much of the country, as indeed they are in Scotland. I draw noble Lords’ attention to the report out this week from Ofcom on the broadband network which has highlighted this problem of very low 3G speeds in Wales and Scotland. I urge the UK Government to work closely with the devolved Administrations to overcome these problems.
Throughout the world the ebb and flow of economic prosperity depends in large part on the speed with which each country can seize the technological initiative. The economic prize goes to the area which picks up the newest technology and runs with it, so it is vital that we stay ahead and lead the field. Our video games industry, which has been mentioned by several noble Lords, is the largest in Europe, with a projected growth of 7.5 per cent over the three-year period ending in 2012. It has many thousands of highly skilled jobs, and 80 per cent of employees in that industry are graduates. But there are still problems with the skills that our young people are being provided with not being relevant to that industry. I repeat what many noble Lords have said about the importance of computer science courses—not standard office-based IT courses but courses involving programming and software skills—up to and including university level if we are to stay ahead.
Finally, I wish briefly to mention the importance of providing good finance for these industries. They are not, as Demos has pointed out, risky businesses any more than those in any other sector of the economy.
The Earl of Clancarty
My Lords, I, too, thank the noble Baroness, Lady Bonham-Carter, for initiating this important debate. I very much enjoyed the excellent and passionate maiden speech of the noble Viscount, Lord Colville. The noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Randerson, mentioned the Demos report, Risky Business, on the creative industries, which has just been published. The title is slightly ironic since the report, compiled by researchers close to government and with an introduction by Ed Vaizey, seeks to puncture the idea that creative people are primarily preoccupied by their art to the exclusion of a concern for business. Consequently, Demos gives a stronger definition of the creative industries than DCMS in 2001:
“We define the creative industries as businesses that ultimately seek to make a profit through the sale of something that is based on an original creative idea, and the surrounding businesses that enable this”.
The Demos report tries to draw a distinction between what it terms “creative businesses”, such as Studio Lambert, which makes television shows to sell at a profit, and “creative organisations”, such as the National Theatre. It quotes the owner and designer of a fashion business as saying:
“You build a company because you have a vision but you also want to make money out of it … If you don’t—there is no point in doing it”.
That is a long way from the belief of many artists, including fashion designers, that their work is the prime consideration irrespective of financial gain.
It is useful at this moment in time when there appears to be a crisis in the way the political sphere treats the arts to take a look at the terminology that is being used by both the Government and the Opposition in respect of the arts and the creative industries. I have long held the belief that the worth of art is not through exchange into money or art for art’s sake, which is an insular argument, but that the artist’s work is itself the contribution to society. What, then, is the relationship between art and the creative industries? Do this Government see the two terms as interchangeable or is “creative industries” a blanket term that contains, or has perhaps even subsumed, the arts? Does the new shadow Culture Minister Dan Jarvis’s repeated use yesterday on his blog of the term “arts and cultural sector” signal a differently nuanced approach from that of the Opposition? After all, “creative industries” was a term which emerged partly in response to the need to democratise the arts, and the battle between high and low art is now largely over. These are legitimate questions. David Cameron has pledged to help the creative industries which Demos defines as “strongly market-orientated”. This is happening through Creative England. But he has not pledged to help the arts unless they are prepared to become businesses and creatives. I say this with great respect for the significance of the commercial sector. It is impossible to seal off the creative industries from the significant background story of continuing cuts to the arts. As ever, it is outside London where the cuts are felt most. The noble Lord, Lord Shipley, has pointed out that the Baltic in Gateshead has had huge crowds to see the Turner Prize exhibition. Entrance to the exhibition is free and that is an investment in the future. That prompts me to ask the Government: are they still committed to free admission for the national museums, considering that the National Maritime Museum continues to charge for some of its sites?
The distinction should be kept and preserved between those art forms which are inherently commercial and those which are not commercial—either because they are not yet commercial or because they never should be commercialised—whether we are talking about the BBC or small performing companies. The non-commercial, subsidised arts, when properly funded, provide a public space or arena, both geographical and mental, in which the public meet and where artists are able to experiment and have the right to fail, as Julie Walters pointed out in the Guardian this week. But if we remove this non-commercial component of the landscape we greatly narrow our horizons and impoverish the culture as a whole.
It is true that the success of the commercial creative industries depends, and has depended in the past, on the subsidised arts and other areas, as countless rock stars and fashion designers have confirmed. A good example of this creative symbiosis is the hugely commercially successful Frieze Art Fair started in 2003, which was made possible only by the opening of Tate Modern. Tate Modern has also benefited from this relationship, not least through purchases from the fair. By the same token, recent cuts to the subsidised sector, such as S4C, have resulted directly in 10 per cent cuts to the staff of Boomerang, one of the largest independent production companies in Wales.
I want to make it clear that my defence of a subsidised sector for the arts is not a rearguard defence of old technology opposed to new. The great majority of artists, as the Design and Artists Copyright Society backs up, strongly supports the proper teaching of ICT in schools, as the noble Lords, Lord Puttnam and Lord Willis, passionately spoke to during proceedings on the Education Bill last week. The Government also need properly to reassess their commitment to the teaching of the arts and creativity at both school and higher education level, a topic that is worthy of a debate on its own. Whatever money the Government allow for the newer industries will in the end mean much less if those industries are not supplied with a workforce that is untrained and unknowledgeable.
Many of the most interesting artists of today are able to arm themselves with a panoply of techniques. It is true, too, that the art, music and fashion scenes have been hugely invigorated by students from abroad. Wolfgang Tillmans, Tomma Abts, both of whom are Turner Prize winners, and more recently Thomas Zipp, are just some of the remarkable artists who spring to mind. The current Government’s insular attitude towards foreign students may well, unfortunately, change this.
Lord Sharkey
I, too, thank my noble friend Lady Bonham-Carter for providing the opportunity to debate such an important issue, and I congratulate her on her forceful and insightful analysis of the creative industries and their contribution to the life of the United Kingdom.
I will focus my remarks on one particular sector of our creative industries: advertising. In April this year Alexandra Albert and Dr Benjamin Reid produced a report under the auspices of the Work Foundation, entitled The Contribution of Advertising to the UK Economy, a creative industries report. The executive summary of this report says, in part:
“The advertising industry has been a UK success story for much of the 20th century, developing as a base for globe-spanning organisations, and taking a central role in the broader creative industries sector. The 21st century advertising industry makes a major contribution, both directly and indirectly, to the UK economy”.
The figures, as we have heard this morning, bear that out. The creative industries as a whole represent 8.7 per cent of all UK businesses and employ 1.3 million people. As the noble Lord, Lord Macdonald, pointed out, the creative economy represents a larger percentage of GDP in the UK than anywhere else in the world. It is twice as big as its nearest competitor in Europe. Paradoxical as it may seem, the advertising sector is in many ways an unsung hero of the UK creative economy. Its products are highly visible but the industry itself is often not. This is in part perhaps because the industry has a strong tradition of self-reliance and self-regulation and does not attract or seek public subsidy.
In fact, the Secretary of State for Culture, Media and Sport addressed a gathering of senior advertising people recently and spoke eloquently and forcefully about the importance of the creative industries without once mentioning advertising itself. Advertising is a driver of growth in the creative economy. Its gross value added—at around £7.8 billion in 2008—was bigger than the film, TV, radio and designer fashion sectors combined, and does not include the multiplier effects of indirect and induced economic impacts.
Other than the public purse and the BBC, if those can be said to be two different things, the advertising industry is the single biggest funding stream for the core arts, the film production and post-production industries and the cultural industries such as commercial TV and radio. According to the Institute of Practitioners in Advertising’s Bellwether report last month, every year around £30 billion of marketing and media money circulates around the UK economy. For every £1 spent, company turnover increases on average by £3 to £5, and profitability by £1.50 to £3. These are truly remarkable figures and show clearly the key economic significance and contribution of the UK advertising industry.
Advertising in the UK has another less direct effect. It provides access to corporate brand budgets, which can be and frequently are directed towards the funding of music venues, film and book festivals and independent programming. Without advertising, ITV and Channel 4 would not be in business, and nor, perhaps slightly more equivocally, would the Millennium Dome. Of course, the diversity, range and freedom of our press would be directly threatened. All this is to speak about the quantitative aspects of our advertising industry.
The qualitative aspects of the industry are just as important, perhaps even more important. I am not entirely impartial here and should perhaps declare a by now somewhat historic interest. I have spent 30 years of my commercial life working in and around the advertising industry. I am proud to have been managing director of Saatchi & Saatchi here when it was the largest advertising agency in the world and producer of the highest quality creative work. But even allowing for a slight partiality, I believe it is true that we have here in the UK one the two best advertising industries in the world. External rankings consistently put the US or the UK in the No. 1 or No. 2 positions. Given our relative sizes, this is a truly astonishing achievement. In the UK, the advertising industry is a truly world-class industry.
The advertising industry has undoubtedly been very successful in the UK, but, as with other leading creative industries, it faces new and very fierce challenges. The Work Foundation report notes that:
“It is likely that the global centre of advertising creative and production gravity will continue to shift away from the western countries and towards the BRIC and SE Asian markets”.
The industry is alive to this challenge and so I believe, very largely, are the Government.
The industry is proactive in positioning itself as a creative and innovation hub to the largest and fastest growing companies in emerging markets, with a view to encouraging them to take their brands global. For example, the Institute of Practitioners in Advertising has just launched a new consumer R&D service in China. Speaking of China, the number of IPA member agencies with offices in China has risen from 23 to 62 in the past three years. With the active support of the DCMS and UKTI, the industry runs trade missions to promote our skills, our expertise and our companies. There was a mission to China at the end of September, and there will even be a mission to Silicon Valley and Hollywood, which is due to leave next week.
The UK is a collection of world-beating industries. Our future prosperity will depend more and more on our ability to sustain and develop our creative leadership in advertising as in all creative industries. As someone who has dealt professionally with creative people for 30 years or so, perhaps I may close by saying to my noble friend the Minister that I have always found it useful when dealing with creative people to bear in mind two key principles: first, be very supportive, especially at an earlier stage; and, secondly, keep well out of the way.
Lord Smith of Finsbury
My Lords, I warmly congratulate the noble Baroness, Lady Bonham-Carter, on securing this important debate, which has led us into a fascinating and illuminating discussion from all parts of the House. I have a especial word of congratulation for the noble Viscount, Lord Colville, on a very moving and interesting maiden speech. I should, of course, note a number of interests: I am chairman of the advertising standards authority, a non-executive board member of Phonographic Performance Ltd, and the person who has been asked by the Government to lead the review of policy on the film industry that is currently under way.
When I became Secretary of State at DCMS in 1997, and looked at the creative sector of the economy—those activities that depend for their economic value on the product of individual creative skill and talent, ranging from music, film and the high arts at one end through to advertising, architecture, design and many other enterprises at the other—I sensed that this was a body of activity that was not just of great aesthetic importance but of huge economic importance to the country. I discovered, however, that no one knew the exact extent of those industries. No one knew what the trends or challenges were or what was happening to them, and more importantly, the rest of Government did not acknowledge that they were important.
The picture has of course changed since then. A lot of work from a succession of Ministers and departments in both Governments has been put into establishing the importance of the creative industries, but perhaps that importance is still not recognised sharply enough. If the Chancellor of the Exchequer is looking for where the growth in the economy is going to come from in the next few years, this is above all the area that he should be looking at. Over the last 20 years, the creative sector has consistently grown at a faster rate of growth than the economy as a whole, and that is still the case. The first and most important thing that a Government can do is recognise that fact and its importance.
Two other things are also vital and both have been touched on in the course of our discussions. The first is the importance of education for the success of the creative sector. That starts with the nurturing of creative spirit in our schools. That does not just mean the chance to absorb, enjoy and develop a passion about dance, drama, the visual arts and the richness of our museums, film and music; it is also about giving every pupil in our schools the chance to play music, to direct a play, to make a movie, to be part of the creative process and not just the enjoyment of the creative process.
We need to ensure the development of skill and talent is taken forward not just in our schools but post-school at higher education and further education level. If we are not training the new generations to become the directors, the designers, the lighting specialists, the wizards at special effects, we are not going to have these industries to cherish at all in the future. Education also needs to consider how to encourage and assist the people who are developing their creative talents and skills to learn business skills as well, because they have to be able to become entrepreneurs as well as hone their creativity.
The second hugely important area in relation to the creative sector is the protection of intellectual property value. This is, after all, where the economic value, the creation of wealth, in these creative sectors comes from. The creator has to be properly remunerated for their talent and skill. I cannot emphasise too strongly how important this is. It is especially important in the digital world where online communication is simultaneously the creator’s best friend and potential foe. We need to ensure that value can be properly and legitimately realised and returned to the creator. That is why I urge the Government to press ahead urgently with the implementation of the Digital Economy Act. The Hargreaves report was all very well—Hargreaves got some things right and some things wrong—but we must not forget the Digital Economy Act in the process.
The creative industries add enormously to the wealth of the economy and to the richness of our lives. That needs to be recognised not only in the heart and soul of DCMS—and I know the noble Baroness absolutely understands this—but in the heart and soul of the Secretary of State for Business, the Secretary of State for Education, the Chancellor of the Exchequer, and the Prime Minister as well.
Lord Stevenson of Balmacara
My Lords, I thank the noble Baroness, Lady Bonham-Carter, for securing this debate. As the noble Lord, Lord Grade, quipped, at a time of bad economic news it is a chance to celebrate a success story, and not just in TV. As the noble Baroness, Lady Randerson, said, the time has passed far too quickly and we could have gone on for much longer to discuss this. I also add my congratulations to the noble Viscount, Lord Colville, on his excellent maiden speech. I think it is one of the best of the year. It was gracious and wove personal experiences with wider perspectives, elegantly moving from a wide shot to a tight close-up when he pressed the case for looking again at internships and the whole question of cherishing our talent in this sector.
It is about two years since your Lordships’ House last discussed this topic, when my noble friend Lord Bragg introduced a similar debate. As then, we have had a very high-quality discussion, much enhanced by the contributions from noble Lords with direct experience in these industries, as well as from those with a passionate engagement with the sector. The main themes that seem to have emerged this morning are: a continuing concern to improve skills and training; worries about the way creativity is being squeezed out of the core curriculum, with particular reference to the EBacc; a decline in the arts and creative courses being taught in higher education because of the cut in the teaching grant; the need for an appropriate solution to stimulating finance for these high risk businesses, not that they are any more risky than others, but the risk is of a different quality—it is a “hit” industry that needs specific attention; how deregulation of the BBC and ITV might help; the need to preserve diversity on and off screen; the need to preserve live music and the performing arts more generally as the seed-bed of all these creative industries; and, as we have just heard, concern about preserving and ensuring that the IP that is created is well used and able to provide a return that is appropriate for its investment.
My noble friend Lord Macdonald of Tradeston raised the question of when the term “creative industries” was actually coined. It was certainly not around when I was working at the British Film Institute in the 1980s and 1990s. It seemed to arrive fully formed in 1997, so perhaps the then incoming Secretary of State, the noble Lord, Lord Smith of Finsbury, had more to do with it than his natural modesty permitted him to say.
Success has many parents so we will probably never know, but by any measure the UK creative industries grew considerably as an industrial sector between 1997 and 2010, sometimes growing at twice the rate of the national average. In London and in several other major cities such as Cardiff, Manchester and Salford, as we have heard, it has become a significant economic sector in its own right and is at the forefront of the UK’s international competitiveness. Data show that exports of services for radio and TV, advertising, architecture, film, video and photography doubled between 1997 and 2007, and almost quadrupled in the case of publishing and software, computer games and electronic publishing. Other figures are just as impressive. The sector as a whole saw an average GVA growth of 5 per cent per annum over that period, with computer games and electronic publishing rising annually at an average of 9 per cent, representing an increase in GVA of nearly 200 per cent over the 10 year period.
Mention has also been made of the fact that the UK has a strategic international lead in the production and export of creative goods and services. Although comparisons are complicated, Eurostat data appear to confirm that the UK is now the European leader on most indicators, while UNCTAD data show that this lead extends to the rest of the world, with the UK currently the second world exporter in cultural goods and services after the USA, which is an impressive achievement. However, as has been said in this debate, the UK’s position is under threat, with emerging economies in particular showing fast growth in all global sectors as a result of the major priority they gave to becoming new centres of growth for these sectors. In addition, the UK is vulnerable in globally mobile sectors, such as film, and in areas where world leadership rests elsewhere: for example software, which remains dominated by the US, and specialist sectors such as fashion.
Some noble Lords spoke about the wider economic and social challenges facing our country, and one of the main themes that emerged this morning was the need for an economy in the UK that looks and feels very different than what we see today, with more opportunities for more people to get better jobs in good companies. There is every reason to believe our cultural industries can play a major part in this recalibration. If that is to happen, we need an active intelligent Government who support an industrial strategy to foster good, high growth, high productivity companies that create great jobs. The challenge, and the opportunity, is significant. We need to equip ourselves with an understanding and commitment to those things that will drive creative, competitive success in a global context.
The last Government can be proud of their record on the creative industries. They recognised that the creative industries would quickly become an increasingly vital source of skilled jobs and economic growth. The coalition Government have said repeatedly that they view the creative industries as key drivers of jobs and growth, but on a number of critical issues they have been accused of failing to respond to the challenges threatening the future strength of the sector.
I will give three or four examples. The announcement of a creative industries council in the last Budget was welcomed, but it remains to be seen whether it is just a talking shop or a focal point for action in areas other than training and skills. This seems to be the one area that is making good progress, although it is hampered—as the noble Lord, Lord Clement-Jones, said—by the fact that there are two sector skills councils operating in a limited space when perhaps Skillset should be in the lead.
Why has there been such a delay in the rollout of universal broadband and a lack of progress in implementing the Digital Economy Act? As many noble Lords argued, intellectual property is at the heart of all that the sector has to offer and do. It must be supported. The Government's higher education plans are resulting in significant cuts in art and design education, and the changes to the EMA are denying many young people the chance to develop education and training opportunities linked to the creative industries. Britain's immigration rules are making it difficult to bring in artists and performers to study, perform and teach. Something must be done about this.
There must be some doubt about whether current government policies will nurture talent, foster growth and widen opportunity in the cultural industries. Clearly, DCMS cannot do this on its own. It is a cross-departmental challenge that requires bold leadership from DCMS. As the Minister is about to respond, perhaps I may suggest that these are the key questions that she and the department should address.
The skills required for the creative economy are changing. We must assess the suitability and impact of current schools policy for the creative industries. Can DCMS re-engineer the relationship between our education system and our support mechanisms for arts and culture so that we grow and nurture talent for the creative economy? The UK has a strong talent base but lacks some of the technical and business abilities required for a digital era, particularly if we want to see more microbusinesses grow. Can the DCMS bring forward an apprenticeship scheme, building on the work of the BBC in Wales that was described by the noble Lord, Lord Rowe-Beddoe? It might be tailored more appropriately for companies operating in the creative economy.
A major challenge for public policy is a shortage of risk capital for creative companies in the content sectors. There will be inevitable consequences for UK competitiveness if we fail to address those issues successfully. My noble friend Lord Hollick drew attention to the predisposition towards debt finance. This structural weakness prevents us from acquiring or owning the economic benefit of creative output, and confines us often to service company status. Will the DCMS work with the Treasury to ensure that appropriate new schemes to bring in risk capital are introduced, and to ensure that the current support through the tax system is not curtailed by the threatened introduction of new eligibility rules? Thirdly and finally, what can DCMS do to widen the UK creative talent pool? Without that, there may be significant detrimental impact in the longer term on a sector that prides itself on the generation of diverse creative content.
The Government need a coherent strategy for the creative industries. They are a key sector for jobs and growth, and the UK needs a framework that underpins confidence, investment and innovation. British young people in the creative sector have extraordinary talent. We must make it as easy as possible for them to flourish, if only to aid growth. I look forward to the Minister's response.
Baroness Rawlings
My Lords, I start by adding to the sentiments of all noble Lords who spoke in appreciation of my noble friend Lady Bonham-Carter having given us the opportunity to discuss the role of the creative industries in the United Kingdom. As we heard, not since the debate on the same subject in June 2009, secured by the noble Lord, Lord Bragg, have we been able to debate at length the importance of their impact. In 2009, it was clear that there was a vast knowledge and commitment in your Lordships' House; today, it is evident once again that your Lordships are as passionate and committed as ever to the creative industries and their contribution to the UK economy.
Perhaps I may especially commend the maiden speech of the noble Viscount, Lord Colville. It was delivered with great modesty. He highlighted the issue of unpaid internships, which is certainly a pressing challenge for these industries. The key will be to find a balance between making these valuable opportunities available to young people and making certain that they are not exploited and that these are genuine learning experiences. It is already clear that your Lordships' House will benefit from the noble Viscount's wide experience in areas ranging from his work as a BBC producer on “Newsnight” in Moscow during the collapse of the Soviet Union to his current projects, one of which is a programme about the physics of the climate. We wish him luck and look forward to hearing him very frequently in this House.
My noble friend Lord Grade, in his eloquent and naturally well informed speech, raised an important point about television advertising and the continuing competition remedy known as contract rights renewal. CRR has formed a major part of the recent Communications Select Committee’s inquiry and subsequent report on the regulation of TV advertising, which we will debate later today. I hope that my noble friend might be able to speak in that debate as he knows so much about the subject. My noble friend also raised the issue of “must carry”. I relished the reference to Ongar, which was part of my old Essex South West constituency, being “one station beyond Barking”. A number of responses to the Secretary of State’s open letter on the communications review raised the issue of transmission charges paid by the BBC and other PSBs to satellite operators. No doubt we will consider the issue in the communications review Green Paper.
I listened with great interest to my noble friend Lord Black's concern about the local press. The question we must consider is whether one reference decision by the Office of Fair Trading is enough to undermine the whole merger regime. Obviously this appears not to work for local newspapers, and I believe that the answer should be no.
The noble Lord, Lord Smith, answered many noble Lords' questions regarding the film industry's role within the creative industries. We are grateful to him for chairing a body with an eight-strong independent panel of industry experts. I will come back to further points made by the noble Lord later.
In answer to the question of my noble friend Lord Clement-Jones about economic contribution, the UK's creative industries are part of the digital economy to which we can look with confidence for growth in future. In these challenging economic times, that makes them particularly important. I will mention later what the Government are doing on this. However, the figures speak for themselves: the creative industries contribute 5.6 per cent to the UK economy as a whole—around £59 billion a year; 1.3 million people are employed in creative jobs; and UK creative exports were worth £17 billion in 2008, which represented around 4.1 per cent of all goods and services exported. Over the past decade, the creative industries have grown faster than the rest of the economy. Recent forecasts by PricewaterhouseCoopers suggest that the UK entertainment and media market will grow by an average of 3.7 per cent per year for the four years to 2014, compared with 2.6 per cent over the same period for the economy as a whole.
My noble friend Lord Fowler asked whether BBC Worldwide should be considered in the forthcoming communications Green Paper. We are discussing this and I hope that the Green Paper will be produced soon. It will look at whether any change is needed to the law. The Communications Act 2003 has held up well, but we need to give it a proper check-up, which will take into account works such as Hargreaves and the Leveson inquiry.
I would like to outline just a few areas where the UK has demonstrated its particular strengths. The status of English as a global language has made the UK a world leader in creative content, giving UK producers a huge advantage in global markets. This is illustrated by the strength of our publishing and music industries, and the value of TV programming, both at home and especially in export sales. In 2010, the UK strengthened its position as one of the only two net exporters of music, growing its trade balance three times faster than the US. British talent is behind many iconic, globally successful games titles too. I am told that these include “Grand Theft Auto” and the UK online video game “Moshi Monsters”, now with 50 million users and one of the fastest growing children's entertainment brands in the world.
Among other topics, my noble friend Lady Randerson, the noble Earl, Lord Clancarty, and the noble Lord, Lord Bichard, mentioned the importance of fashion. I agree with them. The UK is at the cutting edge of international fashion and this year industry forecasters named London Fashion Week the number one fashion week in the world, overtaking Paris, New York and Milan. The noble Lord, Lord Bichard, referred to Vivienne Westwood. She even designed the graduation robes for King’s College, London.
Britain is one of the few countries in the world to have not one but five dedicated PSB broadcasters: BBC, ITV, Channel 4, channel Five and not forgetting S4C. British television produces programmes that are popular around the world, such as “Doctor Who” and “Downton Abbey”.
My noble friend Lord Razzall talked of our success in Cambridge. He is right about our many creative industries there. As we heard on the “Today” programme this week, ARM Holdings, a global company with its headquarters in Cambridge, is the world's leading semi-conductor intellectual property supplier and as such is at the heart of the development of digital electronic products. We need consistently to work to maintain these successes, and continue to retain our share of the growing global market, estimated by UNCTAD to be worth nearly $600 billion, for creative goods and services in an increasingly competitive world.
I can reassure the noble Baroness, Lady Jones, that the Government and especially the Secretary of State fully understand the importance of the arts, both culturally and economically. I suggest that the Arts Council’s settlement was not bad in the current circumstances. I am sorry that the noble Baroness, Lady Jones, felt a need to criticise the Secretary of State. Perhaps she needs to improve her computer skills as both the Secretary of State and the Minister Ed Vaizey are constantly producing new ideas and are on the wavelengths. As our Secretary of State Jeremy Hunt set out in his superb speech at the Royal Television Society conference this year, which is on the web, our first priority must be to capitalise on the extraordinary opportunity presented by our digital and creative industries to drive economic growth.
The noble Lord, Lord Bilimoria, wanted to know whether the Government had given this area top priority. I can say to him yes. In March this year The Plan for Growth included a package of support for the digital and creative industries. These measures are designed to achieve strong, long-term, balanced growth that is more evenly shared across the country and between industries. The Government have established the Creative Industries Council to be a voice for this most important area, and to be a place where Government and council members, who are leading figures drawn from across the creative and digital industries, can work together to tackle barriers to growth facing the sector.
My noble friend Lady Benjamin stressed the challenges identified by the council, including lack of access to finance, skills shortages, the need for better access to export markets and the need to improve the intellectual property regime. I know of the noble Baroness’s preoccupation with children’s programmes and I note her concerns. We have discussed this frequently and no doubt we will come back to it. The council has established working groups on skills and access to finance as a first priority and it will report in 2012, so I agree with the noble Lord, Lord Bilimoria, and the noble Lord, Lord Hollick.
My noble friend Lord Clement-Jones rightly lays emphasis on skills. In tandem with the skills working group of the council, a number of actions have been taken forward to improve skills in the digital and creative industries. These include identifying 360 science, technology, engineering and maths—STEM—ambassadors from the creative and digital industries, and encouraging graduates from the sciences, technology and maths to seek out careers in these sectors.
I have great sympathy with the worries of my noble friend Lady Bonham-Carter and of several others about not including the arts, such as music, and computer sciences in the EBacc. This is a matter for the Education Secretary, but it does not stop these subjects being taught in schools.
My noble friend Lady Randerson and several noble Lords were concerned about superfast broadband. Superfast broadband is a key business growth enabler, and £530 million is being invested over the next four years in order to create the best superfast broadband network in Europe by 2015. We heard the other day that one of Italy’s problems is that it has fallen behind with broadband compared with what we are doing here. The Government have taken further action towards the goal of making certain that all businesses in enterprise zones have access to superfast broadband by 2015, with Broadband Delivery UK considering and addressing where there are gaps in local broadband plans. I know this is an area in which the Secretary of State is particularly interested.
The noble Lord, Lord Rowe-Beddoe, mentioned the importance of the Hargreaves review of intellectual property and growth, which set out recommendations for how the UK's intellectual property framework can further promote entrepreneurialism, economic growth and social and commercial innovation. The Government published on 3 August its response to the Hargreaves report. This included a commitment to establishing licensing and clearance procedures for orphan works. Government will shortly consult formally on proposals taking forward the Hargreaves recommendations. I am happy to address the noble Lord’s concerns on music and congratulate him on stressing the importance of the conservatoires.
The national plan for music education will be published shortly and will set out new arrangements for creating local music hubs expected to support all young people’s music making and offer routes for progression. These might include music industry-based provision and information. I am also fully aware of the importance of the jazz industry, mentioned by my noble friend Lord Colwyn, and I hope his suggestion of jazz will be included.
My noble friend Lord Colwyn also pointed out the need for clarification around the licensing of sites for live music. The Government remain committed to scrapping unnecessary red tape. We support the Bill introduced by my noble friend Lord Clement-Jones and are consulting on a broader approach. I will make sure that my noble friend’s concerns are made known, and I will take them back to my department. However, I must not pre-empt the consultation, and there are concerns on the other side.
This debate has highlighted the fact that the creative industries make a strong contribution to the UK economy. They are worth £59 billion to the economy, and a significant number of people are working to create a dynamic and innovative part of our economy. I wholly agree with the noble Lords, Lord Smith and Lord Stevenson, about the importance of the value of intellectual property in a digital world. We are committed to implementing the Digital Economy Act, and we hope that the initial obligations code will be abolished shortly.
The noble Lord, Lord Smith, also mentioned that it would be wrong to see the creative industries in purely economic terms. My noble friend Lord Shipley also explained this point very clearly. The creative industries make an enormous cultural contribution to this country and to the wider world, and what is being developed in Salford and the north-east is also important. Indeed, the creative industries enhance our reputation as a global creative and cultural leader. It is vital that we understand and continue to make the case for the importance of the close relationship between the arts and the creative industries.
I quite rightly pay tribute to our recent successes in the cultural sphere, which were mentioned by the noble Baroness, Lady McIntosh, whether they be the successes of UK-produced plays such “War Horse” or “Jerusalem” on Broadway, “Downton Abbey”, written by my noble friend Lord Fellowes, winning four Emmy awards, the Frieze Art Fair bringing the world’s collectors to London or the film “The King’s Speech” sweeping the board at the Oscars.
My noble friend Lord Glasgow and other noble Lords asked about the film industry. It is a cultural achievement of which we should be proud. It illustrates the strength of the UK’s creative industries.
The noble Lord, Lord Stevenson, asked about games tax relief. I will write to him with the details.
As we have heard in your Lordships' House today, the creative industries are a sector that we ought to celebrate as a nation. The Government will continue to play their full part in making certain that they remain a global success story. I thank all speakers in today’s extensive debate who have shown such an interest and offered such well informed views. I have certainly learnt a great deal, and in this short time I hope to have answered most noble Lords’ questions. I ask for forgiveness from the noble Earls, Lord Glasgow and Lord Clancarty, and the noble Lords, Lord Macdonald, Lord Sharkey and Lord Stevenson, if I have not answered all their questions. I will read Hansard, and I will, of course, write to any noble Lord who has not had their points addressed and put a copy of the letter in the Library.
In conclusion, I once again thank my noble friend Lady Bonham-Carter, who has brought this important topic to the House.
Lord Clement-Jones
My Lords, I apologise for interrupting the Minister but, specifically, I wonder whether she will write on the question of finance for start-ups in the creative industries. I did not hear anything specific on that, and that question was asked by a number of noble Lords and is crucial to the creative industries.
Baroness Rawlings
My noble friend raises the point at a very opportune moment, with my noble friend Lord Sassoon sitting next to me. No doubt it will be taken into account.
I applaud again the maiden speech by the noble Viscount, Lord Colville, on this important topic that my noble friend Lady Bonham-Carter raised, which has afforded your Lordships such a constructive and creative debate.
Baroness Bonham-Carter of Yarnbury
My Lords, I am grateful to the Minister for her response and to all noble Lords who have taken part in this debate. In particular, I am grateful to the noble Viscount, Lord Colville. Listening to his speech, I was reminded of the advice that he gave me when I was being sent off to the Soviet Union. He said, “You’ll know how important the person you’re interviewing is by the number of telephones on their desk. They won’t ring, but it is a status symbol”. Of course, the creative industries have got rid of that status symbol, and I would be interested to hear from him what he thinks the new one is.
As our time is running out, I will just say that I agree wholeheartedly with what the noble Lord, Lord Smith, said. This is something where all government ministries must get together in order to ensure that the creative industries can provide the economic growth that we need so much. This has been a good debate, and I beg leave to withdraw the Motion.
EU: Financial Stability and Economic Growth
(13 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Newby
To call attention to the Government’s role in supporting financial stability and economic growth in the European Union; and to move for papers.
Lord Newby
My Lords, when I first suggested that we have a debate on Britain’s role within the EU, I knew that because of the crisis within the eurozone, it would be topical. What I did not realise was how this crisis was likely to develop, nor quite what demons it would unleash within the UK. It is now clear that we are at a more critical juncture in our dealings with the EU than at any point since 1975. I believe it is decisively in our national interest to play a positive European role.
Of the many illusions of those who believe that we could have a more successful future outside the EU, the one which is, in my view, the most misconceived is that without participating in the world’s largest single market, the UK would on its own have an influence which would satisfactorily protect our national economic interests. I can only assume that when the antis travelled to, say, India, they hear heard businessmen speak with passion about their future relations and trading prospects with Brazil, China and the rest of south and south-east Asia and mention Britain almost as an afterthought; or speak to American bankers who see London's strength as being largely dependent on being part of the single market; or to South Korean manufacturers, who put their European production plants in eastern Europe, but have a European head office in London only because we are part of the EU.
The EU brings many benefits in terms of helping the UK to promote its values and interests globally, but our relationship with the rest of Europe stands or falls on the economics. Here, despite the growing importance of the BRICs, the EU remains our predominant trade partner: over 40 per cent of our external trade is with the EU. Despite the importance which we are now rightly attaching to expanding our trade with the BRICs, it is the case that, at present, trade with China, India and Brazil combined is but a small fraction of our trade with Europe. So while those countries have tremendous potential, even if our performance improves dramatically, they will still be lagging behind trade with Europe for a very long time.
If we judge that our interests remain best served by staying in the EU, how well are we currently placed to promote those interests and what should we do to strengthen our position? Before the eurozone agreement last week, our position was far from ideal. The Labour Government's approach to Europe often sounded very positive, particularly when articulated by Tony Blair in his early years as Prime Minister, but his failure to match deeds with words, coupled with years of supercilious neglect by Gordon Brown, meant that Britain's traditional posture, more like a sulky teenager than a constructive adult, resulted in a disproportionately low degree of influence. This lack of influence at government level has been compounded by the decision of the Conservative group in the European Parliament to withdraw from the EPP and set up a small ragbag of a group. This has resulted in its influence in the Parliament being significantly weakened at a time when the Parliament itself is exercising greater influence, which is a trend that is set to continue.
The UK’s increasingly unsatisfactory position was exemplified by the recent announcement of a financial transactions tax by the European Commission President. This measure would bear predominantly on the UK: in some estimates, up to 80 per cent of transactions covered by the tax take place here. Both the previous Government and now the coalition have made it abundantly clear that they would oppose such a measure unless it were introduced globally, which is at present a very slim possibility. Nevertheless, President Barroso went ahead and unveiled the plan. It is inconceivable that the Commission would vigorously promote a proposal that would predominantly affect France or Germany if he knew that those countries opposed it. It would be a futile gesture and bad politics. However, no such inhibitions apply to a snub to the UK. This only happened because Barroso knew that we were relatively isolated and unpopular and that a populist proposal aimed at London would win him many more plaudits than brickbats.
This far-from-satisfactory situation was where we found ourselves before last week’s eurozone summit. That meeting not only agreed the package of measures to try to sort out the Greek debt problem, recapitalise eurozone banks and enhance the bailout fund, just as importantly it also agreed a step change in co-ordination of the eurozone. In addition to greater co-ordination of economic and fiscal policies, and in order to give greater political impetus to the process, it established a new eurozone governance structure. This will involve regular summits presided over by a new euro summit president and it also includes the possibility of the president of the eurozone being a full-time post based in Brussels. For non-eurozone members, there is only a commitment that the president of the euro summit will keep us informed of the preparation and outcome of the summits themselves. This is not very reassuring.
Arguably these measures by the eurozone countries should have been put in place when the euro was introduced in order to avoid some of the current mess. However, having belatedly begun to get a grip on the crisis, there is a strong chance now that the eurozone Governments will implement this new plan. What is their plan B? The truth is there is none. If this happens, the UK is in danger of moving from being a central if quarrelsome core EU member to being marginalised. Therefore, what should our response be? We are clearly not suddenly going to apply to join the eurozone.
Of course, we are one of 10 countries in the same position. However, we should not be fooled into thinking that the euro-outs are a credible long-term alternative power structure within the EU. It is worth listing the non-eurozone members: Bulgaria, the Czech Republic, Denmark, Hungary, Latvia, Lithuania, Poland, Romania and Sweden. Leaving aside the fact that some of them are keen to join the euro—including the most important, Poland—there is clearly no particularly broad commonality of interest among the outs. If we were to list those member states with which we have the greatest economic and political ties and interests, few of these countries would be near the top. I hope that British Prime Ministers in coming years enjoy their dinners with the group of outs, but I cannot help feeling that, as they look across at the somewhat larger eurozone table, they will feel slightly queasy.
So far I have been pretty gloomy about our position within the EU and I am well aware that simply moping about our lot will not promote our position. Nor do I think adopting the attitude of vultures waiting for the opportunity to pick at the European treaties and take back the odd morsel of power here and there is a substitute for a credible strategy to help support stability and growth across Europe and therefore within the UK. What should we do, and what is it credible to do within the confines of current British politics?
First, we need to continue making it clear that we support the eurozone countries in the action they are taking, including their plans for greater fiscal co-ordination. Our ability to affect that process is in any event extremely limited, but in doing so we should try to avoid lecturing them on the need to sort themselves out and get on with it. I can understand why Ministers find that a very attractive line but even if it were appropriate before last week’s decisions, those decisions mean that it is doubly inappropriate now. I agree that it is very much for the eurozone to deal with the problem which, as it were, it has created, but I hope that the UK will play a positive role in supporting the IMF in this respect. When the statement was made last week, I felt that the Government went to inordinate lengths to try to put the brakes on the IMF supporting sensible measures to sort out the eurozone mess. Statements by the Prime Minister over the last 24 hours suggest that perhaps I misread what he had in mind, and I would be extremely grateful if the Minister could say this afternoon what now the British Government’s position is on providing additional support for the IMF, which, however generally it may be couched, could mean that we would be supporting greater IMF involvement within the eurozone.
If we adopt a sensible tone, we need to articulate a growth strategy for the whole of the EU that will resonate widely across it. Obviously this has to be built on strengthening the single market. The Prime Minister produced a pamphlet on this subject in March, which had four key pillars. The first was completing the single market, particularly by further liberalisation of services and the creation of a single digital market. It has been estimated that if it were possible to do this in full, it could be worth up to £3,500 for each household in the UK. That figure seems somewhat large but even if we were to achieve only a significant proportion of that it would be a prize worth having. Secondly, we must do more to promote the benefits of free trade by pushing for the conclusion of the Doha round, as well as trade agreements with some of our fastest growing trade partners. All these measures sound a bit like motherhood and apple pie but they are absolutely central to a positive agenda for growth. Thirdly, the Prime Minister suggested that we need to reduce the costs of doing business across the EU. Fourthly, we must do more to make the EU more attractive as a hub for innovation.
Those measures have been amplified and supported by the Deputy Prime Minister in recent days. It is a constructive agenda. The question is how to ensure that it is taken forward positively. This now needs detailed, consistent and concerted follow-through, which should be led by Ministers and involve building coalitions involving both the euro-ins and the euro-outs. I believe that the Government are now adopting this strategy with some success and are finding that there is a broader degree of support for some of the lines that we are taking than might originally have been thought to be the case. If we adopt a less hectoring tone and promote a growth strategy that wins widespread support, I hope that we will create an atmosphere in which our voice will carry a more proportionate weight.
However, I am realistic enough to believe that it is not quite as simple as that. For all member states, the importance of promoting their interests within the EU as well as promoting the EU as a whole is critical. A key way in which they all seek to do this is by making sure that their voice is heard as often and effectively as possible within all the EU structures. That requires them to have as many effective people in place across these institutions as possible. For years, some countries, particularly France and Ireland, have recognised this and gone to great lengths to ensure that as many of their compatriots as possible are in position in the Commission and other EU institutions. Not so the UK. The view too often has been that the best officials would do their careers harm, rather than good, by moving to Brussels either permanently or on secondment. That view has definitely been held in the Treasury and the Bank of England over many years.
It is now extremely important that we place as many top-quality officials as possible, not just in the Commission, but given the importance of the financial services sector to the UK, also in the three European supervisory bodies for banking, insurance and securities and markets. I believe that the Foreign Secretary recognises this and is taking steps to encourage more UK high flyers to spend time in Brussels on secondment or on a permanent basis, which is very much to be welcomed.
If we adopt the agenda that I have outlined, we will stand a better chance of playing the kind of constructive role which is vital for the development of the UK economy within the EU. The stakes are very high, but so is the prize. I beg to move.
Baroness Noakes
My Lords, I congratulate the noble Lord, Lord Newby, on securing this debate. I suspect he little thought how topical it would be when he did so. The noble Lord, Lord Newby, and I agree on many things but I do not think that we shall ever agree on Europe. I am proud to be on the Eurosceptic wing of my party and thus I find myself in agreement with the majority of my party and with a clear majority of the country at large, as many polls have shown.
Let me start with some basics. It is undoubtedly in the interests of Britain as a trading nation that there is both financial stability and economic growth within the community of trading nations. Exporters need growth in the global economy and growth, in turn, needs financial stability. That is also true at the level of the individual countries with which we trade. Countries in financial turmoil that show little or no growth are not good trading partners. So I can go along with the argument that says that to the extent that the UK needs or wants to trade with countries within Europe, it is certainly better for us if those countries are financially stable and growing. But how important is the EU, and therefore financial stability and growth in the EU, to the UK? A claim often made by the Government is that the EU is one of the most important trading zones to the UK, giving access to hundreds of millions of consumers. But that is at best only a partial truth. To start with, only around 10 per cent of the UK economy is actually involved in trading with businesses in other EU states. Most of our economy is focused on the UK or on trade outside the EU, and the USA is by far the largest single country, in value terms, with which we trade.
We are a deficit trading nation, with a significant deficit on goods offset by a surplus on services. Two of our five largest deficits are with Germany and France so, although we might have a need to trade with Germany and France and other EU countries, the fact is that our European neighbours need our markets more than we need theirs. On the other hand, we have a trade surplus with the USA.
Focusing on exports, the EU accounts for around 40 per cent of our exports of goods and services; put another way, the rest of the world is more important to us. Of course, 40 per cent is not unimportant but the EU, even without its current problems, is not a source of massive growth. The plain fact is that global growth forecasts are concentrated outside the EU. If our exporters waste all their energies on the economies of mainland Europe, that will be a real tragedy for our future share of global trade.
As I said earlier, it is important that those countries with which we trade are financially stable and offer prospects for growth. But that is a long way from the proposition that the UK Government have a particular role in supporting that stability and growth. That is subject to one overriding concern: namely, the impact of eurozone financial instability on the international banks, including our global banks. I declare here an interest as a director and shareholder of the Royal Bank of Scotland.
It is very much in our interests to ensure that the problems of the eurozone do not, through interconnectedness, spread through the financial system more widely. That is why it is encouraging news that the exit of Greece from the euro is now being openly discussed as that would be better for both. That would allow the eurozone to concentrate on the rest of its problems.
So what should be the UK’s role? I completely support our Government in refusing to put money into the European stability fund, whether directly or via the IMF. We have enough problems of our own without paying for those of other countries. I support our policy that the problems are for the eurozone countries themselves to solve; it is no business of ours to tell our trading partners how to run things. On the other hand, we must be ready to seize any opportunities to improve our position in Europe, which is not good. If the eurozone needs a treaty change to sort itself out, we must grasp that opportunity to gain greater freedoms for the UK. We must focus on our growth and prosperity. The health of our trading partners is an indirect interest derived from and limited to their impact on our economy.
Our agenda in Europe should be directed at the UK's interests. We must cut the budget; we must roll back the encroachment of the EU into our financial services industry; we must gain control over things like the working time directive; and we must reduce the impact of EU rules and regulations. It is our growth, and no one else’s, that should be the subject of our policies and, in forming their policies, the Government must always remember that our history and destiny are global and not European.
Lord McFall of Alcluith
My Lords, I congratulate the noble Lord, Lord Newby, on securing this hugely important debate. My contribution has two themes: honesty and clarity. Honesty refers to the fact that this is part of the global financial crisis, which started in August 2007 with BNP Paribas stating that it had suspended three funds related to subprime. At the time, I said that we had a banking crisis; that went on to become an economic crisis, which became a political crisis and a social crisis. The latter two now have equal resonance with the former. The political crisis that we see in Greece, where the Prime Minister has lost his nerve, is now a straight choice between in or out, and the sooner that choice is made the better, so that we can get on with business.
The big question is how to maintain the integrity of the eurozone and stop contagion. We must remember that Italy’s bond yields are almost 6.5 per cent compared with Germany’s at 0.3 per cent. That is unsustainable and cannot go on. If you remember, Portugal and Ireland went to the fund for help when their bond yields were around that price.
On the social side, the International Labour Organisation undertook a study and stated very clearly recently that the world economy is on the verge of a new jobs recession. In 45 out of the 118 countries that were examined, the risks of social unrest were there. When the leaders meet at the G20 today, that social dimension should be in the background.
On the issue of honesty, our own Government have to be honest. The Prime Minister has said that he is not going to contribute to a eurozone bailout, and the Chancellor has said that he is not going to contribute to an IMF bailout if it is to be used for Europe. Given that £130 billion of exports are made to Europe every year, that is a false choice and the sooner the Government are honest with the people and say, “We support the IMF because it is in the interests of the larger global community”, the better.
There is a growth crisis in Europe at the moment. In the last year, unemployment has increased in Germany, which has not happened for two years, and its manufacturing sector has contracted as a result. We must remember that Europe as a whole is heading for a recession. In a sovereign debt crisis, where private debt has been transferred to government debt, slow growth and deflation are the biggest risks for solving debt and it will exacerbate the situation if we do not have growth.
The issue facing us today is a lack of demand. My successor as chairman of the Treasury Committee, Andrew Tyrie, put it quite clearly and succinctly when he said that the Government lack a “coherent and credible” plan for growth. If that is the case, we need clarity on that.
Yesterday, along with the noble Lord, Lord Skidelsky, and others, we looked at the issue of a national investment bank, which would invest in large infrastructure projects here. By the way, such a bank would serve the interests of the country, because as far back as 1931 there was what was identified as the Macmillan gap. The Macmillan commission said that there were not adequate resources for British industry and small businesses. We have still to tackle that, and the present crisis is crying out for that. Adam Posen, a member of the Monetary Policy Committee, says that the UK lacks a “spare tyre” and that we have to get on with that issue.
Why do I say that manufacturing industry is in such a serious situation? In the past three or four years, we have seen devaluation of the currency by about 30 per cent. In a normal situation, that would lead to an export-led manufacturing boom. It has not done so, and therefore we need to ensure that we have organisations and facilities that mirror those of the German Mittelstand. A time of cheap capital, real negative interest rates and spare capacity in employment is when to invest in growth so that we come out of recession in the proper way.
When I talk about employment and capacity, that capacity is available not least among young people. There are 991,000 unemployed 16 to 24 year-olds. I know from when I was a school teacher in Glasgow what the decimation was like in society when jobs were not available for young people. It is very important that we take on that issue. Today, a very depressing report from Barnardo’s says that,
“49 per cent … agree that children … behave like animals”,
and that society views children in a negative way. That message is wrong in fact and in principle. If we give out the message that society has given up on young people, young people will certainly give up on us. It is an overwhelming economic need, as well as a humanitarian need, for society to treasure young people.
Let us show that today, with increased urgency, by factoring young people into our economic stability and growth agenda.
Lord Razzall
My Lords, in thanking my noble friend Lord Newby for introducing this important debate, it goes without saying that I agree with everything he said. It probably will not surprise noble Lords that I disagree with almost everything said by the noble Baroness, Lady Noakes.
When the eurozone was established, it was clear that its members could not have the benefits of the euro without the drawbacks of losing domestic control over their currency, which meant ceding fiscal powers to the centre. At that time, rules were established regarding fiscal policies to be followed by members of the eurozone both to qualify for admission and to maintain those rules when they became members. The first thing that happened of course was that for political reasons the numbers were fudged for Greece, Italy, Spain and probably Portugal in order to allow those countries into the eurozone. Even worse, when things got a bit rough in France and Germany, those fiscal rules were scrapped and France and Germany were allowed not to obey the long-established rules. That, inevitably, has led to the situation in which the eurozone finds itself today.
It would be easy to conclude that that is just Europe’s problem and, “Aren’t we lucky to be outside the eurozone?”. Unfortunately, as the noble Baroness, Lady Noakes, touched on, we have a problem as to what the crisis in the eurozone does for our UK banks and financial institutions. She disclosed the fact that she is a non-executive director of the Royal Bank of Scotland. I do not know the details of the RBS’s loan portfolio to eurozone countries but, clearly, were those countries to default, that must have a significant impact on the UK banks which have lent money to those Governments or institutions in those countries. That will have an ongoing effect on the ability of those banks to lend in the UK domestic market.
Perhaps I may introduce your Lordships to the arcane topic of credit default swaps, which is an even greater danger for UK financial institutions. Credit default swaps are a mechanism that has been invented by banks and financial institutions to make money, of course, which basically means that loans to eurozone countries or other countries throughout the world are insured by this mechanism. Credit default swaps involve parties that are not only UK banks but UK pension funds and UK hedge funds, all of which are involved in this market. If the eurozone countries start to default in relation to loans, not only it is UK banks which have to write down the loans that they have made but there are significant losses in the credit default swap market which affects those institutions. Not only the banks will be affected.
What is worse is that, under the new accounting rules that were brought in on the mark-to-market requirements for financial institutions, even if countries have not gone bust but it looks as though the rating of those credit default swaps is worth less than they would be when they were originally taken out, those banks or financial institutions also have to write down the effect of that mark-to-market valuation. That has a very significant effect on the balance sheets of our UK banks and financial institutions, which will have a serious impact on the ability of all those financial institutions to provide the engine for growth that the UK economy needs.
We have no alternative but to continue the engagement with our European friends. It does not mean that we have to rush into the eurozone, although, interestingly, I see that Poland and Lithuania as we speak are very anxious to join. I am not suggesting that, but we absolutely need to engage in Europe. I commend the initiative of the Department for Business, Innovation and Skills, which has put together an informal like-minded group for growth. It consists of 14 states in Europe, half of which are eurozone countries. That group is trying to work together to develop policies for the development of growth in Europe and the United Kingdom. It is now the time to engage in Europe and not to walk away in order to secure policies for growth.
Lord Hannay of Chiswick
My Lords, this debate could hardly be more timely and topical, and for that I thank the noble Lord, Lord Newby. The temptation to pronounce on the turmoil in Athens, and on the prospects for a Greek referendum and what might follow from its outcome, or indeed from a decision not to hold a referendum, is strong. But I believe that for those like us in this House who are not directly involved in the decisions being made, a period of silence on those issues would be the best contribution we can make.
It is a matter for regret and concern that so little of the debate on European issues in this country in recent weeks has been about the Government’s role in supporting financial stability and growth across Europe and that so much of it has been in denigration of the efforts of the 17 eurozone countries to put their house in order and in angry demands that we should have nothing whatever to do with those efforts. Yet, there surely have been few truer words spoken by a member of the coalition Government than those by the Chancellor of the Exchequer when he said:
“We are all in this together”.
I know that those words were spoken in a different context but they apply every bit as much to Britain’s strong national interest in the success of our European partners’ latest package of decisions. I welcome the fact that the Prime Minister and the Chancellor have made our national interest in that emphatically clear. I wish only that I thought that their Back-Benchers were listening to them but there is little sign of that, including, I notice, in this House.
I confess I was a little puzzled—indeed, baffled—by the elaborate detail which the Chancellor’s Statement of 27 October on the European Council went into in trying to block hypothetical ways in which the IMF might be involved in supporting the European package of decisions. It is surely rather unwise to express such firm views on ideas which have not yet even seen the light of day. Should we really be trying to tie the managing director’s hands? I thought we were enthusiastically in favour of her appointment. Do we have no confidence that she will act in all respects within the powers that she has? I fear that the suspicion crosses my mind that that cold shower of disapproval directed towards the IMF was merely offered to placate the critics on the Benches behind the Chancellor. I hope that I was wrong and that the Minister can say a little in a positive turn today about how the rest of the international community, including this country and the IMF, can help the eurozone countries achieve their objectives.
That thought brings me to the role in all this of the single market. Far too often the single market is portrayed as a kind of alternative to the policies being pursued by the eurozone countries. That is surely wrong. If you look at the prescriptions being given by the Commission, the European Central Bank and IMF to the countries being bailed out—Greece, Portugal and Ireland—and the advice being given ever more forcefully to Spain and Italy, those prescriptions and that advice are replete with issues which are at the heart of the single market programme, which is at yet incomplete, such as removing restrictive practices in the professions, breaking up state monopolies or quasi-monopolies and freeing up labour markets. All 27 member states together need, if they are to compete effectively with the great emerging countries—China, Brazil, India and others—to complete the single market measures in the fields of services and energy. Only thus will they achieve the sort of growth and competitiveness that will enable the whole of Europe to hold its own in the new multipolar world. It is often said that whenever the eurozone’s problems are discussed there is a need for “more Europe”. What should equally be being said is that there is a need for “more single market”.
That approach will not be everyone’s cup of tea. There are plenty of voices being raised calling for more protection and deglobalisation—an appalling phrase. Just look at the recent debates within the French Socialist Party. If we are to carry the EU with us, we must engage that discussion now and try to lead it. We must do so in a credibly positive spirit. It is no good proposing an à la carte single market with each country applying only the bits it likes. That will lead to 27 policies and no single market at all. That is why the whole repatriation debate is not only a futile displacement activity but actually inimical to the achievement of Britain’s and Europe’s objectives.
However, we will need more than just warm words if such a positive approach is to be seen by our partners as a credible contribution to supporting Europe’s financial stability. That is why I would like to hear from the noble Lord again some response about the euro-plus pact and the possibility, particularly if it could be renamed, of us being associated with it. I hope he will say something when he winds up.
In conclusion I have a point of tactics. We are in some cases going to have to say a firm “no” to ideas coming forward in Brussels. In my view the proposed financial transaction tax is one such. I cannot anyway for the life of me see how such a tax, at least if it is not applied worldwide, could possibly contribute to Europe’s financial stability and growth. However, if our “noes” are not to be seen as single wrecking manoeuvres, we are going to need to have a wider positive agenda to accompany them.
Earl Attlee
My Lords, we are doing quite well on time but noble Lords need to be very careful. Otherwise we will run out of time if we overshoot—even 30 seconds on each speech will make a difference.
The Lord Bishop of Bath and Wells
My Lords, I am grateful too to the noble Lord, Lord Newby, for initiating this timely debate and inviting this House to look more broadly at the pressing question of financial stability and economic growth in the European Union.
Constraining public spending and securing financial stability can be only part of the equation. Europe also needs to embrace structural reform of its economic model to encourage growth. This means tackling the imbalances that currently exist within Europe and, unless we do so, we are likely to see a damaging outbreak of protectionism across Europe.
European economies for the most part are shrinking while unemployment is rising, in some cases alarmingly so. Austerity measures introduced in response to the financial crisis are biting. The soaring rate of interest on the sovereign debt of some countries underlines the worry that much of the existing debt, even if partly written off, is unaffordable.
Our public and political debate is understandably fixed on the latest saga in the eurozone. However, are we conveniently overlooking the pressing question of where growth will come from? This is not just a eurozone problem but one for the whole of Europe. A stable euro requires more balanced trade and growth among its members. The prevailing economic orthodoxy holds that tough austerity and structural reform will ultimately lead to growth. The past two years may suggest that this orthodoxy is wanting.
Economists will of course point out examples of fiscal austerity preceding economic growth but they all include currency devaluation and/or big cuts in interest rates. Neither option is open to the eurozone economies. It is hardly surprising therefore that household and business confidence is rapidly crumbling across the currency union, depressing economic activity across Europe as a whole. On current trends a series of sovereign and banking defaults looks unavoidable.
A crisis that started on Europe’s periphery has been allowed to grow into a threat to the core of the eurozone and the future of the European project itself. Measures taken across Europe appear to invite economic stagnation and political dislocation, the effects of which can be seen on even the marbled steps of St Paul’s.
There are of course dissenting voices to this orthodoxy. Some talk of a Marshall Plan for Greece to stimulate investment in infrastructure and solar power. In Brussels, the European Commission is working on schemes to speed up the disbursement of the European Union regional aid funds to foster growth in the southern countries and, if last year’s report on the single market drawn up by the former Commissioner Mario Monti to liberalise services and the digital economy had been implemented, Europe’s growth might have increased. However, at the moment too little is being done to boost growth across Europe.
The question of Europe’s competitiveness predates the current crisis affecting the eurozone and is in many ways one of its underlying causes. For decades Europe has grown more slowly than other continents. However, there are remedies. These were set out and agreed in the Lisbon agenda of 2000 and the Commission’s recent European Union 2020 programme. What are we to make today of the statement that Europe should be,
“the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion and respect for the environment”?
European Governments have always found it easier to sell the promise of this agenda than its content. Populism, nationalism and Euro-scepticism are on the rise. Even if Europe’s politicians can agree the right policies to establish and to stabilise Europe’s finances and stimulate economic growth, there is no guarantee that public opinion will be sufficiently benevolent to allow them to carry them out.
One of the greatest achievements of the European Union has been to scrap non-tariff barriers. The biggest danger, however, is that the euro crisis will lead to a two-speed Europe that fractures the single market. We need to be wary that the new bailout mechanisms agreed at last week’s euro summit do not sideline either the European Commission or the European Parliament. A flawed single market that encourages protectionist measures cannot be either in Britain’s best interests or in those of Europe. A more protectionist Europe will result in slower growth, thus fuelling the electoral fortunes of populist parties. A more fractured single market will see Britain disengage yet further from Europe, a retrograde step in the hard fought fight towards peace and prosperity for our region.
Lord Marlesford
My Lords, I want to suggest a specific course of action in the debt crisis, but let me first put it in an abstract context. The result of increasing the size of a rescue fund is that it creates both a precedent and the expectation that it will be increased again—or, as the jargon has it, a moral hazard. And if that rescue fund is based on a central bank, which by definition cannot go bust in the way that other banks can because it can turn on the printing press, that can have only one of two consequences: either in an extreme case it will feed through to inflation, if you believe as I do that inflation is a monetary phenomenon; or you may be able to achieve such a rapid rate of growth that the inflation is absorbed and subsumed in a gradual but slow drift upwards of prices at a lower rate than the nominal rate of growth.
Last week the European Financial Stability Facility rescue fund was increased from its original level in May 2010 of €440 billion to a potential €1 trillion, and there is already talk of it being necessary to raise it to €2 trillion or even €3 trillion, larger than the GDP of Germany. Then remember that the world tends to be divided between those who save and those who borrow. The inclination of borrowers is, as the old advertising slogan has it, “take the waiting out of wanting”. There is normally, however, a fear of having to repay loans. If a debt is forgiven or partly forgiven by the lender, then there is sometimes the irresistible temptation—indeed, the clear message—to borrow more. This is made even more tempting if the lender apparently has an unlimited supply of funds.
Now we have Greece, which has been offered a bailout apparently with no enforceable strings attached. That way lies contagion and thus a further crisis. I believe that Greece should be required to leave the euro area but certainly be allowed to remain inside the EU. Greece will then have the opportunity of deciding whether to invent a Mickey Mouse currency, which it might choose to call the drachma, or to continue to use the euro. Greece outside the euro area will have no borrowing capacity underwritten by the European Central Bank. If it reinvents the drachma no one will take that currency seriously. Remember that the three classical functions of a currency are as a store of value, as a unit of account and as a medium of exchange. A reinvented drachma is unlikely to have any of those. If Greece continues to use the euro it will be in the same position as any of us. It will only get the number of euros that it can earn by selling its goods and services. Greece will have to devalue, which in this case would mean cutting pay and prices from previous euro levels. Without help, in the short run it will not be strong enough to survive the political pressures this would cause.
I am so glad that the noble Lord, Lord Hannay, drew attention to the important role of the International Monetary Fund in all this. I totally agree with him. In fact, I would propose that Greece should become a ward of the IMF. The IMF, which of course cannot print money, will dole out to Greece such sums as it has provided over the decades to other economic basket cases to prevent them becoming failed states. There are plenty of precedents for countries in crisis using a currency other than their own. Yugoslavia, after Tito died, used the deutschmark, and various South American countries have from time to time used the US dollar.
The other advantage of what I propose is that other countries will not wish to leave the euro area and will therefore have a real incentive to accept the necessary tough political decisions in order to avoid a default that would have that consequence. First in line would be Italy. Germany, with 27 per cent of the euro area GDP, is big enough to absorb all the debts of Greece, which has only 3 per cent of the euro area GDP. Italy, of course, represents 17 per cent of the euro area GDP and is therefore too big for Germany to swallow. That is why Greece should be treated in the way I am proposing, but I would say straightaway that Greece is historically and culturally central to Europe, and I would hope that in due course, if these disciplines were used, it would come fully back into the European family.
Lord Giddens
My Lords, I also congratulate the noble Lord, Lord Newby, on initiating this debate on such a momentous topic. The Government rightly recognise that it is in the UK’s interest to achieve stability in the eurozone and, moreover, that this presumes much greater fiscal integration than has been true in the past. Some speak blithely of the euro collapsing, but that would cause social and political as well as economic chaos. I fully agree with the remarks of Germany’s Chancellor Merkel about the dangers of such an event, which must be prevented.
However, I will talk primarily about economic growth and job creation, on the premise that it is no good just preaching austerity, even to beleaguered Greece. We have to provide some kind of message of hope. We have to think in the long term, not just the short term. This has to be coupled to practical plans for investment and renewal. Where will new net jobs come from?
In approaching this question it is important to recognise, as the right reverend Prelate hinted, that the travails of the eurozone and—to some extent—the rest of Europe do not come just from the problems of the euro but from a failure to implement the Lisbon agenda. To put it more precisely, the Lisbon agenda was implemented only partially and regionally within Europe. Some countries, such as the Scandinavian countries, the Netherlands, Germany and to some extent the UK, followed some of the prime suppositions of the Lisbon agenda and are in a superior economic situation to other countries largely situated in the south, such as Spain, Portugal, Italy and Greece, which did not reform. Instead they borrowed and these borrowings have conjoined with the debt in the banking system to generate the extent of the crisis that we see now.
What policy should the Government support to promote growth and job creation in Europe? As I said, to do this one has to think beyond the current crisis. I will mention four main elements. They are not exactly the same ones as the noble Lord, Lord Newby, mentioned.
First, it is possible to promote the return of manufacture to Europe. I ask the Government to pay attention to the really interesting debate on reshoring—the opposite of off-shoring—that is going on in the United States. It is quite a technical debate and the issues are complicated; there is not a simple map that comes from it, but it is important. Many companies suffer from disruptions to their supply chains. Wages in China and India in core manufacturing sectors are rising rapidly. It looks as if it might be possible to recreate manufacture in certain core sectors in some industrial countries, including European ones. It is important to recognise that Europe is strong in manufacture—and not just Germany. For example, even Spain has a higher ratio of manufacturing output per person than the United States. The reshoring debate suggests that if you want to promote manufacture it should be done not only in high-tech, cutting-edge areas. It may be possible to build on established strengths. This is a different orientation from the past.
Secondly, as noble Lords have said, we have to complete the service directive and increase competitiveness in service industries within the single market. I work in higher education, where we are well behind on the possibility of standardisation which would promote mobility of labour. Thirdly—we do have to do that. To have a flexible, competitive economy, you must have mobility of labour. How does that sit with the Government’s strictures on immigration? Of course, movement of European citizens is not technically the same as immigration but mobility of labour is crucial to competitiveness. It is one of the main areas where Europe finds it hard to compete with the United States.
Fourthly, and finally, we have to concentrate on quality of growth and not just on quantity. This means two things, the first of which is distributional. What is the use of growth that only goes to 1 per cent of the population? Not much. It also means an environmental thing. Europe could be in a highly competitive position vis-à-vis the United States or China, neither of which provide a sustainable, environmental model out of which job creation can come. I would welcome the Minister’s comments on any or all of those points.
Lord Teverson
My Lords, I welcome this debate as well. The crux of it is the Government’s and the United Kingdom’s ability to help financial stability and growth in Europe. That is a natural role for us because the United Kingdom is self-evidently part of Europe. We are part of it geographically and economically—as has already been described in the debate—and, absolutely, culturally. I was thinking about this area in particular. Contrast with this country the Obama healthcare reforms in the United States and how they have been received by the media culturally, and all the difficulties that that has caused in terms of ideas of socialism—and that is moving nowhere near to universal healthcare. Here, we have a health Bill going through where even what are seen as contentious propositions guarantee universal delivery, free at the point of need, and competition but not price competition. It shows that there is a big gulf culturally with the Atlantic, and that Britain is very much a European-style nation in the way that it looks at a number of things.
The only way that Britain can contribute towards that economic and financial stability is if it is able to have and promote that influence. My noble friend Lord Newby has already talked about some of that, but I want to emphasise it in the financial regulation area, which is part of the debate. I fully understand why the Financial Services Authority has to be abolished in that it was seen to fail very strongly in its strategic prudential regulation over the last few years. However, there is concern that, in its division into the financial conduct authority and the prudential authority, we could lose our single voice within the new economic and financial structures—in Brussels, the ESMA and the banking authority. I am sure the Minister is also concerned about that area as a high priority. I would be interested to hear the Government’s view.
The other area I mention is the one my noble friend Lord Newby raised, which is parliamentary influence. In the last European elections, I would say there were two major winners. One was the Conservative Party. Out of our 72 seats on an assembly of some 730 Members, 26 Conservatives were elected, 13 UKIP Members—a great result for UKIP—with Labour equal on 13, and the Liberal Democrats slightly below with 11. Yet in the European Parliament itself, which post-Lisbon has very literally equal powers with the Council of Ministers in terms of legislation and therefore British interests, the European People's Party dominates in terms of numbers with more than 200 Members—it is the largest party—with the Socialist Group below that at 184, and then the liberal group well below that at 84. Those are the three parties with real control. As in this Parliament and any other Parliament, in the European Parliament—unless one is in the point of balance—power depends on numbers. That is where influence is. I greatly regret that my coalition partners in Europe are in a group that is roughly equal with the Greens, and has absolutely no influence in the power structure of that Parliament at all. I would love to see it change. We have to keep that influence in Europe to ensure the stability that we are looking at there.
The IMF has been mentioned. I was not going to talk about the IMF loans particularly in this debate, but I will spend my last minute on a short excursion on that. I went to New England for the first time this summer, though I have been to the United States many times. I went to New Hampshire and, being a bit of an anorak and an economics student, I noticed that Bretton Woods, which is a minute settlement at the top of New Hampshire, was within striking range. I made my own pilgrimage to the Bretton Woods Washington hotel. Give it its credit: it still has the pictures there of John Maynard Keynes and the other people who came together to put together the post-war financial system. That system—the IMF side of it—has largely survived. It would be a great regret, as that change and that strategy was largely led by Britain, if we were not a participant in carrying forward those obligations.
We have a great role in Europe. Ironically, during the Delors/Thatcher time we pushed Europe forward more than has been done over the last few decades. We must, in this country, make sure that that momentum continues. We must not be marginalised.
Lord Bilimoria
My Lords, last week, the German Chancellor Angela Merkel warned us that if the euro falls there will be war in Europe. As the noble Lord, Lord Giddens, said, the repercussions would be catastrophic. There is no question that, after World War II, the European Union has been fundamental in preventing conflict among the EU states over the past six decades. In terms of economic stability and growth in the good times, the EU has been fantastic. But underlying the whole concept of the European Union is the question of where you draw the line. How far is too far? We have benefited from a zone of free people and goods, and that is fantastic. I am all for it, and I thank the noble Lord, Lord Newby, for initiating this debate. As he said, almost 50 per cent of our trade is with European Union countries. But one of the best decisions this country made was not to join the euro. In the good times, the euro has been very good. In the bad times, as we have seen, the failure is terrible.
It is illogical to expect that you have the same currency and interest rates for countries that are never—ever—going to be in sync at any one time. How can you have that? Look at Germany at the one extreme and Greece at the other, let alone governance of these countries. How can the Chancellor, George Osborne, possibly suggest increased fiscal integration among the eurozone countries? I cannot see how that can work. Increased fiscal integration is dependent on political and emotional integration, and a buy-in by all the citizens of each country. The last person to achieve integration in Europe was the Emperor Charlemagne in the eighth century. On the other hand, in a country like India where you have a truly federal state, you can have full integration—and the states in India are far more diverse than the countries in Europe. Then you can have a central government. However, in Europe, fiscal integration without political or emotional integration is a pipe dream. It has not happened in 60 years, and it is not going to happen.
Therefore, we have got to accept that the euro was a step too far. Our forays into political integration with the European Union have resulted in a system in which we have MEPs who have absolutely no connection with their constituents, who in turn have no idea who they are. There are constant complaints in our country about the bureaucracy and red tape that come out of Brussels, particular in the areas of business and employment law.
I have spoken before about the domino effect that has taken place in the past five years: of the sub-prime crisis leading to the credit crunch, leading to the financial crisis, leading to the great recession, leading to the sovereign debt crisis, and leading to the eurozone crisis. We are at a very precarious time in history. The people who say that Greece merely represents 0.5 per cent of the world's economy, or 3 per cent of the eurozone, miss the point: it only takes half a spark to start a whole fire.
What are the Government's plans to deal with the possible disintegration of the euro and the eurozone? The Government refuse to have a plan B where the economy is concerned, but I credit them for having sent out the right signals to the global financial markets by showing that we are willing to cut our GDP/public expenditure from 50 per cent to 40 per cent. That is good, but what are the plans for a euro-disaster scenario?
Does the Minister agree that Britain should take a leadership role to resolve this disaster that lies ahead of us? Bailing out Greece—and other countries; we have heard about Italy, with €1.9 trillion of debt—the measures have gone from a sticking plaster to a bandage last week, and now Greece has admitted itself into the operating theatre. We are only prolonging the inevitable. Can Britain play a leadership role with this doomsday scenario possibly taking place, rather than being told by President Sarkozy to stay out of it? Why does it take the noble Lord, Lord Wolfson, to offer a prize for a solution to a country disengaging from the euro? Does that mean that the Government do not know how this should happen? In my role as the president of the UK India Business Council, I always say that we are so perfectly positioned as a gateway to Europe.
What are the Government doing to deal with the negative impact of hedge funds and people taking advantage of credit default swaps, accentuating the downward spiral scenario? Everyone talks about the ECB saving Europe but look at the EFSF, which has not even been able to raise €3 billion out of the €1 trillion it is meant to. Gary Jenkins of Evolution Securities put it really well when he said:
“The vehicle that's supposed to borrow on behalf of the countries that can't borrow, can't borrow”.
With regards to a referendum, the question should be not about whether we are in or out of Europe, but about how countries are in Europe and on what terms. Under the worst of circumstances, where the eurozone could disintegrate, we now have an opportunity to redraw almost from scratch what the European Union should be: a union of countries with democratic principles, with a rule of law and with shared values. Then we will have a European Union with peace, stability and growth.
Lord Flight
My Lords, I congratulate the noble Lord, Lord Newby, on bringing forward this debate at such an appropriate time, and I compliment the noble Lord, Lord Bilimoria, on raising some of the really grave aspects of this crisis.
The first point I want to make is that it is no good tinkering around the edges. It is necessary to understand the cause of the eurozone financial and government debt crisis. It is blindingly obvious. If very disparate economies such as those of southern and northern Europe share a currency for political reasons but they are in no way homogenous, and the south has become 35 per cent uncompetitive against the highly efficient north, it is not surprising that the southern economies are in trouble. Their economies are dead in the water; their government debt and borrowing go up.
Secondly, it is not surprising that the markets in the rest of the world do not want to buy Spanish and Italian debts. The prospect is that these economies will not recover without significant devaluation one way or the other. So who is going to buy their bonds when there is the fear, if not the threat, that sooner or later there will be substantial losses as a result of devaluation? The fundamental problem has to be looked at and addressed.
There have been comments about the fiscal union route of dealing with this. Indeed, there is truth in the principle that, if you are going to share a currency, you need to have common economic and fiscal policies. However, I really do not think that is the solution. I will go through some of the ingredients. Euro bonds are okay, but Germany effectively underwrites whatever proportion of the debts of Italy and Spain it is responsible for. Not surprisingly, Germany is not very keen to do that.
The second, more traditional way is to make transfer payments from the more prosperous areas to the less prosperous areas. In America, transfer payments amount to 30 per cent of federal tax revenues. Even in the UK, in our little common currency area, they are £70 billion or £80 billion of public spending. The problem with the sort of transfer payments that would be required from Germany to southern Europe is that they could be of the order of a third of Germany’s GDP. Anyone who thinks that Germany is going to consider such amounts is mad. Just supporting the former East Germany depressed its economy for 15 years. The German answer is to say, “Right, effect an internal devaluation”. That is fine, but does anyone think it politically practical that Italy and Spain are going to effect internal devaluations of 35 per cent by slashing pay, employment and benefits? Even if they could do it, the result would be a winding-down of their economies, increasing their deficits even further. Candidly, I do not think that the standard route of transfer payments that America and Britain have used offers very much. Transfer payments have had the effect in America and Britain of locking in dependent and rather failed economic areas. The Deep South of America was a failed economic area for 100 years after the Civil War, when it was stuck with the currency of the north.
Finally, as others have said, the whole political objective of the EU was to get rid of nationalism, and what do we see? We see southern Europe starting to get very resentful about being bossed around by Germany, as it sees it, and Germany starting to get extremely uncomfortable about being able to pay for things. This is hardly good news for good relations.
I would like to throw on to the Floor the idea that the only workable solution is for the euro to divide into a hard currency for northern Europe and a soft currency for southern Europe. It would be easy to achieve, but I believe I know how it could be achieved. I think that it would be workable because there is a commonality of economic characteristics between the northern countries and the southern ones. I think that if the eurozone turns its back on this in the present climate, it will miss a huge opportunity to stop chaos.
Lord Harrison
My Lords, in thanking the noble Lord, Lord Newby, for so cogently introducing this debate, I don my hat as chair of the sub-committee of your Lordships EU Select Committee which concerns itself with economic and financial affairs and trade. We are dealing with a number of reports on financial stability. We look forward to the noble Lord, Lord Sassoon, responding to our report on sovereign credit rating agencies and a further report on the new EU financial supervisory framework under three new EU supervisory authorities. Our current inquiry is looking at how a single mortgage market might be established throughout the European Union. A future inquiry will look at the topical financial transactions tax. Among our regular scrutiny items are the EU prudential regime and the reaction to Basle III and CRD4.
However, the most important reports that we have produced recently, in March this year, was on the future of economic governance in the EU and the euro. We are now producing a follow-up report, which involved interviewing Sharon Bowles, the excellent chair of the European Parliament’s Economics Committee, and the German Ambassador Boomgaarden. On a cultural point, the ambassador spoke absolutely fluent English and showed a grasp of British history that I do not think any British spokesman or politician could match if they were to address a German crowd in such a way.
In considering the future of economic governance in the EU, we looked at the Commission’s proposals for the so-called “six pack” in achieving enhanced economic co-ordination. We think that it is going in the right direction. We believe it is essential that the political authorities of the EU take that seriously and abide by the rules. That is even more true of the situation now than it was when we first published our report in March. The UK has a strong interest in seeing the euro area stable and prosperous. The European Stability Mechanism, which in 2013 will take over the tasks carried out by the EFSM and the EFSF, will be compulsory only for members of the euro area. However, we recognise that it might be in the UK’s interest to contribute to rescue packages for member states in difficulties, as happened with Ireland. Our follow-up inquiry looks at what fiscal union might look like and includes a consideration of euro bonds, the implications for the European Union and the UK of the Greek default and the write-downs of Greek debt, the role of the EFSF, the case for recapitalisation of European banks and the position of United Kingdom banks.
I doff my chairman’s hat and return to the other side of this matter—the growth aspects. I rebut the notion of the noble Baroness, Lady Noakes, that our interest is different from that of the European Union. The two interests may well coincide. I encourage the Government to stop deluding others regarding some of the good work that they do. We should not disguise the fact that we had a self-interest in helping out Ireland. When we contribute to the IMF fund, we should not say—as the Chancellor did—that we are just one of 80 countries that have done so. We have a purpose in supporting the IMF and we may need to do the same with the ESM in the future.
The noble Lord, Lord Newby, spoke of the problem that will emerge for us if we find that more and more of the European Union 27 member states join the euro, as they are destined to do. Three countries in the western Balkans already attach themselves to the euro. We may be like the children at birthday parties in the Harrison household who always wanted a place at the bottom of the table, away from where all the adults sat. We may end up at that table, supping with a couple of others who are excluded from the adult conversation taking place higher up the table.
Finally, the secret to growth—I was interested to hear the comments of the noble Lord, Lord Giddens, in this respect—is the single market. In this we can find a political consensus. As the noble Lord, Lord Hannay, has illustrated, if we secure the single market it will bring the prosperity, growth and jobs which we can all enjoy.
Lord Shipley
My Lords, I join with others in thanking my noble friend Lord Newby for initiating this debate. My view is that a demand for a referendum on membership of the European Union was an unnecessary diversion. It was misguided and mistimed. Referendums are not flavour of the month and would simply have added to instability across Europe and the eurozone. However, Europe and the eurozone are often seen by the general public as the same thing, so I think that the reasons for our being in the European Union need much stronger explanation.
Being part of a single market is central to jobs. The UK has 500 million consumers in that single market. Ten per cent of our jobs in the UK—3.5 million jobs—rely on that single market. We export strongly to it. My own region, the north-east of England, is the only region in the UK to have a positive balance of payments, and we have it largely because of exports to the EU. We also have across the UK non-EU foreign direct investment which has come here because we are in a single market. The case for leaving the EU and imagining that growth would follow from being outside it is very badly put. It would be economic madness to withdraw from the EU, and it would cause a major rise in unemployment. Of course, collapse of the euro would devastate jobs, too, and so we have a responsibility outside the eurozone for helping to solve the eurozone crisis. It is central to what our Government should be doing because it is in our national interest so to do. But we have to be very careful.
I agree entirely with what the noble Lord, Lord McFall, said about institutions, particularly democratic institutions, needing to give hope to the people that they represent. We have to be seen to be capable of resolving the problems in the eurozone. I want to draw two things from what the noble Lord, Lord McFall, said, which, broadly speaking, was similar to something I wanted to say myself. The first relates to youth unemployment. It is untenable for youth unemployment across Europe to stand at 21 per cent. It is 21 per cent in the UK but in Spain it has hit 46 per cent. Our 21 per cent is almost a million young people and it is simply too high. Secondly, we have to learn more from Germany because its comparative stability and growth can set an example for other countries, not least ourselves. Germany’s organisation, partly through the Mittelstand but also generally through communications and systems involving employers, the education system, trade unions, and so on, has led to a highly integrated system based on long-term planning as opposed to short-term gain.
I find it quite astonishing that, despite the billions of pounds that have been spent in the UK on education and training, we still have a major skills gap. Unemployment in the north-east of England runs at 11 per cent at the moment, twice the level of the south-east of England. And yet a quarter of the north-east’s manufacturing, engineering and processing companies cannot find enough skilled workers. I welcome every initiative we can take to recreate a desire in young people to learn vocational skills around technology and engineering. For that reason I welcome university technical colleges, places where people learn skills to do real jobs. One has just been announced recently in Newcastle upon Tyne. I am very grateful for the work of my noble friend Lord Baker in supporting this initiative.
It is fundamentally important that to compete in the modern world our young people have to have the skills with which to do it. The skills gap that we have would not happen in Germany. A week ago the CBI issued a report urging the Government and the City to concentrate support on the forgotten army of middle-sized companies of up to £100 million turnover a year with up to 500 employees. I hope that we can learn from that.
My final point is a question to the Minister about the European Globalisation Adjustment Fund to which he may be able to reply. I understand that the UK has never applied to the fund but that it is likely to be extended to December 2013. Will the United Kingdom support that extension? It might be necessary.
Lord Pearson of Rannoch
My Lords, I welcome the debate, if only because it allows me to point out why no British Government can do anything useful to support either financial stability or economic growth in the European Union. At root this is because the big idea that gave birth to the whole project of European integration has failed. The longer the political class tries to prop it up the more painful the result will be to the peoples of Europe.
Let me remind your Lordships once again what that big idea was. It was that the national democracies of Europe had been responsible for two world wars. They therefore had to be emasculated and diluted into a new form of supranational government run by technocrats, with their national Governments and Parliaments largely powerless. The euro, about which we hear so much today but which is not the deeper point, was never an economic project. It was supposed to be the cement that would hold the emerging corporatist state together. Those who designed it in the 1980s knew perfectly well that a currency zone cannot survive for long without a federal budget and without the ability to tax and send money from richer and poorer parts of the zone. Anyone who doubts this should read that great book by Mr Bernard Connolly, The Rotten Heart of Europe.
So the euro was to complete the project of European integration by handing the essential power of taxation to Brussels. All the other powers would have been put in place by a sly and a steady succession of treaty changes ending with the grand, overriding constitution which has come to be known, thanks to the French and Dutch people who turned it down in referendums, as the Lisbon treaty. Now, all according to plan, a British Government have some 8 per cent of the votes in the secret law-making process in Brussels, which interferes in almost every aspect of our daily lives—a process in which your Lordships’ House and the House of Commons are entirely irrelevant. The more the people understand this, the less they like it.
That, very briefly, is why I say there is not much any British Government can do about financial stability or economic growth in the European Union. But there are deeper reasons, even further beyond the reach of any British Government. As to financial stability, in the time available it is perhaps best to let events caused by the euro speak for themselves. It remains to be seen whether the people of first Greece and then elsewhere will go along with the austerity required by the grand euro plan that has been imposed on them without their informed consent. In the mean time, I hope that I can be forgiven for saying: some cement, this euro.
As to economic growth, the position is equally hopeless. Here I draw your Lordships’ attention to a short new publication from Civitas called Time To Say No, written by my colleague at Global Britain, Mr Ian Milne, with a foreword by the noble Lord, Lord Vinson, of Roddam Dene. It draws heavily on a number of Mr Milne’s one-page briefing notes to be found at Global Britain.org, which are a very underused resource in our national debate about the facts of our EU membership—particularly the economic facts. I have time now to draw your Lordships’ attention to only a few. Briefing note number 69 is entitled, “The Coming EU Demographic Winter”. Between now and 2050 the USA will gain some 36 million in working-age population while the EU will lose 55 million or 16 per cent. The UK will go against that trend, increasing our working age population by 3 million or 7 per cent. This scleroticism, or whatever you want to call it, is guaranteed by the European Union’s incurable propensity to overregulate, thus dragging all its economies down in the face of rising competition elsewhere in the world. As the world’s fourth largest exporter, this hits us particularly hard.
The booklet also explains how customs unions have become redundant; how our trade, both ways, with the EU has been declining for some time while expanding with the rest of the world; and why you do not need to be part of the single market to export to it, underlined by the fact that Switzerland exports three times more per capita to the EU than we do and Norway five times.
In conclusion, if this debate does nothing else, I hope it will stop the Government and Europhiles constantly pretending that we need to stay in the EU in order to maintain our exports to clients in it and the jobs that depend on them. If the Minister does not want to take my word for this, Channel 4’s “Fact Check” section on 1 November reveals that the academics who originally found that 3 million of our jobs depend on the sale of goods and services to clients in the EU have never said that any of these would be lost if we left the EU. Of course they would not, and the sooner we do it, the better.
Lord Haskel
My Lords, during the referendum debate on 24 October in another place, at col. 60, one honourable Member—a Conservative colleague of the noble Baroness, Lady Noakes—asked why Members were worried about seeking a better deal with the EU. If we did, he said, the French would still sell us their wine, the Germans would still sell us their cars. Do noble Lords opposite really think that this is why we are in the EU, so that we can drive around in Mercedes cars and drink fine French wines?
My concern is that if we are not in the EU, the French will stop buying our avionics, the Germans our pharmaceuticals and both will stop buying our insurance. As other noble Lords have pointed out, half of our trade is with the EU. If we are not in the EU, will the French and Germans invest in the new power plants that we so desperately need, and will Asian investors restart our steel plants and invest in our car factories? Of course not, as the noble Lord, Lord Shipley, explained. It is outrageous to risk all of these actual jobs and investments with some kind of imaginary option which probably does not exist in reality.
The opposite is true: we should be taking even more advantage of our association, and the timing is right. With a weak pound, rising prices in Asia and supply chain problems, the word near-shoring is beginning to be heard, as my noble friend Lord Giddens told us, not for cheap goods but for better-quality good, branded products and advanced technology. As the noble Lord, Lord Newby, explained in his opening remarks, this is a time of turmoil in the eurozone, but as ever in business, that is the time to invest in the spadework, as my noble friend Lord McFall explained.
Is it that the Government see devaluation as the route to our future, and if so, for how long? The pound has devalued by 30 per cent against the euro in the last five years and surely this devaluation is one reason for the high inflation we have now. It is the less well-off who pick up the tab for this strategy. If we are to seek economic growth within the EU it must be more for the excellence of our business, and less through devaluation.
So, with devaluation less of an option, how do we encourage economic growth? The Government want to achieve it by returning powers from Brussels—repatriation, as the noble Lord, Lord Hannay, put it. So, what are these powers? It seems to me that they deal with the way in which we run our businesses: terms of employment, labour relations, regulation. The theory is that we can compete better with a more flexible labour market and less regulation. This argument has been around for years—long enough for us to judge whether or not it is true. I put to the Minister that in practice the argument no longer stands up. So-called flexibility does not create more value. That is why a lot of businesses have moved on. They are putting into practice the social values that help create the motivation and commitment that are acceptable to the markets and to people, and which make their businesses more trusted and create longer-term value for all. Withdrawal of powers will not make us more competitive.
I will say one more thing—this time to the noble Lord, Lord Pearson. The big idea has not failed. For my generation the EU is more than economics. It is peace instead of war, as the noble Lord, Lord Bilimoria, said; it is shared prosperity instead of social divisions; it is mutual support in an interdependent world. Europe is certainly far more than the pleasures of driving a Mercedes car or drinking fine Bordeaux wine.
Lord Liddle
My Lords, as many noble Lords have said, the noble Lord, Lord Newby, was very timely in choosing the topic for debate today. I agreed with virtually everything he said in his speech, although for the sake of the record I ought to say that I disagreed with his description of the previous Labour Government as an awkward partner in Europe. He should go to Brussels and ask what people today think of the coalition. We should remember the influence the previous Labour Government had over the Lisbon strategy, European defence and climate change policy. There were three new treaties. We greatly increased British influence in Europe. Our problem was that we did not make a strong enough case for Europe in Britain. This is what we now have to do.
The central issue in the debate is how Britain should keep its place among the adults, as my noble friend Lord Harrison said, at the European dining table. Some people think that Europe is irrelevant. The noble Baroness, Lady Noakes, is among those who think that the single market is relatively unimportant. For the noble Lord, Lord Pearson of Rannoch, it is a complete waste of time. I will give one example of something good that the Government did this week in my home town of Carlisle. They gave a grant to Pirelli tyres, which employs 1,500 people in Carlisle, to develop innovation in new tyres. Why is Pirelli in Carlisle? Because it gives access to the European single market. People such as the noble Lord, Lord Pearson of Rannoch, would destroy those jobs.
Lord Liddle
I am not giving way. The single market is a difficult bargain. The Government say that they want to promote it, but when a lot of people are worried about its social effects, how will they be effective in promoting it at the same time as they are trying to withdraw the United Kingdom from our social and employment obligations? This is a fundamental issue for the coalition and a fundamental contradiction in its policy.
I agree with right reverend Prelate the Bishop of Bath and Wells and with other noble Lords who said that the single market in itself is not enough. We need a European plan for growth. It is not difficult to put that together. Hundreds of millions of pounds lie unused in structural funds, many in the United Kingdom. What will the Minister do about that? The European Investment Bank already does far more to support small businesses in Britain than anything the British Government do. We could expand that role very considerably.
Several noble Lords have said they think devaluation is needed as part of growth. May I draw their attention to an article in this morning’s Financial Times? Its respected economics editor, Mr Chris Giles, points to some striking figures, comparing the net trade contribution to GDP since 2008 for the UK and Spain, both hit badly by the banking crisis. For the UK, with 30 per cent devaluation, trade has improved our GDP by 2.5 per cent; for Spain, stuck in the eurozone single currency, its trade contribution to GDP has improved by 6.3 per cent. Devaluation is not the cure.
I said that this debate was timely and serious. It really is serious, because as the eurozone hovers on the brink of an existential crisis, we should recall the words of the German Chancellor Angela Merkel, that if the euro fails, Europe fails. For Germany, that would be unthinkable. Such an outcome should be unthinkable for the United Kingdom, too.
Let us recall that the euro was not conceived as a foolish political venture that took priority over the single market, as some noble Lords appear to think. Instead, it was the only practical means to sustain the single market once capital movements were liberalised under the 1992 programme that was so strongly advocated by the Government of the noble Baroness, Lady Thatcher. Free capital movement made it impossible to continue with the system of managed exchange rates under the ERM. At the end of the 1980s, Europe faced a simple choice between reverting to free-floating exchange rates, which risked competitive devaluations and a return to protectionism—destroying the single market in its wake—or going for a single currency. Europe chose the single currency.
The noble Lord, Lord Teverson, mentioned Bretton Woods, where Keynes’s essential argument was that free trade and open markets are far more important to economic dynamism than flexible exchange rates; and it is very difficult to have both at the same time. That is why the present situation is such a threat to Britain’s vital interests. Let us not kid ourselves: if the euro fails, we will not see a return to the status quo ante. I do not agree on this point with the argument of the noble Lord, Lord Bilimoria, for whom I have the most wonderful respect and admiration. The likelihood is that if the euro broke up, the single market would break up as well, in a new Europe of competing currencies. Member states would take protectionist measures against each other to prevent what they see as unfair competition.
For Britain, which conducts so much of its trade and which has so much investment dependant on the single market, this would truly be an economic catastrophe. It would not be just an economic catastrophe. The collapse of the euro would, as Mrs Merkel said, put the European Union itself at risk. I believe that the single market is the foundation stone of the European Union and, as I have argued, the euro is its essential cement. Pull that away and in place of the remarkable unity that we have seen in Europe since the Second World War, we retreat to a Europe of fractious nation states.
This is what it would be: we in Europe decide to become Westphalian pygmies at the moment that Brazil, India and China become globalisation giants. What hope would there be for our ability to promote the values that we share, with Europe and not with the United States, to back international development, reduce world poverty, tackle climate change, advance democracy and human rights and help to solve the problem of failing states? What would happen then in that disastrous situation to the ideals of the founding fathers of the European Union who fought for a Europe whole and free, at peace in a co-operative partnership of nations where elements of sovereignty were pooled in the cause of democracy, freedom, prosperity and social justice?
Britain will be an enormous loser if the European project founders. It must not happen. We must strain every sinew as a Government and as a Parliament to avoid that terrible catastrophe. In doing so, I say to the noble Lord, Lord Pearson of Rannoch, that we are not traitors to our national interests but are giving a practical expression to modern patriotism.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, I am grateful to my noble friend Lord Newby for initiating this debate. It has been a valuable and insightful debate on stability and growth in the European Union and comes at a particularly good time. As your Lordships are all aware, it has been an incredibly turbulent few months, few days, and few hours for the global economy. The euro area is at the epicentre of this instability. A decisive resolution to the crisis is in our vital national interests, a point that was vigorously underlined by my noble friend Lady Noakes. Such a resolution would provide the single biggest boost to the British economy this autumn.
Last week, good progress was made towards reaching a comprehensive solution for the euro-area crisis. It is one that echoes the approach we have been advocating. First, there is the recapitalisation of European banks. As agreed last week, 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. Importantly, the assessment by the European Banking Authority is that no British banks require additional capital.
Secondly, there is the resolution of Greek debt. There is a headline agreement to reduce the Greek debt-to-GDP ratio to 120 per cent by 2020, with private holders of Greek sovereign debt being asked to accept a nominal write-down of 50 per cent. I should remind my noble friend Lord Marlesford that Greece is subject to an adjustment programme to which the IMF is a party, so there are indeed very considerable and appropriate strings attached.
Finally, in the package is reinforcing the firewall between Greece and other vulnerable euro-area countries, either by using the bailout fund to provide insurance on new debt issued by euro-area countries, or by creating special purpose vehicles to attract private and public resources. As my right honourable friend the Chancellor said, the immediate priority must be to implement the agreement that was entered into on 27 October.
That is the particular and immediate. At the other end of the spectrum we have had considerations of existentialism and very broad future scenarios painted by the noble Lords, Lord Liddle, Lord Pearson of Rannoch and Lord Bilimoria, and my noble friend Lord Flight. I should say at this point that I regret that I will probably disappoint them by not entering today into speculation about what will go on in the future. I will concentrate on the immediate practicalities of the eurozone as we face them today.
The first thing I will address is the question about the IMF, UK resources and where we should put them. The noble Lords, Lord McFall of Alcluith and Lord Hannay of Chiswick, do not paint a fair reflection of the UK’s position towards the IMF and bailout funds. My right honourable friend the Chancellor of the Exchequer has been clear that building up IMF resources and building up euro-area bailout funds are separate issues. The UK has always been a strong supporter of the IMF as a global backstop to the world economy, and this support has been from Governments of all political standpoints since the IMF’s foundation. The Chancellor of the Exchequer has said that the UK,
“stands ready to consider the case … for further increasing the resources of the IMF to keep pace with the size of the global economy”.
That point was reinforced by my right honourable friend the Prime Minister earlier today.
In recent years some of the biggest use of IMF funds has been for countries such as Mexico and Poland, both non-euro-area countries. In uncertain times, lots of areas around the world may need IMF support and it is important to ensure that this key global institution is properly resourced to do its job. That is in the UK’s interest. That is what we will do, but that is very different from entertaining suggestions that the IMF should put its own resources into a potential euro area special purpose vehicle. I say to the noble Lord, Lord Hannay of Chiswick, that there has indeed been talk about that. That is not within the remit of the IMF, which supports individual countries. The Government’s position is that we will support the IMF in its mandate; that is not a mandate that does or should extend to euro area or any other special area bailout funds, which are a completely separate matter. Lastly, I remind noble Lords that our support for the IMF does not add to our debt or our deficit and that no one who has provided money to the IMF has ever lost money.
Of course, the package that I have summarised is not the answer to the longer-term reforms that are needed to make the euro area work more effectively. All euro area members need to implement credible plans to reduce budget deficits. That commitment was made in the very first section of last week’s agreement. We will continue to ensure that our voice will be heard and our national interests protected. In response to a question asked by the noble Lord, Lord Bilimoria, this will of course include planning to cover the widest range of scenarios that may develop.
It is essential that matters that affect all 27 member states continue to be discussed by all 27 member states. This is the approach that we will take to protecting and promoting the single market. We have agreement and confirmation of that as a result of my right honourable friend the Prime Minister’s intervention on 23 October. The noble Lord, Lord Hannay, asked about the euro-plus pact. The Government took a clear decision not to join the current pact as they viewed the pact as a response to the specific needs of the euro area and there has been no change in that position. The vast majority of decisions on economic and financial policy are made by the EU 27, not by the euro area. That will not change. We still have our 29 votes, the same number as France and Germany, and we play an active and positive role in all Council debates. Of course, as noble Lords know full well, it is not a question just of the UK being outside the euro-plus pact; the Czech Republic, Hungary and Sweden did not join either.
As noble Lords have recognised, because the single market is one of the most powerful tools we have to promote sustainable, mutual and renewed growth in the UK and across the EU, we must continue to work hard to progress it. We have made substantial progress to complete the single market over recent years and the UK has worked hard to prioritise measures that bring the greatest benefit to growth. That is why we have strongly supported the liberalisation of EU cross-border trade in services, prioritising the passing and proper implementation of the services directive. Even conservative estimates place the benefits of this at a very substantial 0.8 per cent of EU GDP.
There are huge gains to be had for growth and job creation, a point that my noble friend Lord Shipley drew particular attention to, and those come from even the smallest changes to protect and promote truly free and open markets within the European Union, a point underlined by the right reverend Prelate the Bishop of Bath and Wells. I refer, for example, to that genuine single market in services, addressed by the noble Lord, Lord Giddens. A digital single market could add €800 billion to EU GDP. The Government have led the way in that. My right honourable friend the Prime Minister’s pamphlet, Let’s Choose Growth, published in March this year, provides the blueprint to realise that gain. I draw the attention of the noble Lord, Lord Haskel, to that pamphlet because that is the way in which the Government see growth in the eurozone being driven forward. It has nothing to do with repatriation of powers, as he seeks to paint it.
The Prime Minister also secured language, in the 23 October European Council conclusions, which calls for an EU growth test to filter out EU legislation which is harmful to growth and jobs. That is positive and important. I am, of course, grateful for the ongoing work of the noble Lord, Lord Harrison, in your Lordships’ European Union Committee in discussing and helping to promote these ideas.
In support of that, my noble friend Lord Newby asked about our positioning of UK officials in Brussels. I recognise that we have to work harder in this area, but I believe that the push on this, which the Foreign Office made last year and continues to make, has led to success in the EU campaign. On the number of candidates put forward for EU positions, we have seen the UK rise from a lamentable 19th place to a barely respectable, but much better, 12th position last year. That is one indication that we are making some progress, but we have to work harder.
In respect of this positive agenda, I am grateful to my noble friend Lord Razzall who talked about the wider group of pro-growth member states, which regularly meets with my honourable friend the Minister for Employment Relations, Consumer and Postal Affairs and with counterparts from 13 other EU member states. There are lots of very practical things on the agenda that officials and my ministerial colleagues are working on, just as your Lordships’ committee is doing.
That takes me on to the outward-facing aspect of this, to which a number of noble Lords have drawn attention. We must remember that the gains to be made from freer trade are not just a matter of completing the single market but are a matter of completing the outward-facing trade arrangements under the Doha trade round and out-of-trade bilateral agreements. That is a critically important area to which my noble friend Lord Newby drew attention. The Government continue to support the Doha round. It is important to complete Doha as a matter of urgency but we also should point to the importance of the EU’s bilateral trade deals with markets such as India, Canada and Singapore. On the point made by the noble Lord, Lord Giddens, about labour mobility within the EU and outside it, of course those bilateral deals pick up important issues related to labour mobility as far as they link directly to trade. My noble friend Lord Shipley raised a detailed point. There have indeed been very recent Commission proposals to extend the European globalisation fund. I can certainly assure my noble friend that we are currently considering the Government’s response to those recent proposals.
I turn next to financial services, an area to which a number of noble Lords drew attention. In the past year the Government have demonstrated the same resolve to promote an open and single market in financial services. I say to my noble friend Lord Teverson that I do not recognise that there has been any loss of voice in this area. Yes, we have to recognise that there is a change of architecture and make sure that within that architecture we maximise our voice, but I would suggest that the evidence is that we are being heard. For example, on the alternative investment fund managers directive, we completely reversed the Council’s position to ensure that the directive is internationally consistent and non-discriminatory.
On the Basel III reforms, we are working with the Commission to ensure that the capital requirements directive reinforces rather than weakens the single market by having high, common and consistently applied standards for capital, just as we are doing at the G20 to ensure that we do not distort international competition and markets. Likewise, we cannot undermine European competitiveness by unilaterally implementing a financial transaction tax. At a time when we have to do everything we can to promote growth, a tax to undermine Europe’s competitiveness is in no one’s interest.
These continue to be turbulent, dangerous times for both the European economy and the global economy. Within Europe, the decisions reached last week are a big step to resolving the crisis that has undermined economies around the world since the summer. We still have a long way to go to finalise the details of that agreement and it is important that all parties to the agreement deliver on their commitments. Beyond that, the UK will continue to be at the heart of that process and the process of coming up proactively with pro-growth policies for the UK and for Europe. At the same time, we will continue to protect and promote our interests across the EU.
In conclusion, I am very grateful to my noble friend Lord Newby for stimulating this debate and for the constructive proposals and suggestions from all sides of the House.
Lord Newby
My Lords, I thank all noble Lords who have taken part in this fascinating debate. I am sure that the one thing uniting all participants is that the issues we have been debating are of central importance to the future growth and stability of the UK economy. We will no doubt return to them frequently in coming months but, for today, I beg leave to withdraw the Motion.
Television Advertising: Communications Committee Report
Lord Clement-Jones
That this House takes note of the report of the Communications Committee on Regulation of Television Advertising (First Report, HL Paper 99).
Lord Clement-Jones
My Lords, I declare an interest as a sometime employee of London Weekend Television in the 1980s. First, I thank my fellow members of the committee, those who gave evidence to us, Ralph Publicover and Audrey Nelson who were successively the clerks to the committee, and our expert advisers, Professor Patrick Barwise, emeritus professor of management and marketing at the London Business School, and Professor Steven Barnett, professor of communications at the University of Westminster.
I also want to pay tribute to Michael, the late Earl of Onslow, who, if his health had permitted, would have taken over the chairmanship of the Communications Committee for this its first inquiry after the general election. I took over the acting chairmanship as a result. Despite ill health, as the House may imagine, he contributed intermittently but vigorously—sometimes even on the telephone. He was a considerable individual and we all miss him greatly.
Let me set out the background to the inquiry. The UK television advertising industry has changed over recent years as a result of the growth in the number of commercial channels, competition for marketing budgets from internet advertising and the economic downturn. This has led to calls for changes in the regulation of television advertising.
Although there has been some deregulation within the industry, there remain constraints on the quantity, scheduling and content of television advertisements and additional constraints on the price of commercial airtime—on ITV1 specifically. During 2008-09 there was a sharp fall in the revenues earned by commercial television companies from the sale of advertising—some 16 per cent. This was, in part, a reflection of the general economic downturn but it was also due to other developments including the migration of advertising from television to the internet. When we started the inquiry there had been some recovery of ITV advertising revenues in 2010, which seems to have continued into 2011, but the movement of advertising towards the internet seemed—and still seems—likely to continue.
If the advertising-funded model is in irreversible decline this would have serious implications for the future of commercial public service broadcasting. The committee therefore decided to conduct an inquiry into the current regulation of the television advertising market and how changes might assist the commercial television companies to maintain revenues and output to the benefit of the viewer. At the time, the Secretary of State for Culture, Media and Sport was also reported to have asked his officials to examine the case for ending regulation of the rates ITV could charge for advertising. It therefore seemed a good time to look at the whole question of advertising regulation but focusing on the regulations that do not involve advertising content.
Television advertising in the United Kingdom is subject to regulation in its scheduling and its sales arrangements. There is in particular a set of rules—the contract rights renewal undertakings, or CRR—which regulate what ITV can charge for advertising. These undertakings were required by the Competition Commission in 2003 as part of the arrangements for the Carlton/Granada merger to proceed to protect advertisers and other broadcasters from what was then perceived as potential and unhealthy market dominance from a unified ITV. The other major form of regulation of advertising on ITV is COSTA—the code on scheduling of TV advertising—which specifies an average of nine minutes advertising an hour on satellite channels and seven minutes on commercial public service broadcast channels.
The committee inquiry considered a number of questions: whether the current level of regulation of television advertising is appropriate; what the financial impact might be on television companies if changes are made to the regulation of scheduling and sales of television advertising; and the extent to which current arrangements reflect the public interest. It was not always easy—as committee members will testify—to come up with a clear answer, and sometimes fine judgments had to be made but if in doubt, when looking at particular proposals, we tried to give priority to television viewers’ interests.
The committee came to the following conclusions. First, the COSTA regulations should be harmonised to level the playing field between public service and commercial broadcasters when digital switchover happens in 2012. Research suggests that viewers would not support an increase in the amount of advertising on television, especially on ITV1, Channel 4 and Channel 5. It was our view that a reduction in the quantity of advertising airtime that broadcasters are allowed to sell may well improve the viewer experience and would certainly be fairer to those channels, which are limited more than all other commercial channels at the moment. As I said, under the COSTA rules public service broadcasters such as ITV1, Channel 4 and Channel 5 are permitted an average of seven minutes of advertising an hour and a maximum of eight minutes at peak times. On balance, our recommendation was that all channels should be allowed an average of seven minutes an hour, with an appropriate peak-time maximum which would be determined after research from Ofcom.
We also concluded that the CRR undertakings are no longer the most appropriate mechanism for regulating how advertising airtime is sold on ITV1. Your Lordships may have caught the speech today of the noble Lord, Lord Grade, in which he was exceedingly vigorous in his condemnation of the CRR rules and the remit of the Competition Commission. We took the view that the context in which CRR had been imposed had changed sufficiently to justify this view and that the Competition Commission when recently examining CRR had not been able to take more than a narrow, competition-based view, which did not take account of the wider public interest and in particular the clearly understood preference of television viewers for UK-originated content, as well as the contribution that increased original production makes to the nation’s creative economy.
ITV still dominates the market for fast-build advertising in mass-market popular television shows, but even so the competition has changed considerably, with heavy consolidation of the main media buyers into four organisations. On CRR, the committee therefore recommended that these undertakings should be removed on the important condition that they are replaced with binding undertakings devised and given by ITV plc to invest an appropriate proportion of any additional revenues from advertising in increasing its investment in quality, wide-ranging original UK programming on ITV1, and in training. If the television advertising regime is to be changed, we were insistent, however, that the binding undertakings we recommended would be rigorously upheld. All in all, the committee felt strongly that changes are needed to the regulation of television advertising and that our recommendations would encourage our commercial public service broadcasters to provide their viewers with quality original UK television programmes. After all, even in multichannel homes, over half of all TV viewing still goes to the five core channels.
As we said, it is extremely difficult to predict how much ITV plc would stand to gain in additional advertising revenue from the removal of CRR. However, the available evidence suggested figures of around £30 million to £55 million per annum. This equates to roughly 5 per cent to 10 per cent of ITV1’s current investment in original UK content. The public service broadcasters, I must emphasise, are vitally important for original UK production. Despite the advance of multichannel television and commitments from other broadcasters such as BSkyB to spend more, the PSBs still account for over 90 per cent of first-run original UK production, excluding sports rights. On the basis that they can be held to their promises, this rebalancing of television’s advertising money would therefore be seen on our television screens, to the manifest benefit of viewers and the creative economy, and would partially compensate for the £500 million which has been lost from original UK production in the last six years.
We noted that the changes to CRR may require primary legislation, but that it would be preferable to deal with these as soon as possible under the aegis of the Secretary of State for Culture, Olympics, Media and Sport. We recommended that the proposed changes are implemented at the very latest as part of the next communications Act.
A third extremely important element of our recommendations arose out of our view, in common with the Competition Commission and Ofcom, that the trading system used for selling television advertising is complex and arcane. This traditionally is based on an annual “deal round”, often on a so-called umbrella basis between advertisers, media buyers and broadcast sales houses involving a negotiation over the price of “commercial impacts”, essentially the eyeballs of particular types of target audience and unrelated to buying advertising slots in particular identified programmes, based on the discounts off station average price available for particular share of advertisers’ budgets. We took the view that the lack of transparency within the trading system favoured neither fair competition nor the viewer. We noted that for certain programmes called “specials”, such as the “X Factor” final or a Champions League match, different arrangements were put in place which could relate to the ratings of the programme itself. We therefore recommended that there should be a short, focused review of the trading system for television advertising airtime in order to find a more transparent system which includes a robust appeals process to address any outstanding industry concerns.
How have our recommendations fared at the hands of the Government and the competition authorities? Well, needless to say, we have not seen an instant relaxation of the rules yet, but a victory took place almost before the ink was dry. In March, just weeks after the committee’s report was published, Ofcom announced a review of the advertising trading model, as we recommended. This will be a significant step in assessing whether the CRR rules should be changed. The consultation document was launched in June this year and covers many of the areas which the committee was concerned with: transparency of pricing, signals, bundling of airtime and lack of innovation in the system. Above all, it is looking not only at the impact on advertisers, but also on TV viewers—an aspect that the Competition Commission was unable to consider in relation to CRR in its review. I trust that the review will be short and sharp. Ofcom also believes that more work is needed before changes to advertising minutage are made—that is, under COSTA. It is examining the potential economic impact and public interest arguments of different options.
The Government believe, and gave evidence to the effect, that they currently lack the power to lift CRR without the competition authorities’ recommendation, unless changes are made in the forthcoming communications Bill. However, I shall be interested to hear what the Minister has to say because they seem to have accepted that the Competition Commission was only able to take a narrow view when reviewing CRR in 2009-10 and have welcomed Ofcom’s inquiry into the advertising trading system. They are somewhat doubtful about the desirability of how to formulate and enforce any undertakings of the kind suggested by the committee.
In summary, the Government seem to be attracted to a more deregulated environment but uncertain about how to achieve it. This is understandable given the very different views that we heard about the impact of CRR, but with Ofcom’s advice they should be able to come up with a practicable solution. There is clearly a great deal of water to flow under the bridge. We did not expect a quick response in terms of action. We are pleased that the committee’s report has had an important response from Ofcom and the Government. We look forward to further progress which will explicitly feed into the forthcoming communications Green Paper and the subsequent Bill. I beg to move.
Lord Patten
My Lords, I hope that your Lordships take close note of this report—it is a good one—and in particular of the pressing need to clean up the system of contract rights renewal, or CRR, to which my noble friend Lord Clement-Jones has just referred. By their own words in this report, Ministers do not fully understand the CRR system. I hope that once they do, they will take speedy action in the public interest to change it. That need is urgent.
I have no interests of any sort to declare. I have no business or professional interests in TV or advertising. Rather insultingly, no person, company or body has lobbied me to make my voice heard in the debate. I try not to take that amiss. I decided to take part as a Back-Bench and serious non-expert. I read the report—sometimes a dangerous thing for anyone to do. Not only do I declare no interest of a professional or commercial sort, in the interests of transparency—to which I shall return in a moment—I also declare that at one stage in our lives down the road here in Westminster, we had a deliberate and considered total lack of interest: we brought up our daughter in a home without a television set. I hope that my coming out in this way does not overly shock those of your Lordships of a delicate nature. Indeed, the fact that we brought her up in this way led to one notable occasion when she was asked in her primary school class to name her favourite mid-week programme. She was forced to explain that she did not have one because she did not have a television set at home. I was told that that led to some debate later in the staff-room of the possible need for social services to check up on the manifestly cruel and unnatural lifestyle imposed on her. Having left one of England’s ancient universities, she has more than made up for lost viewing time subsequently.
If one refers to the excellent glossary at the end of this well produced report, one sees that contract rights renewal is defined simply as:
“A set of undertakings which determine the way in which ITV plc is able to sell advertising airtime on ITV1”.
That seems crystal clear and simple, but in practice it is not. CRR seems to lack much transparency of any sort and is exceptionally hard to understand, at least according to the Ministers who have the responsibility of understanding it. The Ministers giving evidence fell over themselves throughout to stress their own lack of understanding of the CRR system. As I ploughed through the report, I carefully noted their various descriptions of it. First, they described CRR as “arcane”; then, slightly revving up, it became “complex”. Getting a bit racier, it was termed reminiscent of the Schleswig-Holstein question. Warming to their theme, it was “Byzantine”, then “highly complicated and Byzantine”, before peaking with the truly wonderful “Byzantine and incestuous”, to be found on page 195 in all its glory. I look forward to being reassured that HMG are not in favour of incest whether in business or elsewhere. If your Lordships and Ministers apply that valuable old test, “If one cannot explain it, it should not exist”, the CRR system, which we have allowed to carry on, fails absolutely.
This is not some arcane administrative sideshow, for the public interest cannot be served nor the market be perfectly informed about a cloudy system that determines how the approximate 80 per cent of annual deals and the 20 per cent of short-term burst deals are agreed. It is right that the public—and best of all even junior Ministers—should be able to understand it. The CRR system should be reformed completely so I very much echo what my noble friend Lord Clement-Jones said earlier. Alas, I was not in the Chamber to hear my noble friend Lord Grade of Yarmouth in an earlier debate, but it sounds as though we agree pretty strongly. We have never discussed the issue; again, I say this in the spirit of transparency.
I think the CRR system should be reformed completely. It should be subject to enhanced public interest undertakings, and subject to an equally enhanced adjudication process to help complaints about the way advertising airtime is sold. This is because of my belief that—as ITV strongly and to a lesser extent Channel 5 have argued—if CRR was removed then advertising revenues would increase. If advertising revenues increase, this will enable broadcasters, by charging more for advertising, to invest more in programming and invest more in the training of broadcasters. Better programming? That is highly desirable. Better training? More training? Both are highly desirable. Both to be guaranteed by a new public service broadcasting undertakings arrangement of a binding sort is a proper trade-off for the transparency and deregulation that I really thought our coalition Government favoured.
This reform of the contract rights renewal system is urgently needed. It is in the public interest. In the light of the migration of advertising to the internet pointed out by my noble friend Lord Clement-Jones, it is much needed as well to sustain good programming and good training for good broadcasters. I congratulate him and his colleagues on this excellent report, and for pinpointing the pressing need for CRR to be reformed as quickly as possible, something that I hope that Ministers will listen to. I ask my noble friend on the Front Bench not to respond in any detailed way to what I have said, but to draw my views to the attention of the Ministers responsible.
Lord Lipsey
My Lords, I too very much welcome the report, which, besides its recommendations, contains a wealth of information on the system. If I might, not having been a member of the committee, I join the noble Lord, Lord Clement-Jones, in saying that the special advisers to the committee, Professor Barwise and Professor Barnett, really deserve an accolade for the work they have done, whether or not one agrees with them.
This debate has been long delayed. The report came out in February and only now in November are we debating it. However, that is quite desirable in one way because Ofcom is now within a few weeks of making its decisions on these matters. Therefore, I hope that the words uttered in this Chamber may have more effect on it than they would if it had had longer to forget them.
I only want to make two points, in one of which I disagree with the report. Its authors will not worry too much about that, but I also disagree with practically everybody else in the world, a not-unfamiliar position in which to find myself. In the other point, I powerfully agree with the report, and hope that it will bear fruit.
The thing that I think that I disagree with the report about is minutage—COSTA. As an economist, I find the concept that we should limit the number of minutes of advertising extraordinarily curious and hard to justify. It is a strange regulation to have introduced. When it was introduced, there was a powerful case for it, because ITV then had a monopoly; it was, famously, a licence to print money, and you had to do something to restrict the amount of money it was allowed to print. Of course, the situation is completely different today. Barely a minute goes by without my television seizing up with me being asked whether I wish to add additional channels; we are up to something like 1,200 or 1,300. There are more porn channels today than there were channels in total 10 years ago. A monopoly has turned into a properly competitive industry. It is very curious that the Government should seek to limit the output of competitive industries, in this case one output being advertising.
Why do people cling to this? I think, in most people’s heads, the reason is due to America. If you watch American television—like other noble Lords present I have recently spent some time in America—you will know that it really is completely ghastly. Actually, in some senses, the ads are a relief from the bloody programmes, but one ghastliness about it is the amount of advertising. Therefore, there is a respectable fear that our television would become like that. However, this fear is greatly overdone for two principal reasons. The first is the BBC. If we do not like the amount of advertising on the commercial channels, we can turn to the BBC; sometimes the BBC itself is an offender because it contains so many trails for upcoming programmes as to seem almost like a commercial channel itself, but that is beside the point. The BBC’s market share is roughly a third of the market: 33.1 per cent, according to its latest annual report. Compare that with America. There are no exactly comparable figures because PBS—public broadcasting in America—does not publish figures for its share but, thanks to the wonderful work of the Library, I have established that it is roughly 1.3 per cent: a 30th of the BBC’s share. The alternative of turning to public broadcasting if you do not like the amount of advertising is not there; you have to put up with what you get. It is a completely different situation.
The second reason is of course that we have quite a lot of good television. Most of us now have DVRs. On good days I can even work the DVR, thanks to Sky+, which has transformed so many lives. Thanks to a DVR you can, if you want, watch a programme later and accelerate through the adverts, so any channel that puts too many ads in is simply inviting people to postpone their viewing and rush through the ads. There is therefore a powerful competitive force which says, “Do not put too much advertising on, otherwise you will lose your viewers”.
There is a complication, a European directive which limits advertising to 12 minutes per hour. Pro-Europeans will say, “Well, it’s great that we’ve got a limitation”, and anti-Europeans will be surprised that the limit is so much higher than those which we ourselves impose: nine minutes for all channels and seven minutes for the public service broadcasters. The European limitation is so far above our limitation that for practical purposes it does not preclude a sensible liberalisation of our rules.
Why should we keep COSTA? The noble Lord, Lord Clement-Jones, gave the only argument there is: viewers do not want more advertising. It is true that polling evidence contained in this report shows that viewers do not want more advertising. However, I do not think that is a very sensible question to ask in a poll because it does not give the trade-off. If you ask people, “Would you like more taxes?”, they are inclined to say no. If you ask them, “Do you want more taxes to pay for better health services?”, they might be inclined to say yes. Similarly, with television advertising, if you ask the viewers, “Would you be prepared to put up with more advertising if you got more ‘Downton Abbey’?”, they might well say yes. I do not know. Certainly they would if you said more “Strictly” or more of Simon Cowell or whatever they much like to see.
It really is not a valid argument to rely on what the opinion polls show. We have to make our own judgments. In my judgment this is an indefensible piece of overregulation, which leads to all the things that overregulation usually gets. Now we get competitive briefings from various organisations, all talking for their vested interests as to whether they want this to change or to be put down to the same level for every broadcaster. As usual, what should be decided by the market is being decided by competitive political lobbying. That does not seem to me, as an economist, to be very desirable.
That is where I disagree with the report. Where I agree with it very much is that there has to be a relaxation. I quite agree with it on CRR, but I believe that the benefit of the relaxation should go to viewers in the form of more spending on programmes and not to anyone else. To use a fashionable phrase, there is no case for giving the broadcasters “something for nothing”. Having been a director of an ITV company, London Weekend Television, I know how attractive it is to say that you want certain relaxations in order to provide a better service to broadcasters and then hand the money to the shareholders. The shareholders invested in these companies knowing full well the limitations on them. Some of them were no doubt hoping that the authorities would hand them a bonanza by lifting the advertising restrictions, but we should not be falling over backwards to grant them a windfall gain from the removal of restrictions.
I wholly agree with paragraph 47 of the report that any relaxation should be matched for viewers by an enforceable commitment to spend more on programmes. Of course, the detail of that is complicated. It is not an easy thing to do. However, I can think of a symbolic way in which this could be done: ITV could agree to restore “The South Bank Show”—so wonderfully compèred by my noble friend Lord Bragg—which it cruelly and remorselessly butchered in December 2009 to the immense disbenefit of its more sophisticated viewers and indeed of its reputation with the public.
Lord Razzall
My Lords, following the remarks of the noble Lord, Lord Lipsey, I ought to report that, as a member of the committee, his noble friend Lord Bragg showed remarkable restraint in not making the point that the noble Lord, Lord Lipsey, has just made.
I think I speak for every member of the committee who had not previously been involved in the television industry when I say that when we started on this inquiry we were to some extent extremely surprised and in some cases shocked to discover the way in which TV advertising was sold. That very much coloured our deliberations. As a relatively sophisticated business person, I would have assumed, until I got to the first meeting of the committee, that advertisers were by and large able to choose which programmes they would like their products to be advertised around. I was somewhat surprised to discover that that applies only to about 20 per cent of advertising, during big events such as a cup final or “The X Factor”. I do not know whether that yet applies to the next episode of “Downton Abbey”, but no doubt the noble Lord, Lord Fellowes, who is not speaking in the debate, will tell us afterwards. That represents only 20 per cent of the way in which advertising is sold.
For the benefit of the people who read Hansard, it is worth expanding a little on my discovery of the way in which advertising is sold. People who do not appreciate the way in which it is sold might be interested to know about that. Each year there is an annual deal round, usually in the autumn, when media agencies negotiate an “umbrella deal” which will form the basis for booking specific advertising campaigns for the year ahead. That surprised me. It was even more of a surprise to learn that those negotiations do not start with a blank sheet of paper each year. The starting point each year is likely to be what was agreed in the previous year, which means that there is likely to be considerable consistency over time in the deals which are made.
In broad terms, media agencies agree to commit a proportion of their television advertising spend to a particular broadcaster. In return the broadcast sales house gives them a discount off the station average price. This is the price which the broadcaster charges for a particular target audience or demographic group; for example, men aged 16 to 34. During the course of the year, within the terms of the annual contracts which have been negotiated, advertisers then negotiate terms to reach certain target audiences for particular advertising campaigns. The standard station average price is calculated after the advertisements have been aired and varies month by month depending on the viewing ratings delivered by a broadcaster for a particular demographic group. The audience viewing figures for each advertisement are measured using an independent industry metric and the overall revenues which it has received.
What I have just said eminently proves what my noble friends Lord Clement-Jones and Lord Patten have indicated—that this is a completely non-transparent, peculiar system. The most fundamental element of our report was that it should be reviewed. All members of the committee were absolutely unanimous on that. We were also unanimous that the CRR undertakings should be removed. They were implemented in 2003 and the broadcasting world has fundamentally changed since then. I was not in my place when the noble Lord, Lord Grade of Yarmouth, spoke in the previous debate but I understand that he expressed the view that I have put rather more strongly than I have just done.
Picking up a point that has been made, if these concessions are going to be made to ITV, it is important that binding undertakings are obtained from it on its commitment to invest in further quality UK original content and training. Although ITV might not like to be quoted on the exact detail, the representations that the committee received from representatives of ITV showed that it was very open to do this. Obviously, there will be a question of definition and what is meant by improved programming; it cannot just be ITV making programmes that it would have made anyway. However, it is perfectly possible to measure that. Those undertakings are very important.
Lord Patten
Would my noble friend also add to his list of desiderata in the matter of undertakings which ITV says it is glad to give that a certain amount of resources should be devoted to more and better training for more up and coming young broadcasters and producers?
Lord Razzall
The committee made that point. I am not sure that in its representations to us ITV talked about training but it certainly indicated its receptiveness to giving undertakings on UK programming. I entirely agree that that is a very important point.
As regards the remarks made by the noble Lord, Lord Lipsey, I do not think that the committee ever contemplated removing all the restrictions on advertising minutage. The debate, which was lengthy—we had representations from a number of different channels on this—concerned whether we should bring in line the minutage that ITV, Channel 5 and Channel 4 were allowed to have with that which the other commercial channels were allowed to have. There was a long debate about whether everyone should go up to nine minutes or the nine-minute people should come down to seven, but we never discussed whether the COSTA rules should be abolished entirely. Even the noble Lord, Lord Lipsey, indicated that there was a general feeling that the public really would not want to have more advertisements. We had no detailed evidence to that effect; there was a general assumption that that was the public’s view. Therefore, we felt that everyone should be brought in line and come down to seven minutes. I will be interested in the response that the noble Baroness, Lady Rawlings, makes to this but no doubt there will be a recommendation by Ofcom in due course as to which of the two it should be. I will be very surprised if the noble Lord, Lord Lipsey, carries the day on a complete abolition of the COSTA rules. To go back to my first point, it is fundamental that we have a comprehensive review as to the way television advertising is sold.
Baroness Fookes
My Lords, before turning to the substance of the debate I want to add my own tribute to that paid by my noble friend Lord Clement-Jones to our late chairman, the Earl of Onslow. He behaved most honourably in relinquishing the chairmanship when he did not feel he could give it his full attention but remained an assiduous member of the committee as far as he could and despite increasingly debilitating illness. I admired greatly his resilience and his honourable approach to the matter, and my respect for him increased by leaps and bounds.
This was the first inquiry that I had held as a new member of the Communications Committee. Unlike some of my colleagues I did not have that tremendous experience of running a TV company or being a long-standing broadcaster, so I came to it very fresh and new. I have to confess that for the first few weeks I was utterly confused. I felt like some explorer, stumbling upon some ancient civilisation remote from the modern world, where the language was strange and the customs even weirder. It took me some time before any sort of light dawned. Television in the history of the world is a very modern device and television advertising is even more modern. How could it be quite so obscure? I remind my noble friend Lord Patten that I was the first to murmur the word “Byzantine” in relation to this arrangement, which has been described by others. Whether your Lordships who are not members of the committee are much the wiser for the descriptions given, I am not sure, because they are pretty impenetrable. There is a case for making the system for purchasing television advertising utterly transparent and clear. Who knows what goes on with all these strange, convoluted arrangements that have been described this afternoon?
I certainly hope that Ofcom, which I believe is going to report soon, will come up with some really good recommendations to cut through this obscure arrangement. Even if it does, it may involve the Competition Commission and the relevant government department. I fear that between these three and possibly other bodies nothing at all will happen or what does happen will not be as clear and decisive as it should be. I hope that my noble friend, if he is unable this afternoon to give detailed responses to what we have recommended, will give an indication that firm and decisive action will be taken, particularly so that if it does require any form of legislation we can latch it on to the next communications Bill, which I believe will be brought forward within the next two years or maybe less.
Looking at one aspect raised by the noble Lord, Lord Lipsey, I have to confess that he is on his own as far as I am concerned. I look at it as an ordinary television viewer and for me there is too much advertising already. I certainly do not want any more. I dislike especially when advertising comes in the middle of a particularly poignant part of a TV programme—I will not mention the one by my noble friend Lord Fellowes, but I have it in mind. It is irritating and demoralising to have some adverts slotted in just when you are in a real state of emotion. For me, the amount of advertising on television that we have at the moment is quite enough and there is merit at least in making the arrangements the same, either seven or nine minutes—for me, definitely seven.
I cannot believe that restricting it will ensure that the whole arrangement for making TV programmes will go down the drain, as I think the noble Lord, Lord Lipsey, was implying. I understand that about £4 billion a year is spent on advertising. If I am incorrect on that I hope somebody will put me right. Anyway, it is a huge sum of money. I believe that for the final contribution of “The X Factor”, £250,000 was being charged for a 30-second slot. I will not shed tears if there is some sort of reduction in the number of minutes that can be broadcast per hour.
Lord Fellowes of West Stafford
I shall interrupt to say one thing, if I may. ITV is a marvellous company to work for. A drama is paid for by advertising. Although I do not disagree with anything that people have said about making things more transparent and so on, I do not think that anyone should ever see advertising revenue as a completely negative factor. We would have been unable to make the show, which I cannot bring myself to name yet again, in that way at the BBC. We were left entirely free to make the show that we wanted to make because we had the funding of advertising to do it. It is wrong to present advertising as a sort of hideous evil that wrecks the programmes it appears in. It also enables and makes them.
Baroness Fookes
I take the point that my noble friend has made. I was against the apparent wishes of the noble Lord, Lord Lipsey—to increase the amount of advertising, to make it without limit and that there should be no rules. That was what I was concerned about. I entirely take the point of my noble friend Lord Fellowes that it is the advertising revenue that produces good-quality drama and other types of programme.
Lord Lipsey
I should correct the misapprehension, which is no doubt my fault. I did not say that we should increase the amount but that we should get rid of the restrictions. It might go up; it might go down. Who can tell? I am not in favour of restrictions on competition in this field.
Baroness Fookes
That is exactly what I thought the noble Lord had said, and what worried me was the thought that there might then be an increase in advertising. However, that is an academic point at the moment. All in all, as I persisted in remaining on the committee despite my initial reservations, I thought that we came out with a good, robust report. It is one that I hope the Government will take on board very seriously.
Lord Macdonald of Tradeston
My Lords, I speak as a member of your Lordships’ Select Committee on Communications and as a veteran of 30 years in the advertising-funded side of public service broadcasting in ITV, Granada and Scottish Television, alongside six years moonlighting on-screen for Channel 4 in the 1980s. I, therefore, vigorously applaud the sentiments expressed by the noble Lord, Lord Fellowes.
I moved on from ITV in 1998, and since then the network has changed a lot. The old network structure of 15 independent regional companies has consolidated into ITV plc, based in London, and only Scottish and Ulster television are still independent.
The issue of contract rights renewal being debated today is a product of the most significant merger to create today’s ITV plc—the merger of Granada and Carlton Television in 2003. The CRR regime in all its complexity was introduced to stop the merged ITV from abusing its powerful position in the advertising market. We did not find any evidence of attempts to abuse that position in the years since. Over the past eight years, many new channels have offered advertisers niche options if they have problems buying airtime on ITV. For advertisers, targeting specific groups of potential customers has become much more economical. Over the same period, a significant proportion of UK advertising has been switched on to the internet. The internet advertising market has just overtaken television advertising spend for the first time, as advertisers spent £2.3 billion on internet advertising in the first half of this year alone, up 14 per cent year on year. By contrast, the forecast for ITV earnings is not too encouraging, falling along with confidence in the economy.
The Select Committee examined the relationship between ITV, media buyers and advertisers, and airtime trading mechanisms are complex and opaque, as has been said. We recommended a short inquiry by an impartial group of industry experts into the system. Our concerns about this operation prompted Ofcom to launch its own review of the way television advertising is traded, as our chairman said. I would be grateful if the Minister could update us on Ofcom’s progress, when it is expected to report, and whether it will report in time to influence trading before the next communications Bill comes to your Lordships’ House; or will all the committee’s concerns be rolled into that legislative process that presumably starts with a Green Paper next year?
Given all the debates and reviews about the contract rights renewal mechanism over the years, it is something of a surprise that the value put on CRR is only between £30 million and £55 million a year, which is a small percentage of a total UK advertising spend of between £8 billion and £9 billion—much less than 1 per cent by my count. If that was spread across corporate advertising budgets, the queues at supermarket checkouts would remain calm. When customers got home and turned into viewers, they might welcome seeing the improved ITV programme that CRR money might put on their screens. As the noble Lord, Lord Clement-Jones, said, it might be a 5 per cent boost to ITV’s programme spend of around £1 billion. I say “might” because ITV could use the extra revenue to enhance dividends for shareholders but, to thwart that, our committee linked the removal of CRR to undertakings that would be required of ITV to put the money on the screen.
Given the nine months since we published our report, it now seems more likely that the spending of any post-CRR gains would be left to the discretion of the management. ITV’s chairman, Archie Norman, complained that the CRR mechanism helped drive a “ratings rat-race”. ITV does seem to be committed to improving its schedule with quality, popular programming. In the first half of this year, ITV launched eight of the 10 most popular new dramas on television, and the second series of “Downton Abbey” has held its huge audience—despite complaints of the advertising breaks being too long.
I support the removal of CRR primarily to encourage more investment in ITV programme production. If ITV gets CRR removed and any unprincipled diversion of that gain can be identified, the danger will be of reputational damage. That would be a real risk. It is probably the most feasible incentive that we will eventually come to rely on—but I hope that I am wrong.
I do not wish to seem pessimistic, but after reading the Government's response to our report, I think that the long grass beckons for our recommendation that the amount of advertising permitted per hour should be harmonised across all channels. I cannot conceal some sympathy for the arguments put forward by my noble friend Lord Lipsey. The government response batted the recommendations on to Ofcom—but we should not hold our breath for that report. My political judgment, for what it is worth, is that if the hundreds of satellite and cable channels lose revenue to a more competitive post-CRR ITV, I doubt that the Government would want to see the sector hit again by a reduction in its advertising minutage. As I said, I have sympathy for the arguments of my noble friend, but in the world to come it will be for viewers to zip through fast and for companies to decide their own minutage.
Another smaller but for me more important interest must be the independent licensees. Scottish Television and Ulster TV must still be protected. Both exist on channel 3 alongside ITV plc. Together, the two of them make up just a small percentage of ITV's advertising revenue. Their airtime is sold largely by ITV's sales house under another arrangement that was put in place in 2003. The undertakings inhibit ITV plc from flexing the rates on its digital channels—ITV2, ITV3 and ITV4—to the detriment of the sales income of channel 3 proper, better known as ITV1, on which Scottish and Ulster depend. These undertakings are covered by airtime sales rules. Removing CRR would give an incentive to ITV to bundle together channels and break those sales rules—an incentive that does not exist at present. It will be for Ofcom to ensure that the two unconsolidated companies are dealt with transparently and fairly if CRR is eventually removed. I am sure that the Minister, too, will want to protect the interests of Scotland and Ulster in this regard.
I greatly enjoyed the description by the noble Lord, Lord Patten, of ministerial mystification. Like him, I will make a confession. During my 30 years in ITV I never quite understood the dark art of airtime sales. For that reason, I look forward with great curiosity to Ofcom’s review of the television advertising market. I hope that it will come sooner rather than later. I, too, conclude by paying tribute to our late chairman, the Earl of Onslow, and by thanking our chairman, the noble Lord, Lord Clement-Jones, for his comprehensive and clear introduction to the key concerns of our report.
Lord Stevenson of Balmacara
My Lords, I was briefly a member of the Communications Committee. By a curious coincidence, my time encompassed almost all of this inquiry, although I was not a member when it started or when the final draft was approved.
The noble Lord, Lord Patten, in his entertaining speech, was right to focus on the CRR and the advertising selling system. Like the noble Baroness, Lady Fookes, I found some of the issues we were probing, in particular the trading system for selling TV advertising, to be extremely complex and arcane. The comparison to the Schleswig-Holstein question was not far-fetched. I also have fond memories of our session with the CRR adjudicator. Rereading the minutes brought back the committee's sense of incredulity at the burdens he said he was carrying, given the relative lack of activity on his patch. In the five years to 2008, he had only 15 disputes to deal with, and he had none between 2008 and 2010.
Your Lordships' House owes the noble Lord, Lord Clement-Jones, a considerable debt of gratitude for chairing the committee and delivering this report. In an earlier debate, the noble Lord, Lord Fowler, said that the committee went through a golden period while he was chairman and the noble Baroness, Lady Bonham-Carter, was a member. I felt that was slightly churlish, but they are his memories and he may wish to differ on that. It seemed to be a golden time when I was on the committee.
Although the late Lord Onslow was present only for a few meetings, he made a great impact and, like other noble Lords, I want to pay tribute to his contribution to the committee and to his memory. In his absence, and sometimes when he was present, the noble Lord, Lord Clement-Jones, was a tower of strength as our chair. Often he probed reluctant witnesses, including Ministers, with supplementary questions that we could never have imagined, let alone deliver, particularly with the Ministers, Messrs Davey and Vaizey. We were brilliantly served by our advisers, Professor Steven Barnett and emeritus Professor Patrick Barwise, and I record my thanks to the clerks for their help and support to a new member and during the inquiry.
Several of the committee’s recommendations affect Ofcom and the Competition Committee as well as DCMS, and the situation is made more complicated by the fact that a lot of time has passed and action has been taken already in some areas and is continuing. As the Government’s response to the committee made clear, this is a fast-moving policy area. On the other hand, as we have heard, we are promised a communications Green Paper and presumably legislation will follow, so in some senses this debate will feed in very well.
The key points are that, by and large, British television benefits, as it always has done, from the main channel groups having separate funding streams. Satellite, licence fee and advertising supported channels are freed up to compete on quality. This has been for the public benefit ever since ITV was introduced to break the BBC monopoly. However, in today’s broadcasting ecology, TV advertising supports hundreds of channels and underpins investment in high-quality, UK-originated content, in particular from the commercial PSBs, ITV, Channel 4 and channel Five. As a matter of public policy, we want this to continue, albeit technology may in the end subvert this desire.
As my noble friend Lord Macdonald says, the growth in internet advertising needs to be taken into account and may upset the entire way in which we approach this. Our report argues that the current advertising minutage rules create an uneven playing field between the commercial PSB channels and the satellite and cable channels. This may have been appropriate 20 or 25 years ago to help the satellite and cable channels when they were starting out, but the situation is very different today. My noble friend Lord Lipsey argues that we should not keep COSTA and he may be right, but Sky+ makes this sort of regulation otiose. I suggest that more work is required and Ofcom should carry out a review urgently.
The current TV advertising market delivers many benefits to advertisers and viewers. It is alleged that advertisers benefit from lower prices, and the price of TV advertising has certainly fallen steeply over the last 10 years. Apparently it has not been cheaper since 1993. Having said that, I feel, like other noble Lords, that the system is almost impossible to follow. It is counterintuitive and arcane. On the other hand, it seems to work. Again, I suggest that an urgent review is required.
The noble Lord, Lord Grade, has fired off a broadside against the CRR regime. Again, the arguments seem to be finely balanced. ITV’s continuing market power, with 40 per cent of TV advertising revenue in 2010, suggests that whatever it says—and it said a lot in evidence—a competition remedy ought to remain in place. However, if the CRR undertakings were removed and the strict conditions imposed by the committee actually took place, there would be a great deal of extra money to invest in UK content across the industry and in matters such as training. As that is definitely a public good, we have to consider it as important. I agree with noble Lords that ITV’s commitments to quality, original UK TV production, training and other PSB obligations would need to be held closely in front of it and there might have to be additional regulation.
For me, this has been a trip down memory lane and I have enjoyed it. This has been a very good debate. The committee system in this House is impressive and it commands wide respect. This report does the committee and your Lordships’ House great credit. I invite the Minister to respond.
Baroness Rawlings
My Lords, I am most grateful to my noble friend Lord Clement-Jones for elevating the last part of this afternoon, which has given us the opportunity to discuss the importance of the regulation of television advertising through the report he chaired following the untimely death of my noble friend Lord Onslow. As my noble friend Lady Fookes, the noble Lord, Lord Stevenson, and my noble friend Lord Clement-Jones all said, we miss him and his contributions.
This debate has confirmed something that is obvious and known to us already, but I repeat it. There is a staggering accumulation and store of informed expertise and experience available in this House that can be marshalled and focused upon in this area. I am grateful to the chairman and members of the House of Lords Communications Select Committee—six noble Lords—for contributing today and for undertaking this inquiry into the regulation of television advertising. I thank all noble Lords who have contributed to a most interesting debate. I read the report with interest and rather wished I had been on the committee.
As the report points out, many of the recommendations are matters for the competition authorities, but there are also recommendations for ways that the competition regime could be changed, which would require legislation. It therefore falls to the Government to consider these points. As my noble friend Lord Patten expressed so clearly, despite not being involved in the television world, the operation of the television advertising market is highly complex. I agree that it is so complex a subject as to compete, as several people have said, with the complexity of the dreaded Schleswig-Holstein question. We have, of course, carefully considered the recommendations and, even where we do not always agree with the solutions, we strongly support the aim of trying to encourage investment in high-quality UK programming.
There is no doubt about the importance of television in most people’s lives. We must therefore make certain that the regulation is correct. That will allow for innovation and growth but will still provide a degree of protection where necessary. The continued success of television broadcasting in the United Kingdom and abroad suggests that the existing regulations are, broadly speaking, fit for purpose.
Let us briefly consider the state of the market, since it is against this backdrop that calls for change must be considered. Time prohibits me from reeling out a series of statistics, but 2010 was a good year for television. Viewing figures were up, revenue was up and investment in content and first-run originated programming for the five main PSB channels also increased. Despite the growth of multi-channel TV, the highest percentage of this viewing remains with the PSBs and their extra channels.
I commend the Communications Committee for its diligence in examining the complexities and regulation of this market with a view to simplifying and improving it. The committee quite rightly concentrated on identifying ways of maintaining the commercial PSBs’ revenue potential so as to encourage more investment in programmes which have high standards.
I now turn to the CRR. Many of the recommendations in the committee’s report concern the removal of contract rights renewal and replacing it with the imposition of undertakings to make certain that ITV invests an appropriate proportion of any additional advertising revenue in high-quality programming. While we would welcome any increase in ITV investment in more diverse and new high-quality programming, we are not persuaded that this is the right way of achieving that.
First, there are a number of potential practical problems with introducing such undertakings which need to be looked at. For example: how is high-quality programming defined and by whom? How can it be determined whether the programmes would have been made anyway? In other words, how do you avoid deadweight? Is a decision taken in advance of broadcasting, so programmes have to be vetted in advance to see that they fit the criteria, or is the decision taken retrospectively? Aside from the practical issues, some of which could possibly be resolved, there are bigger problems around the operation of the competition regime.
ITV remains by a long way the most popular commercial channel in terms of audience. As the committee’s report noted, it is the only commercial broadcaster able consistently to draw in large peak-time audiences with programmes such as “Coronation Street”, my noble friend Lord Fellowes’s Emmy award-winning “Downton Abbey”, and “The X Factor”.
Lord Patten
My noble friend and other noble Lords might wish to be aware that at the close of the London Stock Exchange at 4.30 pm, the biggest riser on the stock market was indeed ITV, up by 5.94 per cent. I am not a shareholder but it may well prove that the mentions of ITV in your Lordships’ debate this afternoon have indeed moved markets.
Baroness Rawlings
I thank my noble friend Lord Patten for keeping us up to date. Unfortunately I have been in the Chamber for most of the day and have not seen that, but I thank my noble Friend very much.
It is precisely these kinds of successes that were a key consideration in the Competition Commission’s review of the CRR, which led it to conclude that it should be retained, notwithstanding the changes in the market since the original review. It cannot be the right time to be making the TV advertising market less competitive, which would be the inevitable effect of removing the CRR undertakings. I am most grateful for the intervention of my noble friend Lord Fellowes, which came from his highly successful professional viewpoint.
I remind noble Lords that Ministers themselves have no power to lift the CRR, which is a competition remedy that only the Competition Commission has the power to lift. Although we have some sympathy with ITV’s position, we should not forget that the CRR undertakings were offered by ITV at the time of the merger of Carlton and Granada when the Competition Commission had concerns that the new company, ITV, would have a dominant market position. We are aware of the important contribution that ITV makes to public service broadcasting. It produces high-quality programmes which also act as a spur to the BBC to produce equally good television. This competition is good for all of us.
We do not believe that it is in anyone’s interests to allow ITV to abuse its dominant position in the television advertising market. This would be bad not just for consumers and advertisers but would also have a detrimental effect on other broadcasters’ ability to produce high-quality content. Even if we could construct a watertight system for making certain that the additional revenue that ITV could raise as a result of the removal of the CRR was spent on additional high-quality content, it surely cannot justify making the TV advertising market less, rather than more, competitive.
The Competition Commission believes that its review of the CRR was constrained by not being able to consider the wider advertising market. This was something it felt Ofcom could do. Many noble Lords, including my noble friends Lord Razzall and Lady Fookes, and the noble Lord, Lord Lipsey, have pressed for the removal of CRR. The Government hear their case, and we welcomed Ofcom’s announcement in March that it would review the way TV advertising is traded. This review is currently going on and we await its outcome with interest. I wish I could answer the question asked by the noble Lord, Lord Macdonald, about the timing of this review. Alas, we have no date as yet but we hope it will be soon. If Ofcom concludes that there are reasons for concern, it can refer the matter to the Competition Commission. The results of Ofcom’s review, or recommendations coming from any further review by the Competition Commission, will feed into our communications review and be carefully considered in that context.
Perhaps I could answer the question put by my noble friend Lord Clement-Jones on harmonising advertising minutage for commercial PSBs and non-PSB commercial channels. I recognise that there is a debate about commercial PSB channels having different rules to non-PSB channels. However, that is an issue for which the independent regulator, Ofcom, is responsible, taking into account representations and the requirements of the AVMS directive. Ofcom is currently reviewing this.
On the question from the noble Lord, Lord Macdonald, on revenue arising from internet advertising, Ofcom has concluded that that is a different market. Of course, I shall pass the clear views of my noble friend Lord Patten to the department.
I close by thanking all noble Lords who have contributed to the debate. If I have not answered all the questions, I shall of course write, placing a copy of my letter in the Library. I am grateful again to my noble friend Lord Clement-Jones for undertaking this inquiry, for his chairmanship of this difficult subject area and for bringing this debate to the House. It may be that as the market develops and circumstances change, the Competition Commission concludes that the CRR is no longer necessary, as felt by so many of your Lordships today. I shall take noble Lords’ views back to the department.
I should like to end on a more positive note. As I touched on earlier, with revenues, investments and viewing all up, television is one of the UK’s strengths and its quality remains the envy of the world.
Lord Clement-Jones
My Lords, I thank all noble Lords who have taken part in the debate, including members of the committee and the two non-members, the noble Lords, Lord Lipsey and Lord Patten, who have plunged into the debate so effectively. As a result of his Front Bench duties, we miss the noble Lord, Lord Stevenson, just when he was making a major contribution to the debate.
The debate has not been at all Byzantine or incestuous. We appreciate the noble Lord, Lord Fellowes, keeping a watchful eye over the future finances of ITV. That has been very helpful. None of us expected a Damascene conversion from the Government in the light of their original response. I am sure that ITV’s share price will go down tomorrow morning as a result of today’s debate, even if it went up earlier.
We have heard significant differences about whether CRR is fit for purpose. We have a common interest in believing that it is the viewers’ desire to have original UK programming. That is paramount. How you judge that and what kind of regulation over ITV advertising is adopted is crucial. I hope that the debate will continue with the Green Paper, when that is produced, and that the Government are persuaded by the outcome of the Ofcom review that the trading system needs to change.