House of Lords
Violence against Women and Girls
(13 years ago)
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Baroness Gale
To ask Her Majesty’s Government what measures they will take to reduce the level of violence against women and girls in the United Kingdom.
Baroness Verma
My Lords, the Government’s action plan on tackling violence against women and girls was published on 8 March 2011 and we have already delivered in several areas. We have provided over £28 million of stable Home Office funding until 2015 for local specialist services and £900,000 until 2015 to support national domestic violence helplines. We are also providing Ministry of Justice funding of £10.5 million over three years for local rape support centres, and £18.5 million to support vulnerable victims and witnesses.
Baroness Gale
My Lords, I thank the Minister for her positive reply. Does she agree that it is a national disgrace that in the United Kingdom one woman is raped every nine minutes, two women are killed by their partner or ex-partner every week, and up to 3 million women suffer some form of violence every year? Does she further agree that prevention is the key in order to reduce such violence? Will she have talks with every government department so that we could have a long-term, well funded education campaign involving schools, churches, the wider community and all strands of government, including the devolved governments, to ensure that boys and men are taught to respect girls and women? We should aim to send out a very strong message that violence against women is totally unacceptable.
Baroness Verma
The noble Baroness raises some very important issues. The Government have taken it upon themselves to make this a cross-government issue. We are working across all departments to ensure that, wherever possible, the impact of any effect on women and girls is taken into consideration when developing policies.
The noble Baroness is of course aware that through the Department for Education we are working with schools on campaigns to raise awareness of young people in particular to challenge the acceptability of violence in teenage relationships. Through the PSHE review, we will be looking at how best we can ensure that young people know about their own requirements with regard to consent within sexual relationships, so a lot is going on. I know that the noble Baroness is concerned, but I want to reassure her that the Government are doing a lot towards the issue.
Lord Boswell of Aynho
My Lords, will the Minister recognise that this is a matter not only of depressing statistics—disastrous as they are—but of culture and education and of involving men just as much as women? In that context, will she consider taking a leaf out of the practice of the Parliamentary Assembly of the Council of Europe, on which the noble Baroness, Lady Gale, and I both have the privilege of serving, where parliamentarians of all countries and genders are prepared to make a public commitment against these practices, or even borrow the practice of some national Parliaments where a specialist committee of men is set up to involve themselves in actively dealing with this sort of issue?
Baroness Verma
My noble friend is absolutely right. Of course, it is about ensuring that men and women will be part of the solution to this culture change. I will take back what my noble friend said about the convention in Europe, but a lot of work is going on in this country where men are at the forefront of trying to ensure that we tackle the vile problem that we have in society. We will never be able to solve the problem unless both men and women are signed up to it.
Baroness Gould of Potternewton
Will the Minister indicate what support and advice have been given to local and other relevant authorities to provide positive programmes to support children who have experienced domestic violence? I ask the question particularly in the light of the report that came out this week published by Refuge and the NSPCC that showed that there were enormous gaps in that service.
Baroness Verma
The noble Baroness raises an important point. I have also read the report. I reassure the noble Baroness, and noble Lords in the House, that we take these issues very seriously, which is why we are working closely with the Department for Education. We also want to ensure that those who provide front-line services, who are there to recognise violence or sexual abuse when they happen, have the guidelines and information to hand.
The Lord Bishop of Ripon and Leeds
My Lords, following that question, and in view of the predominance of violence by young men during the riots of the past summer, will the Minister comment on the need to protect boys from violence so that they do not grow up in a culture where violence becomes endemic? Does she agree that violence of any sort against children is wrong?
Baroness Verma
The right reverend Prelate is absolutely right. Of course, while we are concentrating on violence against women and girls today because of the international day tomorrow, it is right that we tackle all forms of violence, and I pay tribute to my noble friend Lady Newlove for the work that she is carrying out. We take these things incredibly seriously. By working collectively across government, we will ensure that we can respond in a more proactive way than has been done before.
Lord Elystan-Morgan
My Lords, while appreciating the seriousness with which the Government regard this issue, does the Minister agree that the best service that the Government could give to battered women is to amend the provisions in the legal aid legislation now before this House, which creates massive obstacles before legal aid can be granted in domestic violence cases? Does she agree that there is an irony that, in fact, the standard of proof required to get legal aid in the first place is often higher than that required to succeed in a civil court?
Baroness Verma
My Lords, the noble Lord of course knows that when the legal aid Bill comes before us, we will have some in-depth responses. I will leave it to that debate before answering.
Baroness Hamwee
My Lords, does the Minister share my concern about something of a “canteen culture” which persists among junior police officers, who are often the first point of contact for an abused woman? Does she share my concern about the need for training of junior officers in domestic violence issues, so that the good work done by ACPO and the Home Office filters down?
Baroness Verma
My noble friend is absolutely right. That is why we are working very hard with police forces across the country to ensure that they are made fully aware of how they need to respond, very sensitively, to issues of sexual and violent abuse.
Baroness Royall of Blaisdon
My Lords, 76 per cent of ex-partner murders have stalking as a lead-up to the event. Does the Minister agree that actions must be taken now to stop this murder in slow motion? Would the noble Baroness further agree that, while county councils are clearly having to make cuts too deep and too fast, they absolutely should not make cuts to street lighting because of the serious implications for women and their safety?
Baroness Verma
My Lords, very briefly, I inform the noble Baroness that we last week launched a 12-week consultation on stalking to see if it will become a specific offence. A lot is going on, but I will of course write to the noble Baroness on the other issues that she has raised.
Employment Law: Unfair Dismissal
Lord Clinton-Davis
To ask Her Majesty’s Government what plans they have regarding the future of the law on unfair dismissal.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, recruiting a new employee is an important decision for any employer so we need to balance very carefully flexibility for the employer and security for the employee. The Government therefore intend to increase the qualification period for unfair dismissal from one to two years to help give firms the confidence to take people on. We will also be seeking more evidence, particularly on whether further steps in this area would help boost the confidence of micro-businesses to employ people.
Lord Clinton-Davis
Why is the noble Baroness so mealy-mouthed about this issue? It is a disgraceful report, allowing employees to be dismissed without any explanation at all. Adrian Beecroft—a multimillionaire, venture capitalist and donor of more than half a million pounds to the Conservative Party—said that some people will be dismissed simply because their employers do not like them. Is that acceptable?
Baroness Wilcox
We are concerned with the aim of extending the qualifying period in order to improve business confidence in recruiting staff and giving more time to getting the work relationship right. That is why we are doing it. I do not know how I can respond to the other part of the question. Adrian Beecroft was asked to contribute his thoughts to government to support our work examining the burden of employment-related law and he gave them. There are things in there that I think might be very much his own personal viewpoint, because that is what he was asked to give.
Lord Jenkin of Roding
My Lords, is not the issue here one of maintaining a balance between those who are in employment and fortunate enough to have jobs and those who are looking for employment and could be taken on if employers were readier to take the risk? The risk of having a case taken to an employment tribunal actually deters a lot of new recruiting, particularly by small firms.
Baroness Wilcox
My noble friend of course has long experience in this House and I am delighted to hear him ask a question. It is worrying that small companies tell us that they are nervous about employing people. That should not be the case. We need jobs for our young people and for people who have been long-term unemployed. We need our new, coming companies to be confident to employ people. I have been an employer at a small company and a large company, and extending this period means that you have time to get used to each other and to learn the job. Very often people take more time than others to get used to that. We do not think a year is long enough and therefore we will be extending it to two.
Lord Martin of Springburn
Drawing on my own industrial background, I put it to the noble Baroness that two years is far too long. We have come a long way from the days when a worker who had a complaint was told, “If you don’t like it, there’s the door”. We are in danger of going back to those days.
Baroness Wilcox
Other rights, including “day one rights” such as the right not to be discriminated against, are unaffected and will continue to be so. We are trying to see whether this particular piece of work will get more people into employment and will work for smaller companies, which are nervous and which do not very often have big HR departments to help them. We need to get the trust back between the employer and the employee and I think that this will be a good way to do it.
Lord Myners
My Lords, the Minister has spoken about the need to create more employment for young people. How is the Minister going to ensure that new employment opportunities for young people are not achieved at the risk of displacing the employment of older people?
Baroness Wilcox
That is a very interesting question. We are obviously serious about tackling youth unemployment. We have very high youth unemployment. But I am slightly older, and am still employed, and I would like to continue to be so, if that is possible. The balance is that the employer will use the talent that he has got to keep his business profitable. If his business is not profitable and he goes out of business, then nobody has a job.
Lord Tebbit
Would my noble friend remind the House of the period for which an employee has to work before he or she is completely free to break their contract of employment by going on strike, as we shall see many civil servants do next week?
Baroness Wilcox
Gosh. I am afraid that I do not have the details of the answer to that question, but I will write to the noble Lord.
Lord Young of Norwood Green
My Lords, can the Minister explain how watering down people’s rights at work by doubling the service requirement to claim for unfair dismissal from one to two years is a substitute for a credible plan for growth? As the Chartered Institute of Personnel and Development, the professional body, has confirmed, that is not the way to boost jobs and growth. There is no empirical evidence to suggest that such a move will boost job creation and it is highly likely that this change will lead to more people bringing discrimination claims instead, which have no service requirement. Can the Minister confirm that the two-year proposal is part of a consultation process? She seemed to be describing it as a done deal.
Baroness Wilcox
Yes, it is part of a consultation process, and we believe it is the way forward. The previous Government did not, I think, have a particularly good record. This has become more and more of a question, and we feel that ACAS and other bodies that can help in discussions before problems get too large would be a much better way than having to lose a job, start a job and have a relationship between an employee and an employer that is not working. We think that there are ways to do this other than going to court.
Transport: Fuel Prices
Lord Steel of Aikwood
To ask Her Majesty’s Government whether they plan to take action regarding the retail price of fuel at motorway service stations.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Government believe that the prices that an enterprise charges for its products and services is primarily a commercial matter for the enterprise concerned. Any competition concerns relating to the pricing of goods, including the retailing of petrol at motorway service stations, would fall to the Office of Fair Trading to investigate as the responsible competition authority.
Lord Steel of Aikwood
My Lords, I am grateful for that Answer, but is the Minister aware that prices at motorway stations are currently at about 10p a litre above those available elsewhere? This surely cannot be right. Will the Government consider referring the matter to the Office of Fair Trading or, on the other hand, copying what is done in France, where on the approach to a service station there is a notice board indicating the supplier and the price not only at that station but at the following two, and in that way promote competition?
Baroness Wilcox
I am very interested in the second part of that question. That sounds a very good idea, and I shall take it away if I may. My answer to the first part, of course, has to be that the Government believe that the best guarantee of a good deal for consumers is an open and competitive market—so what he suggested at the end of the question would be very helpful. However, if there is a concern that petrol prices at motorway service stations are affected by anti-competitive practices, the responsibility falls back to the Office of Fair Trading, and the Government really cannot interfere with that.
Lord Campbell-Savours
Do those high prices reflect high rents being paid by petroleum companies for motorway sites to the Department of Transport?
Baroness Wilcox
In answer to the noble Lord’s question, we believe that the best guarantee of a good deal for consumers is an open and competitive market. I cannot answer it any more clearly than that.
Lord Cormack
My Lords, could my noble friend answer the question that the noble Lord just asked? Are the high prices, which the noble Lord, Lord Steel, outlined, in any way attributable to the franchise costs charged by government?
Baroness Wilcox
I do not have the answer for that directly. I will go back and get the result, but I have to repeat that the Office of Fair Trading would be very quick to see if there were difficulties on either side in this argument.
Lord Bradshaw
My Lords, will my noble friend tell us when the Office of Fair Trading last investigated motorway fuel prices? The office has spent huge sums of money and time investigating bus fares, but motorway service station prices affect far more people.
Baroness Wilcox
No, I do not know the answer to that question about the last time that it looked. All I know is that it will constantly be looking and if there is enough worry around the area it will, I am sure, look at it.
Lord Brooke of Alverthorpe
Will the noble Baroness confirm that the number of staff engaged by the Office of Fair Trading has been reduced?
Baroness Wilcox
I would imagine that everybody is tightening their belts. No doubt it, too, has had to reduce, as have all government departments following the terrible debts that we incurred when we came into government.
Lord Davies of Oldham
My Lords, given that the 10p excess which is often charged by motorway service stations is a very high fraction of the actual cost of the fuel, and that the companies are therefore getting a much greater return than elsewhere, should the Government not look at this matter as an issue of urgency?
Baroness Wilcox
As I think the noble Lord knows, the Government cannot intervene where the Office of Fair Trading should be acting.
Viscount Simon
My Lords, I have not checked it for quite a number of years, but is the noble Baroness aware that there is, or used to be, a website on which you could access the price of fuel that was closest and cheapest to motorway services?
Baroness Wilcox
That is a wonderful answer. Once again consumers, if they have the right amount of information, can make those choices.
Lord Armstrong of Ilminster
My Lords, while the noble Baroness is looking at the possibility of displaying prices of fuel stations further down the motorway, will she also look at the possibility of allowing those who provide the fuel at motorway services to say on the notices outside the motorway station who they are? You can say where the coffee comes from, and who is providing that and other services, but you do not seem to be able to say who is providing the petrol.
Baroness Wilcox
My Lords, that is a novel idea. I will take it back and write to the noble Lord.
International Monetary Fund
(13 years ago)
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Lord Barnett
To ask Her Majesty’s Government by how much they expect to increase their contribution to the International Monetary Fund.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, at the G20 Britain, and all the other countries, agreed to ensure that the IMF continues to have resources to play its systemic role to the benefit of its whole membership. We stand ready to contribute within limits agreed by the House and set out in the International Monetary Fund Act 1979. However, there is currently no agreement about the timing, extent or exact method through which IMF resources will be increased.
Lord Barnett
In thanking the noble Lord for his Answer, I remind him that the Chief Secretary to the Treasury said on 6 November that he expected our contribution—which is the Question I asked—would be up to £40 billion. Perhaps the noble Lord could answer that as well. He and the Government recognise the need to provide funds for the IMF. Indeed, the Prime Minister said in the House on 7 November that it would be irresponsible to walk away from helping the IMF, but that it must not be used for a bailout. Can the Minister explain the difference between helping for a bailout and helping for a crisis—a very serious world crisis?
Lord Sassoon
My Lords, in answer to the first question, the position under the International Monetary Fund Act 1979 is that the limits agreed by Parliament currently stand at 38.8 billion SDRs, or about £38.3 billion. That is where the £40 billion figure comes from.
On the question of what the IMF is there to do, it is to look at the overall systemic risks in the world and support individual countries. It is not there to support countries in one particular zone as opposed to others or to support currencies. It is there to consider, under its criteria, country by country, where support might be needed.
Lord Newby
My Lords, in view of the failure of the German authorities yesterday to auction off debt, do the Government believe that the time has now come for the development of a Eurobond to provide a long-term stable approach to raising funds for the whole of the eurozone?
Lord Sassoon
My Lords, we are at risk of straying a bit far from the question about the IMF, but there are a number of serious points here. First, with respect to Germany or any other countries, one should not read too much into one particular bond sale that does not meet its target. That has happened to a number of countries over the years, including the UK. As for what the arrangements will be for the eurozone, we continue to wish that the eurozone makes as much progress as it can, as urgently as possible, to put the arrangements in place.
Lord McFall of Alcluith
My Lords, given that the eurozone crisis is potentially more damaging than the one of 2008, is the Minister aware of the IMF statistics that show that over 50 per cent of the Italian, German and French debt is held by non-residents, thereby ensuring that if there is a crisis it will not be confined to the European continent? Is there not a case for more urgent consideration with the IMF to ensure that it and the UK play their part in this global crisis to ensure a better and more stable economic future for the citizens of this country?
Lord Sassoon
The IMF does and will continue to play a pivotal role in these systemic issues. There was no agreement at the G20 for an increase in resources for the IMF because, understandably, the US and other key non-European countries want to see the euro area core’s willingness to contribute to the eurozone crisis before they commit. Meanwhile, the IMF has $400 billion available to lend, but I agree with the noble Lord that there is an urgent need to resolve all these interlinked matters.
Lord Blackwell
My Lords, does my noble friend agree that it is undesirable for the IMF or indeed any other agency to fund the debts of any particular country unless that country has a sustainable plan to restore its international competitiveness?
Lord Sassoon
I very much agree with my noble friend. The IMF’s lending programmes are indeed conditional on programmes of that kind.
Lord Harrison
Given the fact that we help our fellow European countries in the contribution that we have made to Ireland, the IMF and the EFSM, what is the philosophical and practical difference between contributing to the EFSF—which is not wholly confined to the euro 17—and contributing to the future EFSM or, for that matter, any other acronym that may come along to help?
Lord Sassoon
It would be unproductive to be drawn into the history of the arrangements that the previous Government committed this country to, but we could go into that if noble Lords want to. This Government are completely clear: we will support the IMF on a bipartisan and all-party basis, as we have always done since its inception. It must be for the eurozone countries to put in place their mechanisms for future support.
Lord Dykes
My Lords, does the Minister not agree that in view of the deep urgency of this crisis, which the noble Lord, Lord Barnett, referred to—indeed, the United States is the most irresponsibly indebted country of all in the whole IMF system—there is a growing case for a significant increase in these facilities and for working with the eurozone for the good of the whole world? Otherwise this problem is going to grow and grow, including in non-euro countries.
Lord Sassoon
My Lords, I would just reinforce to my noble friend that at the G20 Britain and all the other countries agreed to ensure that the IMF continues to have all the resources that it needs. There is no lack of commitment to the IMF having those resources. We now need to see what proposals develop. I agree that the situation cannot drag on for ever.
Lord Davies of Oldham
My Lords, the noble Lord has cited the resources that are already available to the IMF but many commentators foresee that they will be inadequate to meet the depth of this crisis. If the IMF seeks to raise further funds, will the Government be contributing?
Lord Sassoon
My Lords, I have made it completely clear that we have headroom under the current law and the statutory instruments that were passed by Parliament in July 2010 and July 2011. We have always contributed to the IMF and we will continue to support it.
Business of the House
(13 years ago)
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Lord McNally
That the debates on the Motions in the names of Lord Sugar and Baroness Pitkeathley set down for today shall each be limited to 2½ hours.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, I beg to move the Motion standing in the name of my noble friend Lord Strathclyde on the Order Paper.
Lord Barnett
While the noble Lord is on his feet, I wonder if he could reply to a business question. On 8 November the Leader of the House, the noble Lord, Lord Strathclyde, promised a debate on Europe. When will it take place?
Lord McNally
I am reliably advised that the debate is included in the forthcoming business and will be held on 1 December.
Lord Cormack
My Lords, will the debate be held on the Floor of the House or in the Moses Room? Most of us feel that it should be on the former.
Lord McNally
By agreement with the usual channels, it will be held in the Moses Room.
Government Procurement Policy
(13 years ago)
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Lord Sugar
My Lords, I am encouraged to see so many of your Lordships joining this debate. Government procurement is an important issue. After all, as taxpayers, it is our money that is being spent every day, and we have the right to ensure we are getting good value. Before I move on, I should like to state that, pursuant to the Code of Conduct, I have registered with the Table Office any relevant interests that may arise from those listed in my name in the House register of interests.
Government expenditure was in the region of £238 billion on procurement in the past year. I believe that this was spent on a whole range of items and services, from paper clips to guided missiles. In referring to getting good value for money, I shall break this down into three categories, the first and most obvious being that the best prices should be obtained for any product or service required by the Government. The second is value for the country and the third is value for SMEs.
Starting with real value for money, your Lordships will agree with me that the world has moved on a lot as far as internet connectivity is concerned. For that reason, there is simply no longer the need for local purchasing. Centralised purchasing should be implemented immediately. I regret to say that, from my experience in running so many businesses, when you place the task of procurement in the hands of unqualified people, it is similar in some cases to letting kids run riot in a sweet shop. The main issue, of course, is that it is not their money, and it is amazing how irresponsible some people can be when spending other people's money as opposed to their own. Obviously, that is stating the obvious.
In August 2010, Sir Philip Green was asked by the Prime Minister to carry out an efficiency review. He published his findings in October 2010. The report spoke of inefficiency and waste in government spending. One of its observations was that it was impossible for the Civil Service to operate efficiently with current processes in place. Expensive IT contracts were for too long with no flexibility; there was no motivation to save money or to treat cash as one’s own—the point that I have just made; there was no process for setting and challenging detailed departmental budgets; and, most importantly, there are inconsistent commercial skills across departments. The report gave factual examples of variations of up to 80 per cent across central departments in prices paid for the same product.
For a commercial person like me, these issues are very easy to resolve. What I am about to suggest will be controversial but very commercial. My assumption is based on the fact that a centralised group of real procurement professionals purchasing the same goods and services obtained in the past for £238 billion would be able to procure the exact same amount of goods for £200 billion. I am of course putting to one side the fact that maybe a lot of the stuff should never have been ordered in the first place, but that is another story.
It is here that a controversial issue arises. There is a need to recruit professionals from private industry and offer not just an exciting challenge. More importantly, they should be able to earn what they can earn in the commercial world as well as having bonus targets. These people would in turn have to employ others. This new group should then be responsible for training existing public sector staff to deal with business effectively to get the best possible value for money for the public purse. Hypothetically—I am just dreaming here—if this group of procurement experts costs £50 million a year, that sum pales into insignificance against my forecast saving of £38 billion given in the earlier example.
The reason why the issue is controversial is down to the following question: would the Government have the guts to do this, or would they be frightened off by headlines about the head honcho in charge of procurement earning X millions of pounds a year? One can see a certain national newspaper carrying the headline: “Fred Smith earns £X million a year, while Joe Bloggs in the north-east of England struggles”. Of course, that newspaper would not be interested in the £38 billion being saved because it does not make good headlines. So I ask the Government to consider the implementation of this idea, to rise above the inevitable external criticism and to do the sensible commercial thing.
My second point is value for the country. So many government contracts are awarded to foreign companies or companies that pay little or no tax in this country. Now, I know that we are all fully aware of the requirements under EU rules and regulations on procurement, but I am sure that your Lordships will not be surprised when I cite our cousins in France, who seem magically to manage to be very patriotic when it comes to dishing out orders from their Government.
There are examples of ECJ rulings that have allowed for European countries to widen the criteria for what they see as the “most economically advantageous tender”— more commonly known as MEAT—which should not be based on price alone. Both France and the Netherlands have used this for environmental and social benefits. In 2000, the French Republic was taken to court by the European Commission for failing to comply with European procurement legislation. The case referred to the construction and maintenance of school buildings.
The European Commission’s main objection was the use of an award criterion that required contractors to recruit local workers from a project specifically to combat unemployment. The ECJ defended the French and ruled that a contracting authority can use the fight against unemployment as an award criterion. Dare I say that this could have been used in the recent Bombardier case, thereby saving 1,400 jobs in Derby? Instead, the decision was made that the train carriages would be produced in Germany. This is where I think this Government could learn some serious lessons from our European counterparts. I am sorry, but if I was in charge of procurement I would have fought tooth and nail to keep that Bombardier deal in this country.
When it comes to government procurement of information technology products, many of us will have noticed that in many government offices, hospitals and other government-run establishments desks are littered with computer equipment made by a certain Japanese and German partnership. There is a funny story here. Some of your Lordships may recall a British computer company, ICL, which was Britain’s equivalent of IBM many years ago. That company was eventually sold to a Japanese company, which in turn associated itself with a famous German company. Many years ago the then Government rightly awarded a lot of their IT business to ICL, a British company. That made sense. However, your Lordships may be interested to hear that the Government are still entrenched in contracts dating back years, which originated with ICL but are now enjoyed by this foreign entity. It is what I call “grandfathered-in” contracts. There has been a total lack of flexibility in using and assessing other supply chains.
I apologise for raising the conflict of interest issue again but I do so merely to demonstrate what is going on. I have one of the few computer companies that still produce computers in this country. We supply certain government-run organisations and schools and employ about 200 people. We are typical of many other companies in this country in that regard. I would like to make it perfectly clear that I am not touting for business but merely using this example to show the scale of what I am talking about. If we were awarded a tenth of the computer and IT system services that the Government purchase in the course of a year I would have to employ at least 350 to 400 more people. I have made this point clear to those involved in procurement, but it seems that the penny has still not dropped. As I say, my example is most probably not unique. I am sure that the same point could be made by people in other industries.
I am certainly not advocating that the Government should pay more for British-assembled products. The process of winning government contracts still has very strict criteria on price, quality and delivery but the priorities are wrong. If my company employed another 300 to 400 people, thus removing from the Government the burden of having to look after some of those people through the unemployment benefits system, it would outweigh some of the minor additional costs that may have to be paid to smaller companies trying to compete with the giant foreign organisations that simply dump products in Britain.
My IT company is inundated with inquiries from young school leavers requesting work experience and wanting to get into the IT field. We simply cannot take them on as we have no work for them. Even if apprenticeship schemes or other allowances are available, there simply comes a point when the company has to face harsh commercial reality.
The Government must support British companies and find a way to make the procurement process work for the country, as the French and other European countries have done. The most economically advantageous deal may not always be about the cheapest price. There are wider social impacts to consider, and this is about what the Government should be doing to support jobs and our UK businesses.
The third and final element of value for money relates to SMEs—the small to medium-sized enterprises. I heard the Government say when they were elected that they were going to ensure that at least 25 per cent of contracts are awarded to SMEs. To date, I understand that figure is about 7 per cent. However, there seems to be another 25 per cent rule, which is that an SME cannot bid for a contract if its value is more than 25 per cent of its turnover. This seems crazy because the SME may be the market leader, yet the contract has to be placed with larger companies that do not have the same expertise.
The Government say that they are angry with the banks for not lending to SMEs. Well, they can encourage such lending by making sure that orders are given to SMEs to impress the banks into lending them money. When government contracts are handed out to large organisations, there should be clauses clearly stating that they must give a certain percentage of the contract out to British SME subcontractors.
I am sure the Minister will advise your Lordships’ House that many of the issues I have raised are already under control and that I should not despair. Indeed, I am aware that, coincidently, the right honourable gentleman the Minister for the Cabinet Office held an event on 21 November entitled, A New Way Forward. The agenda showed that the Government had acknowledged many of the things that I have raised today, particularly in respect of IT. As an example it stated that businesses should understand the Government’s intention to,
“move away from large projects that are slow to implement or pose a greater risk of failure and to end the oligopoly of large suppliers that monopolise its service provision”.
That is fighting talk and exactly what we would like to hear. I have had the good fortune to meet some senior civil servants from the Cabinet Office who have politely debated these issues with me, and I am somewhat impressed with the approach they have taken to date but, with the greatest respect, they may also be the first to acknowledge that these plans will not be achieved with those who are currently responsible for procurement. This Government need to engage serious professionals, centralise their procurement processes and get a genuinely better deal for SMEs in the UK.
I have opened up a whole host of topics to which I am sure your Lordships participating in this debate will add, and I await with interest the comments of the speakers who will follow. I beg to move.
Lord Lee of Trafford
My Lords, I congratulate the noble Lord, Lord Sugar, on securing this important debate. I also declare a number of shareholdings in defence companies that are listed in the Register of Lords’ Interests, because I shall talk about defence procurement.
The problems and complexities of defence procurement have been with us for many years. Twenty-five years ago, when I was a junior Defence Minister, we were spending £1 million an hour, every hour, on equipment for our Armed Forces. One of my officials at that stage told me that we could probably have built the whole of the then naval requirement in the Vickers yard at Barrow, and we did not need the half dozen other naval yards. We had a substantial problem of overcapacity.
As a Minister, I was subject to a substantial amount of lobbying in the Division Lobbies in the other place—not least by the noble Lord, Lord O’Neill, who is sitting in his place and from whom we will hear later. Fairly, he lobbied hard for orders for the Scottish yards. We started a NATO frigate programme that got nowhere. We ordered three new conventional submarines that were never used and were subsequently sold. We had major problems with the Nimrod software, and I remember calling in the head of Ferranti. The then Secretary of State, Michael Heseltine, now the noble Lord, Lord Heseltine, brought in Peter Levene, now the noble Lord, Lord Levene, at a salary unheard of in the 1980s of £100,000 a year to bring competition into defence spend and to move away from single sourcing. Incidentally, today 40 per cent of contracts are still placed on a non-competitive basis, amounting to about £9 billion a year.
In 1997, the NAO reported that the 25 largest defence equipment projects under way at that time were £3 billion over budget and, on average, entered service three years late. By 2009—12 years later—the situation had got worse. Bernard Gray, in his report commissioned by a Labour Government, concluded that the MoD was running a “substantially overheated” equipment programme, with,
“too many types of equipment being ordered for too large a range of tasks at too high a specification”.
On 9 July that year in your Lordships’ House I said that,
“in the private sector, if one trades when one knows that one’s operation is insolvent, that is a criminal offence. At the present time, the Ministry of Defence, frankly, is bust. There is a yawning gap between resources and commitments”.
The noble Lord, Lord Drayson, replied:
“My Lords, I am afraid that I do not recognise at all the characterisation that the noble Lord has just set out”.—[Official Report, 9/7/09; col. 760.]
I think it is accepted that when the coalition Government came to power there was an unfunded liability over the next 10 years of about £38 billion. The noble Lord, Lord Davies, who will speak a little later, may well comment on that. I am not endeavouring to make any party-political points, because the problems of defence spend and procurement transcend party politics. I think it is accepted that we have had too much gold-plating, too much specification-changing, too many personnel changes in contract responsibilities and too little co-operation with our European allies on procurement issues. The EDA—the European Defence Agency—estimated that there were 16 separate procurement programmes for armoured vehicles alone. Only days ago, the NAO’s Major Projects Report concluded that we were overrunning by £6 billion on 15 major projects over the past three years, including a £1 billion cost increase on the Astute submarine programme. Of course, we know that £3.4 billion was spent on cancelling Nimrod maritime patrol aircraft.
We also learnt very recently that the MoD had spent something like £550 million on consultancy fees, with one firm, AlixPartners, apparently charging at the rate of £4,000 per consultant per day. In broad-brush terms, industry negotiators have run rings around the MoD over the years. I have tabled a Written Question, which is awaiting answer, asking the MoD to list the six highest salaries that it pays to civilians. My guess is that these will be relatively modest, given the size of the MoD budget. My question is: should we offer really competitive salaries to recruit the best—a point made by the noble Lord, Lord Sugar—and perhaps not need to spend anything like so much on consultancies?
I am encouraged by the number of new initiatives to improve defence acquisitions that are currently under way, including: the establishment of a new major projects review board; a review of single-source contracts by the noble Lord, Lord Currie; a new material strategy, including options for the future of defence equipment and support organisation under Bernard Gray; and reviewing and renegotiating up to 500 contracts with a value of £8 billion. That is all very laudable; let us hope that significant improvements are achieved.
On jobs and employment, defence spend sustains something like 300,000 jobs. Leaving aside for another day the whole question of R&D spin-off and the operation of SMEs—I think that my noble friend Lord Palmer will refer to SMEs a little later—at present there is a presumption that there should be off-the-shelf purchasing wherever possible. At a time of considerable economic difficulty in this country with high unemployment, we have to be very careful to balance value-for-money purchases with jobs at home. Indeed, that has always been the case.
In conclusion, I would like two things to happen: first, greater industry consolidation across the defence sector, particularly in Europe, because only then will we begin to see a real rationalisation of defence equipment and procurement among our European allies and ourselves; and, secondly, if possible, cross-party agreement to the spending of a specific percentage of GDP on defence, coupled with a Treasury commitment to a guaranteed 10-year funding programme, as there is in Australia, thus giving a firm base on which long-term procurement commitments can be entered into.
Lord Bhattacharyya
My Lords, I thank my noble friend Lord Sugar for securing this debate. I am pleased to declare my interest as chairman of Warwick Manufacturing Group at the University of Warwick.
The Government are Britain's biggest customer. As we have heard, the Government spent almost £240 billion last year. State procurement decides the fate of many of the private sector firms that Britain urgently needs to expand. Britain, having a small internal market, in global terms, must export to survive. That can be difficult for firms in specialised markets with low UK volumes. Procurement can be the scaffolding on which such firms build as they grow. Today, Britain has one of the lowest business investment rates in research and development in the developed world. So our main challenge is for procurement to support innovation, research, and product development.
Encouraging innovation through procurement has long been an issue for policy-makers, going all the way back to Harold Wilson's Ministry of Technology. Many noble Lords will recall those debates and will know that policy delivery has rarely matched the rhetoric. That is because our focus has too often been on government processes and structures and not on encouraging business to innovate. We need a procurement system that encourages commercial innovation, which means designing in risk, experimentation and failure.
The Government are bad at taking risks. That has created a plethora of partnerships, pathfinders, pilots, and bureaucracies, all designed to stop failure. Yet, in seeking to avoid risk, we end up accepting second or third best, or even avoiding innovation completely. The chance to use procurement to grow then gets lost in the thicket of excuses: state aid, European rules, the need for tendering and all the rest. What gets forgotten is that we must make British business competitive before tenders are bid for. Then, no matter what value rules apply, UK firms will have a good chance. Business needs volume to invest in the R&D that will make them competitive. This is especially important if the Government pursue a decentralised procurement strategy, where there is a danger that fragmentation leads to business refusal to invest. This makes support for procurement innovation essential if firms are to develop the products that appeal to government customers, both domestically and in export markets.
Britain has a strong science base to support such innovation. We lack consistent funding in the gap between blue-sky research and commercial exploitation. This exploratory development phase is a weakness for British business. Procurement policy could transform this. In America, this is achieved through a programme called Small Business Innovation Research. SBIR takes 2.5 per cent of all federal research spending, and directs it to support business innovation in key government procurement areas. It makes straightforward grants for both exploratory and commercialised projects. It is low bureaucracy and innovation-focused. This programme works. It has seen the emergence of successful US companies like Qualcomm and iRobot. In the UK, we have a similar programme, the Small Business Research Initiative, but it is tiny compared to America's. We should take this programme and use it to transform our approach to innovation in procurement. We could tax a small proportion of all UK procurement budgets to support an innovation fund. This would mean that procurement projects had British innovation designed in, whatever the scale of the procurement. If directly top-slicing procurement budgets and reallocating funds to research cannot be made to work, reducing emphasis on the R&D tax credit in favour of encouraging innovation by small businesses may be an alternative, because very few small businesses get any R&D tax credit.
Once we have secured a funding stream for innovation, we should worry less about structures and focus more on letting businesses lead. Intermediary institutions are vital to business R&D, whether they are university- based, commercial providers or Fraunhofer-type institutes; but too often we have seen government create technology programmes that have little appeal for business. Government should decide what procurement innovation paths they want to support, from health to aerospace; deliver research capacities in these areas; and then let businesses innovate without interference.
To achieve this structural shift, we should expand the Technology and Innovation Centres programme to provide a lead for innovation in every key government procurement area. The primary role of the TICs would be to distribute resources to business-focused intermediary research bodies in order to develop laboratories and research facilities in areas of procurement innovation.
To ensure that the TICs are commercially oriented, the aim should be to move them to the private sector as they mature. They should look to make a return on their capital investment by taking a slice of the research income that their partners generate, enabling them eventually to seek commercial funding. That way, those running TICs will have incentives to favour research groups with a track record of helping businesses successfully innovate in procurement areas.
On the business side of the equation, the SBRI should offer research support to businesses which seek to develop solutions to our long-term procurement challenges. Those businesses should be free to choose where to invest their grants—with profit-making, public or charitable bodies—so long as they work with a procurement TIC partner. Some research projects will prosper, others will fail. The key is that businesses will be free to choose partners who fit their needs and can help them find solutions. Procurement should be an investment in our national future. If we focus on innovation, it will be.
Lord St John of Bletso
My Lords, this is an opportune time for a debate on this issue. It comes just three days after the speech by the Cabinet Office Minister, Francis Maude, on proposals to radically overhaul and improve public procurement. It also comes at a time when all government departments are under pressure to cut costs and when small and medium-sized enterprises are in desperate need of better access to bid for government business, which will call for less red tape.
I am grateful to the noble Lord, Lord Sugar, for giving us the opportunity to debate this important issue. No one in your Lordships' House is better qualified, given his vast commercial experience. I also thank the House of Lords Library for the excellent briefing pack on this debate. As a member of the House of Lords Information Committee, I hope that many Members who recently joined your Lordships' House will avail themselves of the tremendous support provided for these topical debates by the Library.
My interest in the subject of this debate goes back to the Gershon review of 2004, which both set and achieved an ambitious target of efficiency gains across government departments and the wider public sector. Procurement was clearly the largest area in which gains were made. Just as important, the review focused on increasing productive time. Undoubtedly, huge savings in costs and efficiencies followed from the review; but there is a lot more to be done, which is where I will address my few comments.
Every year since then—this is my other reason for speaking in the debate—I have hosted a series of lunches and dinners with members of the purchasing departments of public and private sector organisations in order to exchange knowledge, experience and success stories, and also to learn from errors. That is why this issue is very important. The noble Lord, Lord Sugar, made the point about having effective and strong procurement managers. Clearly, in the past, procurement managers in the public sector have been severely impeded by bureaucracy and red tape emanating not just within the United Kingdom but also from Brussels.
My other interest in this debate has been my desire to promote greater access for SMEs to compete for government contracts and services—by which I mean enabling them not just to be cheaper but to act more expeditiously. With the revolution over the past 10 years in online business this process can and should be a lot more efficient in both cost and time. As the noble Lord, Lord Sugar, mentioned, procurement accounts for £238 billion, or almost 35 per cent, of public sector expenditure. With the budget deficit, efficient and better procurement is essential, not a luxury.
Sir Philip Green's efficiency review of public spending emphasised credit ratings, buying power and the need to leverage spend as well as to mandate centralised procurement for common categories. Very importantly, he also highlighted the need to produce and use accurate data and to simplify and minimise demand and specifications. Although there are clear advantages to centralised purchasing and bulk buying, which allow prices to be driven down and minimise waste and administration costs, there also are dangers which the noble Lord, Lord Sugar, did not outline. I shall raise two very small dangers. First, I believe that innovation might be stifled—by which I mean that if all decisions are made centrally there will be very little room for new initiatives and alternative plans and products. Secondly, differences in local needs might be ignored. There is always a danger that a “one size fits all” attitude could become a matter of “one size does not fit anybody”.
Many SMEs still find the whole process of public procurement too onerous and decide to opt out. My question is: what can the bigger suppliers do to encourage SMEs to get involved through innovative partnering agreements? One of the key objectives must be to procure for an outcome with some flexibility. Procuring for the outcome rather than for the particular product allows suppliers the space to come up with new methods and equipment to solve a particular problem. To enable that, the Government need to put in place financial mechanisms that can cope with payment by results.
We also need to look at cross-departmental incentives. Many outcomes can benefit more than one government department; for example, getting people back to work eases the strain on the health service and others, not just the Department for Work and Pensions. Yet how does one incentivise one department to invest money in a project that will benefit others? Time restricts me from elaborating on this proposal, but what is needed is a budget and payment system that can manage this cross-section benefit.
My time is rapidly running out. While there has been a lot of debate about the benefits of PFIs, I believe that public/private partnerships have an extremely important role to play, with the private sector carrying some of the financial risks of new projects. This is strengthened by payment-by-outcome approaches, but several problems need to be addressed.
I believe that there are huge opportunities but equally huge challenges. Better information is essential. How do you incentivise different departments? The scale and complexity of the public sector is such that there is clearly not a common solution to procurement strategies. Technologies can and should make a huge difference to procurement. I believe that more dialogue between public and private procurement managers could be part of the paradigm shift required in the public sector. A professor at Henley Business School aptly summarised the situation when he said:
“No other aspect of government could release so much money, so readily and with such little political disagreement or social detriment ... Public procurement, with a few notable exceptions, is massively under-led, misunderstood, and under-focused”.
This transformation of procurement as a discipline is long overdue.
Lord Puttnam
My Lords, I, too, thank the noble Lord, Lord Sugar, for making this important debate possible. He managed to set out the principal issues in an honest and typically pugnacious way. The thrust of his speech that particularly impressed me was his insistence that we stop pretending that we are goody two-shoes and start to play the procurement game in the way that it is successfully practised in France, Germany, the Netherlands, Canada and, by the most sophisticated and unyielding protectionist of them all, the United States.
He also made what I believe to be a crucial point in stressing that the most economically advantageous deal may not always be the cheapest price and that there are wider social impacts to consider. To put it another way, I suggest that the overriding aim of successful procurement should always be driving costs down while driving value up. It is this concept of where true value lies that turns procurement from a job or a task into an art, or certainly a craft—one that is able to look right across the value chain and understand the full implications of its remit.
Perhaps I may put a little flesh on that assertion by offering your Lordships an example of what I mean from not all that many years ago. Here, like the noble Lord, Lord Sugar, I must declare an interest, but it is one of those interests that in my judgment adds rather than detracts from the experience that I bring to this House. I am very proud to be the senior non-executive director of Promethean, a British company, founded in Blackburn, and one of the two global leaders in interactive classroom technology.
About eight years ago the then Government sensibly took the view that advances in education were very likely to be technology-driven and that a window of opportunity existed for the UK to become a world leader in the provision of educational hardware and software. Significant government resources were found and a serious procurement programme, amounting to well over £500 million, was put in place. As usual, no particular favours were shown to UK suppliers, that being the ideological stance of the then Labour Government. I should stress that the commitment to procurement from global markets was at that time both fashionable and ideologically driven—wrongheaded in my view but, to its credit, entirely genuine.
In respect of Promethean—and this was long before I joined the board—what was being offered was a very advanced piece of technology together with a pretty comprehensive training package, sufficient to allow the teacher to familiarise him or herself with the full educational potential of the product. As the government procurement process began to bite and the price was squeezed, something had to go. It could have been the R&D commitment to future innovation. Happily, the company decided to protect that. What went instead was the training package. And with what result? For the next few years, white boards, from a variety of manufacturers, were being purchased and shipped to schools, colleges and other institutions in which nobody had the skills to use them. I would guess that hundreds, maybe even a few thousand, found their way into cupboards or were simply never taken out of the wrapping paper for fear of embarrassing staff who were simply never offered the training, and the resulting confidence, adequately to use them.
Procurement in its crudest and most unimaginative form had done its job, but far from creating real value—certainly, value as any one of us would understand it—or helping to build a successful UK-based business, let alone improving the education of an entire cohort of children, it had managed, in effect, to defeat the entire purpose of the exercise. Happily, much of that damage has since been rectified by a generation of enthusiastic and digitally literate heads and teachers, but several vital years and myriad opportunities were lost through the practice of what the noble Lord, Lord Sugar, rightly describes as ill thought-through procurement policies.
I have a dream, and it is a dream that has recurred time and again since my arrival in your Lordships’ House some 14 years ago. That dream is to read a government response to a thoughtful, well argued and thoroughly constructive report by a committee of this House which is similarly thoughtful, similarly well argued and, most important of all, equally constructive. On this occasion the report in question is that of the Science and Technology Committee, entitled Public Procurement as a Tool to Stimulate Innovation.
As I see it, intelligent procurement is all about asking the right questions and understanding what might be the ultimate, long-term national objective. That will not necessarily be the same objective as that of the Treasury, which is invariably tied to a far more short-term view. The report of the committee to which I refer asks all the right questions in a polite and reasoned way. The Government’s response is equally polite, but by my reading falls well short of the degree of urgency and commitment that the committee seeks. The committee makes it clear that it intends to return to this subject next year. I seriously welcome that assurance. But when it does, and assuming that it is as disappointed with progress as I rather expect it to be, I hope that it will follow the example of the noble Lord, Lord Sugar, and be prepared seriously to take the gloves off.
The committee’s hand was strengthened earlier this week by Vince Cable’s welcome announcement of the appointment of Phil Smith, the chief executive of the technology company Cisco, as the new chair of the Government’s Technology Strategy Board. As the committee’s report makes clear, the TSB is ideally placed to influence and maybe even drive through many of its recommendations. In my judgment, the board could not have a better ally in whom to entrust the change of culture that both the committee and the noble Lord, Lord Sugar, are pressing for. I would suggest that this House should commit itself to offering Mr Smith every possible scrap of support in delivering the improvements in policy and practice that are being argued for in this extremely well-timed debate.
Perhaps I may finish with this observation. I find it very strange that for a debate on an economic subject which all but obsesses, and has obsessed over the years, the Conservatives in opposition and in government, they have not put forward a single spokesperson. I am sure that the noble Lord, Lord Wallace, will more than adequately reply for the coalition, but it seems odd that a subject of such enormous importance and which is so central to many elements of Conservative philosophy is not seen to be important enough for them to put up a speaker.
Lord Kestenbaum
My Lords, I too congratulate my noble friend Lord Sugar on calling urgent attention to this matter. At a moment of deep anxiety for the British economy, this debate could not be more timely. The first thing we should do today is lay to rest the myth which says that you only have a pro-business environment if the Government leave the stage. As many noble Lords have said, let us just consider the United States. Many of the high-tech entrepreneurs who I have been involved with in this country have taken their inspiration from Silicon Valley. The conventional wisdom is that that is a place where government do best when they are invisible, and yet the opposite is the case. Procurement has been the major factor in the growth and development of Silicon Valley. Military spending funded the generation of microwave technology companies that were a mainstay of the region before the semiconductor industry arrived. It is no exaggeration to say that whether it is the GPS navigation system we all use or internet protocols the public procurement of technology has been the basis of the most transformational global innovations of recent decades.
The first point I wish to stress is just how underexploited the procurement lever is here in Britain when it comes to driving innovation. It is a huge worry, because particularly now the Government are telling us all the time of the need to drive economic growth while at the same time curbing public spending, and yet the buying power is just not maximised. Let us consider the opportunities. As the blight of worklessness increases, we know broadly where the new jobs will be. All the evidence shows, again and again, that innovative, high-growth firms will produce the jobs of the future. NESTA’s recently cited research into high growth shows that just 7 per cent of businesses in the UK have been responsible for half the jobs in the past decade, and the characteristics of these job-creating businesses are those which are most likely to innovate.
In my own experience recently, first as CEO of NESTA and now as chief executive of Lord Rothschild’s family investment interests, my colleagues and I have been privileged to back some of these great young tech entrepreneurs. Through doing that we learnt what these growing small businesses value above all. Capital is important to them, but above all, these young companies value customers; customers are the key. These companies thrive on customers because they are the lifeblood of the most promising parts of our economy, who in turn will be the lifeblood of our recovery. But too many of them will remain small, without customers, at a time when banks have no interest in this risky end of the market and when venture capital houses are on the prowl for the next high-profile buyout. But it is the most significant customer of all, the Government, who are more likely to make a tech business viable than anyone else.
By way of example, while head of NESTA, I was delighted to learn that one of our investments, a UK tech start-up, was bidding for a government contract for its experimental silicon chip. Imagine my surprise when I found out that the Government in question were not ours but the Government of France. Our company proceeded to tell me how other Governments, of France, Japan and other countries, were so much better sources of these kinds of contracts and that French and Japanese competitors usually benefited from them. After all, they had early customers at an early stage.
As noble friends have suggested, we have made modest steps in transforming government budgets from blank cheques to intelligent, demanding customers. Yes, the SBRI does attempt to open up public procurement of R&D to a wider audience of small businesses. Yet with all the progress made, let us be honest: it is on a tiny scale, a mere pinprick at a time when new customers are life and death to the 99 per cent of firms in the UK that employ fewer than 50 people. Surely it must be time to build these programmes up to a real, meaningful scale that would have great and lasting impact. As the noble Lord, Lord Puttnam, said, the TSB, whose board I have the privilege of sitting on, suggested recently how small tech companies might step up to the task of solving major national challenges if significant procurement budgets were diverted differently.
I have focused my remarks on procurement as the single most significant lever that any Government have to drive innovation and thereby create growth. But permit me one final wider observation. It continues to prove exceedingly difficult for small businesses to win these R&D contracts. That is not, as my noble friend Lord Sugar has correctly observed, because the budgets are not available. It is because too often, government departments are consistently unwilling to accept the risks of financing early-stage technology development, mostly because they do not understand the risks. Surely government departments must start to frame their procurement needs as genuine commercial challenges for small businesses to solve, rather than as bureaucratic hoops to jump through.
Here is the rub: no amount of small programmes, often timid in scale and often initiated with great fanfare and then quietly closed 18 months later, will succeed without genuine, consistent and ambitious leadership from the very top—from ministerial level. That will produce an aggressive, ambitious national programme which runs through government that does nothing other than force a procurement revolution. Yes, we should create incentives, as my noble friend Lord Sugar has suggested—real incentives for those who take risks and get it right
This is a revolution and this procurement revolution needs to be driven, cajoled, inspired and incentivised. It is no exaggeration at this time to say that in large measure, our economic growth will depend on it.
Lord Palmer of Childs Hill
My Lords, I, too, compliment the noble Lord, Lord Sugar, on securing this debate on government procurement policy. The trouble may be that there are a number of policies, most of which are not delivering what is required at the right price. I have seen this in local government, in defence procurement and in procurement in the construction industry—the industry which is supposed to contribute to leading us out of the recession.
The Strategic Defence and Security Review was published a year ago and said that it would fundamentally re-examine how the MoD was structured and managed. Nowhere is this more needed than in its procurement policies and their implementation. The MoD, in deciding its procurement policies, must have a clearer idea of what wars and battles it could be required to fight. There are large items of equipment in various war theatres, and we always end up with the difficult decision about what to do with the equipment at the end of the engagement. As an example of how not to do things, the building of two aircraft carriers which, it appears, no one knows what to do with—we do not have aircraft that can use them—is a prize example of poor procurement policy. The Member of Parliament for the area embracing one of the dockyards said:
“To rip up these contracts worth millions at this stage would not only be financial madness, but political suicide and I hope the coalition government sees sense”.
He is right, but because the previous Government made unbreakable contracts for ships that no one really wants, they will be built. Is that procurement policy or procurement madness? Our home-based defence industry complains, through its trade association, that the MoD has yet to define its indigenous capability requirements, which leaves the acquisition process unguided on what should be procured onshore, and industry with little on which to base investment plans.
The UK's requirement is for a continuously available critical mass of core skills in disciplines such as systems engineering, plus design and development engineering, that can rapidly be placed on a war footing. Assured off-shore access—which my noble friend Lord Lee describes as “buying off the shelf”—alone may be inappropriate for a number of reasons. It invites, as the noble Lord, Lord Sugar, said in another context, home-based inertia. It leads to the fading of skills. It jeopardises the need to maintain a critical mass in the support environment, and it could be subject to political restraints, legal challenges in other countries or third-party regulatory regimes which, together, cannot guarantee the necessary level needed in a national emergency.
ADS, the defence trade organisation, maintains that the majority of equipment costs for the MoD are now incurred in maintaining and upgrading existing systems through life, rather than in the acquisition phase. This means that “Through Life Capability Management” implications must be taken into account during acquisition. So what is needed is an effort to predict what could be needed in 2012 and beyond to work with UK industry to promote a holistic approach to decision-making. Short-termism does not help the MoD, the defence industry or the country.
Good procurement is needed not only in defence. The current economic crisis has created what some see as an opportunity to transform how our public infrastructure is procured and delivered. Much attention has been given to the future of the economic recovery, starting with the construction industry. At least one of the UK's largest construction businesses has strong beliefs on how the construction industry can help the Government to achieve our objectives of reducing the fiscal deficit while maintaining a platform of economic growth by actually reducing—reducing—the costs of construction. The basis of how to achieve this result is in how public infrastructure assets are procured.
Where possible, our Government should group its infrastructure procurement into programmes by geography and type, so that cost-reduction targets can be set over periods of five years. The Government should select the successful bidder or bidding teams on their ability to deliver the acceptable cost and their ability to deliver the cost reductions over a defined period. Bidders would need to accept that projects would not proceed unless the acceptable cost and cost reductions were achieved. The construction industry believes that, in that way, public sector procurement costs will be significantly reduced. Small and medium-sized enterprises will benefit through the supply chain and, with programmes of work defined over a future period, there will be significant opportunities for training and apprenticeships.
A number of noble Lords have referred to small and medium-sized enterprises. Listening to what other noble Lords have said, I throw into this debate that, since January, the Treasury has awarded a total of 16 contracts and put notices on the contracts finder, where there is a total of just over £12 million—none of which has been awarded to small or medium-sized enterprises. The Department of Transport has advertised 122 contracts with a value of more than £135 million on the contracts finder website since May 2010. Of those contracts, only £125,000 went to small businesses: under 1 per cent. Other figures are equally damning.
I never say that a project, be it in defence or construction, should take place purely to make employment, such as with useless aircraft carriers. However, where a contractor agrees to carry out the work and to employ local labour, it must surely weigh heavily in a successful bid. With such improvements in procurement processes, there could be guarantees in the use of SMEs, local employment and apprenticeships. If someone finds a way to do something cheaper and give better quality and value, be they SMEs or large enterprises, then they will prosper and increase market share—until, of course, their competitors catch up, seeing what they need to do in order to compete.
We must tackle why it costs a business twice as much to win a UK government contract as it costs to win a French government contract. We must ask why we often take sensible European laws and apply them overliterally, making the tendering process far more complicated than it needs to be.
Lord Hunt of Chesterton
My Lords, I thank my noble friend Lord Sugar and the other speakers for their remarks about how government procurement needs to improve fast, first, to make government services more effective and, secondly, in order for the Government to support and stimulate UK industry, commerce, technology and medicine. It is important to note that procurement is the purchase not only of goods and services but increasingly of research, software and manpower. I declare an interest as a government scientific consultant and as director of a consulting company that is not growing, but that is deliberate. We are providing all sorts of information to companies that are growing. It is rather hard work, growing a company.
The key to the effective use of procurement to the development of industry, commerce and technology is for the Government to have long-term plans, as the noble Lord, Lord Palmer, has just pointed out, and to consider at the outset how they will be implemented in partnership between the private sector and relevant departments and agencies. In addition, the process of planning procurement should always think of the long-term export possibilities of the decisions, an aspect of policy that needs emphasising. Can the Minister give us some assurance that this aspect of procurement is now firmly on the government agenda? Furthermore, this should be part of the job description of departmental and agency managers. I used to be head of the Met Office. Of course, at no point in my job description was there anything to do with procurement efficiency or improving British industry, unlike that of my colleagues in other countries.
Procurement must also be at the highest standard internationally. Harold Wilson knew this when he initiated government programmes in the 1960s. He was perhaps the last technocrat in No. 10. He realised that it was absolutely vital to have advanced electronics. The transputer came from that. It was interesting to be on the House of Lords committee when we heard from, for example, the managing director of ARM—one of the most successful British software companies—that that came out of Harold Wilson’s programme on transputers.
Over the next decades, there will be huge investments, both in the UK and globally, in various areas, such as coastal defences, for which the Environment Agency is responsible, high-speed trains, carbon capture and storage, and innovative types of nuclear power. Will these investments lead to the greater competitiveness of UK companies? Only if the Government specify high standards and encourage innovative solutions.
The lack of funding for UK privatised and public laboratories—again, unlike what happens abroad—makes this more difficult. Already, other European and Asian countries in the areas that I just mentioned are raising the technical standards in these projects which the UK is not currently planning to follow. Therefore, these other countries will become more competitive in future. For example, the Netherlands is integrating coastal defences with coastal wind power. Norway’s work on carbon capture and storage has higher environmental standards than are planned for the UK. China has more than 600 engineers working on hybrid nuclear; we have a small company that is trying, with China, to begin in this area. In these areas, there will be world expertise in the UK, but it may not be used in the UK if we are not encouraging these advanced solutions.
The UK Government are still not publicising as vigorously as they might on their websites what they are sponsoring, particularly from contractors. In some cases, where there has been some advertising of advanced technology by the Cabinet Office, it is rather strange that the relevant UK companies have not been mentioned. Noble Lords may have heard the remark that I have mentioned before and which many companies in other countries have made that if any small company survives in the UK it must be jolly good.
I will just touch on the indirect aspects of government procurement, which has become increasingly important and has changed significantly since the 1960s. At that time, of course, Parliament regarded it as essential for all organisations in government to have their own very substantial research programmes. Parliament said that the electricity generating board should spend 10 per cent of its turnover on research—of course current electricity companies spend much less that that. I was privileged in the 1960s to work in the world-class Central Electricity Generating Board laboratories. Americans used to come and were amazed at the high-level research that was being conducted there. I was also, incidentally, branch secretary of the local trade union, the EPEA, which shows how these things go together.
The United Kingdom then looked like France, the United States and the Netherlands today, with their world-class government and industrial laboratories. What is to be done? The Government, instead of having their own laboratories, now have to rely on ad hoc advice from consultants and universities, neither of which have the experience of unbiased government experts. The Government need to have a very rigorous programme of using external advice to make their decisions. Of course, this should include international advice. For example, DfID, having eliminated its own natural resources lab—subsumed into the University of Greenwich—now funds much of its advice from centres in the United States or relies upon NGOs such as the ODI.
I hope that the Minister will explain how this procuring of expertise is managed so as to get the best advice about major procurement programmes and the business of government and regulations. One fears that a few big names are often used. I will give noble Lords a little story. When I was head of the Met Office, we asked a very large consultancy company—let us call it WP; you might imagine who that was—to advise the Met Office how to improve its financial controls, which it said would require the installation of a new system that would cost £1 million. On this basis, the Met Office then asked companies to say whether they would bid for this. The company said, “Oh no”, and that it would now cost £2 million. Fortunately, this was the 1990s and the Government had an excellent lab called DERA, the Defence Evaluation and Research Agency. We went down the road to them and we got the job done for half a million. Of course, DERA does not exist any more and doubtless you would have to go back to “WP” and get a very expensive answer.
I believe that we now need much more serious vigilance in real-time monitoring of such contracts, since we have moved to the present position.
Lord Broers
My Lords, I add my congratulations to the noble Lord, Lord Sugar, on obtaining this debate. It is an extraordinarily important topic today and I agree with all his specific suggestions. However, I wish to speak on the broader issue, as discussed by the noble Lord, Lord Palmer, of how we can, as a nation, ensure that we are in a better position to provide and maintain more of our own infrastructure. The noble Lord, Lord Sugar, mentioned Siemens supplying our rail rolling stock rather than Bombardier, which, while not a British company, at least manufactures in the UK. However, the problem is of course much wider than just railways. We are having to turn to overseas companies to supply most of our renewable energy sources and our new nuclear power stations as well, and, if we go ahead with it, our high-speed rail network too. This will further increase our current account deficit in manufactured goods and do nothing to alleviate our serious unemployment problem.
Many of our industrial companies cannot compete with overseas suppliers, despite the significant advantages of being local suppliers, because they have quite simply not kept up in research and development. At the same time as we have held, even advanced, our position in science, we have steadily slipped down the R&D tables in investment and achievement to seventh place. The noble Lord, Lord Bhattacharyya, has already mentioned this. There is nothing inherently lacking; several of our high-technology companies are thriving and well ahead of their competitors, but there are not enough of them and huge gaps are left in our ability to manufacture what we need, especially to meet our energy and transport needs.
To correct this failing, we must do more to ensure that our capabilities better match our needs, and government procurement can play an important role in doing this. Intelligent procurement combined with joined-up planning, as practised by several of our European and American competitors, would put us in a much stronger position. Joined-up planning is a long-term issue, as the noble Lord, Lord Hunt, has just said. Government should not only be thinking 10 and 20 years ahead in planning what infrastructure will be needed but making sure that we will have the industrial capacity to manufacture a significant fraction of it ourselves. I am not trying to suggest that we should do everything—we are a relatively small nation and that would not be sensible—but if we cannot supply a significant fraction of what we need, we are going to further aggravate our financial and employment problems.
The Chinese and Indian economies are growing and their trade balances are healthy because they have geared up to build their own power stations and transport systems. They do not have to get others to do everything for them. This also strengthens their ability to export, and thereby balance their need to import materials and essential commodities. In contrast, our own energy and transport policies seem to be developed without any effort to match them with our industrial capabilities. We do not seem adequately to involve industry in the planning process. By that, I do not mean having a few very senior executives acting as non-executive advisers—they are no doubt valuable, but at another level. What is needed is the involvement of the engineers who set and understand in detail the research and development operations of their companies and that can advise on what is and is not feasible. These experts also need to learn what the Government are planning so that they can comment on whether their companies are likely be in a position to supply it.
There are two ways in which we can do this. First, the TSB, which the noble Lords, Lord Puttnam and Lord Kestenbaum, mentioned, has responsibility for using taxpayers’ money to provide leadership in strategic research and development. It should be able to ensure that appropriate manufacturing capabilities will be available in the future. Its emphasis tends to be on good research to support the long-term development of emerging technologies rather than ensuring state-of-the-art capabilities in existing technologies, although it has the ability to do this as well. In fact, the TSB’s knowledge transfer networks provide an excellent mechanism for getting industrialists together with the Government to provide joined-up planning. I declare my interest here as unpaid chairman of the TSB’s Transport KTN. This evening, I am meeting senior members of the rail, automotive and marine industries to explore the possibilities of a technology innovation centre for transport.
Another mechanism that we have to ensure timely industrial planning is our network of chief scientific advisers. At present, they are seen mainly advising on science rather than engineering, but there is no reason why they should not play a larger role in joining industry with government. This issue was addressed by one of our recommendations in the Science and Technology Select Committee’s recent report, Public Procurement as a Tool to Stimulate Innovation, which says:
“We recommend that CSAs should have responsibility for encouraging engagement with industry (including both suppliers and potential suppliers) and academic communities with a view to promoting the procurement of innovative solutions … This role should be incorporated into departmental objectives”.
I see CSAs playing a more active role in ensuring that government policy in energy and transport is linked with future industrial capabilities.
If we go on planning our future infrastructure without regard to whether we can produce it ourselves, we are throwing away perhaps our best opportunity to solve our financial and employment problems. I ask the Minister to reassure us that the Government will use all the mechanisms available to them to restore our ability to have British workers build our future infrastructure.
Lord Anderson of Swansea
My Lords, my noble friend Lord Sugar made a typically robust and wise opening speech, drawing on his vast commercial experience, and what a reservoir of experience throughout the House has been revealed by this debate. My only interest to declare is that I am a Welsh Peer and I tend to look at elements of public procurement in terms of the fairness in the regional spread, including to my own nation. The aim of procurement generally of course is to obtain the best value for money. In the private sector, that is done in a fairly narrow way; in the public sector, the procurement has to meet a number of other objectives, including regional policy. This is one area that I wish to touch on in one narrow corner of the vineyard.
I draw your Lordships’ attention to one distinct area, the procurement for the 2012 London Olympics. I am grateful to the Financial Times Newcastle correspondent, Chris Tighe, for the figures that she gave me, which she reproduced in the Financial Times on 14 November. My conclusion, which I invite the Government to share, is that the figures that are available display a deep cause for concern, and a failure on the part of government since the initiation of the Olympics to ensure that the Olympic Delivery Authority spread the contracts widely throughout the country. It is now, of course, too late, because the greater part of the contracts have been allocated.
The amount spent by the ODA is substantial: so far it is about £6.5 billion. The total will be just over £7 billion, with a £2 billion contingency. Overwhelmingly that is taxpayers’ money, which could have been used for broader public purposes. Clearly, the Games authorities were aware of their public responsibilities. The noble Lord, Lord Coe, gave this pledge, in 2005, that the Games would,
“provide a unique opportunity for businesses across the UK”.
The chairman of the ODA, John Armitt, said in 2008,
“businesses from all over the UK are already winning ‘economic gold’ with millions of pounds worth of London 2012 work … We want to work with the best of UK plc to successfully deliver the games—the largest project this country has seen for generations”.
So the commitment is there from the leaders and the amount of public funds is substantial, but what is the result—the record? The ODA has agreed thus far 1,500 direct tier 1 contracts—that is, with main suppliers; it estimates that another 50,000 will have been or will be generated through the supply chain. The only contract figures available are therefore for tier 1. That has not been volunteered by the ODA with some excess of transparency but has been made clear by parliamentary Questions in another place. As a percentage of the total value, London has received 54 per cent of contract value; London, the south-east and the east of England together account for 83 per cent of contract value. Scotland has received 0.4 per cent, while Northern Ireland has received 0.28 per cent, the north-east 0.19 per cent and bottom of the table is Wales with 0.01 per cent. That means that less than 0.9 per cent of the total value is accounted for by expenditure in Scotland, Northern Ireland, the north-east and Wales.
I can imagine the Government’s response. “Ah”, they will say, “you are deluding yourself. Look at the cascade down the supply chain; there will be many firms in the north-east, in Wales and Northern Ireland that benefit”. But there are no more robust figures available to support this assertion that there is a spread or cascade to the nations and regions of this country. It seems logical to conclude that the overall percentage of the subcontracts is broadly similar to that of the tier 1 contracts; how could it be otherwise? Only the first tier is within government control, and on the figures available they have surely massively failed on the broader public policy criteria and interests. It has hardly helped us in Wales to receive 0.01 per cent of the spend at a time of massive public expenditure cutbacks and high youth unemployment, when Wales has been largely neglected.
The Government may try to put a gloss on these figures and take refuge in anecdotal evidence and the cascade effect, but the figures that are available are clear and the overall conclusion must surely be that there is a major missed opportunity and it is now too late to redress it. How can I begin to persuade businessmen, unions and the public in Wales that the Government have ensured that they have a fair slice of the cake, particularly when National Lottery funds were diverted to the Olympics—funds that might otherwise have led to projects within Wales? So the result is totally contrary to the professed regional policies of the Government. Surely there is no way in which to hide the manifest failure, save by obfuscation, pious hopes and platitudes.
Lord Sutherland of Houndwood
My Lords, I thank the noble Lord, Lord Sugar, for a vigorous and, dare I say it, characteristically incisive introduction to this important debate. At the beginning, I want to declare an interest. I work with a Malaysian conglomerate, YTL, which is currently working with a vigorous, small young British company in IT, Frog, which is based in Halifax and is doing marvellous things in the provision of IT in the area of education. The other way round, interestingly, we are seeking to procure for that company as part of a broader deal an arrangement to provide IT services for all Malaysian schools. That would be a major thing for such a bright young company, and we wait to see the outcome. There is talent in this country, and that is a good example of how it can be harnessed to international sale of services as well as to the purchase of services locally.
In this debate, I want to offer noble Lords a case study of public sector procurement in which I had to carry out an investigation, and put it in the context of current government policy, which will inevitably lead to much greater need for procurement expertise in the public sector. Those two policies to which I referred, which are mirrored elsewhere, are in health, where many of the services that we now get directly through public sector activities will be procured from other sources. Equally, in education, academies and free schools will have increasing powers of purchase and procurement. I rather approve of this policy, but on the other hand it means that there will be a need to ensure that in the process of procurement in the system we are competent and fit for purpose.
The case study, which bears on both of those—and Ministers should beware and read this—relates to something that happened in July 2008 when an American company that provided a major examination portfolio for English schools’ SATs failed to meet the terms of its contract. Increasing panic spread through the various agencies involved. The fact that at least four different agencies were involved is one of the messages to come from this. The commissioning agency was the Quality Curriculum Authority; within that was a non-statutory subsidiary, the NEA, which ran that side of the business. There was also the statutory subsidiary in Ofqual, which was meant to be an independent regulator but was none the less within the major quango—and then there was the Department for Education, then titled the Department for Children, Schools and Families. Those four all had an interest in this procurement and its correct outcome. You can imagine the panic when it became clear that the delivery of the test results was going to be significantly late. Those are the results for those aged 11 for which parents, pupils, teachers and school league tables wait, and which pupils progressing to secondary school require as a clear picture, so they can take them and be assigned a proper educational syllabus in secondary school.
The panic was great, but what was the initial reaction? Of course, it was to procure someone to carry out an inquiry—procure with a small “p”. That was me. There were some comic elements to that small “p” procurement, but I will not spell them out today. The job, as I saw it initially, was to look at what had gone wrong with the process in the examining system and to rate answers to these questions. Was it efficient? Were the results that eventually came through safe? Finally, what do we have to do to make up for the shortfalls of the process in question?
However, it quickly became apparent that I had to push further back into the process of procurement. This major American company, which had been brought in to carry out that important element of the British examining and assessment system, failed. What was wrong with the procurement? Fundamentally, there was one very considerable thing wrong: by and large, with no disrespect, those responsible for the procurement were amateurs. They were on the quango board or were officials within the quango—officials with strong education experience and a degree of oversight from within the Department for Children, Schools and Families. With no disrespect, those amateurs were recruited because they had other admirable qualities, but in this area they did not have the necessary expertise.
The lessons from this were, first, that procurement in the public sector will increasingly be for services, not just for items such as missiles, schools, new hospitals and so on. Secondly, when amateurs go through a system of procurement they are either dreadfully incompetent and amateur, in which case they get tripped at the first hurdle, or they do what these groups did: they played it by the book, the whole book and, lastly, nothing but the book. All the ticks were in the boxes. I examined very thoroughly the process. It is laid out in my report that 11 stages of the process were all gone through formally and correctly. They got good due diligence on financial matters from one of the big four companies, which investigated the company in question—again, that ticked all the boxes.
Informally, however, what did they not do? As became apparent, and as the then shadow Secretary of State Michael Gove pointed out with some delight, they did not check the web or the press reports. They did not look at what was being said in the lively American press about this company. For example: “Mismanagement by ETS”—that was the company—
“led to over 4,000 teachers being wrongly failed. This led to a shortage of teachers”,
in the USA. It had to pay $11 million in compensation. There are plenty more quotes in the report if your Lordships really want them; that is just an example. Did no one within the QCA have sufficient international contact or nous to pick up the telephone and ask a colleague in the States, “What is this company like?”? The press reports were clear, yet these informal checks had not been made. It was played by the book, as they did on the European journal and the new system whereby competitive dialogue was introduced. All that was correctly done but it was a major failure in procurement.
Another major failure, I suggested, was that because there were four different elements involved, there was not adequate clarity of where the lines of responsibility ran. Yes, they lay with the board of the QCA but in its final minute, in which it approved this contract, it noted:
“The Chairman also suggested that the process be used as a case study to share best practice amongst other divisions”.
If only—that was what went wrong. There were not sufficient lines of communication and there was a degree of amateurism, although with strict propriety. Nothing untoward happened but it was not clear where the responsibilities lay. I rest my case.
Lord Davies of Stamford
My Lords, I fear I must start by refuting and rejecting, I hope definitively, two very unscrupulous pieces of propaganda. They are complete falsehoods in both cases but they get mentioned far too frequently. One of them was mentioned this morning by the noble Lord, Lord Lee. I am sorry about that, because he is a man whose judgment I greatly respect and who knows a lot about this subject. It is absolutely not true that we in the Labour Government left a legacy of a £38 billion deficit—a so-called black hole. It is complete rubbish. You can only get to that figure if you assume that over 10 years, we would not have increased defence expenditure even in nominal or cash terms.
In other words, for 10 years you would have had a real-terms reduction in defence, year-on-year. Obviously, we were not planning to do that; we were increasing defence expenditure at 1.5 per cent in real terms. Even the new coalition Government are not doing that. Disgracefully, they are freezing defence spending in cash terms at the moment while saying that in the latter half of this decade, from 2015, they will be increasing it by 1 per cent per annum. On nobody’s assumption would you get £38 billion. That is absolutely untrue and fanciful. It is a disgraceful figure.
The second thing that I want to nail is the suggestion that we did not do everything we could to equip our troops in Afghanistan properly. That is a particularly unscrupulous suggestion. As history shows, at the beginning of any campaign you do not have the right equipment because the enemy, the terrain and the tactics are new. It takes a bit of time to get your act together, but we did that. We were 100 per cent committed to doing the best for our Armed Forces there. Gordon Brown asked me to do that and supported me 100 per cent.
I had a meeting every month in my office on counter-IED. We looked at a whole range of detection techniques, electronic countermeasures and protection systems. I invested deliberately right across the board in any and all of them that had any chance whatever of success. I think that I ordered nine types of armoured vehicle in my time as Defence Procurement Minister, several of them specifically conceived for Afghanistan: Mastiff 2, Jackal 2, Ridgeback, Coyote, Wolfhound, Husky and Warthog. I saw them all working extremely well last weekend in Afghanistan. My first decision was to re-engine the Lynx helicopter so that it could fly 365 days a year; that was done within a few months. I ordered the Wildcat, which I see in the latest NAO report is 100 per cent on time. I ordered 22 Chinooks, and this Government have cancelled half of them. They blame us for not equipping the Armed Forces properly, which is a bit rich when they then cancel half of the Chinooks. That shows the kind of basis on which these untruths are, I am afraid, being promulgated.
I want to make four points—or five if I have time—drawing the attention of the House to some aspects of defence procurement which are insufficiently appreciated. The first concerns buying off the shelf. I had the discipline in my time, which I hope is continuing, that whenever we looked at early requirement we looked first to see whether we could buy it off the shelf. If we needed to develop it, we looked to see, secondly, whether we could collaborate with another country and, thirdly, whether we could incorporate characteristics to make it exportable to third markets. Indeed, on some occasions I cancelled developments in favour of off-the-shelf solutions—for example, I cancelled the future helicopter project and spent the money on the Chinooks.
In many cases, however, that is not the appropriate thing to do because, by definition, in buying off the shelf you are not buying tomorrow's technology and may not even be buying today's technology. You do not necessarily have complete control of the technology that you are buying. You will not necessarily get all the source codes and will not be able to integrate new sensors and weapon systems. You will not be able to modify the goods in the way that you hoped you might and you will not necessarily have the long-term support, so it is not always the right thing. We in this country must, absolutely fundamentally, always make sure that our fighting men and women have the best that money can buy, or that can be found. That means we have to fight a capital-intensive war, never a labour-intensive war, so we have to go for the best and that often means development.
My second point is that if you go for new development, it is absolutely impossible to know in advance how much it is going to cost. By definition, you are at the frontiers of science and technology and no one can tell you how long it will take and how difficult it will be to solve those problems. Clearly, you have to have a budget for disciplinary reasons. You could put in an enormous contingency provision but you can end up putting in so many of those that, if they had a chance of being sufficient, you would have half your defence budget consumed by those provisions. That would not be sensible. You just have to accept that in defence procurement you will have uncertainty about the costs of development programmes. The first of its class or type will be a prototype. It will not be called that because you cannot junk a £1 billion destroyer or a £100 million fighter aircraft; you have to use it. It becomes a serviceable system but, nevertheless, you are inevitably treating it as a prototype.
The third point, which emerges from that, is that in order to develop new projects and technologies you need to have a long-term relationship of confidence with an industrial partner. You need to be able to work on an open-book system, to have flexibility with them and to have complete commitment from them to make sure that the system or weapon works in practice, over the long haul. That means an industrial strategy. We had some very good relations with the industry in my time; I shall just cite BAE Systems, the Astute class submarine, complex weapons and our relations with MBDA, Talis and Finmeccanica, which were ideal. I am very sorry to see that the present Government do not seem to want to continue with the industrial strategy that we had, although they do not say what kind of industrial strategy they want. Incidentally, we are talking here about what is, next to the pharmaceuticals, the greatest and most internationally competitive aspect of British manufacturing industry.
Because of time I shall pass to my last point, which is an important one. I see from the NAO report that the Government are wasting half a billion pounds by extending the production schedule of the Astute class submarine. As everyone knows, we had to do the same with the aircraft carriers, although I have to say that as a result of my intervention the delay and the cost were much less than they would have been if we had adopted the original Defence Board advice. If you extend the production schedule, you extend the fixed costs for your suppliers for a long time, which is extremely expensive.
That is a very stupid way of running a railway—no private business would do that. A private business would budget for and appraise investments on the basis of present-value comparisons. Present value would also enable you to seize current market opportunities. For example, I inherited a budget of well over £1 billion for six naval tankers. I discovered that I could buy them commercially on the market—the market being very depressed in 2008—for something like £50 million each, saving £500 million or £600 million. I could not do that because it would have meant bringing forward that expenditure into an earlier year. Equally, I could not lump all the systems for Astute boats 4, 5 and 6 together because that would have meant bringing those purchases forward, but seizing a market opportunity in that instance would have saved £300 million or £400 million a year.
We ought to have a present-value system of accounting. I made quite a lot of progress before the election in persuading the NAO of that, and some progress in persuading the Treasury. Obviously, under a present-value system, if you bring something forward it costs you more in the short term because you increase the present value, so using up more of your budget. The budget should be on a present-value basis and the Defence Procurement Minister should be able to bring things to operate within that strict net present-value budget, seizing market opportunities and ensuring that the taxpayers’ money is not spent wastefully, as too often it has been.
Lord Haskel
My Lords, in his characteristically robust speech, my noble friend Lord Sugar told us that the Government spend about £238 billion a year on procuring goods and services. In doing so, he and other noble Lords say that the Government should be active, supporting and helping our economy and helping to shape markets. I agree.
As the noble Lord, Lord Sutherland, said, an active Government must be a skilled purchaser as well as supporting innovation and good design, not a Government who look for the cheapest, most readily available, most risk-averse purchases—a very attractive option at this time of cuts. Being a purchaser that supports innovation and new design is right because in the long run that is better and cheaper, and we are in it for the long run.
The noble Lord, Lord St John of Bletso, reminded us that this week the Government announced that they wanted to speed up the procurement process. If the Minister wants a quick fix, he should speak to his noble friend, the noble Lord, Lord Feldman. Many years ago the noble Lord started the Better Made in Britain exhibitions, where large retailers and others exhibited imported goods and invited UK suppliers to come along and bid. He organised 25 of them and, yes, I went along and won some business. Government procurement always featured because it was one way that the Government had of showing British industry whose side they were on—basic, perhaps, but certainly quick, and they probably helped cut prices.
As other noble Lords have said, though, life is more complicated than that. The right way for the Government to get good value and create jobs and for the nation to benefit is to behave as an intelligent lead customer. My noble friends Lord Kestenbaum and Lord Davies explained how in business you should always look for a good lead customer—a firm that works with you and understands the market so that it can guide the specification and design, support the development and eventually test and validate the product. This is particularly important for early-stage companies that may have a good idea and something new, but lack a route to market.
That applies not only to innovation in technology; it applies equally to innovation in design. They must go hand in hand. Earlier this month, your Lordships debated the creative industries, speaking of their excellence and how they defined the UK in the eyes of the world. So why do they not play a much larger role in the procurement process? Presumably, imaginative, sensible and continual innovation in design is equally important to the public sector as to the private sector. Design is much more than an expensive additional process for making something look good; it drives fitness for purpose and raises the quality of use. Good design is not expensive. Raising design standards improves our quality of life, and who would say no to that?
What is required is a procurement process that not only acts as an intelligent lead customer but encourages the search for innovative design, all within European Union and World Trade Organisation rules. That can be done. My noble friends Lord Bhattacharyya and Lord Kestenbaum spoke of the Small Business Research Initiative Scheme, operated by the Technology Strategy Board. My noble friend Lord Bhattacharyya told us that the scheme was unashamedly copied from the hugely successful US scheme. SBRI was relaunched in April 2009. It operates under pre-commercial procurement rules. It does not involve state aid but delivers funded research and development contracts in the form of a challenge to find an answer to a need or issue in the public sector where the solution is either unknown or not good enough. The challenges can be for the product, for the knowledge gleaned from research or simply for a better or more economical design—procuring for the outcome, as the noble Lord, Lord St John, called it.
Since April 2009 there have been 78 competitions, generating some 640 contracts to a value of more than £43 million. Many of these contracts have gone to small or even micro companies. Some noble Lords have dismissed this as being tiny. It is not so tiny when you compare it with the recent government scheme to bolster exports by small and medium-sized enterprises, which had four takers, or the Business Growth Fund, which had one project.
Often the key to these new developments are new or improved materials. I declare an interest as honorary president of the Materials Knowledge Transfer Network. We encourage all our 4,500 industry members to bid for these and other public procurement challenges. This has resulted in the development of innovative glazing for windows and walls for public buildings that varies the transparency of the glazing automatically to control light and heat transfer. As a result, the UK has a strong position in architectural glass such as e-glazing.
There are many more examples of the way this system works. I join my noble friend Lord Puttnam in regretting that there are not more speakers on the Conservative Benchers who could tell us about it. My special interest is in technical textiles. Through the scheme, the antibacterial hospital gown for the NHS that controls the spread of MRSA has been developed, as has unobtrusive monitoring of health and drug delivery.
Current competitions include DEFRA looking for a small-scale anaerobic digester. Operation research and analysis to help the MoD make better decisions— I am sure that the noble Lords, Lord Lee and Lord Palmer, and my noble friend Lord Davies would all say amen to that. A competition that concluded recently was to deliver assisted living lifestyles at scale, the benefits of which we can all look forward to.
This system works. It benefits the private sector and public procurement. It enhances our quality of life. It is a matter of political will and personal determination to get it to work. Let us see the Government get on with it.
The Earl of Erroll
My Lords, as a taxpayer I have an interest in not seeing billions of pounds of our hard-earned money being siphoned off, primarily to the USA, in excess profit by prime contractors. I probably ought to declare an interest because I help one or two small companies, but none of them is bidding for large government contracts and I will not talk about any of them today. Flexeye, the risk intelligence company, may have some government contracts, but I shall not use any of its experiences when I mention some of the pitfalls a little later. I want to make that quite clear.
This is a time of great hope. As my noble friend Lord St John of Bletso said, Francis Maude made all the right noises and was full of good intentions in his speech last Monday across the road. The problem is that it is easy for things to die a death in the implementation. I am trying to think about how we get innovation into government contracts. Innovation tends to come from the less large companies. Unfortunately, SME has connotations of tiny companies, although at the top end and middle of the “M” they are quite capable of dealing with very large government contracts quite happily. However, they are being tarred with that brush as micro-businesses at the bottom.
How can we get such companies into government contracts? We might try to learn some lessons from the past. I found the PASC report from another place, which was issued on 28 July 2011, very interesting. I have not read the whole thing; it is enormous. However, I read some of the oral evidence from 15 June in volume 2, including that of Martin Rice from Erudine, which has since disappeared, very sadly. However, that is a typical example of a medium-sized company with some innovation.
There is also an interesting comment in the report, which I shall deal with quickly. The PASC noticed that most of the top procurement people in the Cabinet Office, who were running things such as the Office of Government Commerce—which became Buying Solutions and is now called the Government Procurement Service—came from Accenture. I thought about whether this was sinister and decided that it probably was not. The top consultancies attract the brightest people, who know what they are doing. Because the Government lacked the internal expertise to deal with these complicated, new and fast-moving things, they hired the best. However, the trouble is that these people come in inculcated with the belief that only larger organisations are capable of delivering government contracts. Unfortunately, in reality, high performance is not being delivered, which is a great shame.
How do we do something about it? I am told that Vince Cable called the usual suspects—all the prime contractors—into a room and told them to reduce their bills by X per cent. I do not know how much it was. They all went away feeling duly chastened, but do we really believe that they will not claw that money back over the next few years? It is bound to happen.
I look at some of the ways in which the rules make it impossible for the smaller company. A company that I know very well supplies interim managers at a strategic level—heads of HR, CIOs and so on—at around 35 per cent of the cost of the big companies. To do that you must be qualified under a particular framework agreement and the only one open to SMEs was in general management. Suddenly, at the end of 2010, it was cancelled and the company was told that it had to go through one of the prime contractors. Therefore, it went through the DWP’s CIPHER framework, which is run by Capita. The company was then advised that it had either to hand its people over to the incumbent prime contractor or to fire them. For it to be okay for its people, the company handed them over. That is not very good business.
When the DWP was looking at putting contracts out to tender in 2010, it broke its large contract for the rewrite of the system into four or five lots to make it smaller. Some innovative pilots were carried out by various people but these were ignored and, at the end of the day, the DWP handed the contract back to the main incumbent, with the little sop that one other company should handle the legacy system so that there were not too many complaints. Many smaller companies waste a lot of money—six-figure sums in some cases—on tendering. They came to me to talk about it. It is a terrible waste of time and money. This is the challenge. The average OJEU tender takes about 18 months, I am told.
However, there is hope for the future, which is what I prefer to think about. I disagree with the noble Lord, Lord Sugar, who introduced this excellent debate, in one area. I think we must have some local spending. Where you have a regeneration project in certain local authority areas, in some cases it is only local businesses that can supply stationery, services and all sorts of things like that. Years ago I tried to help local authorities with their procurement policies in relation to one company. I noticed that we could easily achieve huge savings through the central buying people. They had got lazy and were charging probably an extra 20 per cent in profit because they had to fund themselves. It was another layer of the procurement process and introduced greater inefficiency, so sometimes central buying does not work. We seem to alternate between central buying, which gets lazy, and repatriating procurement locally. When that becomes inefficient, procurement goes back to being done centrally. Government and everything else is a bit like that, I am afraid; we keep going through these big cycles.
Under this new scheme, 25 per cent of the contract value is supposed to go to SMEs. However, we will have to wait until next spring at the earliest to learn what the new frameworks will say. Knowing government slippage, I bet it will be the summer. How many companies will go bust between now and then while we churn away? What will these frameworks say? The devil is always in the detail. People could very easily be written out of the system. We must make sure that this new proposed dynamic e-marketplace for contracts worth less than £100,000 is open to anyone. We should not suddenly put in subtle things that somehow prevent SMEs qualifying.
I must finish in a second but there is another major point. Because government procurement always wants to compare like with like, it is not open to innovative ideas. It wants to have the tender absolutely locked down for comparison. If you propose an alternative, cleverer, innovative solution, which might be cheaper, you immediately disqualify yourself from the procurement and from the tender. That does not help. It was also commented that, in many cases, 20 per cent of the programme is used to deliver most of the project. It is all these “nice to haves” that cost the money and really inflate the cost. If we drop those, focus on what is really required and handle the exceptions manually, we will probably save huge amounts in some government systems. We must move to agile development methods in which we get feedback from the real world as things develop. We have to stop just developing up front. Flexibility and an ability to change are absolutely essential in this fast-paced modern world. However, it will be very difficult for the Government, who like to deliver certainty and predictability, to handle that.
Lord O'Neill of Clackmannan
My Lords, I thank my noble friend Lord Sugar for securing this debate and doing us the courtesy of indicating in advance what he would talk about. I will not follow him today; I should like to discuss some of the procurement issues surrounding the construction industry. It is an industry that accounts for some 8 per cent of our GDP and involves 230,000-plus companies, the overwhelming majority of them very small. Forty per cent of the industry’s budget is accounted for by government procurement, or certainly by public expenditure, be it through local authorities, health boards or central government itself. I declare my interest as chairman of the Strategic Forum for Construction, which seeks to advise the Government on certain aspects of the construction industry.
I realise that we are debating this subject some five days in advance of the autumn Statement. We have been advised in advance by Francis Maude that there will be a pipeline for construction projects so that the industry can prepare itself, either to bid or to do work, over the next three years. This is to be welcomed. One can only hope that the pipeline will be long and very wide. More often than not, it is to the construction industry that we look for economic stimulus and a pick-up in the economy. However, the other side of this coin is that the Government will be looking for a 20 per cent reduction in construction costs over the next three years. In the pit of a recession, the industry will have to get itself together in ways that will enable these savings to be made.
It is fair to say that there has been much improvement in the construction industry of late. Therefore, in some respects, the challenge of cost savings of the kind that have been indicated will not be quite as difficult to achieve as some people might have thought in the past. However, it would be criminal if these savings were to be achieved by scrimping on materials or through unnecessarily and potentially dangerous speeding up of construction times, both of which, although understandable, are not defensible and very often have serious implications for the lifetime costs of a project, which are rarely given adequate consideration by those who procure on behalf of us, the people whom we entrust with that task.
I also hope that, in this pursuit of cost reduction, we will not see some delaying of payment processes, because, as I said at the beginning of my remarks, the overwhelming majority of firms in the construction industry employ fewer than 10 people. They live on order books which, in good times, can be 12 weeks and which, in times which are not bad, are about six. At the moment, some of them are surviving—those who do survive—on three-week programmes of work. These people depend on speedy payment. We had from the previous Government, and I think that it is the intention of this Government to sustain it, an undertaking that payments to firms through the public purse should be achieved within 30 days wherever possible. I would like to think that it would be incumbent on major contractors who are in receipt of these payments to pass them down the food chain to the smaller players. It would be helpful to hear such a reassurance today.
There is no silver bullet to achieving greater savings or efficiencies—today’s debate has indicated the shortcomings of so many aspects of this—but I would like to identify one source of what might be greater efficiency in procurement in the construction industry: building information modelling, or BIM in the shorthand of the industry. The construction industry has come rather late in the day to what engineers would have called CAD/CAM in the past—the digitalisation of construction plans and the involvement of everybody in seeing three-dimensional pictures of what a building is going to look like and what its specific requirements will be. Hitherto, this has been the preserve of architects and the engineers. It is fair to say that, in a number of instances, architects and engineers have started to embrace it. In 2010, a McGraw-Hill survey suggested that some 35 per cent of these people are now using BIM techniques, but only 23 per cent of contractors, of whom only 7 per cent are employing them on 30 per cent of their projects. So we are talking still about a relatively small area of the construction industry. However, if you go abroad, to the United States and to North America generally, you will find that this is more than the order of the day. A few months ago, I had the opportunity to visit Japan to look at how they were building their nuclear power stations. All of it was done using three-dimensional, and in some instances four-dimensional, screen work.
BIM would mean that all the cards were no longer in the hands of architects, designers and engineers. The work could be accessed by people further down the supply chain, who could point out that, if they did not build something in quite the way prescribed, they would be able to insert the boilers, the pipework or the wiring systems far more easily. And so you would not have what is known as “emerging work” coming up, the cost overruns or the delays. It would mean that you got it right first time, that you took the time to plan it in such a way that you would not be desperate to cut the first sod but rather to do the work in a rigorous way.
There is no end of academic papers being produced on this subject at the moment, but the interesting point is this: to do this will require the client in the first instance to be far more rigorous and precise in the detailing of the specifications which the contract will have to include. It will also put the architects, the designers and the engineers on their mettle to make sure that they do it. If we could get that, we could get the savings, we could get the extra work and we could get the stimulus that this country so desperately requires in its presently dire economic circumstances.
Lord Young of Norwood Green
My Lords, I, too, thank my noble friend Lord Sugar for creating this opportunity to debate a subject of vital importance, especially in today’s economic circumstances, against a background of government policies that are not delivering the growth that we need but delivering, unfortunately, the highest level of unemployment for 17 years. I congratulate my noble friend on his customary and characteristically robust analysis, and I look forward to the ministerial response to some of the points that he raised. I am not sure that centralised purchasing is the total answer, but there are certainly savings to be made—we saw that in the recent Green analysis. I am certain that my noble friend is right to call for a more holistic analysis that goes beyond the lowest price. He made a valid point also about the restrictions that still exist in relation to SMEs.
To pay our way in the future, we need to build an economy that works; we need private sector growth, more people starting businesses and growing businesses succeeding in business. But we need that to work with public investment and procurement. To set this new direction, government cannot just stand at the sidelines. Government must use every tool purposefully and consistently to shape and support this business environment, from competition policy to taxation, and from regulation to procurement. That means developing institutions for collaboration and support, making sure that the right finance is in place, as well as the research base, the skills base and the other elements that support innovation and growth. It means investing in infrastructure, offering certainty in the policy environment and giving businesses the confidence to invest. It is active government, shaping markets, growing key sectors of the economy and supporting the growth of more companies which build value over time, invest long term, innovate, offer good jobs, pay fair wages, and train.
Governments cannot tell individual companies what strategy to pursue—we know that that will not work—but nor should they be indifferent to the choices that they make. There are many businesses already pursuing these strategies—it can make good business sense—but the policy environment does not always mean that this is the case. The challenge for policy-makers is how to create the framework so that that which is good business—socially valuable, sustainable—is also that which is most profitable, good business always being good business. This brings me back to procurement: getting it right so it can shape that environment and enabling procurement to play a critical role in the economy that we need for the future.
In government, we took steps to improve the way in which services are procured. In 2006, for example, we launched the Supply2.gov portal to make it easier for SMEs to access government contracts. In 2008, we commissioned a report on using public sector procurement to encourage SME growth. In the Pre-Budget Report, we committed to advertise government contracts worth more than £20,000 via a single, free online portal; to introduce measures to reduce bureaucracy and make opportunities more transparent for small businesses; to standardise the qualification criteria and encourage innovation by specifying outcomes rather than prescribing solutions; and to help SMEs get a fair deal when they were subcontractors.
Just before we left office, we set in the 2010 Budget central departmental targets to increase the proportion of central government procurement spend that goes to SMEs by 15 per cent throughout the supply chain. I know that this Government have a deep-rooted aversion to targets, but as we have heard a number of noble Lords say in this debate, it is all very well saying that one is going to encourage SMEs, but the track record to date shows that there is a lot more progress to be made.
This Government have sought to build on that legacy: they want 25 per cent of government contracts to be delivered by SMEs and to eliminate pre-qualification questionnaires for all central government procurements under £100,000. They have sought to introduce a one-stop shop that displays every central government tender opportunity and they want to iron out wasteful practices and unnecessary complexity in procurement processes. These measures are welcome but there have been contradictory signals too. The Government’s own adviser, Sir Philip Green, suggesting ways that government procurement would squeeze out SMEs and delay payments is an example. In recent months we have seen the case of Bombardier, which brought into focus the failure of the Government to recognise the significance of this procurement to our future competitive success, the consequences of which have placed the future of the train manufacturing industry in the UK in jeopardy. We believe it is essential that there is a UK-based train-building industry capable of designing, building and, of course, winning orders for those trains. We are urging the Government to outline the strategy for ensuring that this can happen, including for the new Crossrail rolling stock. We want to see UK rail manufacturing in a position to win these orders, not put at a disadvantage following the Thameslink decision.
This draws me to the fundamental question we need to consider—how we ensure that procurement is an engine for growth and how we improve the processes but, critically, the ambition that procurement can unlock. The Government are unfortunately missing this opportunity in our view. With £240 billion to spend, the Government are by far and away the UK’s biggest single consumer. Procurement can and should be a driver of growth, driving innovation, opening up markets, creating new markets and opening up to new businesses and new ways of doing things. That means putting procurement centre stage. We know that that has not always happened across government, local government and in the public sector. We must ask how we can demand more of procurement. How can this buyer power be leveraged to support the kind of economy we want to see? How can we make every single pound of spending create the most value to our economy and society? I suggest that it can be done in the following ways. We should build broader objectives into public procurement contracts, as we did with the Olympics. Construction contracts included clauses requiring the training of apprentices, creating 350 new apprenticeship places. For the life of me I cannot understand why the Government will not act in this area. There is no legal prohibition against doing that. When we have more than a million unemployed young people, it seems to me that every apprenticeship place that we can create is vital. Haringey is doing this; through its procurement process it has opened up business to SMEs and created new employment opportunities for many long-term unemployed people, while saving £8 million over five years. EU law is often put up as an obstacle to so-called “social clauses”, not least because they can limit competition. However, they do not have to, as the noble Lord, Lord Sugar, and other noble Lords have said. This is an area where we need to explore the full potential and test the boundaries rigorously and robustly. Other countries manage to do it and we have heard references to French and Dutch examples.
We need to create markets for innovative products and services. My noble friend Lord Haskel referred to the importance of innovation in design. When in government, Labour created the Small Business Research Initiative, using procurement to create markets for innovative companies which often lack financial backing during exploratory development phases. However, it remains very small; it is worth between £10 million and £15 million a year. By contrast, the US SBIR programme, on which it is modelled, has now been running for almost 30 years and is worth $2.5 billion a year. Properly scaled, we should probably have a programme worth something like £240 million in the UK.
I have already talked about Bombardier so I will not develop that further. However, I was grateful to my noble friend Lord Davies for giving a more balanced assessment of where we are going on Labour’s defence industrial strategy. I know from my experience of being a member of the Armed Forces’ Pay Review Body for four years that our record in ensuring that the forces had the best possible equipment was well appreciated. Labour's defence industrial strategy, which gave certainty to the UK industry, is being replaced by a commitment to buy off the shelf. There are arguments about whether this really is cheaper given the costs of adaptation. My noble friend Lord Davies demonstrated the importance of having a very strategic analysis in the area of defence.
This has been a very wide-ranging, important and constructive debate. I cannot possibly hope to deal with all the points that were raised. My noble friend Lord Puttnam said that there were ways of driving costs down and value up and mentioned the Promethean experience and the interesting incorporation of Phil Smith of Cisco on to the Technology Strategy Board. I share his optimism on that front. My noble friend Lord Kestenbaum made the important point about the need for government investment in vital areas such as global positioning satellites or the development of the internet protocol. Without those seed-corn investments it is doubtful whether important progress would have been made in those areas.
Lord Young of Norwood Green
I see that time has caught up with me; the noble Baroness does not have to remind me of that. I look forward to the Minister’s response.
Lord Wallace of Saltaire
My Lords, this debate has ranged widely. I thank the noble Lord, Lord Sugar, for drawing the House’s attention to such an important issue. Procurement is central to the Government’s programme for reform and efficiency in public services and, as the Autumn Statement will make clear, to the growth agenda. I thank all noble Lords who have spoken in the debate and will do my best to address many of the points that have been raised.
In October 2010, in a debate on Sir Philip Green’s report, the noble Lord, Lord Sugar, argued that,
“it is time to centralise buying and to bring in some kind of head honcho from the private sector who knows what they are doing and pay them the right amount of money, which they would be paid in a large organisation”.—[Official Report, 14/10/10; col. 593.]
Our head honcho—the government chief procurement officer, as we prefer to call him—is John Collington. John is a highly respected procurement professional who joined the Civil Service five years ago after having spent 25 years in the private sector in a number of senior commercial and supply chain roles, operating on a global basis. He is well paid. He is not paid on the scale of the CEO of one of our major banks, but then the Government are not entirely happy with the scale on which our major banks are paying their current CEOs.
Since then the Government have embarked on a new procurement strategy to reform the way in which they buy those goods and services which they need to fulfil their responsibilities. The strategy focuses on having a centralised approach to the purchasing of common goods and services, appointing Crown representatives—of which there are now nine—to work with the Government’s largest suppliers, removing the red tape that stops SMEs competing for government contracts, improving our procurement technology and, above all, investing in our staff to improve our procurement capability. The noble Lord, Lord Kestenbaum, called for a procurement revolution. This is under way.
The scale of government procurement should be set out. Central government procures some £62 billion of supplies a year. The wider public sector, including local government, procures some £168 billion and the total public sector procurement, including that of arm’s-length bodies, is some £230 billion. Some of that is accounted for by commodities and some by services. Then there are the major long-term contracts for infrastructure construction, manufactured systems and trains, armoured vehicles and aircraft carriers. These do not, of course, require entirely the same approach. There are unavoidable tensions between central control and local diversity and—as the noble Lord, Lord Anderson, pointed out—between the squeeze on costs and the political requirement to achieve regional balance where that is possible. I should say that the Olympic Delivery Authority has done extremely well in delivering on time and within cost. I regret that the regional balance has not been as good as it should be but on other criteria it has been a remarkable success.
Much of the criticism in this debate has been about the practice of the previous Government regarding, for example, the ETS and the other enormous IT contracts, and the vast expenditure on consultants. The Government are setting out to be a lean Government in procurement. If I may say so, it is a lean Government in every single aspect through and through. As noble Lords will know, the Government Car Service has been considerably pruned. Ministers are now walking twice as much. I have not yet assessed how much weight they have lost but we are a leaner Government, I think, than our predecessor was in that respect.
Eighteen months ago the Government promised to drive out inefficiency and unjustifiable costs from all parts of central government, including procurement. As part of that drive, in just 10 months we have saved £3 billion from reduced discretionary spend and smarter procurement that has allowed departments to protect essential front-line services and jobs. This has included more than £870 million saved by cutting departmental spend on consultants; nearly £500 million saved by reducing spend on temporary agency staff; some £400 million saved by taking stronger control of our marketing spend; some £360 million saved by centralising spend on common goods and services; and £800 million saved from renegotiating deals with some of the largest suppliers to government. Last March, for example, we announced that nine different commodities would be jointly purchased by October: energy, office supplies, professional services, travel, fleet, telecoms, IT commodities, print, and advertising in the media. I am very happy, as a Yorkshire resident, to say that the domestic travel component was awarded to a small enterprise based in Bradford—so it is not merely a matter of large suppliers. A month later John Collington announced that, over the next four years, this new procurement model is estimated to cut 25 per cent from the £13 billion spend on common goods and services in central government.
This is a very good start, but we also need to do away with the unnecessary bureaucracy that adds wasteful time and costs to the procurement process. Following a lean review of the procurement process, we are adopting a new approach to sourcing that focuses on those practices that add value to the way that government procures goods and services.
Another major step forward has been the transformation of the Buying Solutions trading fund into the Government Procurement Service. This organisation is now established as the delivery arm of the centralised procurement strategy, delivering expert sourcing and category management for common goods and services. It is focused on delivering savings to the taxpayer and increasing the proportion of spend that is centralised. For major projects we have established the Major Projects Authority, which, with the pre-existing Major Projects Review Board, takes particular account of defence procurement, major infrastructure procurement and IT.
The noble Lord, Lord Davies of Stamford, made a characteristically robust speech. I look forward now to his speeches in the way that I used to look forward to those of the noble Lord, Lord Gilbert, who would always robustly tell us how well defence procurement had taken place while he was a Minister and how appallingly it had deteriorated since he left. The only problem, I say to the noble Lord, Lord Davies of Stamford, is that he left the MoD 10 years after the noble Lord, Lord Gilbert. Perhaps he should consult the noble Lord, Lord Gilbert, on how they could better reconcile their narrative next time round.
Over the past six months the Government Procurement Service has already made significant progress. It has developed centralised strategies for energy, office solutions, professional services covering consultancy, contingent labour, legal services, and so on. It has driven much-improved data and significantly increased the transparency of operations and performance through a procurement executive board. It has moved central government customers on to the first centrally let commercial arrangement—the government office supplies contract. The Government Procurement Service has established a process for using surplus income to fund Government Procurement Service and government procurement improvements, with four key investments made to date. The procurement service has managed procurements, extensions and renegotiations of contracts worth approximately £3.6 billion in annual value.
We are conscious that Britain does not compare well with Germany, France and the Netherlands in the relationship with suppliers. Perhaps I may quote the speech made by my colleague Francis Maude on Monday. He said that,
“the British public sector has taken a speed dating approach”
compared with those countries’ mutually beneficial long-term relationships. We are aware of that and looking at it, and we very much hope to improve the relationship. I say to the noble Lords, Lord Broers and Lord Hunt of Chesterton, that we are also well aware of the role that this long-term relationship can play in encouraging innovation and, in particular, new innovative companies.
The noble Lord, Lord Sugar, made a number of remarks about not sending contracts to foreign companies that pay little tax in this country. I say to him that it is not only foreign companies that, in some cases, do not pay very much tax in this country; some of our major domestic media companies do not either. One has to remember that Siemens employs a large number of people in manufacturing plants in this country, and therefore the question of what is and what is not a British company has become a little more complicated. We are also well aware of the French, German, Dutch and other examples. What the noble Lord, Lord Puttnam, called the procurement game is, therefore, something that we intend to learn.
Moreover, we are working not just with the biggest companies. In February this year, the Prime Minister outlined measures to open up the way that government does business in order to ensure that small and medium companies, charities and voluntary organisations are in the best possible position to bid for contracts. Since February we have delivered the following building blocks aimed at supporting SMEs. We have eliminated the use of pre-qualification questionnaires in 15 departments for procurements below the EU threshold of approximately £100,000. Evidence suggested that the length of those pre-qualification questionnaires was one of the biggest inhibitions to small companies in applying for government contracts. The two departments still using pre-qualification questionnaires are doing so only for security reasons. We are also now publishing all central government tenders and contracts through the Contracts Finder website. More than 2,000 tenders have been published, of which 50 per cent were flagged as suitable for SMEs, and more than 30 per cent of contracts listed were flagged as awarded to SMEs. We are also piloting a new e-sourcing solution, the Dynamic Marketplace. Nine departments have signed up and more than 500 suppliers have registered, providing themselves with free and easy access to opportunities below the EU threshold. We have even introduced a “mystery shopper” scheme to allow suppliers to report bad procurement practice by government purchasers. More than 100 cases so far have been received and dealt with under the scheme.
I say to the noble Lord, Lord Sugar, that there is no 25 per cent rule regarding the turnover of SMEs in bidding for public procurement contracts. Consideration is given purely to the financial viability of SMEs bidding for contracts, and we are aware of the need to encourage SMEs in all ways. In July 2011 we published the first SME progress report and departmental action plans outlining how departments are supporting SMEs. We ran an Innovation Launch Pad, which received 351 proposals from SMEs. Two of the best companies have since won new business with government, and we hope that others will do so as well. To help with suppliers’ cash flow—a point raised by the noble Lord, Lord O’Neill—the Government aim to pay 80 percent of undisputed invoices within five days. That is not on the same model as supermarkets. In all new contracts we require main contractors to pay their subcontractors —which are more often SMEs—promptly.
We have also taken steps to raise the competency and professionalism of public sector procurement staff. We are building a training programme that will increase the skills of the Government’s key procurement professionals in line with the use of lean techniques. This will become a prerequisite for procurers who lead on major procurements for government. We have also implemented a two-way commercial interchange pilot programme with industry to bring private sector expertise into government and interchange with our procurers who will benefit from experience of private sector best practices.
I therefore respectfully suggest that in the 13 months since the debate on the Green report, this Government have done far more to transform public procurement than the previous Administration managed to do in 13 years. However, we are not resting on our laurels. We recognise that there is still more to be done, and we have a clear programme to do it.
I turn to the question of EU rules, which clearly need to be substantially reformed. We welcome the European Commission’s intent to publish proposals to simplify the procurement directives by early 2012, and in our response to the Commission’s Green Paper on the modernisation of EU public procurement policy we have called for significant simplification to free up public procurement markets and enable a light-touch, modern regulatory framework. We have been in active dialogue with the Commission on these proposals. This is a once-in-a-decade opportunity to simplify the procedures, cut red tape, embed transparency, and increase cross-border competition to the benefit of citizens, business and public authorities across the European Union. As a priority, we must ensure that these reforms catalyse and drive growth.
Alongside this work, in July the Government stated that we would consider whether the UK was best applying the EU procurement rules and managing our procurements in order to meet our strategic needs, cost effectively, in the long term. We will be publishing more details as part of the growth review on 29 November.
Three days ago, at the Cabinet Office conference on 21 November, my honourable friend the Minister for the Cabinet Office unveiled a radical package of measures that will change how our Government buy from the private sector in a way that supports business and promotes growth. The Government will provide an open door for current and future suppliers to discuss forthcoming procurement opportunities, cutting the time taken in the procurement process. We will work with industry to identify and address any key capabilities needed to meet future demand. We have published a pipeline of £50 billion of potential business opportunities across government, giving an unprecedented view into the Government’s expected future requirements and helping business to build the confidence to invest long term in plant, machinery and people.
We aim to make it 40 per cent faster to do business with government—another issue which matters enormously to smaller companies. All but the most complex procurement processes will be completed within 120 working days from January, compared with the average of 200 days now. By engaging earlier and more openly with business and the wider supply chain, government will be able to reduce the time taken during the procurement process and provide the greater certainty and visibility of this forward pipeline to unlock investment. We will require all civil servants responsible for running major procurements to be trained in the Government’s new approach.
The noble Lord, Lord St John, talked about the advantages of payment by results and procuring for outcomes. As he will know, a number of experiments on this are going on in different sectors. It is something that we are well aware of. We intend to experiment with it further and we hope to benefit from it more in the future. As Francis Maude said on Monday, we will follow the example of our EU neighbours and, indeed, of best practice in the private sector by making it easier for our suppliers to do business with us.
The Government Procurement Service, now based within the Efficiency and Reform Group in the Cabinet Office, will continue to implement the category strategies and deliver centralised contracts in the core category areas. Only last week, we awarded the central government travel management services contract—that is, the domestic and international contract—which is projected to save the Government some £20 million, equating to a saving of approximately 30 per cent against the existing arrangement. I shall not mention which airline I flew with the last time I went on government business, but that is part of the saving.
The Government are committed to continuing the work that we have started, to promoting growth, to increasing savings and reducing bureaucracy, to making public procurement a slick and efficient process, and to making government a reasonable and straightforward customer for businesses to work with.
Lord Young of Norwood Green
The one question that the noble Lord has not addressed on which I should welcome some comment is why in public procurement contracts we do not stipulate, as the previous Government did, that it is a perfectly reasonable quid pro quo to indicate how many apprentices there are and what training they will be undertaking. I thought it disgraceful when I discovered a very large government contract with a company that did not have a single apprentice on its books. I would welcome the Minister’s response to that.
Lord Wallace of Saltaire
As the noble Lord will know, the number of apprentices has increased considerably in the past year, and this is something to which we are paying a great deal of attention. However, on his specific question, I shall investigate and write to him.
Lord Sugar
My Lords, I thank the noble Lords who have contributed to this debate, many of whom have endorsed some of my sentiments. The Minister is right in pointing out that the head honcho to whom I referred is John Collington. I referred to having met somebody in the past whose thoughts and plans I found quite interesting. When I mentioned recruiting someone from industry, I was thinking more of the former CEO of Tesco rather than someone who had worked for the Football Association, which is where Mr Collington came from.
The noble Lord, Lord Lee, made the very good point that some external commercial people run rings around those who are in charge of procurement in government departments. My noble friend Lord Puttnam referred to waste in procurement with items that never get used, and the noble Lord, Lord Sutherland, made an excellent point in concluding that the culprits were amateurs in the procurement department.
I hope that all the comments from noble Lords have not fallen on deaf ears. Once again, I thank everyone for participating.
Baroness Garden of Frognal
My Lords, I remind noble Lords that the next debate is timed. Back-Benchers have seven minutes, so when the Clock shows seven, their time will be up.
Funding of Care and Support
(13 years ago)
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Baroness Pitkeathley
That this House takes note of the report of the Commission on Funding of Care and Support and the future of social care.
Baroness Pitkeathley
My Lords, it is a pleasure and an honour to introduce this debate about the future of social care and to move the Motion that the House takes note of the Dilnot commission report. I am grateful to all noble Lords who have put their names down to speak and I hope they will not mind me calling them, in the context of discussing social care, “the usual suspects”. I mean that as a term of the greatest respect. However, it is a disappointment that there is no speaker from the Conservative Benches apart from the Minister.
Certain reports are so significant in the development of policy that they are known by a single name. Your Lordships will think of Beveridge or Wolfenden. In the field of social care, the names that spring to mind are perhaps Seebohm, Griffiths and Laming, and certainly many of us believe that Dilnot should join that illustrious number. I pay tribute to the Government for setting up the Commission on Funding of Care and Support and the future of social care, and to Andrew Dilnot for his extraordinarily important report. I include thanks, too, to his colleagues Dame Jo Williams and your Lordships’ very own Lord Warner—my noble friend—not only for their contribution to the report but for their continued work to have it accepted and implemented. Their diligence and sheer hard work are enormously appreciated.
The commission was set up to investigate the problems of the current system of adult social care in England and to develop ideas for reform. So what were the problems that the three musketeers, as some have called them, were to investigate? The current system of care and support is seen to be in crisis, severely stretched or broken, depending on where you sit. All agree that “something must be done”.
Of course, it is not the first time that such feelings have been expressed. Let us remember that social care has never been free at the point of delivery as healthcare has been, and the question of who pays—the individual, the family or the state—has occupied politicians for years. Twelve years ago, my own Government set up a royal commission on the subject and recommended that all care should be free. I am delighted that the noble Lord who chaired that commission is to speak in this debate—his second outing of the day—as is one of his dissenting members, and I look forward very much to hearing their views.
The problems in summary are as follows. The system is not fit for purpose. It was set up originally for a country in which men died at the age of 66, shortly after retirement, and women died before they were 70. The new statistics—for example, that 11 million people alive today will live to be 100—are of course a cause for celebration, as is the fact that so many more people are living longer, albeit with greater degrees of disability. This means that we are spending inadequate amounts on care and support, both publicly and privately.
Social care funding has failed to keep pace with demographic change. Since 2004, while spending on the NHS has risen by £25 billion, spending on social care has risen by just £43 million. To cope with rising demand and static resources, councils have increased charges for care services and rapidly raised eligibility criteria, with the percentage of councils providing support to those with moderate needs decreasing from 50 per cent in 2005 to 18 per cent in 2011, as eligibility criteria were raised to cover only those with substantial or critical needs. This has been compounded by recent local government spending reductions, with social services directors reporting £1 billion cuts to services this year and warning that the same level of cuts or even greater ones will have to be made next year. Our public provision is largely seen as providing poor services for poor people, and there have been several examples of this in recent months, most notably yesterday’s distressing report from the EHRC.
However, we should never forget that much good care is still provided to individuals within the system because of the dedication and skill of thousands of workers. Those workers and their agencies have had some success in recent years with the personalisation of services, promoting independence and early intervention. There are pockets of great service to be admired, and we should always remember that, but in general the care and support system is perceived to be starved of cash, failing to meet the volume of need, unfair and a lottery, especially for people with middle incomes, for the simple reason that if you die neatly without needing to use care services, you pay nothing, but if you become disabled through a long-term illness such as Alzheimer’s, you may need expensive services at full cost for many years, involving thousands, sometimes hundreds of thousands, of pounds. So people who own a home and have modest savings are hit very hard. The system is also extremely confusing. It is difficult to find your way around, different in different parts of the country, not portable when your location changes, and so on.
Moreover, caring families as well as the individual needing care suffer at the hands of the system, which for them is too complex, costly and unfair. Family members end up sacrificing their careers, finance and their own health in order to provide care to disabled or older loved ones, getting little or no help from a social care system and finding that services are of poor quality and expensive. However, if you have a carer you are luckier than the frail older person living alone whose total social care is a 15-minute visit once a day—twice if they are very lucky—which is not enough to keep them clean and comfortable, let alone cared for. These problems are only going to get worse if nothing is done. Within 20 years the number of over-85s will double and the number of people living with lifetime disabilities will grow too. Relatively fewer people will be working and paying taxes to help pay for support.
Apart from the practicalities of money and how it is all to be paid for, we have other changes in society that affect what we expect from social care. People want and demand greater choice and control than is often offered by our current system, and people’s expectations about standards of care are rising. The Dilnot proposals were published on 4 July and they aim to change the way that social care funding is raised and spent, extending entitlement to public funding for social care in a way that is acceptable and sustainable to taxpayers.
The key recommendations will be familiar to your Lordships. The contribution of an individual to their social care in their lifetime, which is currently unlimited, should be capped. After the cap is reached, individuals should be eligible for full state support. It is suggested that the cap should be between £25,000 and £50,000. The means-test threshold over which people are entitled to full costs should be raised from £23,000 to £100,000. Further, there should be national eligibility criteria, and portable assessments should be introduced. All those who enter adulthood with a care and support need should be immediately eligible for full state support without a means test. A new information and advice service should be set up to guide families through what they need to know.
The cost is estimated to be about £2 billion, although that figure is disputed. Of course, it is a large sum but not if you compare it with the £170 billion that social security costs or indeed the £119 billion which carers contribute to the coffers every year. In these difficult financial times there is of course a question of how money is to be found, but perhaps a better question is what will happen if that money is not found. We shall certainly see more reports of the kind which the noble Baroness, Lady Greengross, presented to us yesterday.
The unanimity of support for the Dilnot proposals is as great as I have ever seen. In my Second Reading speech on the Health and Social Care Bill, I reminded your Lordships that if you want to bring about change you have to build a consensus. There is no doubt that such a consensus now exists. That consensus is that it is inescapable that the future funding of social care has to be based on a combination of individual and state responsibility and contribution and that these proposals offer the prospect of a lasting settlement based on a partnership approach. That is not to assert that there is unanimity on every aspect of the Dilnot proposals. People are concerned about the level of the cap, about the fact that hotel costs are not included in the calculations, and about whether the life insurance product market will really be stimulated. I have no doubt that other noble Lords will speak about these concerns. Nor should we assume that the commission provides a total answer to the social care problems I have outlined, but these reservations do not detract from embracing its general thrust. The consensus that now is the time and that the general direction of the Dilnot report is right surely cannot be gainsaid. It would be sad and a failure of all of us involved in these important discussions if we allowed disagreement about details in the report and the valid arguments that are put forward to get in the way of action.
If you want to bring about change, another thing that you have to do is to make people, individuals, Governments, political parties and society itself see what they are going to gain as a result of the changes. What will they get out of it? That surely is clear. We will spend existing resources better. It will improve the integration of health and social care systems. When people’s need for social care is not met, they will turn to the NHS, resulting in increased numbers of emergency admissions or delayed discharges. The inconsistency between fully funded NHS care and means-tested social care the delivery of an integrated care system. Recent statistics from the Department of Health show an 11 per cent rise in the number of hospital bed days lost to bed blocking—I thought we had seen the last of those terms—so the costs have risen from £483,000 to £537,000 per day. In addition, if we adopted these proposals, the rights and responsibilities of individuals and agencies would be clear to the public. If people were clear about their future personal liability they could plan how they would meet care costs up to the level of the cap, wherever that was placed. We would also stimulate the care market to provide more choice for families and incentives for business.
The government consultation process on the report is under way and is to be commended. The engagement process is about to conclude. It has been helping people to put their views, and the leaders of the discussion streams will indicate the priorities for change. I hope that the Minister will be able to tell us more about the process of putting those priorities into action. I know that the Government are committed to a White Paper in the spring, but it cannot be stressed too strongly that action is needed, with the greatest possible dispatch, to take advantage of the near consensus around this issue at the moment. We hear rumours of the Treasury having misgivings about the cost of the proposals. Will the Treasury be involved in the decisions about putting the identified priorities into action? I hope the Minister will tell the House the answer.
Another cause for concern is how the Law Commission proposals on social care, which again have been widely welcomed, will be dealt with. I do not have time now to go into these in detail, but they would create a stronger legislative framework, are compatible with the Dilnot proposals and together would form the basis for a White Paper and subsequent legislation. Do the Government intend to combine their response to the Law Commission proposals with their response to the Dilnot report? The chance to do so has been called a once in a lifetime opportunity. It would be tragic if the opportunity were missed. Therefore, it is vital that we harness not only the consensus in the care sector clearly set out by the 52 organisations in the Care and Support Alliance but the willingness of political parties to cross party political divides in the interest of finding a solution to the social care dilemma. We must find political consensus. My own party has suggested ways of facilitating this. My noble friend on the Front Bench will say more about this and I hope that the Minister will respond to these suggestions.
In conclusion, the Minister for Social Care, in a debate on 10 November in another place, said that,
“when the decisions are made … I hope we will be in a position to legislate at the earliest opportunity. Social care has languished … in the ‘too-difficult-to-do’ box for far too long. We are the Government who are committed; we see the urgency and the need. I hope that together we can get the cross-party lead that results in the changes which are long, long overdue”.—[Official Report, 10/11/11; col. 181WH.]
Amen to that. I hope that the Minister today will give an equally strong commitment. We must not fail to grasp the opportunity that Andrew Dilnot and his colleagues have given us. I beg to move.
Baroness Barker
My Lords, I thank the noble Baroness, Lady Pitkeathley, not only for the characteristically thorough way in which she introduced the debate but for securing it in the first place. She is absolutely right that the timing is of the essence. Many noble Lords have buried themselves deep in the Health and Social Care Bill. I was going to observe that perhaps today was light relief for some of us—but it is not. Everything that we will discuss today has an impact on the National Health Service. We have known for so long—and it has been confirmed by every report that the noble Baroness talked about—that if we do not sort out the system of social care, which we know does not work, it will inevitably build up costs for the National Health Service. As ever, it is a great shame that while people are passionately vocal about changes in the NHS, there has been something of a silence on social care, which never gets the same level of reaction despite being so important.
I will not go into great details on the reports. I will focus for my seven minutes on things that have to happen now. It is clear that the public know that they are likely at some point to need social care. However, they do not know the likelihood of that happening to them. We know that for people aged 85 and over, of whom there are a growing number, the figure is three out of four. According to an ABI survey, 51 per cent of the public do not know who will pay for their care; 21 per cent think that their family might pay for it; and 19 per cent think that the Government might pay for it. They have no idea where to go for independent advice. Those are the key issues that we must work around.
We must recognise that this is a generational issue. One’s ability to afford social care depends entirely on whether one has property. That is the determining factor. There is also an age factor. People aged 85 and over at the moment will have to pay for social care from their savings or capital. Those who are 65-plus and already retired will have to try to secure an annuity. As we know, the private market so far has failed to develop appropriate products. People of working age who want to plan for their future social care needs will either have to come to some kind of annuity arrangement or hope that in future insurance products will be made available.
As the noble Baroness, Lady Pitkeathley, said, it is crucial that politicians come together now to agree which parts of the Dilnot report they will accept, and the criteria and level of funding, so that individuals can know with some degree of certainty what the likely state contribution to their care will be, and private companies can come up with forms of insurance that are sustainable. That will take considerable time and is an urgent matter.
The noble Baroness, Lady Pitkeathley, mentioned in passing the Law Commission. She is absolutely right. The Law Commission report is critical to this. It calls for two things: a new statute and regulations that set out community care criteria and eligibility, and the process of assessment for individuals. The importance of community care assessment is something that people in the world of community care understand, but nobody outside it does. It is fundamental to this issue. If individuals cannot tell at what point their care needs will be recognised, accessed and taken forward, we cannot begin to build insurance products that will help people to plug the funding gap.
I will make a further point that has not come out in either of the documents. It is crucial that there is a system of care assessment that runs alongside but is completely independent from any form of financial assessment. In future, people will have to undergo both processes, but one must not contaminate the other.
I mentioned property. It is inevitable, given the generational distribution of property ownership, that equity release and the ability of individuals to release resources that are tied up in capital will become increasingly important. At the moment we do not have equity release products that are deemed to be safe. Nobody who wishes to go down the route of funding their own care in that way knows where to go for reliable advice. I ask the Minister whether the work done on equity release by the Joseph Rowntree Foundation in 2006 is being revisited, and whether the Government are engaging with the FSA on how they might build an equity release market in future that people will be able to trust.
Members of your Lordships' House conducted a seminar in which Andrew Dilnot introduced his report. He spoke to a pretty tough crowd. One political point was raised by the noble Lord, Lord Campbell-Savours, who is not in his place. He challenged Andrew Dilnot on whether his report was not a subsidy to people who were well off. That is the outstanding political point. Andrew Dilnot made the fair rebuttal that healthcare in the NHS is a system of pooled risk and we do not draw the distinction. That is the only substantive political point that was raised against the Dilnot report. I hope that if the noble Lord, Lord Campbell-Savours, agrees that the system that has been devised is equitable across the piece, all parties should be able to agree.
We have been here before. We have been very close to reaching agreement. Some weeks ago Ed Miliband said that he would be willing to take part in cross-party discussions. It is very easy to make such a statement and then find some reason, process or proposal that you cannot agree with. This requires political consensus and courage from all parties. It will take a degree of sustaining. It requires all politicians to convince the media that this is the correct way forward. If we do not agree this now, we will be back in 20 years debating the same issues, and the situation will be worse for the individuals concerned.
Baroness Bakewell
I, too, support the Dilnot recommendations and ask for a White Paper in the new year and action from the Government. I thank my noble friend Lady Pitkeathley for bringing forward the debate. I am sure that we will learn many intricacies, given the expertise in the House.
I will explain from my own experience why this is so important. I recently made a “Panorama” that told the story of someone in her mid-50s who had moved into the family home to care for her mother. Her mother's health deteriorated and she went into a care home. The family home had to be put up for sale and the dutiful daughter was left without either a home or an inheritance. These stories have proliferated in the media and have outraged people who wonder how such things are allowed to happen.
Before the Dilnot commission, there was a very unattractive political skirmish when the previous Government proposed a tax on an individual’s estate. It was denounced in the press and elsewhere as a death tax, and the proposal died. This proposal must not die. It has to be faced. It deals with issues of death and inheritance. Perhaps that is why we have shirked it and spoken less absolutely than we need on the matter. The old fear loss. They fear the loss of their contemporaries. They fear the loss of their capabilities, and they deeply fear the loss of their home and their savings. They fear these things more than other generations that have not got there yet, but such worries impact on the health and well-being of an older generation, and that is a consideration for the health of the nation generally.
There are several popular misunderstandings about this situation that get perpetuated by the press—I am sorry if I am guilty of that, and I hope I am not. When I go to make programmes, people often say to me, “I’ve paid taxes all my life. Why am I not cared for when I am old?”. This refrain has given it a very high profile in the media. It was always understood that the National Health Service provided, as the phrase had it, from the cradle to the grave—to the grave, not to the old people’s home. Social care was mistakenly seen as part of that contract with the state, and it still is. Social care, housing, feeding and dressing were things that, as citizens, we have paid for all our lives, but when it comes to being frail, as well as old, we need help in them, so they bridge a social convention—that we pay for housing, food and health—and the medical convention of the National Health Service. We are back to: “I paid taxes all my life”.
Dilnot’s most high-profile recommendation is that there should be a cap on an individual’s contribution to social care of somewhere between £25,000 and £50,000. This is high-profile because it strikes at this very unease felt by a generation of older people who, I have to say, have assets. We are asking taxpayers to fund the safeguarding of those assets. It is a long explanation to make that plausible to people who do not have such assets and wonder why people better off than themselves are asking people in the lower tax range to fund them. We are a property-owning democracy. Citizens are motivated throughout their lives to own their home and, what is more, it is a widely held impulse and part of our culture to have something to pass on to our children. Whether we approve of that or not is not germane to this argument. It is a widely held cultural belief.
Dilnot seems to me to walk a tightrope in asking that care is funded by a shared responsibility between the individual and the state. That is a new and understandable contract. It is as fair as can be devised and honours the aspirations of as many citizens as possible. Adjacent to this proposal are recommendations urging people to plan early in their lives and to be informed of the financial packages that are on offer to meet the sums they could be called on to pay, but the central proposition is a good one. I urge the Government and the Minister to move on this.
Lord Sutherland of Houndwood
My Lords, I thank the noble Baroness, Lady Pitkeathley, for introducing this debate in such a comprehensive, clear and incisive manner. I thank her, too, for the reference to the usual suspects. I am happy and proud to join her as one of them. Looking around the Chamber, most of us have form in this area. Remember “Butch Cassidy and the Sundance Kid”? In the film, as they are pursued by the Pinkerton men, Butch and Sundance look back and Butch, seeing the cloud on the horizon, says, “Who are these guys?”. We are these guys. We will not give up. We will continue the pursuit because this is such a critical matter. I thank Paul Newman and company for that. I shall group my remarks under a heading borrowed from Al Gore's influential book An Inconvenient Truth. I may use other catchphrases, some of which are stolen from MBA speak, such as “the elephant in the room”, but I want our minds to focus on “inconvenient truth”.
Today we address the Dilnot report, a good report, as one would expect from that stable. I have no hesitation in giving it my very warm support. Contrary to basic belief, we did not profligately recommend the free expenditure of money; we recommended a form of co-payment. I accept that the co-payment line has to be different today, and that is why I find it easy to support what Dilnot proposed. We address the report, but we do not address a government response. That is interesting and important. We have been here before—a situation where apparently the Government take longer to read the report than the excellent team took to write it. From past experience, this is not a good sign.
Occasional possible sightings of Dilnot have been reported, but they are usually accompanied by a pursing of Treasury lips and mutters about the state of the euro and that spendthrift bunch who were in government before. But of the report, there has not been a clear, authenticated sighting. Perhaps we should put David Attenborough on to it. It is perhaps in some frozen grotto in the north awaiting revival.
However, my simple thesis is this: the Dilnot report represents an inconvenient truth—none the less true for being inconvenient. The problems to which it points and the reasons for which it was commissioned—yes, it was commissioned, to the credit of the current coalition Government—have not gone away. It is not that the report has not gone away, but that the issues have not gone away, which is why some of us are here again. They will not go away. They will become more and more pressing the longer we ignore them.
What are the reasons for the delay in the Government’s response? They are the usual ones: “We need more time and information” or “We are consulting”. One thing successive Governments are not short of is advice. There is no need for further consultation. Think of the range of reports I could drop before the House today—I thought about bringing them in, but I would get back strain lifting them: the Joseph Rowntree Foundation report; the Wanless report from the King’s Fund; a report from the LSE by Raphael Wittenberg and colleagues; the 2006 report from the Audit Commission, the Healthcare Commission and CSCI; Her Majesty's Government’s 2006 report Opportunity Age; and their 2009 Green Paper Shaping the Future of Care Together. There was also an IPPR report; I could go on. The Law Commission has already been mentioned. There is plenty of advice. It is decisions that are needed. We need a policy.
All of those reports presented inconvenient truths to successive Governments. We have 13 years of history of this. For example, a government report in 2005 pointed out that by 2051 over 25 per cent of the population will be over 65. Wanless pointed out that the cost of care of older people will rise from £3.7 billion to £8 billion with the net cost to government rising to £1.7 billion. Wittenberg has equivalently devastating statistics. We all know them. I look around the House. Noble Lords know these statistics, and I do not need to repeat them. There is a constant litany on demographic change in this and in other countries. My favourite statistic is that in the course of this debate, if we all keep to time, noble Lords’ statistical life expectancy will rise by 30 minutes. That is not a cashable cheque, but statistically that is the rate of demographic change. These are facts. They are true, but they are inconvenient.
There is a litany of further inconvenient truths: our systems for coping with demographic change are getting worse rather than better. We should note the report that was published yesterday, of which mention has been made, about the failings of care at home; the continuing drip, drip of stories about the failings of residential care and care of the elderly in hospital; and the way in which money allocated to local authorities for these purposes, because it not being ring-fenced, is not visible at point of delivery.
I had a letter last week from someone who runs care homes, which, as far as I can see, are run very well. She reports that the price local authorities are willing to pay is £200 per week under the real price. The homes deal with it, not by cutting staff, which is the inevitable route taken by many, but by raising the money elsewhere. I say, good for them, but not everyone has that capacity. The drip, drip, drip, the points to note and the failures of the system are inevitably reported to us. They are the inconvenient truths.
A further inconvenient truth is an unplanned, unco-ordinated and inadequate system, which is approaching the point of breakdown. Ministers should beware because they will be to blame. MPs should beware because older people vote and will hit them in the ballot box, which is the only place that they have left. Governments may contrive to ignore this but they cannot. These inconvenient truths will not go away.
There are convenient ways in which the Government operate which set these aside. I shall list them. Do not upset the Treasury applecart—it has a system for limiting expenditure and no exceptions are allowed. Do not tamper with the historic power of departments—their budgets should be subject to only marginal change. Especially, do not tamper with the fortifications which separate the budgets for healthcare and social care. We do not recognise the elephant in the room. I put it to the Government that it is time now to recognise it and to deal with these inconvenient truths.
Lord Lipsey
My Lords, I declare an interest as president of the Society of Later Life Advisers, which trains independent financial advisers specialising in elderly care. I want to concentrate on the role of the private sector. I strongly endorse, as every speaker has, the key features of Dilnot, which build on the minority report of the 1998-99 royal commission of which the noble Lord, Lord Sutherland, was such a distinguished chairman. Sadly, however, four months after Dilnot, his core proposal, a cap on care costs, is in danger of going down the pan; first, because of the cost and, secondly, because the Government are chary of opening up this wicked issue. The job of the House today is essentially to save Dilnot.
On private insurance, there are only about 30,000 insurance policies for long-term care extant at the moment. There are so few largely because of a lack of demand. People do not know about care costs and too many assume that the state will pay, which is why the work of SOLLA is so important; why local authorities need to do more to help self-funders understand their options; and why a state information campaign—call it a national care service, if you like—is essential. However, that does not apply just to the demand for policies, but to the supply.
The main reason why insurance companies have been so chary of getting into this area is the fear that people will live longer and longer—we have just heard from the noble Lord, Lord Sutherland, about how fast the expectation of life is increasing—and that the costs of that care will bankrupt the companies. Without a state-funded cap which limits the liabilities of insurance companies, mass private insurance is a dead duck. With a cap, one can envisage a huge expansion in policies, many of them funded from the proceeds of equity release on people’s valuable houses. Enhanced annuities are another promising avenue; for example, a pension that increases if an individual becomes disabled later in life and needs care. In Asia, policies have been developed whereby a sum of money is set aside which can be used for a person’s care if they need it but can be left to their children if they do not, and so on. However, without a cap at some level or other, none of those schemes is likely to develop on any scale.
What should the cap be? I have just one criticism of Andrew Dilnot’s admirable report. As a cap on the costs that an individual must bear, £35,000 is too low for three reasons. First, it would cost the state too much—£3.4 billion by 2025-26. At a time of austerity, that will not happen. Secondly, it gives too much benefit to the better off. Let us remember that the poor will not get a penny of this money because their care is free now. Therefore, it goes entirely to middle to upper income people or, rather, their heirs. I do not say that they should not get any of it but if it is too high a cap, too much will go to the better off. Thirdly, because the cap is too low, most people will not bother to insure privately. They will say, “I can run to £35,000 out of the proceeds of my £300,000 or £400,000 house. I won’t bother”.
What should the level of the cap be? I am afraid that I do not know but that is not due to a lack of assiduity on my part. On 11 July, I asked in a Question for Written Answer what the cost of a £100,000 cap would be. The Minister replied with what I think these days we should call a “Baroness Trumpington”. In private communication the Minister has been his usual helpful self, but we still have no figure of a £60,000, £75,000 or £100,000 cap. I take with a pinch of salt his department’s contention that this is a hard calculation to do—with a ruler I could get quite near it myself. We will have to see what a freedom of information request can do to get an answer out of the Government.
But the more fundamental argument that the Minister uses against a higher cap is that the financial services industry does not want it. He cites the Government’s consultation on Dilnot, which favours a £50,000 to £60,000 cap. My own consultations with the financial services industry—I am in quite close touch—suggest a more mixed picture. Some companies want a low cap, say £35,000, and some want a high cap, say £75,000. However, the crucial point is that nearly all financial services companies agree that we need some cap. The Government’s consultation, cited by the Minister, states that support for the cap is overwhelming. The point is that the choice is not now between a £35,000 cap and a higher cap because the Government will not fund a £35,000 cap in present circumstances. The choice is between a higher cap and no cap at all. If there is no cap, there will be no role for private insurance. It is as simple as that. A cap is what we must get.
What do we want from this process? We want a settlement that will endure and enable private insurance to play its part alongside state provision and state funding in a deal on the matter. When do we want it? We want it, if not now, at least by the time of the White Paper next April, before another generation is condemned to inadequate care and crippling financial anxiety.
Baroness Tyler of Enfield
My Lords, I rise as a very recent recruit to the usual suspects and as someone still very much serving her apprenticeship but very proud to be a member of this group. First, I congratulate the noble Baroness, Lady Pitkeathley, on securing this hugely important debate. I do not think that I am exaggerating when I say that, despite all the challenges the country faces, the funding and the future of social care is the greatest social challenge facing the country, which we know we will all face in a very personal way as we move through our lives. I very much agree with the noble Baroness that it is a matter that has been put into the too-difficult-to-deal-with in-tray for far too long.
I should like to explain why this issue must be at the top of the political agenda. It is impossible to escape the fact that chronic underfunding of care has led to a crisis in our social care system and is putting huge pressure on existing care services, the NHS and, in particular, on families providing care. As we think of the challenges we face, a couple of statistics have really brought that home to me. The first is the fact that the number of over 85 year-olds is set to double over the next 20 years. The second is that 11 million people who are alive today will live to the age of 100. The third is that the number of carers is expected to rise from 6.4 million in 2011 to 9 million in 2037.
The extent to which social care funding has failed to keep pace with demographic change—in marked contrast to NHS funding—has already been well covered, so I do not intend to repeat those comments. Instead, I want to say a word or two about who is really feeling the burden of this underfunding. First of all, there is the cost to families. The result of demographic changes outpacing spending is that growing pressure is placed on family members who provide care. I was interested to see that statistics produced by the NHS Information Centre show that the proportion of carers providing over 50 hours of care a week has doubled in the last 10 years. That has all sorts of implications for people’s health, finances, their availability for work and, indeed, for the economy.
I turn next to the issue of the cost to businesses, which we hear less about. The peak age range for caring is 45 to 65, which often represents employees’ peak of training, skill and experience. Employers are at risk of losing these employees at short notice if the social care system cannot enable families to juggle work and care, and the average cost to businesses of recruitment, training and lost productivity is around £11,000 per staff member lost. As we know, there are many enlightened employers who are working hard to try to promote flexibility and workplace support for employees who are juggling work and care responsibilities, but flexibility in the workplace cannot compensate for poor quality, unreliable or inaccessible social care, and over 40 per cent of carers who have given up work say that they did so due to the lack of sufficiently reliable or flexible services.
Lastly, I mention the cost to the NHS. As we all know, an insufficient supply of social care in the community also results in additional pressures and unavoidable costs for NHS services, particularly through things like emergency admissions and bedblocking—a term that I absolutely hate, but recent statistics show that these issues are currently getting worse.
Like many other noble Lords, I am attracted to the recommendations made by the Dilnot commission. I notice that they have also attracted the support of many influential bodies in the sector and beyond. I believe that, if implemented properly, the recommendations have the potential to help people to prepare and plan for a better older age and take away the terrible fear that so many have. I will not run through the individual recommendations in detail because others have done so, but what is important is protecting families from catastrophic care costs by capping lifetime care bills, and we have already heard very interesting arguments about the level at which the cap might be set. I also welcome the commission’s clear recognition of the need for additional resources for social care to overcome the historical shortfall, as well as the proposed national system of eligibility and portable assessments in order to create a more standardised system across London and across England. That will help families if they move to different parts of the country. Another recommendation has been made which perhaps is not very sexy—we have not heard about it so far today, but I think it is potentially very important—is for a new awareness, advice, information and advocacy strategy to help families plan for care and to access private, state and voluntary sector support.
So where is the money going to come from in the very difficult current climate? I shall highlight a couple of possible areas. First, those of us who are involved in the consideration of the Health and Social Care Bill have heard a lot recently about the importance of the integration of health and social care, and I thought we had a good debate on the subject earlier in the week. The Bill is entitled “Health and Social Care”, which is very good, but I have to say that we do not talk that much about the social care aspect, and it still often feels like the country cousin. It was said earlier this week that it will require a really big shift of existing resources from the NHS to the social care system to make a reality of integration, and that is going to require huge political will at both the national and the local level.
There is also the issue of investment in more preventive work, which covers all sorts of things these days. We have reablement packages, telecare and the like that can make a big difference to older and disabled people and their families in terms of enabling them to remain in their homes. That is very welcome, but where is the money for these preventive services going to be found? Is it really going to be made available from ring-fenced public health budgets? We also need to do more to stimulate the care market and to think carefully about what these proposals will mean for current providers. It was interesting to note that a poll carried out in February 2011 of the social providers of community care showed that 25 per cent of them expected to face closure before the end of this year because of cuts in local authority fees. Finally, we need to do more to improve the quality of care available, in particular by supporting the development of a skilled, flexible and valued workforce. The point about members of the workforce feeling valued is so important.
I shall finish by saying that I believe we must be brave both as politicians and as a political class, and here I offer my apologies to the Cross-Benchers. We need a real political consensus on this. The report sets out the basis for a lasting and long-term settlement, and as a class we will not be forgiven if we duck the challenge because it is too difficult.
Lord Rix
My Lords, like others I welcome this very important debate and I commend the noble Baroness, Lady Pitkeathley, for affording her fellow Peers the opportunity to discuss this issue at such a timely moment. I also declare a personal interest as president of the Royal Mencap Society, an organisation that is greatly concerned about the current social care situation facing many people with a learning disability across the whole of the United Kingdom. In the context of the recommendations made by both the Law Commission and the Dilnot Commission about the reform of social care, there is clearly a demonstrable need and appetite for a change to the system to be achieved as soon as possible. While Government austerity measures have significantly reduced settlements to local authorities, it is important not to overlook the pre-existing underfunding that the social care system has experienced.
The Government spend around £16 billion per year on the provision of social care support, in comparison with £110 billion on health and £180 billion on welfare. Despite the vast number of individuals who rely on social care support to ensure their independence and dignity, these figures suggest that it has become something of an afterthought which merely succeeds in papering over the numerous cracks in the provision received by some of the most vulnerable members of society. I dare to suggest that extra funding awarded to social care, evenly distributed around the country, would reduce the NHS budget by a similar amount.
Matters are only likely to worsen. The number of people using social care is increasing and, within this demographic, the number of people with a learning disability is expected to increase by almost a third over the next 20 years. This is a group which is often highly reliant on social care support. Indeed, adults with a learning disability constitute 24 per cent of the social care budget, and so it is essential that their needs are met. However, this is increasingly not the case as the upward curve of social care need jousts with the downward spiral of funding per head in the system. Organisations such as Mencap and the Learning Disability Coalition warn that the consequence of this is that effective and appropriate social care provision is often increasingly out of the reach of a growing number of people with a learning disability.
According to recent research conducted by Mencap about local authorities’ eligibility criteria, 83 per cent of councils are only supporting people with critical or substantial needs, an increase of 10 per cent on the previous year. This reflects a wider culture of “tightening” eligibility criteria so that only those with the “greatest needs” are able to receive support, whereas those with milder or more moderate needs, who nevertheless still require social care support, stand to miss out. It indicates that, sadly, the funding situation for social care is worsening. Indeed, only two weeks ago, the courts ruled that plans by the Isle of Wight Council to provide assistance to those with critical needs and only for some people with substantial needs, was unlawful for failing to give due regard under disability legislation, alongside other reasoning. While it is encouraging to see that such action is being curtailed, there is the wider point that some councils feel obliged to make such contentious decisions as a result of the limited social care resources that they have at their disposal.
The real costs of underfunding become all the more quantifiable when individuals are affected. Susie is a 47 year-old adult with a severe learning disability, which means that, for all of her life, she has been the recipient of social care services and was able to attend a day centre five days a week. She was then offered the option of having a personal budget, which she accepted and, on reassessment, the council gave Susie a financial budget which amounted to only one and a half days’ worth of services.
What that case represents is the corner cutting that is happening throughout the country. But this is not a problem without a solution. What it does not require is yet more papering over the cracks. Instead, action is needed to bring about fundamental reform of the whole system in a way that does not shrink from making difficult decisions. It also requires a fundamental overhaul of the various processes, the various duties and the various means of support associated with social care provision.
This would help overcome the current postcode lottery of care that exists throughout the UK and which dictates that people with equal needs can receive wholly different outcomes purely as a result of where they live. Essentially, this brings together the recommendations of both the Law Commission and the Dilnot commission reports. The latter points out that the current system of funding of care and support,
“is not fit for purpose, and has desperately needed reform for many years”,
while the former urges that a wide of social care overhaul is required as:
“There is no single modern statute to which local authorities, service users, carers and others can look to understand whether services can or should be provided”.
While I fully appreciate the limitations of the current natural climate, the Government would do well to consider the wisdom of RH Tawney in the context of the future of social care when he wrote in The Acquisitive Society:
“As long as men are men, a poor society cannot be too poor to find a right order of life, nor a rich society too rich to have need to seek it”.
Lord Desai
My Lords, first, I must say that Andrew Dilnot has written a good report, but I am going to be more critical of the proposal than most noble Lords have been so far. That is not because I do not recognise that there is a great and growing need, and that a civilised society should of course take care of people in need. But we have to face the fact that we are at a juncture where we have severe problems in our public finances. It is not just the coalition Government who have done this thing. We have undersaved for practically a generation. We—not just the UK but the developed economies as a whole—now face a serious crisis in that, unless we tackle undersaving, we will not be able to survive further into the 21st century. Our dependency ratio will rise. Noble Lords have already pointed out how many more people will be aged over 65 and how many people will live to 100. That is all very good, but the working population in proportion to the people to be taken care off will be small, and if we continue to have this ludicrous policy on immigration, it will not get any better internally.
My noble friend Lady Bakewell said, as often people say, “I have paid taxes all my life, why can't I be taken care of?”. The bad news is that your taxes are not adequate to take care of you when you need help. I am sorry about that. That is the reality. We find the same crisis in pensions. The pension that you have accumulated over a working life is no longer adequate to pay for the long after-work life that you will have. Once upon a time, when Beveridge put in his proposals, the working man lived three years beyond retirement. It was easy and the pension funds were flush with money. Now, you probably work for say 35 years and live for another 25 to 30 years. It is difficult to devise a system of pensions unless you have saved a lot of money to begin with, which will make it feasible for you to have a comfortable life later on. Somebody has to be the hard man and I will choose to be the hard man here.
At the very least, the cap should be indexed. I will come on to what my noble friend Lord Lipsey said, but we should make it quite clear that the cap of £35,000 cannot be kept constant. It will have to be indexed either to prices or earnings; whichever the Government find more money-saving.
Secondly, my noble friend Lord Lipsey said some very good things about this. There is a market failure in the social care insurance business. Of course, as many noble Lords have already said, it is because people confuse social care with health and they think that health is taken care of. Therefore they think, “Why am I not looked after for this?”.
We have to incentivise the buying of social care insurance at a very young age by people. The way to incentivise it, although I have not worked it out, would be that the amount of cap you get later would be related to how much preparation you have made earlier. If you have actually taken care of some of your needs, then we will help you along. That is not to say that we will not help other people, but ultimately this proposal, as many noble Lords have said, is benefiting the better off. To the better off we will say, “Prepare early on. You may be only 25 now, but if you recognise that you will face problems when you are 70, there will be schemes and there could be some government help for you”.
One of the other problems that we will have is that while we have not saved very much, we have been beguiled into thinking that buying a house is buying an appreciating asset. If you buy a car, you do not think that the car will appreciate as an asset. Why do we all think that a house should appreciate because of inflation? Asset price inflation will not go on. A house will not be the kind of wealth that will support you. It ought not to. We ought not to be living with the continuous asset price inflation that we have seen. Equity release will not be a way out in the future.
Given all these problems, I hope that the Government will accept some version of Andrew Dilnot’s report because we cannot again kick the problem into the long grass and come back to it in several years. That is not possible. We have to start with Dilnot and examine whether £35,000 is the right amount and whether we should index it, or whether £100,000 is the right amount and should we reduce it, especially given that the rich not only have more assets than the poor but they live longer. Both ways, there is this kind of regressive redistribution.
Therefore, we have to be very careful and examine the long-run economics, and the projections in Dilnot are not enough. The long-run economics in the general macroeconomic context are what we can afford and who will pay what in a carefully humane way. But let us not get carried away and let us not land ourselves with yet another bankruptcy-making proposal.
Lord Pearson of Rannoch
My Lords, as previously in debates of this nature, I declare my interest as the father of a 31 year-old daughter with Down’s syndrome, who is fortunate enough to live in a Camphill community. What I have to say therefore particularly concerns those many people with learning disabilities.
For them, personalisation should offer greater opportunities to tailor services to their individual needs; some real choice, in other words. But you cannot have choice that actually means anything—real freedom of choice—unless you have the freedom to move if you want to. Unlike the rest of us, who can decide to move without losing our entitlement to, say, NHS services, people with learning disabilities who wish to move into another authority, even if it is a couple of miles away in the next town, do not have the same freedom. Somewhat understandably, authorities are only too happy to place residents elsewhere because they gain financially by the transfer. But the responsibility for fresh reassessment, care planning and, of course, funding is then transferred to the receiving authority, with no commitment to replicate it. Not surprisingly, individual receiving authorities do not always accept people who move into their area. These people must have their needs reassessed by this receiving authority, which can be a lengthy process. Most importantly, they have no guarantee whatever of receiving the same level of support.
The rules of ordinary residence mean that costly and wearing disputes between authorities leave vulnerable people in limbo while they thrash out who shall take responsibility. This causes great anxiety and suffering to them and to their families, and leaves providers who would be willing to accept them unable to do so because they do not have the funding available. For instance, Camphill life-sharing communities exist in only a few authorities, so if someone chooses such a way of life, it usually means that they have to relocate, which then brings all the problems I have just mentioned. The rules on the process of resolving funding disputes were recently clarified, but unfortunately this still does not get away from the disputes themselves. In a recent briefing from the Voluntary Organisations Disability Group, its chairman, Bill Mumford, the chief executive of McIntyre, said that one of the chief obstacles to the potential success of personalisation is the postcode lottery, which is,
“confusing and complicated for purchasers of services”.
The Dilnot report, which we are discussing, goes some way towards addressing this problem. It supports the Law Commission’s recommendation that assessments should be portable. Like other noble Lords, I urge the Government to implement this as soon as possible. It would be a step in the right direction. However, I fear that it does not go far enough. What is also needed is portable funding; funding, in other words, which follows the individual. I can but urge the Government to look into ways of ensuring that funding, as well as assessments, becomes portable across local authority boundaries. Perhaps we need a centralised system of funding.
This would prevent the use of money intended for the learning disabled, which is no longer ring-fenced, being spent on other local needs. It would get around much of the unfairness, particularly the postcode lottery which is endemic in the current system. It would ensure real freedom, which is—or should be—at the heart of personalisation.
Finally, in these times of stringent cuts—and here I trust that the noble Lord, Lord Desai, will agree with me, in view of his earlier remarks—every penny would be spent at the frontline, actually supporting people in the way that they choose and that best suits them, rather than on costly and wasteful disputes between authorities as to who will pick up the bill.
I look forward to the Minister’s reply.
Baroness Wilkins
My Lords, I thank my noble friend Lady Pitkeathley for initiating this timely debate. The noble Baroness, Lady Campbell of Surbiton, had hoped to take part but, sadly, she has developed a chest infection and I know that all noble Lords will want to join me in wishing her a speedy recovery. She asked me to speak to the points that she wished to make, which I share, and to thank Marija Davidson of RADAR for her help.
The noble Baroness, Lady Campbell, particularly wanted to speak on future policy for people below pension age who need personal care, people who are either born disabled or who become so in their younger years. Her main points focus on the issue of human rights and the place of the precious, long-fought-for concept of independent living in future policy on social care.
The proposals of the Commission on Funding of Care and Support rely heavily on building the ability of people to plan and prepare to contribute financially. This is, of course, sensible for those who have had years of employment which allowed them to save for their inevitable decline. But many disabled people do not have that opportunity. Only 50 per cent of disabled people of working age are in work, compared to 80 per cent of non-disabled people, while 23 per cent of disabled people have no qualifications compared to 9 per cent of non-disabled people. The average gross hourly pay for disabled employees is £11.08, compared to £12.30 for non-disabled employees.
All this does not bode well for our ability as disabled people to save and pay for our social care support, whether early or later in life. For those born disabled, the odds against them are stacked even higher, as they will never be able to accrue enough capital to purchase the big things in life, like a property, or to start a business. Disabled people do not start from a level playing field, and it was pleasing to see that the Dilnot report recognises this inequity in its recommendation 3:
“People born with a care and support need or who develop one in early life cannot be expected to have planned in the same way as older people. Those who enter adulthood already having a care and support need should immediately be eligible for free state support to meet their care needs, rather than being subjected to a means test”.
But what will that “free state support” consist of? How will our precious concept of independent living fare in this new world?
An inquiry is currently being undertaken by the Joint Committee on Human Rights, of which the noble Baroness, Lady Campbell, is a member, into Article 19 of the UN Convention on the Rights of People with Disabilities, which concerns independent living. Three things have become clear during the evidence sessions. First, there has been a decline in opportunities for independent living due to decreasing financial resources. Secondly, there is a continued reluctance of local authorities to embrace choice and control for disabled people so that they can exercise independent living. Thirdly, there is buck-passing. It seems that as soon as money gets tight, the urge to snatch back power and control is overwhelming. The increase in charging for social care over the past decade has been matched by a decrease in disabled people's freedom to live independently.
A Social Care Institute for Excellence report published in February highlighted that social care budget holders are losing control over their budgets, as councils require accountability for every single expenditure. Just over a year ago, disabled people receiving social care support through direct payments had the flexibility to spend their payment in the way they deemed best to meet the agreed objectives in their support plan. It is now being asked whether this is a luxury that local councils can afford. However, what they are calling luxury is Article 19 of the UN convention. The positive effects and benefits of independent living, which basically mean choice and control over how one’s personal support money is spent, are legion. Not only does it mean that disabled people can work, volunteer, support families and be active but by providing social care in this way, service users will create new markets through their individual choices. However, local authorities still do not see it that way. In their desperate efforts to control spending, councils are mistakenly snatching back our control, which will undermine the very markets that we need for 21st-century social care. Are we past the heyday of direct payments, which were hailed as a life-starter by disabled people, just when they have barely started to roll out across the country?
Disabled people report a full-steam reversal on supported independent living in the community, always on the grounds of cost. Many disabled people who have had high levels of need are now being asked or, in some cases, cajoled on to continuing care, where there is no right to control your personal budget.
We have to face the fact that there is a cost to disabled people enjoying their human rights, as there is to most human rights—the right to a fair trial, for instance, the right to education and so on. Surely that is a price worth paying collectively, as the whole of society will benefit, not just disabled people. The evidence to the JCHR Article 19 inquiry has demonstrated this starkly; and we have ever-present evidence in this House in the noble Baroness, Lady Campbell, who writes:
“Without another human being by my side, 24/7 to help me function equally, I cannot exercise any of my fundamental human rights”.
Disabled people have serious concerns whether independent living is being eclipsed in the current debate on social care reform. Will the Minister give an indication of the Government’s thinking? For example, are the Government considering allowing personal health budgets to be controlled far more by disabled people? Of course, there is also the issue of portability, just spoken to so eloquently by the noble Lord, Lord Pearson of Rannoch—the right to disabled people’s freedom of movement. The Minister in the other place has expressed a keen desire to make portability a reality. However, it seems that this Government are talking about portability of assessments. Most people can already take their assessment with them; the issue is whether they will be satisfied in the new area. It is portability of outcome that disabled people are seeking. That is what the noble Baroness, Lady Campbell, is seeking in her Private Member’s Bill and we hope it will receive government support.
Independent living is a great good for disabled people and society at large. We are seeking reassurance from the Minister that the right to independent living will take its rightful place in underpinning the future of social care and in its funding.
Lord Low of Dalston
My Lords, I too congratulate the noble Baroness, Lady Pitkeathley, on securing this extraordinary and interesting debate and on the comprehensive and compelling review that she gave us, which has stimulated so much creative and critical thinking from those who have followed her. I can remember three debates on social care and related issues during my first year in your Lordships’ House—so much so that I observed that social care and the importance of social work had become something of a leitmotif running through the proceedings of the House. This does not seem to have been the case so much of late. Unless I have missed something, the last debate of this kind took place on 9 December last year. It is high time we had another one.
The debate is also very timely. The Government received the Dilnot report last July and are now consulting on it. There also seems to be some disposition for cross-party talks on both sides in advance of the promised White Paper in the spring. If we could get to the point where it was possible to move forward, on a basis of consensus, with reform of the law on social care, the upgrading of social care itself and reform of social care funding, that would truly be a consummation devoutly to be wished.
The debate also does not come a moment too soon, in the sense that hardly a day goes by now without our ears being assailed by further horror stories of the neglect, abuse, dehumanising treatment and downright inhumanity to which the most vulnerable on the receiving end of social care—those in greatest need in our society—are habitually subjected. In the summer we had Winterbourne View; and only yesterday, as has been mentioned, the EHRC was reporting evidence of what it called a “systematic failure” across the country, which amounted to a breach of elderly people’s human rights. Examples that they considered amounted to cruelty included people being robbed, left hungry and unwashed, and food being placed in front of deafblind people without telling them it was there, or putting it in an inaccessible place—something, I have to tell you, that blind people routinely complain about in hospital. On the strength of this, the CQC announced the previous day that it would step up its programme of inspections of homecare services, saying that people who use homecare services often find themselves in vulnerable circumstances and the operation of homecare is not as transparent as care in hospitals and other sectors because interactions happen behind closed doors in people’s homes. The Care and Support Alliance, a consortium of more than 50 organisations representing older and disabled people to which the noble Baroness, Lady Pitkeathley, referred, has recently stated that the social care system is in crisis, unable to meet the needs of growing numbers of older disabled people and those with long-term conditions.
Since the day when I entered this House, and I am sure for some time before, we have been talking about a crisis in social care; now it has become a scandal that many predicted if action was not taken. In some ways, that is a good thing—not that we want anyone to be subjected to inhuman and degrading treatment, but it seems to be the thing that gets Ministers’ attention. Up to now, there have not been any Victoria Climbiés or Baby Ps among the elderly and disabled. My fear is that, when the funding for the deprived and disadvantaged, the most marginalised and dispossessed in our society, is cut or they are subjected to inhuman and degrading treatment, they simply disappear beneath the radar.
Coming towards the end of the debate, I speak after such big-hitting luminaries as the noble Lords, Lord Sutherland, Lord Warner and Lord Lipsey, who all, as the noble Lord, Lord Sutherland, acknowledged, have form on this subject—not all the same form but, nevertheless, considerable form. In their presence, I cannot expect my contribution to be anything more than modest, so I shall content myself with trying to drive home a few key points that seem to me pretty well ungainsayable but cannot be said too often.
We have already mentioned the crisis. As everyone has said, the Government must really bite the bullet on Dilnot now. As has become clear, there is room for a range of opinions on the precise form that the bullet should take, but bite the bullet the Government must no doubt do. Labour did some good things with social care when it was in office, but the past decade, as the noble Lord, Lord Sutherland, reminded us, has been littered with too many reports and policy statements that have remained unenacted. It was to the coalition’s credit, therefore, that it moved quickly to set up the Dilnot commission and it will be even more to its credit if it can build cross-party consensus around it and get on with implementing it. I do not disguise the fact that it is a formidable challenge; expenditure on social care has increased, though not as much as on health and education, but it has not increased enough to keep pace with rising demand stimulated by people living longer, and it needs to increase still further. That is a hard saying at a time of financial stringency, but with the number of 85 year-olds set to double in the next 20 years the level of demand will only go on rising relentlessly. I am afraid that that is just the problem that the Government have to deal with; if they do not, they will attract the opprobrium that rightly attends allowing a scandal to balloon out of control without making any serious attempt to deal with it.
Time is running out. Reforming the funding of social care is not the same as undertaking the upgrading of social care that is needed, so Dilnot is not enough. There will be more to do. I realise that it cannot all be done at once but, in addition to Dilnot, it will be imperative for the Government to commit to embracing a wider agenda. Workforce development is critical, but the proportion of care delivered by the private and voluntary sector has gone up from 56 per cent to 84 per cent in the past 10 years. Much of this will be concerned to keep costs to the bare minimum in order to turn a profit. The noble Baroness, Lady Bakewell, devastatingly laid bare, in the Second Reading of the Health and Social Care Bill, how this issues in a jumbo scandal of its own, with the Southern Cross debacle. This poses real challenges in recruiting a sufficiently high calibre of staff.
Finally, Dilnot’s fourth recommendation says:
“Universal disability benefits for people of all ages should continue as now”.
With the Welfare Reform Bill, that kind of joined-up thinking would appear to have gone by the board already.
There is need for some serious rethinking here. It is not yet quite too late.
Baroness Wall of New Barnet
My Lords, I, too, congratulate my noble friend Lady Pitkeathley on achieving this opportunity for us to debate a subject that is growing more and more important. There is no doubt that Dilnot is a good thing but I suggest that it is not the complete solution to all the problems faced in the delivery of social care. The problem is a major issue for us all and, I suggest, the responsibility of us all, certainly those of us involved in commissioning and delivering services to people who need this care and are entitled to it.
Although I have suggested that the issues are major, I also think that they can be described simply. There are ever increasing demands on social care budgets as the population ages. A little like the noble Lord, Lord Low, I feel that I am repeating everything that everybody has said, but it is more and more difficult for each speaker not to do so in putting over the context and importance of this debate. Councils face a much tougher funding settlement than the NHS, councils’ eligibility criteria and funding levels vary and the public are confused about charges.
All of the above can lead to an imbalance and dysfunction between the health and social care systems, which need—or ought—to operate seamlessly if patients are to receive joined-up care and travel efficiently and safely from the health to the social care system. Dilnot tackles this in various ways, including by proposing standard eligibility criteria and the transferability of assessments between different local authorities. A number of noble Lords have referred to this, and the evidence is very clear that that can cause a great deal of distress for people.
Dilnot also talks about capping an individual's liability for charges. Again, other noble Lords, including my noble friend Lord Lipsey, have spoken in much more detail on the cost of that. My understanding is that this would require between £1.3 billion and £2.2 billion of central government funding, so that those individuals do not lose their home if, for example, they need continuing care. The report suggests that,
“the Government should review the scope for improving the integration of adult social care”,
and do so with other services involved,
“in the wider care and support system”.
Can the noble Earl please share with us his views on this and how he thinks that the Government, working together with all parties, can achieve this? The report continues:
“In particular, we believe it is important that there is improved integration of health and social care in order to deliver better outcomes for individuals and value for money from the state”.
I shall raise some points in this context. First, this is important because it will stop councils putting in place higher eligibility criteria than their neighbours and ensure a consistent standard of approach across the country. Transfer of assessments is an efficiency gain and will reduce the number of repeat assessments, as patients move to different authorities. My understanding from talking to people is that it would also remove much of the anxiety that people have in repeatedly having to go through those.
Secondly—this is also important, I suggest—it benefits individuals and families rather than the social care system. Although Dilnot says more funding is required for social care, simply replacing co-payments by individuals with government funding does not by itself, in my view, bring additional resources.
My third point, which is important for trusts such as mine in Barnet and Chase Farm, is that we need to work as an integrated health and social care system. That is something I have believed for the past five years as chair of that trust. I have urged it to happen and we still do not get there. If we do not do this, we will end up with people lying in expensive hospital beds who do not want or need to be there and who, through no fault of their own, prevent others being able to receive the treatment that they require, perhaps in that bed.
Integrated health and social care delivery does not necessarily mean single organisations providing health and social care. It can be achieved through joint commissioning, joint planning and, dare I suggest, pooled budgets. I would guess that suggestion is too radical for some people, but I believe it is true. That has been the aim of many Governments, and people have made many suggestions. The previous Government had this aim and worked hard to achieve much of it—other noble Lords have referred to many of our achievements in this area—but, because the health system, and I particularly include PCTs in that, have never worked closely enough with local authorities, we allowed the gap to remain into which many vulnerable and needy people fall. They are still falling into it now, and that is worsening.
I suggest that there are some gaps in Andrew Dilnot’s recommendations, particularly regarding where the extra funding is going to come from—which is a big question—and whether even what he recommends goes far enough. The story is not complete, and some of the issues still remain. However, as others have said, this is the most sensible set of proposals that we have seen for some time. They must be supported and worked on by all involved to ensure as seamless an approach to health and social care delivery as we possibly can for very often the most vulnerable of people whom we are dealing with. We must do this with urgency.
Lord Adebowale
My Lords, I support the debate initiated by the noble Baroness, Lady Pitkeathley. I congratulate her on ensuring that, at this critical time, social care is given the attention that it deserves. I should also declare an interest as CEO of the health and social care enterprise, Turning Point. I apologise in advance as I certainly do not match the expertise or the eloquence of the luminaries who are taking part in this important debate.
Like many others, I support the work of the Dilnot commission for creating a once-in-a-lifetime opportunity to resolve the anxiety created by the current position of those in need of social care. The noble Baroness, Lady Bakewell, has already mentioned that the deal between the individual and the state to provide care in older age is one of the pillars of this debate. Her position is a reasonable one to take, in expecting those with assets to contribute to the cost of care, although with a cap. The noble Baroness set out the argument with admirable clarity and I need not keep the House further by saying any more than that I support her arguments and those of the noble Lord, Lord Lipsey. Indeed, I am going to get a T-shirt made of his credible call to arms: “What do we want? A cap. When do we want it? Some time after the full response of the Government to the Dilnot report has been published”.
The noble Lord, Lord Desai, made the point that if you want cradle-to-grave care, you have to pay cradle-to-grave taxes—a point that would indeed make of the Minister a brave man if he were to agree to it during the course of this debate, which of course I invite him to do. No, Dilnot may not solve all the problems of the future, but it is a good place to start.
However, it is not just the fact that the general population are living longer that means we have to resolve this issue; it is also that those who have complex needs across substance misuse, mental health and learning disabilities live longer. Turning Point is working with many elderly people who have addictions, mental health challenges and learning disabilities. While I acknowledge Mr Dilnot’s recommendation that the cap should be zero for someone who enters adulthood with already established care and support needs, we need to do more.
My concern in the matter of adult social care is that we should more clearly acknowledge the needs of those people who do not fit the stereotype of the elderly in care—or, as someone in one of Turning Point’s services put it, “My worry is that everyone talks about care for the elderly as though everyone will be Mrs or Mr Marple. What about my mum who has been drinking, anxious and chaotic for the last 15 years?”.
It is essential that we ensure that the integration of health and social care is built into the design of social care policy. As the noble Baroness, Lady Barker, pointed out, this debate is not a break from the Health and Social Care Bill; it is mission-critical to its success. If people fall through the care gap, they either keep on falling or they land on the often very painful and expensive health spike. The critical need for new technologies and approaches, as mentioned by the noble Baroness, Lady Tyler, is essential. Where the money comes from needs to be considered in the context of the fact that cuts now will not always save money in the not too distant future.
I support the remarks of the noble Lord, Lord Rix—I said I would—with regard to people with learning disabilities. The fact is that desperate measures are being taken to resolve short-term challenges. Susie’s story is being repeated up and down the country. To use the noble Lord’s phrase, Susie has started to fall into the crack. We need national eligibility criteria as a first step in at least acknowledging that this crack exists.
This needs to be addressed alongside the point made by the noble Lord, Lord Pearson of Rannoch: surely in a modern society the idea of a postcode lottery of care is simply unacceptable. We need funding to follow the funded, along with their care passport. This policy supports the remarks of the noble Baroness, Lady Wilkins. If we do not have a right to care, regardless of location, we cannot have independent living. Why should those with care needs, however complex, not have the right to move and to be economically active, as many wish to be?
I, too, hear the disappointment of those who expected to be given the resources to create a bespoke pattern of care for themselves and who are being denied that opportunity. These people might create a solution to their complex needs, as opposed to being shoehorned into a convenient budget heading. Surely, the horror stories recounted by the noble Lord, Lord Low, might be addressed by empowering care customers to demand better care.
Policy on care for the elderly cannot be separated from other areas of government policy. We are aware that the Government’s White Paper on social care is being designed as we debate this matter. The paper must be cross-departmental in scope and cannot work in isolation from other policies, such as the Welfare Reform Bill, already mentioned by the noble Lord, Lord Low. The impact on this client group needs to be at the centre of our concerns.
I often state somewhere in nearly all my speeches that the future is decided by the undiscussable. All parties—the Labour Party and the Conservatives in coalition with the Lib Dems—have contributed to making social care discussable. The baton of leadership in this area has now passed to the coalition Government. As has been pointed out by the noble Baroness, Lady Tyler, and others, failure to grasp the nettle now in both funding and need will allow fear of need in old age and disability to dictate the future for us all.
Lord Warner
My Lords, I, too, congratulate my noble friend Lady Pitkeathley on securing this debate and on her excellent speech, after which I felt that I should like to make her an honorary member of the Dilnot commission. I also pay tribute to the coalition for setting it up. I declare my interest as a member of that commission, which was so ably chaired by Andrew Dilnot.
I do not have time this afternoon to go through all the issues that were raised in the commission’s report; I want to concentrate on a few key issues. First, I emphasise that we formulated our recommendations only after an exhaustive consultation with a very wide range of interests, encompassing commissioners and funders of care, providers across the different sectors, the financial services sector, carers and many others with experience and expertise in this area. These groups were united in the view that the system of funding long-term care needed urgent reform on a sustainable basis that had cross-party political support. This issue will require the leaders of the three parties to oversee a political concordat on a solution. It must not just be left to the health teams to sort out, particularly since, if I may say so, some of the current health-post occupants have form on this issue.
The other thing that was clear from our work was that, however much some people still hanker after a wholly tax-funded solution to the issue of funding, there is now widespread recognition that we must move forward on the basis of a partnership between the state and the private citizen in funding adult social care but—and it is a big “but”—with the state covering the cost for the poorest groups and those incurring high, unpredictable costs at the end of their lives. Only through a partnership of this kind will a sustainable system of mixed funding sources be built and new financial services products developed. The commission has created a wide measure of public agreement on this vexed issue, as the reception of our report on publication has demonstrated. I hope that the elected political class will not casually waste the consensus that has been created.
If I may put it as bluntly as this, the funding system for social care is bust. Despite the additional £2 billion announced by the Government in the previous spending review, for which they deserve huge credit, the King’s Fund estimates that there will be a funding gap of at least £1.2 billion by 2014. Despite their best efforts, local authorities are having to continue to tighten eligibility criteria and face more legal challenges for doing so.
We are seeing a growing number of reports of poor care of elderly people at home, in care homes and in hospitals. Too many of the staff undertaking this care are poorly trained, poorly paid and poorly supervised. A shrinking social care funding pot will inevitably produce more scandals and load pressure on expensive and inappropriate NHS in-patient care. That is the stark reality that we face as a country.
We have to start the process of increasing the size of the adult social care funding pot as a matter of urgency. This cannot all be done by implementing the Dilnot proposals but they are critical to showing commitment to building a more sustainable funding solution. If I may say so to the Government—I make this as a helpful contribution—there is nothing to stop them taking powers in the Health and Social Care Bill to implement Dilnot by regulations subject to affirmative resolution procedure. In the spirit of helpfulness for which I am famed, I have put down an amendment on these lines to test their appetite for a bit of decisive government. They could still complete their consultation on the details to be covered in regulations and the timing and cost of implementation. I suggest that this would give a clear signal to the sector and the public that change and improvement are going to happen.
I recognise that in this difficult financial climate the Government face difficult financial choices. I am sure the Minister will say that even just another 0.25 per cent of GDP—that is the cost of the Dilnot proposals at £1.7 billion—is difficult to find. However, it would be unlikely that all these costs would be incurred in one go, or immediately. I make another constructive suggestion. The Government could implement the proposals in stages of their own choosing. They could halve the cost by raising the cap to something like £65,000 rather than £35,000. I, for one, would be sympathetic to moving in that direction just to establish the principle of the cap, as my noble friend Lord Lipsey said.
While I am in radical mode, I bring one of the Health Secretary’s favourite subjects to the House’s attention—the so-called death tax. The reality is that many people in my generation have seen a remarkable increase in the value of our housing assets. Some would see these as windfall profits. There is no reason why some of those assets should not be collected after death to pay for care. Indeed, as we said in our report, some local authorities already do this but do not charge interest on the effective loan of the care costs. Why do the Government not accept our proposal to have a national scheme to allow more people to meet care costs from their estate if the property value is sufficient and up to a capped limit, and let local authorities charge interest at an agreed national rate? If we have a state student loan scheme, why cannot we have a state long-term care loan scheme? On that constructive note, I end by saying that if we do nothing about this, as the King’s Fund has shown, the cost of the current inadequate scheme for public funding of adult social care will rise from £6.7 billion in 2011 to £12.1 billion in 2026. That is a pretty expensive way of doing nothing.
Baroness Thornton
My Lords, I thank my noble friend Lady Pitkeathley for initiating this debate and pay tribute to Andrew Dilnot and his colleagues, including my noble friend Lord Warner, for the report which they produced in July this year. I am sorry that no Conservative Members on the Benches opposite are present to take part in this debate because the band of “usual suspects” to which reference has been made includes members of the Conservative Party. Their voices have been missed in this debate.
I am grateful to all noble Lords who have taken part in the debate for their insights. We felt that it was important that those on these Benches should initiate this debate as we seem to be at a standstill, or making slow progress, on many social care fronts, and in some areas are possibly moving backwards. That is a matter of grave concern. I echo the final words of my noble friend Lord Warner that we cannot afford not to do anything.
We can all agree that the need to secure a sustainable funding settlement for social care has never been more urgent, with local government and NHS finances under significant pressure and demand for services increasing as the population ages. We all agree that the NHS will never work properly without a sustainable approach to social care funding. The Dilnot report therefore offers a credible and costed way forward. We believe that the Government must move quickly to undertake detailed work on the report’s recommendations and honour their pledge to publish a White Paper, followed by legislation in 2012.
The adoption of the capped cost framework recommended by Dilnot offers a fairer and more transparent way of sharing the costs of care between the individual and the state. This will make it easier to tackle the deeper problem of underfunding that has led to the tighter rationing of services and escalating levels of unmet need, which have also been mentioned by several noble Lords, including my noble friends Lord Lipsey and Lord Warner, and the noble Lord, Lord Sutherland.
The much mentioned budget deficit is no reason for delay. The questions of affordability go beyond the current economic situation, and the additional public spending needed to fund the proposals, as we have noted, is less than 0.25 per cent of GDP. The social care system is widely regarded as inadequate, unfair and unsustainable. Under the current means-testing arrangements, anyone with assets of more than £23,250 must pay the full cost of their care. This leaves one in 10 people over 65 facing costs of more than £100,000. Eligibility criteria for council-funded services have been tightened whereby in most areas only those with very high needs now qualify for help.
The squeeze on local authority budgets over the next four years will widen the gap between needs and resources, despite the additional £2 billion announced in the spending review and the best intentions of all local authorities to protect social care. As my noble friend Lord Warner mentioned, the King’s Fund estimates that a funding gap of at least £1.2 billion could open up by 2014 unless all councils can achieve unlikely and unprecedented efficiency savings.
In addition, only this week, the report of the EHRC, led by the noble Baroness, Lady Greengross, shone a light on the too often invisible experiences of older people receiving care at home. It reveals a service stretched to the limit and older people denied the dignity and respect they deserve. It is shameful and unacceptable for elderly people to be left for hours without food and drink and not properly cleaned.
We know that the Dilnot report called for the improved integration of health and social care. Evidence suggests that this can improve outcomes for individuals and deliver cost savings. We know all this, and we have been talking about it not only for the past 40 years but in the past few days during the proceedings on the Health and Social Care Bill. However, despite notable successes, the progress has been limited, with less than 5 per cent of NHS and social care budgets being subject to joint arrangements and wide variations across different parts of the country in the quality and achievement of joint working. Indeed, part of our scrutiny and testing of the Health and Social Care Bill is whether it will make that situation better or worse.
Nor should we forget that Dilnot did not claim to have the whole answer to the challenges that we face. He claimed that his report was part of the process and addresses very importantly, among other things than those I have mentioned, the injustices of portability of care assessments. The Government’s response to the Law Commission report is most important and was mentioned by my noble friend Lady Wilkins and the noble Lord, Lord Pearson of Rannoch. The Minister should be able to respond that progress is being made on this and other matters.
The proposals for carers are also important in the Dilnot report, as is the establishment of a national source of advice. The commission recommends that better advice should be complemented with a national awareness campaign on the cost of care and a new funding system. I look for that to be part of the Government’s response to this report. Indeed, the assessment and provision of services will be available using the same system as for older people, but the funding cap will work differently for younger adults and the report sets out how this might be achieved.
We must not forget that the need for timely, effective social care not only involves the long-term disabled, those in old age and people with long-term conditions. I thank Macmillan for its briefing and for reminding us that integration across health and social care is also vital in helping to meet the practical, emotional and financial needs of people living with cancer and those reaching the end of their lives. Macmillan welcomes the findings of the Dilnot commission, as it believes that the report also represents the foundation for a fairer funding system for social care.
I have mentioned all the things on which we agree, and I have done so quite deliberately. We all agree that we urgently need a long-term solution for the funding of social care, and that is why Labour offered cross-party talks on this issue from the outset. I urge the Government to get round the table so that we can tackle the care crisis and find a fair and sustainable solution for the future.
I hope that what I have to say now may help the scepticism of the noble Baroness, Lady Barker. Indeed, when I explain how we would like to proceed, I hope that she will nudge her own Government into conceding on this and making faster progress than they have done so far.
As the Minister will recall, when the Dilnot report was launched in early July, my right honourable friend the leader of the Labour Party welcomed it and offered cross-party talks on the future of social care, using the report of the Commission on Funding of Care and Support as a stepping stone to secure a better, fairer system of care for older people and the disabled. I understand that there was an exchange of letters in September and October, and most recently a letter to the Secretary of State dated 8 November.
There are some outstanding questions that the Government need to address in their commitment to this process, and I should be grateful if the Minister would indicate to the House whether progress on them has been made. There are four points. First, securing agreement on funding and implementing the Dilnot proposals clearly goes beyond the remit of the Department of Health and the Secretary of State for Health—it should involve all the departments affected. Given the public spending implications of both the Dilnot proposals and the rising costs and needs, the engagement of the Treasury in this process is crucial. Does the Minister agree with that, and is there agreement that that is how we need to proceed?
Secondly, the Government should nominate an independent person to chair the talks. Again, does the Minister agree with that, and when might it happen? Thirdly, we would like to see established an independent secretariat with the specialist expertise to provide equal access to the negotiations as required. Fourthly, there should be a party leaders’ meeting to agree a clear timetable to demonstrate that we are all equally and seriously committed to talks at the highest level.
Those commitments do not stand in the way of the process: rather, they will facilitate it. I put them on the record now, as they have been put to the Secretary of State for Health, and say that I think it would help the House and the process if the Minister would take the opportunity to respond on this matter. Finally, I thank all noble Lords for taking part in the debate.
Baroness Barker
I thank the noble Baroness very much—I did not know about the correspondence. However, can she explain why an independent chair is necessary for the process? I understand the other three points but I do not understand that one. What is the reason?
Baroness Thornton
We think that having an independent chair is a sensible way to move forward. We have not suggested that we should appoint the chair; we have asked the Government to suggest the name of the person who might chair those talks. I do not think that any of those things is a barrier to progress in this matter.
Finally, we on these Benches think that this is one of the most important issues facing our society today. It is one that we cannot neglect or leave in the long grass, and it is one that we are determined to resolve.
Earl Howe
My Lords, I thank the noble Baroness, Lady Pitkeathley, for calling this debate on a topic that I know is not only close to her heart, but close to the hearts of all those who have spoken, as well as mine. This is also a very well timed debate. It will helpfully feed in to the Government’s consideration of these extremely important matters.
Before I talk about reform, I would like to respond to some of the points that have been made here and in another place about the current funding situation for social care. In these challenging economic times, there is pressure on all areas of government spending. We, as a Government, have had to set our priorities and make some difficult decisions. One of those decisions has been to protect social care funding. In the last spending review settlement, we provided an extra £7.2 billion over the four years to 2015 to protect social care, partly through councils and partly through the NHS.
That additional funding will help to alleviate pressures on the adult social care system in the context of a challenging overall funding settlement for local government. We believe that this settlement will protect services, and our view on this is supported by independent research. The King’s Fund has said in its report, Social Care Funding and the NHS, that central government have put enough money in to protect adult social care services. But times are tough and I am not going to pretend otherwise. Although nationally, I can present a relatively positive picture, there are areas where cuts have been made to front-line adult social care services that are really beginning to bite and that must concern all of us.
I turn now to the reform of social care and what needs to happen in the future to improve the way in which we, as a society, support people with care needs and their families. The noble Baroness, Lady Pitkeathley, set out the position extremely well. In this country, our population is ageing as people live longer. This is to be celebrated and not seen as a burden. My noble friend Lady Tyler reminded us of some of the statistics. Last year, we had 13,000 centenarians. I saw that one of them, Fauja Singh from London, recently completed the Toronto marathon, so I hope that that will be an example to many. Most people who are 65 now will live well into their 80s and the number of over-85s is set to double between now and 2026. These are all things that we, as a country, should be proud of, but I can only echo the noble Lord, Lord Low, and the noble Baroness, Lady Wall, in saying that it is also a fact that, as we live longer, we will have a greater need for social care to ensure that we can continue to lead independent and fulfilling lives.
Demand will rise. This is one of the uncomfortable truths mentioned by the noble Lord, Lord Sutherland. We have an outdated social care system that in some respects has more in common with the principles of 19th-century poor law than it does with the needs of people today and as demand for social care increases, the cracks in this system grow ever wider.
The noble Baroness, Lady Pitkeathley, invited me to signal how strongly the Government feel about this. Our belief is that we urgently need reform, both to the way in which social care is funded and to the legal framework that supports it. The noble Baroness, Lady Bakewell, was absolutely right: many people currently think that when they need social care it will be provided free, just like the NHS. Unfortunately, for most people, this is not true, a fact that people often discover only when they, or their relatives, need care. Many people without direct experience of social care are not aware of the unfairness of the current system and the urgent need to modernise it. We need people to realise that they face a huge financial risk and that this can be met only by reforming the system and by individuals taking greater responsibility for planning and preparing to meet some of these costs.
Social care costs are unpredictable and can be very high. Although a quarter of all those currently aged 65 will not need any significant social care, one in 10 will have costs in excess of £100,000. This can be catastrophic for people and their families. Andrew Dilnot’s report proposes one way in which the problem can be addressed. It is an excellent piece of work and a significant contribution to the debate on social care funding.
I listened with great care to all noble Lords. I will mention the different themes singled out for analysis and comment by the noble Lords, Lord Rix, Lord Adebowale and Lord Low. We now need all those involved with social care, and all sides of the political spectrum, both in your Lordships' House and in another place, to engage in an open and honest debate about the priorities and trade-offs in the area of long-term social care. The engagement on social care that the Government launched in September will provide a forum for the debate and will inform the White Paper and progress report that we intend to publish next April. This will set out our response to Andrew Dilnot's recommendations on funding.
I say to the noble Baroness, Lady Thornton, and to all noble Lords, that this is not an issue that we will shy away from. More than one noble Lord suggested that the Government were, in common parlance, dragging their feet. That is absolutely not the case; social care reform remains a priority for us and we recognise that the current system is unsustainable. However, the matter is complex and we will have to answer a number of related questions. The Dilnot commission's recommendations have significant costs attached to them. As we said in our response to its report, we will need to consider that aspect carefully against other funding priorities and calls on constrained resources. We also set out six tests that we will need to consider in coming to a judgment on the recommendations. Before we set out our plans for major reform of social care, we want to talk to stakeholders about the priorities for reform. That is why we launched the Caring for our Future exercise on 15 September.
The noble Lord, Lord Sutherland, was sceptical about the need for further consultation. He is of course absolutely right that much work has already been done in this area. The Dilnot report builds very capably on that foundation. However, I put it to him that it is also right that we engage with stakeholders on the priorities for reform in the current economic climate. Our commitment to legislate at the earliest opportunity is undiminished.
The noble Baroness, Lady Pitkeathley, asked whether the Government in their White Paper will respond to the Law Commission. The answer is yes. We have committed to legislate for adult social care at the earliest opportunity and we will need to take the Law Commission report as our foundation for that work.
The noble Lord, Lord Desai, took us to the subject of the cap and asked whether we felt that it should be index linked. The Dilnot commission recommended that it should be. The range suggested for the cap was between £25,000 and £50,000. It recommended that ideally the figure should be around £35,000. We are looking very constructively at the suggestion of index linking.
The noble Lord, Lord Lipsey, suggested that I had “done a Baroness Trumpington” in my reply to his question about the cap. I am sorry that he thought that: it is not my style, as I hope he knows. The commission’s report set out detailed costings in its evidence and analysis. These included costs for different levels of cap. The level of the cap is an important variable. We are considering the implications of the different levels. As part of the Caring for our Future engagement, the department discussed the cap with the financial services sector. In particular, we discussed the principle of a considerably higher cap than Dilnot recommended. A key conclusion of the discussions, which we published on the engagement website, was that a high cap such as £100,000 would seem unobtainable to people and would not stimulate the development of financial services.
That brings us to the question posed by my noble friend Lady Barker of whether we are looking at the possibility of improving the equity release market. The engagement is exploring the role for financial services in helping people with care costs. That will include any improvements in equity release that we can see for the future. I do not agree with the implication of the noble Lord, Lord Desai, that equity release is not a potentially useful mechanism for us to explore.
The noble Lord, Lord Warner, put forward his constructive view that the Government might consider setting up a loan scheme so that people can use housing wealth to pay for care. We are aware of the commission’s recommendation for a universal deferred payment scheme, and we have been considering it along with other recommendations as part of the engagement.
My noble friend Lady Barker indicated that assessment of needs has to be independent of the financial assessment. I agree that that is an important issue. The Law Commission’s recommendations make clear provision for that. Following on from that, the noble Baroness, Lady Pitkeathley, talked about the need for information and advice when people use care and said that that has to improve, which was again a theme picked up by Dilnot. We completely agree that information and advice are extremely important. Our publication A Vision for Adult Social Care, which came out a year ago, made it clear that people should have good information. The Law Commission has made recommendations in this area, as I am sure the noble Baroness knows. We are again looking very seriously at this. It is a major issue coming out of the engagement.
I say to the noble Baroness, Lady Wilkins, that we completely agree that disabled people need to have choice and control to live independently. The Government’s A Vision for Adult Social Care makes clear our commitment to more personalised support. We want to see greater rollout of personal budgets that give people choice, control and independence. I think it is unrealistic to believe that we can do that sooner than around 2013, but we are working hard on it.
The noble Lords, Lord Pearson of Rannoch and Lord Adebowale, and the noble Baroness, Lady Wilkins, spoke powerfully about the idea of portability. We recognise that enabling portability of assessment could mean that people moving to a new area and the professionals supporting them would not have to go through unnecessary multiple assessments of their needs. This can be particularly important for people who want to maintain employment and pursue career opportunities. The Government support this in principle. We are considering the practicalities in the light of the recommendations of the Law Commission and the commission on the funding of care and support. We have recently launched an engagement process with stakeholders to bring together the recommendations of these two commissions, as I have mentioned, and to consider what our priorities should be. The White Paper will set out our conclusions. I think it would be wrong at this stage for me to pre-empt that process, but I take on board the points that were made about portable care packages rather than simply assessments.
Lord Pearson of Rannoch
When the Government go through this process, for which I am sure all of us are very grateful, will they bear in mind the cost savings which would emerge from portability, as we are looking for cost savings in this area?
Earl Howe
I am sure that is a factor that should be taken fully into account. If I can tell the noble Lord more about that when I return to the department, I shall be very pleased to do so.
The noble Lord, Lord Warner, whom I thank for his work on the Dilnot commission, talked about portability and flagged his intention to debate this when we go back into Committee on the Health and Social Care Bill. As I have just indicated, we intend to signal our response to the Law Commission’s report and the Dilnot commission in this area when we publish our White Paper. I feel that the Bill that we are debating in Committee at the moment is not the right vehicle into which to shoehorn a recommendation like this. It needs the right legislative vehicle. Nevertheless, I am not shying away from the kind of debate that the noble Lord signalled he would introduce.
Integrated care has been mentioned by a number of noble Lords, including my noble friend Lady Tyler and the noble Baroness, Lady Wall. We recognise the importance of integrated working between the NHS, social care and public health, and the benefits that this can have for individuals and their families. It is important for good outcomes and for achieving value for money, as a number of noble Lords have indicated. We have debated this theme more than once during Committee stage of the Health and Social Care Bill. We want to ensure that local authorities and NHS bodies have the flexibility that they need to work together at a local level. The health Bill will ensure that key flexibilities, such as support for pooled budgets under Section 75 of the Health Act 2006, are translated into the reformed system.
My noble friend Lady Tyler referred to telecare, which is an exciting area. The previous Government instigated the largest randomised control trial of telehealth and telecare anywhere in the world—the whole system demonstrator project—which will provide the gold standard evidence for which everyone is looking. It has been one of the most complex studies ever undertaken by the department but the early results are very promising. Evaluation is ongoing but we are nearly ready to publish headlines that will help decision-makers here and across the world.
My noble friend also spoke about the need to ensure that we have a high quality social care workforce. Of course, she is right. The department is spending nearly £300 million on the training and development of the social care workforce this year. The ONS labour force survey shows that 67 per cent of people working as care assistants and home carers have a level 2 qualification or above. Data show a steadily improving picture with regard to the number of people who hold level 2 or above qualifications. In the current financial year, the department is providing approximately £28 million of funding to Skills4Care for the training and development of the adult social care workforce.
My noble friend Lady Tyler once again referred to the importance of supporting carers. We fully agree with her that the carers’ strategy refresh document prioritises future actions to ensure the best possible outcomes for carers and those they support. We have made available an additional £400 million to the NHS over four years to provide carers with breaks from their caring responsibilities to sustain them in their caring role.
A number of noble Lords have expressed the view that a broad political consensus is emerging on long-term care reform. I genuinely hope that that is so. I can say to the noble Baroness, Lady Thornton, who put the question about cross-party dialogue, that we remain committed to a process of dialogue with the Official Opposition, given the importance of this issue, which is why the Secretary of State wrote to the shadow Secretary of State for Health inviting him in his new role to continue in this dialogue.
As she mentioned, the Secretary of State has received a response from the shadow Health Secretary and the shadow Minister for Care Services stating their commitment and intention to continue with the process. We very much want to seek to build consensus around an issue as important as this. We will of course ensure that sufficient resources are provided to support talks. But, as the noble Baroness will recognise, Ministers must remain ultimately responsible for the decisions that we take. She also mentioned the letter that my right honourable friend wrote to Andy Burnham on 8 November. On the same day, a letter was received from Andy Burnham and Liz Kendall. It outlined their commitment to resuming talks, which we welcome. We are considering the questions and conditions in that letter. I hope that my right honourable friend will be in a position to reply formally very soon.
Of course, there are a number of other priorities for social care. We need to improve the quality of care that people experience to ensure that those with care needs have the best possible outcomes. Services need to be more personalised, more people need more choice about their care so that social care is designed around the needs and wants of the individual, not around the convenience of systems, and we need to push for better integration, as noble Lords have indicated. We need to support more prevention by early intervention so that we can avoid people deteriorating unnecessarily and allow them to remain independent as long as possible, and we need to create a more diverse and responsive care market so that people can buy the services that best meet their needs. All these are our priorities. I hope that the engagement we are now in will find the solutions to those. This is an issue for our times as our society gets older. How we look after people with care needs will become ever more important. We now have an opportunity to get this right, and we must not miss it.
Baroness Pitkeathley
My Lords, we have seen great enthusiasm for the Dilnot Commission in the course of this excellent debate while acknowledging that it is not the whole answer, and while acknowledging its shortcomings. Even my noble friend Lord Desai admitted that it is the best chance we have. However, if the objective of the debate was to save Dilnot, as my noble friend Lord Lipsey proposed, I am not sure we can be confident that we have succeeded, judging by the Minister’s response. Even so, I know that as ever the House will be grateful to the noble Earl for the way in which he has responded and, indeed, confronted some of those inconvenient truths about which the noble Lord, Lord Sutherland, reminded us.
My noble friend Lord Warner robustly reminded us that doing nothing is not an option. As ever, the wisdom and expertise shown around the Chamber has been extraordinary, and there has been universal agreement that we need a lasting settlement based on a partnership between the individual and the state. We have also seen that we must have honesty and, above all, we must have political consensus, which will require a degree of bravery. I know that the usual suspects who have taken part in the debate—these guys, as we all are—will continue to apply pressure, as well as offer advice and consultation to stiffen the resolve of the Government and the Opposition to be brave, to bite the bullet and make this a watershed moment in the history of social care by responding to the call to arms. I thank all noble Lords who have taken part in this inspiring debate.
Renewable Heat Incentive Scheme Regulations 2011
Baroness Stowell of Beeston
That the draft Regulations laid before the House on 25 October be approved.
Relevant documents: 31st Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 22 November.
Voluntary Sector Funding
(13 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Lord Bishop of Ripon and Leeds
To ask Her Majesty’s Government what action they will take to support the work of publicly funded voluntary groups in deprived areas in the light of cuts in local authority budgets.
The Lord Bishop of Ripon and Leeds
My Lords, the voluntary sector in our society is effective, innovative and massively underfunded. The other day I was standing in a Leeds street discussing with community leaders why there were no riots or disturbances in the city in August this year. There was a good deal of sensible discussion about the key points of what had happened in the summer. But the point upon which people agreed was that the immediate presence on those restless evenings of the youth workers who mingled with young people gave expression to their authority and calmed nerves. Some were directly employed by the city, but more were members of a variety of organisations, many of them publicly funded and many of them faith-based, which run or have run youth work within the city. One of the community leaders said, “If this happens next summer, there won’t be the youth workers to provide confidence for the young people of Leeds”.
Those issues are key to a discussion of the work of voluntary groups in deprived areas. So much work is done by this collaboration between local authorities and voluntary organisations. I am sure that the Minister, when he replies to the question, will want to affirm that work. Yet, there is now such a massive threat to so much of it. I take as an example Thrive West Midlands, which is a faith-based infrastructure organisation in Birmingham founded by the Church Urban Fund, which has worked with the city to obtain continued funding for daycare centres for the elderly. That fits so well with the social care debate that we have just been having.
There has been some success, but, for example, the Weoley Castle Community Project has had to pull out of direct daycare making two staff members redundant because of a failure of funding. The impact on the elderly in situations such as that is immense. Individuals suffer and those individuals are often among our most deprived citizens. I know that we face cuts, but it should be for those of us who can afford it to bear the weight of those cuts; not those under most pressure already. There would be no great loss if the dustbins of our comparatively well-resourced suburb were emptied fortnightly rather than weekly. Many of us could afford higher council taxes, yet the pressure is always on the weaker members of our society.
To its credit, Manchester City Council has tried to ring-fence homeless support, but the Booth Centre for the homeless there has had a £40,000 cut from DCLG which means that it is unable to bear the burden of homeless people coming there because of the closure of other advice centres.
Leeds has a good record of collaboration with the voluntary sector through Third Sector Leeds and I pay tribute to the collaboration that we try to express in the city. Yet we have seen cuts, for example, to English as a second or other language provision, which helps people to integrate more fully into our exciting multiethnic society. This has made it all the more difficult for asylum seekers and refugees to be served and helped as we try to support them through charities such as Meeting Point in Armley. That means that the volunteer provision is often unused because we cannot find premises or expenses. There are volunteers who would like to be involved. It is becoming true that some of them cannot afford to be so.
The examples could go on, and I know that the Minister, as a good Yorkshire inhabitant, will want to respond to the particular pressures that we have in the north. Hope Housing in Bradford writes of the increase in clients becoming homeless because of higher rents in the city. The Association of Chief Executives of Voluntary Organisations points to the probable closure of Oxfordshire Children and Voluntary Youth Service, which has placed 3,100 young people in volunteering positions. We know that closures such as those mean a waste of talent, energy and commitment and yet we have not yet found a way to circumvent it. It is not impossible. Philanthropy and generosity have remained remarkably buoyant during the financial squeeze. There could be tax encouragement to make that philanthropy more effective, but philanthropy is not enough. There needs to be some specific ring-fencing of government money, public money, for areas such as mental health, where charities struggle as mental health issues grow, with increasing homelessness and fear. There need to be incentives for money to be directed to areas of most need, and to those organisations which use most volunteers. Earlier in the day, we thought of how there could be incentives for firms which have most apprentices as they seek to provide facilities for the Government. There could be a parallel in direct incentives for those who use volunteers. It is no use exhorting local authorities and then squeezing the amounts they have to work with in the voluntary sector.
There needs to be a greater fairness in the allocation of local authority funds. It is those under most pressure which face the most substantial cuts. So I looked at the authorities with the maximum cut of 8.8 per cent in 2011-12. I began to feel that there might be a personal vendetta in this, because they were most of the places in which I have lived and worked—places like Knowsley, St Helens, Doncaster and Manchester—whereas those with the small cuts are the places where I go on holiday: Dorset, Rutland or West Sussex. The most challenged include some London boroughs: Hackney and Tower Hamlets. For the most part, however, the cuts to local authority funding represent a significant transfer of money from the north to the south. That can only widen the north-south divide which plagues our economics, and which I am quite sure the Minister regrets.
There are a variety of ways forward. I have tried to suggest some of the possibilities. I look forward to hearing proposals from others who speak, and to hearing which of those directions the Government will follow in fulfilling their desire to encourage both volunteering and voluntary groups in their contribution to our society.
Lord Rennard
My Lords, it is six months since I was in the very beautiful cathedral of Ripon, speaking to the synod of the diocese of Ripon and Leeds in its debate on the big society and the role of the church. I welcome the debate this afternoon. In many ways, it will mirror that debate last June, which can still be found on the very good diocese website.
The discussion in the cathedral that morning actually reminded me of rather more political gatherings in many ways, as it revolved around what first seemed to be simply a technical amendment. The main motion said:
“This Synod welcomes the opportunities for the Church's contribution to the common good represented by the Big Society".
The amendment that was carried changed this wording to say:
“This Synod recognizes the opportunities for the Church's contribution to the common good represented by the Big Society".
The difference between those two positions reflects a dilemma faced by many people, communities and voluntary organisations. This is a dilemma about, on one hand, the principles of the big society, which some of us have always called community politics and some may call the good society, and, on the other hand, the practicalities of recognising the need at present to reduce government expenditure.
My invitation to speak at the cathedral arose from the fact that earlier this year I had been asked by the Association of Chief Executives of Voluntary Organisations to chair a commission looking at the role of the voluntary sector in the big society. By the time we reported in May, I had met more than 60 charities and voluntary organisations working in many different parts of this country.
I would say that all of them and indeed all the members of the commission—they came from different backgrounds in the voluntary sector, all the major parties and the church—agreed principles about the big society that are relevant to our debate this afternoon. They all recognised that power and responsibility are shifting in our society; that individuals and communities now have more aspiration, power and capacity to take decisions and solve problems themselves; and that we all need to take greater responsibility for ourselves, our communities and each other. However, just as these principles were commonly agreed, so were the dangers clearly seen that cuts in local council budgets risk undermining many of these principles.
Although the charities and voluntary organisations that I met were very realistic about the country’s economic problems, many of them feared genuinely that they would suffer disproportionately from cutbacks and that this would particularly affect their work in many of the most deprived areas of this country where their efforts are most needed. This resulted in a debate in our commission about how far local authorities could or should be directed to provide services directly themselves or via the voluntary sector. We concluded that it was not compatible with localism to direct local councillors in this way, but we all agreed on the need for much greater transparency in the way in which local councils decide to provide services directly or via alternatives involving the voluntary sector, and how they calculate the costs and benefits of these different approaches.
Frequently, we came across problems arising from government expenditure decisions being taken at different levels and based on far too narrow a consideration of the costs and benefits to that particular part of government in isolation—what they often call a “silo” mentality. We also saw the application very often of too much short-term consideration, which prevented proper evaluation being made that might otherwise have justified some of the expenditure that was being reduced.
Early on in my role as chair of the big society commission, I was challenged on the “Today” programme about whether promoting big society values and the role of the voluntary sector in general was simply a question of spending money and that doing that was not compatible with making the savings in public expenditure that everyone knows are presently required. As ever in my experience, it is always to rebut a charge with a clear and specific example. I was able to quote in the programme the case of what was then Age Concern in south Staffordshire, an example of where funding a voluntary organisation actually led to savings in public expenditure. It was working with seven hospitals to look after older people prior to admission and again as soon as they were ready to come out. By helping to prepare these older people for going into hospital, and helping to support them at the earliest possible time for returning home, their stays in hospital were of a much shorter duration, and of course they were much happier to be in their own homes for more of the time.
The funding to help 3,000 people a year in this way was £500,000 per year, but it saved the NHS around £3 million per year, as these people were in hospital for a much shorter period. It saved £6 for every £1 spent. However, shortly after the programme, I was asked not to use the example again because the £500,000 funding had just been cut—an example of short-termism and the silo mentality. That approach in how decisions over public expenditure are taken needs to change.
The Association of Chief Executives of Voluntary Organisations, known as ACEVO, has given me many similar examples, not all of them based on local authority cutbacks but where the same issues arise. When I was chairing the commission, I spoke to many charities and voluntary organisations that needed professional support and help with things such as the cost of maintaining premises. They explained to me that these organisations could exist only with some significant help from the public purse, especially in low-income areas, but by undertaking the work that they did they could often cause significant savings to be made in the long run to the public purse. The common problem, they explained, was that the haste in which the Department for Communities and Local Government had agreed cuts in local authority budgets meant that some local authorities were able to make their cuts in the required time only by making them disproportionately at the expense of the voluntary sector, and probably also at the cost of additional expenditure to the public purse in future. Of course, some but by no means all local authorities saw the voluntary sector as a softer target in any event.
The Government’s transitional fund helped that problem to some degree and was a welcome £100 million for a year, but it was for one year only and against cuts that the NCVO estimates at about £3 billion over four years. One of the projects that I visited, the Liverpool Lighthouse project, benefited from the transitional funding. It raised substantial funds itself but also explained that it was simply not realistic to expect it to continue all its activities so successfully in future without continued significant public support. I saw for myself how it was succeeding in helping to educate young people who would otherwise be skipping school, often beginning a life of crime, at great expense to their neighbourhood and to all of us if they follow routes leading to imprisonment. The project was helping to get people off drugs and out of criminal activity through volunteering so that they had at least the prospect of gainful employment. However, the long-term value of such projects is not properly factored into how public expenditure decisions are made at present.
In our commission report, Powerful People, Responsible Society, we called for much greater transparency in how local authorities fund the voluntary sector and how they decide on the best long-term providers of services. Many local authorities are very sympathetic to these points; they want to see a rapid and massive rollout of community budgeting to reduce the problems of allocating expenditure by one part of government without taking into account the effect on other parts. Voluntary organisations always want the Government to help them to co-operate better by sharing services without the unfair imposition of VAT bills if they cross-charge services to each other and try to get best value for money. Above all, there needs to be much greater respect between government at all levels and the voluntary sector.
The compact between the government and the voluntary sector was refreshed at the end of last year. It will help and it must be fully implemented next year, and local authorities should all adopt the recent best-value guidance setting out the reasonable expectations that the voluntary sector can expect in its dealings with them. I hope that the impact of cuts to the voluntary sector will be closely monitored, especially in deprived areas, and that this subject is one to which we will return in future.
The Lord Bishop of Derby
My Lords, this is a very vital topic. I echo a lot of what the noble Lord, Lord Rennard, said and offer the Minister a perspective from the grass roots. I have been talking to colleagues I work with in deprived areas in Derbyshire and, especially, in the city of Derby. We all recognise and accept the need for what we call cuts—a reduction in expenditure—but the plight of voluntary groups funded by local authorities is a very powerful litmus test of how these cuts might be made and what the priority should be around public funding of social welfare.
The Government have called us to have this vision of the big society, in which we all co-operate, so that the capacity that we lose through the cuts can be compensated for by an increase in voluntary endeavour and activity. That is a very great challenge, especially to those in churches and the voluntary sectors. But let me offer some perspectives from those trying to rise to that challenge.
First, many of my colleagues say that the voluntary sector is taking a disproportionate cut of the reductions in expenditure that local authorities are making. In Derby this year, community grants by the local authority are to be reduced by one-third, which is a massive cut in the voluntary sector investment. The voluntary sector generates enormous resources. I saw a statistic the other day that the Church of England contributes something like 23 million hours of voluntary work a month to the working of our society.
However, the reality is that, beneath that, much voluntary endeavour is small-scale, fragile and vulnerable. It therefore needs to have a bigger frame and a set of priorities to help the volunteers and those offering the funding make the right decisions, because my colleagues tell me that at the moment energy is going into survival rather than serving the people who the organisation was set up to serve. They say that we are having cuts in public sector spending and in the voluntary sector but that there is almost no evidence of private investment. The result is what one of them calls a feeding frenzy for funds. The experience is that the lottery is becoming the arbiter of social welfare and making big decisions about that. I do not think that it was set up for that. Who should be making decisions about priorities in social welfare?
I welcome, as do my colleagues, the response of the Government in a lot of commendable initiatives on red tape, a national citizen service, community organisers, best value for local authorities and the notion of the compact but, on the ground, it feels as if all those things are calling energies into process and inward-looking negotiation. They are taking energy away from engaging with the need of people on the street, just at the time when the capacity of the voluntary sector needs to increase.
This is having two results. First, people are becoming frustrated. This week in Derby, Action for Blind People demonstrated in the streets and collected petition signatures against the cut in its local authority funding. These were not disaffected youths in Leeds on a Saturday night in the summer. It was Action for Blind People—a main-line charitable enterprise, using local authority funding, whose people are frustrated and angry at the dilemma they are suddenly thrown into, when all their good work looks like receding because of the way that the cuts are being managed. They are saying that volunteers are not being encouraged but being alienated. That is the message which I pick up from people working in deprived areas. The volunteers who we want to encourage to populate the big society are, at the moment, not being encouraged but being alienated—not just by the size of the cuts but by the higgledy-piggledyness of it, really.
The other factor is, of course, that need is increasing rapidly. Some of your Lordships will have seen in the Times this week some articles about human trafficking. Our church is involved with a project called Restore in inner-city Derby, which works with prostitutes. In recent months, besides working with girls who are on the streets, there is an increasing challenge to work with the issue of trafficking, which is coming into our city in a very disturbing way. This requires greater resource and greater engagement—and the kind of policy view, as the Times draws our attention to, which we must look to Government and local government to have. We cannot just leave volunteers to increase their capacity against these odds.
What can we do? There is a primary responsibility on those of us in the voluntary sector to step up and make our contribution, as my right reverend friend the Bishop of Ripon and Leeds said. In our own diocese in Derby, we are sponsoring a movement called “growing community” in the city of Derby. We have taken an initiative to bring together faith communities, voluntary groups and the local authority to see how we can create a new kind of infrastructure to care for people in need in our cities, given the new circumstances. We are looking for a partnership and giving priority to jobs, micro-industries, self-support schemes, food banks, the homeless and the poorly housed. My point, when I ask what the Government can do if we are trying to get organised like that, is to strengthen our arm on priorities.
The Government say that they have a commitment, which I commend, to a fair and equal society. The question is: what does fair and equal mean? Does it mean more than our great concern today with human rights? I suggest, and I ask the Minister to comment on this, that it also means a concern, especially for people in deprived areas, with what we might call “social rights”—rights to access to jobs, housing and an environment that is secure and not threatening.
In the big picture, when we use the word “government”, both nationally and locally, we have to do some hard thinking about priorities and the rights that we desire people to have to flourish in their human lives. That would provide a framework of context within which the groups could make a contribution and get organised. Small and vulnerable though we are, if there were a framework to direct our energies and priorities and to encourage local authorities to have public strategies for social welfare, then we would know what we were trying to achieve and how we could all work together.
Best value, which is important and which the Government rightly invite us to inhabit, is not simply an audit of processes and their effectiveness; it is about the markers of making a difference in the lives of people in our most deprived communities. Surely the markers should not just be decided by agencies like the lottery—there ought to be a richer and more thought-out framework and sense of priorities and values that the Government encourage, and that local authorities negotiate with partners both voluntary and private in their areas. If there were clearer priorities and a sense of direction, we might get more private investment and local authorities might be able to be shown to be more accountable for what they were doing, rather than getting criticism for making cuts but not being seen to offer many positive alternatives.
Lord Wood of Anfield
My Lords, I thank the right reverend Prelate the Bishop of Ripon and Leeds for giving the House the chance to debate the crucial issue of the work of the voluntary sector in our most deprived communities and how that work is being affected by the economic crisis and the Government’s cuts to local authority budgets. Debates such as this shine a light on the plight of those whose voices do not often get heard, and remind us of our duty to show, as the Dean of Norwich said on the 20th anniversary of the landmark Faith in the City report, that our common concerns can be harnessed in the common good.
We all know the vital work that is done by voluntary and community organisations, especially in our most deprived communities. It is work that becomes more, not less, important in difficult economic times such as this, when large-scale cutbacks in funding combine with increased demand among the most vulnerable for the care and community services that these organisations offer. No doubt the Minister will refer in his reply to the need for the voluntary sector to take its fair share of pain in the spending cuts that the current Government are prioritising. I agree. The question is not whether, at a time of fiscal pressure, the voluntary sector should somehow be given wholesale protection from cuts. Rather, the question is whether the cuts meet three eminently reasonable criteria: are they proportionate, are they distributed fairly and are they being made intelligently with regard to the long-run viability of the organisations affected?
I shall start with the scale and proportionality of cuts. About one-third of the voluntary sector’s income of £35 billion a year comes from statutory sources. Survey work has shown that the maximum cut to a local authority in 2011, a figure referred to earlier, was just under 9 per cent of income. However, the average for members of ACEVO was 23 per cent of their funding. For smaller organisations it was higher, at 27 per cent of their income. Activities in the voluntary sector that have been especially badly hit are children and youth charities, services for the elderly and disabled, homelessness and housing charities. For some organisations, the cuts have been both disproportionate and catastrophic, a famous case being Oxfordshire Children and Voluntary Youth Services, hit by 90 per cent cuts in its funding and intending to close in March 2012. If we are all in it together, we should all be in it together in roughly the same way—a way that is proportionate to our means and to the importance of activities to our communities and country. The scale of the cuts to the voluntary sector and the absence of proportionality should give us all real cause for concern.
What about the distribution of cuts and, in particular, their effect on deprived communities? Again, it is becoming clear from survey evidence, imperfect as it may be, that the cuts are having more of an impact on organisations in deprived areas than on those in other areas. First, we know that local authority areas where deprivation is higher are experiencing larger cuts in funding, partly to do with the way that area-based grants work. Secondly, since voluntary sector organisations are more likely to be based in these areas—because activity rightly follows need and demand—such organisations are more likely to experience cuts in government funding. Their dependence on state support, compared to other sources of support, means that their activities will be hit more savagely than those of organisations in better-off areas. The result of this variation is that there is now little doubt that the most vulnerable are being hit the hardest. As Dame Clare Tickell, chief executive of Action for Children, said just last month:
“The scale and pace of change, alongside the cutbacks that we have seen over the past year, are unprecedented. We are now seeing the impact in communities across the country—and fear it could result in severe and long-lasting damage to the most vulnerable children and their families as they struggle to cope … We are at a tipping point”.
What about the third criterion, of sensible cuts? Are they being made intelligently and with regard to the long-term viability of the organisations affected? We know that the cuts have cut into the core activities of the voluntary sector. A third of those surveyed reported having to cut the services that they provide. More than 40 per cent have had to make staff redundant.
As the noble Lord, Lord Rennard, has reminded us, given that cuts of this magnitude are under way, the case for a strategic approach to managing their implementation and impact becomes more compelling for a number of reasons. Many charities have no reserves at all to fall back on, or hold very limited amounts of expenditure. If cuts are imposed without strategy and intelligence, they could lead not only to an interruption of services for a few years but to a more permanent scrapping of expertise and networks that cannot simply be replaced when the good times return. Moreover, in a period when demand for these services among the most deprived is rising, cutting the ability of the voluntary sector to meet these needs often simply displaces the need for provision back on to the state. The needs of the most vulnerable are not like a need for luxury goods which we can defer for a bit while we tighten our belts; they are needs that must be met. Cuts to the voluntary sector which shift the burden of meeting those needs on to another part of the statutory funding landscape neither serve the interests of those in need nor help the spending plans of the Treasury.
What do we know about the Government’s strategy for implementing these cuts, especially in our most deprived areas? The first answer is: not as much as we should. As far as I am aware, the Government do not have reliable data on the distributional effects, by local authority, of the cuts on the voluntary sector. Nor have they taken steps to help ensure that the best practice of councils in handling these cuts is spread to other councils. We know that the way in which local authority cuts to the voluntary sector are being handled varies wildly from case to case. Some local authorities are approaching this difficult task of distributing the pain of cuts in partnership with voluntary organisations, observing the compact between the voluntary sector and the Government, while others show little interest in that partnership.
Does the Minister agree that one important action that the Government could take would be to make sure that all local authorities are aware of and complying with the NCVO’s best practice guide, as well as observing the terms of the compact, such as giving at least three months’ notice when changing funding decisions? Can the Minister also tell us about any plans that the Government have for the renewal in 2012 of the transition fund that was set up for 2011—I believe it was £100 million —to help organisations in the voluntary sector that had been hit by the cuts? Lastly, what are the Government doing to ensure that the Government themselves, and not just the umbrella associations that represent the voluntary sector, monitor the impact of the cuts on that sector, especially in deprived areas?
The effect of spending cuts on civic activity in deprived areas is no doubt of concern to all of us, whatever our party affiliations might be. But there is another, special reason why this Government should care about the long-term effects on the capacities of the voluntary sector: their big idea, the big society, purportedly relies on the health and expansion of this sector, at a time when it is being hit considerably harder than other parts of the institutional landscape.
While the idea of strengthening civic society is of course shared by all, the claim occasionally made by some members of the Government to have come up with the idea has been met with some derision. Their failure so far to respond to the disproportionately severe and long-term effects of cuts to voluntary organisations on poorer areas speaks to two more specific blind spots in the Government's big society agenda.
The first is that they show no appreciation of the importance not simply of inequality in funding but of inequality more generally. The fundamental fact is that inequalities in wealth and income, and levels of deprivation, affect the quality of civic life and the capacity of voluntary organisations. We know that in less well-off areas, you are much less likely to see volunteering. You are twice as likely to be a volunteer if you have graduated from university than if you have no qualifications. One-third of the population provides 90 per cent of total volunteering hours.
The problem is that the laudable desire for a big society is not matched by an understanding of these inequalities or of the more limited capacity for society to be big in poorer areas. Professionals in the sector know it: 83 per cent of voluntary sector chief executives said that they thought the big society would not work well in deprived communities. Sixty per cent of the public agree.
So what is stopping the sincere advocates of the big society responding to this? I think that the answer lies in a second blind spot: the idea that a big society needs a shrunk state to work, when in fact a well functioning civic society needs a supportive state and a Government who understand what factors lead to barriers to participation on the one hand and who build capacity on the other.
A Government who are serious about this would support the big society not just through funding but through helping to skill up the sector, encouraging partnerships and promoting collaborative budgeting et cetera. It is a view that was supported by David Cameron, the Prime Minister, in a speech in 2009, when he said:
“I believe that, in general, a simplistic retrenchment of the state which assumes that better alternatives to state action will just spring to life … is wrong … This means a new role for the state: actively helping to create the big society”.
Eighteen months in, we are still waiting for some idea of what this more active, constructive role for government might be. As this debate has reminded us today, it is the most vulnerable and most needy in our poorest areas who need imagination and boldness on the part of the Government most of all.
Lord Wallace of Saltaire
My Lords, I thank the right reverend Prelate for introducing this debate. I also welcome the noble Lord, Lord Wood, on what I think is his first speech from the Front Bench. I give him a particularly personal welcome. I think that I first met him when I was asked to give a seminar with some colleagues in the Treasury. I was especially nervous because my daughter was going to be one of those who would be listening to us speak. I have to say that, from my knowledge of his role as a special adviser in the Treasury, he was always very warmly spoken of by the officials. For a special adviser, that is an unusual and considerable compliment.
We are discussing a very serious and broad matter today. I want, if I may, to go a little wider than the brief that I was given in terms of what we are all facing. I, too, remember the Faith in the City initiative. Certainly, in the Bradford diocese, I saw this as a Church of England initiative to try to persuade the congregations in the better-off parts of the diocese that they were part of the same community as those in the worst-off parts, and they needed some persuasion. It was an extremely worthwhile exercise, but it required to be done. I am very conscious, in respect of the Leeds diocese, that the richest street in West Yorkshire, according to the Yorkshire Post, is less than two miles from Gipton and Harehills, which is one of the poorest and most deprived estates. My wife and I spent an afternoon some two months ago with the West Yorkshire Police going around and looking at how neighbourhood policing works in Gipton and Harehills.
It is not that we live in a country in which the two sides are very far apart but they do not interact enough and we have unfortunately lost our sense of mutual obligation. The rich do not provide enough in terms of philanthropic giving and resist paying their share of tax. That is part of the problem which we need to address. The gap between the public’s reluctance to pay higher taxes and the public’s expectation of high-quality services is something with which the previous Government struggled. The media, above all the Daily Mail, feed the expectation that you should have lower taxes and better quality public services. We constantly read that the wicked National Health Service is depriving us of a new cancer drug costing only £25,000 a year per person. We are also told that that is not our fault, we do not need to contribute to that and somehow the state should provide it. Only one party has included a commitment to raise taxes in its manifesto in any recent general election campaign and that was the Liberal Democrats in 1997 and 2001. I remember my Labour friends saying in 1996, while I was writing the party manifesto, that this would be a disaster. It was not a complete disaster. I suggest that all parties should educate the public with regard to the fact that in an ageing and highly unequal society we cannot expect to have lower taxes because demands will rise, not fall.
Part of the problem we face is due to the fact that after 2001 the Labour Government accepted a substantial increase in public expenditure on welfare and social support but did not increase taxes proportionately to pay for it. That is why we went into deficit from 2002 onwards, leaving a structural deficit, the consequences of which this Government are now struggling with. Along with implementing very painful cuts the coalition Government are focusing on tax avoidance and tax evasion to ensure that the better off pay their fair and proper share of taxation. I hope that we have the active support of the Opposition in this.
In addition, the Labour Party believed that the state should take over more and more of the functions previously undertaken by the voluntary sector and that services should be provided only by trained and vetted professionals. Long-term problems arise when a voluntary sector is too dependent on the state. However, I am told that only 20 per cent of society organisations depend on state support but that some 50 per cent of public support for the voluntary sector comes from local authorities and 40 per cent comes from central government. I very much support what the right reverend Prelate said about co-operation between civil society organisations and local authorities, not dependence. We all face the long-term challenge of raising public and private funds to pay for social welfare. The public funds will come not from a shrunken state but, sadly, not from a much larger state because the public will not pay out taxes amounting to more than 50 per cent of their gross national income. Therefore, we need to seek a partnership between taxation and philanthropic giving in this respect.
We also believe that central government should not direct what local authorities and schools do too directly and too intrusively. Surveys have shown that some local authorities have cut into support for voluntary organisations much more than others. Liverpool and Sheffield in particular have cut into this support while others have managed to maintain it, and one or two have even increased it. There is substantial evidence that local authorities working in partnership with the voluntary sector have been successful in managing cuts and actively protecting the funding of certain groups. That is something which we, in our capacity as citizens, should all be concerned with. The churches, of course, play a major role in this area, including in providing funds for some of these bodies. Community foundations also have a role to play. I am about to visit the Leeds community foundation to learn more about how it operates.
Voluntary organisations that are also social enterprises can provide funds. I was rather distressed to find one body in Bradford with which I have had some contact cutting back on its income-generating activities because it felt that these were not core to its activities, whereas generating income from what you do while providing social objectives is a highly desirable development.
We certainly need to encourage philanthropy. I have a particular feeling of aggression against the bank for which my father worked for 40 years, which paid for my secondary schooling, and which had a very old Quaker philanthropic tradition. Those who run that bank today have entirely lost that tradition and in some ways seem to have lost any sense of moral shame about the large amount of money they earn and how little of it they give to charity—living offshore, avoiding taxes offshore and denying any sense of responsibility towards the society from which they emerged. We have to turn that around. All of us from all parties have to turn that around.
Central government is doing what it can to help these bodies through the transition. The transition fund, which was mentioned, was intended to be for one year and will not be renewed. There are a number of other activities. The Big Society Capital fund is getting under way. Its interim committee has just made the first grant and we are therefore not leaving everyone to sink or swim afterwards. A new fund of £20 million will also be available for bodies providing advice, and a number of things are in place to help us through the very difficult transition.
While we are conscious of the real difficulties that current cuts are bringing to voluntary organisations, as they are to a range of other essential services, the Government are working to provide what assistance they can through the transition. However, how we see the direction of travel is for support for local organisations to come, as far as possible, through local authorities. That is the appropriate way forward. Central government grants for local activity should not be what one would want in the long term. Again, I am aware of one or two useful organisations in Yorkshire that have been dependent on central funding. That is difficult for local organisations and involves them in the organisation of very complicated contracts. The long-term funding implications of that relationship are something that we will all have to work through as we go on, and as we come—we hope—out of the current crisis.
Meanwhile, the Government are funding the training of community organisers. We have started a national citizen service, we have a new Community First fund for communities in disadvantaged areas to help them take action to improve their lives, and we are working across a range of different voluntary activities by assisting them and their funding to enable people to take greater responsibility for their own communities and their own lives.
As a Liberal Democrat, I think of not precisely a big society but a responsible society. I think that part of what has gone wrong with this country over the past two generations has been that people—again supported by the media, rather too uncritically—have begun to talk about their rights and not about their responsibilities. The noble Lord, Lord Glasman, has written quite powerfully on this, so it is not entirely a single partisan point. We need to get back to a society in which we all recognise our responsibilities to each other, including our financial and philanthropic responsibilities. I hope that that is common ground among us. I know that it is part of the message that I learnt as a choirboy in the Church of England.