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Oral Answers to Questions
(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Julie Elliott (Sunderland Central) (Lab)
1. What assessment his Department has made of the potential effects on other Government Departments of his planned reductions to legal aid for social welfare law.
Graeme Morrice (Livingston) (Lab)
4. What assessment his Department has made of the potential effects on other Government Departments of his planned reductions to legal aid for social welfare law.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
The impact assessment published alongside the Government’s response to consultation lays out the best estimates of the costs and benefits of the legal aid reforms. Ultimately, costs to other Departments will be driven by behavioural responses to the changes, and these are very difficult to predict with any real accuracy.
Julie Elliott
I thank the Secretary of State for that answer. Is it his Government’s view that it is acceptable for a whole swathe of the population to have no access to justice in the area of social welfare law?
Mr Clarke
We are not denying access to justice for anybody, but obviously a huge swathe of the population find it expensive to obtain justice and we have to ask ourselves for which people the taxpayer should pay for access to justice. We have concentrated on the most important issues, in which there is a general public interest in having people represented. It is wrong to represent changes in the way we pay lawyers and the amount that we pay as if we are somehow barring people from access to their legal rights.
Graeme Morrice
Does the Lord Chancellor not feel that the cut in the civil legal aid budget, which will clearly have a detrimental impact on the citizens advice bureau and law centre network, will hinder the notion of the big society?
Mr Clarke
Legal aid is not the principal source of public funding support for citizens advice bureaux, and legal aid changes will not take effect until 2013. Those and other voluntary bodies are taking a big hit from the reduction of local authority and other grants. For that reason, the Department for Business, Innovation and Skills has already announced £27 million of continued funding for citizens advice bureaux, and we have set up a transitional fund for the voluntary sector to manage the transition to a tighter funding environment. We have £20 million set aside this year to support voluntary bodies through their present difficulties, which are mainly because of local government cuts.
Sarah Newton (Truro and Falmouth) (Con)
I very much welcome the Government’s commitment to the extra funding for welfare and benefits advice, but will my right hon. and learned Friend update us on what progress he has made with the Cabinet Office about the allocation of those funds?
Mr Clarke
My hon. Friend has rightly been chasing me on this subject, and with her I have approached the Cabinet Office. My right hon. Friend the Minister of State, Cabinet Office, hopes to make an announcement shortly about the distribution of the money. As the sort of people we are talking about need the general advice offered by such voluntary bodies, I very much hope that he will soon make an announcement on behalf of the Government.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
Is it not clear that what most people will need with these changes is well-supported advice services, a user-friendly tribunal system, and Government Departments that give people what they are entitled to in the first place?
Mr Andy Slaughter (Hammersmith) (Lab)
Last week the Secretary of State confirmed that he was taking legal aid away from brain-damaged children and disabled people unlawfully denied benefits. In answer to questions from my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith), the Minister with responsibility for legal aid, the hon. Member for Huntingdon (Mr Djanogly), admitted that the Department of Health pays up to £183 an hour for legal advice, Work and Pensions pays £201 an hour and Communities and Local Government pays £288 an hour. Some of those well-paid Government lawyers will be up against our unrepresented constituents, especially on appeal. Does the right hon. and learned Gentleman think that that is fair?
Mr Clarke
Most of those do not get legal aid now, and most personal injury cases are not brought using legal aid. They are brought using no win, no fee arrangements. As the hon. Gentleman knows, in the new proposals for how no win, no fee ought to work, we have made special arrangements for particularly difficult cases and the insurance of the costs of medical reports.
Greg Mulholland (Leeds North West) (LD)
2. What steps he is taking to ensure the provision of adequate legal advice in young offender institutions.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
The training requirement to carry out the Prison Service order requiring legal services officers to be available in every prison, including young offender institutions, could not be delivered. In future, governors will be required to give prisoners information on how to access legal advice as part of their induction into custody. The Prison Service order will be promulgated before the end of the year. Juvenile offender institutions have discrete advocacy services available for prisoners under 18 years old.
Greg Mulholland
I thank the Minister for that answer. Last year a study of 25 young offender institutions and 300 requests for legal help from young people showed that 80% of those struggling to access legal advice were from a black and ethnic minority background, and 9% were female, which is disproportionate when compared with the general population. What plan do the Government have to tackle that?
Keith Vaz (Leicester East) (Lab)
Will the Minister agree to meet me and other interested groups to discuss the issue? The only way to combat the high level of discrimination is to be able to discuss it with those concerned.
Simon Wright (Norwich South) (LD)
3. What plans he has to increase the scope of the Freedom of Information Act 2000.
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
This month we extended the Freedom of Information Act to a further three bodies—the Association of Chief Police Officers, the Financial Ombudsman Service and UCAS. Additionally, we intend to extend the Act to over 100 more organisations through the Protection of Freedoms Bill. We have also begun consultations with more than 200 further bodies about their possible inclusion. Next year we plan to consult 2,000 housing associations and the housing ombudsman.
Simon Wright
I thank the Minister for his response and for the progress made by his Department. As he knows, Network Rail is responsible for spending billions of pounds of public money each year. Will he ensure that that organisation is brought within the scope of the Freedom of Information Act?
Mr Djanogly
The Government are committed to making Network Rail more accountable to its customers, and believe that there is a strong case for its inclusion in the FOI.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
Community organisations often have a great deal of trouble getting information out of local councils via the Freedom of Information Act. What plans does the Minister have to make the Act as currently drawn, with the organisations currently included, work better?
Mr Djanogly
If the hon. Lady has problems to be addressed, she should write to the Ministry of Justice and we will take them up.
Sajid Javid (Bromsgrove) (Con)
5. What steps his Department is taking to provide support for victims; and if he will make a statement.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
In the current financial year the Ministry of Justice is providing funding of approximately £50 million to voluntary sector organisations that support victims of crime. Before Christmas we intend to launch a consultation on proposals that will ensure that victims of crime are supported in the best way possible.
Sajid Javid
Too many victims of crime in my constituency feel that their rights are put behind those of criminals. Will my right hon. and learned Friend please share with me what measures he proposes to take to correct that sense of injustice?
Mr Clarke
Apart from continuing to give support to victims organisations, as I said, we are about to implement the Prisoners Earnings Act 1996, which will see up to £1 million taken from prisoners’ wages going into victims’ services. We have given Victim Support its three-year grant for the first time. It has never had such assured support—£38 million a year. We have honoured our coalition commitment to place rape support centres on a secure financial footing, giving them long-term funding, and we are about to open four more.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
Does the Secretary of State agree that the most important thing for victims is the prevention of further offences and reoffending, since what victims want is to know that they are not going to become a victim a further time after a bad experience?
Tom Brake (Carshalton and Wallington) (LD)
Does the Secretary of State agree that restorative justice can be key in helping victims, both in their hearing an apology from the offender, and in some cases hearing an explanation as to why the crime was committed?
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
Can the Lord Chancellor imagine a more needy victim than a child brain-damaged at birth whose parents are unable to sue for its financial security?
Mr Clarke
It is not true that they are unable to sue. We have a dispute about how much the lawyers should be paid in the event of a successful claim, which is an important matter, but I do not accept the assertion that none of these actions will be brought unless we leave the present no win, no fee arrangements completely untouched.
Robert Flello (Stoke-on-Trent South) (Lab)
On 12 October the Prime Minister announced that he had appointed Louise Casey to a new job. The Secretary of State has had at least a month to arrange for a new victims commissioner to take up his or her role. A month on, not only is no one in post, but the position has not been advertised and the Government have not said what plans they have. Victims charities and organisations and the Opposition have urged the Government to move swiftly, so who is it to be? Sadly, we have seen empty words on victims’ rights, and in this case we also have an empty post.
Mr Clarke
I am extremely grateful to Louise Casey for the work she did and the discussions I had with her while she was in office. I find the hon. Gentleman’s question amazing. The post of victims commissioner was created by Act of Parliament in 2004, but the previous Government failed to appoint anyone for five years and a fresh statute was introduced to revise the post in 2009. Louise Casey was appointed in early 2010. We are reconsidering—again—the basis on which we make the appointment, but to be accused of tardiness by someone who was in the last Parliament is positively farcical.
Guy Opperman (Hexham) (Con)
6. What assessment he has made of the causes of reoffending. [R]
The Minister for Policing and Criminal Justice (Nick Herbert)
Based on a survey of nearly 1,500 adult prisoners, we found a number of factors associated with reoffending on release: negative childhood experiences; poor educational backgrounds; low employment prospects; and poor health prospects, including drug usage. Research has also shown that criminal history, age and gender are strong predictors of future reoffending.
Guy Opperman
I thank the Minister for that answer. Almost half of all serving prisoners have very basic literacy and numeracy skills. What steps is he taking to transform the literacy training that offenders receive in prison?
Nick Herbert
I agree with my hon. Friend about the problem. The majority of prisoners do not have the necessary reading and writing skills to do most jobs in the labour market on release. That is why assessing literacy and numeracy skills is a priority in prisons and why those with a need are offered classroom-based courses and individualised support, but there is also a role for the third sector, with organisations such as Toe By Toe providing mentoring for prisoners and by prisoners to help them learn reading skills.
Jim Shannon (Strangford) (DUP)
The Minister has not mentioned young people, and high numbers of them continue to reoffend. What strategy is in place to give them guidance and support so that they do not reoffend when they come out of prison or young offenders institutions?
Nick Herbert
I agree with the hon. Gentleman that reoffending rates by younger people are particularly high and that that is where we need to focus attention. The guidance he mentions is particularly effective when it comes in the form of mentoring, which can be provided by third sector organisations, and we have seen some very effective examples of that. It is a question not only of statutory supervision and support, but of what others can bring.
Steve Brine (Winchester) (Con)
May I urge the Minister to take an even closer look at the voluntary sector’s work in that area, especially the charity KeepOut, which I have recently become aware of? It is a crime diversion scheme delivered by teams of serving prisoners that aims to steer young people away from the conveyor belt to a criminal life and represents a positive step for many prisoners on their rehabilitation journey.
Nick Herbert
I am grateful to my hon. Friend for drawing attention to the work of organisations such as KeepOut that provide exactly the type of mentoring service I was talking about, helping those who are or have been prisoners to dissuade young offenders from pursuing a life of crime.
Mrs Jenny Chapman (Darlington) (Lab)
I have listened to the Minister’s answers. We were promised a rehabilitation revolution, but unfortunately the chief inspector of prisons can find no evidence of it. In the interests of looking at outcomes, can the Minister let us know when we can expect to see this decline in reoffending and by exactly how much it will decline?
Nick Herbert
I think that the whole House agrees that reoffending rates are too high. They have been persistently high, and we need to tackle that issue. That is why the rehabilitation revolution is important, and I am sorry that the hon. Lady does not appear to support it. We have particular proposals on payment by results, and we are now seeing them extended throughout public sector and private sector prisons, where we will ensure that we pay for what works and incentivise providers to reduce reoffending. We are determined to reduce reoffending by using innovative means, not the familiar means that Labour always proposes, which involve simply spending more public money.
Nick Smith (Blaenau Gwent) (Lab)
8. What estimate his Department has made of the future size of the prison population.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
The latest projections of the prison population in England and Wales, published last week, modelled three scenarios. These track, as is the usual practice, the impact of three different sentencing trends on custodial convictions. By the end of June 2017, the prison population is projected to be 83,100 on the lower projection, 88,900 on the medium projection and 94,800 on the higher projection.
Nick Smith
The prison population is at a record high, and some 60% of the prison population have speech, language and communication needs. How will the Justice Secretary address communication disability as part of his rehabilitation revolution?
Mr Clarke
I am sorry, but I missed the second point. Is the point of the question communication disability? [Interruption.] Prison projections are very difficult to make, and that is why we have the equivalent of the fan-shaped projections that the Bank of England produces on inflation forecasts. It has always been the same with prison forecasts.
The future prison population will depend on all kinds of things beyond the control of the Government, but the prison estate is well placed to meet the demand. Eventually it will all depend on whether we have long and protracted youth unemployment, how far the recession has retracted, and how successful we are with our rehabilitation revolution, workplace reform, skills training, education reform and so on. The Prison Service is there to meet the demand, but we expect the demand to be reasonably stable.
Gavin Williamson (South Staffordshire) (Con)
I am sure that my right hon. and learned Friend is aware of the importance of the construction of the Featherstone 2 prison, which is currently being built in my constituency, but can he assure the House that he will do all he can to encourage G4S, the operator, to employ people locally, so that we have not just the disadvantages of a prison being built, but some of the advantages?
Mr Clarke
Featherstone 2 is one of two new prisons that we have coming on stream in 2012, and I am sure that it will provide a very valuable source of local employment when it opens, as it is quite a large prison. It will also, of course, contribute to our battle against crime and to the need to punish serious criminals.
Sadiq Khan (Tooting) (Lab)
I know the Justice Secretary does not like being reminded of this, and that is clearly why I am going to do so. He had a target to reduce the prison population by 3,000 by 2015, and, as my hon. Friend the Member for Blaenau Gwent (Nick Smith) helped to remind the House, it is now 87,747, which is about 3,000 more than when the right hon. and learned Gentleman became Justice Secretary. As a consequence of this Government’s policies, which projection does he believe will be the case? Will the prison population in May 2015 be the same, more or less than it was in May 2010?
Mr Clarke
It is simply not the case that I have ever had a target for prisons, because as I have just explained it is not within the control of Ministers. That is why Ministers in the previous Government used to produce these various scenarios. I do not have a target. We make an estimate of the effect that legislative changes will have on the future prison population, and as the right hon. Gentleman knows, the Legal Aid, Sentencing and Punishment of Offenders Bill that the House has just passed will, other things being equal, which they never are, reduce the prison population by about 2,600.
Sadiq Khan
We have a complacent Justice Secretary who, one third of the way through this Parliament, has no idea whether the prison population will go up, down or stay the same. He has cut our prison building programme, cut capital investment in prisons, he is cutting probation officers and cutting prison officer numbers. Is he surprised that the chief inspector of prisons has seen no evidence of a rehabilitation revolution and thinks that there should be a rocket up this Justice Secretary’s backside?
Mr Clarke
The future level of crime depends on a huge number of variables, which are not within the control of any Government or Minister. What one does is to make sure that one does not exacerbate any problems, and that one accommodates those who come in. I am trying to establish in prisons a more intelligent regime that will achieve some improvements in reoffending rates for those who have to be punished by going to prison. If any of my predecessors ever gave an exact forecast of the prison population, two or three out, that predecessor was in my opinion an idiot. I do remember, however, that the previous Government so miscalculated things that they had to let 80,000 people out of prison, short of their sentence, because prisons were bulging at the seams and they had nowhere to accommodate them.
Mrs Helen Grant (Maidstone and The Weald) (Con)
9. What steps he is taking to reduce the level of reoffending by people sentenced to one year or less.
The Minister for Policing and Criminal Justice (Nick Herbert)
We are supporting local areas to develop integrated approaches to managing offenders and testing payment-by-results arrangements for providers working with short-sentenced prisoners.
Nick Herbert
I suspect there is a consensus across the House about that issue. It is worth reflecting on the fact that, 15 years ago, there were only 1,800 women in prison. The Prison Reform Trust has pointed out that:
“During one year more than 11,000 women are imprisoned and almost 18,000 children are separated from their mothers.”
Some women need to go to prison, and it is important that custody remains available. However, we are focusing on developing suitable, intensive community sentences that can prevent such a flow into the custodial system wherever possible.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Is the Minister aware that stalking is a pernicious crime that often attracts short sentences? Those sentences are no good at all if the quality of the treatment for stalking is not up to a good standard; those people are free to go back and stalk usually the very women they were stalking before.
Nick Herbert
That is an example of the fact that prison plainly plays an important role in relation to both punishing and incapacitating offenders. It must also play a role in the rehabilitation of offenders. The system has too often failed in that third role, including for the most serious crimes.
Mr Philip Hollobone (Kettering) (Con)
The way to stop foreign national prisoners who serve a sentence of a year or less from reoffending is to return them from whence they came to their country of origin. Will my right hon. Friend assure the House that that is being done on each and every occasion?
Nick Herbert
I know my hon. Friend’s long-standing interest in that issue. It is absolutely right that those prisoners who have served a prison sentence should expect to be returned to their country of origin. We are returning more than 5,000 a year, and we will continue to make every effort to do so.
Kevin Brennan (Cardiff West) (Lab)
The hon. Member for Maidstone and The Weald (Mrs Grant) is right about women prisoners. Under the previous Government, an inter-ministerial group was set up to try to implement the recommendations of the Corston report. Will the Minister describe what efforts he is making to maintain that work in Government?
Nick Herbert
We do seek to maintain it. The focus must be on developing suitable community sentences that can satisfy the courts, address the causes of reoffending and also be sufficiently punitive. It is important that the public have confidence in such sentences, so that we can ensure there is a satisfactory alternative for women who do not need to be sent to prison. The absence of satisfactory alternatives in the past has been part of the problem.
Stephen Barclay (North East Cambridgeshire) (Con)
10. What steps he is taking to increase the amount of time probation officers spend with offenders.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
We have already taken steps such as reducing the number of targets and revising national standards to increase the time spent face to face with offenders. The Ministry is taking forward the offender engagement programme of work further to cut red tape and give probation officers back their professional discretion.
Stephen Barclay
In July, the Justice Committee found that, under the previous Government, just 25% of probation service staff time was spent with offenders. I welcome the fact that, in Cambridgeshire, that figure has improved to more than 60%, but I urge the Government to take further steps, given that that has a crucial role in tackling reoffending.
Mr Blunt
I am delighted to hear of that excellent performance in Cambridgeshire. That is evidence of the good practice now flowing from freeing probation officers from the highly prescriptive target setting and performance management that led to that 24% figure. That is what happens when 60 pages of national standards are reduced to three, and professionals are supported with decent guidance and allowed to get on with doing the job to the best of their ability in the public interest.
Paul Goggins (Wythenshawe and Sale East) (Lab)
Ministers have already acknowledged that probation officers will have to spend more time monitoring dangerous offenders on licence in the community as a result of introducing the new extended determinate sentence. What estimates has the Minister made of the additional costs of this extra supervision?
Mr Blunt
It will be some time before prisoners are being released from the sentence framework that we have just introduced, because those sentences apply to people who receive sentences of more than six years’ imprisonment, and the extended sentences will be many years ahead, so we have not yet done a detailed assessment.
Andrew Griffiths (Burton) (Con)
11. What steps he is taking to increase prison tariffs for people sentenced for carrying knives.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
Sentencing guidelines provide that the starting point for an adult convicted of knife possession is a custodial sentence. Where immediate custody is given, the average sentence length increased between June 2010 and June 2011. We are creating new offences so that those who carry a knife in a public place or school, and go on to threaten and cause immediate risk of serious physical harm to another, can expect to face at least a minimum custodial sentence.
Andrew Griffiths
Constituents in Burton will applaud the statements just made about sentences for the type of crime that is covered today on the front page of the Burton Mail, in which a young man was frogmarched to a cash point and forced to hand over money at knifepoint. They want to see that kind of tough sentencing as a deterrent. Will the Secretary of State back the Burton Mail campaign to make Burton a knife-free zone and to prevent these kinds of activities happening again?
Mr Clarke
If the newspaper report is accurate, then whoever carried out that crime committed quite a number of criminal offences, most of which carry very serious penalties, so I hope that the local courts deal with it with appropriate seriousness, having obviously considered all the circumstances. We are sending out, we hope, a strong message that we will not tolerate the use of knives. Threatening with a knife and putting someone in fear of injury is a very serious matter. I wish my hon. Friend every success in working with his constituents to try to reduce the scourge of knife crime in Burton.
Steve McCabe (Birmingham, Selly Oak) (Lab)
12. What steps his Department is taking in respect of prisoners serving indeterminate sentences who have completed their minimum tariff.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
Tariff-expired indeterminate sentence prisoners will be released from custody only if the independent Parole Board is satisfied that they may be safely managed in the community. We are seeking to identify further improvements to the progression of those prisoners through effective sentence planning, which will require the engagement of the offenders themselves.
Steve McCabe
As I understand it, under the Lord Chancellor’s proposals a judge will be required to hand down a mandatory life sentence the second time someone is convicted of using a nuclear weapon. Allowing for all the Lord Chancellor’s wisdom and guile, would it not be an awful lot smarter to hold someone indefinitely the first time they committed that offence?
Mr Clarke
Certainly, the Government take a serious view of the use of a nuclear weapon; I hope that not too much of that breaks out in the hon. Gentleman’s constituency. We discussed these proposals in the House only last week, and we achieved the House’s approval for them. There is an indeterminate sentence called a life sentence, which is the best and most established form of indeterminate sentence. Having got rid of the failed indeterminate sentences for public protection, we expect that quite a lot of people will get life sentences who hitherto would have been given the rather unsatisfactory IPPs.
Jeremy Corbyn (Islington North) (Lab)
Will the Secretary of State consider the problem of pre-release of prisoners where insufficient preparation is made for training or, particularly, for somewhere to live or some kind of community support? That means, in turn, that they either stay longer in prison or are released into the community, where they are inadequately supervised and end up back in a whole regime of crime.
Mr Clarke
We are looking at that problem very seriously, and we hope to produce a substantial improvement on the present situation. In particular, I am working with colleagues in the Department for Work and Pensions to try to ensure that offenders leaving prison can have instant access to the work programmes that we are developing for other people seeking work. Enabling people to get back into employment is one of the best ways of improving the chances that they will not offend again.
Mr Mark Spencer (Sherwood) (Con)
13. What assessment he has made of the effects on reoffending rates of his policy of payment by results to companies.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
The first results against which payment will be made in the two pilots at Her Majesty’s prisons Peterborough and Doncaster will be available in 2014. I am visiting Peterborough prison on Friday to make my initial assessment of the ONE service. I will look in particular at the methodology and evidence from case studies as it is too early for statistical data to be available.
Mr Spencer
The Minister may be aware of a case close to my constituency in which a paedophile was allowed out from a secure health unit on unescorted day release, only to commit a crime against a 10-year-old constituent of mine. I support the Minister’s plans to make improvements when these companies get things correct, but what plans does he have to deal with such companies when they get it wrong?
Mr Blunt
As my hon. Friend has made clear, that case involved a patient who was detained under mental health legislation, under which unescorted leave requires the approval of the Secretary of State, a risk assessment and a recommendation from a responsible clinician. There are no proposals for companies to make such decisions.
Gavin Shuker (Luton South) (Lab/Co-op)
The Minister talks about payment by results for companies. It is clear that in his review of probation and payment by results next year, there is significant uncertainty about the role of smaller probation trusts. Bedfordshire probation trust is one of the smallest but best performing trusts. Can he give an assurance that its role will be upheld in any subsequent review?
Mr Blunt
The hon. Gentleman needs to understand that we are piloting payment by results in six ways in 20 different pilots to see what is the most effective way of delivering it. It might be by putting the responsibility on probation trusts, prisons, local authorities or chiefs of police. We are looking at all those things and will see what is the most effective way to take payment by results forward in the interests of us all.
Mr James Clappison (Hertsmere) (Con)
14. What progress he has made in implementing his plans for the rehabilitation of prisoners.
The Minister for Policing and Criminal Justice (Nick Herbert)
We have started piloting payment-by-results models to drive what works and drug recovery wings. We are supporting the piloting and roll-out of mental health liaison and diversion services in police custody and courts. We are also developing plans to make prisons places of hard work.
Mr Clappison
Would not the task of the employment and work programmes to which my right hon. Friend has referred be improved if prisoners actually worked while in prison? Is it not the case that far too few prisoners are given the opportunity to work in prison workshops for a full working week? Would that not be of benefit to prisoners and their victims?
Nick Herbert
I strongly agree with my hon. Friend. The Government are committed to ensuring that prisons are places of work and restoration. We are focused on a programme to ensure that, wherever possible, we introduce work into prisons. There are problems with the physical estate, but we are determined to make that happen wherever we can.
Mrs Madeleine Moon (Bridgend) (Lab)
Parc young offenders institution in my constituency had a report from the chief inspector of prisons recently that revealed that 60% of the 64 inmates were admitted with drug-related problems, that 25% had alcohol-related problems and that 89% had truanted from school repeatedly. What steps are we taking to ensure that rehabilitation is a real possibility in private sector prisons?
Nick Herbert
Rehabilitation is important, whether in a public or private sector prison. The movement to payment by results will ensure that providers are focused on what they need to do to reduce reoffending. Ensuring that offenders get off drugs and deal with their alcohol problems is an important part of that. That is one reason why we are piloting drug recovery wings in prisons. We will maintain our focus on those areas.
Richard Harrington (Watford) (Con)
I congratulate my right hon. Friend on the work that has been done to introduce work for prisoners. However, my constituents and I are concerned that local companies that are full of honest, hard-working people may lose contracts to prisoners, who are effectively subsidised by taxpayers’ money. Will he assure me that that will not be the case?
Nick Herbert
I appreciate my hon. Friend’s concern. We will design the schemes in a way that ensures that that does not happen. However, we must not lose sight of the importance of ensuring that prisons are places where offenders are not simply idle, but where they are rehabilitated and introduced to the world of work and responsibility.
Fiona Mactaggart (Slough) (Lab)
One factor that means that prisoners are less likely to be rehabilitated on coming out of prison is the lack of access to housing. Many prisoners are released with just a cash voucher and no chance of anywhere to live. What is the Minister doing about that scandal?
Nick Herbert
I agree with the hon. Lady that that is one of the very important factors that determine reoffending. That is why it is important that we have a concerted effort to ensure that on their release, prisoners, and particularly short-term prisoners who are not the subject of statutory supervision or support, receive the necessary support and entitlement to services. That can be done through the integrated offender management programmes that we are supporting, and also through the payment-by-results schemes that we are piloting, which the Under-Secretary of State, my hon. Friend the Member for Reigate (Mr Blunt) described.
Tony Baldry (Banbury) (Con)
15. When he next expects to meet the Magistrates Association to discuss the recruitment and retention of lay magistrates.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
I do not currently have any plans to meet the Magistrates Association to discuss the recruitment and retention of magistrates.
Tony Baldry
Is my right hon. and learned Friend aware that lay magistrates are feeling a bit unloved at the moment? They feel somewhat squeezed between the police increasingly allocating non-court disposals at one end and deputy circuit judges doing rather more work at the other end, and there are court closures and bench mergers. There has been no recruitment to the Oxfordshire bench for several years now. What can he do to ensure that lay magistrates feel appreciated?
Mr Clarke
I will heed my hon. Friend’s warning, but I think we probably all agree that the lay magistracy is one of the distinctive strengths of our justice system. It certainly makes a very valuable contribution, and I am glad to say that it is a popular form of volunteering. We obviously have to appoint strictly on merit, but we recruit more than 1,000 new magistrates every year and magistrates dispose of about 95% of the criminal justice work that goes through our system. I will take on board his points, and I hope that we can encourage people in Oxfordshire to carry on the essential work that they are doing for the good of the community.
Mr Robert Buckland (South Swindon) (Con)
16. What steps he is taking to increase the use of restorative justice.
The Minister for Policing and Criminal Justice (Nick Herbert)
We are committed to delivering more restorative justice across the system, ensuring that more victims have a chance to explain the impact of crime upon them and that offenders face up to the consequences. Many areas already use restorative approaches, and we are considering how we can increase capacity to enable local areas to provide more effective responses to crime and disorder.
Mr Buckland
I thank my right hon. Friend for that response. Both the youth offending team and the police in Swindon are using restorative justice procedures to very good effect, particularly in the sentencing process and as an alternative to prosecution. What specific plans does he have to support that invaluable work?
Nick Herbert
I agree with my hon. Friend about the value of that work, which can both provide enhanced victim satisfaction—victims are otherwise too often an afterthought in the process—and reduce reoffending rates. That was why the coalition agreement committed us to introducing neighbourhood resolution panels, which we intend to take forward. We have invited expressions of interest and had good interest in them, and we will set up pilots in the new year.
Kate Green (Stretford and Urmston) (Lab)
What steps will the Minister take to support restorative justice programmes in prisons, such as that offered by the Prison Fellowship’s “Sycamore Tree” programme?
Nick Herbert
It is important that we support restorative justice as a principle that applies across the criminal justice system, not just in any one part of it. The idea that offenders should make amends and, when victims want it, be required to confront their victims, is good, and where such schemes are successful we want to see them extended.
Katy Clark (North Ayrshire and Arran) (Lab)
17. What assessment he has made of the level of support available to families of people who have been victims of corporate manslaughter; and if he will make a statement.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
In England and Wales, victims of corporate manslaughter are eligible to receive the same support as victims of homicide from the national homicide service, which provides tailored and intensive one-to-one support to bereaved families for as long as they need it. Support for victims of crime in Scotland is a devolved matter.
Katy Clark
I am very grateful to the Minister for that answer. My constituents Dorothy and Douglas Wright recently received an apology from the Director of Public Prosecutions following the failure to take corporate manslaughter action when their son Mark died. They did not get access to such a service, and their experience is that families of those who die in such circumstances do not get such access. Will the Minister consider that issue?
Mr Blunt
Of course, this is a devolved matter for the hon. Lady’s constituents in Scotland, but I am quite happy to consider the development of the whole doctrine of corporate manslaughter. It is very important that the families of those who may be corporate manslaughter victims receive the necessary support, even if a prosecution cannot be successfully secured. That means that Victim Support needs to be notified that there is a requirement of support, which is sometimes not completely clear when someone dies in circumstances that might or might not lead to an investigation or successful prosecution for corporate manslaughter. However, I am very happy to consider the matter.
John Robertson (Glasgow North West) (Lab)
19. What steps his Department is taking to provide compensation for victims of overseas terrorism.
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
The issue of compensation for victims of terrorism overseas is being considered alongside the Government’s review of victims’ services and compensation, at the conclusion of which we will publish a consultation document. We plan to make an announcement on victims of terrorism overseas at the same time as we launch the consultation, which we intend will be before Christmas.
John Robertson
Déjà vu, Mr Speaker: on 28 June, when my hon. Friend the Member for Derby North (Chris Williamson) asked a question on compensation for victims of overseas terrorism, the Minister replied:
“In the coming weeks we intend to launch a public consultation on victims services”—[Official Report, 28 June 2011; Vol. 530, c. 749.]
Nineteen weeks down the road, we are still waiting for it. Will the Minister please tell me this: will he put the victims first and forget about his petty differences with the Opposition?
Mr Blunt
I can assure the hon. Gentleman that I have no petty differences with the Opposition. There are a number of difficult issues to resolve, but the delay is absolutely in the interests of victims, as we identify greater resources so that we can wrestle with the wretched situation that we inherited from the criminal injuries compensation scheme, which was £750 million in debt. We must sort those things out, and once we have done so, we will be able to come forward with a satisfactory policy for victims of crime.
Simon Hughes (Bermondsey and Old Southwark) (LD)
May I say to the Minister—[Laughter.]
Simon Hughes
May I say to the Minister that this is an inherited matter that has now lasted for 18 months? There is an obligation on the Government to sort it out soon. Can he give a commitment that victims will get their answer before the end of this calendar year?
Ian Swales (Redcar) (LD)
T1. If he will make a statement on his departmental responsibilities.
The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
Yesterday, the UK took over the chairmanship of the Council of Europe. Our key priority is reform of the European Court of Human Rights, for which there is widespread support. We are pressing for consensus among all 47 member states on a package of reforms that will make the Court more effective. The Court is struggling under a growing backlog of almost 160,000 cases, which is undermining its authority. The aim will be for the Court to concentrate on the most serious issues of alleged failure to comply with the convention by a member state. The primary duty of compliance with the convention in individual cases should rest with democratic Parliaments and national courts.
Ian Swales
Teesside suffers from arguably the worst coroner service in the country, with families now waiting an average of 43 weeks for a verdict. How is the coroner service held accountable, and what can the Minister do to ensure that my constituents get the service they deserve?
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
Ultimately, coroners are independent judicial appointments, and as such, complaints must be made through the judicial appointments service. Having said that, I have been in contact with people in Teesside and I shall continue to take an interest in this matter.
Sadiq Khan (Tooting) (Lab)
One cannot help but notice the good mood that the Justice Secretary is in today, which I am sure has nothing to do with the spot of bother the Home Secretary is in. May I ask him a question on a similar issue—foreign prisoners? He will be aware that in 2007, the Labour Government negotiated with the EU a prisoner transfer agreement, which comes into force next month, which will mean that no prisoner consent is required, and that the other country must comply with a request for a transfer. The Prime Minister promised the repatriation of thousands of foreign prisoners by personally taking charge of negotiations with individual countries. We all know that he likes to keep his promises, so can the Justice Secretary tell us how many new prisoner transfer agreements have been successfully negotiated with individual countries in the past 18 months, and how many foreign prisoners does he expect to be repatriated this year?
Mr Kenneth Clarke
First, I want to put the right hon. Gentleman’s mind at rest: I agree with my right hon. Friend the Home Secretary in her handling of the current problems, so it is just my usual bonhomie; there is no particular cause for it today. It is true that this important transfer of prisoners agreement is about to come into force, and it will make a difference to our problem with foreign prisoners, although, of course, there are derogations to some important countries, such as Poland and Ireland, where it will not come into effect for a few years. The right hon. Gentleman hits on a serious problem, though: we need to find a way of reducing the foreign prisoner population. At the moment, we have only one international bilateral agreement near to conclusion, but we are continuing to work on it, because foreign prisoners take up more than 10% of places in our prison system.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
T3. At Swaleside prison in my constituency, the Kainos Community programme has an 87% success rate in reducing reoffending by inmates taking part in the scheme. Will my hon. Friend acknowledge this success, and extend the scheme across the prison estate?
The Parliamentary Under-Secretary of State for Justice (Mr Crispin Blunt)
I have seen the Kainos scheme in other prisons, and I am looking forward to visiting my hon. Friend’s constituency to see it work at first hand. Of course, we will want to learn the lessons and apply them, so that we can begin to achieve those kinds of reoffending rates—if they are as described—on a sustainable basis.
Mr Speaker
May I encourage Ministers to face the House, so that we get the full force of their eloquence head-on?
Mr Jim Cunningham (Coventry South) (Lab)
T2. Has the Minister done an impact assessment on the effect of the legal aid reforms on women?
Rehman Chishti (Gillingham and Rainham) (Con)
T5. According to a written question that I asked the Minister earlier this year, in 2009 the disciplinary punishment of additional days for bad behaviour in prisons was imposed on 11,550 occasions. What steps are being taken to improve discipline and behaviour in prisons?
Mr Blunt
There is a zero-tolerance policy for any violence in prison towards staff, visitors or other prisoners. In addition, one should not underestimate the importance of our proposals on work in prisons. If we can put in place a much more useful prison regime under which far more prisoners are engaged in useful work, it will aid the delivery of discipline in our prisons.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
T4. Could I ask whether the Secretary of State will identify the amount of savings he will make in his planned reductions for legal aid in social welfare law and identify the amount of knock-on cuts to the Scottish budget through the Barnett formula? Could he confirm that, if there are cuts, the Scottish Parliament does not have to follow the savage cuts in welfare law legal aid?
Mr Kenneth Clarke
We debated all this last week. We are still spending £50 million on legal aid for welfare law, even as we have revised and cut it back, and cut out areas where, frankly, legal assistance is not necessary, appropriate or justified. Our proposals affect England and Wales only, and the provision of legal aid in Scotland is not a matter for me.
Steve Baker (Wycombe) (Con)
T9. Do the Government agree that magistrates are a vital and integral part of the justice system, and that they must be supported and encouraged to play a part in neighbourhood justice?
The Minister for Policing and Criminal Justice (Nick Herbert)
Yes, we do. As we develop our proposals, including for the neighbourhood resolution panels that I described earlier, we want to consider what role magistrates may play in that. They are, as my right hon. and learned Friend said, an important lay resource, and we should think of new ways to make use of them.
Rushanara Ali (Bethnal Green and Bow) (Lab)
T6. How does the Secretary of State plan to fill the nearly £280 million gap in social welfare law in respect of the provision of crucial advice and support on housing, debt and employment issues to some of the poorest people in our country, given that there is little to no evidence that the voluntary and charitable sectors will be able to back-fill that gap? The £20 million referred to does not seem to go far enough.
Mr Djanogly
First, it is important to appreciate that we are keeping £50 million of legal aid in social welfare law for the most urgent and vulnerable people who need it. We need to appreciate that, at the moment, legal aid is often used as a sticking plaster for matters that should properly be dealt with under general advice from citizens advice bureaux.
Mr Aidan Burley (Cannock Chase) (Con)
T10. After the riots in the summer, courts such as Cannock magistrates court in my constituency sat late and ensured that the surge in work was dealt with smoothly and efficiently. These late-night sittings have been widely regarded as a huge success, not least by those magistrates who have full-time jobs that require them to work during office hours. What plans does the Secretary of State’s Department have to roll out these evening court sittings on a permanent basis?
Mr Kenneth Clarke
The work done after the riots is a tribute to the public spiritedness of all who sat on the bench—all the court staff, probation staff, police and duty defence solicitors. There was a widespread feeling that people should do their bit to restore order, and I am glad to say that the courts rose to the challenge. Normally, on an ordinary day, we do not have a shortage of court space, so there is no general need to have night or evening sittings. We can certainly improve the efficiency with which the more straightforward cases are dealt with. They can be brought on at an ordinary hour more quickly than they sometimes are now. We are working on that. It was a tribute to the court service and everybody who works in it that they all worked as well as they did.
Gloria De Piero (Ashfield) (Lab)
T7. I wrote to the Justice Secretary six weeks ago on behalf of my constituent Gary Thrall, but have not yet had an answer. May I ask him again to look at this case and at the fact that 16 months on from a vicious knife attack, Gary has yet to receive a final settlement from the Criminal Injuries Compensation Authority or to be advised of the likely time scale for the settlement, which is preventing the family from moving on?
Philip Davies (Shipley) (Con)
According to figures from the Department, 10% of all crimes are committed by people on bail and 20% of burglaries are committed by people on bail. When the provisions in the Legal Aid, Sentencing and Punishment of Offenders Bill come into effect, which will make it harder for courts to remand people in custody, what estimate has the Department made of the number of crimes that will be committed by people on bail then?
Mr Kenneth Clarke
The changes we are making are to get rid of the anomaly whereby bail can be refused to someone who is charged with an offence in circumstances where it is quite obvious that they are not going to be sent to prison, even if they are found guilty. It is a reform that should have been made a long time ago. Serious offences are sometimes committed by people on bail, and we have committed ourselves to introducing a right of appeal when someone is given bail in the Crown court. There have been bad cases where serious offences have been committed. We hope to introduce an amendment in the other place that would allow the Crown Prosecution Service to challenge the granting of bail in the Crown court when a potentially dangerous prisoner is involved.
Jessica Morden (Newport East) (Lab)
T8. Constituents of mine with serious health conditions who have been turned down for employment and support allowance are still having to wait up to nine months for a tribunal appeal hearing. With more than 40% of them being successful on appeal, what is the Minister going to do to end this unacceptable wait?
Mr Djanogly
This is relevant to a number of Departments. We are working with them to ensure that the procedures are such that better determinations are made at the outset so that we get fewer appeals. This is taking up a significant amount of my time. The hon. Lady makes an important point.
Alun Cairns (Vale of Glamorgan) (Con)
When a magistrates court is forced to close, does my hon. Friend agree that every effort and flexibility needs to be shown to accommodate those magistrates in alternative courts?
Mr Djanogly
Yes, and they are. So far as I know, no magistrates have been forced to resign because of any court closure. They are normally encouraged to join the successor court, although some take the opportunity to resign at that point for their own reasons.
Huw Irranca-Davies (Ogmore) (Lab)
The Secretary of State will no doubt share my respect for those who carry out pro bono work, which makes a big impact in my communities and throughout the UK. What does he make of the assertion that cutbacks are going to have to be made in pro bono services because of the cuts to overall provision?
Alok Sharma (Reading West) (Con)
One of my constituents who was witness to a burglary and theft in the local area has made me aware that the youth defendant who pleaded guilty on two counts was required as part of his rehabilitation order to spend three weeks at summer arts college. Does the Minister believe that it is time to review some elements of the community sentencing framework?
Mr Blunt
We are going to look at the community sentencing framework, as I announced to the House last week. We are absolutely clear that the whole framework has to carry public confidence that there will be effective punishment in the community, while at the same time delivering effective rehabilitation. A sentence that protects the public and delivers restoration to the victim is a key part of our consideration.
Diana Johnson (Kingston upon Hull North) (Lab)
We have an excellent community legal advice centre in Hull. What are the Minister’s views on the future funding of CLACs and community legal advice networks?
Mr Djanogly
These will have to be looked at in the context of all not-for-profit organisations—citizens advice bureaux and so forth. If the hon. Lady wishes to discuss her particular concerns relating to her particular CLAC, I would be happy to discuss them with her.
Robert Halfon (Harlow) (Con)
Following the publication of the Norgrove report, will my hon. Friend reassure anxious fathers in my constituency, including Mr Colin Riches, and will he make every effort to ensure that parents have equal access to children?
Mr Djanogly
We have every intention of ensuring that both parents have a meaningful relationship with their children, and we will look carefully at the Norgrove report in order to develop a Government approach to the matter.
Hugh Bayley (York Central) (Lab)
The convictions of three world-class cricketers last week shows that even cricket is not immune from corruption. In his role as the Government’s anti-corruption chief, will the Secretary of State look into the problem of corruption in international sporting bodies such as FIFA, and see what Britain can do to drive corruption out of international sport? There has also been controversy involving the Olympics and Formula 1.
Mr Kenneth Clarke
I share the hon. Gentleman’s concern, but the issue of corruption in sport is primarily the responsibility of my right hon. Friend the Secretary of State for Culture, Olympics, Media and Sport. I know that he is working with his European Union opposite numbers on specific measures to tackle it, and I am following his progress very closely. The recent convictions show that there are problems that need to be tackled in the interests of everyone who believes in the value of sport—but honest sport—to a community.
Tom Brake (Carshalton and Wallington) (LD)
The Government are committed to ensuring that women are not sent to prison in disproportionately high numbers. May we have an update on the Corston report?
Mr Blunt
The Government support the objectives of the Corston report, as did our predecessor, and as we did in opposition. There are only one or two elements of it that we are unable to deliver, such as the recommendation for more smaller custodial units. As was made clear in the exchanges that followed the question asked by my hon. Friend the Member for Maidstone and The Weald (Mrs Grant), one of our main priorities is to make progress on the Corston agenda and to learn some of its lessons in how to deal with not just women prisoners, but all prisoners.
Yvonne Fovargue (Makerfield) (Lab)
The Money Advice Service has sacked 100 front-line staff in order to spend more money on publicity. Does the Secretary of State now regret removing nearly all debt advice from the scope of legal aid, and what cross-departmental discussions is he having about the future of such advice?
Mr Kenneth Clarke
I am very sorry to hear what the hon. Lady has said, but I am not sure whether the issue is the responsibility of my Department; it may be the responsibility of the Department for Business, Innovation and Skills. However, I will certainly check, because it is extremely important for advice to be available at what is a difficult time for many people. Advice on debt is, unfortunately, one of the things that many people require—not only foreign Governments, but a fair number of our own citizens.
Sheila Gilmore (Edinburgh East) (Lab)
A few months ago, the Minister said that the backlog of appeals on social security matters would be resolved through the employment of more people. That was before the summer, but the waiting times seem to be as long as ever. Why is that?
Mr Djanogly
There is still a significant number of appeals, but the number is now being stabilised and the delays are being reduced.
Mrs Mary Glindon (North Tyneside) (Lab)
Given that probation trusts are experiencing major cuts in their budgets, can the Minister explain how he expects them to do more for less?
Mr Blunt
Probation trusts have been relatively well protected given the current environment. The additional cuts are at least 13% less than the overall cut in the Ministry of Justice budget, which shows that we are making the protection of the front line a priority in order to ensure that services are delivered effectively. However, like everyone else, probation trusts will have to make their contribution to rescuing our nation’s economy from the wretched mess in which it was left by the last Administration.
Mr Speaker
Order. I apologise to colleagues. I should be happy to allow these exchanges to continue all day if there were time, but there is not.
Points of Order
Tony Baldry (Banbury) (Con)
On a point of order, Mr Speaker. May I ask for your guidance? Item 4 on today’s Order Paper, under the heading “Backbench Business”, is entitled “Publication of a Select Committee Report”. Below that is a motion in the name of the hon. Member for Liverpool, Riverside (Mrs Ellman), which states
“That this House notes the publication of the Tenth Report from the Transport Committee on High Speed Rail”.
As you know, Sir, a number of us are concerned about that issue. Below the motion is a note which says
“Proceedings on Mrs Ellman’s Motion are expected to continue for approximately 20 minutes.”
I have never seen such a provision on the Order Paper before. Will you give the House some idea of what you expect to happen? Will the hon. Member for Liverpool, Riverside be allowed to speak for 20 minutes about the Select Committee’s report? Will those of us who have quite a lot to say about the report have any opportunity to intervene or to make a contribution, or does the note merely constitute guidance meaning that the business can continue until any hour?
Mr Speaker
I am grateful to the hon. Gentleman for his point of order, and I hope to be able, at least in part, to satisfy his curiosity.
First, I am sorry the hon. Gentleman has not noticed such an item on the Order Paper before; that is uncharacteristically unobservant of him, as in my current recollection there have been at least three occasions on which similar items have been placed on the Order Paper.
Secondly, the hon. Gentleman seeks a steer as to the nature of the proceedings in question. It is an occasion upon which the Chair of the Select Committee presents a statement about the report, and it is customary on such occasions for Members to intervene on the Select Committee Chair, if they wish to do so. There are no other speeches, however.
Thirdly, I should inform the hon. Gentleman that this is a relatively recent development, and he may wish to look in the direction of his right hon. Friend the Leader of the House—who is currently sitting on the Treasury Bench—if he is curious as to whether it will be a temporary or an enduring phenomenon. I shall leave that little teaser in the mind of the hon. Gentleman.
Mary Creagh (Wakefield) (Lab)
On a point of order, Mr Speaker. I informed the Environment Secretary of my intention to make a point of order today. Yesterday, the right hon. Lady published a written ministerial statement on the results of the European Union Agricultural Council, in which she states that
“the laying hens directive…comes into force on 1 January 2013.”—[Official Report, 7 November 2011; Vol. 535, c. 5WS.]
As Members on both sides of the House will be aware, the laying hens directive, in fact, comes into force on 1 January 2012. The Secretary of State also states in that document, however, that the Commission plans to uphold the ban on battery cages and to start inspection visits at the start of 2013. There is therefore some confusion about what action the Commission will be taking and in which year that will start.
This is not the first time that Environment Ministers have slipped up. They had to correct the record on the new British Waterways charity, and there is also the now-legendary legal case that was supposed to be proceeding in Europe on the use of wild animals in circuses, but which transpired not to exist. Will you advise the House, Mr Speaker, on when the Secretary of State might come to the Chamber to correct the record? I see that the Leader of the House is in his place; I wonder whether he can assure us that such unfortunate episodes will not become custom and practice.
Mr Speaker
I am grateful to the hon. Lady, the shadow Secretary of State, for her point of order. The matter to which she has referred is certainly of intense, and probably of enduring, interest to a great many, including the hens themselves. The other matters to which she referred will have been noted, doubtless at a distance by the Secretary of State, and here in person, in the Chamber, by the Leader of the House. If the hon. Lady were minded to pursue the matter any further, I might—unfairly—conclude that she was seeking to establish a point not of information, but a political argument; but I am sure she has not got the latter in mind in any way.
Grahame M. Morris (Easington) (Lab)
On a point of order, Mr Speaker. The Prime Minister and the Health Secretary have both claimed that UK cancer survival and death rates are poor by international standards, and they have referred to that as a justification for the NHS reforms. It has become clear from a study produced by Professor Pritchard-Jones—
Mr Speaker
Order. The hon. Gentleman should resume his seat. I fear that points of order might be in danger of transmuting into comments on past ministerial statements on a range of matters. If the hon. Gentleman is seeking to prove to me and the House what an assiduous member of the Health Committee—and of the previous Health and Social Care Public Bill Committee—he is, he has succeeded in his mission.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Further to that point of order, Mr Speaker. I just wonder whether you are keeping any score of how many mistakes, misquotes or misdirections to the House Cabinet Ministers are allowed to make before there is some attempt to call them to account.
Mr Speaker
The short answer to the hon. Gentleman’s question is no, but he has made his point. If there are no further points of order, we can come now to the ten-minute rule motion, for which the hon. Member for Lewisham East (Heidi Alexander) has been patiently waiting.
Internet Regulation (Material Inciting Gang Violence)
Heidi Alexander (Lewisham East) (Lab)
I beg to move,
That leave be given to bring in a Bill to give courts the power to order internet service providers to remove certain material which incites gang violence; and for connected purposes.
I am introducing this Bill because I am appalled by the proliferation of online videos glorifying gangs and serious youth violence. The police, via the courts and internet service providers, need to be given explicit power to get these videos taken down or to get access to them blocked. These videos act as a recruitment mechanism for gangs. I believe they lead to an increased number of young people in our cities who feel the need to carry a knife for protection and they terrify any ordinary human being who watches them.
I first came across these videos last year, when a constituent contacted me after his son had been the victim of a gang-related mugging. He sent me links to a video that was up on YouTube of the gang that had robbed his son. The video was filmed in broad daylight in a car park in the heart of Catford. It contained images of 10 to 15 young men—perhaps I should say boys—rapping, swearing and waving knives around as if they were cigarettes. The video boasts about violence; it is menacing, sickening and frightening. There are hundreds, if not thousands, of these sorts of videos on the internet, not just on YouTube, but on sites such as Spiff TV. If someone types “Brixton gangs”, “Hackney gangs” or “Lewisham gangs” into any online audio-visual search facility, they will find these videos. Not all contain images of knives, but the narrative is the same, “Mess with us and we’ll stab you.” These videos have been viewed tens of thousands of times each—sometimes hundreds of thousands of times.
Over the past year, I have attempted to interest the Minister for Policing and Criminal Justice in this issue, but my letters and contributions in debates have fallen on deaf ears. Last week, the Government launched their report into ending gang and serious youth violence, but it contains almost no mention of the internet. I find that remarkable, short-sighted and out of touch. We know that the internet is increasingly central to people’s everyday lives—that applies to young people in particular. Indeed, some research suggests that teenagers spend as much as 31 hours per week online. The popularity and accessibility of the internet means that it is inevitably one of the ways through which young people get caught up in the madness of youth violence, yet this Government seem to be ignoring it.
These videos frighten me and they will frighten young people too. Every one of us here today knows that carrying a knife is wrong. Some of us will also know that if a young person carries a knife, it is probably as likely to end up injuring them as anyone else. But we also know that many young people carry knives out of fear. They may not start out to stab someone but, as we all know, too often that becomes the tragic reality. As Patrick Regan says in his book “Fighting Chance”:
“The truth is that, for many, the everyday fear of gangs and what they can do to you is far greater than the fear of being caught and going to prison”.
Do we not owe it to the young people who are viewing this stuff online to make them feel safer? These are not videos filmed in some make-believe American gangland. No, these are videos filmed in our own communities—in our car parks, our town centres and on our housing estates. They are filmed in easily recognisable locations where my constituents will walk on a regular basis.
Currently, one of the only ways that this material is removed from the net is if enough people flag the video, via YouTube’s online community policing mechanism, as having inappropriate content; if enough people report the video as being unacceptable, it will ultimately be taken down. That is clearly a start, but it is not good enough. The police should have the power to get access to these videos blocked by the courts and internet service providers. I am not so naive as to think that would be a panacea, but it strikes me that when the police know that this kind of material is freely available to anyone with access to the web, they should be empowered to take action against it.
We should not have to rely on voluntary community censorship in relation to this important issue, not least because the majority of people viewing the material are probably those least likely to want to report it for fear of reprisal. I recognise that policing of the internet will always be incredibly difficult, but unless we start to grapple with the online manifestation of gangs, I question our ability to tackle the problem. We can talk about gang injunctions all we like, and there might be a need for them, but should we not also recognise that the same individuals might cause an equal amount of fear by their actions when sat at a computer at home?
In the time that remains, I shall turn my attention to the existing legislation. Although the Communications Act 2003 does not provide a solution to the problem, the provisions in the Digital Economy Act 2010 might be a useful template for what I propose. Section 127 of the Communications Act, entitled, “Improper use of public electronic communications network” makes it a criminal offence to send
“a message or other matter that is grossly offensive or of an indecent, obscene or menacing character”.
It might be possible to use that measure to deal with the perpetrator of the gang video—the camera man—but it does not provide a means of requiring that the violent material be removed from public view on the internet. Clearly, we need to go after the gang members themselves, but we also need to be able to remove what is effectively their advertising material. The Communications Act does not seem to be of any use in that regard, whereas the Digital Economy Act contains a potentially useful template in respect of the power it grants to courts to order internet service providers to remove web content that infringes copyright. I put it to the House that the removal of material inciting gang violence could and should be dealt with in a similar way.
I understand that in the new year, the Department for Culture, Media and Sport is going to publish a Green Paper on a new communications Bill. In the hope of joined-up government, I urge the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage (Mr Vaizey), who is present, to ensure that DCMS and the Home Office work together and look carefully at the options for addressing this important issue. If the Government are serious about addressing the problems of gangs and youth violence, they need to wake up to the role of the internet and the way in which young people become involved in gangs and knife crime.
As things stand, I fear there is a real danger that the Government are leaving the need for an internet strategy to tackle gang crime, and indeed other forms of crime, in the “too difficult to tackle” box. That simply is not good enough. Gangs may not be a new phenomenon but the casualisation of violence associated with them is. The speed and reach of the internet in propagating and glorifying that violence is also something new and we must not ignore it. We must find a way to address it.
Question put and agreed to.
Ordered,
That Heidi Alexander, Mr David Lammy, Ms Karen Buck, Joan Ruddock, Bob Blackman, Siobhain McDonagh, Meg Hillier, Bill Esterson, Teresa Pearce and Mr Lee Scott present the Bill.
Heidi Alexander accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 16 March, and to be printed (Bill 246).
European Budgets 2014 to 2020
(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That this House takes note of European Union Documents Nos. 12478/11 and Addenda 1 and 2, 12474/11, 12480/11, 12483/11, 12475/11 and Addenda 1 to 3, and 12484/11, relating to the Commission’s proposal on the next Multiannual Financial Framework (MFF), 2014-20; agrees with the Government, that at a time of ongoing economic fragility in Europe and tight constraints on domestic public spending, the Commission’s proposal for very substantial spending increases compared with current spend is unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe to bring deficits under control and stimulate economic growth, that the next MFF must see significant improvements in the financial management of EU resources by the Commission and by Member States and in the value for money of spend and that the proposed changes to the UK abatement and new taxes to fund the EU budget are completely unacceptable and an unwelcome distraction from the pressing issues that the EU needs to address; and supports the Government’s ongoing efforts to reduce the Commission’s proposed budget.
Yesterday, the Prime Minister made a statement to the House following the G20 meeting in Cannes regarding the ongoing crisis in the euro area. As his statement made clear, it is vital that the euro area sticks to the deal agreed to two weeks ago by the European Heads of Government to resolve the ongoing crisis. A resolution to that crisis is vital to UK, European and global economic interests. It is equally important that, over the longer term, the euro area and the wider EU take the necessary steps to tackle the deficits that are the root cause of the crisis.
The ongoing instability in the euro area vindicates this Government’s decision to get ahead of the curve, cut our deficit and impose strict fiscal discipline on our budget. It is vital that EU member states demonstrate the same resolve, and we welcome commitments by Italy and Spain, among others, to do so. However, the European Commission must also lead from the front in a drive to impose financial discipline across the EU institutions. That is why it is unacceptable for the Commission to propose a 4.9% increase in the annual budget for 2012. The UK and the European Council have agreed that we could not approve such an increase at a time when member states are facing tough decisions to impose fiscal discipline and consolidation. We will be taking a firm stand on the 2012 budget when we meet in the budget ECOFIN later this month.
Let me turn now to the principal subject of today’s debate: the multi-annual financial framework that sets out how much the Commission wants to spend in 2014 to 2020 and how it will fund it. The Commission’s proposals seek to increase both its revenue and its spending. It wants new taxes to expand the Brussels coffers, and proposes inflation-busting spending increases. That is simply not acceptable. The answer is not to raise more and spend more; it is to control spending. The best way to restrain EU annual budgets is to set—
Geraint Davies (Swansea West) (Lab/Co-op)
On a point of clarification, the Minister mentioned inflation-busting increases, but am I right in thinking that what is being proposed is a 5% cash increase in the ceiling over the seven-year period? If so, that would be less than the rate of inflation in real terms, and therefore not an inflation-busting increase.
Mr Hoban
No, let me continue.
The best way to restrain EU annual budgets is to set tough multi-annual framework ceilings. That is why, at the European Council in October 2010, member states agreed that the
“forthcoming Multiannual Financial Framework must reflect consolidation efforts being made by Member States to bring deficit and debt onto a more sustainable path”.
Rather than following that path, however, the Commission has meekly bowed to pressure from the European Parliament to increase the budget, thereby returning to the extravagance and irresponsible spending that sowed the seeds of the current global economic crisis. Just as we cannot accept the Commission’s 2012 budget, we also cannot accept the Commission’s proposal, as set out on 29 June, to increase the multi-annual framework budget for 2014 to 2020 by 11%. Such an increase is incompatible with the tough decisions being taken in the United Kingdom and in countries across Europe to cut spending.
Instead of consolidation, the Commission proposes expansion. It has ignored the calls made in December last year by the UK, France and Germany for a real-terms freeze in spending. The Commission claims to have done as we have asked, but let me make it absolutely clear to the House that it has not. On average, the spend in each year of the next framework would be about €14 billion higher than it is today.
Mr John Redwood (Wokingham) (Con)
Given that the Government are now studying the powers and duties that can be brought back to the House for national and local decision, surely we should be taking big lumps out of this budget? If, for example, we repatriated agriculture, industrial aid and regional aid, we could cut the budget by two thirds. I think that the members of the public to whom I answer would be very pleased with that.
Mr Hoban
My right hon. Friend makes an important point. In parallel to the debate about the ceilings for the budgetary framework over the course of the period between 2014 and 2020, debates are also taking place on the individual lines of expenditure within the EU budget, and we are proposing significant reductions in cost to underpin our strategy of curbing overall spending by the EU.
Mr Hoban
May I make a little progress? I am conscious of the number of hon. Members, perhaps on both sides of the House, who want to take part in the debate.
In addition to the on-budget spending increases proposed by the Commission, the Commission has earmarked an extra £18 billion in off-budget spending. That is an alarming lack of transparency that brings added risks of poor oversight and control. In a further lack of transparency, the proposal fails to focus on levels of cash payments—actual expenditure that the multi-annual financial framework will allow in each heading. Instead, it opts to use commitments—planned expenditure—but frankly the cost to UK taxpayers is not how much is planned to be spent but the actual cash going out of the door. This should be the starting point for the higher control over spending, and we and our allies have made that clear to the Commission.
Mr Hoban
Let me make a bit more progress and I will take the right hon. Gentleman’s intervention in a short while.
The Commission also asked us to use as our starting point for a freeze—this is perhaps where the hon. Member for Swansea West (Geraint Davies) has been confused by the Commission’s numbers—the level of spend planned in 2005, but we cannot ignore the fact that the global crisis has taken place since then. Every country has had to scale back its spending from pre-crisis days and the European Commission is no different.
The Commission can also do more to ensure that money is spent more wisely. We are leading the way on reforming financial management in the EU. For the first time in 17 years, we have refused to support the sign-off of the EU accounts. We are pushing for simpler, clearer rules on spending programmes that make it easier to spot fraud and error, and we have also raised our game at home to ensure that EU money spent here is spent properly and wisely.
Andrea Leadsom (South Northamptonshire) (Con)
Will the Financial Secretary give way?
Mr Hoban
Let me finish a couple of sentences and then I will give way.
Tackling financial mismanagement in the EU can help meet spending commitments, so our message on spending is clear. There should be a real-terms freeze on spending, a focus on the amounts actually spent, not plans dreamt up over five years ago when the world was different. Let us tackle waste and financial mismanagement across the EU. I give way to my hon. Friend the Member for South Northamptonshire (Andrea Leadsom).
Mr Speaker
Order. Before the Minister gives way to the hon. Lady, I emphasise that, of course it is in the gift of the Minister to give way as he thinks fit, but the total time for the debate on this matter is only one and a half hours, and it would be a pity if Back Benchers were disappointed. I am sure that the Minister will tailor his remarks and his giving way accordingly.
Andrea Leadsom
Thank you, Mr Speaker. I shall bear in mind your comments. I am grateful to the Minister for giving way. Does he agree that one of the most ridiculous wastes of money in this day and age, with tight budgets, is the European Parliament continuing to move between countries during the week, at enormous expense to British taxpayers?
Mr Hoban
We could spend all one hour and 30 minutes detailing the ways in which the EU wastes money. My hon. Friend has raised one. The EU spends more on buildings in Luxembourg than on vital expenditure. So, conscious of your strictures, Mr Speaker, let me make some progress.
Curbing European spending is not the only priority for the UK. We need to tackle how the EU funds its spending, too. The Commission is trying to increase its control over funding by introducing new EU-wide taxes and amending the correction mechanisms such as the UK abatement or rebate. Now, this Government have been absolutely clear. We will defend our rebate. Last time the UK negotiated the multi-annual financial framework in 2005 the then Labour Government gave ground on the rebate in return for reform of the common agricultural policy. What has happened since then? The value of the rebate has fallen, but the spending on the CAP has not budged. We will not fall for empty promises; we will resist any change to the abatement. Our rebate remains absolutely justified. The structure of EU spending means that we get less per capita than any other member state. Without the rebate, the UK’s net contribution as a percentage of national income would be the largest across Europe and twice as large as the contributions made by France and Italy. Our rebate is fully justified, and we are not going to give it away.
Mr MacShane
Can the Minister confirm that, for the six years, the proposed increase is 11%. Eleven divided by six is 1.85% or about 1.9% each year. Is that factually accurate?
Mr Hoban
This goes back to some of the challenges in the Commission’s presentation of its numbers. The budget proposed by the Commission is £100 billion larger than the real freeze in spending that the UK and its allies have proposed. [Interruption.] The right hon. Member for Rotherham (Mr MacShane) says that I have not answered the question. It is clear that the way in which the European Commission has structured its budget, by having some things on or off-budget and by talking about commitments rather than actual spending, confuses and clouds the position, leaving some to think that the Commission has embarked on a freeze on the budget, whereas in reality the EU is proposing a real-terms increase in the budget.
Let me move on to the second issue in relation to the funding of the EU budget. The Government strongly oppose the proposal for new taxes to fund the European Union budget. They attach considerable importance to the principle of tax sovereignty. Tax is a matter for member states to decide at a national level. We oppose any new taxes or changes to the existing system that increase the UK’s contributions or pose a threat to our long-term position, including a financial transactions tax to fund the EU budget. We cannot accept a budget which asks for more and asks for a greater share from taxpayers and from the UK.
A year ago, the Government set out their plans for the consolidation of public expenditure at the spending review. Supported by the International Monetary Fund and OECD, the Government set out plans to reduce the deficit. We have shown our resolve by keeping the UK out of the storm that has engulfed the euro area, and we will show the same resolve with the European Commission. The inflation-busting increases proposed by the Commission are out of touch with the realities felt by taxpayers across Europe, and out of touch with the views of José Manuel Barroso, who in June argued that many states
“need to show more ambition when it comes to fiscal consolidation”.
We as a Government believe that the Commission needs to show much more ambition, too, when it comes to fiscal consolidation. We will continue to press the European Commission and member states to deliver a multi-annual framework that delivers real fiscal consolidation. This will be a challenging negotiation.
Mr Hoban
There will always be pressure from others to spend more, and a failure to agree the framework would shift the focus to the annual budget process which, unlike the framework, is decided by qualified majority voting. It is an uncertain prospect that we are eager to avoid. That is why we will work tirelessly to seek the best deal on the multi-annual framework, but a deal on our terms—a deal that curbs EU spending and puts a brake on the Commission’s plans for EU-wide taxes and seizing some of our rebate—
Mr Cash
This gives me an opportunity to put one thing on the record, not necessarily in a spirit of cynicism. Last year I moved an amendment, which was accepted by the House, that we would have no increase in the budget. By the end of the convolutions that took place, the Government accepted an increase of 2.9%. May I be absolutely assured that on this occasion, given the robust nature and the tenor of what my hon. Friend has said, that there will be no increase whatsoever?
Mr Hoban
My hon. Friend is well versed in the intricacies of the European Union. As he knows, the budget negotiations later this month are done on a QMV basis. We do not have a veto on the 2012 budget and we will be seeking to build a coalition of allies who are as committed as we are to curbing the expenditure of the EU, and who are as committed as we are to opposing the inflation-busting increase proposed by the European Commission. I am sure that when we reach that deal later this month, my hon. Friend will seek to hold the Government to account on that. I can assure him that we are doing everything in our power to ensure that we curb the EU’s plans and reduce the spending levels proposed by the Commission.
Mr Hoban
I will not, as I was about to end, bearing in mind Mr Speaker’s strictures.
We are committed to seeking the best deal for the United Kingdom, a deal that curbs EU spending, puts a brake on the Commission’s plans for EU-wide taxes, and seizes some of our rebate. I urge the House to support the motion.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister started the debate by referring to today’s news about the eurozone crisis. Despite the failures of all leaders at the G20 summit, including the Prime Minister, and the continued failure of the eurozone to put flesh on the bones with regard to the dimensions of the European financial stability facility and the role of the European Central Bank, we hope that some leadership will eventually emerge across the European stage to get to grips with the problem. I am sure that the Minister will want to take back the message from both sides of the House that far sturdier action is needed on these issues.
It is important that the House recognise the difference between the issues we would like to discuss today and the specific issue addressed by the motion. The Minister referred to the Council of Ministers’ proposal in the summer for a real-terms freeze in the EU’s annual budget for 2012—in other words, a cash rise of over 2%—yet the European Parliament voted on 26 October to back a package even higher than the Commission’s proposal for a 4.9% increase. Labour Members of the European Parliament voted against the package, which would have amounted to an increase of more than 5%. We were prepared to support only a real-terms freeze in the budget.
I am told that there will now be a 21-day negotiation period among the three EU institutions. If the 2012 budget is not passed by December, it will be worked out on a monthly basis, based on 2011 levels. We believe that the proposal to increase the budget by more than 5% will strike most people as unjustified and wrong-headed. The last time we saw the Government negotiate an annual budget, the Prime Minister started by promising a freeze but ended up claiming that an increase was a victory. This time he needs to do better and must not support another inflation-busting rise in the EU budget.
Chris Leslie
I will come to that in a moment.
If that means the Government need to stand firm for the full 21-day negotiating period, so be it. The UK should not allow the 2012 budget to rise beyond a real-terms freeze.
With regard to the snappily titled “Multiannual Financial Framework 2014-2020”, we rarely have an opportunity to debate a subject while the Chancellor is talking about it at an ECOFIN meeting, so this is a useful sign that Parliament is in tune with the issues of the day. Defining the main budget priorities over the seven-year period is a process that began in 1986 but was changed in the Lisbon treaty so that there was greater involvement for the European Parliament. It is important to explore the detail, but in our view the notion that there should be any significant overall increase in expenditure is perverse, given the strictures being placed on mainstream public investment projects at home. The Government must ensure that they deliver on their rhetoric in the motion and secure a much better deal than the one currently on the table.
There are two crucial areas on which the Government need to focus: the Commission’s proposal for new revenue powers and the UK rebate. With regard to the Commission’s proposals to change what it calls its “own resources” method of calculating the income it received from each member state, it is suggesting two new direct revenue streams. The first is a top-slice process for domestic VAT revenues, which I would like to ask the Minister about specifically. I am very sceptical about the proposal and would be grateful if he addressed it when summing up, because I do not think he touched on it adequately in his opening comments. Will he tell the House what proportion of our domestic VAT would be diverted to EU institutions if the change was proceeded with? The Commission seemed to suggest that it is a replacement for the VAT element of the funding formula used to calculate contributions from each member state, but how would the existing arrangements and the new arrangements compare?
With regard to the Commission’s proposal for a new EU financial transaction tax, can we at least be clear that it twists the notion of a Robin Hood tax so wide of the mark that it is barely recognisable from the global FTT, which has received so much support from charities, campaigners and leading economists worldwide? Revenues from any FTT must surely be destined for jobs, growth and carbon reduction at home and in the developing world. Pouring those revenues into the EU budget or EU bail-out funds instead would be the wrong thing to do and totally contrary to the spirit of a genuine Robin Hood tax. Instead, the starting point ought to be the proposal that Labour put forward at the 2009 G20 summit, which is that all countries should agree to work together to establish a tax, set at a fraction of 1%, that could be levied on financial transactions, millions of which happen in the City everyday. We want to see a financial transaction tax—but one that is implemented with the widest possible international agreement.
Mr MacShane
In 1995 I moved an amendment to the Finance Bill proposing exactly what my hon. Friend suggests, but an hon. Friend who later became the Chancellor of the Exchequer and is now my right hon. Friend the Member for Edinburgh South West (Mr Darling) wrote through it with red ink, “No new taxes”, so the idea died the death some 15 years ago. I agree with my hon. Friend the Member for Nottingham East (Chris Leslie), but let us not make the best the enemy of the good. If we get this thing going, we are getting something going that will help people. Waiting for everybody in the world to sign up to it will involve a very long wait.
Chris Leslie
I understand my right hon. Friend’s frustrations, but I really do not think that the proposal on the table from the Commission would achieve the outcomes that he or I seek. We have to make concerted efforts to broker a deal where any FTT applies in any of the world’s big financial centres, all of which by the way have much to gain from a new and reliable revenue stream that supports jobs, growth and the developing world.
The Commission’s proposal falls short, especially because of its intended destination for the revenue, but I think that the difference my right hon. Friend seeks is this: we felt that there was a real window of opportunity to steer the agenda on a financial transaction tax and to persuade other countries that it was something seriously worth considering, but our Chancellor is out there at the ECOFIN meeting today, resisting under all circumstances. Indeed, he wrote a private letter to bankers the other day in which he indicated that he was not in favour of it at all—even though that contradicts some of his statements in this place. He is wrong to block wider discussion among the G20 and beyond.
The BBC’s Nick Robinson reported this lunchtime that our Chancellor asked what was the point in even having a conversation about the financial transaction tax and, apparently, whether it was
“the best way to spend our time”.
It is important that we address those issues, because the Government’s weak and defeatist attitude is an abdication of leadership and a total abandonment of the gains made for the cause at the G20 meeting in 2009. It is time that Britain stepped up to the plate and showed the leadership needed to broker a better deal by being open to the idea that it is possible to win the argument for a different approach. That is why we call on the Government to engage internationally—beyond the EU proposals alone.
The second major proposal in this multi-annual financial framework is for the Commission to change the correction mechanisms for countries that are the most significant net contributors to the EU. In other words, it proposes to end the UK’s permanent rebate. The rebate returns about two thirds of the difference between the UK’s contribution to the EU and the money we receive back. Let us be absolutely clear: the Commission’s proposals are totally unacceptable. Of all the 27 countries, only Germany is a higher net contributor to the EU budget than the UK, and we have the lowest per capita receipts from it. The common agricultural policy is a far bigger distortion of the EU budget than any correction mechanism such as the UK rebate.
This is a key test for the Prime Minister. He needs to put up a strong defence of our rebate if the language that he uses here in the House is to be matched by his deeds in those negotiations.
Chris Leslie
Everybody will be watching closely, including the right hon. Gentleman, to whom I am happy to give way.
Mr Redwood
What promises did the previous Prime Minister but one receive when he gave away a chunk of our rebate? I thought we were promised a reduction in agricultural spending, which would be very welcome.
Chris Leslie
I was not a Member at the time to which the right hon. Gentleman refers, but it is true that there have been changes to the UK rebate, although not to the majority of it. My understanding is that, in terms of money returned, the total amount of rebate has actually gone up, with €5.8 billion in the previous MFF round compared with €2.8 billion before, so the rebate is still a very significant gain for the UK.
There were changes to the common agricultural policy, although—I accept—not as many as people would have liked, but until we have further proposals from the Commission on reforming the common agricultural policy I am certainly not going to get into the business of urging the Minister to change the UK rebate. It is very important that the Government put up a defence of the current position and, indeed, try harder to engage with further proposals on the CAP. That is by far the bigger distortion. We need to pursue a stronger reform agenda and to have a CAP reform that is fairer to small farmers but does not lavish as much on wealthier players in the wealthiest countries. We need to tackle that anomaly as it is an outdated relic.
I am grateful to Business for New Europe’s pamphlet entitled “Rethinking the EU Budget,” which suggests some very important changes to EU competitiveness deficiencies, such as boosting research and development. It is also important that the Minister address the deficiencies in the structural funds. Few of those are helping to boost growth, when they ought to be getting investment moving into the economy. Above all, the MFF ought to contain far greater emphasis on a strategy for jobs and growth, where we know the Government have a blind spot.
The Commission and the European Parliament also need reminding that, without growth, we cannot solve the debt crisis, the banking crisis or the jobs crisis. Energy infrastructure projects, high-speed broadband and transport link improvements could all be brought forward within the MFF envelope and prioritised to boost employment and economic activity. [Interruption.] The Minister shouts from a sedentary position that that involves more spending, but we are talking about within the limitations of the budget. We do not wish to see the increases proposed by the Commission. The Minister should be out there arguing for a proper strategy for growth, and his failure to do so betrays Ministers’ and the Treasury’s blind spot on these issues.
The motion before us tonight talks tough on some of these issues and we will not oppose it, but it is important that this time Ministers do not flunk the tests when they get into the negotiations.
Mr Speaker
Order. A considerable number of Members are seeking to catch my eye. I remind the House that the debate is due to conclude at 19 minutes past 5 and that it would be seemly and courteous to allow the Financial Secretary five minutes to reply to it. Members can do the arithmetic for themselves. There is less than an hour for Back-Bench speeches and, as a consequence, I have imposed a five-minute limit on Back-Bench contributions with immediate effect, beginning with Mr John Baron.
Mr John Baron (Basildon and Billericay) (Con)
I have added my name to the motion because I very much support the Government’s attempts to reduce the Commission’s proposed budget. We must rein in the Commission’s spending, which is excessive, above inflation and goes against the direction of travel of Government budgets generally, as my hon. Friend the Financial Secretary has made clear from the Dispatch Box.
Taking into account changes to the rebate, our net contribution suggests that the increases are far worse for this country. In the previous Parliament, the total net contribution was around £19 billion. In this Parliament —over the next four or five years—it is set to rise to more than £41 billion. We often talk about big figures in this place, but what does that actually mean in terms of people’s perception of such expenditure? Let us consider the average starting salary of a police officer or a nurse, which is well below £30,000. For that £21 billion or £22 billion increase, we could have an extra 750,000 police officers or nurses, or, at less then £300 million each, we could have a further 80 hospitals.
Alternatively, if we were really interested in spurring on and encouraging growth in this country, given that a 1p cut in basic rate income tax brings around £4 billion into the Treasury, we could have a 5p cut in the basic rate of income tax. That certainly would encourage growth and make a real difference to this country’s economic outlook. Speaking of that, given that a 1p cut in small business corporation tax equates to £500 million, one could eliminate small business corporation tax for the increase we are talking about. If we really are serious about growth, I hope that that gives everyone an idea of the scope of the packages we could introduce, instead of just acquiescing in this monumental increase in the EU budget.
Mr Baron
No, because I do not have time and I want to push on. I do apologise.
The situation is made even worse by the fact that the European Court of Auditors has still not signed off the accounts after 16 years. It is unbelievable. Such a situation would simply not exist in the private sector. We would not be more than doubling our contribution to an organisation that has not signed off its accounts. We have no precise idea of how the money is spent. We need to take cognisance of the fact that it is a dire situation when auditors have not been able to sign off the accounts. It proves the lack of transparency that exists when it comes to EU spend.
I suggest to my hon. Friend the Minister that we have to be careful about the position that the Government take. Although our first position is that there should be no net increase at all in absolute terms, our fall-back position seems to be that we do not want any increase in real terms—in other words, that we will match inflation. At the moment, inflation is a touch over 3% across the eurozone. However, there is a risk that inflation could rise, and we should be careful what we wish for when talking about pegging our contribution to inflation.
This recession is unusual in that it is a de-levering recession caused by too much debt. The options available to Governments are to reduce spending, which is difficult in the present environment, to create growth—again, difficult, because people are paying down their debts—or to create an element of inflation in order to inflate the debt away. I suggest that the European Union, or certainly the eurozone, will explore that possibility and is currently exploring the option of quantitative easing on a massive scale. Despite the economic outlook, higher inflation is not an impossibility, particularly looking 12 months out. I ask the Minister to be careful what he wishes for when he talks about pegging our contribution to inflation, because inflation could very well rise shortly.
Kelvin Hopkins (Luton North) (Lab)
Although we are all going to acquiesce in this motion—I understand that there will not be a vote—and although I support the conclusion that we should not increase our spending on the European budget, and, indeed, that it should be reduced, I do not support some of the wording in the motion.
I agree that we should not increase our UK contribution to the EU budget, now or at any time. We have to look towards a world where we reduce our contribution very substantially. The right hon. Member for Wokingham (Mr Redwood) and others have mentioned the common agricultural policy. Many times, when sitting on the Government Benches in previous Parliaments, I have called for the abolition of the common agricultural policy. If it were abolished and we carried on subsidising our own farmers at the level they are subsidised now, we would have a massive reduction in our contribution to the EU budget.
The proposed changes to UK abatement and new taxes are unacceptable. We should decide what our level of taxes should be. The UK abatement was wrongly reduced in a previous negotiation on the common agricultural policy that did not result in anything beneficial for Britain. At the time, The Economist said that the deal was so bad that it could have been better to have had no deal. I agree. I support the Government’s efforts to reduce the Commission’s proposed budget. The numbers that are being talked about are clearly unacceptable. It is regrettable, too, that all these things are governed by qualified majority voting instead of unanimity, but there we are.
I do not care for the wording of the motion. It refers to “economic fragility in Europe”. Yes, the situation is certainly very fragile at the moment, and we will not recover from that fragility until we have more common sense about the eurozone. Certain members should be allowed to recreate their own currencies, find an appropriate parity for their currencies, and then reflate behind those currencies. That is the way forward for those countries, and it will benefit the eurozone and the European Union, and indeed the world economy overall, when that is allowed to happen.
Mr Cash
I should like to correct the hon. Gentleman on something. The multi-annual financial framework is governed by article 312 of the treaty on the functioning of the European Union, under which:
“The European Council may, unanimously,”—
in other words, we could have imposed a veto—
“adopt a decision authorising the Council to act by qualified majority when adopting the regulation”.
That means that it is unanimity first, and then QMV.
Kelvin Hopkins
I would like to see Governments, and in particular our Government, using their veto from time to time in a more bold and radical way.
The wording that I am particularly concerned about is that which talks about
“tough decisions being taken…to bring deficits under control and stimulate economic growth”.
Those things are incompatible. If one wants simply to bring down budgets by cutting, that will not stimulate economic growth, but reduce it. The wording should be the other way around. If one wants to bring deficits under control, the best way to do so is to stimulate economic growth. Economic growth would bring down unemployment, increase tax revenues and reduce the burden of benefits.
If we encourage all the member states of the European Union to deflate collectively, that is the route to depression. There are lessons from the 1930s on that. I hope that we will quickly come to our senses and realise that we are in a pre-1930s situation. If we do not reverse it, we may head towards depression.
In questions to the Chancellor the other day, I talked about the Labour Government of 1945, who had a gross debt much larger than we have now. They chose not to cut spending, but to create the welfare state, bring in the national health service and run a full-employment economy. Full employment was sustained for two and a half to three decades. That is what brought the deficit under control, and that is what we should do again.
There are other bad examples from history, which I have mentioned before. After the first world war, there was the Geddes axe. There was a deficit after the war—there are always deficits after wars—so we thought that we should cut our way back to a lower budget. What happened, of course, was that for a decade we had low growth, high unemployment and the deficit got worse, not better. We are in danger of doing that again.
In the short term, we have to spend. We could reduce our contribution to the European Union budget and spend some of that money on areas of labour intensity with low import content. Those areas are obviously construction and the public services—precisely the areas that are being cut. Cutting is exactly the wrong thing to do and we should do the opposite if we are serious about bringing the deficit down. That would be beneficial for everybody because the people who do not have jobs would have jobs, the public services that are now suffering would not suffer, and the people who are dependent on public services would not be hurt.
I agree with the objective of reducing our contribution to the European budget and constraining it in the short term, but I do not believe that we should emphasise simply cutting deficits without recognising that that could make unemployment rise and the deficit get worse in the long term. That could lead us into a very serious economic situation.
Mr Brian Binley (Northampton South) (Con)
I welcome this motion and the Government’s efforts to trim back the grandiose desires of the European Commission.
With your permission, Mr Speaker, I will take the Minister back to the Maastricht treaty because it is a pretty good place to start. In 1992, that treaty created the European Union. I am sure that the Minister has read it on many occasions. Article A states:
“This Treaty marks a new stage in the process of creating an ever closer union among the peoples of Europe”.
Would Members believe that the sentence continues by saying
“in which decisions are taken as closely as possible to the citizen”?
The European Commission has clearly recognised the great strength of the first part of that sentence, but I fail to see where it has recognised the import of the latter part.
It seems to me that our Government have not really got behind the spirit of that part of the Maastricht treaty. Perhaps it is time that they looked at that sentence again, for democracy is about connection with the people and we have seen a little less of that than I would have liked over recent weeks in this place.
For too long, the European Union has failed to recognise that edict. The very fact that the European Commission could propose a 5.9% increase this year shows just how out of touch it is, at a time when Europe is raging under the constraints of a defunct EU currency. The whole European people face a future that could well be made much more difficult by the arrogance of those who created a currency for political reasons without considering the economic constraints.
Every time I go to Europe, I come back with the view that the European Commission does not live on the same planet that most of us live on, that it is out of touch with the people and that it needs to be told again and again about article A. It does not understand what my grandmother would have told it—that when someone is in financial trouble, there are only two things to do, which are spend less and earn more. There is no other way out of any financial difficulties.
The Government suggest that there is another way—mediaeval coin clipping. I say to the Minister, who is looking quizzically at me, that that means financial easing. People went around cutting little bits of silver off coins, and so devalued the currency. That is exactly what the Government are doing. I point out that there is a cost to pay for coin clipping, and it will be borne by our children and grandchildren, which I find totally immoral. It is about time that we faced up to the real purpose of adding to our inflationary burden. The Government think it is a cheap and easy way of getting out of our deficit problems, but have no doubt, there will be a cost to pay in the future.
I want to come on to the role of this Parliament. I welcome what the Government have done to get the 5.9% additional contribution down, and I congratulate them. However, I believe they have to do more in Europe. They have to point out article A of the treaty to the EU, and particularly to the eurozone. They have to point out that if democracy is to succeed, we have to make every effort to get closer to the people, not to take government away from the people. The truth is that the whole European adventure has achieved the latter, and it is about time that our Government got the point that they ought to aim for the former.
Geraint Davies (Swansea West) (Lab/Co-op)
I will keep my comments brief. I believe we all agree that we do not want to see an increase in the European budget. We all understand that a €1 trillion fund is being established to bail out the euro currency, and if push comes to shove we all understand that we are being asked for more money for the International Monetary Fund. We all understand that we in Britain are facing massive constraints on public spending. However, we should get our facts clear.
As I said in my intervention, I understand that what is being proposed is that the 2013 budget will be higher, and will become the fixed 5% cash increase ceiling between 2014 and 2020. However, it is said the total amount of the budget as a share of EU gross income will fall from 1.12% to 1.05%. I support what the Government are saying, but let us be fair about what is happening. There will be a cash increase ceiling, and the budget will fall in real terms as a share of overall EU income.
Stephen Williams (Bristol West) (LD)
Will the hon. Gentleman recognise that one reason for that fall as a proportion of total European income is that some elements that are currently within the budget are being taken out of it and accounted for in a different way?
Geraint Davies
No, I do not accept that, but I do accept that there need to be structural changes in the budget, such as a reduction in common agricultural policy funding and more focus on growth, investment and tooling up Europe to compete with emerging markets. All those factors are important. Government Members who think this is all a complete waste of money and that we would be better off spending it at home on chip shops miss the point of having a commonality in research and innovation, and of making Europe more successful for the future. The Government seem to be completely ignorant of any strategic undertakings or documentation that come out of Europe on how to push smart, sustainable and inclusive growth. That is missing from the Government’s armoury—they focus always on cuts and never on growth, and they are missing the wood for the trees.
On the Tobin tax, I clearly do not support a tax when 80% of it would fall on Britain and when it would undermine Europe’s competitiveness. I share the view of the shadow Minister, my hon. Friend the Member for Nottingham East (Chris Leslie), that we should look for an international basis for such a measure. That said, we need to understand that an international Tobin tax would fall primarily on the US and the UK.
My understanding is that the rebate has been frozen at £3.2 billion a year for the next seven years, but we need to realise that if the gross contribution is increasing, our rebate is going down proportionately. The Prime Minister should argue harder for the rebate to increase at least at the same rate as the increase in our gross contribution. Without further ado, I shall come to a conclusion, because I know that many hon. Members wish to speak.
Mr William Cash (Stone) (Con)
First, I should like to demonstrate the extent of the documents that I will discuss in the next five minutes, just to give some indication of what is going on.
Secondly, as Chairman of the European Scrutiny Committee, I had the opportunity to go, on behalf of our national Parliament, to a conference on the multi-annual financial framework. It was a complete farce. Mr Barroso, our Minister for Europe, Ministers from other countries and their permanent secretaries and so on were all there. I was completely staggered by their inability to have the faintest idea of what was going on. I said to them, “You are living on another planet!” Somewhat unusually, I ended up being congratulated by our UKRep representatives on at least spelling that out. It is devastating how far removed those people are from the realities of life, as my hon. Friend the Member for Northampton South (Mr Binley) said.
On the structural questions, the proposals—the financial transactions tax and the change to greater own resources—are fundamental changes. The chairman of the European parliamentary committee, Mr Alain Lamassoure, who gave us the benefit of his many speeches, and who has written a huge pamphlet on the subject, is living on another planet. In the meantime, a meteor has hit planet Europe and huge chunks are falling off it, but it is still spinning, even when the whole thing is disintegrating in front of our eyes. These people are astonishing.
With respect to the Minister, I look to the future with some concern, if only because we could end up with another increase in spending despite the blandishments of the motion. Delighted as I am that right hon. and hon. Friends have signed the motion, I issue that cautionary note.
Mrs Main
I would like to test the resilience of the proposal about whether we have to pay more, and say, “No more will we pay,” and see what happens. We for ever capitulate when we are pressed to the point. I would like to say, “This is the will of this sovereign Parliament, and we will not pay any more”. We should test that
Mr Peter Bone (Wellingborough) (Con)
The Prime Minister said at the Dispatch Box that he wanted to gain more reductions, but seemed to imply that he was held back by qualified majority voting. Does my hon. Friend believe that the Prime Minister has a veto, or is it down to QMV?
Mr Cash
I have already quoted article 312. There is no doubt that the whole process can be blocked by unanimity, but once the European Council has made a decision to go ahead, the decision reverts to qualified majority vote. I think that is right, but the Minister will correct me if I am wrong.
I want to deal with one fundamental question that came up over and over again. That conference was regarded as important because it supposedly carried the national Parliaments with it. That was partly the case, although it did not apply to the United Kingdom Parliament—certainly not to me in my capacity there. Growth is the key question, but, over that too, they are living on another planet, because their idea of growth simply means more investment of public money. I had to ask them, “Where is the money coming from?” There were about 300 people there—I was a little bit in the lions’ den, but it was worth doing simply to see the unreality. As T. S. Elliot said:
“humankind cannot bear very much reality”.
When I asked, “Where’s it coming from?”, they said, “The taxpayers”, but it is not coming from the taxpayers; it is coming from small business men all over Europe, who, when running their businesses profitably, can then be taxed. But what if they cannot run them profitably? Here we have the problem with social employment laws, and I had the temerity to mention to them things such as paternity and maternity leave, the working time directive, the temporary agency directives and the rest. I told them about the scale of redundancy payments. We saw the Channel 4 programme the day before yesterday on pensions in Greece. Apparently, when people leave work, those pensions remain, for the rest of their lives, equivalent to what they had earned per year when working.
The growth must come from the small and medium-sized businesses. I have here another of these documents—none of them ever see the light of day, but I have the pleasure of being able to tell the House about it today. This one is entitled, “Towards a European Consensus on Growth”, but it, too, is completely and utterly unrealistic. There is no serious understanding of where the money comes from or of the fact that the result of having no growth in Europe is that there is no growth here either, because 40% of our economy is tied in to Europe. But these people will not change the structural system or the labour laws.
The EU representatives are talking and talking, but they are doing and doing nothing, and as a result, this black hole, whether Greece, Italy, Spain or wherever else in the EU, is condemned to getting deeper and blacker, simply because there is no realisation of where the money comes from in the first place. That is the problem at the root of this multi-annual financial framework. The whole project is based on a con trick of monumental proportions. They believe that they simply need to spend money on infrastructure and bridges—I would like to know where the contracts are going and how they are composed—but that does not solve the problem of the small businesses that simply cannot operate in the kind of environment that Europe now represents. That is all I need to say. This is a dead parrot.
Mr Nigel Dodds (Belfast North) (DUP)
It is always a pleasure to follow the hon. Member for Stone (Mr Cash). I well recall when the House, not that long ago, passed an amendment in his name under which there was to be no annual increase in the EU budget. It was a wise amendment, and I was delighted that the House supported it.
I want to reflect on what happened last year—the Financial Secretary mentioned this—when the proposal was for a 6.2% increase in the annual budget. Despite all the tough talk, we ended up with an increase of 2.9%—at a time when budgets are being slashed in many areas vital to our constituents—and people were mystified about why, after all the tough talk, we had agreed to an increase. Today the Financial Secretary has spoken those dreaded words—“qualified majority voting”—and I am worried that we will end up in a similar position this year, despite all the tough talk. I am particularly concerned because I recall the tough talk not just on last year’s increase, but when the question of the European External Action Service came before the House and we were told that it would mean no increase in the budget. It transpired, however, that there would be a £400 million spike increase in the budget for that.
I was also worried when I saw that, after the European Parliament debated the matter on 26 October in Strasbourg, 52 of the 120 MEPs who voted against the annual increase were UK Members. It does not augur well for gathering together a coalition of those who are prepared to stand against this increase, when more than 420 MEPs voted for it.
I am glad to say that the Democratic Unionist party Member of the European Parliament was among those who voted against, and I am delighted that, on this occasion, every single member of the UK delegation to the European Parliament who actually voted, voted against. I have to note, however, that five Lib Dems, one Plaid Cymru Member and two Greens abstained, which I think is amazing on a vote that attracts such consensus in this House. I am sure that their colleagues here will want to ask their European colleagues exactly why they decided to abstain rather than vote against.
The proposal for an increase of £834 million in the UK contribution, which would bring our overall contribution to more than £14 billion indicates just how out of touch are the Eurocrats and many in the European Parliament. It also illustrates why we need a referendum on our relationship with the European Union. We have a situation in this House today where we are going to agree to what I think is an excellent motion signed by many excellent Members and it will be passed unanimously. People in the country will think, “That’s it, then. The sovereign Parliament of the United Kingdom has declared its position.” Yet, there have been hints, and the Financial Secretary is already paving the way for a further statement at some point, about some increase because we are subject to a qualified majority voting process. We are not masters of our destiny in respect of something as vital as the spending of almost £1 billion of taxpayers’ money.
That goes to the heart of the debate about our relationship with Europe: the incapacity of this House, of Members on all sides, even when they agree, to implement something on which the vast majority agree —virtually everyone apart from a few Lib Dem and Green MEPs, it appears—and yet we cannot do anything about it. This illustrates far more eloquently than anything any of us could say why we need this referendum sooner rather than later, so that we can address these fundamental inadequacies in the entire process, which leaves us sitting here today, talking about an issue, passing resolutions but powerless in this sovereign Parliament to do anything about it. I hope that the Government and all Members will take that on board.
Richard Drax (South Dorset) (Con)
What a pleasure it is to follow the right hon. Member for Belfast North (Mr Dodds). It is an honour, indeed, and I entirely agree with everything he said.
It is encouraging to hear our Front-Bench team mention words such as “resolve”—a word that seems to have disappeared from the English dictionary for a while. I wish they would follow up their words with action. What further evidence do we—the Government, the country, the world—need to see to show that this whole federalist nightmare is not working? It is undemocratic and corrupt.
I have people in my constituency who are trying to borrow £10,000, £20,000 or £30,000 to keep their businesses and jobs going. They simply cannot get it. Yet we are prepared to give Greece—and, I suspect, Italy—billions and billions of euros to a cause that is lost. It is quite beyond me, quite beyond my constituents and quite beyond most people in this country.
Both motions being debated today will, in their own ways, grant further powers and resources to the EU —despite our best intentions. We have heard that the Government have succeeded in reducing the annual budget increase from 2011 from 6% or thereabouts to 2.9%. I welcome that. Like my hon. Friend the Member for Stone (Mr Cash), I hope that it will remain at that level.
As to the multi-annual financial framework, these words are marvellous, are they not? The MFF—a slip of the tongue could get one into all kinds of trouble—now commands our attention. I am relieved that the European Scrutiny Committee has recommended that these documents are seen in this House. Only here can such decisions be taken. The absence of precise details about the Commission’s proposal is concerning, and I note that because of that absence, the European Scrutiny Committee has suggested that we focus on the Commission’s expenditure ambitions and revenue proposals.
The Government estimate that the overall MFF budget represents an average increase of £13.5 billion a year over the period. The UK contribution to the MFF between 2014 and 2020 is provisionally estimated to be 14.5% pre-rebate and 11.5% post-rebate. I agree with the Government that such extravagance is completely unacceptable, particularly when the level of public debt in member states will be 50% more than it was in 2007. The Commission argues that much of the increased expenditure is already committed to EU-wide projects, and suggests that there will be no increases in administration costs. That is hard to believe, given that the Government identified £1.1 billion of administration costs in this year’s budget alone. I am glad to hear that there is no possibility of the UK’s agreeing to the level of expenditure contained in these documents.
The revenue proposals are equally serious. For obvious reasons, the EU’s ultimate aim is to finance the budget entirely from so-called “own resources”—which are, of course, nothing of the sort, and will become so only after the EU has levied a series of new duties, taxes and tariffs on member countries for its own benefit. The documents suggest a financial transaction tax, a financial activities tax, the auctioning of revenue from the EU emissions trading scheme, an air transport tax, a new VAT, an energy tax, and an EU corporate income tax. That is utter madness. It is for us in this House to decide issues of national sovereignty. The European Commission deludes itself in stating that such measures do not affect our right to rule ourselves. Document 12478/11 states:
“It should also be stressed the proposals for new ‘own resource’ have no impact on national sovereignty.”
I strenuously disagree.
Finally, there is the question of the rebate. Perhaps most important is the suggestion that the current financing system must
“simplify the existing correction mechanisms”.
In plain English, that means the UK rebate, which is now in the Commission’s sights. Our relative prosperity is held against us, as is the open-ended nature of the rebate, but without it our net contribution to the EU as a percentage of national income would be twice as large as France’s contribution and 50% larger than that of Germany.
In these dying seconds, I urge the Government please, please to begin to stand up for our country and our future.
Mr Denis MacShane (Rotherham) (Lab)
I stand as a resolute Thatcherite on this question. In 1940, Polish pilots came and grappled with the enemy, getting much closer than our pilots while risking their lives, and shooting down proportionally many more planes. Forty years later, Polish Solidarity helped to dig the grave of European Communism. What is our response? Today Poland is the fourth larger contributor to the UK rebate, despite being a much, much poorer country.
That is why, in the 1980s, the Prime Minister—now Lady Thatcher—was happy to see Britain’s contribution to the European Community budget, as it was then, rise from £656 million in 1984 to £2.54 billion in 1990. During the same period, the EC budget grew threefold. When taxed by Labour Members of Parliament—including my right hon. and good Friend the Member for Blackburn (Mr Straw), who said, “She has come back from Brussels, hauled down the Union flag and hauled up the white flag of surrender to Europe”—the Prime Minister said “No, no, no: we must help our new friends and encourage growth in the economies of the countries that are joining Europe.” Well, we are a different Britain now. We do not like the Poles, and we do not like Poland. We are saying to the Poles, “Keep signing a very large cheque for our rebate.”
There has been much talk about unaccountable transfers of money. May I draw the House’s attention to one very unaccountable and huge transfer of money? I refer to the £40 billion that it is proposed that we should give to the International Monetary Fund, which is unaccountable and secretive and whose staff salaries make the average EU salary look like pauper’s pay. That sum—£40 billion—is more than the entire amount raised in corporation tax in Britain each year. It is bigger than the combined budgets of the Foreign and Commonwealth Office, the Ministry of Defence, the Department for International Development, the Department for Culture, Media and Sport, and all Departments except for the big spenders who have responsibility for costly areas such as the NHS and social security. We are happy to send that £40 billion to Washington with barely a nod or a debate in this House, but it is a far bigger sum than any amount being imposed in respect of Europe.
I agree with the points about maintaining budget discipline, but I ask the Minister to confirm in his winding-up speech that from 2014 to 2020 the EU budget is due to increase by 11%, which is a rise of well under 2% per year—far below current inflation rates in this country. I have every sympathy with the Minister, because I have done some of this work in Europe myself and, frankly, dealing with EU budget questions makes the Rosetta stone translation look like child’s play.
The bottom line is that the EU budget will not go above 1% of Europe’s gross national income because it cannot do so. There are debates to be had about how this money should be spent, and 85% of it comes straight back to nation states, including Britain, to spend on agriculture subsidies and structural and regional funds. If we did not have a common agricultural policy, we would have to have a British agricultural policy, and I can assure colleagues that our farmers’ lobby would extract a far bigger share of taxpayers’ money than it does under the CAP.
Mr MacShane
No, because I want to conclude.
This is not just a European question. The signal we are sending around the world is that we are open to business but are closed to foreigners, and that we want inward investment but want to disconnect from Europe. We are sending a very negative and dangerous signal that we do not like the biggest single market in the world and we do not want to be full partners with the rest of the 500 million people living under the rule of law and democracy.
I understand Front-Bench colleagues’ interpretation of the Robin Hood tax—the fair trade tax—but I feel a lot happier in the current economic crisis standing with the spirit of St Paul’s rather than the spirit of bean counters.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Many Members still wish to speak, so I ask Members to be as brief as possible.
Mr Peter Bone (Wellingborough) (Con)
It is a great pleasure to follow the right hon. Member for Rotherham (Mr MacShane), although I did not agree with a single word he said.
I rise to support the motion in the name of the Financial Secretary to the Treasury, which is signed by me, my hon. Friends the Members for Kettering (Mr Hollobone), for Bury North (Mr Nuttall), for Basildon and Billericay (Mr Baron), for Worthing West (Sir Peter Bottomley), for Brigg and Goole (Andrew Percy) and for Harlow (Robert Halfon), and my right hon. Friend the Member for Wokingham (Mr Redwood). It is disappointing that no Member from Her Majesty’s official Opposition or any Liberal Democrat felt able to sign the motion. How can anyone disagree with a motion that says that the EU budget proposed by the Commission is
“completely unacceptable and an unwelcome distraction from the pressing issues that the EU needs to address”,
that declares it
“supports the Government’s ongoing efforts to reduce the Commission’s proposed budget”,
and that states that
“the Commission’s proposal for very substantial spending increases compared with current spend is unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe”?
Mr Bone
No, I am not giving way.
How can anyone disagree with a motion that states that the
“proposed changes to the UK abatement and new taxes to fund the EU budget”
are “totally unacceptable”?
Why on earth did Opposition Members and our Liberal Democrat coalition colleagues not support the motion? May I suggest that Labour did not do so because of embarrassment, as—
Mr Bone
I must go back to talking about Labour, and I suggest that its approach arises from embarrassment, because in its 13 years in power it rolled over to each and every command put to it by the European Union. The lack of Members on its Benches just goes to increase Labour’s embarrassment. Labour does not understand how a Government could put British interests first and stand up to the European political elite. I suggest that the approach of our Liberal Democrat partners does not arise out of embarrassment; it arises because they love European bureaucrats spending British money without any proper democratic accountability to the British people. If the Lib Dems had their way, we would be in the euro and in a complete financial mess. Of course they represent 8% of the British electorate, but they are likely soon to be overtaken by the United Kingdom Independence party, which is at 6% in the polls.
We have a British bulldog of a Prime Minster who is taking the fight to Europe and putting British interests first, second and third. At least on the Conservative Benches there is unity on wishing the Prime Minister success in reducing the budget. We have a superb Minister, and we want the message to go out that our Prime Minister is going to Europe to get a reduction in the budget and to explain to the Europeans that they cannot spend and spend and spend. My speech goes on to say that “the Deputy Prime Minster thinks”—well, actually that is where it ends.
Stephen Williams (Bristol West) (LD)
I am glad to have the opportunity to speak, especially after that generous build-up. We are having a curious discussion. We have had many European Union discussions in the past few months, and I cannot recall my hon. Friend the Financial Secretary being received with such warm accolade on every occasion as he has been on this one. I am sure that must have cheered him. We saw the curious alliance of Conservative Eurosceptics and Labour Eurosceptics when there was discussion of the possible demise of the eurozone. However, on this issue we might actually have tri-party agreement. May I assure my hon. Friend the Member for Wellingborough (Mr Bone), even though I am a Europhile within the Liberal Democrats—that phrase must make him shudder—that my party has usually been at the forefront of calling for reform from within the European Union? We do that because we want the European Union to work. We want it to be a success and we are certainly not blind to its shortcomings.
Chris Leslie
Will the hon. Gentleman therefore confirm that Fiona Hall, the leader of the UK Lib Dems in the European Parliament, posted an article on 15 July that said:
“It’s time to consign the UK rebate to history, along with the rest of Thatcherism”?
Stephen Williams
That is not a position of this coalition Government at Westminster. As a good democrat, the hon. Gentleman will recognise that decisions that we make in local councils or in the European Parliament, where people have their own electoral mandates, do not bind parliamentarians in this House. That is the way in which our democracy works and we take a different stance on the matter here.
The European Commission has asked for a 5% budget increase, from €966 billion to just over €1 trillion, for the second half of this decade. Most of our constituents would find it extraordinary that a request is being made for the EU budget to wax while people in every member state are having to endure the waning of their budgets. It was right that last December five large net contributors to the EU budget—the UK, Germany, France, the Netherlands and Finland—called for a freeze in the EU budget for the second half of this decade. I would like the Minister to tell us whether the Government are seeking a cash freeze or a real-terms freeze.
Whatever the level of the budget, it certainly is a budget in drastic need of reform. The common agricultural policy still accounts for more than 45% of the European Union’s spending, whereas research and development accounts for only 6.7%. The Commission is actually proposing a switch between those budgets, but that switch is made possible only by the Commission’s call for a larger budget. It is simply ludicrous for the European Union to continue to have agriculture as its largest area of expenditure, rather than the industries of the future—industries where the UK is well placed. We are currently the largest recipient of EU funds for research and development, and that is the budget that should be expanded. The priority for the United Kingdom coalition Government should be to negotiate a major shift within the EU budget and certainly within the existing level of resources. To clarify the issue for the hon. Member for Nottingham East (Chris Leslie), I say that our budget rebate should remain while the EU budget remains in its current unreformed and out-of-date state.
On sources of revenue for the European Union, I share the sentiments expressed by the Opposition Front-Bench team that it would not be right for the EU to take on the personality of a federal state and have taxes paid directly to it, whether that be VAT or the proposed financial transactions tax. There is a very good case for a financial transactions tax being levied once we can have international agreement among the global financial centres, many of which lie outside the European Union, but there is no case at all for the European Union itself to pinch that money, which the people who have campaigned for the Robin Hood tax have earmarked for other purposes. May I reassure my colleagues that the Government are right to call for a freeze in existing EU budgets? However, they should also vigorously press the case for reform.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. There are three speakers and eight minutes.
Jacob Rees-Mogg (North East Somerset) (Con)
It is a great pleasure to follow my hon. Friend the Member for Bristol West (Stephen Williams). I am tempted to say that there is more rejoicing in heaven over one sinner who repenteth than over the 99 who are not in need of repentance.
I have very little time, so I shall address the veto briefly. It is crucial to be clear that there is a veto on the multi-annual financial framework, which applies from 2014, but not on the annual budgets between then and now. The Government are therefore in a very strong negotiating position for that framework but not necessarily for the annual budgets. They are also in a very strong negotiating position regarding the own resources issue, which is also subject to the veto.
I must confess that I rejoiced at the Minister’s speech because we have been hearing for the first time since 1997 a proper and solid view on how we should interact with our European friends and neighbours. However, there is one issue to which I should like to alert Her Majesty’s Government. The budget is drawn up in euros and we have to be careful about what currency that might actually be in the lifetime of the budget. It is of concern to me that the euro might collapse between now and the end of the budget, and that if it were to be a German euro it could be substantially higher in sterling terms than the current euro. We ought therefore to get some acknowledgement of the currency risk in any budget negotiations so that we can protect our position in sterling. That really is a crucial point.
I want to mention own resources, because, as my hon. Friend the Member for South Dorset (Richard Drax) said, they are not own resources. As Margaret Thatcher once said, it is our money, and we must not let the EU get at our money if we need it for our own purposes.
Finally, as time is short and you want me to wind up, Mr Deputy Speaker, let me mention the financial transactions tax. This is the work of the devil and it must be opposed. We have heard a lot of wishy-washy stuff about “If we get global agreement.” Well, thank God for Lee Kuan Yew, because I think we can be confident that the good people of Singapore will say no to this awful nonsense. A financial transactions tax would not tax invisible, non-existent people: it would fall on the citizens and subjects of the United Kingdom. We must oppose it. We must be robust in opposing it and we must not let the European Union get its grubby little hands on it.
Andrew Percy (Brigg and Goole) (Con)
It is a pleasure to follow my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), who made a fantastic speech. I wanted to address the dangerously pro-European speech of the right hon. Member for Rotherham (Mr MacShane), but sadly he has left the Chamber. We heard from him the usual nonsense about how anybody who opposes the European Union in some way hates foreigners, which is not the case at all. I was going to say to him that he should ask the people of Rotherham what they want their money to be used for and put that to a referendum. They might keep re-electing him out of some sort of strange fondness, but I strongly suspect that they do not agree in the slightest with his views on the European Union.
I was intrigued by the words of the hon. Member for Nottingham East (Chris Leslie). Obviously, we on the Government Benches are most grateful for his support for the motion. I was not quite sure whether he was suggesting that, had he been here during the previous Parliament, he would have made sure that the rebate that the previous Government gave away without any reform would not have been given away. He certainly seemed to be making a pitch for a better job, if nothing else.
I was happy to sign this motion for the simple reason that I listen to the constituents of Brigg and Goole. I am not the brightest individual, as anyone who has heard my speeches will confirm, and I have not read through all the relevant documents. However, when I speak to my constituents about what they want to have done with their money, they tell me that the last thing they want is for it to be sent off to an institution with massive bureaucracy whose accounts have not been signed off for 16 years, only for large parts of it to be spent elsewhere. I am a passionate advocate of our withdrawal from the European Union, and I have listened to my constituents. Following the recent vote, I received hundreds of messages telling me that I had done the right thing, and only one from an individual telling me that I had done the wrong thing—
Andrew Percy
No, it was a constituent who informed me that we could not have a referendum on the European Union because the people do not understand the arguments—the usual patronising guff that comes from pro-Europeans.
I fully support the motion, which is why I put my name to it, but we should be going much further. Apart from leaving the European Union, we should be going much further while we are in it to ensure that our budget contribution is substantially reduced. My constituents simply cannot understand why an ever-increasing amount of their hard-earned money is being sent off and spent by that institution.
Andrew Bingham (High Peak) (Con)
Does my hon. Friend agree with my constituents who have written to ask me why the European Commission just does not get it? They point out that, when they are keeping their own budgets under close control, the Commission should be doing the same, instead of proposing these continual increases.
Mr David Nuttall (Bury North) (Con)
As ever, it is a great pleasure to follow my hon. Friend the Member for Brigg and Goole (Andrew Percy), who speaks straightforward common sense. I also rise to support the motion. We have had a good debate, and I want to make some brief points.
First, we must not lose sight of the fact that, under the proposed new EU budget, there remain very few net contributors to the budget. Perhaps if more EU nations contributed to it, the EU might become a more prudent organisation. Secondly, I agree with the wording of the motion that states that the Commission’s proposal for an increase is
“unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK”.
Those words would be a good candidate for the winner of the understatement of the year competition.
The Government state, in paragraph 97 of their explanatory memorandum on the EU budget, that their provisional estimate of the UK contribution to the next EU financial framework is 11.5%, after the UK rebate has been taken into account. The Commission’s proposed ceiling for EU payments within the financial framework over the period from 2014 to 2020 is €972 billion, so a UK contribution of 11.5% on that level of EU payments would see this country paying in almost €112 billion, which is about £96 billion at an exchange rate of £1 to €1.6.
Mr Cash
Is my hon. Friend aware that, according to the European Commission’s proposal for the lump sums “adjusted for relative prosperity”—the annual lump sums relating to the period from 2014 to 2020—Germany’s would be adjusted to €2.5 billion and the United Kingdom’s to €3.6 billion, which is more than Germany’s?
Mr Nuttall
No, I was not aware of that, and I am grateful to my hon. Friend for bringing it to the attention of the House.
This country will need to contribute about £70 billion to the EU budget during the Parliament that will run from 2015 to 2020. Finally, the EU is proposing a substantial extension of its ability to collect its own revenues by introducing new, EU-wide taxes—the so-called own resources decision. It is also proposing a new, dedicated EU VAT and a new financial tax. And, just to rub it in, it is proposing to end the UK’s rebate.
EU officials should spend more of their time ensuring that eurozone nations start to live within their means and less time devising new ways to tax my constituents. The EU wants to spend more and wants the UK to pay more. The EU wants to scrap the UK rebate, and the UK wants to bring in new Euro-taxes. To each of these, and to echo the words of Baroness Thatcher, it is absolutely right that our Government should say no, no, no.
Mr Hoban
This has been a helpful debate. It is good to see that harmony has broken out on the EU budget—something that some of us thought was unlikely. There has been a clear expression of view across the House that the EU Commission’s proposals for increases, not just in the 2012 budget but in the multi-annual framework, are excessive and need to be curbed. I welcome the support for the Government’s approach to building a coalition of allies to curb the increases and seek to restrict the increase in budget to no more than a freeze in real terms.
I want to correct the misconceptions of one or two Labour Members. The hon. Member for Nottingham East (Chris Leslie) lectured us on the need to stay firm on the rebate. That was an extraordinary position, given what happened under the previous Government. He said that the UK rebate had gone up in cash terms since the 2005 deal, but let me tell him that the OBR’s forecast says that, thanks to the giveaway by the previous Government, our rebate falls from £4.2 billion in 2009-10 to £2.7 billion in 2010-11. That is the cost of having a Labour Government in office when these debates are being held in Europe.
The right hon. Member for Rotherham (Mr MacShane), who I notice is not in his place, said that Poland was the fourth largest contributor to the UK abatement. Well, he should get his facts right; it is actually the sixth largest. But of course Poland is the largest net recipient of funds from the EU, and our support for developing the Polish economy far exceeds its contribution to our rebate.
In this settlement, we are looking for a rebalancing of funds to help economic development in those accession countries to give a spur to the economy, and that is in the long-term interest of the UK economy. The right hon. Member for Rotherham said that the EU budget was capped at 1% of EU gross national income. It is not. If one looks at what is on and off-budget, one sees that on average, over the course of the financial framework, EU spending is 1.11% of European GNI, in breach of that condition. He and the hon. Member for Swansea West (Geraint Davies) were also misled by the presentation of the numbers. It is clear, and the information in our report demonstrates clearly, that the EU Commission proposes a real-terms increase in spending, and that is simply unacceptable when countries across the EU are trying to curb their deficits and tackle their public spending.
We will take a tough line in the negotiations on the budget and the financial framework. We want to ensure that Europe lives within its means rather than seeking to expand its means with new taxes and expanding its own resources. Europe should spend the money it has wisely and well. I hope that the House will support the motion before it today.
Question put and agreed to.
Resolved,
That this House takes note of European Union Documents Nos. 12478/11 and Addenda 1 and 2, 12474/11, 12480/11, 12483/11, 12475/11 and Addenda 1 to 3, and 12484/11, relating to the Commission’s proposal on the next Multiannual Financial Framework (MFF), 2014-20; agrees with the Government, that at a time of ongoing economic fragility in Europe and tight constraints on domestic public spending, the Commission’s proposal for very substantial spending increases compared with current spend is unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe to bring deficits under control and stimulate economic growth, that the next MFF must see significant improvements in the financial management of EU resources by the Commission and by Member States and in the value for money of spend and that the proposed changes to the UK abatement and new taxes to fund the EU budget are completely unacceptable and an unwelcome distraction from the pressing issues that the EU needs to address; and supports the Government’s ongoing efforts to reduce the Commission’s proposed budget.
Credit Institutions and Investment Firms
(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That this House considers that the draft Regulation on prudential requirements for credit institutions and investment firms (European Union Document No. 13284/11 and Addenda 1-4) does not comply with the principle of subsidiarity for the reasons set out in the Annex to Chapter 1 of the Forty-second Report of the European Scrutiny Committee (HC 428-xxxvii); and in accordance with Article 6 of the Protocol on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the presidents of the European institutions.
I am pleased to have the opportunity to discuss the European Union’s proposals on prudential requirements for the financial sector, and I welcome the Scrutiny Committee’s thorough report on the issue. I find myself in a slightly odd position today, in that the motion before us today, which stands in my name, was tabled by the Committee. The Committee has done a fantastic job in identifying this issue around subsidiarity, and we shall be supporting the motion.
Mr Cash
My hon. Friend would need to be only half a minute in for the point that I am about to make. There are some recommendations sculling around in the Procedure Committee and the Liaison Committee that the Minister would not necessarily have to reply to the questions put forward by the European Scrutiny Committee and by the Chairman. Is my hon. Friend aware of that?
Mr Hoban
I am indeed aware of that and I think it is a good thing. Although my hon. Friends and I see eye to eye on many of these issues, there may be an occasion when a reasoned opinion is put forward which the Government do not quite agree with. That would put the Government and the Committee in a strange position.
I agree with the Committee that the Commission’s co-proposals on prudential requirements raise serious concerns over subsidiarity and, as drafted, the proposals seriously undermine the efficacy of the Basel reforms in the EU. As argued in the Committee’s report, the proposals for maximum harmonisation will severely restrict the ability of member states to conduct macro-prudential policy. They limit the ability of member states to respond to the unique characteristics and risks of their market, and where necessary, go beyond minimum standards to ensure financial stability in their own jurisdiction.
We cannot risk being straitjacketed into a one-size-fits-all approach in setting prudential levels. Across Europe, no two financial systems are the same, and in a system where euro area banks face the same centrally set interest rate, it is even more important that member states retain the flexibility to use other tools for financial stability. Let me deal with these issues in a little more detail.
As hon. Members are aware, the Commission’s proposal on prudential requirements is the mechanism by which the EU will implement the Basel III agreement to strengthen capital requirements and introduce minimum liquidity and leverage standards, changes that are absolutely necessary to correct the failures that preceded the latest crisis. Basel III is an ambitious agreement, a strong demonstration of collective endeavour and ambition, and an agreement that will fundamentally reform the global financial system. As we agreed with our international counterparts at the G20:
“We are committed to adopt and implement fully these standards”.
There are those who would seek to use current economic circumstances to row back from full implementation of Basel III—those who argue that full implementation would undermine growth at a time when we need to do everything we can to support a global recovery. We disagree. At a time of instability and at a time when bank balance sheets are under intense scrutiny and pressure, now is not the time to row back from strengthening those balance sheets. Stability is in itself a vital precondition for growth, and Basel III sets out the vital reforms that we need to increase stability in the banking sector.
Earlier this year the Commission published its draft regulation on prudential requirements for the financial sector. Despite the G20 commitment to implementing Basel III in full, the draft regulation deviates from that agreement in crucial areas. In doing so, the proposals significantly dilute the minimum standards agreed internationally for global banks and increase the taxpayer’s potential exposure to future losses. As the Scrutiny Committee highlights, the draft regulation also seeks to embed maximum harmonisation of prudential requirements.
I share the Committee’s concern that the draft regulation will severely limit the ability of member states to conduct macro-prudential policy, and where necessary, go beyond minimum standards to ensure financial stability in their own jurisdictions. We believe that it remains the case that member states are best placed to identify risks to financial stability in their jurisdiction. This is particularly the case when it comes to taking action concerning their own financial stability. Given the considerable experience, expertise, information and knowledge available to member states, it is difficult to see how the Commission can be considered to be better placed to assess macro-prudential conditions, systemic risks and appropriate policies for each member state than the member states themselves.
Furthermore, it is not clear that the Commission would be able to respond faster than the competent authorities of member states to risks as they arise. Therefore, I share the Scrutiny Committee’s concern that the inclusion of article 443, which contains a delegated power for the Commission to adopt delegated acts to impose stricter prudential requirements on member states, is entirely inappropriate. Not only is subsidiarity a matter of economic principle, but it is a matter of past experience. The financial crisis taught us that it is vital that national authorities retain discretion to react decisively and speedily to economic developments. It is vital that member states retain their flexibility to adjust prudential requirements to respond to emerging systemic risks and cyclical variations in economic activity, which, as we have seen in the build-up to the eurozone crisis, can be very large.
The crisis also taught us that we were not alert to those systemic risks, and not just at the firm level. It is vital that we are not caught out again. National authorities must retain the tools and flexibility to tackle those risks. Therefore, although Basel III provides an historic and coherent set of minimum standards, the ability to go beyond them if necessary and deploy macro-prudential policy to tailor our response to idiosyncratic macro-financial risks is in our vital economic interest.
We are not alone in making that judgment. The previous head of the European Central Bank, Jean-Claude Trichet, has said that
“the Basel requirements are minimum, and they have to be considered as minimum.”
Likewise, the IMF argued in its UK spillover report:
“UK financial stability will be weakened (with adverse spillovers) if EU rules constrain UK financial regulations at insufficiently ambitious levels or if they limit the ability to use macro-prudential instruments to address emerging risks.”
Retaining that flexibility will not, as the Commission has suggested, undermine our commitment to the single rule book. Of course, a single rule book helps to reduce the burdens on cross-border firms, but that cannot come at the expense of a member state’s ability to implement higher prudential regulations. Instead, a single rule book that establishes harmonised definitions and minimum requirements would protect the flexibility to allow member states to adjust their prudential requirements as necessary, while at the same time helping to reduce burdens on cross-border firms.
Indeed, recommendation No. 10 of the Larosière report on financial supervision states that
“a Member State should be able to adopt more stringent national regulatory measures considered to be domestically appropriate for safeguarding financial stability as long as the principles of the internal market and agreed minimum core standards are respected.”
It is interesting that we have an agreement here. My hon. Friend the Member for Stone (Mr Cash), Jacques de Larosière, who is the architect of the financial regulation, and the Government all agree with that we must have the flexibility to go further if that is appropriate.
I believe that we have a once-in-a-lifetime opportunity to reform financial services and ensure that we embed a system that works in the interests of consumers and underpins stable and sustainable economies. The Government have neither dithered, nor delayed in implementing fundamental reform of our financial sector and our system of regulation. We are reforming the failed tripartite system, leading the debate on the future of the financial sector through the Independent Commission on Banking and leading the international agenda for full and fundamental reform across the global financial system.
At a time of instability, the European Commission will inevitably come under pressure to delay, obfuscate and pander to vested interests across the EU that want to soften standards. It is critical that the Commission stands firm against those pressures and, with respect to the prudential requirements legislation, implements the Basel agreement in full. We must ensure that the Basel requirements are implemented as harmonised definitions and minimum requirements, not a maximum, that member states have the flexibility to respond to the unique risks and characteristics of their own markets, and that we implement regulations that are effective, credible and consistent. I commend the motion to the House.
Chris Leslie (Nottingham East) (Lab/Co-op)
The capital requirements directives have sought to translate the proposals of the Basel Committee on Banking Supervision and apply them across the EU. Today’s proposal, CRD IV—another acronym that is familiar to many of our constituents—attempts to update those arrangements so that they fit the circumstances of today’s banking system and learn the lessons of the global financial crisis. As the Minister said, no one disagrees that the quality and quantity of capital that banks hold in order to absorb losses should be increased, and there is broad consensus on that.
CRD IV will make four changes. It will, first, introduce sanctions to ensure that all EU banks comply; secondly, prevent over-reliance on credit rating agencies, which should not substitute for proper internal due diligence; thirdly, improve corporate governance in the banking sector; and fourthly, address the pro-cyclicality of lending, which can accelerate the expansionary tendencies of an economic cycle. The difficulty comes when the Commission proposes “maximum harmonisation” in order to achieve a single EU rule book for banking, preventing member states from setting higher standards beyond the levels proposed in the directive.
I am aware that many City institutions also favour a harmonised international approach to regulation, but such an approach could render many of the recommendations of the Vickers commission, for example, redundant as we would simply be unable to introduce tougher standards here in the UK. The EU says that the directive is to prevent a race to the top, but we need to ensure that our financial services industry—by far the largest and most systemically important of any EU country—has a regulatory system that can protect UK taxpayers and UK consumers. After all, when domestic banks fail, domestic taxpayers have to come to the rescue, so we need domestic regulation that has the room and flexibility to go beyond any internationally agreed minimum standards.
Mr Cash
The hon. Gentleman acknowledges, I am sure, that the real reason why we are in the situation we are in—I shall make a short statement about it later on behalf of the European Scrutiny Committee—is that we have transferred such jurisdiction to the European Union. As I said in a letter to the Financial Times the other day, we are fighting back against the background not only of the City having moved against the proposals, but of our having opened the sluice gates and allowed it to happen.
Chris Leslie
The hon. Gentleman’s work on the European Scrutiny Committee has been useful in respect of the proposals before us, and it would have been helpful if the Minister had clarified where we stand in terms of qualified majority voting versus any veto options that we might have. I would be grateful if the Minister could set them out.
Chris Leslie
Which proves the point that we need to ensure that we negotiate firmly.
The motion before us is worded correctly. It focuses very much on subsidiarity, and on article 443 and the proposals that would give the Commission the right to vary national regulations, even though it would prevent member states from changing their own rules beyond the maximum harmonisation arrangements—a step, I believe, too far. I agree with the draft reasoned opinion and, therefore, with the motion that the Clerk of the House forward this view to the presidents of the European institutions.
Article 443 does indeed go too far, and it would not be appropriate. Paragraph 18 of the European Scrutiny Committee’s report sums that up well, stating there is no evidence to prove that
“the Commission is better placed than the competent authorities of Member States to address national prudential concerns. Indeed, there is a strong argument to say that national authorities are not only better placed, but can react more quickly than the Commission can by means of delegated legislation, thereby enhancing financial stability.”
Graham Stringer (Blackley and Broughton) (Lab)
Does my hon. Friend agree that the Commission almost certainly knows that it would not be better at that than the regulatory authorities, and that what is behind this regulation is an attack on the City in order to up the game of Frankfurt and Paris? It must be resisted at all costs. It is much more malevolent than just a bureaucratic mistake.
Chris Leslie
It is difficult to ascribe motives to the Commission in all circumstances. My hon. Friend may well be right, but then again I have also talked to some of the City’s large banking institutions, which have in some ways argued in favour of harmonisation, so it is a mixed picture. I agree with the Government on the point before us, however, and it is important that we stand firm and retain the flexibility of higher standards if we possibly can.
Kelvin Hopkins (Luton North) (Lab)
Is it possible that those banks that seem to favour harmonisation think that they might have an easier time under Europe-wide regulations than under more stringent regulations from the British Government?
Chris Leslie
My hon. Friend may well be correct. “Who knows?” is the ultimate question, but his cynicism has been proved right in the past and may well be right today.
The motion is a sensible assessment, and asking the Clerk to send a reasoned opinion to the presidents of the European institutions is absolutely right, but what happens next? Will the Minister set out in a little more detail the consequences of today’s motion, and whether we would have any prospect of shaping our own financial regulatory agenda if, indeed, many of the changes in the directive went through regardless of the opinion that we sent? The mismatch between the Commission’s view and the UK’s position is only the tip of the iceberg or, to use a better metaphor, only the beginning of the story.
I am afraid to say that the Government’s proposals for financial regulation have not been properly thought through and clash so much with European regulatory arrangements that they just will not be able to stand up adequately to their strength and power. Ministers knew very well that the EU supervisory institutions would be split across thematic groups around banking, pensions and insurance, and markets. Yet according to the Minister’s legislation, we are choosing to split our arrangements between prudential and conduct regulation.
I agree completely that we need a greater focus on prudential regulation, but there is a growing risk and increasing evidence that our UK institutions may leave us in a tangled mess unable to engage effectively with those very powerful EU structures. That concern is shared not only by Opposition Members, but across the City and other financial service sectors. If our voice is not adequately heard, we may be unable to be represented properly in the right meetings at the right time.
It is not just the Opposition who are saying that. Last year, the Financial Services Consumer Panel said that
“the current European structure under the ESMA would be a poor fit with the proposed new UK arrangements and that this could potentially weaken the UK’s voice in the European Union.”
In September, the British Bankers Association said that
“little has been related on how the regulators will go about ensuring…that UK representation around the European table is second to none. There has not, for example, been acceptance of the suggestion made by the industry that consideration be given to maintaining a single international secretariat across the relevant authorities as a common shared service and the establishment of cross-authority teams to ensure that UK representatives at the three European Supervisory Authorities and other European and international committees are in a position to draw upon all relevant expertise and knowledge.”
The Association of Independent Financial Advisers—incidentally, I am attending its annual dinner this evening—said in September:
“The AIFA is concerned that the twin peak approach to UK regulation is not consistent with the developing European sectoral approach. We must ensure that the UK system is able to efficiently interact with the European system and does not lead to significant confusion for regulated firms and cost inefficiencies, or damage the competitiveness of the UK.”
Indeed, two weeks ago, the Chairman of the Treasury Committee, the hon. Member for Chichester (Mr Tyrie), said in a letter to the right hon. Member for Hitchin and Harpenden (Mr Lilley):
“How will the PRA and the FCA co-ordinate their interaction with the new European Supervisory Authorities which do not neatly match the twin-peaks model—particularly where both financial stability and consumer protection outcomes may be considered together at an EU level? With an enormous amount of EU legislation under way, how will the EU regulatory authorities ensure that UK interests are represented with one voice?”
So there has been a barrage of anxiety about the Government’s proposals and how the design of their domestic regulatory arrangements will fit with those European supervisory structures. The Minister has time to think about those matters before introducing the Bill. If we try to persuade EU regulators to comply with our approach to financial regulation retrospectively, it will genuinely be like shutting the stable door after the horse has bolted.
Mr Cash
The shadow Minister is perhaps being rather disingenuous when he says that the Minister may have time to think before the Bill comes through. I am sure the hon. Gentleman understands that, under the arrangements for the European Union, where a qualified majority vote is being applied and the measure becomes part of our law, we implement it under section 2 of the European Communities Act 1972. There is absolutely nothing we can do on the Floor of the House to reverse that unless we apply the provisions of my sovereignty arrangements notwithstanding the 1972 Act. It is about time we started to do so.
Chris Leslie
I am simply highlighting the anxieties felt across the City, the financial service sector and by many hon. Members, who are worried that we are stepping into a new set of financial service regulation structures domestically within the UK that are far away from those bodies we need to be influencing, steering and having our voices heard by. It may well be that we are stepping in the wrong direction. That is the anxiety I am voicing today.
Jacob Rees-Mogg (North East Somerset) (Con)
I am very grateful to the hon. Gentleman for allowing me to interrupt his characteristically thoughtful speech. Given what he is saying, does he think that this would be a very good, if not ideal, area in which to repatriate powers?
Chris Leslie
I do not think it is wrong to try to have some level of co-ordination on financial services regulation across the EU. This is a global industry, and that is broadly sensible. However, we now know very well how those supervisory institutions of the EU are to be structured, and yet we are designing new arrangements for the post-Financial Services Authority world that do not match very suitably with those. There may be different approaches to how we can make the fit more effective and improve Britain’s voice. However, there is genuine concern that even though we knew about these arrangements 18 months ago, the Government have not yet provided the capability to adapt the regulatory reforms to ensure that we do not lose influence—and, in fact, build our influence.
As regards the capital requirements directive, it is clear that for the time being we need to resist the Commission’s challenge to proper subsidiarity and give our reasons for retaining national discretion to have safer and higher standards for financial regulation here in the UK.
We support the motion but hope that Ministers will take the opportunity to think more strategically about how best to address the structural mismatch between their proposed reforms and the European arrangements, because that risks marginalising the UK’s voice time and again.
Mr William Cash (Stone) (Con)
Before I go into the question of subsidiarity, I want to raise some matters that relate to what the shadow Minister said. He made some extremely important remarks. I am sorry that our own Front Benchers did not address those questions, because they know that they are very much on my mind and have been for a very long time.
The Minister said I would be glad to know that he and Commissioner de Larosière were ad idem as regards the de Larosière report. I have to say that I have been anything but ad idem with Mr de Larosière and his report for three or four years. The moment I saw the report, I wrote a letter to the Financial Times in which I pointed out that it was a very dangerous move and that its consequences would lead to jurisdiction over the City of London being transferred to the European Union. With all due respect to the shadow Minister, his Government were in power at the time this was under discussion. He has been issuing strictures about negotiations, but I am not interested in negotiations when 20% of our GDP is at risk in relation to a legislative system that will completely and totally undermine and annihilate our ability to maintain that strength in the financial services sector. I directly blame the previous Government for their total failure to do anything about this.
I will go further. I also blame those on our side of the equation who allowed this to happen, because it is, at the very least, acquiescence in a system. Before the general election, my hon. Friend the Member for Ludlow (Mr Dunne)—my own Member of Parliament—convened a meeting in the Grand Committee Room relating to these matters. Some very distinguished people were present. There were people from the City of London, the City institutions and the City of London Corporation, as well as the rapporteur, or lady in charge, of the financial services arrangements for the European Commission. It was a very high-powered conference. Despite the fact that I put up a very strong case for ensuring that this nonsense, from our point of view, did not continue, I found—not unusually, I have to say—that I was completely and utterly outvoted. At least, I was out-manoeuvred by a number of people, not on the quality of their arguments but on the sheer force of their attitudes, which amounted to saying, “This is a global marketplace, this is what we have to do, we must engage in a situation where the rest of the world works together.” We now hear the same talk about the dreadful proposal for a financial transactions tax.
The reality is that the City has woken up. The hon. Member for Nottingham East (Chris Leslie) mentioned the British Bankers Association. I have not examined every document that has come from these great and august bodies, but I fear that they did not do the right thing at the right time and that they allowed this situation to happen. The Government and the Opposition of the time went along with the idea that it would somehow be beneficial to the United Kingdom for it to be put in this peril—and peril this is. The House is fairly thinly attended this afternoon, but I venture to suggest that these documents, which are six inches high on just the one issue of European Union prudential requirements, are a dagger pointing at the heart of the City of London.
The Minister rightly said that the proposal severely undermines Basel. He said that we will negotiate firmly. However, as I asked the Prime Minister yesterday, how will the Government be able to do anything about it in the context of the fiscal union that they propose, which must include voting solidarity among the members of the eurozone, who have long wanted to take the City of London away from us, when this issue is governed by a qualified majority vote? I have taken the trouble to look this up and my best recollection is that there are 231 votes for the 17 members of the eurozone compared with 130 votes for the rest. We are in a permanent massive minority. That is what is going on. It is a kind of economic warfare. This is not just about Euroscepticism; this is an issue that goes to the heart of our capacity to deliver revenues and prosperity in this country.
There may well be cases for reform. I have great sympathy for those who think that the City has gone off beam recently in many respects, including on salaries, pay and remuneration. Some of those points are exaggerated, but some are justified. I think that we should go back to a system of regulation that is more along the old Quaker lines, whereby one knew what one’s capital was and how to use it properly, and through self-regulation people who were out of line were put back into line by common consent. That is for another day, but I am deeply worried.
My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) raised the question of repatriation. Why is it that I have argued consistently for the repatriation of powers, not just in social and employment legislation, which again is for another day, but in the kind of powers we are discussing? If the City of London goes down or is severely diminished, it will do nobody any good. Those who vote for the Labour party would also be affected because we need that money. For three and a half centuries, the City of London has been at the heart of our financial system and our revenue base. We cannot afford to have that money redistributed, like so much chaff, among the other member states.
Graham Stringer
The hon. Gentleman is making the powerful case, with which I agree, that this is malevolent legislation that is directed at undermining the City of London. I suspect he will agree with me that the Government should use the fundamental crisis at the heart of the European Union to be as brutal and as determined as possible in bringing back as many powers as they can, because the European Union is not a benevolent body when it comes to the UK’s interests.
Mr Cash
I very much agree with the hon. Gentleman. The more I have heard from him over the past few years, the more I have admired his determination to speak the truth. That is the position. This is not a party game; this is serious and it is deadly. This move is determined and deliberate. That is what people need to know.
Roland Vaubel, the famous economist from Mannheim university, talks about the use of the qualified majority voting system in the Council of Ministers as a form of “regulatory collusion”, and mentions the strategy of deliberately raising rivals’ costs. Particular groups of countries—there are no prizes for guessing which—enter into arrangements behind the scenes, and vote accordingly. Both France and Germany use that system to their advantage, and as I said in the Financial Times the other day, we are being outmanoeuvred.
Despite all the time, money and effort being put into the Vickers report, there are, as the shadow Minister made clear, serious worries that Vickers may yet be undermined by the very proposals that we are discussing. The problem goes much further, but I do not need to enlarge upon all that any more.
Some people tend to sneer at the idea, which I occasionally put forward, that our sovereignty is the most important issue of all. I say that for one reason and one reason alone—it is only by exercising the sovereignty of this House on behalf of the British people that we have any chance of being able to return and repatriate powers if the other member states are not prepared to negotiate.
I am prepared to listen to the Prime Minister telling me that he will fight hard, or whatever answer he gave me yesterday, but I remain totally unconvinced. We are at risk as a result of proposals such as these, so it is absolutely essential that we get things right. When I wrote a pamphlet for him—in fact, for the general public—called “It’s the EU, Stupid”, I set all that out, so I do not need to enlarge on it any further.
I have got out of the way the general points that I believe are necessary to put the whole matter in context. I see the Foreign Secretary laughing a little. I do not hold that against him, but I have to say that this is no laughing matter; it is a very serious question. We are reduced to having to argue about reasoned opinions and subsidiarity. Important though those are, as I have said, there is a dagger pointing at the City of London. Not just this particular draft regulation but an accumulated vast array of weaponry is being aimed at the heart of our economic system.
Mr Andrew Turner (Isle of Wight) (Con)
Could my hon. Friend help by reminding me how much is owed to the City of London as a proportion of national income?
Mr Cash
It has been declining, and that is another reason for concern, but the latest figure is something of the order of 15% to 20% of our gross domestic product. Take that away, and where would we be? The draft regulation is a deliberate attempt to do that, and it is only one document of many.
The aim of the Basel Committee on Banking Supervision is to
“enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.”
I hope that it succeeds. However, the various directives in question relate to the taking up and pursuit of the business of credit institutions and to capital adequacy, and they are collectively known as the capital requirement directive or CRD. They introduce a supervisory framework within the EU, designed, it is stated, to
“ensure the financial soundness of credit institutions (banks and building societies) and certain investment firms.”
I take a slight interest in that, because my family founded the Abbey National building society back in the 19th century and the National Provident Institution in 1835. Those institutions were run on sound grounds and lasted until very recently, but have unfortunately now been mopped up as a result of some of the international goings-on in the financial sphere.
In 2011, the European Commission proposed a draft regulation—the document referred to in the motion—and a draft directive, known together as CRD IV. They would incorporate the Basel III agreement on prudential requirements for credit institutions and investment firms into EU law. How often have I said that the danger is that when a matter is transferred to EU jurisdiction, we lose control? Because of section 2 of the European Communities Act 1972, we cease to be able to control it. We hand over control of the drafting, method and interpretation of the law, and its effect on our own institutions, our own initiative and our own ability to be innovative and succeed.
The proposals are still before the European Scrutiny Committee, pending the receipt of further information from the Government. Meanwhile, the Committee has recommended that the House submit a reasoned opinion on the draft regulation to the European Commission, the Council of Ministers and the European Parliament. A draft is annexed to the Committee’s report. I mention that because if enough member states issue a reasoned opinion, we will be able to stop the proposals. I strongly urge the Government to get as many member states as possible together, and I am sure they are doing that, if only to retrieve the situation as best they can.
Of course, as we all know, other member states will know what we are up to, and they will not enter into an arrangement to submit a reasoned opinion. We have seen that in the past—we do not get the requisite number of member states, and the proposal goes through. This is a test not just of the Government but of the integrity of the system. If a reasoned opinion is required because the Commission has exceeded its powers in relation to subsidiarity, nothing should prevent that from going ahead on an objective basis. I am not trying to pre-empt the decision, but I am anxious, on the grounds that I am about to mention, for other member states to understand that a reasoned opinion is necessary. It is in their hands to prevent the proposals from going through.
I turn now to the argument about the objectivity of a reasoned opinion. When the Commission makes a proposal for legislation, it is now required under the European treaties to produce a “detailed statement” that makes it possible to appraise the proposal’s compliance with the principles of subsidiarity. I do not for a minute demur from what I said during the Maastricht debates—that subsidiarity was a con trick intended to establish hierarchies, not true subsidiarity. We shall see.
That detailed statement is not just a bureaucratic procedure for its own sake, although one might be forgiven for thinking that some in Brussels think it is. It is the principal means left whereby national Parliaments and electorates can assess the basis on which the Commission considers legislation to be necessary at supranational rather than national level. The presumption underpinning subsidiarity is that decisions are best taken as close to the citizen as possible. Amen to that, providing that it happens.
It is not sufficient to underline the importance of those detailed statements. I remind, or inform, the House that no piece of European legislation has ever successfully been challenged in the Court of Justice of the EU on the grounds that it breached subsidiarity. Not one. That sends a very powerful message. There is not a little suspicion, therefore, that subsidiarity is just something to which lip service is paid. It strikes the democratic gong, but is not followed by any lunch. One of the jobs of national Parliaments—that is us here in the Chamber—is to try to change that position.
Kelvin Hopkins
I suggested yesterday in European Committee A that, as the hon. Gentleman suggests, subsidiarity has not functioned well. In fact, I do not really understand it myself. I suggested that it was a political decoration, to overcome a difficulty. The reality that I would understand is opt-outs and opt-ins, with member states having the independence to do what they thought was right for their interests.
Mr Cash
I very much agree. All that I can say is that on this occasion, there will be a very good test of whether subsidiarity can win the day. Let us see.
Given the importance of the detailed statement, the treaty makes several stipulations about what it should contain, which include an
“assessment of the proposal’s financial impact…in the case of a Directive, some assessment of the proposal’s implications for national and, where necessary, regional legislation; and…qualitative and, wherever possible, quantitative substantiation of the reasons for concluding that an EU objective can be better achieved at EU level.”
When the European Scrutiny Committee looked at the draft regulation, it found—not by any means for the first time—that neither the Commission’s explanatory memorandum nor its impact assessment contained a detailed statement to make possible an assessment of its compliance with subsidiarity. Hon. Members should bear it in mind that the draft regulation, which is of immense importance, amends the capital requirements directive by removing the discretion previously given to member states to impose stricter prudential requirements where national circumstances require that. That is a significant change. Indeed, the Government argue that it could lead to greater financial instability and, as the Minister said, could severely undermine Basel. It will be seen from the draft reasoned opinion that the Committee concluded that the Commission failed to discharge the treaty obligation placed upon it to provide quantitative and qualitative reasons for that change in the form of a detailed statement.
Putting the procedural failures to one side, the House will gather from the draft reasoned opinion that, on the substance, the Committee agrees with the Government that the objectives of the regulation were not better achieved by precluding member states from imposing stricter prudential requirements when they considered that necessary. The Committee came to that conclusion because it was clear from the Government’s explanatory memorandum that there continued to be a need for a flexible approach to address prudential concerns at a national level. That reality was reflected in the fact that the Commission proposes in article 443 of the draft regulation that it should be able to adopt delegated Acts to impose stricter prudential requirements for member states where necessary. The Committee could not find sufficient evidence to demonstrate that the Commission was better placed than member states to address national prudential risks that suddenly arise. Indeed, there was a strong argument for saying that national authorities were not only better placed, but could react more quickly than the Commission by means of delegated legislation, thereby enhancing financial stability.
I also have grave misgivings about the Commission having such powers delegated to it—ever. EU delegated legislation is not unlike our own: it affords considerable Executive power with far less oversight.
Finally, the Commission’s approach to the consideration of subsidiarity is a matter of concern not only to the European Scrutiny Committee, but to every national Parliament of every member state. I hope that they take note and do something about it, because a great deal is at risk. At its last meeting, COSAC—the bi-annual conference of the EU Committees of national Parliaments, which I attended—concluded that the Commission was not complying with the treaty obligations placed upon it to provide sufficiently detailed statements. That was on the motion that I proposed, which was accepted by COSAC. This was good news, because the Committee had been pushing for it. We await a response from the Commission, but we need support from other member states.
I repeat: I urge the Government to use all their diplomatic and persuasive powers, because we are put at a significant disadvantage as a result of the transfer of functions to the European Union. If there is sufficient opposition from enough member states, we can defeat this proposal.
Harriett Baldwin (West Worcestershire) (Con)
I shall be brief in following my hon. Friend the Member for Stone (Mr Cash) and in supporting the reasoned opinion. I also hope to strengthen and add to some of the arguments made by the Minister and the Opposition spokesman from the Dispatch Box in favour of subsidiarity in banking regulation.
If there is one over-arching lesson that we learned from the financial crisis of the past few years, it is the importance of having the primary banking regulator close to the financial market. I welcome the direction of travel on financial regulation in our national life, which will place much more importance on the role of the Bank of England, because the Bank follows what is happening in this country’s financial markets on a day-to-day basis.
It is instructive that the United States—a country that has had monetary union for the past century—is also caught up in the financial crisis. That subsidiarity in banking regulation continues to apply in the US in that each state is responsible for banking licences and supervision in its jurisdiction.
Mr Cash
I am fascinated by my hon. Friend’s line of argument, because she has raised the question of commercial states’ rights, which are embedded in the American constitution—they are inviolable. Countries in the EU have no such rights. When legislation at EU level goes through—this is why I so strongly attack and resist the idea of transfer of jurisdiction to that level—we are required under the 1972 Act to implement the law. We do not have commercial states’ rights.
Harriett Baldwin
Indeed, and to continue with my example, the US Federal Reserve is very much a system of individual reserve banks—the Federal Reserve Bank of New York and the Federal Reserve Bank of San Francisco all play important and distinct roles, recognising that different banking markets have different characteristics, and recognising how vital subsidiarity is in banking regulation.
My heart sank when I asked at the Vote Office for papers relevant to today’s motion and was handed this 1,200-page document. We discussed earlier how the EU could save money on its budget, but the document is a prime example of where money could be saved. It is completely unnecessary.
I opened the document at random and found that one proposal is to start dictating quotas for women on the boards of financial institutions in the EU. Page 1,132, which I am sure my hon. Friend the Member for Stone will want to read in detail, is on quota laws for the number of women who sit on the boards of financial institutions in different countries. I noted that in the table of a survey of governance arrangements, Iceland and Norway are included, but the last time I checked, they were not even member states. I put myself firmly in the camp of people who think that the more diverse range of views one has on boards, the better, but I certainly do not think that that should be laid down in 1,200 pages of EU guidance.
Mr Cash
To give another example, article 218 refers—incomprehensibly—to the so-called financial collateral comprehensive method. To illustrate how far away we have moved from the notion of running a capitalist and financial system sensibly, we are now down to formulas. I shall try to quote it. The document states:
“Institutions shall calculate the volatility-adjusted value of the collateral (CVA) they need to take into account as follows …CVA = C (1 - HC - Hfx)…where…C = the value of the collateral”.
That is absolute gobbledegook, but that is the manner in which our system is run. It is completely mad.
Harriett Baldwin
I can see that if I carry on giving examples, I will only encourage my hon. Friend to find more passages of gobbledegook to read into the record, but it is indeed the most appalling document.
Mr Nigel Dodds (Belfast North) (DUP)
The hon. Lady makes powerful points on subsidiarity. We have had some fun at the expense of the document, which is long, convoluted gobbledegook, as the hon. Member for Stone (Mr Cash) said. However, the reality—this makes my heart sink too—is that unless we get enough countries in Europe to agree with us, the document will become directly applicable law in the UK. That is how serious the matter is. When one considers the amount of scrutiny that we rightly give to legislation in the House, one realises that the amount of scrutiny given to the document is appallingly low.
Harriett Baldwin
What adds to the power of the right hon. Gentleman’s argument is the fact that this week, of all weeks, we have seen how completely inadequately the euro countries have managed the governance of their budgetary arrangements and affairs over a matter that is causing serious problems for the world economy.
I wish to conclude by making one further point. I was completely gobsmacked by the chutzpah—if that is a parliamentary word, Mr Deputy Speaker—of the Opposition spokesman, the hon. Member for Nottingham East (Chris Leslie). Although I welcome the fact that he agrees with the motion, I noted that he did not refer to the previous Labour Government’s role in signing us up to the Lisbon treaty without a referendum. It displayed a stark lack of acknowledgement of his party’s role in getting us to this position.
I have spoken briefly because there is important business to follow, but I want to reiterate how important it is that the Financial Secretary be armed with the maximum political support for his trip to argue our case against this ridiculous 1,200-page document.
Jacob Rees-Mogg (North East Somerset) (Con)
It is a pleasure to follow my hon. Friend the Member for West Worcestershire (Harriett Baldwin). I agreed with practically every word she said.
I want to focus on subsidiarity in relation to the bank capital requirements. It seems to me that those capital requirements must rest with the lender of last resort, because the organisation that will be best informed about the requirements of banks within its system will be the bank to which they report. This regulation might therefore be an area where it is suitable for the eurozone to have a single regulation, but where those outside the eurozone ought to have regulations referring to their own currencies and central banks.
That works both ways. There has been much concentration on the need to raise bank capital rates when an economy is booming, as part of efforts to calm down an economic expansion, and that is obviously true: had bank capitalisation rates been raised during the last boom, the effects would have been lessened, the degree of gearing, particularly in the Royal Bank of Scotland, would have been lower and the problems that followed would have been fewer. However, it is equally important, when an economy is turning down, that bank capital requirements might need to be lowered, and that might well be the case now.
When banks face large amounts of bad loans and write-offs, we might need our central bank to say, “Well, at this point, we cannot enforce a high bank capital adequacy ratio because, if we do, our banks will not be able to continue in business, or they will not be able to make loans to good-quality borrowers now coming forward.” The key argument of subsidiarity, therefore, is that bank capital adequacy regulations have to relate to the currency at issue, and that comes back to the central bank at issue—in our case, of course, the Bank of England. Those ratios must be flexible beyond international agreement, because if the lender of last resort is willing to lend to a bank with low capitalisation in a time of crisis, that is a decision for that central bank and its risk-taking decision makers; it does not need to be decided at an international level.
My final point is the one made by my hon. Friend the Member for Stone (Mr Cash): there is a danger, under the qualified majority voting system, of regulations entirely suitable for the eurozone being passed through for the whole of the EU. Her Majesty’s Government need to be alert to that and to make every effort to prevent such regulations from being forced upon us. I hope, therefore, that this motion, when passed, will be taken seriously by the EU, and that we will be allowed to regulate our banks in our way, as appropriate.
Mr Hoban
This has been a helpful and thoughtful debate, and it will give the Government immense support in making the arguments over the coming months about the need to get CRD IV right; about recognising that it should be the responsibility of competent authorities in member states to set appropriate levels of bank capital beyond high minimum standards; and about the fact that we need the flexibility to do so in order to protect the stability of our financial system. That recognises the fact that banking structures and systems vary between member states. The complexity of those banking systems manifests itself in the extraordinary length of the document before us. These are complex issues that we need to tackle.
I want to make a point about engagement with Europe, picking up on the comments made by the hon. Member for Nottingham East (Chris Leslie) about trade bodies. The same comments were made to the Treasury Select Committee today. There is nothing new about regulators co-ordinating the views of others when representing the UK on regulatory bodies. At the moment, the Financial Services Authority is our representative on the European Securities and Markets Authority, and in its representative role, the FSA must also reflect the views of other regulatory bodies not represented on ESMA. For example, it must take into account and reflect the views of the Financial Reporting Council and, on takeovers and mergers, the Takeover Panel.
Furthermore, the European Insurance and Occupational Pensions Authority has to represent the views of the Pensions Regulator. If I am right, at one point, the UK’s representative on EIOPA’s predecessor body, the Committee of European Insurance and Occupational Pensions Supervisors, was not the FSA, but the Pensions Regulator itself. There is nothing new, therefore, about one body representing the views of other regulators in the UK on these European bodies, and it would be wrong to suggest that this is something novel or different.
We need to ensure that, under the new regulatory architecture, we are clear about who speaks for the UK on these matters. On the European Banking Authority and EIOPA, the Prudential Regulation Authority speaks for the UK, so it will want to gather the views of the Pensions Regulator and the Financial Conduct Authority on insurance issues, for example. It is clear that the FCA will represent the UK on the board of ESMA, and it will have to gather the views not only of the FRC and the Takeover Panel, as it does now, but of the Bank of England, on clearing houses, and the PRA on prudential issues relating to securities firms.
I do not therefore see this as some great novelty or innovation. It needs to work. However, surely no one in the House is suggesting that UK regulatory bodies should be driven by what is happening in Europe, rather than meeting the needs of businesses and consumers in the UK. I do not think that anyone is seriously suggesting that we have sectoral regulation in the UK, rather than functional regulation. If the Opposition want to go down the former route, let them say so, but we should find a way of ensuring that the current system works.
Chris Leslie
What is the Financial Secretary’s assessment of the British Bankers Association’s suggestion for a properly resourced international secretariat to ensure a better single interface with those European institutions? He might be right that we should not necessarily follow those European arrangements, but surely he accepts that a complex existing arrangement could be made even more complex by the proliferation of financial regulatory bodies that he is proposing.
Mr Hoban
The hon. Gentleman has just recommended such a proliferation of bodies—with this co-ordinating secretariat. The PRA and the FCA are more than capable of talking to each other about these matters. We need to ensure that they gather people’s views and that the interests of the FRC and the Pensions Regulator are reflected. However, I do not consider it to be the huge problem that he is inflating it to be.
It is also the case, of course, that the negotiation of level 1 instruments, such as the directive before us today, is the responsibility not of the PRA, the FCA or the Bank of England, but of Her Majesty’s Government and, in particular, the Treasury. It is very clear where the focus is; we do not seem to have any problem at all in co-ordinating the views of others for that process.
This has been a helpful debate. It will help strengthen the Government’s hand in negotiation with Brussels. It is very clear that it is not just the UK Government who believe that we should have the freedom to go further beyond minimum standards if necessary, and the freedom to set our own macro-prudential strategy. That is the view of the International Monetary Fund, the view of Jean-Claude Trichet and the view of Jacques de Larosière. There is a consensus around this. What is important, I think, is that the Commission listens to that consensus and takes the right action to enable member states to tackle financial stability. I am grateful for the support for this motion and commend it to the House.
Question put and agreed to.
Resolved,
That this House considers that the draft Regulation on prudential requirements for credit institutions and investment firms (European Union Document No. 13284/11 and Addenda 1-4) does not comply with the principle of subsidiarity for the reasons set out in the Annex to Chapter 1 of the Forty-second Report of the European Scrutiny Committee (HC 428-xxxvii); and in accordance with Article 6 of the Protocol on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the presidents of the European institutions.
Backbench Business
Transport Committee Report (High Speed Rail)
Mr Deputy Speaker (Mr Nigel Evans)
We now move on to the first of two items of Back-Bench business. I shall shortly call Louise Ellman to move the first motion—and, indeed, she will move the second. As I said to the House just over a year ago when we debated the first item under this relatively new procedure, the Chair of a Committee speaks for about 20 minutes, during which time interventions may be taken, but after he or she concludes there will be no separate speeches and we will move on to the next business.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
I beg to move,
That this House notes the publication of the Tenth Report from the Transport Committee on High Speed Rail, HC 1185.
I am grateful for the opportunity to present on the Floor of the House the Transport Select Committee’s report into high-speed rail. Our inquiry attracted widespread interest and considered strongly contested and diverse views on the Government’s proposal to build a dedicated, high-speed, Y-shape network, with trains running at up to 250 mph.
Phase 1 is proposed to run from London to Birmingham, opening in 2026. Phase 2 would add two legs to the line, with one going to Manchester and the other to Leeds, operating from 2032-33. The total projected costs are £32 billion, with £16.8 billion for phase 1. The former Secretary of State for Transport, the right hon. Member for Runnymede and Weybridge (Mr Hammond), told the Committee that, spread over 17 years, this was affordable and amounted to an average of £2 billion a year—very similar to the current costs of building Crossrail. Should this proceed, Parliament would consider a hybrid Bill from October 2013 to May 2015.
Our inquiry included consideration of more than 200 pieces of written evidence. We held five oral evidence sessions, with more than 40 witnesses. We travelled on high-speed rail in Frankfurt, Paris and Lille, and spoke to business and civic representatives there, so that we could make some assessment of the impact of high-speed rail on continental Europe. We commissioned a report on High Speed 2 from Oxera Consulting and asked for its analysis of the case put for High Speed 2. We appointed specialist advisers, Bob Linnard and Richard Goldson, to work with our excellent Committee staff. We took those steps because we recognised the importance of this inquiry and we wanted to listen to the greatest possible number of people with different views and different experience, and we wanted the highest level of advice and support in assisting us to analyse the validity of the project before us.
It is regrettable that people expressing sincere and legitimate concerns about what they fear would be the local impact of high-speed rail on their environment have been castigated as “nymbys”. People are entitled to express their views, and while a decision on a major investment of this nature should be taken in the national interest, people are fully entitled to express their concerns about what they believe might be the impact on them, their community and their local environment. Abuse does not help debate.
What are our conclusions? We conclude that there is a good case for proceeding with a high-speed rail network linking London and the major cities of the midlands, the north and Scotland, principally because it will provide a substantial and necessary step change in capacity and a dramatic shift in connectivity not offered by any of the alternatives proposed. This investment will assist passengers and freight. We reject a policy of ever-rising train fares in an attempt to suppress peak-time passenger demand. Current overcrowding is a consequence of a current failure to provide necessary capacity at a time when people want to travel and often need to travel.
The number of long-distance rail journeys more than doubled in the 15 years to 2009. Some of the highest growth has been on the west coast main line, where the number of journeys has increased by about 10% per annum for the past three years. The west coast main line passenger demand levels forecast by HS2 for 2021 have already been overtaken and are projected to increase.
Mr Andrew Turner (Isle of Wight) (Con)
Will the hon. Lady help me by explaining how much money from the Government and how much from the customers or the users of the railway is involved? May I add that, as a representative of the Isle of Wight, there is no benefit whatever for me or my constituents if a lot of money is spent on a railway in the north of England?
Mrs Ellman
I thank the hon. Gentleman for his comments. Currently, the proportion paid by the traveller or fare payer is increasing and is now about half of the cost. That is very different from what applied in previous years.
We were told clearly that the west coast main line will be full by the end of this decade, which means that additional required routes and services for passengers and freight could not be made available. Our specialist advisers were clear that HS2 is needed for capacity reasons if the pattern of growth continues or if peak demand cannot be spread.
The step change that HS2 would bring does not apply only to people who would use the new line. It would enable expansion on the existing classic line for more local and regional services and for freight. Places such as Milton Keynes would benefit; freight on rail would expand—and demand for freight on rail is anticipated to double. When an assessment of the impact of High Speed 2 is made, it is important to look at what services could be made available on the existing classic line, as well as what would run on the new line.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
As a Birmingham MP, it always strikes me that we focus on the benefits from London to Birmingham, but what about trade between Birmingham and cities in the north-east and north-west—another benefit that should not be ignored?
Mrs Ellman
I thank my hon. Friend for her comments. It is evident that the debate on High Speed 2 is often cast solely in terms of access to London, but this is also about access between major cities. For example, if and when the line is completed as planned, Manchester and Leeds would be brought within 80 minutes of London, travelling from Manchester to Birmingham would take 49 minutes, while Birmingham to Leeds would take one hour and five minutes. It is as much about the connectivity between the cities of the United Kingdom as it is between cities and their access solely to London. Indeed, a high-speed line offers a dramatic shift in connectivity between the UK’s major cities as well as improved access from the regions to Heathrow and, through linking with High Speed 1, to continental Europe.
A high-speed network could be a catalyst for economic growth, supporting jobs and investment. It could help to rebalance the economy and address the north-south divide.
Mr Andrew Turner
At present half the money comes from the Government, and a new railway costing about £18 billion is proposed. It is not clear whether people who can currently afford to travel would still enjoy the same benefits. Would the money that is being spent continue to be spent, or would the amount be reduced?
Mrs Ellman
Those are matters for Government policy. When we raised that specific issue with Ministers in the Select Committee, we were told that the current assessments were based on existing Government policy. That could, of course, change; it would be a matter for the Government of the day.
Many local authorities and business representatives, especially in the west midlands and the north, were extremely enthusiastic about the potential economic benefits of High Speed 2, and many referred to specially commissioned studies that showed what could be achieved. We do, however, have a number of concerns, which must be addressed during progress on High Speed 2 to ensure that the potential of a new high-speed rail network is realised and informs decision making. The Government must commit themselves to phase 2 before phase 1 is agreed.
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
I congratulate the Select Committee on its exhaustive report. Would it not be useful if the Government found some technical way of including in the Bill provision for services to Manchester and Leeds, so that the north could give its full support to the railway?
Mrs Ellman
I agree with the hon. Gentleman. Indeed, if he reads our report, he will see that we suggested a specific form of words enabling the Government to do just that. I hope that the Government read the report very carefully, particularly the section to which I have referred.
The case for a high-speed line between London and the west midlands depends largely on the assumption that the Y-shape network will be completed. To provide a high-speed line that went solely from London to Birmingham would be to abandon the north, which I do not think many Members would want. Indeed, in the longer term the line could extend to Scotland, Wales and other parts of the United Kingdom.
It is important that local and regional economic strategies are drawn up and supported—that includes support from Government as well as the private sector—to maximise high-speed rail’s potential to rebalance the economy, but it is equally important that investment is maintained in the existing classic line, including initiatives such as the northern hub. Continued investment in the classic line is important for the purpose of local improvements, and people travelling on local lines must be able to benefit from the maximum possible access to the high-speed line.
Stuart Andrew (Pudsey) (Con)
I congratulate the hon. Lady and the Committee on the report. She raised an important point about connectivity in the north. If people are to travel from London to the north and vice versa, once they have reached the north they will need to be able to travel effectively and efficiently, which they cannot do at present. I therefore believe that the northern hub is crucial to the success of High Speed 2.
Mrs Ellman
I agree with the hon. Gentleman. I hope that he will put his weight behind the views of the Select Committee, which is already working hard to ensure that the northern hub is delivered.
The Committee considered that further information was required to inform decisions on access to Heathrow and terminals in London. We felt that there was not enough information in the public sphere, particularly in relation to Heathrow. We also felt, strongly, that environmental concerns should be properly assessed in a revised business case. High-speed rail is likely to have substantial impacts on some local communities and areas along the route, and we need to be satisfied that full consideration has been given to an assessment of what those impacts might be.
Dan Byles (North Warwickshire) (Con)
I join those who have welcomed the report, which contains a very thorough analysis. The Committee has entered a number of caveats alongside its support for High Speed 2. In the summary, the Committee calls on the Government
“to consider and clarify these matters before it reaches its decision”.
Does the Committee believe that the Government should not make a decision until all the points raised in the report have been clarified?
Mrs Ellman
If the Government decide to proceed, they should issue a statement of their intention to do so. We have already been told that more information will be made available before a statement is issued. Following that, intensive work should be done to deal with some of the issues that we have raised before the House considers a hybrid Bill in 2013. It is proposed that proceedings on the Bill should take place over 18 months, so if the Government decide to go ahead there will be plenty of time for consideration to be given and for more information to be produced before any final decision is made.
Ms Gisela Stuart
If the Government think it right to go ahead—and I agree with them—what will change between now and 2013? Surely the hybrid Bill can serve as a framework Bill, and it will not be necessary to wait until next year.
Mrs Ellman
While we are committed to the necessity for high-speed rail, we think it important for the detailed issues that we have raised to be considered fully.
Christopher Pincher
The hon. Lady says that the Committee’s report raises important points, and she says that the environmental impact has not been properly assessed. Does she believe that that impact will have a significant effect on the net cost-benefit ratio in the business case?
Mrs Ellman
That is an important point. I cannot anticipate what the impact would be, but we think that other factors, including the importance of reducing current overcrowding, should be assessed as well. Ultimately, any cost-benefit ratio would have to take account of the findings in regard to those factors, and possibly others as well.
The significance of the 250 mph maximum speed should be explained in relation to the choice of route, and the value of time-saving per individual should be reconsidered. The importance of reducing overcrowding should also be assessed. Much more progress must be made on decarbonising fuel before High Speed 2 can be seen as an essentially green project. Any reduction in carbon emissions that is attributable to high-speed rail should be determined by the extent to which the UK’s energy is decarbonised, although it is certainly true that travelling by high-speed rail is greener than travelling by car or plane. The information that we currently have does not make clear the extent to which high-speed rail would replace air travel, particularly in phase 1. We repeat our call to the Government to publish a transport strategy so that the role of rail and aviation, including high-speed rail, can be assessed in a national context.
Those are our major concerns. We believe that they must be addressed if the High Speed 2 legislation is to complete its passage through Parliament in what, as I have explained, would be a lengthy and detailed process. A decision to invest in a new dedicated high-speed rail network would be the single most important transport infrastructure investment for generations. Our report supports high-speed rail, and identifies important matters that must be addressed before final decisions are made on High Speed 2. I call on the Government to respond constructively.
Question put and agreed to.
Cost of Motor Insurance
(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Deputy Speaker (Mr Nigel Evans)
The procedure for this motion will be as follows. Louise Ellman will speak for around 10 minutes. We will then move to full debate, which can last until 10 o’clock. Ministers will indicate when they wish to speak, which need not be at the beginning, and Louise Ellman will be afforded five minutes in which to wind-up at the end.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
I beg to move,
That this House expresses concern over the large increase in the cost of motor insurance in recent years, including in relation to young drivers; welcomes the report by the Transport Committee on the cost of motor insurance (HC 591) and its continuing inquiry into the reasons for this increase; notes that factors explaining the cost of motor insurance include the number and cost of personal injury claims arising from road accidents, assessment of risk, fraud, and uninsured driving; notes that the Government has taken some steps to deal with these issues, including a ban on referral fees in personal injury cases, but that more could be done; further notes that Ministerial responsibility for these issues is split across several departments; and calls on the Government to establish a cross-departmental Ministerial committee on reducing the cost of motor insurance and to publish a plan for dealing with the different aspects of this problem during this Parliament.
Members of the Transport Committee are signatories to the motion, and I thank the Backbench Business Committee for allowing me to move it.
Many Members will have received letters complaining about the rising cost of car insurance. People with clean records who have driven for years without incident have suddenly found themselves facing big increases in their premiums, and young drivers are now being asked to pay about £3,000 for insurance, effectively forcing them off the road.
The Committee started looking into this issue in November of last year, and we published a report in March. It generated massive interest. People are extremely concerned about their premiums, but serious questions about how the insurance industry works were also raised, and, unusually, we decided to reopen our inquiry.
It is, perhaps, fair to say that motor insurance was not the Minister’s highest priority before our inquiry began, but I hope it has become a higher priority now. Many Members have campaigned on the cost of motor insurance, and I single out for tribute my right hon. Friend the Member for Blackburn (Mr Straw), who has campaigned strenuously for the abolition of referral fees.
The AA’s regular survey of the cost of motor insurance shows that quoted premiums have more than doubled since 2006, reaching an average of £921 last month. The premiums faced by young people, and especially young males, are significantly higher—in many cases, about £3,000.
Jonathan Evans (Cardiff North) (Con)
Did the Committee also look at the impact of the recent Test-Achats judgment on gender discrimination? At present, there is a significant disparity between insurance rates for young women and young men, but that case argues that the rates should, in fact, be the same.
Mrs Ellman
I thank the hon. Gentleman for his question. The Committee did not look specifically at that point, but I fear that if there is to be equity, it will be equity upwards, rather than lead to a lowering of premiums.
High premiums have a major impact on the lives of our constituents. Motor insurance is rightly compulsory, but for many people driving a car is a necessity, perhaps for getting to work, to college or to hospitals for appointments, as well as for visiting friends and family, doing the shopping or taking children to school.
I and other Members have received a great deal of correspondence from people wanting to give examples of the problems they have experienced. I received a letter saying the following:
“My partner has just tried to insure me again on our vehicle which is not a sporty flash car, to be told that it would cost him an extra £1,370.”
A lady from Birmingham wrote:
“My car was involved in an accident where a lorry collided with my car. The driver accepted it was his responsibility…My renewal was due and my premium had increased from £700 to over £2,000.”
These stories illustrate why the Government must act.
Surprisingly, the recent increase in premiums has coincided with significant improvements in road safety, which is part of a welcome trend of falling numbers of deaths and serious injuries on the roads. Why have premiums risen so much, therefore?
There is better access to justice, with no win, no fee arrangements. Those arrangements are being changed, but we must not return to a situation in which justice is available only to the rich.
There is also cold calling, where claims management companies canvass for claims, often using personal information obtained from unknown sources. Where is the regulation of data protection that is supposed to be in place? Claims management firms deserve special scrutiny. They encourage people to claim, and to make multiple claims when they might not otherwise have done so. Premiums in the north-west are 50% higher than the national average, apparently because of the activities of these companies.
Referral fees have been in the news. They are paid to a number of players in the industry as a reward for passing on business, thereby encouraging claims and sometimes inflating bills. They are not paid to insurers alone; a number of bodies are involved, including insurance companies, solicitors, car hire firms, claims management companies, medical experts and vehicle repairers. Although the Government have started to act on referral fees, what they are doing does not encompass all those sectors of the industry, and neither does it take into account how companies might try to get around the abolition of referral fees. There are now alternative business structures, where non-lawyers can buy legal practices. How will the Government ensure that companies do not get around the ban on referral fees through taking such steps?
Fraud is a major concern, including the staging of accidents by criminal gangs. That adds £80 to the average premium.
Julian Sturdy (York Outer) (Con)
The hon. Lady is making some powerful arguments on issues that the Transport Committee has addressed. Does she agree that we need greater transparency in the industry if we are to drive down the costs of motor insurance?
Mrs Ellman
Yes, and the Committee has called for greater transparency, but the Government did not comment clearly on that point in their response to our report. As we did not get a clear answer then, I shall repeat the question now: what are the Government’s views on greater transparency?
Some criminal gangs commit fraud by staging accidents, but fraud can also include giving false information. We commissioned a survey with Young Marmalade, an insurance company specialising in young people, and a third of young drivers said they had considered giving inaccurate information to insurers in order to try to get a lower premium. There are plans to give insurers access to Driver and Vehicle Licensing Agency data, but when will that be implemented? Whiplash claims are another source of increased costs and premiums. We need to find a way of identifying when such injuries are genuine.
One of the reasons for the high premiums faced by young people, and in particular young males, is the high accident rates among them. The accident rates for young males are 10 times higher than those for older people. Some years ago, the Committee looked into this issue and made a number of recommendations, including changing attitudes and enforcing a graduated licence scheme, but we are still waiting for the Government to respond. We support the “black box” idea developed by some insurers to monitor and assess the driving standards of young people so that that information can, perhaps, be used to calculate their premiums.
I am glad that the Office of Fair Trading is looking into the industry, and that the Government have started to act by starting the legal process to ban referral fees, but do we truly have any confidence that premiums will come down? I do not believe we have seen any evidence of that.
A great deal more needs to be done and that involves a number of Departments: the Department for Transport; the Home Office; the Ministry of Justice; the Department for Education, which springs to mind immediately when one thinks about road safety and attitudes; and perhaps some others. Diverse Departments are involved and responsible for this area, so a cross-departmental working party is required, and that is why I have brought this motion to the House. I hope that the Government will be able to agree to setting up such a working party, so that insurance premiums can become affordable and the growing outrage of people forced to pay extortionate rates can be addressed.
Karl MᶜCartney (Lincoln) (Con)
It is a pleasure to follow the hon. Member for Liverpool, Riverside (Mrs Ellman), who made many points with which I agree. I congratulate her and hon. Members across the House on securing this debate and putting forward this motion. May I declare an interest as both a justice of the peace and one of 32 million drivers who pays insurance for the family car? Like many, I am dismayed that the previous Labour Government did nothing to dissuade the estimated 1.5 million uninsured drivers still on our roads or to halt the rise in fraudulent claims and insurance scamming which plague drivers and our courts.
Like many colleagues, I am aware that it can often be the issues that never make the front pages, or those that receive little, if any, attention, that can irritate people the most and can undermine and shake their belief in the rule of law and a responsible society. Normally, this occurs when people have done the right thing yet their fellow citizens who have purposely done the wrong thing somehow get away with it and the law-abiding are left to pay the penalty. The menace of uninsured drivers is one such issue. If that and the so-called insurance scammers were effectively tackled, the costs of motor insurance would be significantly reduced for the law-abiding drivers of our country.
In September, I conducted an online survey regarding uninsured drivers, the fines and punishments currently handed down, and what respondents felt should be the punishment, given the rising costs of premiums that most law-abiding drivers have had to pay in recent years. There is a widely held view that there is a need for far harsher penalties for uninsured drivers and other people who, aided and abetted by the claims industry, lie about the extent of injuries caused to them and, in some cases, wilfully manufacture the circumstances in which accidents occur. There are also about 1,200 claims per day for whiplash, each case averaging a payout of £3,500, and hire car charges for replacement cars are also eye-wateringly high. That is not sustainable, or, I believe, a true representation of accidents on our roads.
My interest results not only from what my constituents or friends and family tell me, but from what I have seen with my own eyes and experienced personally. As a magistrate, I have found that our hands have for some time been tied by rules and by the ring-fencing of the level of fines and type of sentences we can impose on the same old faces that come before us, often three or four times in a few years. These people include those who drive without insurance, and often without tax and MOTs for their vehicles too. It is also a proven fact that many of those convicted of vehicle crime are involved in other law-breaking activities.
Moreover, my family and I have been the victim of three car insurance scams, and the police forces in both Kent and St Albans have shown no interest in following them up, despite judges and courts finding in favour of us and our insurance company. But they should, because how many fully insured drivers have the time and bullishness to see through such action, and challenge the system and the fraudsters? The system relies on this lack of willingness.
Kwasi Kwarteng (Spelthorne) (Con)
How extensive does my hon. Friend think the problem of fraud is in relation to rising premiums?
Karl MᶜCartney
It is very extensive, and I shall discuss it later in my speech. It is something we have to deal with.
The system relies on a lack of willingness to contest such fraudulent claims. After the judge’s decision in our most recent case, it was revealed in court that these scammers had tried it on—successfully—six times in the past five years from the same registered address of the vehicle. Unpunished, they are probably trying it on again as I speak. Not only do uninsured drivers increase the insurance premiums of law-abiding insured drivers, but we taxpayers are being fleeced a second time, as our courts are seeing similar claims cases taking up large amounts of court time, whereas 10 to 12 years ago that was not so. Typically, the courts, those working in them and the legal system suspect that the true number of fraudulent claims is at least 10 times that which reaches our courts.
To gauge whether my views were in tune with others—I feel that there is an appalling lack of appropriate punishments for uninsured drivers and accident scammers—I conducted an online survey, as I said. It was predominantly of local people in Lincoln and asked their views about uninsured drivers, given that the average fine for driving uninsured in the county of Lincolnshire was £213 in 2010, a reduction from £233 in 2008. I was not surprised to find that the vast majority felt the fine level was too low. It is especially galling for insured drivers to note that while their average insurance premiums have risen by up to 40% in recent years, the fines for uninsured drivers have decreased in the same period. We can see why this situation has occurred. The average comprehensive premium for the Lincoln postcode was just over £603 at the end of September 2011, which shows that someone has to be caught 2.8 times or more in a year for it to be more expensive than to drive with insurance.
However, as we have heard, insurance is about risk and age, and those key factors also matter. For example, the estimated cost for comprehensive insurance for a male in Lincoln aged between 17 and 20 is £2,733. It is £1,338 for a 21 to 25-year-old and £765 for a 25 to 30-year-old. That means that anyone from those age groups caught driving uninsured has respectively to be fined 12.8, 6.5 and 3.6 times per year before the fine exceeds the insurance cost.
Jonathan Evans
But this is not only about the financial penalty that may be imposed on uninsured drivers. If the uninsured driver is involved in an accident, the significant costs of personal injury have to be borne by all the people who are doing the right thing, and that then adds to the insurance costs to which my hon. Friend has referred.
Karl MᶜCartney
My hon. Friend is correct, and that is something else that I will discuss later in my speech.
For many, the risk of driving without insurance is attractive. The “getting away with it” factor is too enticing. As hon. Members on both sides, and you, Mr Deputy Speaker, may know, I like being positive, and there have been many changes recently that I warmly welcome: the reported fall, by a claimed 25% in the past five years, in the number of people driving while uninsured; the recent clampdown on people owning uninsured cars; the seizure of uninsured vehicles; and the coming prevention of insurance companies and other agencies selling on personal data, which has fuelled insurance scamming. That move followed the welcome recent Motor Insurance Regulation Bill sponsored by the right hon. Member for Blackburn (Mr Straw). I hope that my ministerial colleagues will ensure that this applies to all referrals of personal data following vehicle accidents, and that the insurance industry and associated agencies will not look for any loopholes.
However, I believe that more needs to done, and the survey that I conducted through my website shows that the vast majority of local people who responded think so too. Unfortunately, I suspect that much of the insurance industry’s claimed recent fall in uninsured driving has come in London, where of course there has been a proliferation of number plate recognition cameras, in the City and, more recently, with the congestion charge area. Across the country a frightening statistic is still in force, which is that when we drive on UK roads in some areas every 12th car we pass has an uninsured driver at the wheel.
Having taken my views and those of my constituents into account, I have come up with a 10-point plan to clamp down further on the scourge of uninsured driving and phoney claims. First, as part of the need for a far more zero-tolerance attitude to be taken against supposedly low-level crimes, driving without insurance needs to be treated as a higher priority by the police. Like drink-driving, uninsured driving needs to be no longer socially acceptable.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
Does my hon. Friend agree that things are a load easier for enforcement agencies in other countries, because the certificate of insurance is displayed on windscreens there?
Karl MᶜCartney
Remarkably, my hon. Friend picks up on the second point of my plan. Secondly, we should have an insurance sticker on every windscreen, just as we do for the current tax disc, that proves that a car is insured. Thirdly, we need far tougher sentences for those caught driving uninsured, with the minimum fine in each area being the double the average insurance cost in that area for the age and gender of the person caught. Fourthly, where someone is caught and prosecuted for driving uninsured, they should automatically lose their driving licence for a set period, perhaps at least one year. That should certainly be the case for a second offence and perhaps the period should be longer—say five years—for subsequent offences. Fifthly, when someone is caught and prosecuted for driving uninsured for at least the third time, they should perhaps go to prison—only for a short time—and be given a lifetime driving ban. Sixthly, if someone causes a serious accident while driving uninsured, they should go to prison and be given a lifetime driving ban. Seventhly, juries and magistrates should be made aware of whether false vehicle insurance claims had been made by those making a subsequent vehicle insurance claim that has reached the court.
Eighthly, those making false insurance vehicle claims that reach the courts should be prosecuted and actively pursued by the relevant police force. My penultimate point is that the names and addresses of those prosecuted for driving uninsured should be published widely. Finally, we must support both the clampdown on insurers being able to trade personal data of those involved in accidents and the regulation of the monopoly and sharp practices currently engaged in by insurers and the legal profession that see the motorist paying through insurance premiums and general taxation for their unwillingness to stamp out fraudulent and speculative claims, such as personal injury and hire car charges. These moves are just the start, and throughout my time in Parliament I am going to continue to campaign for justice for the insured drivers of our country.
Julian Sturdy
I agree with my hon. Friend that tougher action is required. Is he surprised to hear that 10% of drivers aged under 34 do not realise it is compulsory to have motor insurance?
Karl MᶜCartney
I have heard that before and I am still surprised considering that I was brought up knowing that one had to be insured and given that one has to show one’s insurance documents to tax one’s vehicle. However, the point is well made.
I am going to continue to campaign for justice for the insured drivers of our country and for heavier punishments for those who are uninsured. The law-abiding majority—in this case drivers who, in many cases, struggle to pay large car insurance premiums but who rely on their car for work, for transporting children to school in rural areas or just to access local services and amenities—must always come first. I am also wary of the claims made by insurance companies and their insurance bodies and organisations, along with some parts of our legal system—the legal firms and operators in this field—that they are doing their best to reduce uninsured driving and scamming claims. They patently are not doing what they claim to be doing. They are complicit in passing on the cost of fraudulent claims and the £400 million to £500 million a year that the Motor Insurers Bureau fund pays out, which is taken from our premiums rather than their profits, to insure drivers who are involved in accidents with uninsured drivers. That is too much. They do not mind what our premiums are, as we have to pay the figures they quote. They have a monopoly.
I hope that my right hon. and hon. elected colleagues in government and honourable members of the judiciary and legal system will actively seek to reduce the financial burden of motor insurance on law-abiding drivers, particularly on new and young drivers, by ensuring that uninsured driver numbers are further reduced. That will ensure that young drivers in particular, at what should be an exciting time when they are able to have some independence, will be able to afford to drive legally on our roads. Further, older drivers who are struggling to afford motor insurance should find that premiums are reduced not just marginally but heavily if the insurance industry and legal system help to clamp down on the cost of uninsured drivers and on the cost generated by fraudulent and inflated claims. Those involved in the legal system that is currently in place are happy to see those claims passed through the system because they generate work, fees and profits at no cost to them, with drivers’ insurance premiums rising instead, as they have by more than 40% in the past year, to cover those costs.
The points I have made are based on the views of law-abiding respondents locally and on the view I have always held that the law-abiding majority should come first and the criminal should come last by a long way. The irritating system under which people may break the law knowing that the penalties for being caught are minor compared with the cost of complying with the law cannot continue. The situation has to be rectified to ensure that the law is on the side of those who uphold it, not of those who break it. Tackling uninsured drivers and insurance scammers will be a good step in the right direction.
Anything that will help to reduce the cost of insurance premiums for the law-abiding 32 million-plus drivers in our country has to be a good thing. Ensuring that there is a truly competitive insurance industry can only help drivers, especially if moves are made to ensure that it is no longer viewed as a rip-off for the motorist—or highway robbery, as some have termed the recent 40% rise in premiums. Perhaps regulating and removing the absolute monopoly enjoyed by the sector will also, along with appropriate levels of punishment, help to eradicate the despicable practice of uninsured driving on our roads. I support the motion.
Jim Dowd (Lewisham West and Penge) (Lab)
May I apologise to you, Mr Deputy Speaker, and to my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) for missing the first few moments of her introduction to the debate? I commend her and the Committee for the excellent work they have done in this timely report. As she mentioned, the motor car has moved a long way from being a luxury to being, although not quite a necessity, something that is critical to the economic and social well-being of many millions of people across the country. Issues relating to cars clearly have a wide impact in every constituency.
The issue of young drivers concerns everybody. The difficulty that many of them have in obtaining insurance is only one part of that. I remember when I bought my first car back in—
Jim Dowd
No, it was not a Model T—it was a Mini, back in 1968. It was six years old and it cost me just over £100. By the time I had got my insurance, which was £60, plus four-months’ road tax—as it was then and as the rest of the world calls it, or vehicle excise duty as we call it now—and an MOT certificate, I had spent as much on those three items as the car had cost me. I was quite young at the time and that was probably reflected in the premium, but none the less it was a shock to have to spend as much on ancillary costs as on the vehicle itself.
Today, we hear stories of young people having a vehicle costing a few hundred pounds and insurance premiums of more than £1,000. It is not the cost of the vehicle that is the issue; it is the risk of using it on the road. Effectively, motor insurance is a public liability insurance; one does not necessarily have to insure one’s property but one does have to insure against damage to other people’s property and, indeed, to other people. It is the scale of the problem that we need to look at. As has been said, there are more than 30 million cars on the road and it does not take a genius to work out that as the number of cars on the road rises, so the likelihood of accidents rises in similar proportion. However, I believe that this country has a very good, but still improvable, record on reducing road accidents and certainly road casualties.
One shock that I had in 1992 when I was first elected to the House—apart from having been elected to the House—was the fact that for the first time in more than 20 years I had to buy my own car. I had experienced the comparative luxury of having a company car in the intervening 20 years and precisely because I did not have a personal insurance record—a no-claims bonus, as everyone knows it—at that time, the first insurance quote I got was more than £1,200 for a very medium-range car, which my former company kindly sold to me. It was only when I got the company to provide me with a certificate saying that I had had blemish-free motoring for 10 years or more that the insurance company reduced the figure, but it still only came down to £800—and that was the better part of 20 years ago. The problems with increased costs in insurance and the increased likelihood of people driving uninsured, as well as the risks posed to those people and, more particularly, to everybody else, are intolerable.
Motor insurance is a curious entity in that it is one of the few examples, although not the only example, of a statutory obligation to purchase a product from a private supplier. There may be far more than one supplier, but one has to have motor insurance to drive on public roads. That places on the motor insurance industry particular responsibilities that it should meet but that would not otherwise arise. I think the situation implies that the industry should have the most stringent, open, transparent—I think a Government Member said that transparency was a key issue—and fair standards of behaviour towards customers because it has a captive market. I accept that people can move from one provider to another, but one thing they have to have to drive on public roads is motor insurance. If one’s household contents insurance premium becomes unsustainable or extortionate, one can either go to another supplier or take the risk on oneself. One can say, “The premiums are not worth what I’m paying: I’ll take the risk on myself. I don’t have to have it,” but the same is not true of motor insurance. If one wants to drive on a public road one has to be insured.
The industry is confronted by a number of problems, to which others have referred. For example, there is the rise in personal injury claims, almost all of which seem to include claims for whiplash injury, as well as the issue of referral fees, which the report has looked at and which others have mentioned. There is also the growth of the no win, no fee—or ambulance chasing, as it is known in some circles—industry, and the business of downright fraudulent claims. All these issues have to be grappled with by the industry, which is an extensive one, and I am sure that people will have different views about how well it is dealing with them.
The report covered a number of areas, including personal injury claims, referral fees, uninsured drivers and fraud, but it did not cover an area that I want to make particular reference to on behalf of one of my constituents. He is 73 years old, and he has been working as a minicab driver for a number of years. He has a state pension, although not a full one, and that is his only other income, so he is keen to carry on working. In August this year, his then insurer advised him not that it was putting up his premium but that it was cancelling his hire and reward cover. It gave no other reason than the fact that he was now 73, as though he had just gone across some magical threshold. It was not even prepared to take on the risk at a higher price.
My constituent quite understands that, as people grow older, so they might become a bigger risk and therefore have to pay a bigger premium, but the insurer would not increase the premium. It simply would not accept the risk, for no other reason than his age. His wife is somewhat younger than him, but she, too, is past retirement age. She is still working, however, so his recourse to benefits would be somewhat limited. He contacted other insurance companies and brokers, but to no avail. He got no offers at all to renew his hire and reward cover, which is essential for anyone wishing to work as a minicab driver.
My constituent’s social, domestic and pleasure policy was unaffected, except for a marginal increase in price. I could understand if the insurer felt that he was a danger to the public and should therefore not be on the road. I would not agree with such a proposition—I do not think that any sensible person would—but it would at least have the characteristic of consistency. As things stand, however, it is perfectly legal for him to drive on the roads as a private citizen in his very unglamorous minicab, but it is no longer possible for him to pursue his livelihood as a minicab driver.
The majority of the population have a driving licence, and I quite understand why they expire on the licence holder’s 70th birthday. The assumption is that we need to consider whether people are still fit to drive on public roads. The primary consideration must be safety, not least the safety of other road users, and it is perfectly reasonable to check people’s eyesight and reaction times more as they get older, to ensure that they can still drive safely. We are told that we have an increasingly ageing population, so this is going to become more and more of an issue. There is no question but that everyone who drives on public roads should be deemed fit to do so, but I cannot understand the distinction between my constituent driving as a private individual and driving for gain as a minicab driver.
After my constituent had been to see me, I wrote to the Chancellor of the Exchequer and to the director-general of the Association of British Insurers. I got a reply from the Financial Secretary to the Treasury, in which he states:
“Some age-based practices, such as the use of broad age bands combined with significant price increases between age bands, may appear arbitrary. Insurers, however, use age bands as a means by which to price the risk of insuring a variety of individuals, and the transaction costs involved. The effects of age bands will, however, be reflected in the premium charged to an individual should they enter a new band.”
As I have said, my constituent has been denied that opportunity, as he has not been put into a new band. His premium has not been increased; it has been refused.
I also received a response from Mr Otto Thoresen, the director-general of the Association of British Insurers. I will read out a point that supports exactly what the Committee says in its report. He says:
“In 2010, motor insurers paid out £1.21 in claims and expenses for every £1 received in premiums. A combination of high legal costs, rapidly increasing personal injury claims, fraud, and a stubbornly high level of uninsured driving have driven the industry to a point where, after price stability and, in many cases, falling premiums in the middle of the last decade, they have now had to rise.”
The Committee makes that point as well. Mr Thoresen went on to say that there were issues relating to the taxi insurance business, and that
“evidence across the market has shown that the probability of being involved in an accident worsens as drivers reach their mid-70s”,
as my constituent is now doing.
One of the objections to the way in which insurance companies conduct their business is that, when it suits them to do so, they treat people as individuals, and if an individual has a particularly poor record, they will suffer the consequences. However, when it suits them, they also treat people as part of a group that has an alleged poor record, and increase the premiums accordingly. This never seems to work in the opposite direction.
Mr Thoresen suggested that my constituent continue to try to secure insurance through a specialist broker, and he very kindly gave me the details of four specialist companies for him to approach. My constituent contacted me again in the middle of October, having contacted all four companies. Of the four, three would not offer him insurance at all, and the one company that did so wanted about £750 a month. That amounts to well over £9,000 a year. I have absolute confidence that my constituent is an excellent minicab driver, and I am sure that his customers must be among the happiest in south London, but I am also fairly certain that he does not make enough money to pay £9,000 a year in insurance costs.
In the Financial Secretary’s response, he also said:
“Research has indicated that no age groups are specifically excluded from the insurance market”.
I suggest to him that it is unnecessary specifically to exclude anyone if they are being offered a price that is completely and utterly unaffordable. Theoretically, everyone in this country can go and stay at the Savoy—there is not a sign outside saying “No riff-raff”—but most people would not consider doing so because they cannot afford it. Similarly, in this case, that insurer made the cover so unaffordable that it might just as well have banned my constituent from having it. He and I have no objection to the need for an increase, but we object to the scale and disproportionate nature of that increase. All he wants to do is continue to pursue his livelihood and not have to depend on benefits.
David Rutley (Macclesfield) (Con)
The hon. Gentleman is making some important points. Does he agree that there might be scope for some new products in the motor insurance industry that could be tailored to older or younger drivers and perhaps designed around themes such as pay as you go? Such products could be made more affordable if they were tailored to specific age segments that have different risk profiles from those of the average driver.
Jim Dowd
I am grateful to the hon. Gentleman for that suggestion. I said earlier that the insurance market should be more personalised, rather than more generalised. Companies should certainly look into that. I fear that, because the motor insurance sector is a captive market, we do not get the level of service that we would get from, say, the home insurance sector, because it knows that everyone has to have insurance if they want to drive on public roads. I agree with the hon. Gentleman, however, that products should be tailored more specifically to the individual.
As I said, my constituent wants to continue to work. He does not want to become dependent on benefits. Some years ago, the then Secretary of State for Employment was famously misquoted as saying that people should get on their bikes to find work. The present Secretary of State for Work and Pensions advised people in south Wales to get on the bus and go to Cardiff to look for a job. My constituent wants to get in his minicab and work, but the insurance industry will not let him.
Roger Williams (Brecon and Radnorshire) (LD)
I welcome this opportunity to speak in the debate. I want to say a few words about young drivers, the insurance industry and Government policy. I have some sympathy with the excellent points about why the industry is being pushed into charging ever higher premiums, but the premiums young people are charged are very high indeed. Many would argue that that is for good reason. Premiums have been quoted this evening of £2,700 for a newly qualified male driver. I shall quote a few statistics that might substantiate that.
One in five young drivers will have an accident in their first six months on the road, and 17 to 24-year-olds make up 12% of insured drivers but 25% of claims. An 18-year-old is three times more likely to be involved in a car accident than a 48-year-old, and young drivers tend to be involved in more serious accidents than older people, with the average claim for a younger driver being three times more than that for older drivers. Men between the ages of 17 and 20 are seven times more likely to be killed or seriously injured on the road than all male drivers. I thank the road safety charity Brake for supplying me with that information. There is a clear cost to insuring young drivers.
More tragically, every year 3,300 young drivers and passengers are killed or suffer life-changing injury as a result of road crashes. In rural areas there is a lack of public transport so young people need to drive, and I am absolutely not discouraging them from doing so. Many wish to have the opportunity of independence from their parents and, not having public transport, take to driving, but we must ensure that young people are as safe as possible, not just for their sake but for passengers and other road users and pedestrians.
In my constituency in 2006 we had the tragic loss of life of four young girls on Llangynidr mountain, and this summer a young girl from Hay-on-Wye was killed in a neighbouring village in Herefordshire. Many of these tragedies can be avoided. I have worked with Brake and with Sarah Jones of Cardiff university on graduated driving licences, whereby restrictions are placed on newly qualified drivers. The proposals supported by Brake are, first, a restriction on the number of young passengers in the car. Often the excitement of first going out and having friends in the car leads to reckless and ill-considered driving. There should be no driving for young newly qualified drivers between 11 pm and 6 am, unless for work purposes. There should be zero tolerance of alcohol, and no driving on motorways. This is not a radical plan. Countries with a form of graduated driving licence include New Zealand, Australia, much of Canada and 48 of the American states.
Mrs Ellman
Is the hon. Gentleman aware that the Transport Committee considered this issue in the previous Parliament and made precisely the same recommendation as he is making now? The then Government did not respond positively; perhaps this Government will.
Roger Williams
I was aware of the report, and I have met the Minister in this Government. While he understood my good intentions, he was not able to reciprocate positively.
Jonathan Evans
Rather than go down the route of legislation, might it not be a helpful preliminary step if the insurance industry reduced the premium provided that people accepted the proposals he has made on driving behaviour? That would not require legislation and might ultimately encourage better driving habits.
Roger Williams
That was precisely the comment that the Minister made to me. I commend the work of Co-operative Insurance and other insurance companies, which have come up with their own graduated driving licence scheme. A smart box in the insured car monitors many aspects of the driver’s habits, including speed, cornering and the time the car is driven. The driver is given a quarterly cashback payment according to their driving score. The data collected from a sample of 1,300 young drivers show that almost four in five consistently drive within the speed limits, and 40% of males and 41% of females achieved the top score in all categories.
So either through Government policy or by persuading insurance companies to take up similar measures, we can reduce the number of accidents on the road. That will not only bring down the costs of everyone’s insurance premium but, far more important, prevent many fatalities on our roads.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member for Liverpool, Riverside (Mrs Ellman) on introducing the debate. Car insurance and premiums is a big issue in Northern Ireland. Just two weeks ago the hon. Member for South Down (Ms Ritchie) secured an Adjournment debate on insurance in Northern Ireland, for which Northern Irish Members were present. It is good to be involved in the bigger issue for the whole of the United Kingdom, because we are part of the UK and as such we are concerned about the issue.
The Consumer Council for Northern Ireland has produced figures demonstrating that the cost of car insurance is comparatively higher in Northern Ireland than in England and Wales. It is accepted that there is a disparity, and the insurance companies and many other people understand that to be the case. There is, however, a lack of understanding and analysis of the factors that have resulted in the higher costs.
There has to date been a lack of informed discussion about the cost of car insurance in Northern Ireland. The premiums for us are clear, and those of us who pay their insurance are aware of that.
Mr Nigel Dodds (Belfast North) (DUP)
On average, premiums in Northern Ireland are 84% higher than in other regions of the United Kingdom—a startling figure given the high cost of insurance premiums across the UK as a whole. My hon. Friend is right to point out the particular problems in Northern Ireland.
Jim Shannon
Clearly, the fact that premiums are 84% higher shows what we in Northern Ireland have to bear. Part of the role of the cross-departmental ministerial Committee is to address that issue.
Premiums are high in Northern Ireland, but the number of compensation claims is falling, whereas in England and Wales it is increasing. The number of claims notified to the compensation recovery unit has reduced by 23% in Northern Ireland over a nine- year period, and over the same period it increased in England and Wales by 17%. It is a clear disparity—84% dearer insurance to start with, despite the fact that our claims are reducing. We have to ask why premiums are so high in Northern Ireland.
In 2009 the CRU was notified of 29,467 claims for compensation. In 2010 the county court of Northern Ireland made awards in only 768 civil bills for personal injury claims. The vast majority of claims are dealt with without the need for determination by the court. Again, claims are down but we are paying extremely high premiums.
In England and Wales a claim for damages arising from personal injury will routinely involve detailed claims for future caring costs. In Northern Ireland, these costs are reduced as injured persons will often be cared for by family members. That is perhaps the nature of us in Northern Ireland, but it is a factual example. In 2010, 87% of awards for personal injury in the county court were for less than £5,000. When there are claims, the average claim is small. That is important to note.
Karl MᶜCartney
Does the hon. Gentleman know whether the reduction in Northern Ireland is a result of insurance companies still having plenty of assessors who look at claims and make sure they are not fraudulent or as high as they are in England and Wales?
Jim Shannon
I am not aware of all the details. I am aware only that compensation claims are down. The value is down, as well as the numbers. That indicates that we deserve consideration when it comes to premiums. That is the point I am making.
A number of the factors that are thought to have contributed to the rise in the cost of insurance premiums in England and Wales are absent from Northern Ireland—again, it is important to draw the comparison. The absence of no win, no fee agreements means that those in Northern Ireland who are seeking compensation must invest their own funds—perhaps that explains the previous point—before a legal claim can be brought. Alternatively, a solicitor’s practice may be willing to fund the outlays. This dissuades unmeritorious litigants. Furthermore, in England and Wales a successful plaintiff’s solicitor can claim a success fee, which can increase legal costs by up to 100%. There is no provision for success fees in Northern Ireland.
The insurance market in Northern Ireland shares a number of characteristics with England and Wales. The same advertisements are shown on TV. Admiral Group advertises on TV, as does Churchill, but underneath, the wee small print says, “Not available in Northern Ireland.” So although Churchill says, “Oh, yes” to every question he is asked, that does not apply to Northern Ireland, so there is clearly an issue to be addressed. The insurance market in Northern Ireland shares a number of characteristics, but not the price. That is the point we want to make.
Some time ago I had the opportunity to go with some of my constituents to meet the Department of the Environment in relation to a suggestion we were making. Perhaps the Minister in his response, as well as the Committee, will take this on board to see how we could reduce premiums and fees in Northern Ireland. One of the suggestions that was made concerned a new scheme that exists in parts of America and Europe, whereby a gadget, for want of a better word, is put in cars that monitors the speed and the mannerisms of the driver. That feeds back to a central place. That reduces fees because if drivers transgress, on the principle of “Three strikes and you’re out,” they lose their premium reduction. That might be a way of addressing some of the issues.
Mike Penning
It is not for me to publicise which companies do that, but, as we heard from the hon. Member for Brecon and Radnorshire (Roger Williams), at least one of them does, and there are several available on the market.
Jim Shannon
It is not for me to advertise those firms either, but I understand that they do good work and there are good possibilities for young drivers.
We want to make it clear, first, that the number of insurance providers operating in the market is lower than in England and Wales, restricting choice for consumers and reducing competition within the market. Secondly, there is a small number of accident management companies operating in Northern Ireland. There is some suggestion that costs are higher when accident management companies are involved. Despite the point that was made earlier, that may be a contributing factor and requires consideration. Lastly, the fact that Northern Ireland is a rural community with a dense road network and high levels of social need requires specific consideration.
Northern Ireland Members of Parliament have a duty tonight to highlight the imbalance in insurance premiums between Northern Ireland and the rest of the United Kingdom. We believe that, as the hon. Member for Liverpool, Riverside said in her submission, a review is needed. Northern Ireland needs to be part of that cross-departmental ministerial committee. We look forward to its conclusion and to a reduction in fees for car drivers and for those who have to pay such high insurance premiums in Northern Ireland. I support the proposal.
Iain Stewart (Milton Keynes South) (Con)
As a member of the Transport Committee, I am pleased to have an opportunity to take part in the debate. I pay tribute to the hon. Member for Liverpool, Riverside (Mrs Ellman) for introducing the Committee’s report so ably and comprehensively. I do not intend to speak for long, but having spent a considerable time examining the issues, there are a few points that I would like to place on the record.
Two weeks ago two events happened to me that crystallised in my mind the facts that we are debating tonight. First, I received in the post my motor insurance renewal notice from my insurance company. I can assure the House that it was not a happy moment in the Stewart household, because my premium had shot up by the order of 25%. I shopped around a little and got a slightly better quote, but it was still a substantial increase on last year, despite my having had no accidents.
Secondly, no sooner had I signed up to the new policy than I got a text message suggesting that as I had had an accident in the past three years, perhaps I required assistance to claim compensation. As I said, I had had no such accident. It strikes me that those two experiences, which I am sure have been shared by thousands, if not millions, of people up and down the country, are not unlinked.
Although I accept that, as the Select Committee’s report sets out, there is a range of reasons why insurance premiums have gone up considerably in recent years, from the evidence that I saw as part of our inquiry, together with private discussions that I have had with some insurance companies, I am convinced that it is referral fees for personal injury claims and the activities of some claims management companies that have been a significant contributor to the growth of those premiums.
I do not doubt that there may be perfectly respectable claims management companies, but I am of the view that the current arrangements whereby lawyers and others can pay and receive fees for referring personal injury claims has created an industry that pursues claimants for profit. Although I do not want to see anyone who has a genuine claim denied proper compensation, far too often those proper boundaries are breached and there is a financial incentive throughout the system to exacerbate claims or make fraudulent ones.
It has been difficult to obtain exact figures, but there is certainly an average sum of several hundred pounds in each claim which sloshes around the system in ways that are very opaque. The cost, of course, is picked up by the policyholder. This creates a double problem. For the honest motorist, that pushes up premiums at a time when many households are struggling to meet the cost of living.
Dr Sarah Wollaston (Totnes) (Con)
Further to the unfortunate shock that happened in the Stewart household, may I tell the House about the unfortunate shock in my household when I received a notice saying that I did not need to take any further action to continue my insurance with Tesco, but the small print indicated that the premium had gone up from £900 to £5,700 as I am the parent of a 17-year-old boy? It is a further sharp practice that the small print is not there, and it would have been very easy to miss the fact that I could have spent nearly two months’ salary on insuring my 17-year-old boy. I think everybody in the House would agree that it would be entirely unreasonable and very difficult for anyone living in a very rural area, as I do, for my son not to be able to drive.
Iain Stewart
My hon. Friend makes a powerful point. The shock in my household cannot even begin to compare with that in Totnes. She raises an extremely important point. Many of us will pay our motor insurance premiums by a monthly direct debit, and among all the paperwork that we receive it is very easy to say, “Yes, we’ll continue with that policy,” and then suddenly the premiums that we are paying shoot up. I echo her call for much more transparency and explanation on the renewal documents about what the new cost will be.
The first problem I identified is that the premiums go up, placing a strain on households that have tight incomes, but another problem is that premiums are pushed up to such a level that other, less honest motorists seek in some way to evade paying their insurance, and other Members have alluded to that. They will either not have insurance at all, or they will in some way make fraudulent claims on their insurance policies to try to minimise payments. That creates a vicious cycle; the more people evade payment or misclaim on their policies, the higher the costs that honest motorists have to bear.
The destination of those fees and the routes by which they travel are far from clear, but I have been surprised to learn of some of the organisations that potentially gain a sizeable income from referral fees. For example, it has been suggested to me that trade unions receive significant income, either directly or through benefits in kind, from referral fees. I have been unable to quantify that, but Lord Justice Jackson states in his review of the cost of civil litigation:
“Trade unions refer the personal injury claims of their members to solicitors on union panels…For example, one union informs me that it receives a referral fee of £200 for every case which proves to be “worthy of investigation”. Other trade unions do not charge referral fees as such, but instead receive certain free legal services from solicitors for their members.”
I am in no way suggesting that that is wrong, but it illustrates the opaqueness of the system and the fact that money can be distributed in ways that people might not first realise. For that reason, I am glad that the Government have taken action to ban referral fees through the amendments made last week to the Legal Aid, Sentencing and Punishment of Offenders Bill.
I would be grateful if the Minister could clarify one point on that—I appreciate that it was not his Bill and that he might wish to speak with the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly) about it. The new clause added to the Bill last week defined payment for referral fees as “any form of consideration”. I presume that that will include the offset models to which I have referred, where legal services are traded rather than cash, but I would be grateful for clarification.
I strongly believe that the ban on referral fees will help to strip out some of the unnecessary costs in motor insurance. There is a balance to be struck between providing fair access to justice and having a system that is wide open to abuse in a “something for nothing” culture. I believe that the pendulum has swung too far in the latter direction and I am glad that the Government have taken action on referral fees. However, as the Transport Committee’s report recommends, there are many other causes behind the rising cost of premiums and they often cut across Government Departments.
In conclusion, I urge the Government to take on board the motion’s final recommendation, which is also set out in the Committee’s report. A cross-departmental ministerial committee should be set up to consider further ways of reducing the cost of motor insurance.
Julie Hilling (Bolton West) (Lab)
As a member of the Transport Committee, I, too, pay tribute to our Chair, my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), for leading the debate. The ever-rising cost of motor insurance simply cannot continue, and it is the only insurance that is compulsory. It is up to an individual, and perhaps their mortgage company, to insure their house, their holiday or anything else, but the law states that we must insure our cars and motorbikes; we are a captive audience. That is why it is absolutely right to debate the issue this evening.
Insurance premiums are bad enough for mature motorists, but for young drivers they are frankly ridiculous. They lead to young people finding solutions that are against the law. Research from the AA shows that more than a fifth of drivers under the age of 25 are prepared to break the law to avoid high insurance premiums. It shows that 21% would consider driving without insurance, 42% have changed the information they provide to an insurance firm to qualify for a cheaper policy, 22% have added another driver to their policy, 15% have changed whether they were the main driver, 3% have changed their employment information and 2% have changed information about their address.
All over the UK, otherwise law-abiding citizens are breaking the law to get affordable car insurance. For example, cars belonging to young people are being insured by their parents, with the parents registered as the main driver even though they never drive the car. Tragically, if one of those young people has an accident, their claim might not be met by the insurance company. It is bad enough to lose their car and possibly be prosecuted, but what about the person they might hurt?
Some young people are finding unique ways of overcoming the problem. For example, 18-year-old Chris Berry from Bolton was quoted £17,800 to insure his P-reg VW Polo. He is now using a 1953 Fordson Major tractor to get around, with an insurance premium of £57 a year. He said:
“If I had the choice, I’d have my car—I can go further in it and it would be much better in the rain. If you are image conscious, I don’t think you would drive the tractor…but it can go 40 mph on a good day”
He also told The Bolton News that the insurance company rang him up after he received the quote for nearly £18,000 to ask him whether he wanted to take it out. He said:
“I told them they were having a laugh—it’s a Polo, not a Ferrari”
Of course, no insurance company would offer him any sort of quote if it was a Ferrari.
Julie Hilling
I do not think so, although perhaps that is worth investigation.
We have heard much over the past few months about referral fees, which the hon. Member for Milton Keynes South (Iain Stewart) mentioned. I am sure that other hon. Members will talk about that in detail, so I will confine my remarks to just a few points. I believe that referral fees must be stopped, but they should be stopped for the whole of a motor claim, not just the personal injury part. I also believe that the money paid to solicitors in the motor insurance portal should be reduced to an amount that simply covers the true cost of dealing with a case. While there is spare money in the system, there will always be a tendency to find another way of bypassing the ban. For instance, there is money to be made in referring claims for vehicle repairs. The Committee also heard about how credit hire cars are supplied to accident victims, rather than normal hire cars, which are much cheaper. We heard how insurance companies will pass claims to claims management companies, thereby building more costs into the system.
Although I agree that referral fees should be banned, the insurance industry should do more to tackle the situation. I challenged a number of insurance companies and their professional bodies to look to themselves for solutions. Whenever I have been involved in a claims situation, my first port of call has always been to my insurance company. Perhaps naively, I have expected it to sort the situation out. In times gone by there was the “knock for knock” policy; one’s insurance company funded the repairs to the vehicle, even if the fault was with another driver. I am told that the increased number of insurers in the industry and its internet basis stopped that policy.
The last time I had to use my insurance, I was clearly sold to a claims management company. Instead of the normal car hire company, I had a credit hire car, although I did not know anything about that at the time. I was contacted many times to claim for the “injuries” I had received, even though I had been sitting in my living room when someone drove into my car. Why did my insurance company not provide the necessary services itself and charge the other person’s insurer, or pass my case on to the other insurer to deal with?
I also believe that insurance companies could do far more to reward good drivers. The Pass Plus scheme was introduced to give additional post-test instructions to novice drivers, such as motorway driving, driving at night, town centre driving and so on. Initially that reduced premiums, but it seems that people with Pass Plus are no longer being rewarded. We have been told of schemes that can introduce technology into cars to show if a person is driving safely, for example when they are driving within speed limits and whether they accelerate and brake gently. I believe that the insurance companies should do more to promote such schemes.
We have been told about the very high propensity for young drivers to have serious accidents, but in truth it is not young drivers but young, male drivers, and I regret the European ruling that insurance premiums should be equalised for men and women. Insurance has always been based on risk, and it seems perverse that the ruling will end up costing women a great deal more because of the risky behaviour of men and, particularly, young men.
More regulation should therefore be introduced for novice drivers, and I should welcome a mandatory “newly qualified” plate, which exists in other European countries, because it would have two advantages. First, it would warn experienced drivers that the person in front just might do something a little out of the ordinary. Indeed, I remember the first time that I drove alone, along a country road, and a lorry decided to overtake me. I was absolutely terrified, but I am sure that the driver would have thought twice if he had realised that I had passed my test only the day before.
Secondly, the plate could be used to identify drivers on the road in order to enforce other restrictions that should be in place. We hear tragic stories of young people losing their lives or having life-changing injuries after car accidents, and normally the driver is found to be alcohol and drug-free, but I suspect that they are fired up on testosterone. Young drivers should not be allowed to carry backseat passengers, and we should investigate other restrictions to make our roads safer.
I hope the Government make rapid progress on making the driving test more rigorous and on ensuring that all drivers are prepared for many more of the situations that they find on the roads.
I was alarmed to find out recently that about 10,000 people are driving on our roads with more than 12 points on their licences, so I urge the Government to investigate that urgently and to take action. Previously, there was an effective carrot and stick: if someone built up their no claims bonus, they got cheaper car insurance; if they got endorsements or points, their insurance premium went up; and if they got three endorsements or 12 points, they lost their licence. We need to do more to ensure that good drivers can afford to drive, and I hope that the Government will take urgent and comprehensive action.
Mr David Ward (Bradford East) (LD)
Just after I was elected, I was asked to go to a local mosque to meet a group of young men who wanted to talk to me about various issues in the BD3 area of Bradford. It soon became apparent, however, that the main issue that they wanted to discuss was unaffordable motor insurance. Tales were told of people having to give up the ownership of vehicles used for family purposes and, more worryingly, of people having to give up the ownership of vehicles such as taxis, which were used for businesses and as part of their livelihoods. Even more worrying, I guess, were tales of friends who used Leeds postcodes when applying for insurance, despite living in Bradford, as the only way—fraudulently, of course—to obtain affordable motor insurance.
I undertook to determine the extent of the problem locally, and to see what proceedings had already taken place in Parliament to address the issue. It quickly became clear that Parliament did indeed take the issue seriously, especially through the work of the Transport Committee. It was useful to see the work that took place during the previous Parliament, and I am delighted that it has continued into this Parliament on such an important issue. Indeed, I welcome the Committee’s dogged and persistent pursuit of it.
We distributed about 15,000 local survey forms, and incredibly almost 2,000 were returned. In fact, they are still coming back. The respondents to the survey have seen their premiums rise by more than 60% in the past two years, at an average of just under £900, and their responses show that many Bradford residents are well aware of the role that personal injury claims play in pushing up total claims and, therefore, premiums. Many people have reported being pressurised to make bogus claims, and often by reputable firms of solicitors.
We carried out interviews with the police, insurance brokers and companies, driving instructors, GPs and, of course, numerous affordable-insurance-seeking drivers in order to get their views, and we produced a report and held a summit meeting to report back on the work that we carried out. What became apparent was that almost everybody we talked to had their own pet reason why insurance premiums were high. Whoever we talked to, they would say, “This is why they are so high.”
Many members of the public blamed uninsured drivers, and unfortunately we have the dishonour of topping the hit parade for uninsured drivers. I think that we have held it for several years in the BD3 community, and during our survey we often heard the question, “Why don’t the police do more about it?”
The police pointed out that the cost of uninsured drivers—the Transport Committee covered the point, but not a lot of people know this—is about £30 per premium, and it plays a part in high premiums but not a tremendously large part in excessively high premiums.
I went out with the police on a dawn patrol—all very exciting—in a vehicle impressively equipped with the latest, unbelievable technology for automatic number plate recognition. We have a ring of steel in Bradford—fixed cameras—but the technology in our vehicle enabled us to see all the number plates coming towards us and going away from us. They pinged up as information came through about vehicles that the police had an interest in, not necessarily just those that were uninsured.
Within 60 minutes of leaving the police station, we had identified an uninsured driver, the car had been seized and it was on the back of a trailer on its way to the compound. The car probably ended up being crushed. It would have been held for a period, but probably the owner just went to the next car auction and replaced the vehicle—and off he went again.
The police do impressive work—they seized 2,000 vehicles during the previous 12 months—but the level of fines has to be investigated. There is a difficulty for magistrates, because they have to take into account the ability to pay of the person being charged. It seems a simple solution just to increase the fine, but if the person cannot pay the penalty it does not really matter whether it is £300 or £3 million because it is not going to be a deterrent.
Karl MᶜCartney
The hon. Gentleman may have heard my speech, in which I made precisely that point. Fines have to be such that uninsured drivers definitely insure themselves. Unless they are increased in the magistrates courts and elsewhere, such drivers will not be forced to do so. What does the hon. Gentleman think?
Mr Ward
Absolutely. When the fines are so much lower than the premiums, there are bound to be people who take the risk of getting caught, and it completely undermines the public’s confidence in the system and, indeed, the police. If fines are to be a proper deterrent, surely they should at least reflect the amount that the driver would have had to pay had they not avoided paying insurance.
Sammy Wilson (East Antrim) (DUP)
Given that the fine system is clearly not working, does the hon. Gentleman agree that one way we could deal with the issue would be to ensure that when someone purchases a car, whether from an auction, a dealer or wherever, they need to have proof of insurance before they can leave the premises? In that way we would have someone checking before the car ever got on to the road.
Mr Ward
Absolutely. I mentioned all the survey returns that we received, and we asked for people’s suggestions on how they would improve things. Several respondents suggested a gibbet in the centre of Bradford, but the hon. Gentleman’s point is useful, because there is no shortage of suggested solutions. I am not aware of the processes and protocols of the House, but, rather than relying all the time on the Transport Committee to resurrect and pursue the issue, we could establish a small all-party working group to consider many of the ideas that are coming forward and constantly keep up the pressure. For a number of years, there has been a spiral of ever-increasing insurance premiums, and we need to reverse that. We need to keep constant pressure on the system until we bring premiums down.
We considered the issue of road accidents. Our initial, intuitive position was that there are a lot more accidents and that that explains the situation; but of course the opposite is true. Road safety experts revealed that the number of car accidents had fallen dramatically. Driving instructors called for more stringent testing—I suppose they would—and, indeed, for post-test tests to take place perhaps a year or six months after the original test to deal with some of the issues involving young drivers. However, that did not seem to offer a solution to the murky world of personal injury claims that became apparent. There is an increasing number of claims and the cost per claim emerged through discussions with brokers, who candidly told us that £3,000 was the going rate for a personal injury claim. It is widely known in the community that insurance companies are willing to pay out because it is a quicker and less costly course of action than challenging claims, even when they suspect claims of being opportunistic and fraudulent.
One driving instructor was full of genuine, deep sympathy for young drivers. He said that many good drivers simply cannot afford vehicles. There is a problem when a young driver passes their test and cannot afford to drive for probably a year or 18 months but they then jump into a car. Putting that to one side, the driving instructor was sympathetic to young drivers who had passed their test, but who were unable to afford insurance. However, he then said, “I did it, you know.” I said, “Well, what exactly do you mean?” He said that he was giving a driving lesson to a young woman and that they were involved in an accident that was not their fault. There was minor vehicle damage and no personal damage at all—or so he thought.
The next day, the woman returned after a discussion with family members who were clearly more streetwise than her. She told the instructor that, over night, she had developed a neck pain. They both ended up claiming and received more than £2,000 each plus £3,000 for the car repairs—simple as that. I went to see the police and said, “Well, surely you can do something about the matter.” The police said that it is very difficult to prove fraud in such cases. In fact, they had managed to catch only one person who was guilty of fraud. That case involved an accident after which somebody had immediately jumped out of the car, lain on the floor and called for an ambulance. The person then realised that they were not insured, so they rang their brother and got him to lie on the floor. That fraud was, in fact, detected, but that example shows the difficulties.
People talk about the compensation culture, but what is interesting—I am fascinated by this—is the immoral stance taken by many people who are otherwise good and honest. They would never drop a sweet wrapper or let their dog foul the pavement, and yet they get involved in this world of fraud. Many people believe that they should not have been asked to pay so much for their insurance in the first place and that it is not wrong to try to get some of that money back through a fraudulent claim. It is almost as if people feel they are getting back something they are entitled to. Good people are, sadly, doing bad things.
Sammy Wilson
The hon. Gentleman is right: there is that culture, which is encouraged by people’s experiences, their friends’ experiences and sometimes the advice they are given by their legal advisers, solicitors and so on. However, does not the fact that insurance companies almost appear to roll over if a personal injury claim is set below a certain level encourage people to make such a claim? The hon. Gentleman is right to point out that fraud is sometimes hard to prove, but one thing insurance companies perhaps ought to be doing is to fight more of these cases, so that if people want to get this money, they have to put up some evidence in court. That might deter some of these applications.
Mr Ward
That is absolutely right; we need someone to take on and challenge the system. Over the years it has clearly become easier just to recoup the money by doing the same to someone else. That is what has happened in the system. Insurance companies have been guilty of such an approach and they have had to respond to what other companies have done. Those other companies have then also had to do it, and so the cycle goes on.
We considered the various component parts of the matter: whiplash injuries, referral fees, personal injury lawyers’ costs and many of the things that have been covered in great detail by other speakers and the Transport Committee. The overall conclusion was that there was not a simple solution to the problem of unaffordable car insurance and that, in fact, it is a complex and deeply flawed system. None of the component parts can be removed: they all fit together to create the system and they all need to be dealt with individually. We need a batch of measures, each one designed to deal with the component parts of what has become a crazy, crazy system.
Our work over the summer generated a number of case studies, some of which would be funny if they were not so serious. I was contacted in January by a teenager who had been quoted £26,000 for third party insurance on a 1.1 litre Citroen Saxo. When I raised that with the local paper, I was contacted by other young people who had received even more ridiculous quotes. One young woman was quoted a figure of £53,000, which was the record. I think we can take it that the insurance company did not want to insure that person. Clearly such premiums are unaffordable for anyone, even those with an extremely high disposable income.
The young seem to be particularly affected, but they are not the only ones experiencing problems. The hon. Member for Lewisham West and Penge (Jim Dowd) mentioned an incident concerning an elderly gentleman, which shows that the issue affects everyone. During the summer, I was visited by various reporters and journalists as part of my investigation. The comical thing was that invariably, after the interview or the filming, the journalist or the cameraman or woman gave me their story or that of their nephew, niece, son or daughter. They all had a tale to tell and were of the opinion that something had to be done.
A recent case study is worth considering because it is about an ordinary person. A gentleman and his wife owned a 2007 Vauxhall Corsa that was in decent condition. He had held his licence for 17 years and had had no accidents, and his wife had held her licence for five years and had had no accidents or claims. He had a nine-year no-claims bonus. In 2009-10, he paid £600, the next year he paid £800 and the next year £6,200—no accidents, no claims, no difference. Another sad thing about that case is that the gentleman has recently become unemployed, and because of that his insurance premium has gone up. How does that make sense?
That case study reveals the impact of the postcode lottery, which is an issue that has not been raised because it is difficult to do so. I mentioned that my very first meeting was in a mosque. There is a huge community cohesion issue because people say, “The reason we are paying a lot is because of those people over there.” That is why I was so keen to get involved in this campaign at the beginning. The young men I met were living in an area with ridiculously high insurance premiums.
Graham Jones (Hyndburn) (Lab)
People such as taxi drivers have been particularly hit. As other Members have said, taxi drivers’ premiums have risen exponentially and they are suffering greatly—far more in fact than the constituents who write to me because they are suffering. In my constituency, there is a second issue with taxi drivers, and I wonder whether it is the case elsewhere. Very few companies now want to insure taxi companies, and that is probably why the fees are more exorbitant. In my constituency, only one or two insurers will insure taxis in my postcode area. Is that something that the hon. Gentleman is familiar with and would like to comment on?
Mr Ward
The hon. Gentleman makes a good point about the branding of people. Whether it is taxi drivers or all those who live in the BD3 area, the assumption is that because they are from that area they are all contributing to the high insurance premiums that we are paying. That is very unfair and also very dangerous as regards the cohesion of the wider community.
The report that we prepared concluded with a whole range of measures, and many Members have come up with additional measures. I conclude by again paying tribute to the work of the Select Committee, which needs to keep driving this. The title of our report was “It can’t go on like this”, and we all know that it cannot go on like this. If we all work together across the House we can slay this monster.
Ms Margaret Ritchie (South Down) (SDLP)
I congratulate my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) on tabling this motion for debate. As the hon. Member for Strangford (Jim Shannon) said, some two weeks ago I had an Adjournment debate on the cost of motor insurance in Northern Ireland. A Minister from the Treasury responded on that occasion, and I found that useful, but many issues are involved in the rising cost of insurance premiums in Northern Ireland.
Drivers in Northern Ireland are subject to excessively high insurance costs that are rapidly rising year on year. I appreciate that the problems are not unique to Northern Ireland, but they are particularly striking in our case. We have found in our research that consumers in Northern Ireland have less choice of insurance providers, with three times fewer companies offering car insurance. In August, as the hon. Member for Strangford stated, the Consumer Council for Northern Ireland launched a campaign to highlight the cost of car insurance, and I fully support that. The Minister is no doubt aware that the Office of Fair Trading subsequently agreed to undertake an investigation into the car insurance market with a specific focus on Northern Ireland. We must robustly establish why premiums have increased by a reported 40% in the 12 months to March 2011 and why insurance costs are significantly higher in Northern Ireland than in comparable regions of Britain. Indeed, we must not only assess that but redress it. The findings from the OFT must be robustly addressed and the resulting measures must have teeth.
Some of the evidence produced has suggested that car insurance premiums in Northern Ireland have increased by almost 73% in the past two years. The situation is even worse for younger drivers, whose premiums, according to research, have increased by 112%. Young people face severe difficulties in entering the job market, and the prohibitively high cost of motor insurance is yet another barrier to their finding work. Only yesterday, I received a letter from a constituent who highlighted a problem he had encountered with his son. He said that approximately three weeks ago he received a quote to renew his insurance with his 18-year-old son on the policy, and to say that he was shocked at the price would be a gross understatement. The price quoted was £2,488.92, which he simply could not afford. He rang a number of insurance companies and was quoted between £2,800 and £4,000 to cover his son. The first company told him that it would drop the price to £2,200, but it was still beyond his means to pay such an amount.
My constituent said that the sad part of the situation is that his son has now been forced off the road due to the exorbitant price of car insurance in Northern Ireland. He will not be able to stay on in his part-time job, as his father’s working schedule does not allow him the time to leave and collect him when he requires transport. My constituent feels strongly that something needs to be done to help young drivers to stay on the road and travel to their jobs, even if they are part-time, or even if they are students pursuing their studies, and thereby do their bit to help get the economy in that part of the world up and running again. He says that it was tough to have to sit his son down and tell him that as from 15 November he will not be able to allow him to drive. That young boy not only showed remarkable courage but is a very sensible young adult, and he is being penalised by insurance companies for the actions of others. It has been suggested that those companies are quick to label some young drivers as boy racers, and that needs to be addressed.
All these problems are compounded by the restricted range of companies offering premiums in Northern Ireland, which limits competition and drives up prices. I urge the Minister to address and where possible, working with others, to remove any barriers to companies that wish to enter the market, particularly those in Northern Ireland. Obviously, that means working with Ministers in the Northern Ireland Executive.
Two fundamental arguments are put forward to justify the high costs of motor insurance in Northern Ireland: first, that Northern Ireland is a case apart because its demographics and road layouts bring an increased risk of incidents on our roads; and secondly, that Northern Ireland’s legal system places a higher burden on insurers. The evidence that Northern Ireland has a very young population is greatly exaggerated; indeed, we have a proportion of young people similar to that found in many regions in Britain. Likewise, a lack of motorway coverage has been cited as a reason for increased premiums, because statistically motorways are the safest road type. However, maps show that Northern Ireland has a relatively consistent motorway density compared with regions in Britain and in Europe. Moreover, some of the fundamental actuarial evidence regarding the number of accidents, claims and casualties on our highways weighs against any of the debatable factors regarding demographics or road layout. Those facts must be kept at the forefront of our minds when considering the claimed justification for the increased cost of premiums, which are rising at a time when we in Northern Ireland are experiencing a decline in the number of road traffic accidents. The numbers available for the latest year, 2010, show the lowest number of road deaths since records began in 1931. Naturally, every death on our roads is a tragedy, but we must commend the work done to improve safety.
There are some basic facts that are hard to reconcile with rising insurance costs. The number of road traffic accidents reported to the police service has dropped over the past decade from nearly 40,000 per year in 2000 to about 30,000 per year in 2009. The number of compensation claims is decreasing, whereas in England and Wales the numbers are rising. More specifically, according to a National Audit Office report published at the beginning of the year, the number of claims reported to the compensation recovery unit fell by 23% in the decade up to 2009.
In short, the trend is clear: although accidents and claims are decreasing, the cost of insurance is increasing. I ask the Minister again to give detailed consideration to this fundamental point. All these facts weigh heavily against the argument that the demographic or topographical factors in Northern Ireland justify the increasing cost of insurance. Those factors are difficult to relate to the draconian rise in the cost of insurance premiums.
Sammy Wilson
The hon. Lady has done some impressive research into the fall in accidents. It is clear from the statistics on road accidents and deaths that there has been a dramatic improvement even since four or five years ago. For that reason, we should agree that this issue is not about the number of accidents, the demography or the level of claims, but about the lack of competition in the market. It therefore needs to be addressed by the Department for Business, Innovation and Skills and the Office of Fair Trading. They must find out whether collusion between the insurance companies has increased the price of insurance in Northern Ireland.
Ms Ritchie
I thank the hon. Gentleman for that helpful intervention. I agree that the research shows clearly that the lack of competition in Northern Ireland has driven up the cost of insurance premiums. That is an area that the Office of Fair Trading should focus on in its investigation. It should drill down on the nature and cost of insurance premiums in Northern Ireland. We, as Members of Parliament for Northern Ireland, will look at that. The hon. Gentleman, wearing his other hat as a member of the Northern Ireland Executive, is no doubt working with Ministers in Whitehall to address those issues. The hon. Member for Strangford has highlighted the legal issue, so I do not need to elaborate on that.
Many people living on low incomes or in rural areas can simply no longer afford to keep a car on the road. As I have said, many young people and their parents in my constituency have told me of their struggle to secure affordable insurance. They are understandably concerned about the discrepancy in insurance prices between Northern Ireland and other regions in Britain. Households feel that by having to pay excessive insurance fees, they are being unduly discriminated against. That unfair practice has been in place for too long. It adversely affects the young and the old who depend on their cars for work, particularly in areas where public transport provision is limited. Essentially, that means rural communities. There are, shall we say, certain locational issues.
The broader context is that the economy is suffering, with record numbers of young people out of work. That is exacerbated by people’s use of motor vehicles being restricted. At this time of economic recession, we need a dynamic, mobile work force. Car insurance being so expensive puts up a barrier to economic success, especially for the young. The unemployment rate among young people is estimated to be 18%—almost one in five cannot find a job. That compares with an overall unemployment rate in Northern Ireland of 7.6%. Excessive insurance premiums adversely affect young people and prevent them from offering the skill of driving to potential employers. In these extremely challenging times, I ask the Minister to consider any measures that would make insurance more affordable for young people, particularly when driving relates to their employment.
In conclusion, insurance costs have a real impact on people, both young and old, who need to be mobile for social and economic reasons. I hope that my short contribution has made clear the scale of the problem faced by motorists. I hope that I have given examples that illustrate that parents are suffering from the undue burden of being quoted high insurance costs for their sons and daughters. They are not able to pay those costs because of the limited financial means that they now have. I believe that the insurance industry must stabilise its premiums so that hard-pressed motorists get a fair deal when they purchase their motor vehicle insurance. I seek assurances from the Minister that he recognises the problem and will act on a cross-departmental basis, as the motion suggests. Supplementary to that, in the case of Northern Ireland, I ask him to work directly with Ministers in the Northern Ireland Executive to address its particular problems in light of any recommendations that come from the Office of Fair Trading report later this year.
John McDonnell (Hayes and Harlington) (Lab)
I will be as brief as I can be, because my right hon. Friend the Member for Leicester East (Keith Vaz) is clearly keen to speak early and at length on the subject of his Adjournment debate, and because everything has been said. Anybody reading this debate in Hansard will be impressed by the amount of work and time that individual Members have spent performing research in their constituencies. This subject is close to many of our hearts.
I wanted to speak because when constituents approach us, particularly young constituents, we have a duty to ensure that their voice is heard in this Chamber. I was approached by a young man called Joshua Deacon, who lives in the London borough of Hillingdon. He has experienced high insurance costs. He did a mini survey and a petition on the internet because he thought that the same must be happening to his friends. He found costs ranging from £2,000 up to about £20,000, which is ludicrous. His survey showed that a number of young people, particularly in my area, which is quite a geographical expanse, used their cars for work or to seek work, but that such costs were preventing them from travelling and driving them off the road.
The other concern that emerged, which has been expressed by other Members, is that the higher the cost, the more people there are who just do not insure themselves. Like the hon. Member for Bradford East (Mr Ward), I went out with my local police, and the first arrest was of an uninsured young person. He was not driving particularly dangerously, but it was obvious from his driving that he was young. When he was pulled over, he was found to have no insurance. The worry, given what is happening in my constituency, is that as unemployment increases and incomes decrease, more and more people will be unable to pay their insurance costs. As a result, there will be an increase in criminality.
As a result of my young constituent’s efforts, a number of months ago I put down an early-day motion on this subject. The responses that I received from the insurance companies were exactly as have been reported here. With regard to Northern Ireland, I think that there is a cartel in operation. One particular area of the country is being exploited as a result of the insurance companies working together to produce higher rates. In fact, I believe that is happening more broadly as well.
I have received the same responses from insurance companies as are mentioned in the report. They say that the figures are based on actuarial valuations and on the high level of accidents involving young people. We all understand that completely, but we cannot understand why the situation has not changed despite the fact that we have been knocking the subject around for so long in the House. I pay tribute to my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), who has persisted with it through the Transport Committee. Time and again, we have come up with a list of suggestions, many of which the hon. Member for Brecon and Radnorshire (Roger Williams) listed. We have suggested graduated licences, restrictions in use, curfew arrangements, limits on the number of passengers and where they are located, and alcohol restrictions. In addition, we raised some time ago the idea of black boxes and speed limiters being inserted into cars.
Sammy Wilson
I can fully understand the hon. Gentleman’s point about the cost of insurance premiums for young people, but does he not feel that imposing restrictions on freedom such as curfews on top of high insurance premiums would be unfair, even if it were enforceable? For many young people, getting their driving licence is their ticket to freedom. To tell them that they cannot go out at night or have their friends in the car is not fair, especially when most young people drive responsibly and do not race around the roads causing accidents.
John McDonnell
I fully agree, and that was why, when the proposal for black boxes came up, I thought it was the ideal solution. It would enable someone to demonstrate that they were driving carefully and not at speed. I thought that could have been the technical solution, or at least could have moved us a bit further on. I cannot for the life of me understand why it has not been taken up by the insurance industry as well as it should have been. So far, Co-operative Insurance and others have offered some voluntary schemes, but they do not seem to have had the take-up that they should have done.
The question, then, is how we move forward. We know that a range of solutions could be put in place, and that a technical solution could be introduced on a voluntary basis to give people incentives and reduce their costs. I believe that the next stage is to bring the matter back to the Government. We have tried exhortation in the past, but we need to try it again, as was said earlier. We need another meeting at which we bring all the insurance companies together and exhort them to consider financial incentives for young people. We have such arrangements in acceptable behaviour contracts in other areas. People could sign up to certain behaviour patterns if they so wished, which would enable us to monitor them using technical solutions so that we could reduce their overall insurance costs.
Tessa Munt (Wells) (LD)
I wonder whether, when that is being considered, it might be possible to consider the circumstances that two or three of my constituents have found themselves in. Young people have applied for insurance online and the insurance company has agreed a premium and formed a contract with those young people to provide insurance, but has then come back six or eight weeks later with a much increased premium, ostensibly because something was originally incorrect. That has certainly happened to young women in my constituency with the Diamond insurance company.
John McDonnell
It is almost like the policy of excess that has been developed for other insurance costs. I believe that the onus is now on the Government to bring the insurance companies in for a thorough discussion about how we can take forward voluntary arrangements. However, there will come a time, which I believe we are nearing, when if we cannot get in place voluntary arrangements and incentives that work, we will have to introduce regulation.
Like many other Members, I cannot cope any more with driving along the road and seeing shrines to people who have died. The number in my area seemed to be peaking at one point, although I have not looked at the recent statistics. A large number of young people were being killed on the roads, and we would drive down the road and see the bouquets of flowers and the pictures of those young people. It relates to the point that the hon. Member for East Antrim (Sammy Wilson) made about youthful exuberance—young people get their first car and are out on the roads, and sometimes it goes to their heads. They might have their friends with them, and unfortunately it often results in tragedy.
Roger Williams
The hon. Gentleman is making a very powerful case. I know that the hon. Member for East Antrim (Sammy Wilson) made a point about a restriction of freedom, but surely that is the whole point of a driving licence. People have to pass a test, and maybe there ought to be another test for them to pass before they can have unlimited access to a car.
John McDonnell
It is true that we need to consider a whole range of measures. I believe that we need to make another attempt to find voluntary arrangements with the insurance companies, setting out a range of activities that people can sign up to and that we can technically monitor. In that way, we could reduce insurance premiums. However, if that is not brought to fruition, we may well have to move on to regulation. That could mean more testing, and in fact that extra testing need not just be for young people. It could be much wider than that, because it is not just young people who are affected, even though the statistics that the insurance companies produce demonstrate the high number of accidents among young drivers in their first couple of years after passing their test.
In addition, if regulation is to be introduced, and if it involves imposing technical solutions, the insurance companies should bear some of the cost. If it is not willing to work with us in promoting voluntary solutions effectively, it should bear the cost.
To return to an earlier point, this is about reducing costs, but it is also about reducing deaths and accidents. That does not just involve young people, because collateral damage is also done to pedestrians and others. The House has addressed that significant issue effectively in the debate tonight, and now it is over to us to work with the Government to get the insurance companies to agree a strategy that we can monitor over the coming year or so. We can see whether that works, and take legislative action if it does not, to demonstrate our seriousness.
John Woodcock (Barrow and Furness) (Lab/Co-op)
May I add my congratulations to my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) on securing this important and well informed debate, and to the Committee on producing its excellent and timely report?
The eye-watering rises in the cost of motor insurance in the past few years have been one more burden on families already hit by high prices at the pump, food inflation and soaring energy costs. Earlier in the year, annual increases in insurance premiums were running as high as 40%. Although the AA reports that by September the figure had dropped to around 16%, premium increases still far outstrip inflation. The average premium of £921, which my hon. Friend highlighted, means that more than half an average monthly take-home salary is used simply to insure a car.
We know that those likely to be earning least are paying most for their insurance. As we have heard, average premiums for young drivers are more than £2,000. Understandably, motorists resent those huge increases. The overwhelming majority of careful, responsible drivers feel that they are subsidising the careless, the reckless and the uninsured. Increasingly, they are aware that their premiums are increasing as a result of fraudulent or frivolous personal injury claims for non-existent or pre-existing conditions.
Although the Government should not get into the business of setting insurance premiums, Ministers have a responsibility to ensure that the market works fairly and in the interests of consumers. The insurance industry has made a strong case that the 75% increase in the number of compensation claims in the past five years is a key factor in driving up premiums. Increased access to legal redress for genuine injury is a good thing, but responsible motorists paying for insurance fraud is clearly not.
For many, the car is and will remain the essential way of getting around. For some—and, as we have heard, particularly young people—the fast-rising cost of insurance could make the difference between taking up a job that requires a car and being a burden on taxpayers by living on benefits. With job vacancies so scarce, transport to access opportunity needs to be affordable—that relates to motor insurance just as it relates to bus and rail fares.
The sky-high cost of motor insurance for young people has been an important part of the Opposition’s policy review. We urge the Government to implement the Committee’s recommendations to improve the education and safety awareness of young drivers and to consider further changes to the driving test.
It is important to stress that all drivers will benefit from having safer younger drivers on the road—that point was well made in the debate. Equally importantly, much has been heard about the potential of the black box and the relative lack of take-up so far. I am sure that the Minister will join me in praising insurance providers that use black boxes, but will he make clear what he is doing to encourage greater take-up of the technology among providers?
There is no excuse for breaking the rules, but as premiums rise we know that related criminal behaviour is at risk of increasing, potentially undermining the progress that the previous Administration made in tackling fraud and driving without insurance. The Association of British Insurers recorded a 9% increase in fraud.
Mike Penning
Would the hon. Gentleman be kind enough to tell the House what measures the previous Administration took against uninsured driving? This Government introduced the continuous insurance policy.
John Woodcock
The hon. Gentleman knows that the continuous insurance policy was a measure that was set out by the Labour party and which he has taken forward, which we welcome. According to the Motor Insurers Bureau, however, there has been a 25% fall in insurance fraud and uninsured driving over the past five years, which we welcome and want to see continue.
On tackling uninsured drivers, the Minister mentioned the continuous insurance enforcement scheme, but to work effectively that needs the necessary tools to do the enforcing, so will he tell the House, either now or during his speech, what level of resource the DVLA has put aside to pursue and enable the prosecution of transgressors, and how many drivers who ignore official reminders that their insurance has expired have so far been given a fixed penalty notice under the new scheme?
Last week, the House had the opportunity to debate referral fees paid by claims management companies and personal injury lawyers to insurance firms in return for the details of potential claimants. For the past five or six years, these fees have greased the wheels of a perceived compensation culture, encouraging claims that have little realistic chance of success or which are simply fraudulent. The cost of those claims feed directly back into the premiums that all motorists pay, so I, too, pay tribute to the work done by my right hon. Friend the Member for Blackburn (Mr Straw) on this issue. His investigation into the scale of the problem and his private Member’s Bill put pressure on Ministers to add clauses on referral fees, at the last moment, to the Legal Aid, Sentencing and Punishment of Offenders Bill last week. However, as we made clear then, the Government have so far missed the opportunity to crack down adequately.
I shall list what measures the Government have so far rejected: making the soliciting for and payment of fees in road traffic accident cases a criminal offence; outlawing the blight of unsolicited phone calls and text messages; strengthening the rules on data protection and third-party capture; and tightening the rules for whiplash claims. It is unfortunate that as industry practice has been shown to be driving up costs for law-abiding motorist, the Government are ducking their responsibilities on this issue. If the Minister is serious about keeping premiums as low as possible, I hope that, even at this late stage, he will prevail upon Justice Ministers to change the Government’s position.
The Select Committee made the sensible suggestion that the Government examine international experience on restraining claims numbers. It is disappointing that Ministers have refused its idea of a proper study. I hope that they will reconsider. The Committee also rightly pointed to the importance of road safety as another key factor influencing insurance premiums. Despite last week’s horrific tragedy—the Minister visited the scene, at the M5 in Somerset, at the weekend—Britain continues to have the safest roads in Europe and among the safest in the world. However, the first two quarters of this year have seen increases in deaths compared with the same point the previous year. A continuation of that trend would mean 2011 would be the first year since 2003 to see a rising death toll on Britain’s roads.
It is worrying that these upward ticks in road deaths have come at a time when spending on road safety campaigns has been cut. If the trend of safer roads were to reverse, the country’s principal concern—everyone’s principal concern—would, of course, be the tragic human cost seen so vividly this week. We know that a knock-on effect of less safe roads would be further upward pressure on insurance premiums. That raises this question: has the Minister estimated what the impact would be on road safety and on premiums of his proposal to scrap the annual MOT—a move that could lead to 800,000 cars that are dangerous to drive being left on the roads for up to a year longer?
Motorists are feeling the squeeze. Many face being priced out of their cars and, by extension, out of their jobs. As the Transport Committee has so effectively set out, those motorists want to know that their Government are doing what they can to enable lower insurance costs. If Ministers wish to prove that they are not out of touch with those concerns, they need to set out how they will go further.
The Parliamentary Under-Secretary of State for Transport (Mike Penning)
For colleagues who have been here throughout the debate, may I say—I know it is not my brief to do so—that my thoughts and prayers go to the family of the Red Arrows pilot who was killed this afternoon? Our servicemen do a lot for us. I say this as colleagues might not know that, sadly, this pilot died—the second fatality in the Red Arrows this year.
This afternoon’s debate has been excellent—led brilliantly by the Chair of the Transport Select Committee, the hon. Member for Liverpool, Riverside (Mrs Ellman). In general, the debate has been sensible, measured and useful to our constituents. I cannot say that about parts of the speech by the hon. Member for Barrow and Furness (John Woodcock), particularly when it became party political. That is not what this evening’s debate was about, especially considering that the previous Administration were in government for 13 years and many of the measures he now asks us to bring forward could have been introduced then. The hon. Member for Poplar and Limehouse (Jim Fitzpatrick), a former Front-Bench Transport spokesman was much better in his tone; he never used to read out a speech that was written before and that did not contribute anything to the debate.
To answer what was probably the only sensible point that the hon. Member for Barrow and Furness raised—about continuous insurance enforcement—60% of all those written to, having been shown to be uninsured, have responded positively and were either given a statutory off-road notice or said that they would insure. About £122,000 has been picked up in fines, and 250,000 penalty notices have been issued—in excess of what we expected at this stage of the new piece of legislation.
Let us move on to the general debate, led so excellently by the hon. Member for Liverpool, Riverside. Everyone will be pleased to know that we shall not divide the House on the motion. There is an issue about the committee that is being formed, but I will come back to that in a few moments. Many of the issues I see in my constituency correspondence have been alluded to brilliantly in this evening’s debate.
To add to the anecdotal evidence, a member of my own staff was in a road traffic accident the other evening. She was hit from behind; the person got out of the car and was very amenable. My staff member said, “How are you? Are you okay? Do you want to go through the insurance process?” The other lady said, “I’d like to pay you privately because otherwise my premiums will go through the roof.” Everything was sorted out fine; no contact was made with the insurers or the police. However, she received a text message asking “Would you like to claim for the injury that you had?” A member of the public had obviously informed those whom I described to the Committee as ambulance chasers. Apparently it is not just the insurers who are passing information around; others also think that they can secure substantial earnings from such events.
Several Members paid tribute to the right hon. Member for Blackburn (Mr Straw). I thank him, in his absence, for contacting me to say that he could not be present this evening. We have worked closely for many years on many subjects when our respective parties have been in opposition and in government, and I believe that the motion has opened the Government’s eyes to the possibility of using his Bill for this purpose. There will of course be attempts to find loopholes, but it is the Government’s responsibility to ensure that any legislation is fit for purpose.
I believe that 11, if not 12, Members spoke in the debate—that does not include those who have intervened—and it will be impossible for me to respond to all the points that they raised, but I will of course write to all those whose questions I have not had time to answer.
My hon. Friend the Member for Lincoln (Karl MᶜCartney) made an important point about uninsured drivers. Uninsured driving is a criminal offence, and I am sure that no Member would condone it, but given that it contributes only £30 to the average premium, there must be many other factors in the market. I see that the hon. Member for South Down (Ms Ritchie) is present, and I shall comment on the position in Northern Ireland shortly, but the fact remains that that £30 is not the reason that premiums have been shooting through the roof—although we have seen some reduction in recent months.
Nevertheless, notwithstanding our concern about the size of premiums, we must in no circumstances condone uninsured driving, which plagues not only our constituents who pay their premiums but the police. Like the hon. Member for Bradford East (Mr Ward), I have been out with the local police force many times, and I am sure that anyone else who has done so will confirm that when the police pull drivers over for being uninsured, they will almost certainly pick them up for another offence which, in many cases, will have nothing to do with driving offences. People who wish to break the law in that way often wish to break it in other ways. We must help the police in every possible way to ensure that such fraud is dealt with, because driving without insurance is indeed fraudulent.
We must also help the insurers, who will doubtless be monitoring this debate and will realise that they are the pariahs: the nasty, horrible people to whom we must pay our premiums. I suppose that I should declare an interest at this stage. I have two daughters between the ages of 17 and 25, and the premium is high. I am proud to say that they have managed to work hard throughout their time at university, and that the work that they have done has helped to pay the insurance. I have not had to bear the whole burden.
The hon. Member for Bolton West (Julie Hilling) mentioned the crass decision by the European Court of Justice that gender could not be taken into account by insurers deciding premiums, although, as we all know, premiums are based on risk. I find that astonishing, because the figures clearly show that, sadly, boys aged between 17 and 25 are 10 times more likely to be involved in accidents than girls of a similar age. One of the most frightening pieces of evidence that has been given to me while I have had the honour of being the Minister responsible for these matters is that the most dangerous activity in which a young lady can engage in this country is sitting next to a boy aged between 17 and 25 who is driving a car.
Jim Dowd
Is not the problem with the European approach the assumption that every member of a certain group will behave in a certain way? It is a generalised rather than a personalised approach. The assessment is being made not on the basis of what a particular individual who wants to buy a particular product is likely to do, but on the basis of what people in a particular category are likely to do. Even if there is no evidence against an individual, that individual will be subject to the same penalty.
Mike Penning
I completely agree—just as I often agreed with the hon. Gentleman during the many years when we served on the Health Committee together. The actuaries have to be able to look at risk in general; otherwise we will all be put into the same pot, which is unfair to those who are in lower-risk categories. I have concerns that addressing this issue will lead to premiums being increased, not reduced.
Many colleagues, including the hon. Member for Hayes and Harlington (John McDonnell), have said we need to do more about the insurers, and I agree. I certainly do bring the insurers around the table, and I give them a very hard time. After all, they want things from me. They wanted the continuous insurance; they have been calling for that for years, and they have got it. They also want access to DVLA data in order to try to alleviate fraud, both intentional and unintentional.
People ask me, “What do you mean by ‘unintentional fraud’?” Well, I am a dad, and I was asked whether I would put my daughter on the insurance as an additional driver. I had to look very carefully at whether she was an additional driver or the main driver, but most parents would not know the difference, so we need to educate them on that. They think they are helping their young people by naming them as an additional driver in those circumstances, but if their son or daughter is, in fact, not the additional driver, that insurance will be invalid, and the insurer will almost certainly find that out—and if the son or daughter is involved in a crash, they will almost certainly not be covered, and anybody else involved in the accident with them will also be penalised.
Some Members who were present for the debate have moved on to other things, so our proceedings now feel a little like an Adjournment debate, where people have not returned for the concluding speeches. That is a shame, because this is not an Adjournment debate; it is, rather, a proper debate of the House with a motion before it. Perhaps as Members get more used to debates such as this, more of them will return to hear the concluding remarks.
I certainly will work with the devolved Governments in respect of their responsibilities. Responding to the comments of the hon. Member for South Down (Ms Ritchie), I have serious concerns about the market as it operates in Northern Ireland. I am not responsible for the market, however; that is a Treasury matter, which is why the Treasury took the recent debate. I also understand that the Northern Ireland regulators are conducting a review, and I can assure the hon. Lady that if there is any evidence of collusion in the market—if any cartels are operating there or here—we will come down on them like a ton of bricks, as would be only right and proper.
As the Transport Committee has concluded, there is not just one simple solution to this problem. I agree, for instance, that there is a postcode lottery. In some ways, that is similar to the gender issue we have just discussed. Some postcodes cover large areas; that is certainly the case in my part of the world. It is fundamentally wrong for people to be penalised because of the road or neighbourhood in which they happen to live. Insurance calculations used to be based on theft and damage rates, but modern cars are very difficult to steal. Joyriders still steal ordinary cars, but most vehicle thefts are of high-value cars that are stolen to order. That is a completely different kind of theft from the thefts that affect premiums.
Let us consider why premiums are so high. It is not just to do with uninsured drivers. It is also to do with ambulance chasers. Some 50% of all personal injury claims are made on car insurance. How can that be right when, as we have heard this evening, we have some of the safest roads in the world, and certainly the safest roads in Europe? Our killed and seriously-injured rates are extremely low, although we need to get them even lower. The truth of the matter is that most of these claims, many of which are fraudulent, are not reported to the police. Very often they are reported after the incident; Members have referred to constituents saying people followed up on incidents the following day. The hon. Member for Lewisham West and Penge (Jim Dowd) touched on this in his speech. The police would never have been called in such cases; it will never be on the records of the police that that sort of thing has taken place. Some countries in Europe, including Germany, have carefully considered the speed that someone would have had to be travelling to be in an accident before they can claim for whiplash. I was with the relevant German Minister at a conference recently, and we discussed this and other measures, particularly priority. The evidence is that this does not appear to be working in Germany simply because people are increasing the speed that they claim they were travelling at before the accident.
John Woodcock
I just want the Minister to set out why he has rejected our calls to restrict whiplash claims, given the seriousness of this problem in forcing up insurance premiums. Will he not reconsider?
Mike Penning
I have not rejected that; this was done by a colleague in the Ministry of Justice, as it is a legal matter. However, I completely agree with my colleague, as he is a legal person and I am not. There are legal differences between Germany and this country. Everything is possible, and this Parliament can do whatever it wants to do. [Interruption.] Perhaps that is not the case—I see some of my Eurosceptic friends in the House this evening. There are certain things that I would like to be doing in my Department that Europe prevents me from doing.
As we have heard across the House today, insurers have to take responsibility and say, “No, we’ll take you to court and we will challenge this.” They should not just settle out of court because it happens to be cheaper than the possible consequences of going to court. Immediately we start to do that, the no win, no fee ambulance chasers will look very carefully at their cases, and people who should genuinely get their compensation will get it and those who are swinging a leg, as my grandfather would say, will not. I shall refer back to my time on the Select Committee on Health, because it is not just in this area that we have this problem with insurance. Our hospitals, in particular, tend to settle out of court rather than challenging claims, and that is costing the taxpayer and the NHS an absolute fortune, so this is a culture that we have to turn around.
Hon. Members have touched on other aspects in the report and the evidence to the Select Committee. I have significantly changed the driving test, the practical and the theory, since my appointment, and I intend to change it even more. I have said it before and I will say it again that people are currently taught to pass a test; they are not taught to drive. They are not taught to drive safely for themselves and for others, and we have to make sure that we have qualified driving instructors and that everybody knows they are qualified when they get into that car. One change we are going to make—I hope that the Select Committee will agree with me on this—is that someone who is not a qualified driving instructor will not be able to take someone out on their own to teach them to drive. I am not going to stop parents, grandparents and sisters doing that, but someone who gets into a car marked “driving instructor” should not have to look for a little badge on the windscreen that says that the person is a trainee. These people should be qualified driving instructors. The industry supports me on this and we will do this. There also has to be an ongoing training programme for driving instructors. Some instructors took their qualifications many years ago, and we need to make sure that they are au fait with what we want from the driving test, although we also want them to earn an income.
As we have heard today, there are also things that happen to people suddenly when they pass their driving test. Clearly, some people—young people in particular, but not all of them—appear to have some kind of lobotomy when they get behind the wheel of a car. I am talking about highly intelligent young people who are perfect role models in every other aspect of their life, and then they get behind the wheel of a car. Sadly, as has been discussed, testosterone is one of the leading factors. Drink and drugs are involved, but testosterone is one of the big problems here.
In my constituency, the place where most people pass their test is St Albans. Between my constituency and St Albans is a rather large motorway called the M1, and to get back from the test centre, people have to cross it. That means that someone could be driving for the first time on their own and as they turn left or right to come off the A414 they will be on the M1. I think we need to give people, particularly young people, the opportunity to learn how to drive on the motorway before they pass their test. That is why we will pass regulations to allow qualified driving instructors to take learners on to motorways. Can I make that compulsory? No, I cannot because some counties have no motorways, so it would be discriminatory to do so, but we will give qualified instructors the opportunity to do that.
We need to make sure that the test is not the endgame, but not—in my opinion or that of the Government—to make it compulsory to take post-test qualifications. Pass Plus was a partial success, but was never really rolled out properly.
Jim Dowd
Before I came to the House, I used to drive extensively on the motorway network—in my company car, for those who were listening earlier—and the idea of the odd learner turning up on the motorway is strange. Traffic on our motorways travels at much higher speeds generally. Would it not be better to allow people to pass the traditional test and then take an additional period of tuition on the motorway, rather than allow someone who might have been behind the wheel of a car for only two or three hours suddenly to turn up on a motorway alongside juggernauts and fast-driving cars? The Minister will know better than anyone that the average speed on motorways is much higher than the 70 mph limit.
Madam Deputy Speaker (Dawn Primarolo)
Order. Minister, I realise that driving on motorways is a very important subject, but I have a feeling that you were going to bring the debate back to the cost of motoring.
Mike Penning
An integral part of driving and the cost of insurance is how people are qualified to drive. That is why qualifications, as well as the ordinary driving test, are specifically mentioned in the report we are discussing, which is why I was speaking to the issue. However, I shall take your guidance, Madam Deputy Speaker, and steer towards more detailed work on the black box.
Madam Deputy Speaker
Order. I am very sorry, but I was trying to ensure that the Minister stayed where he wanted to be, whereas the hon. Member for Lewisham West and Penge (Jim Dowd) was tempting him away. I do not need a gentle rebuke from the Minister; I thought I was helping him.
Mike Penning
I know you too well ever to rebuke you, Madam Deputy Speaker, and I would never be led astray by the hon. Gentleman.
I do not agree with the hon. Gentleman. We have a situation in which young people—or, indeed, anyone—passing their test today can go on the motorway. There are no restrictions on that, and we need to give them the necessary skills. I have a full car, full motorbike, HGV and tank licence to boot, and I have driven on the motorway in all types of vehicle, so I understand. I have an H licence. The hon. Gentleman was indicating from a sedentary position, “What is a tank licence?”—it is an H licence for tracked vehicles.
Let me touch on issues of technology. As we heard earlier, some insurers have been using technology, particularly the black box. The Co-operative insurance company, which was mentioned earlier, has a scheme that encourages people to take the box in their car, and it monitors very carefully what speed one is travelling at, what time of day one is driving—nearly everything. I have been pushing quite extensively with insurers to roll that out further. It is the obvious way forward. If people are given the responsibility of a driving licence, they can be given the opportunity of responsibility. However, insurance companies have to be transparent. We have to know why the premiums are what they are and how they can best be broken down so that the public, when they look at their premium, know exactly what they are getting for their money. If there is a discount, we need to know exactly what it is and that if the person who takes out that policy sticks rigidly to the agreement their premium will not shoot up the following year or month.
In conclusion, I think this has been a very sensible debate. I welcome the report from the Committee chaired by the hon. Member for Liverpool, Riverside and I think that we can agree on most things. We have many, many Committees sitting already; one more would be quite difficult. We meet regularly on a cross-party basis to discuss these matters, and myriad Departments can be involved, depending on the issue in question.
At the moment, we are doing a great deal of work on penalties, which I have not yet touched on, and on the question of whether fines are the answer. The Secretary of State for Work and Pensions has already announced that he is going to allow fines to be increased for those on benefits. At the moment, the figure is £5, but that will increase to £25. I personally think that, as well as looking at increasing fines, we need to look at the points. In most cases, people will be prepared to pay a fine, but they might find the prospect of getting additional points on their licence more of a deterrent. They might decide that getting an extra six points, rather than just three, might mean losing their licence. I hope that such a move might prevent more people from driving while uninsured.
Karl MᶜCartney
I understand what my hon. Friend is saying about points. Is there not also a need to make it socially unacceptable to drive while uninsured? Would it perhaps be prudent to consider a prison sentence for people who seem determined to do it three, four of five times or who have been involved in a serious accident while uninsured?
Mike Penning
I thank my hon. Friend for that point. We will continue to look at the penalties involved. Those of us who came through the drink-driving campaigns of the ’70s and ’80s will remember how we turned drink-drivers into pariahs, but that involved educating the public first, then using a big stick. We did the same with seat belts, and we now need to do it with drug-driving as well as with uninsured driving. We will continue to look at this, but, at the end of the day, it is for the magistrates and the courts to decide how they interpret the law. They have a degree of autonomy, which is why so many drivers who have more than 12 points have kept their licence. It is a matter for the courts to interpret the special needs of the people involved, and perhaps the lawyers who represent them are also a factor. I was shocked when I saw the figures, and it was my own Department that released them.
I know that the hon. Member for Liverpool, Riverside is going to respond to the debate. Her Committee has produced an excellent report, and we have had an excellent debate. I look forward to implementing many of the measures that have been mentioned, so that our roads can continue to be the safest in Europe and among the safest in the world.
Mrs Ellman
We have heard many excellent contributions this evening. Members have reflected different experiences, but all have given us the same message: insurance premiums are too high, the insurance industry is dysfunctional and more must be done. I recognise the work that the Minister has been doing, particularly on uninsured driving, on referral fees, and on improving driving standards. I am pleased that the insurance sector has now adopted the Select Committee’s recommendation to fund a specialised unit in police service to detect and act on fraud.
I have listened carefully to what the Minister has said, and I recognise his good will and commitment. I do not wish to divide the House on the motion tonight, but I must warn him that the Committee will continue its scrutiny, and we look forward to the next occasion on which we can question him on what has been done in his Department and across government, because that is the only way we will make progress on this important issue.
Question put and agreed to.
Resolved,
That this House expresses concern over the large increase in the cost of motor insurance in recent years, including in relation to young drivers; welcomes the report by the Transport Committee on the cost of motor insurance (HC 591) and its continuing inquiry into the reasons for this increase; notes that factors explaining the cost of motor insurance include the number and cost of personal injury claims arising from road accidents, assessment of risk, fraud, and uninsured driving; notes that the Government has taken some steps to deal with these issues, including a ban on referral fees in personal injury cases, but that more could be done; further notes that Ministerial responsibility for these issues is split across several departments; and calls on the Government to establish a cross-departmental Ministerial committee on reducing the cost of motor insurance and to publish a plan for dealing with the different aspects of this problem during this Parliament.
Business without Debate
Delegated legislation
European Union documents
Madam Deputy Speaker (Dawn Primarolo)
We now come to motion 9. There is a small error in the motion as printed on the Order Paper. It should refer to the motion in the name of Mr Peter Lilley, not Sir George Young, relating to the House of Commons Members’ Fund. I will therefore ask the House to consider the motion in the amended form.
DELEGATED LEGISLATION (COMMITTEES)
Ordered,
That the Motion in the name of Mr Peter Lilley relating to the House of Commons Members’ Fund shall be treated as if it related to an instrument subject to the provisions of Standing Order No. 118 (Delegated Legislation Committees) in respect of which notice of a motion has been given that the instrument be approved.—(James Duddridge.)
Yemen
(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Keith Vaz (Leicester East) (Lab)
It is a great pleasure for me, though a sad pleasure, to raise in the House yet again the situation in Yemen. I am delighted to see the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne) at the Dispatch Box to keep the House informed of developments in Yemen.
My attachment to Yemen comes from the fact that it is the country of my birth. My parents having been born in Mumbai in India travelled to Aden in south Yemen, where I, my sister, my hon. Friend the Member for Walsall South (Valerie Vaz) and my other sister were born. For the first nine years of my life I lived in Yemen. I have returned to Yemen over the years, having established the all-party Yemen group. It is a country to which I feel an emotional and physical attachment, because of the kindness that was shown to me and my family and the way in which that country has sought to develop over the past quarter of a century.
I am sorry to say that the situation in Yemen is yet again at a crisis level. That is despite the good work of successive British Governments. I pay tribute in particular to the Foreign Secretary, the Secretary of State for International Development, the Minister of State, Department for International Development, the right hon. Member for Rutland and Melton (Mr Duncan), our ambassador in Sana’a, Jon Wilks and Joanna Reid, who heads the DFID project there. All those people who are still in that country in turmoil show what is best about Britain. A commitment made by Ministers at the Dispatch Box and at numerous conferences in the past decade has been followed through by exceptional public servants.
The political crisis that we are seeing shows a central Government in Yemen who are weak, peaceful protests that are turned into violence and, since the start of this year, hundreds of people dead and thousands injured across this impoverished country. At least 94 children are known to have died since the start of the year. Recent reports from places such as Taiz, a southern town that has always had a tradition of law and order—a real civil society—reveal that it has become a place of lawlessness. Only last Wednesday seven civilians were killed in Taiz, including two children.
The background to the events has always been that Yemen is a poor country, but we now have a humanitarian crisis. Some 7.5 million people struggle to find enough to eat each day; 320,000 people have been displaced in the north and 100,000 in the south. Yemen is the poorest country in the middle east, with 40% of Yemenis living off less than £1.25 a day. In Yemen there are 3.6 million children under the age of five, 43% of whom are underweight and 58% of whom have had their growth stunted. There are acute water shortages, and inflation and unemployment are rocketing. One in three Yemenis go hungry every night. It has the third highest malnutrition rate in the world.
So the background to the current situation of unease and crisis is the humanitarian catastrophe. I was told recently at a meeting with the Yemeni Foreign Minister that 32 schools were closed in Sana’a due to military occupation and that there are severe electricity shortages.
The World Bank has cut back on aid, freezing its £500 million programme and citing the uncertainty in the political and security situation. As the Minister will know if he has followed the deliberations on Yemen in the House, the concern has always been that countries of good will come together, as they did under the previous Government when the former Prime Minister held a conference concerning Yemen, and the Friends of Yemen donated billions of dollars to Yemen, but at the end of the day very little of that money finds its way to the Yemenis.
So we have a power vacuum. President Saleh has been in office for many, many years. I have met him on many occasions and the Foreign Secretary met him just before the Arab spring and the protests began. He is a president who has been very supportive of the present Government, but a president nevertheless who made it clear that he wished to leave the country’s presidency, vacate his position and give way to a Government of national unity. We need to resolve the impasse. Because of the bombing that occurred in the presidential palace, President Saleh went to Saudi Arabia and the situation became a little calmer, but it has become worse again.
Why does this matter? The situation matters to us hugely because what happens in Sana’a today may well happen on the streets of London, so the counter-terrorism agenda is extremely important. That is why I have welcomed the support that the American Government gave to the Yemeni security forces, donating £90,000- worth of public order equipment in order to train members who were there to provide support. The reason we are so interested in that country is that al-Qaeda in the Arabian Peninsula is based in Yemen. There are people in that country who not only want to destabilise Yemen and therefore the middle east, but want to export their brand of terrorism to other parts of the world. Tackling terrorism is a key factor in trying to deal with the situation there.
I was heartened to hear from the Prime Minister at the Liaison Committee that at a meeting of the National Security Council, the Secretaries of State of all the major Departments focused on the situation in Yemen. That pleases me, having raised the matter on so many occasions. As Yemen does not have the oil resources of a Libya or the punch power of a country such as Saudi Arabia, it is easily forgotten. It was heartening to know that at the highest levels of our Government, the Prime Minister and senior Ministers were prepared to have that discussion and set out a roadmap.
How do we deal with the situation? That is what I hope the Minister will tell the House about tonight. We need somehow to move on the good work that we have done in the international debate that we are having and the pressure that we are applying in the Security Council, with an excellent resolution sponsored by the United Kingdom recently about the situation in Yemen. We have to turn those resolutions into good deeds.
That means that we need to send support for the UN envoy, and as I have said for the past six months and seriously believe, we need to send to Yemen three wise people, one representing the UN, one representing the Government, and one representing the European Union, to negotiate directly with the president and the Opposition to try to bring all sides together. It is clearly something that cannot be done just by the Yemeni Government and the Yemeni people. The Gulf Co-operation Council and the Saudi Arabian Government have tried and failed. My message to the Minister tonight is that we cannot allow the situation to drift and eventually Yemen to break up into civil war.
The picture I have painted is bleak, but we must not forget the courage of the Yemeni people. The country is awash with weapons, yet peaceful protesters are going out and trying to bring international attention to what is happening. There is a long history of peaceful protest in the Arab world. My first memory of Yemen is of standing after school one day on the top floor of the block of flats where we lived and seeing my first political protest. A group of Yemeni students were walking through the centre of Malah and protesting about the level of English teaching in their schools. I went to the balcony and watched that amazing protest. There is a long history of peaceful protest in Yemen, not a history that ends with the violence we have seen.
We must come to the aid of the Yemeni people. I know that the Minister is very busy—he now has responsibility for India, in addition to his large responsibilities all over the world—and that this is not his primary area of concern as a Foreign Office Minister, but he has come to the Dispatch Box today because he represents the Foreign Office. When he goes back to his fellow Ministers, he must tell his right hon. and hon. Friends that the House is debating Yemen today because we believe that tomorrow will be even worse.
The good news is that in a few days’ time I will welcome Tawakkal Karman, the first Yemeni to win the Nobel peace prize, to the House of Commons, where she will talk with colleagues. Because of the House’s wonderful structure of all-party groups, the all-party group on Yemen has been able to visit the country almost every year, but we have not done so for the past year and a half. I am assured by the President and the ambassador that it is safe to visit but, as I pointed out to the ambassador, even the President was not safe in the presidential palace. I am not sure that they could guarantee the safety of British Members of Parliament, so we said no on this occasion.
It has always been my dream to take my young son and daughter to visit the country where their father and aunts were born and where their grandparents had such a wonderful life before the revolution started in Aden. My dream is that one day I can ask you, Mr Speaker, to go to Sana’a and speak to the Yemeni Parliament in a situation that is very different from the one that exists currently. You have been such a great Speaker and gone to so many countries. You recently went to India and spoke to the Indian Parliament. Your going out to speak to the Yemeni Parliament in different circumstances would be of such great benefit.
I do not use the term often, but I beg the Minister, as a Government spokesman, to give this as much ministerial time as he can, not to lose focus, not to allow Yemen to break up in civil war and not to allow those who wish to peddle terrorism to take it from the streets of Aden, Taiz and Sana’a and bring it to the streets of Birmingham, London and Manchester. That is my plea to the Minister tonight.
The Minister of State, Foreign and Commonwealth Office (Mr Jeremy Browne)
I am grateful for the opportunity to respond to this short but important debate. I start by paying tribute to you, Mr Speaker, for your recent visit to India—it is not the topic under consideration, but it was mentioned by the right hon. Member for Leicester East (Keith Vaz)—which was greatly appreciated by the Foreign Office and Parliament. I pay tribute to the right hon. Gentleman, a former Foreign Office Minister himself, for his long-standing interest in Yemen, which is born of his personal commitment to the country and a very contemporary interest. It is a constant reminder to the House and the Foreign and Commonwealth Office of the importance of Yemen to Britain’s national interests.
The British Government have a long-standing relationship with Yemen, and we have worked with its Government and our partners in the international community for some years to pursue security, prosperity and democracy in the country. The current situation is of increasing concern, however, and I am grateful for this opportunity to lay out comprehensively before the House the British Government’s current assessment.
As the right hon. Gentleman has already said, Yemen is in a sad state today. The political process is stalled, the economy is in tatters and ordinary Yemenis are suffering greatly. Security is fragile, violence is worsening and the country is fragmented and divided. Al-Qaeda in the Arabian Peninsula will exploit and is exploiting that instability. The country will take a long time to recover, and the British Government are profoundly concerned by Yemen’s decline, a concern that is reflected at the highest levels of the Government and in the interest being taken by the most senior Ministers.
Yemen is stuck in political stalemate. The momentum behind the valuable initiative of the Gulf Co-operation Council—GCC—to broker a political settlement leading to a managed transition has been lost, and over the past 10 months we have seen widespread demonstrations throughout Yemen calling for President Saleh to step down and for democratic change. Tragically, the demonstrations have also frequently seen the use of excessive and lethal force by Government security forces, but regrettably the armed opposition, too, has been partly responsible for the frequent escalation of violence.
We have condemned in the strongest terms the use of excessive force against unarmed protesters, and we have called for restraint by all sides and for the Yemeni authorities to listen to the legitimate demands of the Yemeni public for change. We continue energetically to encourage negotiators on both sides urgently to conclude discussions on implementing a plan for political transition based on the Gulf Co-operation Council initiative. That plan, brokered by Yemen’s neighbours and with widespread international support, represents the best hope for a peaceful end to the crisis. It envisages a transfer of presidential power to the vice-president, the establishment of a national unity Government led by the Opposition and early presidential elections.
We welcomed President Saleh’s decree in September in which he authorised Vice-President Hadi to restart dialogue with the Opposition and to sign the initiative on his behalf. Along with our EU, US and GCC partners, as well as the UN, we have been working closely with the vice-president and the Opposition to encourage a speedy conclusion to discussions on an implementation mechanism.
It is important to appreciate, however, that our and, principally, our regional partners’ efforts are ultimately dependent on the willingness of President Saleh to fulfil his promise to agree formally to transition. To date, he has pledged on several occasions to pass all executive authority to the vice-president and then to step down, but each time I regret to say that he has reneged on his promise.
Our task, alongside our international partners, has been and continues to be to impress upon the Yemeni leadership that, in the absence of an agreed and sustainable political settlement, Yemen will continue to spiral downwards towards state failure and humanitarian catastrophe. We can already see that the country is fragmented and under-governed, with growing insecurity, especially in southern Yemen, and with frequent episodes of extreme violence, targeted largely at unarmed protestors.
The Yemeni authorities have lost security control over large swathes of the country, and the Government are barely functional, struggling to deliver services and to pay salaries. The current situation has the biggest impact on the wider Yemeni population, who are struggling to eke out an existence in an environment of food price rises, water scarcity and sudden upsurges in violence, so it is indeed a truly terrible situation.
Keith Vaz
I thank the Minister very much for what he has said so far, but there is a logjam: we have groups, in their particular positions, unwilling to give way. The President has said that he wants to go, the Opposition want to take over, and the Saudi Arabian Government and the Gulf Co-operation Council are involved, but what is the mechanism by which we break that logjam? We do not want a bloody revolution, so there must be something that we can do, with all the great diplomacy at our disposal, to try to break this logjam. What does the Minister think it should be?
Mr Browne
I agree with the right hon. Gentleman’s assessment. I hope that the next passage of my speech will at least provide him with some assurance that we are seeking to make progress, while recognising that we inevitably face some restrictions and limitations on our ability to bring about the change we all wish to see.
The lack of urgent progress in Yemen towards achieving peace, alongside a worsening humanitarian situation, has placed the country increasingly under the international spotlight. Since the Adjournment debate on the subject secured by the right hon. Gentleman in April, the United Nations has begun to play a helpful political role in support of the efforts of the GCC, alongside our EU and US partners. A UN special adviser has visited the country five times and will be arriving in Yemen again shortly. We welcome the UN Security Council’s statements and, most recently, resolution 2014, which was adopted unanimously on 21 October. As the Foreign Secretary stated, that resolution represents a clear indication from the international community that the deteriorating humanitarian, economic and security situation in Yemen is a direct result of President Saleh’s refusal to agree to a political settlement.
That was also the view of the EU Foreign Affairs Council in October, which said that it would explore all available options if the political impasse persisted and the economic and humanitarian situation continued to deteriorate as a result. We, the British Government, will continue to work closely with our international partners and allies, including in both the EU and the Security Council, to support a peaceful transition. We look forward to the Security Council’s review on 21 November of the situation in Yemen in the light of the adoption of resolution 2014.
We have talked about the Yemeni economy. Its situation is truly desperate. Economic collapse and escalating conflict and violence is pushing Yemen into a humanitarian crisis. The right hon. Gentleman mentioned the role played by the Minister of State, Department for International Development, my right hon. Friend the Member for Rutland and Melton (Mr Duncan) in that regard. We share the UN Security Council’s grave concern about the deteriorating humanitarian situation. Although a £15.4 million package of humanitarian assistance has been given, DFID continues to support a range of initiatives being carried out by non-governmental organisations, UN agencies and the International Committee of the Red Cross to help to alleviate the suffering of Yemenis. DFID continues to be active in Yemen.
More generally, the current crisis has set back Yemen’s development by years. Yemen was already the poorest country in the middle east and faced significant challenges, including falling oil revenues, increased water scarcity and rapid population growth. There is political instability, violence, great poverty, economic hardship and, as a result, humanitarian suffering. It is very much the Government’s intention to approach Yemen in a broad co-ordinated way, drawing on our security and diplomatic expertise, as well as on our humanitarian and development knowledge.
Yemen’s human rights record is also very worrying. The high number of credible allegations of violations perpetrated by the authorities against peaceful demonstrators is disturbing. There have been numerous reports of detentions, civilians caught up in armed conflict, the recruitment of child soldiers and restrictions applied to the media. We have witnessed appalling violations by the security forces since the beginning of the protests, in particular in Sana'a on 18 March. Most recently, we have seen an escalation of violence by both sides in Sana'a in September, and the shocking use of heavy artillery to quell demonstrations. We estimate that more than 400 civilians have now been killed and that thousands have been injured.
I should like to use this opportunity to pay tribute to the work of all our staff in the embassy at Sana’a. The right hon. Gentleman said at the end of his speech how much he would like to be able to take a cross-party delegation from this Parliament to the Parliament in Yemen but was prevented from doing so by his concerns about the security situation. It is worth placing on the record the fact that the United Kingdom staff and their Yemeni colleagues have been operating in very difficult circumstances in an environment of high terrorist threat. Sana’a is now probably our most dangerous post world-wide—the most dangerous place for Foreign Office and other British Government staff to serve in. Our diplomats’ ability to operate has also been continually constrained by ever-present and unpredictable bouts of violence and civil disorder. Our staff are living in temporary container accommodation inside the embassy compound and have to cope with irregular electricity, and occasionally even water, supplies. Life for our local staff has often been even more difficult, with many living in areas of the city affected by ongoing violence and curfews. They have been constantly affected by frequent food, fuel and electricity shortages. Yet through all this, all our staff continue to show willingness, effectiveness and commitment in pursuit of our vital national objectives in Yemen.
That brings me to the crux of what I wish to say. The reason we maintain, at considerable cost and, in terms of hardship, a considerable burden on our staff, a diplomatic and wider British Government presence in Yemen is that we recognise, as the right hon. Gentleman said, the great importance of Yemen in its own right across the wider region and globally. As he said, it is important in security terms because the presence of al-Qaeda and other malign influences in Yemen means that they have the potential to visit themselves on us here in the United Kingdom. However, we also recognise it in other regards.
Bob Stewart (Beckenham) (Con)
I hope the Minister will forgive me for interrupting. We also have responsibility because the Aden protectorate was, for a very long time, a responsibility of ours. I speak as someone who lived there for four years. We also have a responsibility to this part of the world because of that.
Mr Browne
I endorse the point that my hon. Friend makes. We have a narrow self-interest in security terms, but I hope and believe that we also have a wider enlightened interest, and a desire on humanitarian grounds to see the population of Yemen living more materially prosperous lives free from the degree of insecurity that they must feel on a daily basis. I hope and believe that not only because of the hard concerns about national security but because of a desire to see stability, peace and relatively greater prosperity in Yemen, the British Government are affording that country the degree of attention and seriousness that it clearly warrants.
I thank the right hon. Gentleman for the opportunity to discuss Yemen’s manifold challenges and what he has said about them. I am sure that we will have other opportunities to discuss what I hope will be progress by the British Government and our international partners in the months and years ahead.
Question put and agreed to.