Westminster Hall

Tuesday 22nd November 2011 Westminster Hall

Tuesday 22 November 2011

[Hywel Williams in the Chair]

Horse Racing (Funding)

Tuesday 22nd November 2011 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Stephen Crabb.)

09:30

[Matthew Hancock (West Suffolk) (Con)]

It is a pleasure to speak under your chairmanship, Mr Williams, and to see my hon. Friend the Under-Secretary of State for Culture, Olympics, Media and Sport, or the Minister for horse racing, as he is known in Newmarket, in his place.

I applied for this debate because the future funding of horse racing remains in a parlous condition. Although the Government have shown willingness to deal with the matter—no one doubts the Minister’s personal commitment—more action is needed.

Horse racing has, for centuries, been part of our national heritage. It has been interwoven in our national life from the time King Charles II took Nell Gwynne to Newmarket for a month in the spring and a month in the autumn and races were used to keep up the quality of bloodstock during times of peace. The current exhibition of early actresses at the National Portrait Gallery shows the beauty and other attractions of Nell Gwynne, so I understand the desire of King Charles II to spend two months on the plains of Suffolk to enjoy all the riches on offer.

The sport was about not just bloodstock but high entertainment, and so it is today. Racing is the second most watched sport after football in this country. It contributes more than £3 billion to our economy, and employs more than 100,000 people, 5,000 of them in and around racing in Newmarket. None the less, racing’s finances are in jeopardy. In 2010, the number of foals born in the UK fell by a sixth. The number of horses in training has been falling consistently over the past three years. The root of the issue is a breakdown in funding. The most important part of the funding for the industry is the levy—the money that betting pays to racing in return for the races on which people bet—and as we know, it has fallen dramatically.

The changes in the way that people bet and the move to more and more online gambling are at the heart of the matter. Racing has moved into a modern world and outstripped the outdated and outmoded outfit that has determined its funding—the levy system. Prize money has almost halved since 2009, dropping from around £65 million to £34 million this year. Prizes are in freefall compared with our nearest competitors. At Newmarket, a win in a middle-ranking race will net around £6,500; at Longchamp the equivalent is more than £21,000. Across the country, prize money has fallen by about a third over a couple of years.

[Julian Smith (Skipton and Ripon) (Con)]

Does my hon. Friend agree that for smaller race courses, such as Ripon in my constituency, the issue of prize money and its value is a major prohibitor to attracting good races, and for smaller race courses that is one of their biggest challenges?

[Matthew Hancock]

If the problem is serious for Newmarket, it is even more serious for many smaller race courses, especially if the prize money hardly pays for the diesel to get the horse to the race. If a horse comes third or fourth, the owner’s costs are not even covered, and if an owner’s costs are not covered even when their horse wins, one of the great incentives for owning a horse is removed. Of course people own race horses for all sorts of reasons, not least the glamour of the winning enclosure and the thrill of their horse being the first to cross the line. None the less, it is important for an owner at least to have the dream that they may make money from their horse. People who own race horses are normally realistic about the fact that they may not get back their outlay, but they should at least have the hope that they can. The fall in prize money is central to a fall in the attractiveness of owning and breeding race horses.

The fall in prize money reflects the fall in the value of the levy itself—from £111 million in 2003 to £60 million in 2010. Will the Minister assure us that we can make the changes that are necessary to put the funding on a sustainable footing; that in the sale of the Tote there are commitments to racing that will be fulfilled; and that the money that used to come directly from the Tote and will now come through the deal agreed during its sale will still happen? The Tote, although smaller in cash terms, is another important part of the funding of racing.

Some progress has been made. It looks as though last year’s yield on the levy will come in at around £65 million, well below the target of £71.4 million, which in itself was too low. This year’s target is marginally higher, and it has been underpinned by a guarantee from three of the big bookmakers. The Levy Board will spend an extra £5 million in 2012, £4 million of which will go in prize money. Welcome as such a move is, it is merely damage limitation. A long-term solution to the levy needs to be put in place, not least because of the adversarial nature of the levy. Instead of the racing industry and bookmakers working together to provide a product that is great for the punter and good for racing, they have an adversarial relationship, which needs to be addressed.

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

I congratulate the hon. Gentleman on securing this important debate on the future of horse racing. Does he agree that the most important factor is a level playing field between onshore and offshore betting operators to fund the future of British horse racing?

[Matthew Hancock]

I was just about to come to exactly that point, so the hon. Gentleman is prescient. There is consensus that the system is broken and needs to be reformed. We have no God-given right in Britain to some of the best racing in the world.

[Philip Davies (Shipley) (Con)]

My hon. Friend mentioned the fact that the levy is going up, which must be welcomed by everybody. Does he not agree though that that is only half the story and that one of the other major costs for bookmakers is the media rights that they pay? After 2012, those will increase by £50 million a year, which is a huge windfall for the racing industry. It will even benefit race courses such as the one in the constituency of my hon. Friend the Member for Skipton and Ripon (Julian Smith).

[Matthew Hancock]

I am not surprised that the amount being paid by bookies for picture rights is going up, not least because of the attractiveness of the sport and the amount of interest in racing. Of course the rise is good news but picture rights are only part of the story, because when a punter bets on a race the bet is based on the racing product that underpins it, so picture rights alone cannot be the answer to the question of how to fund horse racing.

I come now to what will be the core of my argument today and the core of the question that I will put to the Minister. During the last decade or so, what has been central to the fall in the value of the levy is the removal from British shores of almost all the big bookmakers. Of the 20 biggest bookies, only two are now domiciled in the UK. As I said earlier, that change reflects changes in technology that mean we can bet more online and over the phone. However, we must recognise the change and deal with it, if we are to put matters right.

The fact that bet365 and Coral are still onshore is great news, but we should not be in a position where we have to be grateful to bookies for staying onshore. The idea that we should thank people for paying the tax that they are due to pay is not one that we apply anywhere else in the tax system. In fact, everywhere else in the tax system we are pretty firm if people do not pay their tax. Although I am grateful that those two bookmakers—bet365 and Coral—have stayed onshore, many independent bookmakers cannot move offshore; they do not have the capacity to do so, as they are too small. Consequently there is not a level playing field even within the gambling industry to ensure that there can be fair competition in gambling.

The impact of that offshoring is felt across the board. There is a loss of millions in levy contributions and a loss to the taxpayer, estimated at £62 million a year, in lost betting duty. I would be very interested to find out whether the Minister has an updated estimate of the amount of tax that is lost in betting duty because of the number of offshore bookmakers.

[Andrew Griffiths (Burton) (Con)]

I have been told to thank my hon. Friend on behalf of Uttoxeter race course, which is in my constituency, where his work on behalf of the racing industry has become legendary. People at Uttoxeter have asked me to pass on their personal thanks.

My hon. Friend raises the very important issue of betting going offshore. Obviously we live in a global world and the internet makes it incredibly difficult for us to regulate betting offshore. However, many offshore bookmakers still advertise in the UK; in magazines, on billboards and on the side of bus stops. Does he agree that one of the ways we could get them to understand the consequences of not being based in the UK is to regulate their advertising in those kinds of media?

[Matthew Hancock]

I think that the consensus in the House on the need to make such reforms is demonstrated by the fact that all the interventions so far have anticipated the next page of my speech. I am very grateful to my hon. Friend for his intervention, because dealing with that offshore loophole is the first thing that we need to do if we are to sort out the problems of financing the racing industry.

When I talk to individual bookmaking companies that are offshore, each of them argues that they would really like to be onshore and that the only reason they are not onshore is that all their competitors are offshore. I have worked in a small business and I understand that argument. If somebody else has taken a chunk of tax and levy contributions out of their cost base, of course others will want to do the same.

I have a solution, which is to create a level playing field; let us have everybody onshore and paying their fair share of tax and levy contributions. The solution that the Minister put forward in July was a neat and quite simple one. Changing the designation of the location of a bet from where the bookie is based to where the punter is based would turn what at the moment is legitimate tax avoidance into tax evasion. Because of the internet, we might not necessarily catch 100% of bets by making that change, but we could capture the vast majority. All the major bookmakers who want to advertise or do other business in the UK will come onshore because they would not want to break the law by not paying tax and levy on the bets placed with them. Most bookmakers are good corporate citizens, so a change such as this would ensure that all the major players would come onshore. That would not only help with the funding of racing, on which bookmakers’ own business models depend, but with the lack of a level playing field, which is a scourge of independent and small bookmakers.

[Philip Davies]

I understand the point that my hon. Friend is making. May I suggest a more conservative approach? I understand that he has great influence with the Chancellor. Has he thought about persuading the Chancellor to reduce the rate of tax on those offshore businesses, which will tempt them back onshore? As a keen economist, I am sure that my hon. Friend will appreciate that 5% of something is far better than 15% of nothing.

[Matthew Hancock]

I do not believe in tempting people to pay tax; I believe in ensuring that people pay tax. I myself am not tempted to pay tax, but I have to pay tax. Indeed, the tax is taken out of my wages before I even see it. People across the country would not understand a system in which we merely tempt people to pay tax; we need to insist that people pay tax.

Nevertheless, my hon. Friend makes an important point. As he suggests, if all bookmakers came back onshore, the amount that went into the racing industry through tax and the levy would be substantially higher and it may well be that at the same time we could look at the rates of tax being applied to bookmakers. Indeed, there is a Treasury consultation on that very point at the moment. I am sure that he and others will make a contribution to that process, and no doubt the Chancellor will listen to all Conservative Back Benchers equally.

The argument that the Minister made in July in his written ministerial statement, and in response to a question that I put on the Floor of the House, concentrated on widening the regulatory net and ensuring that gambling regulations cover all people in the UK who make bets; it focused on the regulatory aspect. Of course I support the argument that the appropriate regulatory net should cover all people gambling in the UK and the principles behind that argument, but expanding the reach of regulation is not as urgent for the financing of the racing industry as closing the tax and levy loophole. I urge the Minister to look at the issue from the perspective of fair and appropriate funding of horse racing rather than the wider changes to the coverage of gambling regulation that he seeks. I am sure that people will support him in both those aims but one is urgent and the other is important, and the distinction between urgency and importance is one that I am sure he recognises every time he opens his ministerial red box.

I am very pleased that the Treasury is conducting a consultation, but I want to ask the Minister some questions about how we will make the progress that is necessary and how we will turn tax avoidance into tax evasion through legislation. A tax change and a financial change to the levy could be made through the Finance Bill, and Finance Bills happen regularly. If that means that we cannot make the wider regulatory changes that the Minister seeks, so be it. The urgent task is on the financial side, because it is only when we tackle the offshore problem that we can go on to make the broader changes in the levy that many people want to see; indeed, I think that there is cross-party consensus about the need for broader changes in the levy.

With bookies back onshore and paying their share, we can finally establish the long-term funding structure that is both sustainable and fair to everybody involved in racing, including bookmakers, and it could improve the relationship between racing and bookmakers.

[Ben Gummer (Ipswich) (Con)]

My hon. Friend has used a key word, which is “sustainable”. As he rightly said, one can understand the business reason for bookmakers going offshore in the short term, but such a number of bookmakers going offshore is ensuring their own destruction and the destruction of the industry on which they survive, so this is bigger than paying tax onshore—it is about ensuring that the industry, and therefore bookmaking itself, continues.

[Matthew Hancock]

Indeed. Bookmakers tend to value having racing on regularly so that there can be product in their shops—races on which people can bet. Around the country, having regular racing and a full fixture list is good not only for the paying punters who want to go, but for bookies, and it is important to ensure that that can be appropriately financed, because the number of fixtures cannot be increased without increased support. Ensuring that prize money per race returned to a reasonable level would provide the impetus for people to own the horses on which the rest of the industry depends. There is a chain of causation through the fixture list and the prize money, and ensuring that the appropriate levy is paid is critical.

[Sir Alan Meale (Mansfield) (Lab)]

I assure the hon. Gentleman that I am going to refer not to the next page of his speech, but to the first one. He mentioned the fall in the number of foals produced in the UK. The levy is not simply about betting in betting shops or prize money at race courses; it is about the British breeding industry and the support necessary to maintain it. I hope he will assure everybody in the Chamber that he is also supportive in that direction.

[Matthew Hancock]

Absolutely. On that point and more broadly, I declare a very wide interest: I am heavily supported in Newmarket, including by people from the breeding fraternity, or sorority—there are an awful lot of extremely impressive men and women involved in breeding—but this is also about racing welfare, which is supported by the levy. There is a much broader point, and I am grateful to have the opportunity to put that on the record. This is about not only the flow from prize money into the activities of horsemen, but the direct payments from the levy system to breeding, welfare, veterinary research and other important associated aspects of the sport, and indeed ensuring that the regulation of racing is adequately funded to guarantee high-quality and well-regulated racing. I do not want to dwell on that point, but I am sure that those of us with an interest in debates on the matter have noticed it over the past couple of months.

[Julian Smith]

If the Minister got his skates on, how quickly could the change happen? We have talked about Finance Bills, but what would his optimal timetable be for this tax change to happen?

[Matthew Hancock]

The proposed change is relatively simple. It would require primary legislation, but take only a couple of clauses in a Bill. The legislation would be fairly simple because it would change the designation of where a bet was and everything else would flow from that. That is the foundation of unlocking all the other changes for which there is cross-party support.

I urge the Minister to act. It is rare for the Government to have in front of them a proposal that is popular, important, timely, simple, money-raising and necessary. Since the proposal has all those attributes—and indeed, as we have discovered today, cross-party support—I ask him to act with the greatest possible speed. He cares deeply about horse racing, the people of Newmarket care about horse racing, and the country cares about the future of horse racing, so let us make this change and put the finances of horse racing on the sustainable footing that they deserve.

[Several hon. Members]

rose—

[Hywel Williams (in the Chair)]

Order. I want to start the winding-up speeches at 10.40 am, so I hope that Members will time their contributions appropriately.

09:54

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

I congratulate the hon. Member for West Suffolk (Matthew Hancock) on securing this important debate. I have Ayr race course in my constituency and, as the only Scottish Member here today, I think that I can confidently speak on behalf of all Scottish Members with race courses in their constituencies.

I want to start by emphasising to the Minister the significant role that Ayr race course has in the Ayrshire economy. It is important because of local jobs—we have heard about the many people employed throughout the UK in racing in its many forms—and in relation to tourism. Ayrshire is a very beautiful tourist area and the race course contributes greatly to encouraging people to come to the area. Ayr race course is also an innovative and enthusiastic local business, with a strong community focus. It is the leading race course in Scotland, with the Ayr gold cup and the Scottish grand national among its annual fixtures. The race course does not just sit back and wait for funding in the form of a levy or anything else; it has built a business and has greatly diversified over the past few years, outwith race days. For example, it holds popular Christmas parties every year, which are a profitable enterprise. I have watched with great pleasure as Ayr race course has changed from a run-down facility, lacking investment and vitality, to one of our most popular local attractions. That is a credit to the management and the work force, and I wish to put on record my thanks for everything they contribute to our local area. The race course is well supported by local people.

Having said all that, since I have been a Member of the House, I cannot remember a time when levy negotiations have been anything other than a problem. Every year, with monotonous predictability, we can look forward to protracted, unsatisfactory, adversarial negotiations that go to the brink and do not achieve a positive outcome. It has been blindingly obvious for some time that the levy mechanism does not work, is outdated and no longer fit for purpose. I must be frank: despite the best efforts of the then Minister, my hon. Friend the Member for Bradford South (Mr Sutcliffe), who took a very keen interest in this matter and always tried to be helpful, I feel that the previous Government could have done more. They should have grasped the nettle. From the debate so far, it seems that more progress is being made. I hope I am right in saying that and look forward to the Minister confirming it.

I can assure the House that the lack of progress was not due to lack of trying on the part of every Member with a race course in their constituency. We set up Friends of Scottish Racing as a cross-party group, and we try to use every opportunity to highlight areas of concern alongside the UK Parliament’s all-party group on horse racing. It has already been mentioned that the levy is not the only area of concern, but it is of central importance because it undoubtedly puts race courses at serious risk. The fact that funding has reduced so drastically is rendering the sport uneconomic. We are reaching crisis point and something urgently needs to be done. I do not wish to be over-dramatic, and I am very aware that the racing community would prefer a more collaborative approach, with partnership working, but the current system militates against that and it is imperative that a new funding mechanism is found.

As a Scottish MP, I also wish to emphasise the difficulties faced by those in the north in attracting owners prepared to incur the extra costs and travelling time of bringing horses and jockeys further afield. We have already talked about attracting business to race courses, but in Scotland we have a particular problem because of the geography, and it is undermining if prize money does not reflect that effort. As the hon. Member for West Suffolk said, if people’s costs are not covered, they do not feel that it is worth the effort.

[Andrew Griffiths]

Does the hon. Lady share my concern and that of my hon. Friend the Member for West Suffolk (Matthew Hancock) about the fact that the UK has now dropped to 38th in the world rankings for prize money, and that prize money has halved in two years? That is of major concern to the industry and it calls for urgent action.

[Sandra Osborne]

I could not agree more; that is a major issue. Despite the wish to maintain a competitive prize regime for Scottish fixtures, to say nothing of our excellent facilities, the industry in Scotland cannot be sustained indefinitely in the face of massive cuts in income from the levy. The annual payment from betting to racing has fallen from an average of £106 million to £59 million in three years—a drop of almost 50%. One of the most important reasons for the fall in racing’s funding position, as Members have said, is the move offshore by bookmakers and betting exchanges. How can it be right for bookmakers to advertise and transact in the UK but not contribute to the levy or pay taxes? Of 19 listed bookmakers, only two are now onshore, as the hon. Member for West Suffolk said.

I am aware of the Minister’s July announcement in which he proposed to regulate remote gambling on a point-of-consumption basis. That would create a level playing field and it is long overdue. All operators based here or abroad would have to hold a Gambling Commission licence to transact with UK customers. I welcome that and any other idea that would deal with this urgent situation as the hon. Member for West Suffolk implored—as soon as possible.

10:01

[Guy Opperman (Hexham) (Con)]

Thank you for the opportunity to speak, Mr Williams. I congratulate my hon. Friend the Member for West Suffolk (Matthew Hancock), who represents Newmarket, on making an eloquent and persuasive case. Right now, racing—along with its partners, the bookmakers—reminds me of the eurozone: a once mighty beast, unable to lead, unfit to govern, almost ungovernable and slowly being starved of cash, with solutions that too many vested interests will not address or embrace for fear of criticism by their members.

I have many things to declare. I am a category B licence holder and the only jockey in the House of Commons. As hon. Members will see, I am now in the heavyweight division. I blame the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) for many things, but I am afraid that the election and the delights of the House of Commons have caused me to lose the racing weight that I enjoyed when I won races in 2009 at Corbridge in Hexham.

I must also declare a definite bookmaking background. At age 11, at school, I survived by running an illegal bookmaking operation, which well and truly persuaded me that the bookmaker will always be one step ahead of the punter. On Fridays, we used to receive five boiled sweets in a bag, which was the currency that we used to run our bookmaking operation. My headmaster tried to stop that illegal betting ring, which clearly paid no tax, but was prevented by the outcry among the punters—my fellow schoolchildren—and by the positive encouragement of my parents, who were pleased to see, although I was not necessarily concentrating on my studies, that at least I was not such a daydreamer that I could not make a bob or two. So I have worked as a bookmaker and understand the difficulties and delights of that noble profession.

I should also declare an interest as a former horse racing journalist. For three halcyon years, I was the racing correspondent for that august racing journal, the Limerick Weekly Echo. I managed to put one Limerick bookmaker out of business by predicting the first, second and third in the grand national of 1981, an accumulator that one would wish to get a hold of. I have worked in horse sales, bred racehorses and worked as a stable lad in various places up and down the country. Also, although I confess that I am not nearly as wealthy as my hon. Friend the Member for Shipley (Philip Davies), who has many racehorses, I am in a syndicate with a part share in pointers and a chaser.

Over the years, I have ridden at a multitude of race courses, from Cheltenham to Kempton, and have enjoyed their delights, but I have a particular affiliation with and love for the finest race course in the world, which, as we all know, is Hexham. If hon. Members have not visited it, I urge them to do so. The team behind Hexham, one of the last few privately owned race courses in the country, have racing and the general public’s interest very much at heart. The race course provides employment, tourism and sport, supports breeding, vets and feed companies and is an integral part of society in the north-east. I know that I speak for all Members with race courses in their communities. Each of us will tell the same tale of how integral it is to their community, and how it provides much more than simply a race course where punters can place bets.

As the only jockey in Parliament and someone acutely interested in the issue, I can declare that the future funding of racing is important. It is a harsh reality that the number of horses going through the ranks of racing will increasingly diminish. That is patently obvious from the numbers. Horses will also be taken abroad to be trained. Why would anybody stay in this country to train a horse, unless they were particularly in love with the sport?

My hon. Friend the Member for West Suffolk spoke eloquently of the disparity in prize money for flat racing. The winner of a steeplechase race in France would get a minimum of £5,000, but the winner of a novice hurdle race at one of the lesser tracks here will probably end up with £1,000 or £1,200. By the time they have paid for travel, entry and all the other bits and bobs, it is almost not worth going to the races from a financial point of view. That 5:1 disparity in funding and prize money will eventually seep down into the system, causing the demise of racing in this country. Let us not be in any doubt. In what other sport is this country a world leader? One could make a case for cricket or a few other things, but in reality, racing is clearly the No. 1 sport at which this country is the champion, and we should support it. I certainly believe that it is a cause worth fighting for.

As others have said—I think that this opinion is cross-party—the present situation is patently untenable. We must address how racing is funded. The Government’s levy solution is clearly not sustainable in the long term. I applaud the Government’s efforts, which I know follow the efforts of previous Ministers, to find a radical new solution to how the levy is funded. I regret to say that I have little faith in bookmakers to volunteer a better system in future. That simply will not happen. My hon. Friend the Member for Shipley seeks a discounted version of taxation in relation to offshore. That is a commercial advantage to which bookmakers would sign up gratefully, but it would be no solution whatever.

It is important to note that such companies’ profits are significant. Betfair made £26.6 million to April 2011. William Hill made £277 million to 29 December 2010, and its chief executive’s salary is £1.65 million, which I suspect would fund Hexham about eight times over. All the other organisations make substantial profits as well.

[Philip Davies]

My hon. Friend should know that the fact that I have more horses in training than him is the reason why he is far richer than I am. He rattled off the figures, but will he acknowledge how much those businesses give to racing? Betfair, which has gone offshore, still gives £6.5 million of its £26 million every year in a voluntary levy to racing. If racing is so strapped for cash, is it not bizarre that the British Horseracing Authority is ignoring the advice of two eminent QCs that its customers should not pay a levy, and is spending money needlessly on a judicial review with William Hill? If the racing industry is strapped for cash, one would think that it would spend its money a bit more sensibly.

[Guy Opperman]

To misquote Christine Keeler, they would say that, wouldn’t they? The harsh reality is that Betfair is effectively trying to buy off the racing industry by making a donation that it does not have to make, in the hope that the matter will not be transferred back onshore. That is a strong assertion to make, but I suggest that there is ample evidence to support it.

It is also clear that bookmakers are seeing the writing on the wall. They are trying to diversify away from racing and into sports such as cricket and football. For example, on the subcontinent, in India, there is little betting on racing, because most of it is on cricket.

I urge the Minister to change the tax rules. If overseas operations wish to utilise British racing, they must pay more. I support entirely the idea that the punter based in this country is the source of the taxation.

I want to go one step further. If we do not have a solution and if we do not refinance racing, we will need to look at what to do then. If we do not resolve the issue and if the bookmakers and the Government do not address it properly, there will be only one solution. It is draconian, but it is the only alternative solution, and that is the nationalisation of bookmaking. That is the only way that we could approach the issue if bookmakers are no longer able or no longer willing, and the Government do not create a scheme, to fund it in this particular way. [Interruption.] My hon. Friend the Member for Shipley chunters from a sedentary position, although I accept that he never usually does that.

The point is that America may be the land of the free, but it has no competition in terms of state-sponsored bookmaking. Similarly, France, which is another competitive society, has a state-sponsored bookmaking system. That is also the way it is done in Australia and other places. Why is it that racing is funded so much better in those countries? Because everything that racing does goes back that way. I stress that I do not want to go down that route, but bookmakers and the Government need to understand that, if they do not sort this out, I regret to say that that will probably be the only remaining option.

I could say much more about how racing has been led and about the disaster of the whip debate and the way in which the British Horseracing Authority and Mr Roy have conducted themselves, but I have probably said enough.

10:12

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Williams. I add my congratulations to the hon. Member for West Suffolk (Matthew Hancock), not only on securing this debate, but on his continued interest in the issue, for all the reasons that he has given.

Everyone present agrees that racing is a fantastic product. We only have to consider last Saturday’s Betfair Chase, where Kauto Star won a fantastic victory. All racing fans enjoyed that event. I do not have a racecourse in my constituency, but Go Racing in Yorkshire is a fantastic body that does well not only by promoting racing, but by bringing new people to racing through tourism and so on. Racing has an impact on employment and the country’s national identity, which is vital and something that we should not lose. A person’s social background and what they want out of a horse-racing event do not matter—they can go to the biggest and the best courses or to their local tracks, and enjoy the experience.

Today’s debate is timely. I thank the Minister for his work in trying to keep the momentum going—that is something that I tried, but, unfortunately, I was unsuccessful—on where we need to be and on achieving some realism. The hon. Member for Hexham (Guy Opperman) is right—there are too many vested interests for the issue to be resolved. Much as it appeals to me as a Labour politician, his solution to nationalise the betting industry might not be the way forward, although I like where he is coming from and can think of other issues that he might like to talk about in terms of nationalisation. There are too many vested interests, which means that the debate centres on the argument between horse racing on one side and betting on the other, but the issue is too complex for it to be as simple as that.

I agree with the hon. Member for West Suffolk about what should happen with offshoring and think that the Minister’s solution is sensible. I wish him well on trying to resolve that with his colleagues in Government—I know how difficult that can be—and on the taxation issue.

I favour sports rights—I do not think that it is unknown that that is the route that I would follow. I think that sports betting rights are the way forward. The comparison with France is a good one—it has an 8% sports betting levy—and I think that sports rights will eventually be introduced, probably in three or four years’ time.

There has to be some more movement. I do not think that racing can sustain our 60 courses, or that the levy support helps that. Racing itself has tried, through Racing for Change and other initiatives, to deal with the issue by introducing a championship and examining what can be done on the grading of courses. That work needs to continue, because it is unlikely that we will be able to sustain the levels of prize money and investment. That does not mean that local courses cannot look for other means of support and investment—they should. The reality might hit some such courses. Towcester is a good example of what can be done by an individual course.

The issue of the levy needs to be resolved and the vested interests need to be sorted out. We also need to look at the betting industry. We have talked about the reliance of betting shops on the horse-racing product, but I believe that that now accounts for less than 30% of the takings, because people are betting on other sports such as football, rugby and cricket. The future of high street betting shops is an issue. The Minister will be aware of concerns surrounding the fixed-odds betting terminals—FOBTs—and what may or may not happen to them in the future. There has also been a move to online betting. I think that the structure and size of the betting industry will change, and that will affect racing. I feel for the independent bookmakers, because they get caught up in the problems. They have to do what the big boys do, and it costs them more, so their costs are ever increasing.

I believe that good faith has a part to play. Talking of which, I hope that the Minister will update us on the position of on-course pitch tenure. We entered into an agreement in good faith and progress has been made with some courses, but I hope that the matter is not forgotten and put to one side, because small independent bookmakers rely on those pitches and I think that we came to a compromise that should be accepted.

I think it was the hon. Member for Shipley (Philip Davies) who raised the issue of William Hill, Betfair and the Levy Board. The money being spent on that is an absolute waste, and the fact that the BHA has to cover the costs is an issue that needs to be resolved. It should not be going through the courts in the way that it is and the matter should be resolved. Betfair’s commitment to racing is well known. The levy may be voluntary, but it exists.

The Minister should continue with his work. It is good to see the co-chair of the all-party group on racing and bloodstock industries, the hon. Member for Tewkesbury (Mr Robertson), present. We as Members of Parliament can and will continue to help to put pressure on vested interests. The day will come when, if they do not sort this out themselves, it will be sorted out, but not in a way that people want. I congratulate the hon. Member for West Suffolk again on securing the debate. I am sure there will be other such debates and look forward to hearing the Minister’s response.

10:18

[Mr Laurence Robertson (Tewkesbury) (Con)]

It is a pleasure to serve under your chairmanship, Mr Williams, and to follow the hon. Member for Bradford South (Mr Sutcliffe), who works so very hard to try to resolve what are extremely difficult issues. I congratulate my hon. Friend the Member for West Suffolk (Matthew Hancock) on introducing this important and timely debate, and thank him for many of the things that he said.

I want to declare two non-declarable interests. I am joint-chairman of the all-party group on racing and bloodstock industries, along with the hon. Member for Mansfield (Sir Alan Meale), whom I am pleased to see present. With respect to other Members, I also have the honour of representing what I consider the greatest race course in the world—Cheltenham race course, where each year we have the world-famous Cheltenham gold cup. That is one of the greatest, if not the greatest, steeplechases in the world. I am delighted that my hon. Friend the Minister is a holder of one of those gold cups. I know that it is not the tradition of Government to have people who know what they are doing in post, but he is a very welcome exception to that rule.

I can only really endorse a lot of what my hon. Friend the Member for West Suffolk and others have said. In this country, we have what is probably the greatest racing in the world. It is certainly up there with the best, if not the actual best. As the hon. Member for Bradford South said, we had the most fantastic spectacle at Haydock on Saturday, when Kauto Star won against all expectation, providing such excitement in the world of horse racing and in the world of sport. Last year, Tony McCoy—AP McCoy—won the BBC sports personality of the year because of his exploits, yet all that gets overshadowed by the constant wrangling about funding and the constant falling out over the levy—not just the level, but the details.

I agree with my hon. Friend the Member for West Suffolk, who said that that is one of the best reasons for getting rid of the levy. It is divisive. It pits bookmaker against people in racing, whatever racing means in that respect. The levy was finally decided at quarter to 12 on the night of Halloween, which made for an unedifying spectacle. This is a very outdated and impractical system. As has been said, it has also delivered falling revenue. As the hon. Member for Mansfield said, that is important in many respects, not just for prize money, although it is significant with regard to prize money. Prize money is not everything, but it does filter down and find its way to trainers, jockeys and stable staff. It is extremely important not just so the rich can get richer, to coin a phrase, but so that those who work at the bottom can continue to work in the sport. Therefore, it is important to find a better funding mechanism, if mechanism is the right word. I will come on to that.

The principal point made by my hon. Friend the Member for West Suffolk was about how overseas operators are avoiding paying the levy. I do not object to anything he said, but I have quite a bit of sympathy with the point made by my hon. Friend the Member for Shipley (Philip Davies). We have to analyse why people have gone abroad. It is not just because of the levy. To draw a brief analogy, I have the honour of chairing the Northern Ireland Affairs Committee and one recent proposal was for the Northern Ireland Assembly to have the right to set a corporation tax that would be attractive to companies and businesses, compared with corporation tax in the Republic of Ireland. The tax is 12.5% in the Republic and 26% in the UK—a bit of a no-brainer when thinking about where to put a factory or business. We should explore why companies have gone abroad in the first place and consider having the kind of tax regime that attracts them. That is not just about bookmakers; I could expand that argument to all sorts of other businesses, especially in the competitive world in which we live. I therefore hope that that point will be considered.

I have no objection to the proposals that my hon. Friend the Member for West Suffolk made to the Minister, nor indeed to the considerations that the Minister is making, but we ought to think about why businesses went abroad in the first place. The constant pursuit of the exchanges is not healthy for the sport, or indeed for bookmakers, at this point. If we are talking about a levy replacement, let us get on with replacing it. Let us not get on with trying to tinker with the existing levy arrangement. If we do that, all we will end up with is levy mark 2—a similar arrangement to the one we have now, but called something else. I want us to move on from that.

How do we find the future funding for horse racing? That will not be particularly easy. If it were easy, the problem would have been solved a long time ago. We have heard a lot about a commercial solution. In terms of name and concept, I am all in favour of that commercial solution, but I am a little concerned that some of the proposals are not a commercial solution at all, but a rerunning of the levy. We need to avoid that.

There has been a call for any arrangement that is designed and agreed to be underpinned or guaranteed. We have to be very careful over how we go about that. Are we talking about underpinning through legislation? If we are, we have not really moved on much from where we are now. Indeed, we could find ourselves up in the European Court in relation to state aid rules. My view on state aid is that we are an independent country with a Parliament here, and we should do as we will. I would not bow to—[Interruption.] I thought that my hon. Friend the Member for Shipley would agree with me on that point. However, we are where we are at the moment, although we may change those rules in the future, and we do not want to fall foul of state aid rules. Any solution that we reach must be compliant. If the Minister will allow me to say so, we were rather too obsessed with state aid rules when it came to changing the status of the Tote—we gave them far too much credibility—but there is an issue here, no question about that.

[Matthew Hancock]

On the question whether a transfer should be underpinned by legislation, would it not be better in the long term to have it underpinned by contract—by agreement—based on, for instance, a racing right or sports betting right? That could be the basis of a commercial agreement. However, is it not important in the short term to solve the offshore problem, so that we have an appropriate basis from which to go forward to a truly sustainable position?

[Mr Robertson]

Just as many hon. Members anticipated my hon. Friend’s next statement, he has anticipated mine. The arrangement has to be consolidated and underpinned by the civil law, rather than by legislation. I entirely agree with him for a number of reasons, and the state aid issue is one. Another is that, if we are going commercial, we are going commercial—that is the way we should go. I understand his point. We have to bring offshore companies back onshore, but I would prefer to explore that through the way that I have described—perhaps by making it attractive for companies to do business in this country. We may need to go a little further than that, but it should certainly be explored.

On coming up with the commercial solution, I am not entirely convinced that the Government should decide the replacement for the levy. The Government have proposed three options, although I do not suppose that they are the only options that they would consider. However, there are other options that are perhaps not for the Government, but for racing and bookmakers, to put in place.

My hon. Friend the Member for Shipley talked about the increase in media rights. I understand that over the next year, from 2011-12 to 2012-13, they will increase by 26%. That could be considered different from the levy, but when an owner gets his cheque for £5,000 or £10,000, I do not think he is too concerned whether that has come from media rights, race courses, the levy or wherever; he is concerned about the size of that cheque. The whole cake is the important thing, not necessarily which particular segments have come from where.

[Martin Horwood (Cheltenham) (LD)]

I will not take up the Boundary Commission’s strange oversight in not including Cheltenham race course in the Cheltenham constituency this time. What does the hon. Gentleman think of the mechanism of having a requirement for all bookmakers, whether offshore or onshore, to hold a Gambling Commission licence in the UK? That Government proposal has merit, and I think the Jockey Club also supports it.

[Mr Robertson]

I am grateful to the Member for the Cheltenham constituency but not for the racecourse for his intervention. He makes a fair point that needs to be considered. The workings of the Gambling Commission are being looked at, which is a welcome step. That may be a way of tying people in, so that all bookmakers are caught up in the agreement that is eventually reached between racing and bookmakers. I hope that that could be explored.

On the commercial solution, I mentioned media rights. I also mentioned sponsorship, which is rarely discussed, although many bookmakers voluntarily put money into it—not only bookmakers, but many other companies. I am reliably informed by many in racing who are involved to trying to fund the sport that racing does not pursue sponsors and sponsorship as much, as often or as deeply as it could. That certainly needs exploring. It might not necessarily be part of a system or structure, but that money is available. Companies often sponsor more than just one sport: they might sponsor cricket and football and racing. That has to be further looked into.

[Sir Alan Meale]

I agree with much of what the hon. Gentleman has just said, but we still need somehow to extract a price guarantee for the product. I find it difficult to accept that trainers, owners and jockeys will participate in a venture that produces a race for the industry to consume and make money from. Even at the minor level, £1.5 million is bet off-course on every single race, yet we have a scenario, which was referred to earlier, in which the owners and trainers of the race horses do not get enough money, even after winning the race, to provide the diesel and cover the transport costs of getting to the race course. That has to change and we must be given some access to a price guarantee for such people to make it worth doing at all.

[Mr Robertson]

I agree with the co-chairman of the all-party group on that matter. My only point is that the system should be guaranteed commercially and not necessarily underpinned by legislation or by the Government. I agree entirely with his point—I simply do not know how people continue to fund owning racehorses. If they cover their training fee for one month, they have done extremely well. That cannot be done every time—an owner will not win a race each month to cover the training fees, and indeed, they would still be no better off. In this country, the official figure for costs recovered is about 23%, which cannot be sustainable.

My final point on a commercial solution is that race courses, as well as bookmakers, are a big player. I agree with a lot of what has been said by other hon. Members in that there are too many other, bit-part players involved. It might be more polite to say that too many middlemen are involved, which clouds the issue and causes too many problems. Race courses and bookmakers are probably the main players in finding a solution, and we must find that solution. Horse racing is an outstanding sport that gives much pleasure, enjoyment, exercise and discipline to many people each and every day. We must find a way forward to maintain the very high level that horse racing has achieved over many years.

10:31

[Ian Swales (Redcar) (LD)]

I congratulate the hon. Member for West Suffolk (Matthew Hancock) on his continued pressure on the subject and on securing the debate today. He and other hon. Members who have spoken have anticipated every page of my speech, so my few remarks will be from the angle of representing Redcar race course in my constituency. I am delighted that Go Racing in Yorkshire still says that the course is in Yorkshire, despite the local government gyrations that keep giving my area different administrations.

For a course such as Redcar, the effect of the problem over the past few years has been quite dramatic and, to some extent, hidden. The subtle effect of lowering prize money is that fewer owners attend the races, while some races are getting a lower rating, which influences the view of top trainers. They have always been happy to send horses to Redcar—trainers such as Henry Cecil are regular visitors—in particular as it is one of the few courses in the country with a flat straight mile. The 2011 cards have seen a noticeable drop in the number of trainers coming from places such as Newmarket or even further south—a trainer from Arundel used to send horses regularly—partly because of the cost of transport but also the subtle effect of lower prize money, which means lower quality racing. That vicious circle affects many smaller courses.

Redcar race course sits right in the middle of the town, so any change would have far-reaching effects, way beyond racegoers. It is a key part of our cultural life; for example, a great charity event for Help for Heroes was held there this summer, and I was happy to be one of those presenting a prize. The effect of race courses on towns is far wider than just racing.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

Is racing not one of those unique sporting occasions that brings people from isolated rural areas in contact with those in urban areas? All walks of life coalesce around that fantastic sport, which is unique in that respect.

[Ian Swales]

Absolutely. I cannot beat my hon. Friend’s lyrical description, but in Redcar, the race course is particularly important because it brings people into the resort activities of Redcar as well as for racing, often on the same day. Race courses play a key cultural role.

We must also remember—a point that has not been made—that bookmakers are key tenants on our hard-pressed high streets. I recently visited a bookmaker’s in Redcar, along with a representative of the Association of British Bookmakers. Although the ABB likes to remind us that UK racing is a smaller slice of the cake these days, the manager of the shop confirmed that it is still the major source of footfall in the shop. People using casino machines, for example, will most likely have come through the door because of racing. That is also true for many of those putting a bet on football on a Saturday; they are in the shop because of racing, even though the bet will appear in the bookmaker’s turnover as a bet on football. We should not accept too many scare stories from bookmakers.

[Matthew Hancock]

Does that not reiterate the need for a level playing field? Betting shops inevitably pay the levy because a shop cannot be moved offshore.

[Ian Swales]

That is absolutely true. My hon. Friend made the point earlier that independent bookmakers do not have the option to move offshore and, typically, they operate from fixed premises.

I support everything that has been said so far, and I welcome the Minister’s statement of 14 July. The suggestion that operators, wherever based, wishing to transact with UK customers would have to pay for a licence makes sense. I congratulate my hon. Friend the Member for Tewkesbury (Mr Robertson) on his hard work on behalf of the racing industry, and I agree that we have to think a bit bigger. It is high time that the levy system was scrapped; the tinkering that he mentioned will not provide a long-term solution. Commercial negotiations over the sale of the product, and a more entrepreneurial attitude from the industry, could have dramatic effects. We have seen what happens in other sports such as football, cricket and even darts when proper negotiations take place.

There is also sponsorship. Newcastle United has just decided, controversially, to rename its ground from St James’s Park, but that will net something like £10 million a year. What opportunities do race courses have in that regard?

[Mr Graham Stuart (Beverley and Holderness) (Con)]

I represent the most beautiful race course in the world, in Beverley. Does the hon. Gentleman agree that we need Government action to provide a new settlement that will get us over the endless grief caused to the former Minister and, I am sure, to Ministers in this Government? We can get the framework right, giving certainty for the future. We would send out a cross-party message that there will be no further legislative interventions, and then ask the commercial partners—bookmakers and race courses—to sit down together and sort out the differences, rather than looking constantly to us to provide a solution for them.

[Ian Swales]

I agree. I am not suggesting that the levy should be scrapped overnight, but we should have an eye to the future, beyond a system that will get us to the future.

I ask Members to think about the amounts of money that pour into sports such as football and Formula 1 from TV, and then think about how few hours those sports are shown on television compared with racing. Does racing even know what its product is worth? If people off the courses are generating £1.5 million every half an hour, what are the TV rights really worth?

I welcome the direction that the Minister is taking. I welcome the Tote deal, because it kept a large benefit for racing, although I reiterate the point made by my hon. Friend the Member for Hexham (Guy Opperman), which is that the most successful racing countries in the world typically do not have commercial bookmakers but a Tote-style system. I hope we never get there, but it is possibly a safety net.

It is vital to our communities that we reform the finances, because race courses play a crucial cultural, economic and environmental role. The Government must continue to set the framework for the industry.

10:39

[George Freeman (Mid Norfolk) (Con)]

Thank you for the opportunity to speak, Mr Williams. I am sorry that I was a little late. I shall keep my comments short.

I add my support for my hon. Friend the Member for West Suffolk (Matthew Hancock) and congratulate him on raising the issue of an important industry and a vital part of our heritage. When the Government and all of us are stretching every sinew to promote growth in the country, it seems criminally negligent to allow the decline of a great industry that we already have. On a personal note, as the proud son of a former grand national-winning jockey who had the privilege of riding for Her Majesty the Queen Mother, it is a chance to remind ourselves of the great heritage of this great sport. My point is about the importance of national hunt racing in the rural economy. Low prize money is a particularly acute problem, and the whole pyramid of small trainers, point-to-points, hunts, pony clubs, hauliers and feed suppliers in a constituency such as mine is essential to underpin our rural economy and rural communities.

10:40

[Clive Efford (Eltham) (Lab)]

I add my congratulations to the hon. Member for West Suffolk (Matthew Hancock) on securing the debate, and his tenacity in following the issue. I have read previous debates that he has taken part in. I do not know whether he is aware that we share an interest in the Middle Park stud. Back in the mid-19th century, William Blenkiron, who had made an enormous amount of money in a men’s outfitters in the City, bought a horse called Glance, and set up stables in London after he retired. That activity grew so much that Blenkiron moved to Middle Park—it was then in Kent, but is now in an inner London borough—where he set up the Middle Park stud, which became the biggest stud in the country, and a tourist attraction. People from all over Europe would go to see that magnificent place. It is now a council housing estate, and in the middle is a place called Newmarket Green. The stud moved to the hon. Gentleman’s constituency, so we share some history. I believe that the Middle Park stakes are still run at Newmarket.

I bow to the superior knowledge that has been displayed by all hon. Members who have spoken. I cannot claim to be steeped in the history of racing, or to be as involved as Members who have spoken with great knowledge of the subject. My experience comes from childhood memories of my dad reading Sporting Life and studying form at the kitchen table on Saturday mornings. He was a member of a number of syndicates, and was a lifelong advocate and supporter of most betting shops, not to put too fine a point on it. He frequently told me that a horse was a dead cert and that he had been following it for years. Most were last heard of at the starting line, and never seen again. He loved racing, and had a lifelong association with it. It was a real joy for him, and it is part of our heritage. It is an industry and a sport that we should all protect, because it is important and we would rue the day if it were damaged or lost.

The history of gambling and betting shops is synonymous with horse racing. Gambling started at the trackside, and moved into the high street. That is when the levy arose. Betting shops were no longer on-course, and because of the investment necessary for racing, breeding horses and the industry generally, it was recognised that they should contribute to sustaining the sport through the levy. There is agreement that the arrangement should continue into the future if we are to sustain the industry. I add my voice to those who have today urged the Government to legislate to enable the horse racing industry to negotiate a return for its intellectual property rights and the investment that it puts into horse racing to ensure that it is sustained in future.

Does the racing industry believe that it is sustainable, not just in horse racing but in sport generally, for it to make enormous sums of money from what is invested in the sport and the effort that goes into organising the sport? Additional costs are imposed on the sport to sustain its integrity because of the dangers that it is exposed to through illegal gambling activities. Is it sustainable for the betting industry to continue to make money from the sport without contributing to it, particularly to its grass roots in our communities that sustain it? As has been said, horse racing involves a great deal at community level, and it is such an important part of local communities that without investment trickling down to its grass roots, the whole edifice will be undermined. None of us wants that, and I am sure that no one in the betting industry wants it either.

The question today is whether the current situation, when so many people are moving away and contributing less, is sustainable in the long term, not just in horse racing, but in sport generally. Some of the scandals in sport generally have involved illegal gambling practices with inducements for people to become involved in activities that do not affect the outcome—a no-ball in cricket, the first yellow card or a throw-in in football. If larger sums of money can be made from such activities than from performing in the sport, its integrity will be undermined. It is not just a matter of saying that such practices have occurred in the unregulated areas of gambling, because that is not so. There have been examples even in the UK’s regulated gambling operations of quite severe and large-scale corrupt activities to try to fix the outcome of gambling. If we are to sustain the integrity of the gambling industry so that it is not undermined, and to continue to have faith in sport and its outcome, knowing that it is genuine competition, we must work together to sustain the integrity of both sport and gambling. That means that a fair return must be paid to sport, and we must ensure that we work together to achieve that outcome.

I have some questions for the Minister. I assume that he accepts the principle that those who make money from gambling should contribute to the sport, particularly horse racing, which is the subject of this debate. What conclusions has he come to? He said that he intends to legislate to create a level playing field between those who operate onshore and those who operate offshore. Can he tell us today when and how he intends to move forward on that? Does he agree with the British racing industry that payment should be based around betting, not just on viewing rights, and that there should be some relationship to the amount of money that is exchanged in gambling on horse racing so that there is a sustainable replacement for the levy? Does he intend to legislate in that vein?

The hon. Member for West Suffolk asked about the future of the Tote. Will the Minister say what arrangements will be made for the Tote to make a continuing contribution to racing? It was set up to contribute to the future of horse racing. My time is up, so I ask the Minister to respond to those few questions.

10:50

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose)]

It is a pleasure to have you in the Chair looking after us today, Mr Williams. I want to thank and congratulate all hon. Members who have spoken in today’s debate. My hon. Friend the Member for West Suffolk (Matthew Hancock), who secured the debate, has been notable in his continuing support for the industry and also for his tenacity in following it.

I am greatly heartened by the relatively widespread cross-party position on many aspects surrounding the debate. That is important to note not just now but for the future, because the problem has been knocking around for 51 years—the levy is 51 years old this year—and has defeated many people across the House and in the gambling and horse racing industries. It is not a simple problem; it is a difficult issue. Many Members have remarked on the fact that there are entrenched interests and points of view, and honestly held and fervently delivered opinions on all sides. If the problem were simple, we would have solved it 30 years ago. However, nobody has managed it, so it is helpful and worth marking that there seems to be emerging consensus, although there are still many important points of detail to deal with.

I am not sure whether this is a declarable interest, but in the interests of transparency I mention that my wife is a non-executive director of the race course at Cheltenham, from where my hon. Friend the Member for Tewkesbury (Mr Robertson) comes. She also has a horse in training, although the prospect of its being involved in any meaningful prize money is more theoretical than actual at the moment. At least the declaration has been made.

Several colleagues have asked about the proceeds of the Tote, including my hon. Friend the Member for West Suffolk and the hon. Member for Eltham (Clive Efford). The Government made a promise during the process of selling the Tote that 50% of the net returns would go to racing, and we intend to honour that promise. We are currently in discussions with the racing industry, and my approach has been very simple. I am happy to provide those proceeds via whatever mechanism racing chooses, with the sole proviso that it will not fall foul of competition or state aid rules. Basically, we sat down with racing and said, “With those sole provisos, tell us how you want it done”, and we are getting close to a solution. I am pleased to report steady progress, but there are important details that need to be sorted out.

The hon. Member for Bradford South (Mr Sutcliffe) asked about progress on on-course bookmakers’ pitches. That is a knotty problem that has been ongoing since he was in the ministerial chair. I am happy to report that Arena and Northern race courses are making good progress. They are all but there in terms of signing agreements. Certainly, there have been handshakes on deals, and I welcome that progress. Jockey Club race courses are still in negotiation. Once the big three groups of race courses have agreed a structure, I suspect that the remaining independents, of which there are many, as the hon. Gentleman will appreciate, will follow. I urge Jockey Club race courses and on-course bookmakers to pursue that remaining piece of negotiation rapidly. Others have managed it already. If we can get them over the line, or if they can get themselves over the line, they will not have to worry about politicians interfering. If politicians come up with a deal, I suspect it will be less good than one the industries come up with themselves.

I was delighted about and thankful for the level of support voiced for the Government’s proposals to change the way that offshore bookmaking is dealt with. It is important to realise that for entirely understandable commercial reasons—entirely logical commercial decisions in many cases—because of a system that was set up with a set of commercial incentives, many bookmakers moved offshore over the course of the past five or 10 years. We aim to change the way those offshore bookmakers are regulated. Several colleagues have been kind enough to describe this as simple and elegant; we are switching the way offshore bookmakers are regulated so that anybody anywhere in the world who is selling gambling services to people based in Britain will have to hold a British Gambling Commission licence. That neatly enfranchises all those firms within the British regulatory net, which is important for consumer protection. In this country, we are used to a well regulated and responsible gambling industry that is by and large clean and tries to make sure that it delivers on its social responsibilities for the small and unfortunate minority of people who suffer from gambling addiction. That is not the case in many other countries.

We need to ensure that we remain well regulated and that we continue to have a responsible industry. A British punter who goes online and uses this or that gambling website does not necessarily know whether the website is regulated in the UK or abroad. In some foreign jurisdictions, there are good regulators, but not in others, I am afraid. It is essential that a British punter knows that no matter where the website may be hosted, it is still protected by British regulation, and therefore they have the legal protections that they would expect if they walked into a betting shop on a British high street. That is the starting point for our regulatory changes.

The changes may also have important knock-on implications for taxation. I will try not to tread on the Treasury’s toes, but some parallel announcements were made a few days after we announced our regulatory changes. They are also working their way through the system. The point I want to make to my hon. Friend the Member for West Suffolk and anybody else who has raised the point during the debate is that changing the way we treat offshore regulation is an essential first step to dealing with consumer protection and potentially to dealing with things such as the levy and possibly even taxation. However, that is not the whole answer. Clearly, we need to move on, having built that foundation, to create a new environment and a new type of successor to the levy.

[Mr Edward Leigh (Gainsborough) (Con)]

We do not want the gambling industry to go the same way as the British shipping industry. The way to solve the problem is to reduce taxation so that the industry does not want go offshore in the first place.

[John Penrose]

As a low-tax and free-market Tory, my instincts are of course with my hon. Friend. We will have to wait for the Treasury’s announcement on such matters. It is important to remember that there is a distinction between betting duty and corporation tax. Just as Goldman Sachs has a headquarters based in America but a large operation here in the UK, so too the location of betting firms’ corporate headquarters may be in a different place from where their operations and the jobs are. That is an important distinction to remember.

Given the limited amount of time, I want briefly to update colleagues on the progress we are making in the ongoing discussions between the gambling and horse racing industries in our search to find a successor to the levy. I am afraid I will not be able to give a running commentary, because the conversations are detailed and difficult, with the entrenched positions that everyone here has already mentioned. However, I can report that I have been impressed so far by the willingness of all sides to engage constructively and actively, and with a degree of determination. We are only partway through the process. There is a great deal further to do.

I reassure my hon. Friend the Member for Tewkesbury that while we may have started with the three options that I laid out to get the conversation started, we are moving on from them. I am taking the approach that if the gambling and horse racing industries can come up with something that they are both willing to sign up to, which satisfies basic principles of fairness on each side, it is not up to politicians to second-guess or contradict what the two industries can agree. We want to come up with something that is both enforceable and sustainable, so that when a new contract comes to an end there is a series of incentives and potential downsides for both industries that force them back to the table. That would ensure that they need to negotiate a successor contract or agreement so that the arrangement does not just come to an end after five years. If we can arrange those kinds of incentives, we will have that long sought after arrangement where racing will become in the best possible sense of the word a normal sport that does not depend on politicians and does not require Ministers or anybody from the Department for Culture, Media and Sport, and where the phrase “Hello, I’m here from the Government, and I’m here to help” does not send a chill through the blood.

Human Rights (Colombia)

Tuesday 22nd November 2011 Westminster Hall

11:00

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Williams, and may I express my appreciation to Mr Speaker for having selected this important debate?

The conflict in Colombia is one of the oldest on the planet and it spans some 50 years. Technically, the fighting is between Colombian Government official armed forces and various guerrilla groups such as the ELN—the national liberation army—and FARC. The situation, however, is more complicated because of the large number of right-wing paramilitaries, who operate with almost complete impunity, systematically murdering the ordinary people of Colombia in droves, and an army that clearly colludes and co-operates with them. I requested this debate because we need to send the Colombian Government a clear message.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

I have with me a statement on Colombia issued jointly by the Governments of Colombia and of the United Kingdom, and I understand that an important visit took place yesterday. The statement contains, however, no reference whatever to the trade unions, or—as far as I can see on a quick reading—to any of the Churches. Does my hon. Friend find that somewhat interesting?

[Jim Sheridan]

My right hon. Friend raises an important point; he has a proud track record of looking at situations in terms of human rights. I hope that the Minister will take his comments on board and perhaps clarify that point.

[The Minister of State, Foreign and Commonwealth Office (Mr Jeremy Browne)]

I am grateful for the opportunity to contribute to the debate at this early stage. I have just hosted a meeting in the Foreign Office that was held by the President of Colombia and at which a range of non-governmental organisations, including representatives from trade unions and Christian organisations, had the opportunity to make those points directly to him as part of a wider conversation.

[Jim Sheridan]

I thank the Minister for that clarification. I do not want to sound negative, but the all-party British-Latin America group arranged a meeting with President Santos for yesterday and, unfortunately, not much notice was given to the rest of us, so we heard about a meeting scheduled for Monday afternoon only on Monday morning. Speaking personally, it was almost impossible to get to that meeting, but had we known about it earlier, even more trade unionists and similar people would have attended.

[Mr Gerry Sutcliffe (Bradford South) (Lab)]

We hear the Minister’s comments, but if we as a country attack those in the middle east who kill their own people—in particular, I highlight Syria and other countries where there have been problems—should we not do the same with Colombia? Many MPs have tried over many years to raise the issue of Colombia and highlight the fact that many innocent people, mainly trade unionists, are being killed. Should our Government not send a clear message to the Colombian Government that we will not tolerate that, and that we want to highlight things that are taking place on a daily basis?

[Jim Sheridan]

That is the objective of this debate: we are sending a clear message to the Colombian Government that what they are doing is simply unacceptable. We have sent clear messages to Syria and other countries on exactly the same issue.

[Paul Flynn (Newport West) (Lab)]

My hon. Friend is more fortunate than me, as my invitation to yesterday’s meeting is yet to arrive. I believe, however, that we, as parliamentarians, should send an important message to President Santos: in addition to the points raised this morning, we want to congratulate him on the courageous stand he is making to challenge the system that results in the prohibition of drugs throughout the world. We wholeheartedly support him on that.

[Jim Sheridan]

I am more than happy to concur with my hon. Friend, but, although I do not wish to be cynical, we have heard those words before. We are now at the stage where rhetoric is no longer acceptable and we are looking for deeds.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on securing the debate. We know about the history of Colombia and the human rights abuses, and that it is probably the capital of drug barons. Furthermore, UN figures and the research papers cite 26,500 cases of presumed forced disappearance, and there are major concerns that Colombia is a network for people trafficking. Organisations such as the A21 campaign, and other groups in England, are greatly concerned. Does he agree that it is possible that people are being trafficked around the world?

[Jim Sheridan]

The hon. Gentleman is right—human trafficking in Colombia is an extremely important issue that I hope we will address seriously.

The international community will not remain silent while human rights abuses continue, and we must make clear our support for a proper peace process in Colombia. The conflict will end only with a peace process between the Government and the guerrilla groups, and the UK Government should do everything in their power to encourage all parties in the conflict to enter into serious negotiations. We must support civil society’s efforts for peace.

The authorities, and particularly the armed forces, readily label any ordinary Colombian, especially rural peasants or any Colombian they like—or, more accurately, do not like—a terrorist. They then kill or butcher them, or at best arrest them and lock them in jail without proper charges or trial. Until recently, the army offered holiday bonuses or promotions to personnel who captured or killed a FARC guerrilla, so it is hardly surprising that innocent people were being rounded up, shot and dressed as terrorists.

Two years ago, I visited Colombia together with some colleagues, and I met mothers who told me how their sons had been murdered. The authorities said that the boys were FARC guerrillas, and the army had even set up false employment recruitment agencies to offer those poor boys jobs in the countryside before simply executing them. Boys as young as 16 met that fate. Other mothers told us of sons who were killed and then dressed in guerrilla uniforms. When the mothers went to see the bodies, their sons were wearing FARC uniforms that the mothers had never seen before, despite their sons having lived at home. Remarkably, although the bodies had bullet holes, the uniforms they were wearing did not. The killing of a FARC terrorist earned the soldiers extra holiday. Killing an innocent boy and stuffing the body in a FARC uniform was—and still is—common practice.

The Colombian human rights movement calls such actions false positives. Thousands of people have been killed in that way, many while President Santos was Defence Minister. When I visited Colombia in 2009, the United Nations stated that the number of killings carried out by the Colombian army could constitute a crime against humanity. It also said that the figure for such killings that have not resulted in any conviction stands at 98%, and according to the Colombian Commission of Jurists, impunity for crimes committed by the army or paramilitaries stands at 99%—a shocking situation.

The current Government under Juan Manuel Santos—who I am happy to say is visiting London today; he is very welcome—have pledged that many things will change, and the international community is watching closely. Nevertheless, the number of ordinary Colombian civilians being killed is as high as before. Since President Santos came to power, 110 social activists have been killed, and 29 human rights defenders were killed in the first half of this year. No one has been brought to trial for any of those murders.

Sadly, just two weeks ago, the highly respected NGO, the Centre for Investigation and Popular Education, reported that under President Santos the army has continued to carry out extrajudicial executions—nine so far—and to report murdered civilians as guerrillas killed in combat. Amnesty International states:

“The security forces’ counter-insurgency strategy is largely based on the premise that those living in conflict areas are part of the enemy”.

Let me give some examples. Just last month, on 13 October, a student, Yan Lugo, was killed by a bomb thrown into a student demonstration in Cali. He was nearly blown in half. Ten other students were severely wounded. The police accused him of being blown up by a bomb that he was carrying. All the students deny that, but—surprise, surprise—no investigation has taken place, as far as we know.

An even more brutal story appeared earlier this year when three women from one family were massacred—butchered to death—by paramilitaries, in addition to two farm workers being shot. Those people were killed with machetes. The youngest, five-year-old Sorith Roa, had her hands chopped off. That happened on the same day that 1,000 local peasants organised an event to give testimony of army abuses in the region. It happened in an area controlled by the army, which, it seems, did nothing whatever about it and let it happen. Why were those women murdered? Was five-year-old Sorith a FARC guerrilla?

Those are just two examples of what continues to go on in Colombia today, and still no one is brought to justice.

[Jim McGovern (Dundee West) (Lab)]

I, too, took part in the visit to Colombia in 2009. Like me, my hon. Friend will be aware that people are murdered—shot to death, their bodies riddled with bullets. Then a camouflage uniform is put on them, but there are no bullet holes in the uniform, so there is no investigation. Does he agree that that is outrageous?

[Jim Sheridan]

That is a classic example of how the Colombian authorities carry out their business. My hon. Friend is absolutely right. He was with me, and we spoke to the mothers of the poor young men who were assassinated—massacred—in exactly the way he describes.

To return to the question of people being brought to justice, 98% of the crimes that we are discussing were carried out under the army’s nose. I fully appreciate that President Santos has promised widespread reform and “democratic prosperity”. One of his announcements was that he would disband the Colombian security police force, known as the DAS, which was notorious for its widespread links with paramilitaries. He has also set up an investigation into the links between DAS police and the paramilitaries. However, the 6,000 DAS staff are simply to be divided up among a new intelligence agency, the Office of the Attorney General, which is charged with investigating crimes, and the Office of the Prosecutor General. Therefore, that so-called reform, rather than purging one institution of its links to paramilitarism and crime, will place its members within the institutions charged with investigating those links. You could not make it up, Mr Williams.

Furthermore, the national security doctrine that governed the DAS will remain unchanged, which means that the new intelligence agency is likely to continue to view the political opposition and social movements as allies of subversion.

Under President Uribe, Colombia pushed through a justice and peace law that allegedly saw paramilitary forces demobilise. From that moment on, the Government have said that paramilitaries no longer exist. The growth of abuses by successor groups has forced the Government to recognise the violence, and they now call them “criminal bands”. However, that does not recognise the political and economic control that paramilitaries continue to exert in vast regions of the country, and it reduces the murders that they commit to random acts of violence, rather than classing them as politically motivated crimes.

Furthermore, the complicity and co-operation of Government forces with the groups continues. In the Casa Zinc massacre in Montecristo at 7 pm on 17 August, paramilitaries tortured and killed three peasants. Army troops were stationed nearby, but did not intervene. On 12 October, the San José peace community denounced army and paramilitary co-operation in the region, cataloguing a series of abuses, including threats, illegal searches and recruitment of minors. On 16 August, Rafael Andres Gonzalez Garnica, a peasant trade unionist, was assassinated in Cartagena del Chaira, Caqueta, an operational centre for the army, only a block from a police checkpoint.

An independent report by the New Rainbow Corporation states that, in some areas in Colombia, paramilitary forces follow once the army establishes control and that in others

“some members of the military forces seem to be one”

with paramilitary groups. That helps to explain why many human rights abuses occur in areas that the army controls.

I fully appreciate that President Santos has introduced, as the flagship of his approach, the land and victims law, the stated intention of which is to return land to the peasants from whom it has been stolen since 1991 and to compensate people who have been the victims of human rights abuses since 1986. However, the reality is that even if the web of quasi-legal documents that now tie that land to big business or even multinationals is untangled and even if, as is unlikely, peasants can win a claim to some land, they are likely to suffer the same fate as Ana Fabricia Cordoba—a community leader killed on 7 June this year. She had repeatedly told authorities that she was receiving death threats, but nothing was done to provide her with protection. She had led the community’s demand for their stolen land to be returned. She fled her home region in 2001, after her husband was murdered. She was killed 11 months after her son was also murdered—a crime allegedly carried out by the police.

[Jim McGovern]

Last week, Aidee Moreno—a Colombian trade unionist—visited Parliament. Her entire family has been targeted because of her trade union activities. Her brother, husband and mother have been brutally murdered by paramilitaries. Her niece has disappeared, never to be seen again. Under the provisions of the land and victims law, Aidee Moreno would be due some financial compensation. However, she does not seek compensation, because she says that it

“doesn’t compensate for all those years of suffering and injustice.”

Will my hon. Friend join me in sending best wishes and regards to Aidee Moreno?

[Jim Sheridan]

I, too, had the privilege and pleasure of meeting that brave young woman, who has put her life on the line for people in her community. I have to say, unfortunately, that time will tell whether her bravery is rewarded or whether she is found dead—killed—as well. We complain about the problems in relation to workers’ rights and trade unions in this country; it is a humbling experience then to see what happens to people in Colombia who stand up for their basic human rights.

The reality is that paramilitaries still control large regions of Colombia and that, while the army continues to collude with them, nothing will change. Until the Government acknowledge that paramilitarism still exists as a major force, despite Uribe’s justice and peace law and the supposed demobilisation, and unless they recognise the political motivation behind the abuses committed by those groups, nothing will change.

The land and victims law would be workable in a truly post-conflict situation, but this is not a post-conflict situation and illegal armed groups are everywhere. Additionally, peasant farmers continue to be displaced and those new victims will not be recognised. It is also disturbing that the victims, if they are to be recompensed in any way under the land and victims law, are forced to waive the right to seek justice for the crime that has been committed against them. They literally have to sign a document saying that they will not seek an investigation into the murder of their mother, father or husband. How can that possibly provide people with any dignity or peace of mind?

[Mark Durkan (Foyle) (SDLP)]

My hon. Friend rightly highlights the fact that the supposed aim of victims law 1448 is to offer victims restitution, but will not victims be unable meaningfully to pursue restitution when they are still at risk in circumstances of ongoing conflict? Does the law not fail to protect victims in many respects? Does it not offer protection to the victim makers? Is there not also the question of how indigenous people are meant to gain access to their lands when so many mining rights have been granted over huge areas?

[Jim Sheridan]

My hon. Friend is absolutely right: it is almost impossible for indigenous people in Colombia to reclaim their land, not simply because of the fear of death, but because of the behaviour of some large multinational companies, many of which are based in this country. Their behaviour in clearing peasants’ land is unforgiveable, and that must also be challenged.

In addition to buying people off and failing to provide any security to those trying to return to their land, the state has not put in place sufficient organisation to deal with the millions of claims, and it still will not recognise any state responsibility for abuses.

[Mr Jeremy Browne]

The hon. Gentleman said that British companies, or at least companies based in Britain, were driving indigenous people off their land in Colombia. I should be grateful if he named them, because I would wish to take up his concerns directly with those companies. If he could name them now, that would be very helpful.

[Jim Sheridan]

I am absolutely delighted that the Minister will take up that case on our behalf, and I will send him the list of companies that we are investigating. I am happy to provide him with that evidence. He can then clearly tell us what actions he, as a Minister, will take.

The land and victims law has arbitrarily established different cut-off points for recompense. The cut-off point is 1991 for victims of displacement and 1986 for victims of human rights abuses, thus denying recompense to those who were made victims before those dates. The land and victims law also arbitrarily sets 2005 as the end date for claims of victimhood. Victims must prove the political nature of crimes committed against them after that date, because the paramilitaries are considered to have demobilised after 2005, despite masses of evidence to the contrary.

The land and victims law effectively legalises displacement in cases where it is established that returning land would affect a region’s economic interests. It fails to recognise the phenomenon of urban displacement. Furthermore, the health and education benefits assigned to victims are not a form of recompense; rather, it is the duty of the state to provide such things to all Colombian citizens.

Worse still is the fact that, under the country’s new national development plan, priority will be given to industries such as mining and oil extraction. That rules out returning any lands that fall into those categories where it is claimed that doing so would affect a region’s economic interests. Ever more people are being displaced as a means of gaining access to land that is rich in resources. In the Meta department, 2,500 families are due to be pushed off their land by the armed forces. The military has accused them of being FARC families, putting their lives in grave danger. Is it purely coincidental that coltan—a highly valuable mineral—has been discovered in the area, which is also highly likely to contain oil?

The land and victims law effectively divides the victims movement, recognising some victims and rejecting others, depending on when the abuse occurred. It also divides victims into those who think a little compensation is better than justice, therefore playing on the desperation of the usually poor victims. For those who try to go home, the continuing existence of paramilitary groups makes doing so a deadly proposition.

Although the President should be given credit for finally recognising the existence of victims, the land and victims law has done more for the Government’s political reputation than for victims themselves. Alongside this law, reforms are being made to the judiciary. That includes returning cases involving crimes committed by soldiers to military courts, opening the way for continued impunity, with no one being brought to justice for the thousands of civilian executions that soldiers carried out in cold blood.

To return to the ongoing extra-judicial executions and the general human rights carnage, it is terribly sad that the Colombian Government refuse to acknowledge that politically motivated paramilitaries continue to exist, that their own forces are responsible for extensive killings and that, despite efforts to the contrary, no progress has been made on impunity.

Trade union activists in Colombia risk their lives in their attempt to bargain collectively for better pay and conditions. Colombia is the most dangerous place in the world to be a trade unionist. In 2001, a British trade union delegation travelled to Colombia to meet colleagues there. Its members were so horrified by what they encountered—the lack of basic human rights and a general free hand to kill trade unionists—that they came back to Britain and, with other unions here, established the excellent NGO, Justice for Colombia, which belongs to every major UK trade union, such is the strength of feeling among unions here about the basic right to pursue collectivism to improve working conditions.

Some 2,908 trade unionists have been killed in Colombia since 1986, and 23 have been killed this year alone. Before anyone else mentions this, I should point out that the Vice-President is a former trade union leader. The embassy seems to think that that will convince us that things have changed, but in reality, it has changed nothing for trade union activists.

At 10 pm on 16 August, trade union activist Rafael Andres Gonzalez Garnica was murdered while having dinner with friends in a restaurant. He was shot dead just yards from a police checkpoint in the department of Caqueta, which locals suspect was being manned by police and paramilitaries. On 22 August, trade union activist Alfonso Diaz Villa was assassinated near his home. He was a regional leader of the university workers union, SINTRAUNICOL, and he had been receiving death threats since 2005. Despite the danger in which the union’s leaders find themselves, the Colombian Government have suspended the protection scheme for them, belying the regime’s claims that trade unionists are given adequate protection. As usual, the murderers are not brought to justice. According to Human Rights Watch, people have been brought to justice in only 10% of cases, although almost 3,000 people have been killed.

The British unions and their NGO, Justice for Colombia, formed a parliamentary group of MPs and lords. Together, we will continue to fight for the safety, well-being and rights of our friends in the Colombian trade union movement and of others fighting for justice in Colombia. Our main priority is to help to encourage the parties to the Colombian conflict to engage in a proper peace process that achieves real social justice, because the conflict will not end without it. A colleague will come on to this issue in more detail later, but I want to highlight early-day motion 2276, which we have tabled to that end. I call on the UK Government to use their influence to support that aim.

Justice for Colombia and the MPs and peers in its parliamentary group are often the subject of underhand slurs and insinuations, but we understand that that is par for the course, and we will not be deterred. Meanwhile, I hope President Santos’s words will soon be translated into actions. For too long, our intelligence has been insulted by the Colombian Government, who think that we will be convinced by flowery speeches and well-meaning words. The Colombian people have suffered enough—it is time to see action.

11:29

[Martin Horwood (Cheltenham) (LD)]

I welcome the debate. It is timely that the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) has obtained it to coincide with the visit to this country of President Santos. The account that the hon. Gentleman gave of the violence and abuse being meted out to individuals and whole communities in Colombia was very moving and disturbing. While I expect the Government will want to emphasise trade and positive co-operation on such things as climate finance during the visit—those things are extremely positive—it is right that human rights should play a prominent part in the debates surrounding the visit, and in the Government’s specific discussions with President Santos.

The record is still very poor. The ABColombia group of British NGOs working in Colombia reported in recent documentation that the total number of people assumed —even by the Colombian Attorney-General’s office—to have disappeared for political reasons in Colombia is 27,000. That is an astonishing number. The Catholic Fund for Overseas Development reports that attacks on human rights defenders and community leaders have, if anything, escalated in recent years, despite the positive statements that President Santos made when he came into office. In fact, it says that 54 human rights defenders or community leaders have been killed in the first year of the President’s term of office. A local NGO reported 174 different acts of aggression or violence against human rights defenders.

The hon. Member for Paisley and Renfrewshire North is right to highlight the position of trade unionists in Colombia, which seems uniquely vulnerable. An International Confederation of Free Trade Unions survey this year reported that 49 trade unionists had been killed in Colombia—more than ICFTU reported killed in the whole of the rest of the world. Even the country’s Government admit that 37 people have been killed simply for their trade union activities. Amnesty International tried to get to the source of the killings of trade unionists, and its analysis suggested that roughly half were paramilitary groups completely outside the control of state agencies and that a very small fraction were guerrilla movements such as FARC; but Amnesty reckoned that more than 40% were connected to state forces. That is an extremely troubling statistic in any country that aspires to democracy and the rule of law, as Colombia clearly does. It has ratified international human rights conventions, and International Labour Organisation conventions on the rights of trade unionists; yet until last year, it had been on the ILO trade unionist rights blacklist for 21 years in succession. That is a pretty appalling record.

The Foreign Office has recognised the seriousness of the human rights situation in Colombia, and I have many times praised and welcomed last year’s human rights report by the Department and the Secretary of State, which highlighted issues about Colombia. It also highlighted another issue dear to my heart, since as well as being an occasional Liberal Democrat spokesman, I chair the all-party group on tribal peoples. The Government’s report sets out very well the vulnerability of indigenous peoples. It is not only illegal armed groups but commercial interests—in mining, rubber and palm oil—that are effectively involved in land grabs and some of the worst violence against any communities in Colombia. Twelve people were killed in the worst massacre, in 2009, of the Awa people, including a three-year-old child and an eight-month-old baby. That is the level of violence and abuse. As always, tribal people’s rights are connected to land rights.

The present Government must be given some credit. The hon. Member for Paisley and Renfrewshire North talked about the victims law; ABColombia highlighted that and, indeed, many of its weaknesses and the interaction with the economic situation. They nevertheless described it as

“an important step forward in recognising the need to restore land to Colombia’s victims.”

There is a slight danger that if we criticise every aspect of progress we shall end up discrediting every attempt to make progress. President Santos has made positive statements. He has talked about the “firm and unavoidable commitment” to the defence of human rights.

My hon. Friend the Minister has been active in positively promoting human rights in Colombia, seeking an active role for the embassy in co-ordinating with civil society and the Government in recognising the importance of human rights and their defenders. On his August visit he met a variety of Colombian Ministers, including, I notice, the Minister of Defence. Are we planning any co-operation with the Colombian Government on military-to-military links, to try to re-emphasise the role of the military in a democratic society? That role is difficult for some military establishments in new and fragile democracies. We see it played out in Egypt, where the military are reluctant to submit to full scrutiny and to full exposure of abuses that have been going on for years. They are reluctant to step back from a role of assumed oversight of the welfare of the country. However, that is what the military must do: they must be forced to step back and tackle the abuses in their own organisation, and the connections, indeed, to some paramilitaries, which still clearly exist in Colombia. Are the British Government actively promoting such change in the Colombian military?

Apparently 298 members of the military have been convicted of human rights abuses, which is a positive development. When President Santos was Minister of Defence he sacked 27 military officers, including three generals, and as the hon. Member for Paisley and Renfrewshire North said, he disbanded the DAS organisation; so positive steps are being taken.

[Jim Sheridan]

The hon. Gentleman is right; they were sacked—but none of them was prosecuted.

[Martin Horwood]

That emphasises the importance of seeing such commitments through, and taking a thorough approach to transparency and accountability among the military. I was going to say that although 298 convictions sound like a huge number, the total number of outstanding cases under investigation as of September 2011 was 1,486. The figure of 298 is a fairly small percentage.

I shall not take more time, because other hon. Members want to speak. I recognise the positive work that the Minister is doing to promote human rights in Colombia, and it is welcome, but my fundamental question to him is about the concrete steps he has managed to discuss with the Colombian Government, to try to make a difference to the underlying violence and abuse that are clearly still present in Colombian society. What steps are we taking to collaborate with and support the Government in taking those concrete, definable steps?

[Several hon. Members]

rose—

[Hywel Williams (in the Chair)]

Order. The wind-ups will start at 10 past 12, and several hon. Members hope to catch my eye, so I appeal to them to be brief.

11:38

[Chris Bryant (Rhondda) (Lab)]

I congratulate my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) on securing the debate. It is timely not only because of the visit of President Santos: it is important that the House should constantly remind itself of the human rights problems in Colombia and, for that matter, other countries in Latin America. One of the sadnesses for many hon. Members who have had dealings with Latin America is the fact that it is still one of the continents most plagued by violence of many kinds, and that it is also plagued by phenomenal poverty and extraordinary wealth. Many of us hope that it will be a continent where the wealth of the land is more evenly distributed between everyone.

My hon. Friend has already outlined some specific problems of Colombia, which include the fact that 5.2 million people have been displaced, more than in any other country, and despite the fact that the population is not enormous compared with many others. The process of displacement goes on. In 2010, according to many NGOs, another 280,000 people were displaced from their land.

There is a hideous degree of corruption in many parts of the state in Colombia, including the judiciary. That is one of the problems that has led to a significant degree of impunity, to which my hon. Friend the Member for Paisley and Renfrewshire North alluded, particularly for paramilitary groups of many different shapes, sizes and kinds. Indeed, Vice President Angelino Garzon said in November 2010 that

“the immense majority of crimes [against] trade unionists remain in impunity…there have been advances in the investigations…but we still have not”—

I apologise for the American English that I am about to use—

“gotten to 200 court rulings, and there are thousands of workers and union leaders killed and disappeared.”

That is absolutely true.

There are many reasons for that impunity. In particular, under previous dispensations, it was in part because the Government did not want to deal with it or punish the people responsible. In some cases, that was, as I said, due to corruption in parts of the judiciary, but in other cases, it was due to intimidation of the judiciary.

I think that the Attorney-General’s office would admit that although the sub-unit that has been dealing with specific issues regarding trade unionists since 2007 has had some success, a large amount of that success has been because of the confessions that some people made under the justice and peace process that was started back then. In fact, since 2007, there have been only six convictions in 195 cases regarding trade unionists. Lest people think that the situation is markedly better today, in 2010, within everyone’s accepted definition, there were at least 51 cases of trade unionists being murdered, and so far, only one case has been opened by the Attorney-General’s office. The process of impunity continues, not least because often, while the actual murderers may be prosecuted, the authors—those who have started, promoted and enabled the process and allowed it to continue—have rarely been touched by the Attorney-General’s sub-unit. That is a major issue that needs to be addressed. Many candidates were killed in the run-up to last year’s local elections, and still we see complete impunity regarding those cases.

When I was the Minister who had responsibility for this area, I spoke clearly to the then Attorney-General, to various Ministers in the Uribe Government and to President Uribe himself and outlined one of my concerns, regarding the nature of the law of rebellion. If we had a law against rebellion in the United Kingdom, I think my hon. Friend the Member for Newport West (Paul Flynn) would be permanently in jail. The way that law is used in Colombia in many cases brings its criminal justice system into disrepute. Many people will say, “But it is just an additional law. Someone must already have been found guilty of another criminal offence”, but that is one area in Colombia’s statute book that needs reform.

I have met President Santos on several occasions. He spoke fine words in his inauguration speech and I think he intends them, but the question is whether he can see them through to a conclusion. It is great that one of the first things he did was to achieve some kind of resolution on the relationship with Venezuela. The Uribe-Chavez mutual hatred appreciation society did no favours for either Venezuela or Colombia, in particular for the poorest people living on the border between the two countries.

I am delighted at the change in the mood music, especially regarding human rights defenders and workers. However, in the first six months of 2011, there was a 129% increase on the previous year in the number of attacks on human rights defenders. While I wholeheartedly support President Santos’s declared intentions, I want to see them pursued in reality.

[Jim McGovern]

The hon. Member for Cheltenham (Martin Horwood) seemed to be saying that President Santos’s visit is primarily about trade, industry and the economy, and that human rights may possibly be discussed. Does my hon. Friend agree that human rights should be very high on the agenda, rather than an aside or an afterthought?

[Chris Bryant]

My hon. Friend predicts what I am going to say. Yes, I have always believed that UK foreign policy needs to be pursued on parallel tracks. Of course we want to promote greater trade, but that trade must be based on fairness and freedom. It cannot be based just on our freedom to trade with people; it must be based on the freedom of people to live their lives with dignity and liberty. In Colombia, that has been difficult to achieve in many cases.

That is why I want to raise the issue of the European Union free trade agreement. Originally, the agreement was meant to be with several central American countries, but some wanted to pull out. Now, it is envisaged as just being with Colombia and Peru. I passionately believe that the agreement has to be a mixed one. It should not just be about trade, and so should not just be the sole responsibility of the European Commission. It is vital that when Europe pursues FTAs, they include human rights issues and issues about weapons of mass destruction—not because I think Colombia has a WMD, but because we cannot have one form of FTA in one part of the world and a completely different form in another part. It is therefore important that the Commission does not deal with the issue on its own, and that the agreement is ratified in the Parliaments of each EU member state.

For instance, in our Parliament, we could have a united position to say, “Yes, we want greater and better trade with Colombia.” I know that the Scotch whisky industry has long been keen to have an improved relationship with Colombia and, for that matter, Peru, but it cannot ignore the human rights abuses that are self-evident in Colombia and, increasingly, in Peru. I hope that the Minister will reply that that is the process we are going to adopt, although I note that the Commission keeps trying to squirm its way out, so that it ends up in a position where it decides just on its own.

I want to pay a little tribute to the British ambassador and his staff in Colombia. I will spare his blushes, but Mr John Dew is, I think, one of the finest diplomats employed by the Foreign Office. Colombia is a phenomenally difficult environment to work in, where difficult security measures have to be adopted, but he has carried that off with aplomb. I also pay tribute to the many other British people who have worked in extremely difficult circumstances in our embassy in Colombia.

I very much hope that we will not say that our foreign policy is just about trying to sell more things to foreigners. It also has to be about trying to achieve a fair world, not least because British businesses cannot do business in other countries if the rights of indigenous people are trampled on, if violence is a daily transaction that people have to make to survive, and if people do not have enough to live on.

11:39

[Paul Flynn (Newport West) (Lab)]

I pay tribute to my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) for securing the debate and for his persistent campaigning. He clearly feels deeply about the tragedies that are taking place, and have been for decades now, in Colombia. He is absolutely right to continue to draw them to the attention of the House.

A low point was when we saw a British Foreign Office Minister posing and smiling among a group—

[Chris Bryant]

Not me.

[Paul Flynn]

Not my hon. Friend. That Minister was smiling with an army unit that was notorious for murdering trade unionists. We have a record of plenty of indignation and horror at the atrocities that are going on, but little practical progress that we can see.

I agree with those who say that we should seize the opportunity offered by the words of Santos and give him the benefit of the doubt—there are many reasons for doubting his sincerity, due to his past. However, he is now speaking a language that no one else has spoken for a long time in Colombia. The President of Mexico has made a similar plea to the one made by Santos the other day—Mexico has lost 40,000 people in the past five years due to drug trafficking and the drug wars—to address the core of the problem, which started not last year or 10 years ago, but in 1961, when the world decided, through the United Nations, that all illegal drug use throughout the world should be eliminated. It was a simple matter: we had only to increase the punishments and the surveillance and, within a decade or two, there would be no use of illegal drugs. In Britain, we passed the Misuse of Drugs Act 1971. We had fewer than 1,000 people addicted to heroin and cocaine then; now we have 320,000. That pattern has gone on throughout the world. Santos is right to say that the divisions in his country, the armies that are funded entirely by money from drugs and the chaos that exists in many other South American countries are problems that we in the west, and particularly in the United Kingdom, have created.

Last week, the European Monitoring Centre for Drugs and Drug Addiction published a report that identified the United Kingdom as the second largest consumer of cocaine in our continent. The other countries that use drugs in similar record amounts are the United States and Spain. The reason for the chaos in South American countries is the demand that is coming from this country. We have mistaken the use of coca and cocaine. Coca has been used for centuries, particularly in Bolivia, as an appetite suppressant and to guard against altitude sickness. The way it was ingested ensured that there was no narcotic effect. In the west, however, cocaine is ingested in a manner that produces the narcotic effect. To a great extent, therefore, the problem is ours. If we are looking for some way to reduce this, we should listen to what Santos is saying now. He is bravely calling for a new look at drugs, perhaps including the legalisation of the use of cocaine and other drugs. He realises that he is taking a great risk and that he will be mocked and denounced, particularly by the United States.

Sir Keith Morris, former British ambassador to Colombia, said:

“Those of us who have campaigned for serious debate on the issue have been frustrated by the number of senior politicians who have agreed with us but said they could not take a public stand for fear of committing political suicide due to a hostile reaction from the US administration or public opinion or, in the UK, from the Daily Mail.”

How true that is. When we talk to one another and discuss these things—[Interruption.] Does the hon. Member for Gloucester (Richard Graham) want me to give way? He does not. We know from private discussions among consenting MPs that there is general agreement that the drug laws are disastrous and that prohibition is increasing the problem. We must take a fresh look at the problem, which is what Santos is calling for. Sir Keith Morris went on :

“The fact that the president of Colombia, the country that has paid the highest price and fought hardest in the war on drugs, should have been prepared to speak out so courageously should inspire the many in American and European political circles who share his view about the failure of the war on drugs at last to make their voices heard.”

The problem and the bloodshed in Colombia would be best undermined if there was an act of courage by European and world politicians. We must face up to the awful fact that it is prohibition that is killing people in South America and on the streets of our cities.

11:53

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

I am pleased to have the opportunity to contribute to the debate. I have been to Colombia on two occasions. My first visit was some 10 years ago. I went to the rain forest and met a community of Afro-Colombians who had been displaced from their homes. It was an experience that I will never forget. No one in this Chamber today has anything but the best wishes and best intentions for Colombia and for the Colombian people. We should recognise where progress has been made and the rhetoric has certainly changed with the new president, but, as we have heard quite graphically, the rhetoric does not necessarily match up to the reality. Human Rights Watch has said that there has been virtually no progress in bringing to justice the killers of trade unionists. We want progress now. Fine words have been said far too often in the past.

I want to concentrate on the situation that faces political prisoners in Colombia. Two years ago, I went to the country with my colleagues from Justice for Colombia. I saw the horrors faced by trade unionists, members of the opposition, community leaders and human rights activists. One of my most tragic and heart-wrenching experiences was visiting the women’s prison in Bogota. We visited patio 6, which is where trade unionists and other critics of the regime are locked up simply for defending the rights that we hold dear, including the right to protest, the right to organise and the right to freedom of expression.

Basic human rights are constantly denied and that is repeated in prisons all over the country. Leading activists are arrested and accused of “rebellion”, which is a catch-all charge used to imprison critical voices. They are accused of being guerrilla collaborators simply for exercising their right to criticise and organise. Thousands of political prisoners live a precarious existence in which they are often held for months or years without trial. They are denied due process, medical care and their freedom. Others are simply peasants who have committed the grave crime of living in a region where there is a guerrilla presence. As such, they are rounded up and imprisoned.

Examples of recent detentions include the arrest on 22 August of four members of FENSUAGRO, the Colombian agricultural workers’ union, who were detained in Putumayo. Two more of their colleagues from the region were detained, on 30 June and 7 August. All are accused of “rebellion” and continue to be held in Mocoa prison, Putumayo.

On 2 October, eight social leaders, including trade unionists, human rights defenders, teachers and students, were detained in Neiva and Caqueta. On 16 October, more peasant farmers were detained arbitrarily in the municipality of La Uribe, Meta.

When I visited the prison, I met Liliany Obando, who left a lasting impression on us. She is an academic and trade unionist who, like many MPs and union leaders, was imprisoned for highlighting the killings of trade unionists. Liliany is accused of “rebellion” and has been detained since 8 August 2008 without being convicted of any crime. Her legal process is marred by severe irregularities and arbitrary delays. The supposed evidence against her has been used in numerous cases against members of the opposition and has been ruled “inadmissible” in one of those separate cases. Her defence continues to be denied full access to this “evidence”. Her lawyers have submitted 16 appeals against what were considered unfounded legal decisions, yet all were denied, with no legitimate reason provided.

In June, Liliany was moved to a patio that she now shares with paramilitaries, and she is allowed outside for only one hour per week. The Colombian Government, through their embassy in the UK, have claimed that that action was taken for Liliany’s own safety. She has faced physical abuse from prison guards and been denied many visits in recent months. When I met her she said that

“even though we are imprisoned, we don’t give up our struggle, we retain our principles and our morals. We are women who can change things.”

Those words have been lodged in my memory ever since.

Another example is Professor Miguel Angel Beltran, who is a member of the academics’ trade union and a well known critical thinker. He was accused of “rebellion” and imprisoned from 23 May 2009 until 7 June 2011, when he was finally absolved of the charges against him. Just one day after Miguel’s arrest, the then President, Uribe, publicly accused him of being one of the most dangerous terrorists of the FARC. Of course, President Uribe was famous for describing as a terrorist anyone who suits him. He used a few fine words against me and some of my colleagues during our visit to Colombia.

Despite the fact that Dr Beltran was absolved of any crime, the Office of the Inspector General opened a new disciplinary procedure against him, based on the evidence that has already been disproved at his trial. If Dr Beltran is wrongly convicted, that will yet again prevent him from working and teaching as an academic. Ministers and the mainstream Colombian media have also continued to describe him as a terrorist. For example, in an interview with El Tiempo on 27 June 2011, the Minister of the Interior referred to Dr Beltran as “Cienfuegos”, which is his supposed terrorist alias. That was particularly concerning given that, on paper, that Minister had agreed to provide Dr Beltran with a security scheme because of concerns about his security and threats against his life. That promise is yet to be fulfilled. Instead, since his release Dr Beltran has faced threats and phone interceptions, a USB has been robbed from his apartment and he has learned of plans for his assassination, which state that it will be carried out by either forced disappearance or faked accident.

[Annette Brooke in the Chair]

Those are just a few examples of the many political prisoners in Colombia, whose existence the Colombian Government deny. In meetings held with the Colombian ambassador to the UK, that issue causes the most anger. The ambassador vehemently denies that any political prisoners exist in Colombia. The Colombian Government’s argument is that the judiciary and executive branches of government are separate, and that the Government have no political influence over the judiciary. That is blatantly untrue. Time and again, we have seen instances of political bias in legal cases, impunity for the killers and legal set-ups of the victims. We know that, although Santos does not attack the judiciary as Uribe did, there continues to be a paramilitary influence in many cases.

Colombia’s political prisoners are not mentioned in the international media, unlike political prisoners in Burma or Zimbabwe. The majority of the British public do not know of the tragic scenarios being played out around Colombia, where trade unionists, academics and human rights activists are subjected to indefinite periods of imprisonment. They are kept away from their children and held in terrible conditions.

We do not hear of the beatings of prisoners, the mass hunger strikes or the lack of water. On 2 December last year, a prisoner died after being beaten by prison guards. Earlier this year, hunger strikers in Valledupar prison sewed their mouths up after being denied proper access to water. The response of the authorities was to attack the prisoners.

I will never forget the experience of seeing single mothers and babies being locked up over the mothers’ trade union activities. As we condemn that practice in other countries, so too must we condemn it in Colombia. This is a systematic pattern of action being used to silence critical voices and it shows that, on the ground, Colombia is very far from being the democracy that its leaders claim it is.

[Several hon. Members]

rose—

[Annette Brooke (in the Chair)]

Order. I remind hon. Members that the winding-up speeches will begin at 12.10 pm. I call Jim Shannon.

12:02

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) on securing this debate and on bringing this matter to the House. I want to highlight an issue that perhaps has not been touched upon, which is the human rights of Christians in Colombia.

The Church that I belong to and that I suspect some others in this Chamber belong to, and that many people outside of this Chamber belong to, supports missionaries in many parts of the world and it specifically supports Christians in Colombia. I just want to highlight some of the issues that concern that Church.

We are all very aware of the deadly FARC extremists who are trying to hold sway in Colombia; they are the longest-operating left-wing guerrilla group in Latin America. I want to focus on the human rights abuses and the violence in Colombia that deliberately target churches and their leaders for standing up to the guerrillas and their armed rebellion.

In the time that I have today, I just want to highlight some of those abuses; I am conscious of the issues, but I will not dwell on them too long. There is a catalogue of examples of how the FARC guerrillas have deliberately targeted churches and the work that they do. The guerrillas have tried to close the churches and stop the prayer meetings and gatherings of the people who attend them. By and large, however, the churches have managed to stand up to the guerrillas, and it is good that they have done so.

There is not only human rights abuses against Christians by the FARC extremists, but diminution of human rights and Christian activity by the Colombian state, and I wanted to highlight some examples of that state activity. The Indigenous Municipal Council has suffered a number of violations, including violations against 3,000 indigenous Christians in the province of Cauca. The hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne) said she had some difficulty with some of these Colombian words and so have I. As an Ulster Scot with a very distinct Ulster accent, it is sometimes difficult to get my tongue around some of these words. The governor of Cauca ordered property to be removed from some people in the province. On 17 December last year, a council man was murdered because he was a Christian. On 3 February this year, a Christian family were forced out of their burning home. The leaders of the Indigenous Municipal Council and 20 Christian families were also forcibly moved. A pastor, his nine-year-old daughter and a woman from the pastor’s church were killed because they stood up to the abuse of Christians. Another pastor’s wife was killed, and other people have been imprisoned. Clearly, there has been a catalogue of discrimination and brutal attacks on members of the Christian community.

There have also been political attacks on people. In many villages in Colombia, especially on the western coast, the guerrillas are writing threatening messages on walls and deliberately targeting people in the villages to get them to vote for the candidates that the guerrillas support in elections.

I also want to comment on the issue of religious freedom and on the restrictions that exist in Colombia. In 1991, the Colombian constitution respected religious freedom and practice, and it also mandated the separation of church and state, which is a principle I support. However, the Catholic Church retains a de facto privilege and status in Colombia. Also, the state recognises as legally binding only those religious marriages celebrated by the Catholic Church. Members of the 13 non-Catholic religious organisations, which are not signatories to the constitutional agreement, must marry in a civil ceremony. So I again highlight the fact that there is clear human rights abuse and discrimination against those people. Also, the Treasury Department in Colombia imposes a 4% tax on all tithes, offerings and charitable contributions to certain churches. I contribute to much missionary work—I know that other people do as well—and in Colombia there is also a 17% tax on all financial assistance received from abroad.

Those are the points that I want the Minister to respond to. I am sorry that I do not have time to develop them more, but I look forward to hearing his response.

[Annette Brooke (in the Chair)]

I call Mr Andy Love to speak. I am afraid that you have only three minutes.

12:07

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Thank you, Mrs Brooke, for calling me to speak.

I congratulate my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) on securing this debate and on securing it in the week that President Santos is in the UK. One hopes that not only the Minister but President Santos himself will hear the concerns that are being expressed today.

I will speak briefly about trade unionists. My hon. Friend and indeed all Members who have spoken in the debate have touched upon the habitual abuses committed against trade unionists in Colombia. During the past 25 years, 3,000 trade unionists have been murdered, often in front of their families. I will come back to that issue in a moment, but before I do so it is important that we discuss the current Colombian Government’s approach to trade union rights.

For some time, Colombia has been seeking to reach a free trade agreement with the European Union—that was touched upon by my hon. Friend—and with the United States, Canada and other countries. President Obama was deeply unhappy about the human rights situation in Colombia and talked about it in his campaign speeches. As one means of going some way to addressing the situation facing any organised labour in Colombia—workers need that help in Colombia, where people work in the most basic of conditions in a mineral-rich country, earning a pittance while making millions for multinationals—the Colombian Government agreed, under pressure, to what was called a labour action plan. That was stipulated by the Americans as a condition of their entering into a free trade agreement with Colombia. Some of the measures included in that plan held out promise of improving labour and human rights, and they were widely trumpeted as if they would resolve the labour rights situation.

Now, more than seven months since that action plan was signed, all three federations of the Colombian labour movement and the highly respected ENS trade union school have said that they were not consulted in the drawing-up of the action plan and that the Colombian Government have failed to implement the measures outlined in that plan, because:

“the State as a whole is not committed to the Action Plan related to Labour rights”.

The ENS trade union school has said:

“the new labor agenda is not a reality, since business owners and public servants continue to broadly violate labor and union rights.”

Since the action plan was signed, 16 trade unionists have been assassinated. In normal circumstances, I would have gone on in much greater detail about the problems faced by trade unions, but they have been well documented today. However, I ask the Minister: did he take these concerns up with President Santos in his meeting earlier today, and what further action does he propose the British Government take to address all the trade union and human rights violations, in the context of the trade agreement that is likely to come forward at a European level?

09:52

[Kerry McCarthy (Bristol East) (Lab)]

I congratulate my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) on securing the debate. The number of Members wanting to speak, intervene and listen shows the strength of feeling about the issue. The debate is very timely, coinciding as it does with President Santos’s visit.

My hon. Friend provided us, as did a number of other speakers, with compelling accounts of human rights abuses in Colombia, in particular concerns about comrades in the Colombian trade union movement. He said that Colombia is the most dangerous place in the world to be a trade unionist, with 2,908 of them killed since 1986 and 23 so far this year. He expressed his deep concern about impunity, about the lack of prosecution of those responsible for the killings. He also expressed some scepticism about whether the warm words and rhetoric of President Santos, who was elected last year, would be matched by action, and about the how the land and victims law will work in practice. I shall come to that.

My hon. Friend the Member for Rhondda (Chris Bryant) talked about the EU free trade agreement, and he is right that it should not be just about trade. When we enter into such negotiations, it is important to use the leverage that they give us to put human rights issues on the table as well. He said that foreign policy should not just be about selling more to foreigners, and I entirely agree.

My hon. Friend the Member for Newport West (Paul Flynn) raised the important issue of the impact of the drugs trade and consumption in the west on communities in Colombia and Mexico. He said that the UK, the US and Spain are the largest consumers of cocaine. It is said that a line of coke snorted here results in a death back in Colombia—a compelling image. When President Santos addressed the all-party British-Latin America group yesterday, he was asked about that and he said that it is not just the link between cocaine consumption here and the violence in Colombia but the really serious issue of deforestation and land grabbing. We ought to factor in the significant environmental impact of consuming cocaine in the west.

We of course welcome President Santos on his visit to the UK. It is a very important opportunity for dialogue, not just on human rights but on other issues of great importance to the relationship between our nations, such as trade, the environment and working together on technology transfer. Yesterday, the President was particularly keen to flag up education, and whether Colombia can learn from and adapt our approach to training and skills in the UK, which is somewhat ironic given that the trade union movement has been so involved in pushing that agenda here. As today’s debate has shown however, the human rights situation in Colombia continues to be our gravest concern. I appreciate the President’s willingness to address that issue in a full and frank manner with the all-party group yesterday, and also at the meeting I attended with the Leader of the Opposition and the shadow Foreign Secretary straight afterwards, when we discussed in depth concerns about the continued violence in Colombia and impunity, in particular attacks on human rights defenders and trade unionists.

[Jeremy Corbyn (Islington North) (Lab)]

I am sorry that I missed the early part of the debate; I was in a Select Committee. Does my hon. Friend agree that it is a collective failure by the European Union, the International Labour Organisation and the Inter-American Court of Human Rights that none of the human rights elements in the trade and other international agreements that Colombia has signed up to has been enforced at local level, and that therefore the disappearances of very brave human rights defenders and the abuse of their human rights continue?

[Kerry McCarthy]

I agree that past attempts to put pressure on Colombian Governments have not been effective. Impunity, at 98% or thereabouts, is a shocking statistic. It is important, and I will ask the Minister about this in a moment, that we use any leverage we have, anything within our power, to try to push that agenda along to ensure that it is not just warm words about human rights but that action is taken on the ground to protect them. President Santos was prepared to meet the non-governmental organisations today. I was not aware yesterday that trade unions would be involved in that meeting, and it is very important that they were. Anything the Minister can do to ensure better dialogue between the people from the trade union movement who have visited Colombia and the Colombian regime is an important step forward.

Anyone who has met human rights campaigners from Colombia cannot fail to be moved by their stories. A week or two ago I met some women who were talking about the shocking rise in gender-based violence and the use of rape in the conflict. President Santos was not able to explain why there has been such a dramatic increase over the past year or two, and the assessments that have been made seem to indicate that the violence is being carried out by the guerrilla movement, paramilitaries in particular, and the security forces, and that women are being targeted across the board. I hope that issue is very much on the Minister’s radar.

[Eric Joyce (Falkirk) (Lab)]

Does my hon. Friend agree that we tend to conflate the issues of drugs and human rights in Colombia but that human rights problems existed long before the country was effectively the centre of the world as far as cocaine production was concerned? Any solution, therefore, must not simply involve killing the likes of Alfonso Cano but have social justice at its core.

[Kerry McCarthy]

I agree. It is a complex situation, involving drug wars, the political situation, the role of FARC, the land grab and commercial interests. I am not suggesting that there is one solution. It is an incredibly complex situation to unravel, but President Santos’s rhetoric is very welcome. Recently, there has been significant progress in tackling some of the violence that has plagued the country over the past 50 years. FARC’s activities have been curtailed, but there is genuine concern that a more fragmented organisation is less likely to come to the negotiating table.

Does the Minister see a particular role for the UK? It has been flagged up a number of times that given our history of negotiating with groups, particularly in Northern Ireland, and given the recent decision by ETA, there might be lessons to be learnt that could help the Colombian Government in their discussions with FARC. President Santos has indicated that he is very willing to pursue such negotiations.

President Santos’s announcement in the past month about disbanding DAS, the administrative department of security, is a very welcome step given the allegations of collusion with paramilitaries, illegal surveillance, corruption and harassment of judges, journalists and politicians. The president has said:

“The country knows why we have decided to take this step,”

and that is, I think, both a tacit admission that the allegations against DAS were well founded, and an important signal that the President wants to restore the integrity of his country’s intelligence services.

Nevertheless, there are understandably still concerns about the human rights situation. In the first year of the Santos Administration 54 human rights defenders were killed, there has been a significant increase in gender-based violence, and there are concerns about the future of indigenous peoples—campesinos and Afro-Colombians—who have been displaced from their land to make way for drug and palm oil plantations and cattle ranching, which the United Nations has described as ethnic cleansing. It is not up there with the human rights abuses involving killings, but displacement is important, as is the question whether the new land and victims law will provide reparation and restitution for those people. What role does the Minister feel Britain has to play, particularly when British commercial interests are involved in such land grabs? How does he think that we can resolve the issue and return land to people?

I know that the Minister has visited Colombia twice and that he met President Santos in Peru as well as this week. He has had a lot of time to get a feel for the new regime. Does he feel that the agenda is moving forward and that we are making progress in pushing Colombia on human rights abuses? In particular, what has he learned from this week’s visit?

12:20

[The Minister of State, Foreign and Commonwealth Office (Mr Jeremy Browne)]

Thank you, Mrs Brooke, for giving me this first opportunity to serve under your chairmanship. I pay tribute to the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) for securing the debate and for his ongoing interest in the subject.

We all agree that we want to do whatever we can to reduce human rights abuses in Colombia. I do not think that I have ever met anybody who believes that British foreign policy should solely be about selling things to foreigners, so let us start with the assumption that we all have greater ambitions than that. The question is how to achieve them.

In his Canning House lecture a year ago, the Foreign Secretary set out his vision for a step change in our engagement with Latin America, and we are working to broaden and deepen our relationship with Colombia in a range of areas, including human rights, trade, education, science, innovation and environmental growth. In our bilateral co-operation, respect for human rights remains a core value. I have raised the issue on numerous occasions with the President of Colombia and many Colombian Ministers. Although, inevitably, our meeting was not as long as many would have liked, it is important that the president was willing to have discussions in the Foreign Office this morning with non-governmental organisations, members of which are attending this debate.

The debate has highlighted some of the human rights problems in Colombia, but it is important to remember the historical context. In the 1990s, Colombia was a country on the brink of complete disintegration. Guerrillas, paramilitary groups and the armed forces were all responsible for widespread abuses of human rights and international humanitarian law. Improvements have been made since that time. My hon. Friend the Member for Cheltenham (Martin Horwood) asked how we have tried to contribute in terms of the military. We have programmes specifically designed to use our expertise and insight to normalise and modernise the Colombian military’s behaviour and conduct, but that is inevitably a process. Progress is being made, and a new Colombia is emerging.

Drugs are clearly a problem. I respect the hon. Member for Newport West (Paul Flynn); he made a point about parliamentarians in Britain not daring to raise the issue. I remember the Littleborough and Saddleworth by-election. Given the behaviour of the Labour party, he might choose to reflect on why Labour did not wish to raise the issue after that election.

[Chris Bryant]

The Minister lets himself down by those last comments. He referred to co-operation between the British military and the Colombian military. Exactly what shape does that take? It is a new policy under his Government. How much is it costing?

[Mr Browne]

It is not a new policy. We are completely committed to strong human rights in Colombia. We want a normalised military that observes and protects human rights rather than risking or, on occasion, abusing them. We are trying to ensure that the Colombian military has the characteristics that we recognise in our own military rather than those that we do not wish it to have. It is as simple as that. I stand by my previous point. I am in favour of mature debate about drug consumption in the west, but all politicians and all parties must approach that debate with equal maturity.

[Paul Flynn]

I do not want to mislead the House. The words that I quoted on the cowardice of British politicians were those of a former ambassador. Does the Minister agree with President Santos’s call for a new look at prohibition?

[Mr Browne]

The point I am making is that that was an example of a politician trying to make a broader point about the consumption and legal status of drugs in Britain. I suspect that the way that the politician was attacked in that election provided a disincentive for others to take the same approach.

[Eric Joyce]

Will the Minister give way?

[Mr Browne]

I will not, because many points have been made.

There have been improvements in Colombia. Cocaine production has decreased significantly, murder and kidnap rates have declined and Colombia is safer as a result, but more still needs to be done. As Members have said, many candidates were murdered during last month’s local elections, and attacks on human rights defenders increased in 2011. The situation is serious. President Santos has set an ambitious reform and modernisation agenda, including a policy of zero tolerance of human rights abuses. In my meetings with him and other Ministers, he emphasised that powerfully.

The passage of the victims and land restitution law is one of the President’s most important achievements to date and has been commended by the UN. It aims to return land to huge numbers of displaced people and to compensate victims, and we attach great importance to it. The Santos Government have made it clear that civic society has a key role to play in addressing human rights concerns in Colombia. The British Government share that view. To respond to the hon. Member for Shannon, our ambassadors and others are here today, and I will ask our ambassador to raise our concerns directly.

[Jim Shannon]

I am the hon. Member for Strangford. Shannon is down south; I am up in the north.

[Mr Browne]

Sorry. I do not know whether I am the first person to have made that mistake, but I apologise unreservedly.

To respond to the hon. Member for Bristol East (Kerry McCarthy), I have met Afro-Colombian groups and raised their concerns, as well as those of indigenous people, directly with President Santos and senior members of Government. I hope that they are fully versed in the British Government’s position.

In March 2011, the Foreign Office’s human rights Command Paper identified a chronic lack of capacity and resources in the judicial system as a key barrier to the enjoyment of human rights in Colombia. It remains a significant concern, but progress has been made. The number of prosecutions for extra-judicial killings has risen sharply, and in September, the former head of the state intelligence agency—DAS—was found guilty of criminal conspiracy for providing right-wing militias with lists of left-wing activists and trade union leaders, some of whom were subsequently imprisoned or killed. I agree completely with the hon. Member for Paisley and Renfrewshire North that the problem is far from being resolved. The Colombian Attorney-General’s office is currently investigating 1,486 human rights violations allegedly committed by members of the armed forces.

Concerns have been raised about British businesses. I want to make it completely clear that our approach is to ensure that British businesses operating in Colombia and elsewhere maintain the highest standards of conduct. I repeat my offer to the hon. Member for Paisley and Renfrewshire North: if he has examples of specific violations, I hope that he will bring them to my attention.

A point was made about free trade agreements by my predecessor, the hon. Member for Rhondda (Chris Bryant), among others. We support free trade agreements, but for the avoidance of doubt, our view is that the proposed free trade agreement between Colombia and the European Union should be, in the jargon, a mixed competence agreement. In other words, it should include the concerns that have been raised. However, as Members have said, there is a Colombian-American free trade agreement, so I hope that we will make progress, with the conditions that I mentioned.

I believe that Colombia offers great potential. It is the second most populous country in South America, and it has worked closely with Britain on numerous issues of joint concern that I am sure are shared by Ministers and Members as well. However, we take the point that a normalised, strong, healthy relationship with the Colombians requires marked improvements on human rights. That process has been ongoing, and we recognise the progress made, but we wish to work closely with the Colombian Government to ensure that dramatic further progress is made soon.

Pension Protection Fund

Tuesday 22nd November 2011 Westminster Hall

12:30

[Jonathan Evans (Cardiff North) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. I shall begin by drawing attention to my entry in the Register of Members’ Financial Interests, although I am not aware that any of the companies to which I am connected have any current business associated with any of the issues that I intend to raise. It is, however, important that I draw the entry to Members’ attention.

I am grateful for the opportunity to discuss important and unresolved issues in relation to the operation of the Pension Protection Fund and the financial assistance scheme, and their impact on a group of former employees of Allied Steel and Wire, a number of whom are my constituents. I want to begin by acknowledging the relentless work of Mr John Benson of the Pensions Action Group, and by thanking the chief executive officer of Saga, Ros Altmann, who has been a consistent supporter of the former workers, who have been stripped of their pensions through no fault of their own.

I would also like to thank my parliamentary colleagues, my hon. Friends the Members for Beckenham (Bob Stewart), for Sittingbourne and Sheppey (Gordon Henderson), who also has an ASW interest, for Vale of Glamorgan (Alun Cairns)—John Benson is one of his constituents—and for Montgomeryshire (Glyn Davies), as well as the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) and the hon. Members for Arfon (Hywel Williams) and for Cardiff West (Kevin Brennan), for attending the debate. We have discussed the issues with all of them over time. I should also like to mention the hon. Member for Cardiff Central (Jenny Willott), who is unable to attend the debate because of conflicting public duties, but who has been a consistent supporter of the workers.

Ever since the early part of the 20th century, Parliament has recognised the need to promote proper and adequate pension provision for those in their later years. We have seen the development of the state pension system and its refinement and adjustment in a variety of ways that still continue to this day. Overlaying that, Parliament has rightly encouraged people to make better provision for themselves through occupational or private pension routes. Again, we see that issue at the forefront of parliamentary debate. The Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), has responsibility for the latest Pensions Bill, which is currently in another place, and there has been legislation on pensions in this House on an almost annual basis in recent years.

On the 30th of this month, we anticipate a major public services strike because of Government plans to adjust the future pensions benefits of public sector workers. The merits of those arguments are matters for another debate, but what is undeniable is that the Minister and his colleagues in Government have been at pains to stress that, irrespective of the outcome of the negotiations, the current accrued pensions rights of all public sector workers will be honoured. The then Government made a similar pledge to Northern Rock workers when the bank was taken into public ownership in 2007, and matched that promise in respect of each of the other banks that have found themselves in the public sector.

The reason why such pledges are important is that the success of pension saving depends on the maintenance of trust—trust that, if someone makes regular contributions, they will in due course receive nothing less than the sum that has been promised to them. That trust was significantly shaken 20 years ago by revelations that Robert Maxwell had stolen £460 million from the pensions of Mirror Group Newspapers workers, which led to the establishment of the Occupational Pensions Regulatory Authority in 1995. From that time onwards, workers in company pension schemes had every reason to believe that their pensions would be safe. As Ros Altmann put it in a letter to the Financial Times some years ago:

“Members were told that their accrued pension rights were protected in law and that actuaries would calculate contributions, in line with the minimum funding requirement, to ensure adequate funding to pay the promised pensions.”

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

I congratulate the hon. Gentleman on securing this debate. He is making a powerful case. I support everything that he is doing and agree with all Members present that justice has to be done for this group of pensioners. I would also like to mention that the hon. Member for Newport West (Paul Flynn) is also present.

[Jonathan Evans]

I apologise for failing to mention the hon. Member for Newport West (Paul Flynn). He regularly attends all such debates. I had presumed that he was present for the previous debate on Colombia, without realising that he also wished to contribute to this one. I am happy to put the record straight on that and to give credit to the right hon. Member for Dwyfor Meirionnydd and his colleague, the hon. Member for Arfon, for their support for the ASW workers.

[Glyn Davies (Montgomeryshire) (Con)]

Following on from the intervention of the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd), many years ago, I met groups of people from ASW outside the National Assembly for Wales when they were explaining their case to Assembly Members. If we are going to have a successful pensions industry to which people are willing to contribute, we cannot let these things drift on for decades. This is not the only case, and I congratulate my hon. Friend on highlighting the issue.

[Jonathan Evans]

I am grateful to my hon. Friend for that point and shall now endeavour to make some progress.

Ros Altmann’s letter continued:

“Literature from the government, the Financial Services Authority, the Occupational Pensions Regulatory Authority and everyone else contrasted the safety of final salary schemes with money purchase arrangements, where members’ pensions were not guaranteed”,

as we see from what happens on the stock market almost daily. That was the guarantee that ASW workers believed they had right up until July 2002, when the company went into liquidation. It was then that John Benson and his colleagues discovered that, despite years of parliamentary inquiry, debate and legislation on pensions, they were no better off than the MGN staff, whose pensions had been stolen. As Ros Altmann put it at the time:

“Simply to say it is a tragedy that thousands of people have had their pension expectations reduced is an insult to those who have suffered in this way. This is not an example of life’s unfairness; this is more like fraud. Other victims of mis-selling receive compensation. Having contributed their money loyally for 30 or 40 years, with the promise of a secure pension and no risk warning from anyone, many now find not that they will get a reduced pension but that they will get no pension at all.”

She went on to say that

“they would in fact have been better off throwing their contributions away, than putting them into their employer’s schemes. Is it any wonder that people are frightened of pensions and have lost confidence?”

The ASW scandal provoked a major campaign, which, as my hon. Friend has mentioned, began during his time at the Welsh Assembly. There was a call for action in this House and the workers were invited to No. 10 Downing street for tea and sympathy with Tony Blair, but more practical help was demanded by others in the House. I pay credit to the hon. Member for Cardiff West in that regard—he was certainly active on behalf of the pensioners—and to my good friend, the former Member for Eastbourne, Nigel Waterson, who played a leading role in supporting the workers and in highlighting the injustice of the situation. The Minister himself was also active and supportive in that debate. The campaign led to the establishment of the financial assistance scheme under the Pensions Act 2004.

At the time that the scheme was put in place, many believed that the outcome would guarantee 90% of expected pensions benefits for affected workers. I have read the parliamentary debates in which many members of the then Government expressed the joy with which workers would greet the news that 90% of their entitlements were safeguarded. Unfortunately, they were sold a line that was both simplistic and inaccurate.

Although schemes such as that for ASW provided up to 5% inflation proofing, the legislation cut it to 2.5%, less than half of the current level of inflation. Over time, that still further erodes the pension value and is further cut by the switch from RPI to CPI, which the Minister has also applied to the financial assistance scheme.

In parliamentary questions on 29 June 2009, one Member rightly exposed that deceit, although he was too courteous to suggest that the deception was in any way deliberate. He said:

“Does she”—

the then Secretary of State—

“accept that this 90 per cent. figure that she uses is highly misleading…because it is not just capped…there are big issues about the inflation protection? Does she accept that many pensioners will get much less than 90 per cent., and that over the years they will see annual falls in their real pensions? Will she look at those cases again?”—[Official Report, 29 June 2009; Vol. 495, c. 6.]

Of course, the hon. Member who was able to identify all those shortcomings is now the Minister himself. Let me make it clear that I am a strong admirer of the Minister. I believe that he is personally motivated to do all he can to help these cheated pensioners. I know that since the election he has met, on more than one occasion, with the ASW pensioners to examine any ways their plight can be alleviated. We are all aware of the difficult financial circumstances that the Government face. Nevertheless, Mr Benson and my constituents have pointed out to me that, in the run-up to the general election, both coalition parties heavily criticised the previous Labour Government for the shortcomings of this scheme. It was, therefore, a reasonable inference for them to draw that some action might be taken to address these failings if we were successful in the election.

[Lilian Greenwood (Nottingham South) (Lab)]

The hon. Gentleman is making a very powerful point. Does he agree that these people feel so very angry because their limited indexation is now affected by the change from RPI to CPI, which will see them losing hundreds and thousands of pounds?

[Jonathan Evans]

I highlighted the point in relation to RPI and CPI. I am endeavouring not to engage in a partisan debate, with the criticisms that I have made of my own side. However, I am bound to say that the fixed 2.5% inflation cap will have a much more marked effect than the CPI-RPI issue, even though I had mentioned it myself.

My constituents highlight the 100% pension protection that has been offered to the workers in the bailed-out banks. They point to the guarantee on accrued pension rights that are to be given to all public sector workers—rightly so—and the recent decision to extend those rights further, so that all workers who are retiring from the public sector in the next decade will see no change whatever in their future entitlements. They argue that, far from their situation improving, their pensions have actually worsened since 2010. Government—I use that generically, because I think it was prior to 2010—have lost their case on maladministration in the Court of Appeal, yet the recommendations made by the parliamentary ombudsman have not been honoured.

Having set out those criticisms, let me say that there are areas in which this situation could be improved. The Government should increase the inflation-linking cap. As I have indicated, the current 2.5% cap will seriously erode the pensions of affected people within just a few years, and that reduction is accentuated year-on-year moving forward. I know that the Minister understands that. As I have pointed out, he was the one who highlighted it two years ago. The Government should consider scheme-specific capping. The ASW scheme promised workers much greater inflation protection. Not only have we seen a reduction, but we have seen a reduction that, in contrast to the scheme that they had, is much less generous. The former Government removed the right of trustees to use deemed buyback after a number of schemes had taken that up. Permitting deemed buyback would assist FAS scheme members in future. The Minister could consider establishing a hardship fund for those worst affected.

The Minister has been examining the potential unwinding of annuity purchase. Annuity purchases have taken place with two major annuity providers, and I am aware that he met ASW workers as recently as 1 November to discuss the issue. Will he confirm the outcome of those discussions, with whom the discussions have taken place and whether any progress has been made?

Reduced early retirement pensions should also be permitted. There are a range of pensioners, including my own constituents, who are currently unemployed and cannot find work, yet cannot access their pension. Changing the rules would have no cost implications, because there would be an actuarial adjustment. I have a constituent who is in poor health. He could be considered for early retirement only if his doctor is prepared to say that he will die within five years. Those requirements seem excessive and wrong. Allowing early retirement, subject to actuarial revaluation, would seem fair.

Earlier today, I received an e-mail from one of my constituents, Mr Iain Kenworthy-Neale of Thornhill in Cardiff, entitled, “Fair Pensions for All”. I warn colleagues that they will all receive a similar e-mail shortly. He expresses support for the national strike on 30 November for fair pensions for all. He says that he is not impressed with the Government guaranteeing accrued pensions rights. He is not impressed with the Government maintaining current public sector provision for the next decade. He wants no change whatever in relation to public sector pensions, and he wants the Government to scrap their plans. However, Mr Kenworthy-Neale does not limit his views to public sector pensions. He also calls for all state pensions to be increased by £70 a week forthwith, and for every private sector employer to be compelled to pay pensions to their workers. He has asked for me to draw his demands to the attention of the Minister, and I am happy to do so.

In contrast, the demands of John Benson, the Pensions Action Group and all the former ASW workers at Cardiff and Sheerness are much more modest. They are merely looking for their pension promise, as underwritten by Government and regulators, to be met. I was pleased to stand with them at their protest at my party’s conference in Manchester in October. They are people of real dignity who have been badly let down by successive Governments. I hope that the Minister will be able to offer them today some light at the end of what seems a very dark tunnel.

12:46

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

I congratulate my hon. Friend the Member for Cardiff North (Jonathan Evans) on securing the debate and welcome the fact that a number of hon. Members have come to the Chamber to register their support for their constituents who have been affected in the way that he describes. He is right to pay tribute to those who have campaigned on the issue for a long time; I recall many such debates in previous Parliaments. The hon. Member for Cardiff West (Kevin Brennan) was certainly one of the principal campaigners on the issue, on behalf of his constituents. Indeed, Derek Wyatt, predecessor of my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson), campaigned on the issue during his time as a Member of the House, particularly with respect to the link with ASW Sheerness.

As my hon. Friend the Member for Cardiff North rightly said, my involvement goes back a long way. I recall going with Mr Andrew Parr, from ASW Sheerness, and Dr Ros Altmann, to whom my hon. Friend was absolutely right to pay tribute for her role in all this, to see the parliamentary ombudsman way back when. We sat down with the ombudsman and went through all the literature that people were provided with at the time, as well as the concerns about the way successive Governments had said, “No questions asked, company pensions are a good deal.” Essentially, they had said, “Go for it.” As my hon. Friend rightly says, some people lost out very badly. That is, in a sense, how the financial assistance scheme came about.

It is worth reflecting on the sequence of events and the creation of the Pension Protection Fund, and how the financial assistance scheme fits into that universe. The existence of the PPF is germane to my response to my hon. Friend. Rightly, people sometimes ask about what previous pensions Ministers got wrong. One thing that previous pensions Ministers got right was the creation of the PPF. Going forward, people in defined benefit pensions can know that the scheme is paying a levy, that there is a sort of collective insurance and that, essentially, those who see their company become insolvent can expect to receive 100% as pensioners, and 90% as active or deferred members of the scheme.

We can all take some reassurance from the fact that for the sort of scandals my hon. Friend describes—where Governments have encouraged people to save through workplace pensions and then they find that there is an insolvency event and they have lost not only their job, but their pension—there is now pretty good protection in place, although it is not total protection. Insurance schemes tend not to be total, but they are very significant.

One criterion for what we may or may not do with the financial assistance scheme is that I believe it would be wrong to take its principles beyond what the PPF provides. The PPF is a levy-based insurance scheme. It would seem to me to be wrong to say to people whose employers are paying an insurance premium that they will get less insurance cover than those who did not. It is not their fault that they did not, but it would seem to me that that is a logical and coherent position. If we create an insurance scheme and people pay for it, that is what we think is fair provision. Therefore, the financial assistance scheme should not be more generous than the PPF. That, therefore, is part of my initial response to my hon. Friend’s first point about the 2.5% inflation cap. I take his point that we live in times of high inflation, with the consumer prices index at 5.2%, or 5% as the most recent figure. However, if we were to lift the cap on the financial assistance scheme indexation, by corollary we would have to do so on the PPF indexation. If we did not, that would be odd, and we would probably be in court by the end of the day, I suspect. The PPF indexation is funded by the levy payers, so there could be a significant additional cost from removing that cap, which would have to be met by the firms in British industry today that are continuing to run quality pension schemes, or that continue to have liabilities under them. A challenge that we face is the balance between wanting good-quality pension protection and good-quality pension provision. Every time we put a new burden on those who provide final-salary and salary-related pensions, the danger is that another will say, “Forget this, that is just another cost and we will close it.” That is one of the trade-offs.

My hon. Friend mentioned the indexation provisions specific to the ASW scheme, which were relatively generous compared with some, but, to give a feel for the scale of what we might be talking about, if we were to provide indexation along the lines of the schemes that people were in previously, rather than at a general level, it is estimated that we would add about 30% to the cost. Just one of the things on his list would add significantly to the cost.

[Kevin Brennan (Cardiff West) (Lab)]

I did not intend to intervene, but as the Minister rightly says, in the past he and I were allies at times in working on the issue. We all accept that the deal that eventually happened was not what we would have liked to see, nor was it as adequate as we would have liked—he accepted that at the time—but does he not feel some responsibility at least not to make matters worse, which is what he is doing?

[Steve Webb]

Let me come on to the CPI point, which is what I assume the hon. Gentleman is referring to. Clearly, the Government took a view in summer 2010 as to the measure of inflation that they would use to uprate benefits and tax credits. There is no perfect measure of inflation; clearly, each has its strengths and weaknesses. However, as a new Pensions Minister in 2010, I received angry letters from people asking why their state earnings-related pension scheme had been frozen. Obviously, “It wasn’t me, guv”, as it were, but their SERPS pension had been frozen because “inflation” in the year to September 2009, as measured by the retail prices index, was negative.

We had a bizarre situation. I have yet to meet a pensioner who felt that inflation was negative in the year to September 2009, but, because mortgage rates were falling dramatically, headline RPI inflation was negative and, therefore, people’s pensions were frozen in 2010. CPI would have given them an increase then.

The further paradox was that, at a time of falling interest rates when savings returns were falling—low interest rates are, on the whole, bad news for pensioners, who tend to be savers rather than borrowers—we were using a negative or a low measure of inflation. That did not seem a good fit to us, particularly for pensioners, so the Government took the view that they would measure inflation using the CPI for benefits, tax credits, state earnings-related pensions, the underpin for occupational pensions and, thereby, via SERPS, public-sector pensions, and the PPF. Having decided that that was what inflation was across whole swathes of the what the Government do, it would be odd to have an island where we measured inflation differently.

I fully accept that that reduces the value of the financial assistance scheme pensions—I cannot dispute that—but that was not the purpose of the exercise, and the effect was well down the track from the decision on the CPI. It would, however, have been incoherent to have said that inflation was something different for the financial assistance scheme.

I have met Pensions Action Group campaigners on a number of occasions over many years, as my hon. Friend the Member for Cardiff North said, and I have great respect for what he described as their dignity and for their perseverance in campaigning, which has got the financial assistance scheme to where it is. The switch to using the CPI has reduced the cost of the financial assistance scheme in the longer term—it has had no impact in the first couple of years because we are above the cap on either measure of inflation—but other factors have led us to spend more on the financial assistance scheme than we were budgeting for. Rather than looking at a budget line that allows me some slack, I am having to explain why I am overspending relative to the budget that I inherited. The reason for that is that new schemes come into the financial assistance scheme, or we get data for schemes that we knew were coming in but for which we did not know the details, and we tend to find out that we have greater liabilities, in particular in the short term, than we had thought.

Working out what we will spend on the financial assistance scheme is not a precise science, although it is getting more so. However, it would be wrong to think that somehow the budget line has some slack in it and that we can decide what to spend it on. On the contrary, I am having to make the case in Government that we have made promises to the financial assistance scheme that we need to keep. Therefore, we have to find extra money compared with what we budgeted for.

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

Will the Minister give way?

[Steve Webb]

If my hon. Friend will forgive me, I will not, out of respect for my hon. Friend the Member for Cardiff North, who secured the debate, but only because I want to respond to his comments.

To be clear, it is not the case, therefore, that some financial slack is available for the financial assistance scheme.

My hon. Friend also mentioned deemed buy-back, which is complex, so I will not say, “Here is one I prepared earlier.” Essentially, deemed buy-back is treating the scheme as if it had not contracted out of SERPS. On the face of it, we would assume that that is better, but it turns out that the situation is rather more complicated than that. At the moment, people in the financial assistance scheme have a level of certainty: they know what the rules are and they know what 90% is and is not. I entirely accept my own point from a few years ago that we have to be careful when we say, “It’s 90%,” because clearly the matter is much more sophisticated than that and there are limits, as he rightly said. However, those people have the certainty of knowing what the scheme rules are. Under deemed buy-back, they would not have that certainty while some people would get more than 100% of their scheme pension and some people less.

[Jonathan Evans]

Would there not be a responsibility on the trustees to form a view as to whether they wished to action that? My hon. Friend the Minister is indicating that some circumstances could be advantageous and others not, but that would be a judgment made in each case. Currently, no one can exercise such judgment.

[Steve Webb]

The answer might be different for each individual rather than for each scheme. How would a trustee judge? If the trustees chose deemed buy-back for the scheme and we agreed with that, might they put some members in a worse position and others in a better? How would a trustee balance the different interests of the different members? This is complex.

The other thing about deemed buy-back is that under the financial assistance scheme there is some flexibility as to when the payments are made. My hon. Friend the Member for Cardiff North thinks that the ill-health provision is too rigid, but there is no ill-health early access to SERPS, so, again, the current system has a measure of flexibility that deemed buy-back would not have. Deemed buy-back, therefore, is complex and technical, and not a silver bullet. We have looked at it—in fact, we have looked at just about everything imaginable to try to find ways to provide better value to those individuals.

My hon. Friend mentioned annuities. All the way through, Dr Ros Altmann has argued that one reason that we did not get good value in the first place was that many of the schemes were annuitising, and if we had got in there quicker, we could have done better. That is absolutely right and why the so-called FAS 2 schemes, in which the Government have taken over the assets, have enabled us to improve to a baseline of 90% compared with what was previously on offer.

To try to take that further, I had a personal meeting with the chief executive of Legal & General—no reason why I should not mention it—which is far and away the company with the most of those books still going. He was content to transfer the schemes across to us on the basis of the book value in his annual accounts. His comment was, “I don’t want to profit from this, but I can’t show a loss, so it goes across at the book value.” I am not sure we have said this before, but Andy Young, who was involved in the Government Actuary’s Department and has been instrumental in all this, helped us considerably, of his own free will, to analyse all the facts and figures and so on. We have had discussions with the Government Actuary and with the Treasury. The short answer is that the book value of those contracts has already got the profit in it. Therefore, we take across something from which the profit has already been made, and the view of the Treasury, which I understand, is that there simply was not the confidence that we would get extra value—that the Government doing this would provide added value. In fact, there was a risk that we would be net losers.

I was keen to pursue that avenue and I hoped that it would provide a way for us to squeeze some extra money into the financial assistance scheme, but, unfortunately, it has proved fruitless. I am disappointed about that, which I told the Pensions Action Group members when I met them a few weeks ago. I was keen not to string them along. The very least that they are owed is a firm statement of the Government’s position. It was suggested that we might have a review, perhaps when the Government have more money, but I was keen not to create a false hope or an expectation, because those group members have been through so many stages. However, considering the state of the public finances, it would have been dishonest and dishonourable of me to suggest that we might find a little pot of money to address their concern.

As I hope is apparent from all that I have said today and through the months that I have dealt with the group, I have huge sympathy for the situation in which they find themselves, but I do not believe that I can offer any realistic prospect of improvements beyond the current financial assistance scheme.

Incapacity Benefit (North-East)

Tuesday 22nd November 2011 Westminster Hall

12:59

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

It is a pleasure, Mrs Brooke, to serve under your chairmanship for the first time. There has been tremendous interest in the economic effects in the north-east of changes to incapacity benefit. I was hoping for a much longer debate—a number of right hon. and hon. Members have indicated that they would be interested in participating in such a debate—but I will try to be brief.

I am pleased to have secured this debate, which gives me the opportunity to raise some important issues that affect communities throughout the north-east of England. As the title suggests, I want to focus on the economic effects of one specific coalition policy: the impact of welfare reform and changes to incapacity benefit. I shall refer specifically to a recent research report by Sheffield Hallam university on “Incapacity Benefit Reform: the local, regional and national impact”, and a report from the Institute for Public Policy Research North, the “Northern Economic Summary: October 2011”. I commend the latter report, which is the first of its kind, but IPPR North will produce it quarterly. It will be a useful way of tracking the impact of the Government’s policies on the north-eastern economy.

Before going into my main argument, I want to set the scene and to provide some context for the debate. The IPPR North report indicates that unemployment in the north-east is accelerating and is being driven by a weak northern economy being pushed into recession by public sector spending cuts, which are threatening to increase the north-south divide. The north-east, with Yorkshire and the Humber region, has faced the worst increases in unemployment in the UK. The figure for the north-east now exceeds 11%. Gross domestic product nationally suggests that the UK economy is avoiding a strictly defined technical recession at the moment, but it can be best described as flat-lining. Labour has a five-point plan to stimulate jobs and growth, but I do not want to go into that because of shortage of time. Perhaps it is a subject for another debate.

The situation for workers and those seeking work in the north-east is much bleaker than in many other regions. The northern economy could already be contracting, as the index of production figures produced by the Office for National Statistics show UK manufacturing contracting by 0.6% in the three months from June to August. Contraction in manufacturing affects the north-east disproportionately. It affects the economy in the whole of the north, but particularly the north-east because, despite the need to rebalance the economy—I am a great supporter of manufacturing—the north-east has a relatively high proportion of employees in manufacturing.

The latest job figures show that the north has lost a large proportion of public sector jobs in the last year. The figures produced by the northern TUC show that we are losing them at a rate of 2,000 a month, with almost no increase in the number of private sector jobs. In the north-east, the number of private sector jobs is declining. It has lost more than 32,000 public sector jobs, but more than 8,000 public sector jobs have been created in London, and 24,000 in the south-east. That is clear evidence of the Government’s failing regional policy.

I want to concentrate on the impact of the Government’s welfare reform policies on the economic situation in the north-east. Sheffield Hallam university’s report, “Incapacity Benefit Reform: the local, regional and national impact”, shows that 60,000 people in the north-east face being moved off incapacity benefits, 35,000 of whom will be pushed out of the benefits system altogether due to the time limits. More than 20,000 will be added to the unemployment figures.

My constituency has the highest rate of working-age adults claiming incapacity benefits in England and will be one of the most affected. In my constituency alone, 4,200 people will be moved off incapacity benefit, of whom 2,000 will lose their benefits altogether. That will have a huge adverse impact on those individuals and households, but I want to focus on what it means for the north-east economy as a whole.

If 35,000 people are taken off incapacity benefit altogether, as the pilot study indicates, that will effectively remove more than £170 million every year from the north-east’s economy.

[James Wharton (Stockton South) (Con)]

Will the hon. Gentleman give way?

[Grahame M. Morris]

I would like to make a little more progress, but I will give way when I have made my point.

That money would be in the hands of the poorest in society and would be spent in local communities, neighbourhood shops and local businesses. The clear economic argument is that unemployment would increase if benefits were cut in the region, owing to a reverse multiplier effect of credit withdrawal, because less money would be spent in the local economy. It is staggering that as the north-east seems to be heading into a regional recession, the Government are set to take another £170 million from our regional economy every year. It is even more staggering that, as employment is falling in the private sector owing to the Government’s lack of a credible policy for jobs and growth, they are simultaneously moving 60,000 people off incapacity benefit and adding more than 20,000 to the unemployment count.

The legacy of incapacity benefit is felt most in older industrial areas. The number of people claiming incapacity benefit is not evenly spread. The communities that I represent are mainly former coal-mining areas where long-term ill health is a consequence of years spent working in damp, cramped and physically arduous conditions underground. A recent review of coalfield areas by the former Member for the then constituency of Barnsley West and Penistone, Mick Clapham, reported two significant problems. He identified that incapacity benefit claims are not confined to the older generation, whose ill health was caused by working conditions. Ill health in the younger generation is due mainly to poor employment opportunities and the low expectations resulting from their marginalisation in the active labour market and has given rise to a lost generation.

[James Wharton]

I congratulate the hon. Gentleman on securing this debate. The topic is extremely important to him and to many of his constituents. I am a little concerned that he seems to believe that being on incapacity benefit when able to work is an acceptable end in itself. Does he agree in principle that those who are able to work should be encouraged to do so and should be taken off incapacity benefit and helped back into work? Does he also agree that, although incapacity benefit must be available for those who need it, the Government have a duty to review the system and to address some of the problems that have arisen as the system became out of control in recent years?

[Grahame M. Morris]

I will come to that. My fundamental point in response to the hon. Gentleman is that the big issue for us is not just worklessness; it is joblessness. We want the Government to invest in creating jobs in the private sector and generally to get the local economy moving. There seems to be little point in inflicting penury and misery on large sections of already impoverished communities when there are no jobs for them to go into. The two should go hand in glove, and I have some suggestions for achieving that.

[Mr David Anderson (Blaydon) (Lab)]

I agree with my colleague. The figure of 32,000 that the report spoke about was released about a month ago. That figure has not been challenged by the Government. We have 32,000 job losses across the public sector in the north-east. If my hon. Friend is correct, another 35,000 will be taken off incapacity benefit, which will put up the unemployment figures. There will be a 70,000 increase in those two groups alone. There is also the failure of the private sector to move into the void. Does that not make the jobs situation even more serious than it already is?

[Grahame M. Morris]

I am grateful for that intervention, which reinforces the point that I was trying to make. It is absolutely essential that we tackle joblessness; the Government have a responsibility to do that. I am concerned about the complete failure of regional policy; I am not convinced that we have an effective regional policy. We lost our regional development agency, One North East, and our regional Minister. It cost nothing to have an advocate at the top table of government, arguing the case for business, as well as for the regeneration of the whole region. It seems perverse that the coalition should abandon that, particularly when the region is doing so badly.

[Ian Swales (Redcar) (LD)]

I congratulate the hon. Gentleman on securing a debate that is very important for the region. Does he agree that the current process of checking who should claim incapacity benefit follows a system—work capability assessment—introduced by the previous Government? Does he further agree that that system is flawed and broken? Will he congratulate this Government on trying to do something about it?

[Grahame M. Morris]

I certainly would not like to do any of those things. However, there are some positive things that the Government could do to address a dire and worsening situation that many people are not aware is going to hit them in the next 12 or 24 months. There are things that the Government could and should do. Sheffield Hallam’s recommendations were clear:

“government should resist penalising the older generation, who, not unexpectedly, are suffering from ill-health.”

Instead, efforts should be concentrated on

“creating opportunities for work”

for this younger generation, this lost generation, which could prevent the problem that we have experienced with young people

“falling into a cycle of ”

dependency and

“economic inactivity”.

That often relates to mental health issues, a lack of self-esteem and a lack of aspiration, which eventually leads to

“disability and incapacity.”

We should have an early intervention to tackle this huge problem. There are lessons for Government to apply not only in the north-east, but for other former industrial areas. This is a big issue in the north-west, in parts of Scotland, in Merseyside and in the former mining communities of Wales. Claimants of incapacity benefit are usually concentrated in the same disadvantaged communities that have weak local economies with little chance of finding work. The Government must recognise that.

The authors of the Sheffield Hallam report, Christina Beatty and Steve Fothergill, are also damning of the reforms, saying that there is little reason to suppose that changes will lead to significant increases in employment. Without creating the jobs first, it seems like a double punishment on the thousands of people who will be adversely affected: 35,000 in our region and more than 4,000 in my constituency.

I want to give the Minister an opportunity to respond, but first I want to say a few words about the Government’s workfare programme, which seems like cynical exploitation by a Government that have already put thousands of people out of work. I want to place on the record my opposition to an extension of workfare. Where will the jobs for the long-term unemployed come from? If such jobs exist, why are they not being offered as real jobs with real wages, as opposed to benefits that carry the threat of withdrawal of benefit if individuals are unable or unwilling to take up offers?

The effects of such changes will not hurt the affluent south, but will be a body blow to the poorest areas, particularly in the north-east. At the same time as the Government are retrenching on any support for jobs and growth in the north-east, they are quick to pull the rug from underneath the sick, disabled and worst-off in society. I want to focus on the loss that that represents to the north-east regional economy and what the Government could do to limit the damaging effects.

I want to pose some specific questions, and I look forward to the Minister’s response. Can the Minister confirm that the north-east has seen a decline in private sector employment over the last year? Does he have an estimate of what the financial loss will be to the north-east economy owing to changes in incapacity benefit? Can he confirm the figure of £170 million? Will he consider how money lost to the north-east could be ring-fenced and reinvested in the region to support job creation?

I will give the Minister a few helpful suggestions from the IPPR:

“The government should offer a guaranteed job, paid at the minimum wage or above to anyone who has been unemployed and claiming JSA for more than 12 consecutive months. The guarantee should be matched by an obligation”

because there are rights and responsibilities. If the Government give somebody a right to a guaranteed job, the individual should be obliged to take up the offer of employment

“or to find an alternative that does not involve claiming JSA.”

Will the Minister look at this proposal and whether it could be targeted as a jobs guarantee for the north-east? A jobs guarantee could be implemented in areas of the north-east where long-term unemployment meets a certain critical level or where the job density ratio falls below an agreed threshold.

The IPPR believes that these recommendations could be afforded if the proposed reduction in corporation tax was abandoned. All the evidence suggests that the reduction in corporation tax is unlikely to increase employment and it significantly benefits large finance companies, particularly banks, and companies employing fewer staff. If the Government are serious about getting people back to work—I will conclude on this point, so that the Minister has a chance to respond—they should commit to supporting our regional economy and reinvesting any money saved from changes to incapacity benefit back into the north-east directly, to support jobs and create growth.

13:09

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

I congratulate the hon. Member for Easington (Grahame M. Morris) on securing an important debate. It is good to see other hon. Members from his region present for the debate today. I will speak primarily about incapacity benefit and the changes made by the Government—indeed, primarily by the previous Government. It is worth spending at least a moment on the context. Every night on the television news, we see stories of what happens in countries that did not get their deficits under control. We see fiascos, shambles, rioting in the streets and Governments being overturned.

It strikes me that two political parties working together in the national interest after the 2010 general election has meant that Britain is not seeing the extraordinary bond rates that Italy or Spain have faced. We are able to borrow at modest rates because of the fiscal credibility that we have. In the context of the north-east, low interest rates are one of the critical things in giving householders money to spend. If someone has a mortgage and the bank base rate is 0.5%, that gives them money in their pocket to spend in the regional economy.

[Grahame M. Morris]

Will the Minister give way?

[Steve Webb]

I will give way in a second. There are direct consequences of the difficult choices that we have made on the deficit that are specifically to the benefit of local economies such as the hon. Gentleman’s. I will give way to him, but he has not left me long to respond. If he wants to add additional points, I will have even less time.

[Grahame M. Morris]

I am grateful to the Minister, but it is important to challenge the point that is raised again and again that everything has to be sacrificed on the altar of deficit reduction. Is it not true that the Government’s plan is hurting but not working, and that the deficit is growing because there is no growth in the economy? The last figures I saw showed that we are borrowing an additional £46 billion.

[Steve Webb]

The hon. Gentleman mixes the structural deficit with the cyclical deficit. We have said that we will eliminate the country’s structural deficit. Although when the economy grows faster we get additional revenues and save money on benefit spending, we also have to tackle the structural deficit—something the previous Government failed to do. He referred to a five-point plan that simply adds more debt, and it is hard to see how the solution to a problem caused by excessive borrowing is more borrowing.

The hon. Gentleman referred to incapacity benefit, and his constituency has the highest concentration of people of working age on incapacity benefit in England. I have seen the Sheffield Hallam report to which he refers. It lists four changes that have been made, three of which—although he did not want to admit it—were introduced by the previous Government. My hon. Friend the Member for Redcar (Ian Swales) made that point. The replacement of the personal capability assessment by the work capability assessment was introduced by the previous Government; I am not sure whether the hon. Member for Easington supports that, or indeed the process of re-testing the stock of people on incapacity benefit, or the requirement to undertake work-related activities—all measures initiated by the previous Government. Those are three of the four measures in the Sheffield Hallam report, and it seems that each was a move in the right direction.

My hon. Friend the Member for Redcar was right to say that the system of work capability assessment that we inherited was broken, and a work capability assessment that focuses on whether people can work or not is a positive measure. We have proceeded with the Harrington review, and Professor Harrington’s second report will be published imminently. Significant changes have been made to the WCA process. For example, we will ensure that we garner more medical information initially rather than wait for it to emerge on appeal, and we will allow Department for Work and Pensions decision makers to more readily override the Atos assessment. A lot of positive changes to the WCA process have been recognised by those who campaign on such issues, and we have refined and improved the process to the benefit of the hon. Gentleman’s constituents, and others.

My hon. Friend the Member for Stockton South (James Wharton) asked the key question: what does the hon. Member for Easington want for his constituents who are on incapacity benefit? Even when private sector jobs are created, they do not go to those on incapacity benefit. There is a gap: folk on IB are stuck on IB and nothing gets them off it. We need to bridge that gap, which is where the reassessment process and, crucially, the Work programme come in, involving serious money that gets spent only when real jobs are created.

Let me give the hon. Gentleman a feel of how seriously the Government approach this issue. He referred to the ring-fencing of money, but suppose one of his constituents is on incapacity benefit but expected to be ready for work in about three months under the employment and support allowance process. If they find a job through the Work programme and that job is sustained, we will pay about £13,700 to the provider—double the £6,500 that we pay when someone comes off jobseeker’s allowance. That is a serious amount of public money going into the hon. Gentleman’s constituency, although only if those people about whom he is rightly worried get lasting jobs. The money does not get paid—via a small up-front fee—if the folk do not get a job. In many previous Government programmes and new deals, people got sent on schemes and the providers were paid whether those schemes were useless or not. Under this scheme, the providers will be paid only if they get people into lasting jobs. That will benefit the local area and is an entirely positive measure.

Time limiting of ESA was an important part of the deficit reduction strategy, and the hon. Gentleman referred to people being left “in penury.” It is, therefore, important to put on record two key features of that time limiting, which are that the sickest and poorest people will not be affected. The sickest people will be in the support group, which is not time limited, and they will continue to receive contributory ESA.

[Grahame M. Morris]

Will the Minister give way?

[Steve Webb]

Perhaps the hon. Gentleman will bear with me; I have six minutes left to respond to everything that he said. The people in the support group are not on time-limited ESA, and if they are regarded as inappropriate for work-related activity, they will continue to receive benefits indefinitely. The second category of people who are not affected by the time limiting are those on income-related ESA—in other words, even if someone else in the household has an income or substantial capital, they will not be affected. That means that 60% of those coming to the end of a period of time-limited contributory ESA will move to the income-related version. Those in the support group are not on time-limited ESA, and nor are those who move on to the income-related version. People not in those groups will be those who have other household income or substantial amounts of capital in the bank.

People may ask about the impact of such measures on the local economy, but we must also look at the impact of thousands of people who are stuck on incapacity benefit for years with nobody talking to them. Sometimes, people are stuck on IB for three, four or five years, with no contact at all. Nobody asks them, “What would it take? What are the barriers to work? What would help and support you?”, which shows the difference in approach taken by the new Government. We are not writing people off and leaving them on IB; we want to talk to them, identify those who could be active participants in the labour market with the right support, and have a Work programme that supports them into a job.

The hon. Gentleman mentioned regional policy, but my personal view is that having a regional Minister would feel a little tokenistic. We can have a Minister for this or for that, but will they be in the room when key decisions are made in the way that departmental Ministers will be? I am sceptical that a Minister for one region would get special treatment compared with a Minister for another region. We do, however, have a substantial regional growth fund that is worth £1.4 billion and has been popular and successful. We have now had two rounds of bidding—I could go through a long list of projects in the north-east that have been awarded funding. We recognise that additional support needs to be provided to areas that have experienced difficult economic times, and the regional growth fund is an important part of our response to that.

Many of the changes to incapacity benefit were rightly introduced by the previous Government, whether that is the work capability assessment, which, as my hon. Friend the Member for Redcar said, needed to be refined to ensure that we get decisions right, or the attempt to take an incredible number of people—1.5 million nationwide—off incapacity benefit. As the hon. Member for Easington noted, some of those people will be former miners who have claimed IB for a decade or more. Is it humane or economically rational to say, “Well, you’ve been on IB for a decade, you are seven years away from the state pension age so we will leave you alone, you can have IB until pension age, and then you will get a pretty lousy pension because your miner’s pension will have stopped years ago”? That is not good enough.

The hon. Gentleman asks why we cannot wait until there are more jobs, but even if we waited for a big increase in private sector jobs, those on IB would not be active participants in that labour market. Ex-miners who have received IB for seven years are far from that labour market and not competing in it. When jobs are available, who will the employer choose between someone who has received no contact with the system, and no encouragement, work-related activity or training, and someone who has just come from another job? Both I and the hon. Gentleman know who that employer will choose, and it will not be his constituent on IB. We must talk to people on IB and look at who could work with the right support and who needs to be in the support group. We must enable and support those who are able to work for when jobs become available. I accept that there is currently pressure on jobs, but there is churn every day and week as people leave old jobs and start new ones. When recruiting someone new, perhaps not net additional employment but as a replacement for someone who has left, the crucial question will be whether the person on IB is a credible participant in that labour market. We believe that our policies support the north-east by helping those on IB, supporting them and paying by results when people get lasting jobs. That is the long-term answer to the pressures faced by the hon. Gentleman’s constituents.

Music and the Economy

Tuesday 22nd November 2011 Westminster Hall

13:29

[Nigel Adams (Selby and Ainsty) (Con)]

I thank my hon. Friend the Minister and the many other hon. Members present for attending this very important debate. Unfortunately, we have only half an hour, so I shall have to crack on. I want to talk about the UK music industry and its importance to the British economy. The music industry mainly comprises small and medium-sized enterprises, micro-businesses and creative individuals; 92% of music businesses employ fewer than 10 people. In terms of the economy, it is invaluable. I want to focus on the positives that are coming out of the UK music industry, rather than the headline-grabbing negatives that we regularly hear about.

The UK music industry is a £3.9 billion business, employing more than 130,000 people. Additionally, UK artists are responsible for 12% of global album sales. That is a phenomenal figure. The music industry as a sector continues to outperform the rest of the economy, with the UK continuing to be one of only three countries that export more music than they import. The UK is the largest producer of recorded music in Europe and the second largest in the world. In 2007, 2008 and 2009, the top-selling global artist album was by a British act—Amy Winehouse, Coldplay and Susan Boyle respectively. In March this year, UK artists occupied the top three spots in the US album chart for the first time in 25 years. Again, that is a fantastic achievement for our industry.

As a country, we are also centre stage for live music, playing host to some of the world’s greatest music festivals. Many of us will have been to those festivals, which include Glastonbury, the V festival, Reading and Leeds. Hon. Members will no doubt have heard of the Selby fake festival. That enormous event attracts thousands of people to watch some of the best cover bands. This country is also home to the most successful ticketed venue in the world—the O2 arena in London. It is therefore vital that we make the most of the next big opportunity for music tourism—the 2012 Olympics.

[John Robertson (Glasgow North West) (Lab)]

I congratulate the hon. Gentleman on securing this very important debate. One of the most important factors in ensuring that bands progress is live music in pubs and clubs, where they can develop. Does the hon. Gentleman agree that more must be done to ensure that we have more live music, not less?

[Nigel Adams]

The hon. Gentleman is right. Live music is incredibly important to pubs as venues, not just for the pub’s business, but for the artist. It is incredibly important that young artists—people starting out—get an opportunity to play in pubs as venues. I shall talk about that later.

[Kevin Brennan (Cardiff West) (Lab)]

rose—

[Mr Don Foster (Bath) (LD)]

rose—

[Louise Mensch (Corby) (Con)]

rose—

[Nigel Adams]

I give way first to my hon. Friend.

[Louise Mensch]

I am grateful to my hon. Friend for taking an early intervention. It is right that he concentrates on the great successes of the UK music industry, and I congratulate him on securing this very important debate. May I ask for his agreement on a couple of points? First, will he join me in paying tribute to Feargal Sharkey, who recently retired as the head of UK Music, and in welcoming Andy Heath of Beggars Banquet, one of our greatest independent labels, who is taking over that role? The debate seems an appropriate juncture at which to do that. Secondly, will my hon. Friend join me in expressing some fear about the success of the UK music industry being perhaps undermined, by the proposals in the Hargreaves report on format shifting? There is a great deal of support for format shifting for private use, but as the UK music industry moves into global leadership with cloud services, one would not wish—

[Annette Brooke (in the Chair)]

Order. May I point out that interventions should be short and to the point?

[Nigel Adams]

I agree with my hon. Friend the Member for Corby (Louise Mensch). The Government broadly welcome the Hargreaves report—the Minister will no doubt talk about it—but in relation to cloud services, we must be mindful of anything that has an impact on growth. My hon. Friend is absolutely right about that. She also refers to the contribution that Feargal Sharkey has made, to UK Music in particular and to the industry as a whole. It is rare to switch the telly on and not hear one of his pieces of music being played in an advertisement. I certainly wish him well in whatever he does next as a venture. He has done a sterling job with UK Music in the past three and a half years. However, we can all agree that, with Andy Heath involved, UK Music is in very good hands.

[Mr Ben Bradshaw (Exeter) (Lab)]

Does the hon. Gentleman agree that one of the great achievements of UK Music under Feargal’s stewardship has been bringing diverse voices together in one organisation that has the ear of Government, Opposition parties and the public? That is a model that I suggest the rest of the creative industries could follow, because they have not always spoken with one voice as effectively as, for example, the CBI and other business organisations, although they are just as important.

[Nigel Adams]

Yes. The right hon. Gentleman is right about having someone such as Feargal Sharkey involved. He is a unique character because he brings experience of having done the job previously and he has enormous respect not only in the industry, but in both Houses and across—

[Mr Foster]

rose—

[Nigel Adams]

I will give way again, but I will have to move on at some stage.

[Mr Foster]

I apologise; I know that the hon. Gentleman wants to make progress. May I add my own tribute to Feargal Sharkey? He has done an enormous service to music in this country. On the issue of live music, does the hon. Gentleman share my view that when on Friday I seek to steer my noble Friend Lord Clement-Jones’s Live Music Bill through the House of Commons, it would be a disgrace if any member of any party tried to object, preventing the Bill from making progress?

[Nigel Adams]

I certainly share that view and would support the right hon. Gentleman in that move. It is very important that the Bill is not talked out. The Minister might refer to that as well. I need to move on now, because one or two other hon. Members want to make a contribution.

It is vital that we make the most of the Olympics. Obviously, that is a sporting event, but we need to make the most of the opportunity to ensure that Britain continues to be, in the words of Danny Boyle, the film director, “a beacon of music.” UK Music’s report, “Destination: Music”, highlights the impact that festivals, which I have referred to, and other large-scale music events have on tourism, with such events contributing £864 million of gross value added to the national economy and the equivalent of 19,500 full-time jobs. Although the Olympics are not a music event, the opening ceremony offers us a huge opportunity to showcase our talent across the world.

In this difficult economic climate, it is refreshing to hear that businesses based on manufacturing the intangibles of intellectual property are the cornerstone of economic growth and, as things stand, one of the only parts of our economy that is growing. That is yet more evidence of how this diverse and uplifting industry can help our economy and must be allowed and, indeed, encouraged to do so.

[Damian Collins (Folkestone and Hythe) (Con)]

I congratulate my hon. Friend on securing the debate. Does he agree that protecting intellectual property is very important for young and emerging acts as well? I am thinking particularly of young performers such as Zorzilla, Magnets and Daniel Addison in Folkestone in my constituency. They are writers and performers and need to know that their investment in their future is secure.

[Nigel Adams]

It is crucial that there is as much support as possible for those people, certainly when they are starting out. My hon. Friend is absolutely right.

I am pleased that the Conservative-led coalition has recognised the importance of the creative industries, specifically highlighting the industry in “The Plan for Growth.” I welcome the plans to remove live music in venues with audiences under 5,000 from the Licensing Act 2003. That policy has been detrimental to the music industry for too long. The change will enable pubs, which we have referred to, to host live music without navigating the red tape and regulation currently in place. The change is supported by the British Beer and Pub Association on behalf of its members. It will encourage musicians to perform in pubs as their venue of choice for small-scale events.

The creation of the Creative Industries Council has been well received by the industry and by UK Music in particular, and plans to reduce digital copyright infringement and further develop the digital market are also steps in the right direction. However, more can and should be done. We need to ensure there is proper access to finance so that more artists can get their careers off the ground. As I mentioned earlier, this is very much an industry of small and medium-sized enterprises, so we need to ensure that musical SMEs can find the finance to invest in artists.

[Gloria De Piero (Ashfield) (Lab)]

I, too, pay tribute to Feargal. On finance, has the hon. Gentleman, like me, heard about the problems with the enterprise finance guarantee scheme? Will he press the Government to address those issues?

[Nigel Adams]

The hon. Lady is absolutely right: the industry seems to be excluded from the enterprise finance guarantee scheme, and I hope the Minister will comment on that. However, I am looking forward to hearing the Chancellor’s autumn statement; I hope there will be something in it for this important industry.

I should say at this stage that it is not all doom and gloom for the music industry. I was just on the phone to my son, who is in a teenage band that has been together for four years. I asked him how the band was going, and he told me it had secured a grant from the Keyfund scheme, which is run by North Yorkshire county council—a fine Conservative council. The band has managed to raise a few hundred pounds for a recording session, and it is about to secure some more money—in the thousands of pounds—to record a video, so there is money out there. However, the hon. Lady makes a good point.

[Jonathan Lord (Woking) (Con)]

Will my hon. Friend give us the name of his son’s band? It should be on the record so that we can look out for it in the years ahead.

[Nigel Adams]

At the risk of my son never speaking to me again because of the embarrassment that I have caused him as a teenage boy, the band is Summer City, and it is rather good. My son is Ben Adams, and there are three Bens in the band. If Andy Heath is listening, it has not yet been signed, but he can check it out. When it has made the recording it just got the money for, I will make sure that Mr Heath and the industry get a copy.

We must ensure that finance is in place and that all possible measures are taken in this climate to help the business. We must also ensure that intellectual property is properly protected; copyright law must be made relevant to the world we live in. By that, I mean it is time we caught up with our European counterparts and recognised that private copying from CD to iPod, for example, should be made lawful. As things stand, there is a grey area between what is allowed under copyright exceptions and the reasonable behaviour and expectations of most people.

On this matter, I urge my ministerial colleague to consider the effects that changes to format shifting may have on a larger scale. It is right that personal format shifting becomes an exception, but if the terms are drafted too widely, we could see an adverse effect on future innovation and potential revenue, which would be very damaging. Cloud services, for example, are an area where, if we get the balance right, music will play an even greater role in the UK’s future economic success. If we get it wrong, however, those who manufacture and create valuable intellectual properly could be undercut, which would be disastrous for the industry and those businesses.

[Several hon. Members]

rose—

[Annette Brooke (in the Chair)]

Order. Two Members are standing. The debate finishes at 2 pm. Obviously, there must be time for the Minister to respond.

00:00

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing the debate. How appropriate it is that we are having a debate on UK music and the economy on St Cecilia’s day, given that she is the patron saint of music. There is, dare I say it, a member of another distinguished band—MP4—here today, and we pay tribute to its members.

My hon. Friend strongly outlined how important music is to the economy, creating more than £5 billion. As he said, more than £1 billion is also generated by live events. In that respect, I should plug an excellent festival in my constituency, which is called Latitude. My right hon. Friend the Member for Bath (Mr Foster) spoke there earlier this year.

There is a side aspect to the economic issues involved here, which is about not only music or tourism, but some of the construction work involved in creating arenas. Latitude has just committed to a 15-year contract and is now investing in its site and in other aspects of the festival. That is important for local people. It also makes the area a great place to live.

There is also the investment undertaken by Arts Council England in UK music. Although it perhaps does not invest in popular music—the Professor Greens and the like—it does invest in things such as the Aldeburgh festival, at Snape Maltings, which has made that an attractive place to live in Suffolk Coastal.

I therefore want to make a call to councils. I understand the strong economic pressures they are under, but they should think about how they use some of their arts funding and how they invest in areas. Thirty or 40 years ago, Basingstoke and Deane borough council, for example, invested in ensuring that it had a concert hall so that it would attract companies to the area. That meant that it was a nice place to be and that people did not always need to travel elsewhere to get their cultural entertainment.

I, too, support the suggestion that we should deregulate entertainment in pubs and similar venues. My council has asked me to lobby against the changes, and I have said no, because I think the Government are making the right move. I would like to go even further and try to get rid of temporary event notices for unamplified music of any kind, because it is a shame when things go slightly wrong and the brass band can no longer play at the bandstand in a concert that was supposed to happen. I am delighted that the Live Music Bill, which my right hon. Friend the Member for Bath will take through the House, deals with that.

I pay tribute to the Government for their support for bodies such as Chetham’s school of music and the Yehudi Menuhin school, which stresses the excellence of such provision. There is also the wider point that children at every single school are being encouraged to play a musical instrument.

The 12 notes on a keyboard can give rise to extraordinary emotions. Six strings on a guitar, four strings on a cello and just three valves on a trumpet can really touch the heartstrings of what makes people special. I think it was Tolstoy—that master of words—who said:

“Music is the shorthand of emotion.”

That is absolutely right. We need to ensure that UK music is celebrated and supported so that it will contribute to our economic growth.

13:46

[Esther McVey (Wirral West) (Con)]

Time is short, so I will keep my remarks brief. The music industry and the entertainment business are not called that for no reason; they are called that because they are worth £5 billion to the economy, with £1.3 billion coming specifically from exports, and they employ 130,000 people. However, I want to look specifically at the impact on the north-west.

Coming from Liverpool, I like to see the city as the epicentre of creativity and the hub of the music industry. Whether we are talking about Gerry and the Pacemakers, The Real Thing, Orchestral Manoeuvres in the Dark, Echo and The Bunnymen, The Lightning Seeds, The La’s, The Zutons or The Coral, Liverpool is a creative hub.

I want to look at the direct and indirect consequences of music and the music industry. Yes, music has financial implications, but it is also an emotional outlet for a younger generation and a way to let their creativity out. It can provide jobs that people might not otherwise have. People can express and stretch themselves, and they can explain their life and their whole meaning.

Obviously, I could not talk about Liverpool as a creative hub without mentioning The Beatles and what they are still worth to the city. The Beatles Story museum attracts 600,000 people every year. It is claimed that people going there over recent years have brought £20 million to Liverpool and Merseyside per year—that is just because of The Beatles.

UK Music research found that the north-west attracts 965,000 music tourism visitors per year and accounts for 12% of all such visits to the UK. It is the second biggest such destination outside London. In addition, it is estimated that music tourists in the north-west spend at least £132 million a year, which benefits the north-west economy by £56 million a year in gross value added. That also sustains the equivalent of 1,400 full-time jobs. The music industry is vital for us and something we particularly excel in. It links to the film industry, adverts, the gaming industry, TV and radio. We also have the brand-new MediaCity in Salford.

My point to the Minister is that we need to protect the industry and the creatives. We need to protect music as a financial and creative industry. We must support it to help it grow, and we must sustain it as much as possible. We must also link in the new MediaCity in Salford as much as we can, so that we get as much benefit from it as we can.

13:47

[The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)]

It is a delight to appear under your chairmanship once again, Mrs Brooke. I congratulate my hon. Friend the Member for Selby and Ainsty (Nigel Adams) on securing this important debate. The fact that so many hon. Members have attended, intervened and made speeches shows that there is large-scale recognition throughout the House of the success of the music industry, and support for it.

I wish Ben Adams the best of luck in his music career. I shall look out for Summer City, which has a ring to it. I can just hear the late Saturday night programme announcer saying, “We’ve got Ben Adams from Summer City coming on next,” and people will stay through the advert break to hear what he says.

I congratulate my hon. Friends the Members for Suffolk Coastal (Dr Coffey) and for Wirral West (Esther McVey) on their important contributions. Obviously, I go regularly to the Aldeburgh festival, which is probably one of the world’s leading classical music festivals. When my hon. Friend the Member for Wirral West recalled The Beatles, that made me recall a recent visit to Abbey Road studios, which I think still has the largest recording studio in the world. Hon. Members may have seen the George Harrison documentary recently, with the extraordinary pictures of The Beatles recording in Abbey Road. The studios still have the piano on which “Eleanor Rigby” was composed—a piano built in 1902. If hon. Members can find any excuse to visit Abbey Road studios, I would urge them to do it.

We talked about the huge success of the British music industry—and it is a staggering success, with almost £4 billion of sales. Britain is the only country apart from the United States and Sweden that is a net exporter of music, and although the major record labels may no longer be owned by UK companies, it is heartening that Beggars Banquet, the largest independent label, has had such astonishing success working with that amazing artist Adele. That leads me on to the point that was made about Andy Heath taking the helm at UK Music, following Feargal Sharkey’s resignation. I pay tribute to Mr Sharkey’s astonishing record in leading the UK music industry, and herding cats in putting things together. He was ably assisted by his second in command Jo Dipple, who I know will continue to play an important role.

[Kerry McCarthy (Bristol East) (Lab)]

I, too, pay tribute to Feargal Sharkey. The Minister rightly talks about our success in exporting albums, but I understand that if we were to take away from the equation Adele, Amy Winehouse and Coldplay, and a few other big names, we would be doing a lot worse. Does he share my concern that things are increasingly difficult for struggling artists, some of whom, in the independent sector, have made the greatest contribution because of their influence? They struggle in today’s climate, and we are in a world where only “The X Factor”-type bands and the huge sellers such as Adele and Coldplay can survive.

[Mr Vaizey]

We have a thriving and vibrant music scene, and no individual singer or band is guaranteed success, but it is reassuring to me—I happen to be a fan of “The X Factor”, but people understandably say it should not be the future of UK music—that Adele and other stars have risen. Adele, I think, is the biggest selling artist in the world at the moment; that is an astonishing achievement. Obviously, the Government cannot dictate who is going to survive and thrive, but that is testament to the fact that we have a vibrant music ecology in this country.

I know that the hon. Member for Bristol East (Kerry McCarthy) has concerns about visa issues. It is important that bands in this country should have the opportunity to tour the world, and I am happy to continue working with her on the question of jurisdictions where it might be difficult for bands to get the appropriate visas—perhaps for understandable reasons.

[Kevin Brennan]

Will the Minister give way?

[Mr Vaizey]

I give way to the musician in the Chamber.

[Kevin Brennan]

That might be a stretch. Without making the debate too much of a love-fest I, too, pay tribute to the work that Feargal Sharkey did, including the ultimate sacrifice of actually playing with MP4 once or twice along the way.

Does the Minister agree that it is important for the industry to maintain that single-voice focus, which Feargal Sharkey helped to establish with the setting up of UK Music; that that put an end to the old days, when it was difficult to get a single established view from the music industry; and that it is important that that should continue into the future?

[Mr Vaizey]

Yes, absolutely. I agree that when UK Music came together two or three years ago, that was a real achievement. There were a number of disparate voices. I emphasise, for the benefit of all hon. Members, that Feargal Sharkey is still very much alive; the range of tributes being made might make people think he is not. He is entitled to move on, and I have no doubt that he will continue to play an extremely important role.

Among other issues covered in the debate was the importance of live music and of deregulating the licensing system. I echo the call made by the right hon. Member for Bath (Mr Foster) that no man should stand in the way of the Bill that Lord Clement-Jones has introduced. Let no man put asunder the marriage between the right hon. Gentleman and the Bill this Friday. Let us hope that it passes through the House with ease. Nevertheless, there is the backstop of the Government’s consultation on live music licensing.

Copyright is an incredibly important issue to the music industry. The Hargreaves report was mentioned; a consultation will shortly be initiated by the Intellectual Property Office. As to format shifting, from a common-sense point of view it makes sense to establish regulations that would allow people to do what they do already—move from CD to iPod and so on—while at the same time ensuring that any measures that are appropriate to protect the music industry are in place. That will be part of the consultation.

There are other things whose importance I want to highlight: the digital copyright exchange, which we are not forcing on the music industry—we hope that there will be a bottom-up approach, with Government help; the recent extension of copyright for performers, taken through the European Commission; and the continued action that the Government take to combat the theft of intellectual property—otherwise known as piracy—not only through the Digital Economy Act 2010, passed by the previous Government, but through brokering conversations and deals with rights holders and internet service providers, including advertisements on pirate sites, credit card details, payment facilities being provided on pirate sites and search engine optimisation issues, and through the important progress made recently in the courts, with the blocking of the Newzbin site, which began 10 days ago.

Access to finance is of course a perennial problem for the creative industries. The Creative Industries Council, which we established last year, has one specific work stream on access to finance, chaired by Ian Livingstone from the games industry. It is important that people engage with him on issues of access to finance. I have spoken to banks about the enterprise finance guarantee scheme. I had a meeting, for example, with the Royal Bank of Scotland, to discuss it. Importantly, a recent Demos report, authored by the researcher Helen Burrows, shows that the creative industries are not as risky as people think, and that they are a good investment.

Others could take a leaf out of the video games industry’s book. After the debate I shall be going to the National Endowment for Science, Technology and the Arts to talk to small-scale angel investors, who are being introduced to games companies. If UK Music could stretch itself even further to organising one or two investment conferences with banks and the music industry, and independent labels in particular, that could bring progress.

My hon. Friend the Member for Suffolk Coastal, who rightly highlighted the Aldeburgh festival, made the point that the record industry of course encompasses classical music. Although we missed a trick by not launching it today, on St Cecilia’s day, we shall shortly launch our national music plan. I gather that it is pencilled in for Friday; it is a constantly moveable feast, as we seek to improve it more and more. However, the key point about the national music plan is the music education hubs that will sit at the heart of it. I hope that those will bring together local authorities and organisations such as the Aldeburgh festival to provide a wider offer to children in schools. The money has been secured for local authorities, but we want to put a system in place to secure the participation of the much wider ecology of the music industry locally, whether that is local orchestras, the brass band or the Aldeburgh festival.

We have had a good-natured and well-tempered debate in which hon. Members from both sides of the House have united to emphasise our support for the music industry. We have highlighted the key issues that affect it: education in schools, copyright, access to finance and live music. The Government are focused on all those issues, and I am grateful for the participation and input of hon. Members from both sides of the House.

Question put and agreed to.

13:59

Sitting adjourned.