Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Skelmersdale)
My Lords, we have two affirmative instruments before the Grand Committee this afternoon, but it has been agreed by the usual channels that the Grand Committee will adjourn to allow Front-Benchers speaking in the debate on the Intelligence and Security Committee report to be in the Chamber during today’s Statement—apparently, any overlap with the Treasury statutory instruments does not matter. The Hansard staff and the Whips are aware.
Before the first Motion is considered, I remind noble Lords that, in the case of the two statutory instruments, the Motion before the Committee will be that the Committee do consider the statutory instrument in question. The Motions to approve the instruments will be moved in the Chamber in the usual way. In addition to any other adjournment, if there is a Division in the House, the Committee will adjourn for 10 minutes.
Financial Restrictions (Iran) Order 2011
(13 years ago)
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Lord Sassoon
That the Grand Committee do consider the Financial Restrictions (Iran) Order 2011.
Relevant documents: 34th Report from the Joint Committee on Statutory Instruments.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, this financial restrictions measure against the Iranian banking sector was introduced on 21 November by my right honourable friend the Chancellor of the Exchequer. The Treasury laid the Financial Restrictions (Iran) Order 2011 before Parliament under its powers in Schedule 7 to the Counter-Terrorism Act 2008. The order contains restrictions requiring UK credit and financial institutions to cease business relationships and transactions with all banks incorporated in Iran, including their branches and subsidiaries wherever they are located, and with the Central Bank of Iran.
I would like to turn first to the rationale for the order. The restriction contained in the order responds to the risk to the national interests of the UK caused by activity in Iran that facilitates the development or production of nuclear weapons. The Government have had serious concerns about Iran’s nuclear activities for some time, and these concerns are shared by the international community. The 18 November board of governors report of the International Atomic Energy Agency, which is the UN body charged with monitoring Iran’s activities, provided further evidence that Iran’s nuclear programme was being used for non-civilian applications. In particular, the report sets out the IAEA’s concerns about,
“possible military dimensions to Iran’s nuclear programme”.
The case for UK action is underlined by the urgent call from the Financial Action Task Force—the FATF—which noted its particular and exceptional concern about Iran’s failure to address the risk of terrorist financing and the serious threat that this poses to the integrity of the international financial system. Other countries share our concerns in respect of Iran. These include the US and Canada, both of which implemented further restrictive measures against Iran on 21 November. The EU also has financial sanctions in place, including further asset-freezing measures against 180 Iranian individuals and entities agreed at the beginning of this month, and is considering future measures to implement.
The Government introduced the Financial Restrictions (Iran) Order 2011 to respond rapidly to further evidence of the risks posed by Iran’s nuclear development programme. Iranian banks play an important role in providing financial services to individuals and entities within Iran’s nuclear and ballistic missile programmes, and many Iranian banks have been sanctioned by the UN and EU for their role in Iran’s proliferation-sensitive activities. Given the UK’s important position as a global financial centre, the UK restrictions will have a major impact on the options available to Iranian banks. This will make it more difficult for Iranian banks to use the international financial system in support of proliferation-sensitive activities. The action also protects the UK financial sector from the risk of unwittingly being used to facilitate activities which support Iran’s nuclear and ballistic missile programmes.
I will now explain the specifics of the order. The order was made under Schedule 7 to the Counter-Terrorism Act 2008, which provides the Treasury with powers to impose a range of financial restrictions in response to certain risks to the UK’s national interests. The powers enable the Treasury to respond to proliferation risks, as we have in this case, and to money-laundering and terrorist financing risks, or where the FATF calls for countermeasures.
Shortly after the restrictions came into effect on 21 November, the Treasury published a series of documents on its public website. These alerted the financial sector to the restrictions and provided guidance on their implementation. These documents were also e-mailed to more than 13,000 subscribers to our e-mail alert system.
In addition, the Treasury worked with the Financial Services Authority, HM Revenue and Customs, and the Export Control Organisation to publicise the restrictions and provide information to firms on the requirements. The documents published by the Treasury on 21 November included six general licences exempting specific activities from the restrictions. These general licences enable credit and financial institutions with existing business relationships or transactions with the entities concerned to manage the cessation of business in an orderly way. They permit them to provide financial services for humanitarian purposes and personal remittances between individuals here and in Iran.
Further licences, whether general or individual, may be granted by the Treasury to manage the impact of the requirements on third parties. Companies affected by the restrictions can apply for a licence of exemption and we are particularly minded to grant licences where UK companies are owed money under existing contracts. This approach is similar to that used in other sanctions.
Firms already have in place procedures and systems to meet obligations relating to financial sanctions and anti-money laundering. They help to minimise the burden of complying with these restrictions. It is expected that compliance costs for the sector as a whole will be moderate, although any institution with significant business relationships with an Iranian bank will face larger costs. Supervision of the financial sector’s compliance with these restrictions will form part of the existing supervisory regime of the Financial Services Authority, HM Revenue and Customs, the Office of Fair Trading and the Department of Enterprise, Trade and Investment Northern Ireland.
Let me conclude by emphasising that this order was issued by the Government to respond to the severe risk that Iran’s nuclear activities posed to the UK’s national interests. This is a strong measure, but it is necessary. Iran’s proliferation-sensitive activities are a serious and ongoing concern for the UK and the international community as a whole. It is vital that we continue to take steps to increase pressure on the Iranian regime and to encourage Iran back to the negotiating table to find a diplomatic solution. For these reasons, I commend the order to the Committee.
Lord Newby
My Lords, I thank the Minister for the clear introduction that he has given to this measure which seems, broadly speaking, to be proportionate. I have just one question. To what extent will Iranian banks be able to continue doing business here direct with companies as opposed to with UK financial sector bodies? I think that the Minister said that they will be able do that. If so, have the Government given any consideration to freezing the operations of Iranian banks so that they simply cannot do any business out of the UK?
Lord Tunnicliffe
My Lords, the Minister will be delighted to know that we support this order. I would like to thank him for his introduction and to say that he has certainly satisfied any questions that I might have had on the technical side of the banking—not that I am particularly qualified to be able to ask him any questions on that. This is, essentially, a foreign policy issue and I will say a word or two on what has led to this very strong action, which we support.
We are contemplating a nuclear-capable Iran, the consequence of which would be dire. It would destabilise the region; it would cause other states to react; it would probably put the non-proliferation treaty under pressure—perhaps terminal pressure—and, of course, it would lead to an increased possibility of the use of nuclear weapons. The military solution that has been talked about in some international circles is no less dire. The idea of a simple, surgical strike is almost certainly unreal and we may well see ourselves in military conflicts whose breadth and depth are quite appalling to think about, stretching from Hezbollah as one actor through to Saudi Arabia, the Emirates, Israel, US facilities in the area and, as ever, the Strait of Hormuz.
Fortunately, actions taken to date that are short of military actions are being successful. Most commentators seem to view them as successfully holding Iran some two years away from capability. This order is part of that widespread non-military action that international states are taking to keep Iran away from that capability. Nevertheless, the seriousness of this order and the reaction to it in Iran is illustrated by the probability that the attack on the British embassy in Tehran was stimulated by it. I pay tribute to the bravery of our staff in Tehran during the violence that they were subjected to in that difficult situation.
Having looked at the FCO’s statement, it seems to me that the order has a twin-track set of reasons. The first is the International Atomic Energy Agency's latest report on Iran, highlighting fresh concerns. In situations such as this, I always like to try and turn to the source information. The document that it refers to has 25 pages and is quite chilling reading, if one knows anything about nuclear weapons. The general view is that nuclear weapons are about getting enough nuclear material but they are much more difficult than that. They are about clever explosives, hydrodynamics and all that sort of thing. Just flicking through the report, the chilling thing is to see the amount of energy that Iran is apparently putting into that technical side of making a bomb work.
Sadly, one of the problems with the IAEA is that while it is a very capable body, at the end of the day it does not have the ability to instruct people to do things. If you actually read its resolution, it uses words such as press, stress, urge, express and commend. The only thing that it decides to do is to remain seized of the matter, so I would be grateful if the Minister could express to me just how widely this concern, which I think was expressed on 18 November this year, has been followed up by other countries. Can he flesh out any more detail of the actions on it that other countries have taken?
Lord Sassoon
I am grateful to my noble friend Lord Newby and the noble Lord, Lord Tunnicliffe, for making this a short, constructive and to-the-point debate. I shall go straight into the questions that have been asked. First, on the question from my noble friend about the extent to which Iranian banks can still continue in this country to do direct business with companies or individuals, the answer is that the four Iranian banks in the UK are already subject to asset freezes. They cannot do any business at all in this country unless they get licensed by the Treasury, and of course licences are going to be issued only in very particular and limited circumstances. The prohibitions in respect of the UK are pretty watertight, and no UK company can, in effect, use a UK bank to deal directly or indirectly with an Iranian bank.
The noble Lord, Lord Tunnicliffe, asked what other countries are doing. As I said on 21 November when we brought forward the order, the US and Canada took further, similar measures. France, too, announced that it was going to take measures in the near future, particularly in relation to oil trading. The 27 member states of the EU designated 180 individuals and entities for asset-freezing at the beginning of this month, so there is already significant co-ordinated action. The Foreign and Commonwealth Office is working with our EU partners to consider a further round of strong sanctions measures, including targeting in the new year the Iranian oil and gas sector and the central bank, so there is ongoing work with many of our partners. Incidentally, 32 out of 35 countries on the IAEA board of governors supported the resolution of the IAEA in this respect.
The FATF is an international best-practice body. As I know because I chaired it for a year, members take its calls for action very seriously. Often, in my experience, those who are outside the EU and North America will take a bit longer to consider their response. The FATF has three plenary meetings a year and there is always follow-up to action taken since the previous meeting, so it does not let these things wither on the vine. Its next meeting will be approximately four months after the October meeting, at which it will take stock of progress.
The noble Lord also asked a question about the risk of leakage through other countries and what we are doing to avoid the risks which the impact assessment identifies. As I have already said, we are working with many Governments to make sure that they are aware of our concerns. I was in the Gulf during the week when this order came into effect. I had discussions with central bank governors and others there about what they were doing in response to the IAEA report. We talked to many countries. It is quite clear that the tightening sanctions have a significant effect on Iran’s economy and its ability to move money around, but I fully accept that we have to remain extremely vigilant and work with our partners to ensure that we make it as difficult as possible for it to move money in any way. It is ongoing business.
Lastly, on the penalty regime, I suggest that a two-year prison sentence should be a significant deterrent. The penalties in this order are equivalent to those in other, similar sanction regimes. We have not therefore broken any new ground and have followed precedent in this order. The financial institutions which are the subject of this order in the UK are obliged to have systems and controls in place to counter the risk that they might be used to further financial crime. The FSA, as the supervisor, has a statutory duty to monitor those whom it supervises for the purposes of securing compliance with the requirements of a direction. It can impose civil penalties under the Act. Although I should stress that this was under a different part of the UK asset-freezing and financial sanction regimes, it is worth pointing out that RBS was fined £5.6 million in 2010 for the failure to have adequate systems and controls in place to prevent breaches of UK financial sanctions, specifically in relation to Iran. Although that was, as I say, under a different part of the sanction regime, it indicates how seriously the FSA takes these issues.
In conclusion, I suggest that the IAEA’s latest report highlights the serious situation we have with Iran’s nuclear programme and its possible military dimensions. The FATF, as has been recognised, has made repeated calls for countries to take countermeasures to address the risk of money laundering and terrorist financing emanating from Iran. I hope your Lordships agree that the decision to issue this order is a proportionate and reasonable response to the threat of nuclear proliferation and that this action mitigates the risk of the UK financial system being used to facilitate proliferation-sensitive activities in Iran.
I thank noble Lords for their engagement with this issue and I hope that my answers to the important questions they have raised have been sufficient. I urge noble Lords to support me in this important matter.
Open-Ended Investment Companies (Amendment) Regulations 2011
(13 years ago)
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Lord Sassoon
That the Grand Committee do report to the House that it has considered the Open-Ended Investment Companies (Amendment) Regulations 2011.
Relevant documents: 34th Report from the Joint Committee on Statutory Instruments.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, these regulations amend the Open-Ended Investment Companies Regulations 2001 to introduce a protected cell regime for open-ended investment companies, or OEICs. They will ensure the segregation of liabilities of different sub-funds held under the same OEIC umbrella company so that investors in one sub-fund will not be liable to creditors in the event of another sub-fund failing.
I would like first to give a little background on why this legislation is needed. Open-ended investment companies are one of two major forms of pooled investment fund. UK regulations for OEICs were first approved by Parliament in 1996 to help UK fund managers compete more effectively in the European market. Collectively, there is around £580 billion in UK-domiciled funds and the work needed to administer those funds brings jobs to a number of parts of the UK, including outside the UK’s traditional fund management centres of London and Edinburgh.
Large fund managers generally operate a small number of OEIC umbrella companies with a large number of sub-funds within each umbrella, allowing them to operate a large range of funds more efficiently. The sub-funds, or cells, do not have a separate legal personality but are separately managed, charged, accounted for and assessed for tax. Under current UK law, there is no segregation of liabilities between sub-funds, so creditors of one sub-fund could have a claim on the assets of another sub-fund. While using multiple separate OEICs instead of sub-funds within a single OEIC would protect investors from this risk, it would make operations less efficient and add significant cost to end-users. In practice, the likelihood of creditors having a claim is small, both because OEICs must comply with borrowing limits imposed by the FSA and because feedback from the industry suggests that most credit agreements stipulate segregated liability. However, because this risk has never crystallised, it is not certain how these stipulations would be treated by the courts.
This legislation increases consumer protection and, by doing so, improves the competitiveness of the UK as a domicile for funds. Investors increasingly require segregated liability to address the small risk present in umbrella structures. Managers seeking to domicile their funds in the UK need to be able to offer this based on a statutory provision. This legislation does just that. It removes the risk of contagion by providing an effective ring-fencing of a sub-fund’s assets from the other sub-funds and the umbrella itself. The Government are introducing the regime to ensure that the UK can continue to compete with other jurisdictions that already operate protected cell regimes. Failure to introduce the legislation would risk funds being unwilling to domicile here.
In deciding how to implement this legislation, the Government have been mindful that, despite the undoubted benefits, there are some potential costs to operators in converting from their existing arrangements. We have, therefore, provided for a general two-year transition period, which may, at the FSA’s discretion, be extended for a further year. During this period, existing OEICs cannot enter into any new contract that is not subject to a protected cell regime unless that contract is subject to an existing master agreement which governs the terms of all contracts entered into under it. This should allow firms ample time to convert the necessary contracts, many of which will have come up for renewal in any case. For operators establishing new OEICs, the costs introduced by this legislation are negligible, so they are required to comply immediately with the new regime.
The Government’s Plan For Growth, published alongside the March Budget, also announced a moratorium on new domestic regulation for microbusinesses—firms employing nine staff or fewer—for a period of three years. The protected cells legislation complies with this announcement. Microbusinesses will be fully exempt from the legislation’s requirements for a period of three years. However, early indications are that they may seek to comply with the legislation earlier, given the benefits it brings.
The UK fund management industry has been calling strongly for a statutory protected cells regime and has warmly welcomed news of its introduction. The industry has worked closely with the Government to get the regulations right and they will bring considerable benefits to investors in UK funds and increase the competitiveness of UK industry. I hope that noble Lords will give their support to the regulations today. I beg to move.
Lord Newby
My Lords, this is a fascinating example of the industry asking for regulation that the FSA seems to have been slow to introduce. This is an almost unique experience for the sector, which is normally grumbling that there is too much regulation.
I am intrigued that it is being introduced here purely under domestic legislation rather than within the ambit of any EU cover, and I wonder whether there is any prospect of OEICs, in this regard, being the subject of any of the many EU directives that are currently on their way down the track or being discussed. I note that, at the moment, the jurisdictions that already have this additional regulation are a mixed bag and include Jersey, Ireland and Luxembourg. I find it slightly surprising that it has taken some time for both the UK industry and the Government to get round to implementing this legislation, given that its benefit is that it will improve the competitive position of OEICs in the UK. It seems extremely sensible. I want to confirm what I think the Minister said: that there is no suggestion that this is being introduced because there has been any difficulty with any existing OEICs. Is it purely as a pro-competitive rather than as an anti-competitive measure?
Lord Tunnicliffe
My Lords, I make it clear from the outset that we support this order. I am looking forward to the Minister’s answer to the noble Lord’s questions about how the regulations fit in with the EU—questions which are particularly apposite at this moment. I will content myself with a few comments on the impact assessment and two or three questions.
The impact assessment is absolutely fascinating. From my reading of it—and I am happy to be corrected here—the net benefit of the regulations will be between £18 million and £360 million, which is a pretty wide range that will involve lots of sums to prove that. The only point that I feel I can take from the impact assessment is that, in all credible scenarios, the introduction of a protected cell regime will be favourable, and I think that we can all be satisfied with that.
I have just a few questions. First, new Regulation 11A(4) provides for an exception, which is referred to in the Explanatory Note. However, for myself I cannot quite see what sorts of transactions or assets the exception refers to. Like all exceptions, one is always slightly worried that the exception ends up negating the intent of the order. I am sure that it does not, but I pose that question for assurance.
Secondly, as I understand it—once again, I could be wrong—there will be a period in which PCR products and non-PCR products will be on sale at the same time. I may have misunderstood that, but if I am right in that assumption, what actions are the Government taking to ensure that there is no confusion in the marketplace during that period of overlap? I will be happy if there is no period of overlap, but if there is one then it is important that we do not introduce confusion through these very sensible regulations.
Finally, I like reading impact assessments, which is a little burden that I have to carry. The wonderful thing about impact assessments is that I always sense that they are written by rather more junior people— I was going to say with rather less care, but care is perhaps the wrong term—as you get that little hint from things. On page 10, the impact assessment states:
“The UK fund regime has been viewed as less favourable by managers and investors for a number of reasons, with the lack of a PCR being one of them”.
Perhaps the Minister could enlighten us as to what other reasons exist and what, if anything, he is doing about them.
Lord Sassoon
My Lords, again those questions were short, sharp and to the point. Let me go straight to trying to answer them.
First, my noble friend Lord Newby asked about the interaction with Europe and what else is coming from Europe. The main thing that I see is an up-side opportunity in the link to the UCITS directive and the push to make sure that UK and other fund managers are able to sell products safely on a pan-European basis. I am not aware of any particular threats, but I am aware that, given the ongoing work that is looking again at the UCITS directive, there is further opportunity to complete the single market. UCITS 4 has just been implemented, and the UCITS 5 proposals that are expected from the Commission in 2012 are likely to include consumer protection measures on, for example, the use of depositories, so these regulations are part of a piece. As my noble friend said, these regulations are certainly pro-competitive but, as I touched on in my opening remarks, they also act to protect investors—they work for both the provider and the user of these products. Just to be absolutely clear, the regulations are being introduced not as a reaction to some disaster or something having gone wrong but because there is an untidiness and lack of clarity that we should tidy up ahead of the game.
I will answer the questions of the noble Lord, Lord Tunnicliffe. First, on new Regulation 11A(4), this refers to assets and liabilities which belong to the sub-funds; they do not belong to the umbrella company but have been billed to it for practical or legal reasons. They then have to be pushed down to the sub-funds. For example, there are certain generic costs such as Companies House fees and VAT for which the umbrella company, as the only entity with legal personality, is responsible but then needs to attribute to the sub-funds. It is put in there not as a means of driving a coach and horses through; it is there to deal with appropriate liabilities in particular, which have to be allocated down below the umbrella.
There was then a question about the transition period. The Government certainly recognise the importance of clarity for consumers. This is one reason why the protected cell regime will become mandatory after the transition period. In that transition period, the FSA rules require OEICs that are unprotected to make this clear in their prospectuses. Once an OEIC has converted, it will declare that it is protected. The FSA considers this approach to be proportionate and appropriate, given the low risks involved.
Lastly, there was a question about the impact assessment and the comment on page 10 about the UK regime being “viewed as less favourable”. Incidentally, this was not an impact assessment that I signed off myself so I had the pleasure of reading it afterwards. I am sure that when the noble Lord, Lord Tunnicliffe, mentioned junior people signing it off, he was referring not to my honourable friend the Financial Secretary or the officials who draft these things but to the authorship. The authorship is every bit as expert as is needed. It is great, anyway, to know that some people read the fine print. This is a long preamble to answering the noble Lord’s question.
The other major reasons why people might see the UK regime as less favourable concern perceived tax treatment of funds. The Government are taking steps to address this. For example, only last week the Government announced that they intend to improve the operation of the tax regime for property-authorised investment funds. This will mean that under some circumstances, investors may exchange their units in a dedicated PAIF feeder fund for units in the PAIFs, and vice versa, without incurring a charge to tax on capital gains at the time of exchange. This was a specific response to industry representations and will improve the competitiveness of the UK funds regime. We are responsive to other issues out there, which are generally around taxation.
I hope that that deals with the Committee’s questions. This is legislation that strengthens investor protection in a way that brings considerable benefits to the competitiveness of the UK as a domicile of funds. I therefore commend these regulations to the Committee.
Arrangement of Business
(13 years ago)
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Earl Attlee
My Lords, the Statement or Division is likely to occur very shortly. Unless any noble Lords object, I propose to adjourn the Committee until after the Statement.
The Deputy Chairman of Committees (Lord Skelmersdale)
My Lords, this is a most unusual procedure. I note that the Opposition Front Bench spokesman has not yet finished speaking in the Chamber, nor has the Minister responded. However, I am of course in the hands of the Grand Committee.
The Marquess of Lothian
In referring to the end of the Statement, does the noble Earl mean the end of my noble friend Lord Strathclyde’s Statement or the end of proceedings on the Statement as a whole, which I see has been extended to 40 minutes?
Earl Attlee
My Lords, I was referring to the end of the proceedings on the Statement. If the Committee wants, it can start considering the report but my advice is to adjourn.
Lord Foulkes of Cumnock
My Lords, what is happening in the Chamber is fairly open-ended. If we adjourn, by the time the Statement and all the interventions are finished it could be quite late. A number of noble Lords wish to speak in this Committee and it could drag on and on. It might create problems for the Grand Committee in terms of the time we are able to meet. I counsel us to continue.
Lord Tunnicliffe
My Lords, perhaps I may suggest a compromise—that we proceed with the debate and adjourn when the Statement is notified.
Intelligence and Security Committee Annual Report for 2010-11
(13 years ago)
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The Marquess of Lothian
That the Grand Committee do consider the Intelligence and Security Committee Annual Report for 2010–11.
The Marquess of Lothian
My Lords, I understand that these proceedings may be interrupted. Having served for many years in the other place, I am quite used to being interrupted and to coming back to where I was at the start. I think this is perhaps the best way to get our business done.
This is the first opportunity I have had to speak in this House on the work of the Intelligence and Security Committee, on which, both in the other place and in this House, I have had the great privilege to sit since January 2006. I am not the longest serving member of it—George Howarth remains the longest serving member—but I am one of the longest serving members.
I note that when the previous report was considered by your Lordships on 30 March 2010, a number of representations, including one from the noble Lord, Lord Foulkes of Cumnock, were made for an increase in the number of representatives from this House on the committee. At that time, there was only one, the noble Lord, Lord Foulkes of Cumnock—a much valued colleague on the committee—who on that occasion moved consideration of the report, as I am doing today. I am delighted that those representations were heeded and that there are now two Members of this House on the committee. I am even more delighted that the other, who has not yet joined us—but I am sure he will shortly—is my noble colleague, the noble Lord, Lord Butler, who represents the Cross Benches and brings with him the broad knowledge and unique insight that come from not only having been Cabinet Secretary but having conducted the 2004 review of intelligence on weapons of mass destruction.
Lord Foulkes of Cumnock
I was going to raise this point in my speech, but it is perhaps better raised now. The noble Marquess is right, we argued on both sides of the House that the number should increase. He is also right that the noble Lord, Lord Butler, will bring a unique and interesting perspective to the work of the Intelligence and Security Committee. However, is it not strange, ridiculous and unacceptable that there is no Member of the Opposition in the House of Lords on the committee? It is quite ridiculous. The total number of members of the committee, including those from the House of Commons, is nine, of which only three are Members of the Official Opposition. This is a scrutiny committee which challenges the work of the intelligence agencies from time to time, and to have such a poor representation of Labour members—and not one from the House of Lords—is quite unacceptable. That point was made by the Opposition Chief Whip of this House at the time and, unfortunately, was not accepted by No. 10 Downing Street.
The Marquess of Lothian
I am sure that what the noble Lord, Lord Foulkes, has said will be heard more widely. I would answer him in this way: as he will see from the report, we are at the moment seeking to have the nature of the committee reformed in a fundamental way. That process is being undertaken at the moment through the Green Paper and I shall come on to it later in my remarks. However, it would be premature to get involved on this before the process has at least got under way and the kind of points made by the noble Lord can be considered.
Even though he is not in his place, I must say that it is a great pleasure for me—as I hope it is for other noble Lords—to have the noble Lord, Lord Butler, on the committee. It means that I can speak more briefly in this debate than otherwise might have been the case because I am confident that he will, with far greater skill, cover all the areas which I fail to cover and may indeed correct me on those areas where I get it wrong.
This is the first annual report of this committee produced under the chairmanship of Sir Malcolm Rifkind, who I am sure all other members of the committee would also like to thank for his excellent leadership over the past year. I should also like to thank the members of the committee from the other place.
As the noble Lord, Lord Foulkes, knows, the ISC is unique in many ways, but perhaps the one that strikes you most when you first join it is the level of consensus on the committee and the absence of party politics from our discussions. That is an important part of the nature of the committee and makes serving on it an even greater pleasure. The abiding ethos of the committee, as noble Lords here today who have served on it in the past know, is one of trust—trust between members, of course, but also, and more importantly, between the committee and those who it is the committee’s responsibility to oversee. We work in an environment where secrecy is often required by the national interest and where, if oversight and scrutiny are to be comprehensive and effective, trust in that secrecy is of the essence.
The same stricture of secrecy also means that the full report, which we are required to submit to the Prime Minister, has to be redacted in certain areas before it is more widely published, to protect that same national interest. As noble Lords will know, these redactions appear as asterisks in the report before your Lordships and have in the past—I must plead guilty of this myself in a previous political incarnation—been the cause of not just complaint but often ridicule. However, in truth, redactions are inevitable and necessary if the committee is to produce a comprehensive report for the Prime Minister. We have conscientiously striven this year to keep redactions to the minimum consistent with the production of that comprehensive report.
This year we have also preceded our report with a section on key themes, which we hope will provide a more structured introduction to the rest of the report by indicating those areas of particular interest to the committee and explaining why they were of such interest. In the past, I always found that these reports tended to be very piecemeal and quite difficult to follow. We felt that it would be for the benefit not just of this House and the other place but of the wider public as well if we produced an introduction of themes that at least gave some shape to the rest of the committee.
I am delighted to see that my colleague, the noble Lord, Lord Butler, has now joined us. At the risk of repeating myself, I said earlier that it is a pleasure to have him on the committee. It makes my speech today shorter, and I am sure he will fill in the gaps and correct me where I have got things wrong.
In general, noble Lords will see from our report that it has been a very busy year for the committee. Indeed, we made a record number of conclusions and recommendations. The report covers several important issues. I do not want to take too much time today; I just want to highlight a few of them.
The first relates to funding for the single intelligence account. In the current economic climate, the committee recognised that the flat cash settlement that the intelligence agencies received in the spending review was fair. This was reflected in what the agencies themselves told us. They will, in broad terms, be able to maintain their key coverage and capabilities. Nevertheless, the committee has recommended that the settlement must be kept under review. The Government must be willing to revisit the funding available to the agencies if there is a significant change in the threat. We cannot prioritise budgets in advance if the security of the country is at stake. The Government’s response to the committee report responded to this and mentioned agility, flexibility and reprioritisation—wonderful words, but I am not certain what exactly they mean in practical terms. It did not mention the possibility of an adjustment in the settlement should that be necessary. In the light of events that are coming over the next 12 months and beyond, we believe that this is important. I would therefore welcome the Minister’s confirmation that, should the threat change significantly—that is the condition—there is scope to revisit the single intelligence account.
I should also like to draw the Committee’s attention to the recommendations on cybersecurity. The threats that exist in cyberspace are familiar ones: theft, fraud, exploitation of the vulnerable and espionage, to name just a few. However, the internet provides criminals and spies with a new avenue of activity, where these deeds can increasingly be carried out with greater anonymity behind a cloak of binary digits and encryption. It is a rapidly growing threat to our security and prosperity, and the ISC in previous reports had urged the Government to increase the funding and priority of this work. Therefore, we welcome the Government’s decision to list cybersecurity as a top-tier threat in their national security strategy, and we welcome the new funding that has been made available to fund cyber-related work. Half of this new money will go to the intelligence agencies, which is very much in our view to be welcomed. However, there is still a great deal of work to be done in this area.
While the committee has welcomed the increased priority being given to cyber, the downside has been the proliferation of new teams and units working in this area. There are at least 18 departments, units and agencies involved in this work in some way, and the committee remains concerned at the risk of duplication and lack of co-ordination in this essential field.
Many other important matters are mentioned in our annual report, including the very welcome establishment of the National Security Council itself, matters relating to detainees and rendition, counterterrorism work and Olympic security, to name but a few. I do not propose to cover them now, as the report sets out our views clearly, and no doubt your Lordships will wish to raise some of them during the course of the afternoon, as I am confident will my colleague, the noble Lord, Lord Butler.
I want to turn now to the wider issues that we mention in the report. One that has exercised the committee this year and which we touch on in our annual report is the future of the committee itself. The ISC has been in existence under statute for some 17 years now. Since it was established under the 1994 Act, the threats that we face have changed and, in response, the intelligence community has had to change as well. The work of the committee has evolved to take account of this. However, public expectation of transparency and openness has increased significantly during this time, and the committee must ensure that it has the powers and the remit necessary to provide reassurance to the public and to Parliament. We therefore made it a priority in the first year of this Parliament to review the committee’s role, structure, remit and powers. We concluded that the current arrangements are now significantly out of date. The committee therefore produced radical proposals for change designed to increase accountability, transparency and capacity for oversight of the intelligence community as a whole. The timing of our review was fortuitous; the Government were in the process of producing a Green Paper, now published, on the protection of intelligence material in the courts and were considering how, if they were to recommend changes in the power of courts, oversight of the agencies should be strengthened to compensate for that. The committee therefore put its proposals for change to the Prime Minister.
Noble Lords will have seen that the Government’s Justice and Security Green Paper for the most part reflects the committee’s recommendations. Under the proposals, the Intelligence and Security Committee will become a committee of Parliament, something that it has not been in the past; it has been a statutory committee of parliamentarians under the authority of the Prime Minister. We are seeking for it to become a committee of Parliament, with the necessary safeguards, reporting to Parliament and to the Prime Minister. The remit of the committee will reflect the fact that the ISC has for some years taken evidence from and made recommendations regarding the wider intelligence community and not just SIS, GCHQ and the security services, which were its statutory responsibility. It will also reflect the fact that the committee is not limited to examining just policy, administration and finances, which were also part of its statutory remit, but encompasses all the work of the agencies. Further, the committee will have the power to require information to be provided.
However, there are two issues on which the Green Paper does not entirely reflect the Government’s proposals, which I wish to raise now with the Minister. The first relates to oversight of operational activity. The work of the agencies cannot be understood fully, let alone scrutinised effectively, without regard to operational matters. The ISC has for many years had access to operational material and has reported on operations publicly and in confidence to the Prime Minister. That includes reports as far back as the 1999 inquiries into Sierra Leone and the Mitrokhin archive, when the committee was still relatively new, through to more recent examples, such as the 2007 inquiries into the 7/7 bombings and the 2009 inquiry into the Binyam Mohamed case. Some of these investigations were at the express request of the then Prime Minister, and others were instigated by the committee itself. They were all specific operations that gave rise to public concern and significant national interest. They were all inquiries in which the committee had access to specific, detailed operational material.
The committee considers that the arrangements that have taken place in practice should now be formalised and that this work should be placed on a statutory footing. However, the Green Paper is less than forthcoming in this regard. It states only that,
“the Government is giving careful consideration to the ISC’s proposal to extend its remit to include operational aspects of the work of the Agencies”.
I underline once again that this is not something new, but something that has been happening over the past few years. Access to operational information is fundamental to the work of the committee. The Government must recognise that to deny the committee access to operational material would be a major step backwards from the current arrangements at a time when the Government say that they are seeking to strengthen oversight. I would welcome my noble friend’s assurance that he and the Government will look forward in this respect and not backwards.
The second issue on which I would welcome clarification from my noble friend is the committee’s resources. Currently, it has limited personnel resources. However, the changes that are envisaged to its powers and remit will increase that requirement and will involve new ways of working. The key difference will be as a result of the committee’s new power to require information to be provided. At the moment, it is reliant on the agencies themselves considering and summarising their information.
The Deputy Chairman of Committees (Lord Skelmersdale)
My Lords, there is a Division in the Chamber. I do not know whether the noble Marquess intends to finish very shortly. If not, we will adjourn the Committee for 10 minutes.
The Marquess of Lothian
I have a little more to say, and I think it would be better to adjourn and return.
The Deputy Chairman of Committees
My Lords, I apologise for interrupting the noble Marquess. The Committee is now in session.
Earl Attlee
My Lords, it will be for the convenience of the House and the Committee if we adjourn the Committee until a point three minutes after the conclusion of the Statement in the Chamber.
The Marquess of Lothian
My Lords, after this lengthy adjournment, I fear that I still have a number of issues to discuss from this lengthy and comprehensive report. I will touch on them as briefly as I can.
When we adjourned, I was discussing how the committee must be able to look at operational information in order to carry out its job of scrutiny properly and I was just beginning to touch on the second issue, which was to ask the Government for clarification with regard to the resources of the committee. We currently have limited personnel resources, but we are now looking at changes to enable the committee to require that information be provided. While at the moment the committee is reliant upon the agencies considering and summarising their information, in future the committee’s staff will need to be engaged in this process to assure the committee that it has the information it requires. This is very important, particularly following the inquest that we heard earlier this summer, where the deficiencies in the information provided by the agencies were shown to have put the committee at a disadvantage.
Due to the sensitive nature of the material involved, the intelligence community is not subject to the same level of public scrutiny as other departments’ agencies. It is not subject to regular debates or questions in Parliament; academic research is limited to matters of somewhat distant history; investigative journalists cannot delve very deeply; and it is exempt from freedom of information. The responsibility for independent parliamentary oversight and security therefore falls to this committee and to the Intelligence Services and Interception of Communications Commissioners whose role is to check the legality of the agents’ activities. That is why both must be adequately supported, so I urge the Minister to accept that this will not be possible unless the committee has sufficient staff of adequate seniority and authority.
I now turn to the thorny and increasingly important question of protecting intelligence material in court proceedings. In the committee’s report on rendition in the last Parliament, we highlighted the importance of intelligence exchanges with foreign liaison partners. We explained that the United Kingdom cannot work in a vacuum and that we depend upon the co-operation of others. We concluded:
“Our intelligence-sharing relationships, particularly with the United States, are critical to providing the breadth and depth of intelligence coverage required to counter the threat to the UK posed by global terrorism. These relationships have saved lives and must continue”.
These relationships are based on confidentiality. Intelligence is shared on the understanding that it will be protected. If our allies fear that their material might be disclosed by our courts—and after this summer they have good reason to fear this—then they may reduce their co-operation. In other words, if we cannot protect it, we will not be given it in the first place. The committee has heard first hand from those within the United States intelligence community that the decision of UK courts in recent cases to disclose US intelligence material has damaged the UK-US intelligence relationship. On a visit earlier this year this was said to us often and—as I am sure my colleague, the noble Lord, Lord Butler, will endorse—with some great force. This is of serious concern. The United Kingdom must honour its obligations to protect foreign intelligence material from disclosure.
We therefore support the Government’s initiative in bringing forward the Justice and Security Green Paper and in looking for a way to honour our obligations. The Green Paper proposes that closed material procedures, including the use of special advocates, be extended to civil cases. The committee considers this to be a step in the right direction. However, it does not on its own provide the answer, nor does it offer certainty to those that we work with that their information is safe with us. The Green Paper recognises that closed material procedures would only “reduce”—not eliminate—
“the risk of damaging disclosure of sensitive material”.
The Green Paper does, however, raise the possibility of a statutory presumption against the disclosure of intelligence material. This would have the advantage of providing a clear indication to judges of Parliament’s intention in relation to such material. Such a presumption would be invaluable to a court in seeking to understand Parliament’s intention in this respect. Any presumption would of course be rebuttable, so the final decision would lie with the courts—we are not trying to take the courts out of it. However, there would need to be a compelling reason for the judge to rule against such a presumption. We regard that as the right balance to strike in these very difficult and important circumstances. Therefore, we consider that this rebuttable presumption should be included in addition to the closed material procedures. The combined package would still not offer a total guarantee to our allies, but it would provide far greater protection than the CMPs alone. In seeking to protect the UK, we must work with others who must feel confident that we will protect the information that they share with us. We must give them that confidence. Therefore, I hope that my noble friend will consider our recommendation that a rebuttable statutory presumption should be included as part of a package of measures.
Finally, I want to pay tribute to the men and women who work for our security and intelligence agencies. As we have seen on the committee, it is a difficult job, which inevitably receives little if any recognition, where successes cannot be celebrated and decisions cannot always be easily defended in public. The Intelligence and Security Committee plays an important role in holding the services to account, scrutinising their actions and criticising them where that is necessary. However, we also believe that we must be their champion and congratulate them on a job well done behind the scenes, as I unreservedly do now. I commend the report to the Grand Committee.
Lord Foulkes of Cumnock
My Lords, let me first say how much I welcome this debate, with two reservations—it would not be from me if there were not a couple of reservations. The first is that we are having the debate in Grand Committee and not on the Floor of the House. Secondly, the debate follows two Treasury instruments, which suggests that the House does not give enough importance to the work of the Intelligence and Security Committee and the agencies. I hope that, in the future, the usual channels will think of the possibility of holding the debate on the Floor of the House so that a larger number of people may not only participate but hear about the work, so that it can get to a wider audience.
However, I congratulate my noble friend the Marquess of Lothian. He is my friend because in the other place he and I were paired for many years—we managed to find opportunities to travel the world together—and then we were members of the Intelligence and Security Committee, which I served on for four years. I know how diligently he serves on it and how impressive he is as a questioner on that committee. He has shown by his introduction today the depth of his knowledge and understanding of the committee’s work.
I commend the work done by the noble Lord, Lord Butler, who brings a slightly different perspective to the committee. Now that he is here, I repeat what I said earlier with absolutely no disrespect whatever to him. He is clearly a very powerful and important Member of this House and I know, from the accounts of members of the committee, that he does an extremely good job on it. It is very unfortunate that this House is not better represented on a committee such as this. I argued this, as did others, in the debate on 30 March last year. We succeeded in doubling the representation but it is slightly odd that there is not a Member of the Official Opposition from this House serving on the committee. It was unfortunate that No. 10 saw fit not to take account of the representations made very forcefully by our Chief Whip. It was a pity that that happened.
On 30 March last year, we had a very interesting debate, in which the noble Lord, Lord King, participated. I am sorry he is not here today; he participated very effectively, as those Members who were here will recall—it is included at column GC 544 of the Hansard of that day. He argued very strongly that the credibility of the committee would be much greater if it had an opposition member as chairman. Obviously, that did not carry much weight with the new Government when they took over. Again, I mean no disrespect to Sir Malcolm Rifkind, whom I have known for as long as I have known the noble Marquess, Lord Lothian, and for whom I have the greatest respect. I think that the noble Lord, Lord King, had a very good argument there that, on a committee such as this committee, it helps to increase its credibility if an opposition member chairs it.
Those are my general comments, but I also want to comment on the reform of the committee. We discussed that when I was a member of the committee, and I hope I am not giving away too many secrets—on that committee, we learnt the importance of not giving away secrets. As far as the committee was concerned, I strongly supported the change in the nature of the committee, and I am sure that the noble Marquess will recall that. Indeed, it was the then Prime Minister Gordon Brown who suggested that the committee might become more open, have public sessions and look towards becoming a parliamentary committee of both Houses. He urged movement in that direction. I supported that, but there were members of the committee who did not agree. I am very glad to hear that the committee is now, as I understand it, unanimously in favour of moving towards reform of the structure of the committee. I hope that the Minister will give an indication in his contribution as to whether that has the support of the Government and whether we will see the necessary legislation in the forthcoming Session of Parliament. I think it would be right to move in that direction. I agree with the committee. It would be more transparent and accountable if that took place. There are problems in relation to certain parts of the evidence being dealt with in public, and meetings would have to be held in private, but the more meetings that can be held in public and the more that Parliament is responsible for the nomination of the members of the committee, the better.
The items that I want to raise that arise from the report relate not to the specifics that the noble Marquess raised but to wider questions of national security policy and, specifically, to the role and the nature of the national adviser. I am now a member of the Joint Committee of both Houses of Parliament on the national security strategy, which is under the chairmanship of my right honourable friend Margaret Beckett. We recently had evidence from the current national security adviser Sir Peter Ricketts, and I was disappointed in it in a number of ways. Page 39 of the Intelligence and Security Committee report records that the national security adviser has three main roles and that the second is,
“to act as personal adviser to the Prime Minister on foreign and security policy”.
I think that is a very important point. When Sir Peter Ricketts appeared before us—I am quoting from the uncorrected evidence—he said:
“The second role is effectively as a foreign policy adviser to the Prime Minister”.
He did not say “foreign and security policy”. I think that, with his Foreign Office background, Sir Peter—who is on his way back to the Foreign Office to become our ambassador in Paris—unfortunately sees himself very much as a Foreign Office person. There is a problem in that kind of role of national security adviser where the two roles have been combined. Sir Peter sees it very much in foreign policy terms. With no disrespect to the Minister, Foreign Office officials sometimes have a particular set of blinkers that means that they do not look at the wider context.
There was also a very strange exchange between the noble Baroness, Lady Ramsay of Cartvale, and Sir Peter Ricketts. I will quote from the transcript. The noble Baroness, Lady Ramsay, as well as having served with great distinction on the ISC, has a better working knowledge of the agencies than most of us here. She asked:
“Is it not constitutionally slightly odd that you are writing the confidential annual reports of the heads of intelligence agencies?”.
He told us that he is in effect the line manager of the heads of the intelligence agencies. When I served on the Intelligence and Security Committee, that never occurred to me. It occurred to me that C and the director-general and the head of GCHQ were working independently and with their own, wider authority, reporting directly to Ministers and particularly to the Prime Minister, but Sir Peter Rickets said that,
“agency heads are also Permanent Secretaries of departments in the same way that I was Permanent Secretary of the Foreign Office”.
I do not know about the noble Marquess, or the Minister, or other Members of this Grand Committee, but I never saw them as that when I was on the committee. I wonder whether something has subtly changed over the last couple of years in terms of the reporting arrangements for the heads of the intelligence agencies. That would be unfortunate.
Another thing that came up in our evidence was that Sir Peter Ricketts has the responsibility for co-ordinating the work of agencies throughout government and for this whole aspect of the work of government. When we asked who had replaced the noble Baroness, Lady Neville-Jones, in particular terms—and previously the noble Lord, Lord West, who had a wider remit than just in the Home Office, although Mr Brokenshire deals with it in the Home Office—we were told that each department on the National Security Council has a Minister responsible. But it seems that no one at ministerial level, apart from the Prime Minister himself, is co-ordinating national security right across government—across all aspects, whether it be energy supply, defence or a whole range of other responsibilities. That seems unfortunate. The interesting thing was that Sir Peter thought that he could co-ordinate it as an official but somehow it was impossible for a Minister to take on that role as well.
My penultimate point is that I also raised with Sir Peter Ricketts on that occasion the question about Scotland, and the potential threats to national security arising from the demands of the present Scottish Government for independence. The astonishing thing was that no work is being done, according to Sir Peter Ricketts, to look at the security implications of the increasing demand for Scottish independence. I hope that the Minister will either confirm or deny this. I raised the question, and was supported by a Conservative Member of Parliament on the committee, about the division of oil reserves if there was a dispute on that, or if the policy of the Scottish Government was different from the United Kingdom on the deployment of Trident—as it is—and on membership of NATO. This raises some implications that ought to be thought about.
Those are the only substantive points that I want to raise today. I want to conclude as the noble Marquess concluded, with a word of thanks not just to the members of the intelligence and security services—MI6 or SIS; MI5 or the Security Service; and GCHQ—who do, as the noble Marquess said, a fantastic job. But as I am sure the noble Marquess would concur, we should say a word of thanks to the staff of the committee, who came under sustained pressure during my time on the committee and weathered it extremely well. One advantage of moving towards a different structure for the committee, where the responsibility is not to the Cabinet Office but to Parliament, is that it would protect them in a way that they were not protected during a very difficult situation in the very important and excellent work that they do to service the committee.
Lord Alderdice
My Lords, I, too, thank my noble friend Lord Lothian for obtaining this debate and for his sterling work on the committee and the report that has been produced. I declare two interests, one as president of ARTIS Europe, which is a research and risk analysis company that takes an interest in areas of politically motivated violence and terrorism, and the other as a customer of the Security Service during the past seven years as a member of the Independent Monitoring Commission. We spent a good deal of our time working with various elements of the Security Service here in the United Kingdom, the Republic of Ireland and elsewhere.
This is an extremely worthwhile report, which merits considerable study. I want to refer only to a few aspects of it. I could pick up on some of the positive remarks about, for example, the National Security Council, which seems to be an important development. I could pick up also on the concerns expressed about the BBC Monitoring service, an issue referred to in general terms in your Lordships' House but very specifically in this report. I welcome not only what the report had to say but some of the remarks in the Government’s response to it.
I note what my noble friend said about concerns about confidentiality in respect of our partners and material coming into the public domain. This is a very difficult area to put into structure and regulation. In the Independent Monitoring Commission, we found ourselves meeting at a very early stage, because it was a somewhat unusual body, as my noble friend knows from his own experience in Northern Ireland. Quite quickly, rather more because of the personnel than of the structure, we were able to build up a sense of confidence with our interlocutors. That was able to function adequately over a period in excess of seven years during which we published some 26 reports. That confidence was not maintained purely by the structures in place, though some were important, but because of the personnel and the relationships between them, which are very difficult to legislate for. It is extremely important to come to understand those things which you can, and should, properly put in the public domain and those matters which have to be dealt with in another way. Without that, it is impossible to do serious work in this area. Structures alone will not address that.
Let me come to the more specific areas that I wish to concentrate on. First, on Northern Ireland and republican terrorism, my friend the Minister of Justice in the Northern Ireland Assembly, David Ford, recently remarked to the Assembly in answer to a question that the level of attacks was not currently increasing, which was very welcome news, because, during our period, they had continued to increase. I am absolutely clear, as I think he was, too, that that is not because the level of activity has diminished but rather because of the excellent work of the security services, the police and the Garda Síochána. It is quite clear that there is still a very high level of dissident republican activity, but it is being foiled by excellent work. I take this opportunity, as other noble Lords have done, to convey my own appreciation to those involved, in so far as I can on behalf of the people of Northern Ireland, for the protection afforded to them and other people in the United Kingdom by their extraordinary work. One of the difficulties about it is that, as with good civil servants’ work, when it is successful you do not see anything publicly and people then take for granted that everything is fine. That is a little bit dangerous because people then let their security guard down and something terrible can happen. With good civil servants’ work and good security work, it looks as though everything is going swimmingly, which is only because of the quality of the work that has been undertaken.
I was gratified to note the recognition of cybersecurity as a tier-1 risk, as is recorded in the report. It is important to understand that this is not simply a question of traditional terrorists, whether domestic or international—although they are mostly international—using the modality of cyber to arrange traditional-style terrorism. In other words, cyberterrorism is not about people communicating with each other using the internet in order to plant bombs or all the other things that terrorists traditionally do. Rather, there are new ways of engaging in attacks that are mediated entirely through the internet—for example, the damaging of government infrastructure and the necessary national utilities. These are very real dangers not just in the defence field but in all aspects of life, including things such as water and electricity, not to mention all our own practical activities. That struck me very forcibly some years ago when some Taiwanese colleagues made it clear to me that, in the Taiwanese Parliament, every parliamentarian’s computer was being hacked into every single day. I think that some colleagues in your Lordships’ House and elsewhere might not be quite aware of the vulnerability of many of these things, although I know that that is not the case with noble Lords in this Room.
The whole area of cybersecurity presents an enormous difficulty and challenge, including on a number of elements that I note are mentioned in the report. First, the question of staff retention and pay, which is referred to, is a very difficult issue. In some long discussions that I had on this front, a young man who runs a company in the United States remarked to me that one of the problems with those who are most skilled in this area of work is that they are often—though this may surprise some noble Lords—not qualified with university degrees, but they are extremely skilled in this work and they have a very particular set of personality attributes and a particular way of working. When a number of small companies were established that became very effective in providing anti-hacking services—largely, setting a thief to catch a thief—a number of the large corporations saw this work as an ideal undertaking. There was clear money to be made and the expertise was available, so these large corporations bought over a number of these small firms. As far as I am aware, almost none of them survived because, brought inside a corporate structure, this was not the way that these young men—and they are almost all young men—functioned. Therefore, one of my questions for the Minister is: how are departments finding the challenge of engaging some of these young people who are not the traditional personalities for the Civil Service or the security agencies or the military or the police? In fact, these are the kind of young people who might be firmly outside these structures, yet they are exactly the kind of people that we need inside if we are to deal with this kind of problem. The report talks about this issue in terms of finance, but I really think that it is much more about other things in addition to the question of finance.
That leads me to the issue of psychological research in these areas. I have been to a number of conferences recently where it has become clear that huge amounts of money are being spent on hardware and on software, but very little is being spent on understanding the psychology of the kind of people who get involved in these sorts of activities. This was commented on in a recent conference that was promoted by the right honourable Foreign Secretary, at which Misha Glenney—a former BBC journalist who has recently published an excellent book on the subject—pointed out that almost no work has been done in this area. For me, that is reflected in the report, which highlights key themes as: “Organised crime”; “Hostile foreign activity” coming from Governments and so on, which is absolutely true; and “Terrorism”. However, the report does not refer at all to what is commonly known as “hacktivism”, whereby young people become involved in activities that become crime, because they break the law, but their intent is not that of traditional organised crime to make a lot of money; much of it is about gaining respect for themselves as serious operators on the internet. However, they then get themselves in trouble and find themselves on the wrong side of the tracks and on the wrong side of the law. I was struck by the fact that that is not identified in the report as a fourth area. This is not organised crime, or terrorism per se, or foreign activity in terms of Government and armies and so on, but it causes us a great deal of problems. That suggests to me that there is something about the whole psychology of this new space that has been created—as well as land, sea, air and space, we now have a new context for engagement and, indeed, for war.
That leads me to another question about legal research. I submit that if the Stuxnet attack had happened in an equivalent way on land, at sea, in the air or even in space, it would have been regarded as a declaration of war. However, despite the great problems that it obviously caused for Iran, it does not seem to have been regarded in that way. At this stage, without waiting for something to happen, a serious piece of work needs to be done in international law to explore at what point such a thing becomes a declaration of war, at what point can it be responded to only by cyber-response and at what point by other kinds of response. There is a lot of work to be done in that area.
The Marquess of Lothian
On that point, this is an important question and the real problem in this area is one of attribution. All the evidence that we have taken suggests that it is very difficult, when you get a worm of the type that Stuxnet was, to find out where it has come from.
Lord Alderdice
My Lords, my noble friend is absolutely right. That is why there is a problem, to which there is no simple answer. Great damage is done whether the attribution can be established or not. Sometimes in the past people have not waited to establish the attribution. A doctrine of pre-emption, which I do not in any way recommend or commend, was created by a previous American Administration. The point is that sometimes we have to find a way of dealing with these things. I simply seek reassurance from the Minister that it is being actively looked at by those with the experience and legal expertise to address the question.
To some extent, that leads me to the question of attribution more generally and in regard to research. Some comments were made about the threat of al-Qaeda, including that in the Arabian Peninsula and other places. In looking at it, it seemed to me that there was rather a surface view of the thing. For example, many of those who get involved in Yemen in support of al-Qaeda in the Arabian Peninsula are concerned about their local situation, as was the case in Afghanistan. There are a small number at the top who have all these notions about the caliphate and so on, but they are not necessarily carried forward because everyone who is involved on the ground believes that. That is extremely important in understanding how to deal with it.
Let me give a specific example from our own country. There are those who have looked at the way of thinking of young people who are potentially vulnerable to being involved in terrorism in this country. I commend the noble Lord, Lord Foulkes, for pointing out that this is not always a question for foreign policy; it is very much a domestic issue. The view has been taken that it is about fundamentalist views. The job is to persuade young people not to have these hard-line, extreme, fundamentalist religious views. I have always had some doubt that it is possible to persuade young people of anything of the kind. Indeed, the more adults try to do it, the less likely young people are to go along with it. However, research has recently suggested that that is not the best way to deal with it anyway. Even if these people have very fundamentalist views and, at the same time, accept that democracy and the rule of law is the only proper way to change and govern society, they are not vulnerable to becoming terrorists.
That is an extremely important question to be explored, so I seek some assurance from the Minister that research is not necessarily being done only by those inside the services, who may have a particular expectation of research. Those of us with any passing understanding of academic research know that it is extremely important that people do not come with preconceived ideas. Those inside the services cannot but have preconceived ideas. Is there any role for research that is being done externally, on a more objective basis, to inform the work of the security services?
On the issue of being up-to-date with difficult questions, we have had a strategic defence and security review, but we have just come from the Chamber where we have been looking at the dramatic and disturbing changes taking place in our own continent of Europe. Only a couple of days ago, General Martin Dempsey, chairman of the United States Joint Chiefs of Staff, said that he was “extraordinarily concerned” about euro survival, civil unrest and the break-up of the EU. Again, this is not a question of distant places but of our own part of Europe. I seek reassurance— I do not ask for anything more—that our intelligence services are paying attention to the real and present danger of unrest in Europe over the next few years as the weight of financial difficulty and political disjunction begins to bear down. That may be, sadly, a substantial part of the work of our security services which is not, as yet—I understand why because the report is now a few months old—focused on in the report.
Lord Butler of Brockwell
My Lords, it is an honour to represent your Lordships’ House on the Intelligence and Security Committee, not least because I share the view which has been expressed that the committee’s work is very important. It is also a pleasure to serve on such a distinguished and experienced committee, which is very ably chaired by Sir Malcolm Rifkind, with his experience as a former Foreign Secretary and Defence Secretary, and is supported by a first-rate secretariat. I was glad to hear the noble Lord, Lord Foulkes, refer to that. The committee also contains others with ministerial and Front-Bench experience in the Home Office and the Northern Ireland Office, including, notably, the noble Marquess, Lord Lothian, with whom it is a special pleasure for me to share the representation of your Lordships’ House.
As the noble Lord, Lord Foulkes, has referred to the chairmanship of the committee, I see the argument that such committees should have a chairman drawn from an opposition party. However, I am absolutely confident that I speak for the whole committee when I say that when we have the good fortune to have a chairman of the calibre, energy and experience of Sir Malcolm Rifkind, that trumps every other argument.
Lord Foulkes of Cumnock
Perhaps I may make two things clear. First, I was repeating the argument that the noble Lord, Lord King of Bridgwater, made last year; it was not I but he who was arguing for an opposition chairman. Secondly, having known Malcolm Rifkind since we served together on Edinburgh City Council, I wholly endorse what the noble Lord, Lord Butler, has said.
Lord Butler of Brockwell
My Lords, the importance of the work of the committee has grown because of the greatly increased salience that the intelligence services have gained in our national life. It is a long time—many decades—since their activities were directed only against foreign antagonists of this country. Sadly, the growth of terrorism—first Irish and then other forms of criminality and terrorism, not only Islamic—has meant that the activities of the intelligence services have had also to involve citizens of our own country. It is therefore right that the agencies should no longer operate wholly in the shadows but that legislation should have been passed to put them on a statutory basis, to regulate them and to hold them accountable to Parliament.
At the same time, much of their activity has to remain secret. On that secrecy their effectiveness and the trust and co-operation of allied countries and those who would help them depends. We have to combine accountability with the protection of legitimate secrecy, and that is where a committee of parliamentarians has an important role to play.
Two other circumstances have affected the role of the intelligence agencies in today’s world. One—and this point has not been made this afternoon—is that their work has become much more international. Terrorism, espionage and criminality no longer respect national boundaries, if they ever did. This means not only that we have to work much more closely with allies and other countries with shared interests, but that the agencies within our own country—both outward-looking and inward-looking—have to work much more closely together. The committee has seen that development and it welcomes and encourages it.
The second development is that the advance of technology means that the methods and instruments of intrusion into the lives of individuals and institutions have greatly expanded. The noble Marquess, Lord Lothian, and the noble Lord, Lord Alderdice, rightly referred to cybercrime and the threat that it presents to public and private institutions in our country. Other examples are the extraordinary development of satellite imagery and the more mundane but equally intrusive proliferation of close-circuit television cameras, through which those pursuing their legitimate business around the streets of London may these days be recorded several hundred times in a single day. Quite rightly, the Protection of Freedoms Bill before your Lordships’ House provides for regulation of the uses to which such recordings can be put.
I mention these developments because it must be the responsibility of those who supervise the agencies on behalf of Parliament, within the ring of secrecy, to ensure not only that the agencies are efficient and effective in their vital work, but that they use the instruments of intelligence-collection available to them both proportionately and responsibly. I want to refer to a point made by the noble Lord, Lord Alderdice, picking up on the report, about the remuneration and character of those who work within the agencies. On the character of those people I think that I can reassure him. When one has the privilege of meeting staff of the agencies, one can be certain that it never has been the case that they are conventional, like any other civil servants. There are a lot of unconventional personalities.
Two other things hold them to the agencies—in addition to remuneration, which is very important. One is the importance with which they regard their work, which is a very important factor in morale, and the other is the excitement, originality and opportunities for enterprise within the law. They are the sort of people who can be relied on to operate in that way.
I was Cabinet Secretary when the legislation establishing the Intelligence and Security Committee was passed in 1994. I well remember the hesitation and anxiety with which the Government and agencies regarded the admission of parliamentarians into the ring of secrecy at that time—hesitation and anxiety which I confess I wholly shared. The committee has come a very long way since then in building the confidence of successive Governments and the intelligence community. The fact that it has done so has been due to the responsibility and wisdom shown by successive members of the committee, and I pay tribute to them. Over the past 17 years, there really has not been a major incident to damage that confidence, and that is essential to the work of the committee. The committee needs to be prepared to be a frank critic of the intelligence community when criticism is justified, but also—as was said earlier—its champion when external criticism and antagonism from those who know little of the agencies’ work is unjustified.
The noble Marquess, Lord Lothian, made the point that, as the confidence of the intelligence community and the responsibility and discretion of successive members of the intelligence and security community have grown, the committee’s work has extended well beyond the restrictions in the original legislation. This has benefits for Parliament and the intelligence community itself. The committee’s surveillance is no longer restricted in practice to the administration, policy and expenditure of the Security Service, SIS and GCHQ, the terms in which the original legislation was expressed. It has extended more generally to the work of the intelligence community as a whole, including—retrospectively—specific operations. This has been of general benefit.
However, if the committee is to achieve its full value, it needs to command the confidence not only of the Government and the intelligence community but of Parliament and the public generally. What has happened de facto therefore now needs to be recognised in legislative changes while retaining the necessary safeguards. The committee should now become a parliamentary committee instead of a government-appointed committee of parliamentarians. The wider extent of its activities should be explicitly provided for. Picking up the point that the noble Lord, Lord Foulkes, made, this would increase the independence of the secretariat of the committee who would then become servants of Parliament and not simply members of the Executive. I agree that that would be valuable. The committee should be able to reassure the public that it can require information from the intelligence community and not just request it—require it subject to the veto of a Secretary of State, without being at the mercy of the agencies in respect of the information they can obtain. These are changes that the committee has proposed; in fact, successive committees have proposed them. It is very welcome that the Government have endorsed them in their Justice and Security Green Paper.
As the noble Marquess, Lord Lothian, said, the Government have so far reserved their position on the extent to which the committee should oversee the operational activity of the agencies. Like the noble Marquess, I urge the Government to have confidence about this. I make one point in particular. The committee has already shown itself to be competent in examining specific episodes, often at the Government’s request. However, the public are much more naturally concerned with the operational activities of the agencies—such as their part in the treatment of terrorist suspects or the events leading up to 7/7—than in the agencies’ financing and administration. If the committee is to command the public’s confidence in holding the intelligence community to account, it must reassure them that the agencies are being properly supervised by Parliament. It is essential that the Intelligence and Security Committee be able to play a role in that, as indeed it already has done. It is not as though we want to look at such operations currently; we will always look at them retrospectively. Nor do we want to go as far as the US congressional committees, which are required by legislation to be informed of the agencies’ current operations. Does the Lord Chairman think I am going on too long?
The Deputy Chairman of Committees (Lord Faulkner of Worcester)
I was waiting to see if the noble Lord had finished because a Division has been called and we will have to adjourn the Committee. We will look forward to hearing the remainder of his speech when we reconvene at 7 pm.
Lord Butler of Brockwell
My Lords, I have only one other point to make, and it is the one that was covered by the noble Marquess, Lord Lothian. It is a very important part of the Government’s Justice and Security Green Paper and of the ISC’s annual report. It is the balance between the interests of justice and the protection of intelligence in court proceedings.
Civil litigation against the Government by those who claim to have been improperly treated at Guantanamo and elsewhere has introduced two new dimensions to this problem. One is the order of the judge in the Binyam Mohamed case referred to by the noble Marquess to disclose American-sourced material. As the noble Marquess said, it is difficult to overstress the effect that this has had on the attitude of the US authorities to sharing intelligence material with the UK. The other is the difficulty that the United Kingdom has had in defending actions against the Government when it can do so only by disclosing sensitive material. I fully understand the feelings of those who are reluctant to see the extension of closed material procedures or the greater use of special advocates. But I agree with the Government that the best interests of justice for all parties can be secured only by the extension of closed material procedures and the use of special advocates in those cases. But I also agree with the noble Marquess, Lord Lothian, that this needs to be buttressed by writing into the law a rebuttable presumption against the disclosure of sensitive material in such cases to provide guidance to judges about what is the will of Parliament. I agree with the noble Marquess about that as, indeed, I do on all the other points he made.
As has already been said, there are many other important matters covered by the ISC’s report: the creation of a National Security Council and its implications for the Joint Intelligence Committee and the rest of the Government’s central intelligence machinery; the security aspects of the Olympic Games and the challenges to the intelligence agencies in dealing with them at the same time as the other demands on their resources; the need to wake up government agencies and the private sector to the threat that cyber poses to them; and much else.
One of the great benefits of the ISC’s annual report is that it is a comprehensive annual report on current issues affecting our intelligence community. What is more, having had no part in drafting it, I think I can say that it is a good read. I feel grateful and privileged to be able to contribute to it in at least a small way.
Lord Hennessy of Nympsfield
My Lords, I add my thanks to the noble Marquess, Lord Lothian, for securing this debate. Sir Colin McColl, a former chief of the Secret Intelligence Service, was asked some years ago to encapsulate the purpose of British intelligence. He replied that its job is to provide,
“cats’ eyes in the dark”,
for its customers. I regard the Intelligence and Security Committee in a similar light, for it provides Parliament and the public with an indispensable pair of cat’s eyes into the necessarily dark world of our secret state. I therefore welcome the committee’s new remit, reach and status as a committee of Parliament and support the words of the noble Marquess about the need for extra resourcing.
Last Thursday, I found myself on the 2.30 from Paddington—to give the occasion a Miss Marple-ish touch—with the noble Lord, Lord King of Bridgwater, the founding chairman of the ISC, who guided the committee through its first seven years of life after its creation by the Intelligence Services Act 1994, during which, as the noble Lord, Lord Butler, has already said, great strides were made. The noble Lord, Lord King, told me not only how much he regretted the short notice of our debate today and that he could not alter his travel arrangements and be here but also that he, to use his own words, “always thought that the ISC would be a Select Committee one day”, and that this would be, “a natural progression”.
In my judgment, the committee’s work over the past 17 years represents a significant constitutional development alongside its regular functions of inquiry, scrutiny and report. We have come a very long way on the openness front. In 1982, when I was working for the Economist, the Falklands War erupted as if out of the blue. In the Economist the following week I produced a chart of what we called the “Falklands war machine”. In it I put the Joint Intelligence Committee in the hierarchy of the Defence and Overseas Committee of the Cabinet, and so on, and what was going to be the War Cabinet, and mentioned the weekly production of the summary of intelligence, the Red Book. The reaction in Whitehall was astonishment; it was if I had held a crucifix to Dracula. We have, indeed, come a very long way, and quite rightly. The ending of the Cold War made it so much easier as well in terms of admitting to all of the agencies and the structure of Cabinet committees and assessment staff and so on beneath.
Perhaps I may concentrate today on the terrain covered by section 5 of the ISC’s 2010-2011 report—the configuration and the working rhythms of the central intelligence machinery. Since the committee reported and the Government replied, we have had the report to the Prime Minister prepared by Paul Rimmer of the Cabinet Office’s assessment staff, and Kieran Martin, then of its Security and Intelligence Secretariat, on the future workings of the Joint Intelligence Committee.
In essence, the Rimmer-Martin report recognises the new reality—that the JIC has become partially eclipsed by the work of Mr David Cameron’s highly significant innovation on the first day of his premiership when he created the National Security Council. As the National Security Adviser, Sir Peter Ricketts, expressed it during an International Institute of Strategic Studies seminar on 30 November—at which the noble Lord, Lord Gilbert, was also present—the NSC has become,
“the uber customer for the intelligence product”,
which, he explained, has resulted in a,
“big change in the landscape of the JIC”.
The Rimmer-Martin report, which the Prime Minister has now signed off, declares that,
“The NSC’s priorities should be the lead driver of the JIC agenda”,
and that,
“The NSC (Officials) meeting”,
each Wednesday morning,
“is best placed to oversee the tasking of the JIC, in line with its core role of setting strategic direction for the NSC. The NSC(O) should therefore task the JIC. However”,
Rimmer-Martin continues,
“the JIC must retain the latitude to provide early warning on issues outside the immediate cycle of the NSC agenda”.
As a result, from next month, January, JIC meetings are to divide into two: into a monthly gathering of principals at four-star level, including the heads of the agencies, as has been the norm, to take the more strategic and longer-term papers prepared by the assessments staff; and weekly meetings in the interim of sub-principals, “to agree papers in between”.
I recognise that these arrangements reflect the new reality. Over the past few years, even before the creation of the National Security Council, it has sometimes been hard to entice busy grade 4s to JIC meetings. For a while they fell to fortnightly rather than weekly, which was a mistake. Indeed, I have heard the JIC described by an initiate as, “the most highly paid re-drafting committee in Whitehall”. I am reassured by the fact that the assessments staff reports are very much a part of the NSC’s meetings and that the assessments staff continue to produce each morning the daily highlights of intelligence summaries for the Prime Minister and those Ministers inside the inner intelligence loop. I note, too, that the JIC will continue to set the annual requirements and priorities for the intelligence and security agencies.
However, I am concerned that some key elements of the JIC tradition might fade under the new dispensation. The most crucial and lustrous elements of that tradition emerged from the experience of the JIC during the Second World War, after Winston Churchill brought the JIC fully into the Whitehall sun—and after a pretty feeble first four years of life following the committee's establishment in 1936. It was the working assumption that the painters of the intelligence picture would keep firmly separate from those who decide what to do on the basis of it, and that the intelligence providers and the JIC analysts do not fall into the trap either of advocacy or of telling their customers what they wish to hear, rather than speaking truth unto power. I have always believed truth unto power to be the gold standard of all Crown service, but especially those of the secret servants of the state. There have been lapses during the history of the JIC, but that tradition has always been restored and remains much admired by allied intelligence nations.
Early in the new year, a chairman of the JIC will be appointed to replace Alex Allan, for whom I have the highest regard. I hope that his successor, whoever he or she may be, will be steeped and marinated in that great tradition. I hope, too, that the Intelligence and Security Committee will keep a close watch on the new arrangements, to protect the JIC as best it can from further marginalisation and to report to Parliament next year how the NSC's pace-making and task-mastering has played out in real terms, both within the central intelligence machinery and in the work of the secret agencies. As ever, the ISC must be Parliament’s cat’s eyes in the dark.
Viscount Slim
My Lords, I did not intend to intervene until I heard from both the noble Marquess, Lord Lothian, and the noble Lord, Lord Butler, of the slight rift—I put it at slight—with our American cousins. I was in Washington some three weeks ago. I must declare that I am an honorary chairman and director of the OSS—the only Englishman ever to be given such an honour. Of course, one mixes with the fraternity, as one might say. I also made a point of talking to a couple of senators and a number of congressmen, particularly those concerned with the Armed Forces committees and so on. My message throughout was, “You have problems; we have problems. It is absolutely vital—more than ever before—that our intelligence and security services, and the special forces of both our countries, work closer than they ever have”, because, as we have heard today, other problems are going to hit us and they are coming on the horizon very quickly.
I merely tell your Lordships this because while it is up to the committee to handle it, not me, I got the most tremendous feedback and reception from our American friends of all the various agencies that I met. There was a gathering of 600 at which I spoke, and just about everybody was there. They came up to me afterwards and said, “This is vital. You have made a good point. We agree, and we must do something about it”. While it is your Lordships’ job on the committee and I support you greatly, I just felt that your Lordships should know about that tremendous feedback, and I was talking to the most senior people. We should not approach it too nervously. We should get stuck in and retain our great and close co-operation with the American fraternity.
Lord Triesman
My Lords, I start by joining everyone else in thanking the noble Marquess, Lord Lothian, who not only introduced a very important report but did so in a way that I thought was very valuable in clarifying the critical issues in that report. Like him, I welcome the appointment of the noble Lord, Lord Butler, to whom I must apologise. I got locked in as the Vote was being declared in the Chamber and consequently missed what I hope was no more than a few seconds of his informative and important speech.
In thanking the noble Marquess, Lord Lothian, I want to say that I was strongly impressed by what he had to say about the reform of the committee and about the proposals that are likely to appear in the Green Paper—an issue to which my noble friend Lord Foulkes also referred. I am quite sure that my noble friend Lord Foulkes is right about political balance, but I accept the argument that the future disposition of the committee and the way in which it works is a matter that still falls to be discussed on another occasion.
I agree with the noble Marquess about the role of redactions—they are plainly necessary, so we might as well be candid in saying that—and I agree strongly that the character of the changing risks that we face may well suggest the need for the recreation of a single account in order to be able to act with the appropriate flexibility.
I agree strongly with the notion of oversight of operational matters and of material of public concern that is in the national interest, and I can completely see that that could be formalised on a statutory footing by the Government. On behalf of the Opposition, I indicate my strong support for those propositions.
The noble Marquess must be right in what he says about the committee’s resources. The committee must have the capacity to generate information and to be able to analyse information on its own account.
Both the noble Marquess, Lord Lothian, and the noble Lord, Lord Butler, made the point that there is a strong case for the provision, under parliamentary rubric, of a presumption that foreign intelligence should remain closed in court procedures unless there is another reason. Unless we are going to abandon that whole approach, we must surely take that step, which is the only rational step that achieves that outcome.
My noble friend Lord Foulkes, in describing the importance of this overall area, said that he would welcome broader discussions on the Floor of the Chamber. There must be good sense in that.
The noble Lord, Lord Alderdice, drew attention to cyberattacks. I will come back to that more substantially in a moment because he made some very important points. However, I was intrigued by his argument, for which there may well be compelling evidence, that as changes take place in Europe more generally—and certainly within the EU—there will need to be careful consideration of whether new kinds of threats are emerging as a result. It will be interesting, to say the least, to see how fast these issues emerge on the agenda of the principal think-tanks over this next period.
The noble Lord, Lord Butler of Brockwell, made the point, which I think has just been echoed by the noble Viscount, Lord Slim, about the international character of the work of the intelligence agencies. I share that view completely. In the contemporary circumstances, it is almost impossible to imagine working other than with those who have shared interests. There is too big a hill to climb under any other circumstances.
Like the noble Lord, Lord Butler, and others, including the noble Lord, Lord Hennessy, we strongly support the creation of a parliamentary committee as the natural successor to the committee’s work over a long period.
The noble Lord, Lord Hennessy, provided an exceptional forensic description of the new architecture, and I appreciated that a good deal. In the course of his speech, he made the point about the JIC potentially fading away. Perhaps I can address that point in a little more detail. First, Sir Malcolm Rifkind’s committee has produced an illuminating report that is of great use to all of us. He does not specifically mention the work of the staff of the intelligence agencies, but when you look at the overall substance of the report, you can identify the value of that unsung part of our work permeating throughout it. I share that appreciation and want to record the fact.
The report is couched, like so many that we produce and see, in typically diplomatic language. None the less, it is very sharp on all the main issues. However, I fear that the Government’s response is much less sharp, rather less focused and can be frustrating to read. I say this out of an interest and pride in, and a concern for, our national interest in this. There is no party politics in this point as far as I am concerned. I fear that it is of no use to deal simply with the main observations and proposals by thanking the committee for all its work and saying that you agree with all of it when the following text gives no detail of what that agreement might mean. I do not say this to be disobliging but the Government cannot argue that important parts of their response can be put in those terms without any apparent need to say what they intend to do about some of those key issues. I would have welcomed much more detail within the restrictions of dealing with secret intelligence.
May I just identify a few of the things that fall under that rubric and where I should like to see a more detailed, and perhaps more penetrating, response from the Government? The first is the issue that the noble Marquess, Lord Lothian, and the noble Lords, Lord Alderdice and Lord Butler, have all mentioned: the provision of a suitable cadre of internet specialists. The noble Marquess, Lord Lothian, rightly mentioned that 18 bodies seemed to be involved in this and that there is at least a risk of a lack of co-ordination among so many of them. I share the view of the noble Lord, Lord Alderdice, that the attributes of many of the specialists are curious in the general spectrum of government service. I well remember, on one occasion as a Minister, talking to a young guy who collided with me on his skateboard in the office. Neither of us was seriously injured; I am bringing no claims against anybody for injury at work. However, it was certainly unusual. I completely subscribe to the view of the noble Lord, Lord Butler, that many of these interesting and obsessive characters do it out of sheer love of diving into the nitty-gritty of all these processes.
The Government’s view of the possible need for a suitable cadre of internet specialists appears in their response to proposal E. It is essentially that we will somehow find a significant number of people who will emerge and train those we need. I will be candid: I do not expect to see it and I do not believe it. Interestingly, in recommendation K, shortly after the Government have made the point that they will produce these people by exposing them to the available suitable trainers, they also say that they will improve value for money from their work. I am keen to know how we will do these things and how many people we think we can recruit to these roles. Will the departments compete, as the Government’s response suggests, or, as under recommendation K, will they not compete because this is a time for non-competitive recruitment? Both proposals appear within two or three recommendations of each other. How on earth will we do these things? I do not ask this to be objectionable. If we all agree that it is that important, I am just eager to know how on earth we will do it. What do we think we need to do to reach any kind of milestone in that area?
I turn to recommendation F, about GCHQ’s accommodation strategy, which is described in the report as having been “haphazard in the past” and inflexible for the future, with no long-term sensible strategy. The Government’s response to that is that the haphazard character of the strategy will broadly be overcome. It is not clear how, because all the means of overcoming it seem to be dependent on others, including SIA. I am not sure that that is a strategy at all. How precisely will the Government overcome the criticism that the report levels and what is their plan for doing so?
I turn to the Government’s response to recommendation I, on the need to respond effectively to increased threats in Northern Ireland—incidentally, I do not for a second think that the Government do not take these threats seriously; quite the contrary, I do not know of any Government who in recent times have not taken the issue completely seriously. The committee states that,
“further sustained effort will be required”.
The Government agree, but how is that to be achieved? What consolidation of effort do the Government have in mind? Will there be additional resources or is it suggested that existing resources will be redirected? What, broadly—and without providing any sensitive information to those who would take unfair or wrong advantage—is the plan for doing that? What is even the shadow of the plan that we might have a look at?
I want to focus above all on the committee’s concern, which the noble Lord, Lord Hennessy, has also dissected for us with great clarity, to avoid duplication, overlap and the consequent lack of focus, those matters which are covered broadly in section 5, but which come up time and again in the report as a whole. They are dealt with in recommendation N, on prioritisation and allocation of effort; in recommendation O, on the creation of the national security adviser post; in recommendation P, on overlaps in remit and duplication; in recommendation S, on the effective co-ordination of it all; and in recommendation T, on the strategic tasking directive not being satisfactory.
The noble Lords, Lord Foulkes and Lord Hennessy, have both discussed that this evening. The noble Lord, Lord Hennessy, said that we need to address a new reality, which I am sure is quite right. However, the Government’s response is essentially an assertion that there will be prioritisation, that the roles will not overlap, that the national security adviser post will co-ordinate the work of the JIC, and that the requirements and priorities in process and the strategic direction of the National Security Council will all somehow be addressed without confusion in the midst of this quite complicated architecture. All those things are at least implied by the Government’s response to recommendation O.
In response to recommendation P, there is a list of the primary responsibilities of the Office for Security and Counter-Terrorism. It is said that they are not the responsibilities of the National Security Secretariat, in respect of which no equivalent list is produced by the Government. I think that a number of people, including those on the committee, have described the listings as being details at a high level. It is because they are at a high level that I cannot tell whether the overlaps have been overcome. I simply cannot follow it; I have tried really hard. I hope that noble Lords will forgive me if I have somehow missed it, but I think that those questions about duplication, overlap and the lack of focus that might result have simply not been dealt with intelligibly in the Government’s response, and they are vital concerns for our national security. I am therefore inclined to the belief, expressed by the committee, that there is more to be done. Can the Minister perhaps list for us today the specific responsibilities of the secretariat so that I can see how they differ from those of other bodies? That would allow us to judge a little more about the overlap question.
My final observation, very briefly if I may, is on the question of the limitation of vital resources to undertake the work successfully. I think that the noble Lord, Lord Alderdice, also raised this question. In recommendation V, the point is made that cuts to the ISC and the BBC Monitoring service are regarded as dangerous to defence intelligence capability. Defence intelligence relies heavily on these sources to support operations—these are the points that the committee makes. They serve the intelligence community as a whole, in addition, and without good information it is obviously hard to work on the basis that you genuinely have sound enough intelligence to do the job effectively.
The Government's response is not to give a clear undertaking or commitment about those resources—one might perhaps expect that response to what might be a problem for the safety of the people of the United Kingdom—but to say that they will work with the BBC to examine requirements. I want to know how and when that assessment is to take place. Will the levels of investment be sustained in the interim, while everybody is working out what might be the future dispositions? What leads the Government to believe that the defence intelligence and wider intelligence communities have not made a proper assessment so far of what they need, in order to work effectively at present? There may be an adequate response, but what I worry about is that in some areas—for example, on page 13 of the Government's response—it appears that those decisions have already been made in a negative sense. The future cuts will be, it says,
“fully in line with those of the wider Cabinet Office”,
while the task remaining is to,
“identify ways of minimising the impact”.
Whatever happens, it looks as though those cuts have been embedded.
It may be that the answer to a number of these questions will be that there is an operational risk in answering them. If that is said today, I shall accept it because I know from first-hand ministerial experience that I have no desire to see anything said that would be of any use to an enemy of the United Kingdom. However, the background detail in Sir Malcolm’s committee's excellent report suggests that those questions could be answered. That is the reason I urge the Government to do so. I look forward to the Minister’s answers. I feel that he will surely do better than the Government's response to the report and that that would be of huge benefit in making sure that the value of Sir Malcolm Rifkind's work, and the work of his committee, is realised to its fullest extent.
Lord Gilbert
My Lords, may I enter a rather eccentric note of dissent? I was listening with great care to my noble friend's speech. I thought it extremely well informed, and I was not surprised at that. My point of dissent is that I do not approve of this committee being translated into a parliamentary committee. I see great virtue in it being the only committee of parliamentarians that reports directly to the Prime Minister. In my experience, when I was on the committee and Sir John Major was the Prime Minister we used to have meetings with him at No. 10 to discuss our reports in detail. I know of no other committee that has that sort of access and I think that the Prime Minister and the committee benefited from it. The other benefit which you have from it being a non-parliamentary committee but a committee of parliamentarians is that you hugely diminish the role of the Whips in who goes on that committee. Both those things are matters of supreme advantage, which we would sacrifice by transforming this into a parliamentary Select Committee—a development which I personally deplore.
Lord Triesman
My Lords, that intervention invites a very brief response. I have no aversion whatever to the committee being available to and able to speak to the Prime Minister. Broadly speaking, I believe that Select Committees in Parliament have had that capability for a long time. In my view, the biggest advantage is that these areas which have been regarded as incredibly obscure and difficult, and usually as a means of veiling from the public and parliamentarians some things which are in their vital interests, and in the vital interests of the country, will at least be dealt with on the same basis that much other sensitive material is.
The Marquess of Lothian
As a matter of information, what we are looking to become is not a parliamentary committee, a Select Committee, but a committee of Parliament—there is an important distinction. Because of the work we do, being a parliamentary committee, a Select Committee, would put at risk some of the committee's ability to look at certain information that it can look at at the moment. We are looking to become something in-between. For exactly what that will be, I think we have to wait to see the outcome of the Green Paper, when the White Paper is produced.
The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)
My Lords, this has been an extremely well informed debate, as one would expect. I am sorry if the noble Lord, Lord Triesman, found the Government’s response—
Lord Howell of Guildford
My Lords, as I was saying, this has been a highly informed and expert debate conducted by many expert people. I was regretting that the noble Lord, Lord Triesman, found the Government’s response a little lacking in sharpness and focus or perhaps lacking flavour; I shall use my best endeavours to add a bit of pepper and salt to the meal and perhaps make it a little more tasty.
Before turning to address a range of detailed points, which I intend to do, first let me thank the noble Marquess, Lord Lothian, for opening this debate and the two Members of our House, the noble Marquess and the noble Lord, Lord Butler, who are the representatives of the House of Lords on the Intelligence and Security Committee. The words before me are to thank in a rather formal way all the other members of the Committee, but I would like to go a bit further than that. First, I would like to thank the staff as well as the committee members, and secondly, I would like to say frankly that I am awed by the amount of expertise and the work and dedication that are put into the committee’s work. In a sordid world of gain and loss, this committee has no obvious reward and there is no dose of the elixir of publicity that politicians like—it is toiling in solitude, and it is magnificent work. One sometimes half-wishes that the media would pick up on the fact that all this work is done, because they are oblivious of the amount of effort involved. They may comment on the results and the things that titivate the public, the media and so on, but they are rather oblivious of the amount of work that it is put in by people such as the noble Marquess, the noble Lord and the committee. I can see that too much publicity is not desirable, but a little greater recognition in the media of what is being done in the national interest would sometimes be appreciated.
It is vital that we have a strong framework for overseeing the work of the security and intelligence agencies. The ISC’s annual report is of the highest quality and underlines the unique and valuable role in this framework that the committee plays; I do not think there is any question about that. We should also think about the subject matter: the agencies. We should be proud of them. Their staff work day in, day out, often at very great personal risk to themselves, to keep the nation and its people safe. We owe them an enormous debt of gratitude and, as the committee notes, those working in this field continue to excel at a very challenging task. Again, those words are inadequate for the sheer danger often involved in the task. I remind noble Lords of the very striking speech made by my right honourable friend the Foreign Secretary on 16 November about the work of the intelligence services, in which he highlighted the extreme, often fatal, danger faced by those working in those agencies. I am sure that noble Lords will join with me in sending them our thanks and our praise for the work they do for our nation.
As my right honourable friend said in that speech, these agencies not only defend us from threats to our national security and to the lives of British citizens but they also provide vital support to British military operations and diplomatic intelligence which gives us a key national advantage in foreign and security policy. It is precisely because of the vital importance of the agencies’ role—and much of it must inevitably be kept away from the public gaze—that their work should be, and is, properly scrutinised.
Now let me turn to the detailed issues raised, after which I will turn to the detailed points made by individual Members in this debate. First, the Government’s Justice and Security Green Paper—it is white, but never mind—has generally been recognised as a very striking and strong contribution to the evolution of thinking in this area. The Government’s aims were set out in the Green Paper. These are: to better equip our courts to pass judgment in cases involving sensitive information; to protect UK national security by preventing damaging disclosure of genuinely national security-sensitive material—I will come in a moment to how that balance is to be struck; and to modernise judicial, independent and parliamentary scrutiny of the security and intelligence agencies to improve public confidence that executive power is held fully to account.
The Green Paper is one part of a package of measures announced by the Prime Minister in July 2010 aimed at restoring confidence in our security and intelligence services and allowing them to get on with the crucial job of keeping us safe. The Prime Minister also announced the establishment of the Detainee, or Gibson, inquiry. He published the consolidated guidance issued to intelligence officers and service personnel on engaging with detainees held overseas by third parties. He also announced the intention to reach a mediated settlement of the civil claims brought by former detainees of Guantanamo Bay because those claims could not be properly tried. This was achieved in November 2010 and was touched on by the noble Lord, Lord Butler, in his very sagacious intervention.
Combined with the proposals in the Green Paper aimed at improving the courts’ ability to handle intelligence and other sensitive material, this represents a comprehensive package to address these difficult issues and to enable our security and intelligence agencies to get on with the vital task of keeping the nation safe. The Green Paper consultation process is under way and closes on 6 January. In answer to the query raised by the noble Lord, Lord Foulkes, the aim is to go for legislation as soon as practicable, or thereafter. The comments in this debate will also receive full attention as part of that process, along with the range of responses from the public, which have been fairly extensive and substantial.
There are two distinct parts to the Green Paper proposals: reform of judicial scrutiny of intelligence and other government-held sensitive material, and reform of the non-judicial scrutiny of the intelligence community by independent and parliamentary bodies. I am going to deal with both of these. Reform in each area in its own right is required and necessary.
On judicial reform, the Government favour legislation to make closed material procedures available in civil legal proceedings where they are not currently available and in the rare instances in which sensitive information is centrally relevant to the case. The role of special advocates to represent the interests of the excluded individual is central to ensuring a sufficient degree of procedural fairness in closed hearings. The Government will ensure that this, and all other legislative proposals in the Green Paper, are consistent with our domestic and international legal obligations. The two drivers in this whole process are to increase fairness to all parties in civil proceedings, and to ensure that sensitive material is adequately safeguarded from public disclosure. That is the balance that has to be struck. This last point is critical, especially the importance of keeping safe information passed to us by other Governments, which several noble Lords, including the noble Marquess, Lord Lothian, referred to. We expect other Governments to keep our material safe when we pass it to them, and of course they expect the same of us. This goes to the heart of the control principle. Where it has in the past been offended—one instance was quoted—the repercussions were serious, sensitive and difficult to handle.
On non-judicial reform, the Intelligence and Security Committee has put forward in its excellent report, and indeed in the debates that took place in another place, reform proposals that the Green Paper largely supports. We have here a concurrence of support. The Green Paper proposes: changing the ISC’s status to a statutory committee of Parliament, answerable to Parliament as well as to the Prime Minister—a point that almost all noble Lords have raised; formalising the ISC’s role in overseeing the work of the wider intelligence community—that is, defence intelligence and the OSCT central intelligence machinery in the Cabinet Office; reforming the ISC appointments process to give Parliament a more substantial role; reviewing the ISC’s resourcing and accommodating the ISC on the Parliamentary Estate—a matter raised by my noble friend Lord Lothian—and the Government are reviewing the central question of resources for the ISC as distinct from resources for intelligence operations generally; and the question of the ISC having the power to require information from the agencies, subject only to a veto exercisable by the relevant Secretary of State. That is our positive and detailed response to the Green Paper, which coincides with what noble Lords have been saying.
On a more sensitive and difficult area, the Government are giving careful consideration to the ISC’s proposal, reinforced by the noble Lord, Lord Butler, and I think by my noble friend Lord Lothian, to extend its remit to include operational aspects of the work of the agency. At the risk of too much repetition, I can only repeat the words of the Green Paper about how far one can go on this front. The consequences of creating a general power are significant and need careful thought to ensure that the implications have been understood. The principles that the Government believe are important in considering this issue include safeguarding the integrity of ministerial responsibilities, avoiding overlap with the roles of other independent oversight bodies and ensuring that there is no lessening in the effectiveness of the work of the agencies or undue resource burdens placed on them. In addition, any such oversight of operational work would need to be clearly retrospective and, in the Government’s view, would need to be focused on matters of significant national interest. The point was rightly made, I think by the noble Lord, Lord Butler, that we do not want to go down the path of our American allies or the Washington procedures, which go into areas where we would not want necessarily to follow. Any change of the kind that we suggest or has been suggested would therefore need to be based on a clear understanding between the Government and the committee on how this should work in practice, articulated either in legislation or possibly in a supporting document such as a memorandum of understanding.
Before I come to the detailed points that have been made, let me refer to cybersecurity, an issue raised by the noble Lord, Lord Alderdice, and several others. Of course there are concerns and of course the Government share them. The Government have recognised the real and increasing risk to the UK’s national security from cyberattack. The National Security Council has assessed cyberattack as a tier 1 threat in the national security strategy and has allocated additional funding of £650 million over four years to respond effectively to threats from cyberspace through a transformative national cybersecurity programme.
In fact, my right honourable friend William Hague, the Foreign Secretary, hosted a conference on cyberspace at the beginning of last month, which looked at how Governments, businesses, individuals and non-governmental organisations can maintain the economic and social benefits of the internet and guard against criminal and security threats posed in cyberspace. All delegates agreed that immediate steps must be taken to develop practical measures and shared understanding, and to agree common approaches and confidence building through the UN group of government experts and through the Organisation for Security and Co-operation in Europe and other regional organisations. The UK is taking a leading role in initiating these important international discussions and we are pleased that the London agenda will be carried forward at a further session, which will be held in Hungary, and after that in South Korea. So we will continue to be very vigilant on that front in both overseas fora and at home.
I was going to add something on the Olympics, which did not come up in this debate but was certainly a matter aired in the debate in the other place. Therefore, for reassurance and for the record, I say that the Government are committed to a safe and secure Olympic and Paralympic Games. With less than eight months to go, safety and security activity is on track and well advanced, including within the intelligence community. Funding for Games security has been protected. The Government remain confident that the core safety and security programme can be delivered within the £475 million announced in the spending review of last December. The venue security budget is separate from the budget for policing the Games. We are confident that the 2012 Games will be delivered within the £9.3 billion public sector funding package. These costs are an appropriate investment in the safety and security of the public and our international visitors.
I have covered some of the points raised but let me turn in more detail to the excellent and informed comments of various Members during this debate. I repeat: the ISC report is excellent. My noble friend Lord Lothian made a number of central points about status and so on. I have already mentioned that. He asked about funding changes if the nature of the threat changes. This is something that can and does happen. The nature of the threat changes and there needs to be flexibility. Where unforeseen emerging threats place new demands on the SIA, the first response has been and will be to reprioritise within existing work. Agility and flexibility to redirect effort towards emerging threats and away from receding ones are core established strengths of the British intelligence community. That is splendid language for saying, “Don’t go on spending on things that have been solved and have passed. Focus on the new challenges and switch your resources to them”. There are mechanisms in place for doing that. The Government’s top requirements are given the priority and resources that they need. The point that there is a need for flexibility and that things can change rapidly is well taken, and the operational systems are in place to meet it.
My noble friend also mentioned the overseeing of operations by the ISC and closed material procedures, which I have already covered. He also mentioned a rebuttable statutory presumption. With a statutory presumption against disclosure, it must be possible for the courts to rebut the presumption if necessary. The Government’s analysis is that such a rebuttable presumption, while carrying the weight of Parliament’s opinion, would not alter the decision-making process of the court, which is anyway already deferential to the Executive on national security-related decisions. That is the Government’s comment on that point, which my noble friend Lord Lothian raised.
The noble Lord, Lord Foulkes, spoke about a number of relevant issues. He talked about the composition of the committee. The obvious answer is that party politics and the balance between parties are not relevant to the nomination of individuals to the committee. It is not seen as a political matter at all. It is a matter of gaining people with first-class experience. It might well be that in one Parliament or one set of membership there would be two or three members of the Opposition and one or two on the Government’s side. The people who serve on the committee are not connected to the balance between the parties. I have to say that to the noble Lord. He may say that he wishes it was but that is just not the way it is.
Should it be a committee of Parliament? The answer is yes. That is what the Green Paper proposes and that is what we are moving towards. We will work out how to do that. I have answered the noble Lord’s question about the timing of legislation.
The noble Lord turned to the national security adviser, and I do not think I am going to make any personal comments here, except to agree with him that of course all departments put up their defences—he used the word “blinkers”. All institutions put up their defences and fight their corners, and they are right to do so, just as Ministers are right to try to remove the blinkers. They do not always do so to roars of applause, but these things have to go on, and if Ministers do not do that, they are not doing their job. That is the remedy for his concerns.
As for co-ordination and who co-ordinates what, the whole point is that the National Security Council, which, as the noble Lord, Lord Hennessy, said, is an amazingly important innovation, co-ordinates. It is under the chairmanship of the Prime Minister, and it is the co-ordinating body. That is the way the new system works and is the whole point of the National Security Council in its developed role under this Government. It is a very significant change. There is co-ordination right under the Prime Minister. He has advisers and that committee, and there is a relationship with the JIC as well, which is charged with looking at, responding to or putting into effect the kind of agenda that the NSC establishes and lays down.
The noble Lord, Lord Foulkes, also asked about Scotland and the security implications of Scottish independence. I am not sure I am in a position to give an answer to that, or even want to, but one can safely assume that the relevant departments are assessing it, and if such a thing were to occur, the machinery would go forward to examine all the implications for all aspects of UK policy of Scottish independence. I do not think I can say more than that. The noble Lord very generously reminded us again to thank the intelligence services for their skill, professionalism, integrity and, I would add, sheer courage as well.
The noble Lord, Lord Alderdice, said that he had been a customer of the services. So was I for a time in the past, and I suppose we were good customers because we are here to tell the tale. He mentioned BBC Monitoring, which is important, and I have a note on it that I would like to share with him about the real cuts that had to be applied when the new Government came in. We did not have any choice. The cuts were discussed with BBC Monitoring in principle before the start of the financial year, and we have worked closely with BBC Monitoring, and continue to do so, on the best ways of minimising the impact of reduced funding. I am advised that the Cabinet Office is currently working with stakeholders and BBC Monitoring to agree the form and structure of BBC Monitoring during the transition period and after it has joined the BBC, which will be in April 2013. That is what is going on there. That is what I wanted to tell the noble Lord about that.
The recruitment of people who are not conventional civil servants, in the phrase used by the noble Lord, Lord Butler, brought back memories—and I suspect it does to a number of noble Lords—about life in university days when people appeared from unmarked offices in London and wanted to have tea to look you up and down to see whether you were suitable material for their purposes. A number of my friends went off for long strolls with those gentlemen and may even have received invitations afterwards. I waited eagerly to be asked to go on a long stroll or to have tea, but an invitation never came my way, so I was obviously considered unsuitable material, much too conventional or wrong in some sense, right from the start. The eye was clearly out, and is always out, for the original person, the non-conforming, challenging, questioning person, man or woman, and they are the people with the flair and the ability for quick lateral thinking that the intelligence services clearly need.
From my experience in and out of ministries over almost half a century, the old phrase “the conventional civil servant” is vanishing. The officials that I encounter are anything but conventional. They are a lively, original and disparate group of people who are bringing to bear ingenious minds on the increasingly complex world of government—which, of course, it is. The internet now empowers the individual and challenges the data monopoly of government, and the whole business of government is infinitely more difficult than it was 20, 30 or 40 years ago.
I would like to say a number of things on training, which is a very important aspect that was raised by the noble Lord, Lord Triesman, the noble Lord, Lord Alderdice, and others. Policies for the recruitment and retention of specialist staff are the responsibility of individual departments—that is rather obvious—but under the national cybersecurity programme the Government are supporting individual departments and agencies in developing cybersecurity training and skills capabilities for their staff. In addition, the Cabinet Office and GCHQ are both supporters of initiatives such as the cybersecurity challenge, which promotes careers in cybersecurity by annual competitions and events while providing advice and opportunities to individuals who wish to learn how to start a career in the information security field. This is a busy area and we recognise that technologists specialising in internet security, especially with experience at GCHQ, are very highly prized within a competitive external industry. GCHQ, therefore, has a retention payments system to retain its competitiveness with industry where it can. This is reviewed from time to time to ensure it remains competitive and these bonuses—because that is what they are—and the appeal of GCHQ’s mission help to keep leaver rates low compared with industry peers. That is the position; that is what we are doing. Obviously, not everything works, but the main thrust is there and will continue to deliver requirements.
On psychological training—even if I knew a great deal about it, I would not be sure whether it was right to reveal it—it would pass belief if there was not a very heavy emphasis on psychological training inside the intelligence services. One is dealing with psychological situations, so training of that kind is necessary. I would take a bet—it should perhaps be an assurance—that such training is in place.
The noble Lord, Lord Alderdice, asked about research sources. Yes, a great deal of research is carried out internally, but we also turn to independent external research support to an extensive degree. That will certainly continue.
The noble Lord, Lord Alderdice, shared with us a fascinating thought about anti-government street protests, political instability and so on arising in Europe: are we informed about where the next so-called Arab spring phenomenon is going to occur? It might occur anywhere. The intelligence services tend to keep as much of an eye on this as well-informed politicians and journalists. It does not necessarily need an exclusive monopoly of experts in secrecy to assess when the next riot in the next capital, the next burning of flags, the next raiding of buildings, or anything else, is going to be.
The noble Lord, Lord Butler, touched on the fundamental issues, as one would expect, and said that the combination had to be between accountability on the one hand and the proper requirements of secrecy on the other—that is the challenge. He referred to new spying technologies, and there are plenty of those. One tends to learn about them mostly in racy novels and then, a few years later, you discover that the intelligence services have either caught up or have been practising these things all the time. I commend particularly to your Lordships the Swedish novels by a gentleman whose name I have forgotten at the moment, but they are very popular and have been made into films. They contain hair-raising matters, broadly to the effect that nothing, but nothing, that we put onto our mobile telephones or computers is private or inaccessible to the right kind of technologies. He reinforced that we must move from a committee of parliamentarians to a Committee of Parliament, and he discussed the operational role issue which I have already commented on in considerable detail to your Lordships.
The question of the interaction between judges and courts and the need to guard sensitive material is very difficult. The noble Lord outlined the difficulty. Whether it can be met in general or whether there will be recurring individual instances where we are in difficulties, I do not know, but it is a matter that must be examined and watched acutely and very carefully. It is partly covered by what I said earlier about the control principle, access to courts for more sensitive material and closed material procedures.
The noble Viscount, Lord Slim, mentioned the American links, which are very important. No-one questions the importance of all our international links, and it may be that we need to develop—this is not a report of what is happening but an opinion by a Minister—links with intelligence in unconventional areas. The truth is that the world’s power, wealth and technological and security capabilities are moving, like everything else, to Asia, to rising Africa and to Latin America. These are the places where we will need to seek services and information. It is not merely a question of us providing them. We will also need to seek an input of new technologies, methods and information from those countries as well. This is an international scene, as the noble Lord, Lord Butler, emphasised.
The noble Lord, Lord Triesman, mentioned the response of the Government, and I have done my best to add to it. He returned to the central issue of training up a suitable cadre of people, and I have described what the Government are doing. He asked about resources and the National Security Secretariat and asked for a list of things that it does. I will give him the following list that may help. It provides support to the national security adviser by co-ordinating the development and implementation of policy for decision-making at the National Security Council; it is responsible for providing policy advice on national security and foreign policy matters to the Prime Minister, the Deputy Prime Minister and Cabinet Office Ministers; and it has a wide range of other functions including the co-ordination of the Government’s response during civil emergencies and international crises, overseeing the delivery of the Government’s cybersecurity programme and its overseas single intelligence account, that we have discussed. The secretariat has also delivered a number of cross-departmental projects, including the national security strategy and strategic defence and security review. If I may add my opinion as an old hand, I think that that is a pretty good, detailed answer to the question that the noble Lord asked. I hope he feels that it meets his needs.
We have had a very important and wide-ranging debate this evening which illustrates that it is very important that the public have confidence that the Government’s national security work is being robustly scrutinised. The first duty and the overriding priority of any Government is the protection of the British public. Great progress has been made in counterterrorism and in other areas in recent years, but serious threats to our national security remain on all sides and there are always the new surprises, the unpredictability and the variation of threats which noble Lords have referred to, which we have to be ready to meet. That is why it is vital that we have security and intelligence agencies that can continue to reduce those threats and help to keep us all safe. Their work is among the most important carried out by anyone, so it is right that they should have robust oversight. That is why we are modernising and strengthening the oversight arrangements in the way that the counsel of the debate this evening, the debate in the other place, the ISC report and the Green Paper from the Government have all emphasised. I warmly welcome the latest annual report which we have debated tonight. Its recommendations are informing change as we speak. I look forward to future annual reports being even more useful in helping our world-class intelligence and security agencies to get even better.
I end with one small anecdote. About 47 years ago—no, let me be more accurate; it was 41 years ago—when I first entered the Government as a junior Minister, a Permanent Under-Secretary of great eminence who I will not name slipped into my room one day. I eagerly expounded on the virtues of a freedom of information Act—transparency, better scrutiny, accountability and all the things that young Ministers are keen on, to which he replied, “Very interesting, but just remember, Minister, too bright a light often deepens the surrounding darkness”. That left me thinking, and I am still thinking about that statement now.
The Marquess of Lothian
My Lords, I thank my noble friend the Minister for a very comprehensive reply—one which, indeed, saved me having to say very much. I will try to be as brief as I possibly can. I also thank my colleague the noble Lord, Lord Butler, who also dealt in his speech with a number of the subjects that I thought I might have to deal with in finishing up. Perhaps I may say to my noble friend the Minister that I was disappointed in his response to the rebuttable presumption, as that has been put forward by a number of very senior people. I know that I am a mere Scottish lawyer, as indeed is Sir Malcolm Rifkind, but many lawyers feel that the rebuttable presumption gives some strength and weight to the principle of control and would be helpful to the judges in the long run. I hope that before the consultation is finished, my noble friend will look at that again but I was reassured by many of the other responses that he gave us tonight.
I have two or three very brief items. The noble Lord, Lord Foulkes, talked about having public evidence sessions in future, something which we are looking at very actively in terms of the reformed committee. It is not easy to do if they are to be genuine because of the nature of the information that we are dealing with but we think—as do the agencies—that there may be areas where we can have very genuine public evidence sessions. As the reforms go forward, we hope to be able to get somewhere towards that.
Secondly, in answer to the noble Lords, Lord Hennessy and Lord Triesman, the committee takes very seriously the question of the intelligence machinery and we will continue to do so. We will be looking in our evidence this year to pursue some of the points that have been made in this debate, and when we come to our report next year we will be reporting on whether we think that the new machinery is working. I assure your Lordships that the committee will take that very seriously.
Finally, there is something which is a slight bee in my bonnet. We were talking earlier about staff retention. I am particularly concerned about GCHQ, which really is a world leader in what it does. Rather than listen to me, perhaps I may briefly quote a little of what the director of GCHQ said, and which we published in our report:
“I need some real internet whizzes”—
he calls them whizzes—
“in order to do cyber … They will be working for Microsoft or Google or Amazon … And I can’t compete with their salaries; I can offer them a fantastic mission, but I can’t compete with their salaries … we do have a steady drip, I am afraid. Month-on-month, we are losing whizzes who’ll basically say: ‘I’m sorry, I am going to take three times the salary and the car and whatever else’”.
That is not really a problem of government or administration but a real, practical problem if we are to retain the valuable work that is done at GCHQ. We all need, together, to try and find a way of addressing that.
Very finally, and I have left this deliberately to the end, can I say thanks to the staff of the Intelligence and Security Committee? After six years, I can say that I have never come across staff who are so hard-working—in fact, they are overworked, as I think the noble Lord, Lord Foulkes, would recognise—and who constantly produce work of the highest quality and standard, without which we would not be able to operate. I also give my thanks to them.
House of Lords
Airports: Heathrow
(13 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Spicer
To ask Her Majesty’s Government what assumption they make about capacity levels at peak times at Heathrow Airport when forming their transport plans.
Earl Attlee
My Lords, Heathrow Airport’s annual capacity is capped at 480,000 air transport movements, and the Department for Transport’s latest aviation forecasts assume there will be no increase in runway capacity to 2050. The Government do not make detailed assumptions about the airport’s capacity levels at peak times. This is a matter for the airport operator.
Lord Spicer
My Lords, my Question came with the bias of a former Aviation Minister. Given that Heathrow Airport is now effectively full at peak times, what is to be done about that while we wait 20 years for a new airport to be built in the Thames?
Earl Attlee
My Lords, the short answer is that the South East Airports Taskforce, chaired by my right honourable friend Theresa Villiers, determined that there should be operational freedoms for Heathrow Airport to enable the airport to recover quickly from disruptions to operations.
Lord Soley
According to the Written Answers I have received from Ministers, when the Chinese Government, the Chinese civil aviation authority and the Chinese airlines have asked repeatedly for more landing slots at Heathrow they have been told that their views will be taken into consideration by the review. Is this not deeply embarrassing and totally hopeless, in view of the economic need of this country to relate to China and other countries of that nature?
Earl Attlee
That was a bit quick, my Lords. We are grateful for all the input from all overseas Governments into our future aviation framework policy.
Lord Trefgarne
My Lords, as another member of the numerous club of former Aviation Ministers in your Lordships’ House, I ask the Minister whether the additional runway capacity that may in due course—perhaps fairly soon—be required in the south-east really cannot be at Heathrow.
Earl Attlee
I am grateful to my noble friend. I am absolutely sure and clear that there will not be a third runway at Heathrow.
Lord Clinton-Davis
—will be available at Heathrow between 2012 and 2015? I would be obliged if the Minister could give me an answer.
Earl Attlee
My Lords, I am very sorry but I did not catch the first part of the noble Lord’s question.
Lord Clinton-Davis
How many slots will be available at Heathrow between 2012 and 2015?
Earl Attlee
My Lords, I am grateful to the noble Lord. There will be no increase in slots at Heathrow, but the key point is that the number of aircraft movements is capped at 480,000 movements per year.
Baroness Kramer
My Lords, I apologise for my jack-in-the-box tendency earlier, which was due to my eagerness on this topic. Can the Minister confirm that operational freedoms are currently only in a pilot scheme and are undergoing consultation? Can he also confirm that the Government will be putting some pressure on the airlines to see whether they can move night flights into the post-6 am slot and to use quieter aircraft—the Airbus A380s, as they come on stream—for any flights that must happen at night?
Earl Attlee
My noble friend is quite right. The operational freedoms trial is in two phases: the current phase, and another phase largely over the Olympics period. One of the benefits of the operational freedoms trial is to reduce unscheduled night flights. I will have to write to my noble friend on the detail of her rather more searching questions.
Lord Davies of Oldham
My Lords, the House must be dismayed at the Minister’s negative response to this very important issue. After all, aviation is one of the important parts of the economy that is capable of growth, yet we are getting nothing but negative responses from the Government. Will the Minister at least acknowledge that we on the opposition Front Bench have offered to meet Ministers to see how we can plan a future for aviation that is considerably more productive than the Government’s present position, which is largely one of stalling and negativism?
Earl Attlee
My Lords, it is difficult to avoid being negative when the answer is, “No third runway at Heathrow”. However, we look forward to any contribution Her Majesty’s Opposition make to the future aviation policy framework. The Government want aviation to grow, but to do so it must play its part in delivering our environmental goals and protecting the quality of life of local communities. We are developing a sustainable framework for UK aviation that supports economic growth and addresses aviation’s environmental impacts.
Baroness Gardner of Parkes
My Lords, is the Minister aware that many airlines now are changing to larger aircraft, which will bring in many more passengers on each flight? Will that contribute to helping Heathrow to continue at least to receive more people, even if not more flights?
Earl Attlee
My noble friend makes an extremely good point. For instance, the A380 aircraft will be able to carry 450 to 500 passengers, and has the potential to grow significantly to its certified amount of 855.
Baroness Liddell of Coatdyke
My Lords, the tourism industry is very concerned about congestion at Heathrow, particularly as we approach 2012, which is such a significant year. I have a registered interest as a director of VisitBritain. We know that a number of airlines are not using their slots at Heathrow, thereby adding to the congestion. Will the Minister undertake to look at the situation and see whether there is a way of freeing up the slots that are being hoarded?
Earl Attlee
My Lords, the slots at Heathrow are managed by an organisation called Airport Coordination Limited, which is independent of government, and has to be. However, it has mechanisms to ensure that slots are used as much as possible. As I understand it, there are penalties if it does not use all the slots economically.
Gangmasters
(13 years ago)
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Baroness Young of Hornsey
To ask Her Majesty’s Government whether they will ensure that the enforcement of the rights of vulnerable workers protected by the Gangmasters Licensing Authority will not be weakened as a result of the red tape challenge.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Taylor of Holbeach)
The Government are committed to protecting the rights of the most vulnerable workers in all sectors. I am pleased to say that the need for the GLA to enforce protections for vulnerable workers in its sectors was endorsed by the red tape challenge ministerial star chamber, although it recognised that the GLA needed to better target non-compliant operators and reduce burdens on the compliant. The GLA will of course continue to be monitored under the Government’s ongoing reviews of public bodies and enforcement agencies.
Baroness Young of Hornsey
I thank the noble Lord for that encouraging reply. As he will be aware, the GLA’s remit is limited to the agricultural sector. Currently, if the GLA finds that a business is engaged in abusive behaviour and practices operating in other sectors as well as agriculture, it has no powers to take action. I wonder, given the confidence in its effectiveness, what the Government are doing to ensure that the GLA can take a leading role in multiagency actions which tackle the abuse of vulnerable workers.
Lord Taylor of Holbeach
The noble Baroness can be reassured by the fact that the GLA works with a number of enforcement agencies, particularly as a partner in the Government’s human trafficking strategy. However, there are principles that underline the red tape challenge’s review on employment. The Government’s workplace rights compliance and enforcement review is now considering an enforcement architecture which would cover all workplaces and vulnerable workers, and how that can be made as effective as possible. This is part and parcel of the way in which the GLA may well be able to provide particular expertise to that body.
Lord Rooker
Given the success of the GLA, which has just been admitted in the industry that it manages and looks after, why can its remit not be extended to the construction industry? Why should the construction industry, which is as full of gangmasters as agriculture and farming, be exempt from the kind of activities that the GLA does on behalf of workers?
Lord Taylor of Holbeach
I think that I have just given the noble Lord the answer to that question. Indeed, there is a review of all vulnerable workers across the piece. Noble Lords will accept that there needs to be balance. We do not want employment to be so difficult and complex that people are discouraged from taking on employment, but we all have a duty to make sure that vulnerable workers are properly protected.
Baroness Parminter
My Lords, it is welcome that the Government have protected the budget of the GLA during this financial year. In the light of that support, is it clear that Defra will remain the lead department in order to ensure that the vital work that the GLA does to support vulnerable, low-paid, low-skilled workers will continue?
Lord Taylor of Holbeach
I have made it clear that Defra values the GLA and sees it as being a particular responsibility to make sure that it is properly funded. Not only is its budget protected for this year, it is protected for the next four financial years in its enforcement activities. I hope that noble Lords are reassured by that and the determination of the department to make sure that it is effective in performing its task.
Lord Knight of Weymouth
My Lords, last month, when I raised the issue of the Gangmasters Licensing Authority in Questions, I was much reassured by the Minister’s answer that the authority would remain free-standing. In his answer to the noble Baroness, Lady Young of Hornsey, he talked about a new “enforcement architecture”—that was the pithy phrase he used. Does that mean that the position has changed around its remaining free-standing? If so, what has changed that the Government want to weaken the focus of this highly effective body?
Lord Taylor of Holbeach
There is no way in which the Government wish to weaken the focus of this highly effective body. The previous questions pointed out that there are experiences that the GLA has in its field which could well be useful in other fields of employment. That is why my honourable friend Ed Davey, in conducting his review, is looking at the GLA to see how its practices can be incorporated into a broader brief.
Lord Foulkes of Cumnock
My Lords, I am sure that the House was very interested to learn that the red tape challenge has a ministerial star chamber. Will the Minister tell us how many other ministerial star chambers there are in government? Is there one on the European Union?
Lord Taylor of Holbeach
From my knowledge of star chambers, which is rather limited to history books and the like, they are where conflicting views which may need to be resolved are discussed in an informal way. That is exactly how the star chamber has functioned in this way. I am not suggesting for a moment that the European issue could be resolved quite so easily.
Lord Brooke of Sutton Mandeville
My Lords, “GLA” has another acronymic provenance. Will my noble friend see if it is possible to avoid duplication of acronyms when they occur for bears of very little brain who find it very difficult to follow?
Lord Taylor of Holbeach
Unfortunately, the first letters tie up with the Greater London Authority but as far as I am concerned the GLA is the Gangmasters Licensing Authority.
Baroness Butler-Sloss
My Lords, in view of the very helpful comments of the Minister, is Defra the right department to be carrying this forward?
Disability Benefits
(13 years ago)
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Baroness Sharples
To ask Her Majesty’s Government what checks are carried out on those claiming benefits on the grounds of disability.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, as with all benefits, a series of measures is in place to ensure that disability benefits are paid only to those who are entitled. These vary for each benefit. Last month, Professor Harrington confirmed that there has been positive progress in improving the work capability assessment, which determines entitlement to employment and support allowance. The department continues to develop the assessment for personal independence payment in consultation with stakeholders and relevant experts.
Baroness Sharples
Now that Crimestoppers is involved, can we expect to see more claims dealt with quickly—which are false claims? Will the public be encouraged to approach Crimestoppers? I gather that their calls will be entirely anonymous.
Lord Freud
Yes, my Lords. I very much welcome the fact that we have made an arrangement with Crimestoppers. We already have the national benefit fraud hotline; but the good thing about Crimestoppers is that it is a very trusted brand, which carries anonymity to those who call it. That will be particularly useful when we look at organised fraud, an area about which I am particularly concerned.
Lord Wigley
My Lords, does the Minister accept that the campaign organised by parts of the tabloid press insinuating that disabled people drawing benefits are cheats and scroungers, is totally unacceptable; that the vast majority of disabled people dependent on benefits are absolutely straight and honest; that the level of fraud is relatively low; and that this campaign should stop?
Lord Freud
Well, my Lords, clearly we are very concerned by any misrepresentation in the tabloid press, which likes to simplify matters a great deal. We have a real issue in making sure that we have a very clear, coherent and consistent categorisation of who should receive these benefits, because one of the main policy thrusts of this Government is to make sure that the people who really need the money are the ones who get it.
Lord Low of Dalston
My Lords, is the Minister aware that the Benefit Integrity Project, introduced by the previous Government to weed out the misuse of disability benefits, found more people on DLA whose needs had risen than fallen, contributing to a rise in expenditure on benefits? Does he expect the introduction of personal independence payments to lead to a similar increase in expenditure, as well as a rise in the cost of administration?
Lord Freud
My Lords, there has been relatively little research on DLA and how accurately it is targeted. The last comprehensive survey was in 2005, and it was found that more than 11 per cent of cases were no longer applicable. That does not mean that fraud was involved; it just means that matters had moved on so that it was no longer applicable. We also found a reasonable proportion—much less—of people who should have had higher payments. It is a subjective, inconsistent benefit, which relies too much on self-assessment. We need to get a grip of it.
The Lord Bishop of Oxford
My Lords, is the Minister aware that many of us are very concerned that the measure envisaged might have a deleterious effect on the very group that the Government are most concerned to help—that is, those who would come into the support group eligible for universal benefit, but who are actually living alone and without carers?
Lord Freud
Yes, my Lords. One of the things we are aiming to do with the employment and support allowance, and the support elements there, is to make sure that we have consistent and simple definitions of who should obtain benefits. At the moment, we have a multiplicity of benefits, and we are aiming to simplify things so as clearly to direct our support to those who need it most.
Lord Beecham
My Lords, do the Government intend to implement Professor Harrington’s recommendation to subject cancer patients undergoing chemotherapy to work capacity assessments?
Lord Freud
My Lords, this is a very interesting issue. We have been reading closely Macmillan’s evidence to us, and what is set out is not what Macmillan is actually asking for. Many of the oncologists whose evidence was taken say that it is important for many patients to stay in work. One stated that it may be inappropriate for some patients and that it risks stigmatising chemo patients, but that some people on long-term maintenance treatments may have little or no upset and be quite able to work. We are taking that evidence and looking closely at how we apply it. We will have more people with cancer in the support group because many undergoing oral chemotherapy need to be in it. However, we are not taking a blanket view and we do not want to stigmatise cancer patients.
Lord Addington
My Lords, will my noble friend give an assurance that when the initial assessment is made, someone with real expertise in the disability or group of disabilities advises on whether the benefit should be paid?
Lord Freud
My Lords, yes, one of the things we are keen to ensure is that there are people with expertise on whom those making the assessments can rely. Professor Harrington addressed that in his first review. For that reason, we had mental health champions in particular in each of the offices undertaking this work.
Baroness Farrington of Ribbleton
My Lords, many Members of your Lordships’ House will be aware from personal and family experience that the experience of undergoing chemotherapy of any kind, quite apart from oral chemotherapy, is most unpredictable in each individual case. Within a period of 48 hours, someone who had been coping admirably can suddenly find that they are unable to work. How on earth can the Government respond immediately to those circumstances and how can they stop the media, to which the Minister referred earlier, castigating everyone on chemotherapy as though they are workshy?
Lord Freud
My Lords, let me make it absolutely clear that the presumption for people on chemotherapy, whether it is in oral or other forms, is that they will be in the support group. However, we will check this because some people, as the evidence in the Macmillan report demonstrated, get through their chemotherapy with few ill effects, so it is right for them to continue in the workplace. They will want to do that, but the risk is that if there is a blanket move away from the workplace, we basically write off those people’s opportunity to work, and that is wrong.
Lord Roberts of Llandudno
My Lords, perhaps I may declare an interest. My wife underwent chemotherapy treatment for some time and she could not have worked at all. How much consultation is there with the patients themselves as they undergo chemotherapy as opposed to with their doctors, in order to find out exactly what their response to this is?
Lord Freud
My Lords, when people are in a position where they cannot work and the presumption is that they will be in the support group, we will take the evidence for that from the people who are treating them because it is easily available. It is only in those cases where people are able to work that we will look to place them in the other category so that we do not have a blanket position. This is what the evidence from Macmillan has shown us. We are now going to consult more widely with other cancer organisations so as to be sure that we get this particular, very difficult policy right.
Food: Waste
(13 years ago)
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Baroness Jenkin of Kennington
To ask Her Majesty’s Government what progress they are making on reducing household food waste.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Taylor of Holbeach)
My Lords, on 15 November the government-funded Waste and Resources Action Programme—if my noble friend Lord Brooke of Sutton Mandeville will forgive me, I shall call it WRAP—announced a 1.1 million tonne, or 13 per cent, reduction in annual UK household food waste since 2006. We recognise the efforts of householders and the actions taken by WRAP and the food industry to help achieve this reduction. We are continuing to work with the industry to help householders cut food waste through responsibility deals and consumer advice.
Baroness Jenkin of Kennington
While welcoming this significant improvement and accepting that there is much more to do, I would like to ask about the Courtauld commitment. Accepting that supermarkets have made reasonable progress towards their household food waste reduction objectives—3 per cent towards their rather unambitious 4 per cent target—would my noble friend agree that the slow progress on the grocery supply chain product and packaging waste reduction, with a marginal decrease to date of only 0.4 per cent against a 5 per cent 2012 reduction target, is disappointing? Bearing in mind the estimated £17 billion a year cost associated with food, drink and packaging waste generation, would he tell us what the Government are doing to encourage supermarkets to achieve this target by the timescale set in the Courtauld commitment?
Lord Taylor of Holbeach
We are working through a voluntary deal in the Courtauld agreement. It has had some success, as I have just revealed with the figures on the reduction of food waste. Much of that is down to the work that WRAP has done in co-operation with the grocery retail trade and food manufacturing sector. My noble friend is right that more needs to be done to meet our new target for reducing waste in the supply chain. We are developing Courtauld 2 to achieve that objective.
Lord Redesdale
My Lords, are the Government making it a priority to return the nutrients and phosphates from food waste back on to the land through anaerobic digestion? I declare an interest as chairman of the Anaerobic Digestion and Biogas Association. Also, are the Government taking into account the financial savings that are being made for council tax payers through using anaerobic digestion and segregating waste on the doorstep? This has been undertaken in Wales and has shown that it costs councils a great deal less than putting it into landfill.
Lord Taylor of Holbeach
I thank my noble friend. Anaerobic digestion can divert food waste from landfill. It generates some renewable energy and improved nutrient management on farms, as he said. The biogas can generate heat and energy or be injected into the gas grid. The Government published an AD strategy and action plan in June that includes actions to develop a £10 million loan fund to support that new capacity. However, the strategy must be to avoid food waste in the first place, hence the Government’s focus on the Courtauld agreement. I note what my noble friend said about the Welsh experiment. We are learning a lot from projects undertaken in the devolved authorities. We will certainly monitor them carefully and take that on board.
Lord Davies of Coity
My Lords, I have noticed one thing with retailers: buy one get one free. Buying two is cheaper than buying singly. Are the Government trying to do anything to encourage retailers to reduce the price of each unit of product rather than produce these gimmicks?
Lord Taylor of Holbeach
The noble Lord is very topical. Some results are to be released shortly on research into exactly the impact of BOGOF—as it is called in the trade—on expenditure patterns and food waste. The noble Lord will have to await the outcome of that research before I can give him an answer.
Lord Naseby
My Lords, surely we owe a vote of thanks to retailers for the way they have taken up what the Minister calls WRAP. A 3 per cent achievement in a single year is to be greatly welcomed. Would my noble friend comment on one area where there is still confusion? The “best before” date is still confused by the “use by” date. Is there any programme for further publicity to clarify what each of those two phrases means?
Lord Taylor of Holbeach
This is an ongoing project, and an important one. As my noble friend quite rightly points out, there is confusion. Defra recently published date-marking guidance. This should help to ensure that dates are applied consistently—for example, that all hard cheeses display “best before” dates—thus making it easier for consumers to understand their meaning. I have already seen date marks that drop the confusing “display until”, in line with our guidance. I will shortly be visiting Sainbury’s to see its new eco-labelling system. My noble friend is quite right to congratulate supermarkets on the efforts that they are making.
Lord Knight of Weymouth
My Lords, as we agreed in the debate last week, household food waste is still way too high. The voluntary approach is having some effect with retailers, as we have heard. Many are moving away from BOGOF—as the Minister likes to refer to it—and for that they should be applauded. However, these actions are easily undermined by more unscrupulous competitors. Is the Minister still planning an effective grocery adjudicator, and will it have a remit to report and act on measures to reduce food waste?
Lord Taylor of Holbeach
Indeed, my Lords, the grocery supply code of practice aims to prevent retailers from transferring excessive risk to their suppliers through unreasonable business practices. Two of its conditions cover wastage and forecasting errors, clarifying the conditions in which compensation for these may be sought. The greater certainty provided to suppliers and the role that the groceries code adjudicator will play may help to reduce food waste; we certainly hope so. The body will indeed be set up.
Water Supply (Amendment to the Threshold Requirement) Regulations 2011
(13 years ago)
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Lord Taylor of Holbeach
That the draft regulations laid before the House on 31 October be approved.
Relevant documents: 32nd Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 22 November.
Welfare Reform Bill
(13 years ago)
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16:32 - Division on Amendment 1 - Ayes: 224 / Noes: 227 - Amendment 1 disagreed.
Baroness Lister of Burtersett
My Lords, I rise to support Amendments 1 and 2 in the name of the noble Baroness, Lady Meacher—who does not appear to be here—as well as in my name. These are not techie, administrative amendments; they are about people’s lives and have particular consequences for the lives of women, who are still the main managers of poverty on a day-to-day basis. At present, the out-of-work benefits, which the universal credit will replace, are paid fortnightly.
The Lord Speaker (Baroness D'Souza)
My Lords, I believe that the noble Baroness is discussing Amendment 1 in Clause 7.
Baroness Lister of Burtersett
I beg your Lordships’ pardon. I am speaking to Amendment 2, but also to Amendment 1, even though it has not been formally moved.
These payments used to be paid weekly and, according to Fran Bennett of the Women’s Budget Group, there is evidence from recent qualitative research carried out at Oxford University that the move to fortnightly payments has caused more problems than is sometimes claimed. “Struggle” was the word one woman used to describe what it meant. The leap from fortnightly to monthly payments will be much greater. As one claimant put it, “Very difficult to budget with two-weekly payments, impossible with monthly”. For those in-work recipients of tax credits who have opted to receive the credit weekly rather than four-weekly, who tend to be those on lower wages, the leap will be greater still.
We know from government survey evidence that nearly two in five of the lowest fifth of low-income families with children run out of money always or frequently, so we are not talking about a small number of vulnerable people in exceptional circumstances, nor are we talking in most cases about mismanagement. Again, research shows how well most people on low incomes manage their money—probably better than many of us, because they have to. However, managing money on a low income is very stressful, particularly for women who act as the shock absorbers of poverty, and it can have a damaging impact on physical and mental health.
One of the big fears is that monthly payments will lead to more families turning to high-cost credit and getting into debt. Just last week a big news story was the spread of payday loans which, according to an earlier report, have quadrupled in the past four years. In Committee, I read from an e-mail that I had received from a Conservative supporter, who described himself as a “responsible lender” to low-income households and who was enraged by the idea of monthly payments, which, he warned, would lead to an even greater reliance on such loans, which he wrote, had,
“risen up on the back of predominantly low income earners who get paid monthly”.
According to last week’s R3 report, nearly half the population sometimes or often struggles to make it to payday. In addition, there has been growing use of pawnbrokers, particularly by low-income women with children.
In Committee, we all got the impression that the Minister really listened and took on board the concerns expressed from all Benches. Indeed, he said that we had given him quite a bit of food for thought. This was very welcome. It is therefore disappointing that, having digested the overwhelming message coming from the Committee, he appears not to be willing to concede even on the point of giving claimants the right to opt for twice-monthly payments with the default remaining monthly, as provided for in Amendment 1. Instead, he appears to be looking to encourage access to budgeting products such as jam jar accounts, which would enable people to mimic jam jars in allocating their universal credit payment to different purposes through their accounts.
The Minister rightly observed in Committee that budgeting products mystified him, so, like a good academic, I have done my research. I can see the attraction in this context and I hope that the Minister is successful in developing the idea, but I am yet to be convinced that such accounts obviate the need for the amendments before your Lordships' House. Certainly, this is the view of the Personal Finance Research Centre. At present, only about 150,000 people use such accounts and typically they are charged between £12.50 and £14.50 a month for doing so. While I acknowledge that Social Finance, which provided these figures, is enthusiastic about the potential of such accounts to help people manage monthly payments, there is a long way to go to get there from here. Moreover, it has been suggested by the Personal Finance Research Centre that such accounts are more relevant to helping people who receive income weekly or fortnightly and pay monthly and quarterly bills, so they would still have a role to play in the context of the proposed amendments.
I know that the role of such budgeting tools will be explored in the planned demonstration projects, which according to the DWP will test some of the support mechanisms we will need to have in place for vulnerable groups. However, as I have already tried to explain, this is not just an issue for certain vulnerable groups. Anyone on a low income is potentially vulnerable to the problems created by monthly payments. Are they all going to be helped to access such budgeting products? I appreciate the effort that the Minister is putting in to try to develop the budgeting products solution to the problems raised in Committee, which he acknowledged were very real. However, I remain puzzled as to why he is so resistant to accepting the most obvious solution that we offered—more frequent payments.
“Is it because of cost?”, some people have asked me. It would appear not, as that was not an objection raised in Committee. The Minister himself emphasised in Committee that there is a distinction between payment period and assessment period, so that more frequent payment would not require more frequent assessment, which perhaps would have cost implications. The answer to a Written Question about cost in the House of Commons simply evaded the question. It leaves me to wonder whether the Minister’s solution is not more costly, particularly as it will also involve more frequent use of interim payments to tide people over as payments are made four-weekly in arrears. A story in the FT in September suggested as much. It said that,
“the plans had not yet been fully worked out or costed”.
In Committee, I asked that your Lordships’ House should receive a fully costed plan before monthly payments are finally agreed, but no such plan has been forthcoming. In its absence, I believe that it is only prudent that your Lordships’ House build in the kind of protection that the amendment would provide.
The Lord Bishop of Leicester
My Lords, it is a privilege to speak in support of the noble Baroness’s amendment. Her evident mastery of the subject has impressed the whole House, as it certainly impressed everyone involved in Committee. I do not have a great deal to add to what she said except that, in reading the transcript of that Committee, it struck me that two things did not emerge clearly enough, particularly given what the Minister said in reply. They were: first, a clear recognition that living on a very low income requires highly sophisticated financial domestic management and highly sophisticated budgeting. That would almost certainly be beyond the rest of us to manage. It seem to me unreasonable to expect people who are living with the burden of that kind of pressure also to develop skills beyond what the average in the community would be in terms of managing their finances.
That relates to my second point. The proposal for a monthly payment seems to have been made to generate a culture change among those who are not perhaps in the habit of regular employment—in other words, to build the capacity of those in receipt of the benefit to behave like the rest of society. However, I put it to the House and to the Minister that perhaps what we need more of is the capacity of government to understand what it is like to live on a very low income. That is where the capacity building needs to happen here.
I very much hope that the Minister, who has consistently shown a readiness to listen and respond, will think again on these amendments. My own experience as a parish priest in east London, and more recently in the parishes of the outer estates of Leicester, has shown me repeatedly and at first hand the extreme pressures under which those on very low incomes live. This is a modest amendment that would signal to those in receipt of these payments that their problems are understood and that the Government are ready to be sympathetic.
Lord McKenzie of Luton
My Lords, perhaps I may clarify precisely what it is that we are debating. I believe that my noble friend Lady Lister moved Amendment 1, somewhat belatedly, on behalf of the noble Baroness, Lady Meacher, and also spoke to Amendment 2, which is in her name.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, as I understand it, Amendment 1 has not been moved, but Amendment 2 has. I think that the noble Baroness, Lady Meacher, will speak to Amendment 1, but I do not think that she is in a position to move it. That is my understanding.
Lord McKenzie of Luton
My Lords, I do not want an endless wrangle on this. I think that that is being a little tough on the calling of amendments. My noble friend did not immediately realise that the noble Baroness, Lady Meacher, was not in her place, so it perhaps took her a little while to move the amendment on the noble Baroness’s behalf. Frankly, if we are denied the opportunity to proceed with Amendment 1 today, we will simply bring it back at Third Reading. However, I do not think that that is in anyone’s interest.
Baroness Hollis of Heigham
I support my noble friend on this. Some of the difficulty may have been caused by the noble Baroness, Lady Hollins, kindly agreeing not to move her opening amendments, Amendments A1 and A2, so that we could have enough time to debate this matter fully. This has arisen because of the time required for the European Council Statement, which has thrown out all the expected timings. As a result, the noble Baroness, Lady Meacher, was not in her place, as noble Lords would expect, because she had assumed that the other amendments were being debated. So I hope that the House will be sympathetic to my noble friend’s request, which makes good sense. The House is self-regulating. If the House thinks that this is a reasonable thing to do, we can do it. I very much hope that the noble Lord, Lord Freud, will respond to my noble friend in the manner indicated.
Lord Wigley
My Lords, I was under the impression that when the noble Baroness, Lady Lister, got to her feet to speak, she said that she would move the first amendment and speak to the second. As she has her name on the first amendment, I would not have thought that there was an issue.
Lord De Mauley
My Lords, I think that there is a feeling around the House that the House would like to debate Amendment 1. So if the Lord Speaker is willing, perhaps we could go back.
Amendment 1
Baroness Meacher
“( ) Regulations must make provision for claimants to require payment of universal credit to be received more frequently than would otherwise be the case under subsections (1) and (3).”
Baroness Meacher
My Lords, I think that I owe a rather large apology to the House. I seem to have caused complete confusion, and am deeply sorry. I rise now to speak to Amendments 1 and 2, which, one way or another, would ensure that universal credit could be paid more frequently to claimants. Amendment 1 provides choice. Amendment 2 provides something rather specific.
The Government’s aim has been to encourage,
“out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life”.—[Official Report, 10/10/11; col. GC 440.]
Those are the words of the Government. The point is that very many low-income earners are paid weekly or fortnightly, as the noble Baroness, Lady Lister, has rightly pointed out. Although two-thirds of tax credit recipients are paid monthly, many of these people will cease to be entitled to benefits in the future. The great majority of universal credit recipients will be very low paid, going in and out of work, as many people do, to weekly or fortnightly payments and then back on to benefit. People certainly do need to be prepared for the world of work—I completely agree with the Minister about that—but they need to be prepared for the world of work that they are actually going to move into. That is the whole point. At a very helpful meeting last week, the Minister seemed to accept that there are differences and that there needs to be some flexibility. Promotion of choice in the frequency of payment is very much in line with the Government’s choice agenda. I am sure that the Minister identifies with that.
In practical terms, it was made clear in Committee that monthly payments will cause very considerable management problems within households, and a dramatic increase in the numbers of people struggling with debts. The fact that applications for crisis loans rose significantly from 2009, when the change from weekly to fortnightly payments was introduced, tells the story. The CAB service saw a fourfold increase in the number of people with payday loans coming to them for debt advice in the first quarter of this year compared with the same period two years ago. The Association of Business Recovery Professionals is the UK’s leading trade association for insolvency and related issues. On Wednesday 7 November, it released a report into payday loans showing that 3.5 million adults are considering taking out a payday loan over the next six months and that 48 per cent of the people who receive payday loans believe that the loans have made their debt crisis worse.
What is the Government’s estimate of the number of payday loans to claimants of universal credit that will be in place within 12 months of the introduction of the new system? This is clearly a matter of very grave interest to Members of this House—we know that such loans have interest payments in excess of 300, 400 or 500 per cent, if not more than 1,000 per cent. We cannot just ignore that problem.
At the meeting with the Secretary of State on Thursday, he talked about the need for a culture change. Indeed, he even implied that this was the only problem—people just need to change the culture within which they live. However, people’s problems in managing money over a month are far more extensive than purely a matter of culture. Numeracy skills are vital if people are going to manage their bills and payments over a month. I understand that the Skills for Life survey found that 1.7 million people had very poor numeracy skills. A further 5 million had poor numeracy skills. All these people’s skills were described as “below functional”.
Lord Boswell of Aynho
My Lords, all those who participated in the deliberations of the Grand Committee will regard it as a rather extraordinary process in two respects. First, for those of us who do not claim huge expertise—though it was represented elsewhere in the Committee—it was a remarkably informative process, and that applied across all quarters. Secondly, there was a high degree of understanding, if not consensus, and it is entirely proper of course that the process of refining the difficulties comes forward to this Report stage and we then get to the moments when the rubber hits the road.
I intervene briefly for two reasons. The first is in a sense to express my gratitude to the noble Baronesses, Lady Lister of Burtersett and Lady Meacher, for their contributions in Committee. As the forenamed has actually been kind enough to quote me in terms in support of her argument I probably owe her a response. The second reason is that it is understood by all sides of this House that there is a real problem. I have an odd facility about which I do not boast, which is the ability to craft titles for books that I never get round to reading—writing, I mean. One of them would have been “Life After Tuesday”. There is clearly a difficulty for people, where they have limited means, in budgeting and in managing themselves. I will quote two points about that. First, as in previous occupations I have run farms and paid farm workers, I am fairly familiar with people who are typically paid at the lower end of the pay spectrum. Secondly, I have recently chaired on behalf of the National Institute of Adult Continuing Education an inquiry into adult literacy. I do not of course confuse that with numeracy, but the problems of the two are somewhat conjoined. An estimate of something like 5 million people who would have difficulty in functioning is a real worry. The question is what we do about that.
On reflection, having listened to the Minister’s remarks both in Committee and indeed at the meeting of some of us on Thursday, I think that the Government’s strategy is the right one. It is right, and it also avoids any suggestion of patronisation, to say people should try to budget on the same basis as those who now receive a wage. I make the point in passing that many of the people—the farm workers and other people in relatively low-paid occupations—have transitioned fairly effectively towards monthly payments or salaries and arrangements of that kind. It is not conceptually impossible and we certainly should not set out to preclude it in advance.
The question is how it works. That was behind my remarks in Committee and will be behind my interest in my noble friend the Minister’s remarks when he comes to respond. It is clearly important that we are able to engage in a sensible package which enables people to find a way through this. If we were simply to say it is a month unless you deem it to be otherwise, or unless some special arrangements are invoked by way of a legal right, then that would be giving something of a green light towards people falling back into shorter periods—perhaps when that is not necessary or appropriate for their circumstances. But at the same time, picking up my non-written book, it clearly is important that people should be able to manage through this, not only for themselves and other adults in their household but also for children who need sustaining and maybe should not be expected to pay the price for parental or other failure.
We look to the Minister to explain very carefully the ideas which he has begun to develop, and which are very positive, for saying we start with a month, but of course like everybody else you need in effect to be able to navigate through that month, and this is how we will help you. That is, as it were, an approach of principle. Secondly, there is an issue of practicality here, which again I slightly touched on in Committee. If this system does not work comfortably and there is a huge increase in the use of pay-day loans, crisis payments or whatever, then there will be problems with the credibility of the universal credit system, which, to judge by the Committee, we all want to see, as I certainly do.
The Minister has to find a practical way of doing this but I suggest, with respect to the noble Baroness whose amendments we are considering, that the way of finding a practical solution should not lie through derogating from the principle of moving towards the monthly payment of credit with the necessary safeguards.
Lord Wigley
My Lords, we delved into this issue in quite considerable depth in Committee, and I do not want to rake over areas that we have covered. However, I suspect that there is a fundamental question here, which I think the Minister accepts—namely, that there will always be some people who find it difficult, if not impossible, to handle a lump-sum budget that is meant to cover a month. In those circumstances, some mechanism—whether it is a voluntary one making a facility available, as suggested by the noble Baroness, Lady Meacher, a moment ago, or some other mechanism—has to be brought forward by the Government to ensure that these people are helped to avoid getting into financial difficulties. That must be in the interests of the Government and everybody who is concerned about children, in particular, who may be vulnerable as a consequence of such action. I think that the House would be very glad to hear from the Minister how he sees the operation of a mechanism that will ensure in a minority of cases where the monthly pattern does not fit that a system is in place to answer the needs of these vulnerable families.
Lord Hamilton of Epsom
My Lords, I am a relative newcomer to this debate but I should like to pick up one point made by the noble Baroness, Lady Lister, who said that cost had never been an issue here. I cannot quite understand why money would not be saved if payments were made monthly rather than weekly. It seems to me that a saving would be made there, and surely we are trying to achieve savings because of the economic situation that this Government have inherited.
I should like to pick up one other point from the right reverend Prelate the Bishop of Leicester. He seemed to think that it was a bad idea that the Government were trying to introduce a culture change. I should have thought that that was rather a good idea. Surely we are trying to get people into a mindset whereby they move into the world of work and come off benefits. Anything that can be done to encourage that seems to be a good idea. However, I should like some guidance from the Minister on whether there is any saving to be made here and whether he has any idea how much it would come to.
Baroness Howe of Idlicote
My Lords, I, too, have sat right the way through Committee and have been very persuaded that some families—I accept that they are mainly families with children—who are not good managers of money will have difficulties in meeting the Minister’s no doubt otherwise ideal method of providing these benefits. However, I argue that there will be people other than those with families who may not be good with their sums or who, because of mental health problems or other reasons, might much prefer to have weekly or fortnightly payments, rather than monthly payments, which would mean a larger gap to fill with few finances.
Having said that, I accept that the Government clearly have plans in mind for sorting out this problem. However, echoing what others have said, it will be very important to get the support of those of us who have sat through all these debates by explaining in considerable detail exactly how the system will work and what flexibility it will contain. I hope that the Minister will be able to respond to those points.
Lord Kirkwood of Kirkhope
My Lords, I, too, was a Member of the Grand Committee considering this issue, and I apologise to the noble Baroness for being late for her opening remarks, whichever amendment she moved.
I shall pick up a point, if I may, made by my noble friend Lord Hamilton. The Government said that it was not a cost issue; there is no doubt about that. Indeed, the Minister was good enough to confess that. I have been thinking about this since we had our full discussion upstairs and I remain totally unconvinced that it is necessary to effect such a culture change. The notion that the kind of people we are seeking to serve with universal credit will fall into executive jobs that will pay them monthly into bank accounts is so remote from reality as to be unhelpful, but I put that to one side.
I say honestly to anybody who is listening that this is not a trivial matter. It seemed like an operational issue but it is not that at all. It is about the management of weekly budgets day by day in families that can blow apart because of debt. Anybody who thinks that we are short of debt, especially in the household income strata of below £10,000 a year, is completely wrong and should look at the evidence referred to by the noble Baroness, Lady Meacher, about the payday loans and the extent to which people rely on week-to-week, month-to-month emergency packages, paying Peter and paying Paul on different days and trying to survive in the middle. It is a great skill, which some people are forced to exercise. It causes enormous pressure, which is normally borne by the women in the household. We have to be careful how we typify some of the caricatures within families, but in my experience it is the womenfolk who have to make the difference between Tuesday and Friday, which is not always easy. Often they go short of food in trying. That is the reality.
How do I know that? In 2009 the payment system went from weekly to fortnightly, which caused enormous difficulty. It is not that long ago, so we do not really know what the impact of that change has been. If in 2011 we are considering going from weekly to monthly, we are talking about an entirely different regime of family budgets and people keeping their households together. It is symptomatic of how we treat the 15 per cent of the caseload that will be affected and will struggle with this. I encourage the Minister, who is absolutely correct to be ambitious for this new reform. He has lots of ideas and is a master of the technology to the extent that Ministers have not been before in terms of what he is trying to do. I absolutely support the jam jar accounts, sophisticated bank accounts and applications that go on my iPad so that if I ever need income support I will be fine. But I do not believe that the 15 per cent of the family households at the bottom end of the income distribution will be anywhere near using these things comfortably.
For me, this is a litmus test issue; it is not a trivial, operational matter. It is not safe to have anything in the legislation other than payment being fortnightly. Anything else is a bonus. By paying universal credit fortnightly there is a chance of being safe and dealing with the 15 per cent of the household distribution that we are talking about. If we do not get the system to work for the lower end of the household income distribution, we will fail the people who need it most, so it is not a sensible policy to be considering. Lots of imaginative things have been talked about and I am in favour of them all, but they are a fudge. We are making it potentially much more difficult for people who cannot manage day-to-day budgets from week to week.
The other thing that I have great fears about is that, no matter how many jam jars there are in your bank account, it is all arrestable. My Scots law might be slightly out of date but a long time ago—to my shame—I used to work for the South of Scotland Electricity Board, arresting people’s wages. In those days, you had to go to the sheriff to get the account properly closed down and the supply cut off. Those days are thankfully now gone, but you can still pend and arrest bank accounts. If I am owed money and I know somebody is getting a monthly payment of all their benefit under one wrapper called universal credit, I will be waiting at the counter of the bank and I will slap an injunction on them and they will have no money at all.
There must be some safety mechanism to protect these essential monthly payments. You might get away with surviving fortnight to fortnight if one fortnightly payment is made, but just think of the pressure and difficulty for families who have annual incomes that rely on universal credit if somebody arrests their Co-operative account or whatever it is that the Minister is thinking of. These are not straightforward issues and this is not a small matter. Unless the Minister can persuade me that this will adequately serve the 15 per cent of the caseload at the bottom end of the income distribution, this House would be sensible to require fortnightly payment to be put in the primary legislation.
Lord Ramsbotham
I too apologise for not being here at the start. I just ask the Minister to reflect on the words of my company sergeant-major when the Army moved from weekly pay packets to bank accounts. He said, “Thems that pays by the week lives by the week, but if you pay them by the month they will still live by the week”.
Baroness Sherlock
My Lords, I have a couple of brief points to add. One is addressed to the noble Lord, Lord Hamilton. Perhaps he would like to reflect on the fact that what the Minister is doing in this Bill is taking two completely separate systems of support, one for those in work and one for those out of work, and creating a single seamless new product. However, for that to work, it must meet the needs of both sets of people. I think that was the point that the noble Lord, Lord Kirkwood, was making just now—that the Minister may want to effect a culture change for those who are in work, or whom he would like to be in work, but universal credit is also available to support many people who are not required to work, who may never be required to work and who may never be capable of working. Why should they be forced to go through a culture change to no end? Is there really a strong case and can the Minister explain it to us?
Secondly, I want to pick up on the very good point made by the right reverend Prelate the Bishop of Leicester that it takes a lot of time, energy and skill to manage on a very small amount of money. It also takes a lot of intelligence and aptitude to be able to budget well on that. Perhaps the Minister could reflect on what may seem to be simply a matter of timing. If one has plenty of money it is much easier; it is also easier if one has a pot of working capital, so if something goes wrong one month the consequences are simply that you dip into your savings. I spent some years working with single parents and most of them had almost no cushion at all, so if they got it wrong they had nothing to fall back on. For many poor people, their friends are also poor, their families are poor; they do not have the kind of networks where you simply go and borrow from somebody else or you to go the bank and ask it to lend the money, because it will not. The consequences for those families of getting that budgeting wrong can be very severe. Given what is happening in other areas to the Social Fund and the other kinds of support, we really do not want to be driving people into the arms of moneylenders.
Finally, within that group there are some people who, because of their particular circumstances, have very strong reasons why they need to be paid regularly. It is a point I made in Committee but I think it bears repeating here. I have worked with families where, for example, the husband had a problem with drugs or alcohol and went off on a bender and spent the week’s wages; the mother would have to find a way of feeding the children until the next benefit cheque arrived. If that happens in one week, it is difficult; if it is happening in two weeks, it is difficult; but as the noble Lord, Lord Boswell, will appreciate, if it is not a matter of “life after next Tuesday” but “life for the three weeks that follow next Tuesday until the end of the month”, how does she manage?
The question the Minister has to answer is not whether he would like to do this; I have no doubt that he would. Rather, it is: is the price that will be paid by some of the poorest people really worth the culture change he wants to achieve?
Lord German
My Lords, I am always staggered to find out more about my noble friend Lord Kirkwood. In Committee we learnt what he did in the bath, and now we have learnt that he goes around arresting bank accounts. We have been having some very interesting debates. However, I am slightly less sanguine about this issue than he is, perhaps largely because many of your Lordships have said that we have to look at people for what they can do and what their ambitions are. People, and groups of people, are not all the same. It strikes me that this is not about going in one direction or another, and that we are treating people as having exactly the same ability to manage their own money.
I also heard in Committee the Minister’s ambitions for looking at other methods of dealing with payments. I looked back over the last four to five years of the growth in the Post Office card account and in basic bank accounts, which of course is where you would expect to find the sorts of people who make and deal with money in this manner. And there has been growth; in fact, 12 per cent of the whole population—according to the appropriate survey done by the DWP, which is published on their website—is using one of those two bank accounts.
It also struck me that the price that we are paying for the Post Office card account is frighteningly expensive for what we get as a country. It is a bank of this country, and a bank, JP Morgan, underwrites it, and it charges the state for managing these Post Office card accounts. I believe that we pay something like £50 each a year—£142 million per annum—have those accounts run for us. It strikes me that we perhaps need a presumption to ensure that we put things of this nature in place by giving people the appropriate support, but at the same time ensuring assistance for those who cannot. The language that I have heard many Lordships use, which seems to come from the documents, is the “chaotic family syndrome”, where people just cannot manage and need to have some different form of assistance. That is why I started by saying that we should not treat everyone in the same way.
The Post Office card account is a bank account. It does not come with what we might normally expect a bank account to have, but why not, when we are paying so much money for it? Why are people not able to make payments from it for their utilities and gain benefits and savings? I guess that most noble Lords do this because of the way in which they pay for their heating, electricity and gas at the present time. Surely we should be offering that opportunity and using that ability to help people in that manner. We also should not think that people should not be able to separate out their money in the way in which they pay it to themselves. However, in order to do that you have to have appropriate levels of support.
My question to the Minister is: if you are pursuing the idea of developing the facilities which a large number of people currently use for payment, will you also be able to offer advice and support to assist those people who might wish to avail themselves of an enhanced system that allows them to pay their utility bills monthly by a straight payment or direct debit, thus allowing them to get the benefits of reduced charges?
I noticed that the Cabinet Office issued a press release for those who live in England, which says that £16.8 million of support will be given for free debt advice in this country. Does the Minister regard that as being some of the funding that he intends to use for the support that might go with these enhanced accounts?
I know that over the years there has been considerable discussion about the use of the Post Office card account, primarily, of course, in the context of trying to support the local post office in each of our communities. Surely, however, if we were able to do more with it and to provide that advice, perhaps even at the Post Office, it might even be better to do that with the funding that might be available.
There is the problem that many people, or some people, will not be able to manage and will need alternative forms of assistance and advice. My noble friend Lord Boswell was saying that we ought to move in one direction, but it strikes me that we must be wary and understand that there are people who will not be able to manage. We must be able to assist those people properly.
Lord Brooke of Sutton Mandeville
My Lords, I reassure the government Chief Whip that I intend to speak no more on Report than I did in Grand Committee; nor will I speak on the substance of this matter except early on Report to thank the Minister for providing upstairs on Thursday afternoon the opportunity to discuss this issue, among others, on an all-party basis. I think it would be in the spirit of the comradeship that we developed in Grand Committee to suggest that, following the graciousness with which the government Chief Whip rescued us from the procedural imbroglio at the start of this group, he or the Minister should, before we leave this group, confirm my understanding that on a group of amendments, in the absence of the first name on the Order Paper, anyone in your Lordships’ House can move the first amendment on their behalf without necessarily speaking to it, but that no one can speak on the subsequent amendments in the group unless this initial formality has been discharged.
Lord Newton of Braintree
My Lords, I do not know whether the Minister wants to give guidance on that point or to take it up later. I want to intervene briefly, and slightly apologetically, because, like the noble Lord, Lord Kirkwood, I was a bit late on the scene, but I am conscious that I played some part on this subject in Committee, so I think that it would be wrong to keep my head completely down in this debate.
I differ from my noble friend Lord Kirkwood in one respect; I think that the objective of what the Secretary of State describes as culture change in this field is not unworthy. Apart from that, I agree with pretty well everything that the noble Lord said. However, we need to remember something I learnt in various roles, including in my early years as a junior Social Security Minister when I became, it was be fair to say, friends, more or less, with the noble Baroness, Lady Lister. As I said in another context recently, culture change is not an event; it is a process. It takes time and not everyone will get through it. In an organisation, if you want a culture change and people cannot accommodate it, sooner or later they and the organisation have to part company, and they do something else.
This is the social security system, and people cannot part company with it. There is nowhere else for them to go, and we cannot abandon them. There is therefore real force in some of the concerns that are being expressed. Some people, such as those I tried to help in my former constituency, simply will not be able to manage. What are we going to do about them? As I say, we cannot abandon them. I might say that this will feed into something that is coming up later: whether rent should be paid directly to landlords. In some cases, where they cannot manage they will put the food for the baby first and the rent will not be paid. Then there will be another little problem, and someone will have to sort them out. Let us not pretend that this is easy, even if the objective is worth while.
I am not sure—and here I look with some trepidation at the noble Baroness, Lady Lister—that inserting into the Bill an insistence on ossifying fortnightly payments is right. The Bill already provides for some flexibility. Some benefits—including disability living allowance, I think I am right in saying—are paid monthly. This is not a simple picture. We do, however, need that flexibility where it is clear that failing to pay at more frequent intervals will multiply problems, difficulties and further costs in other parts of the system. The Bill allows for that, and I welcome that, but we need clear indication from the Minister this afternoon that this flexibility will be used.
Lord McKenzie of Luton
My Lords, first, I thank the government French Bench for facilitating the debate on these three amendments, after the hiccup we had at the start, and I thank the noble Lord, Lord Brooke, for his helpful advice. I say to the noble Lord, Lord German, in respect of his comments on Amendment 3, that I take the point. If he wants, perhaps, a more iterative process, I am happy to accept an amendment to our amendment. I am bound to say that we rather learnt about calling for reviews from the Liberal Democrats and Conservatives when we were in government—it has the merit of generally not having much of a price tag attached to it.
We start our deliberations on Report by considering the important aspect of how universal credit would work—that is, how payment would be affected, especially the frequency of the payment. However, let me first put in context our approach to the general issue. As we have clearly stated on the record, we support the concept and broad approach of universal credit, a benefit system that provides in-and-out-of-work support, as a clear system of the income disregards and common tapers has significant potential, not least the prospect of clearer incentives for work.
As has been apparent from our Committee sessions, and the matters that we will discuss on Report, the manner in which it is proposed to be introduced is, we believe, flawed. Some of the shortcomings are resource issues—work incentives for second earners—but some are potential failings in the base architecture: the exclusion of council tax benefit; the treatment of self-employed people; and, also, the payment arrangements. I agree with the noble Lord, Lord Kirkwood, that this is not a peripheral operation or issue—this is central to how the system should work.
We will come on to discuss issues about which member of the couple should receive payment and how landlords are to be treated—as the noble Lord, Lord Newton, has indicated. The amendments we are considering now address the vital matter of frequency of payment. Amendment 3, tabled in my name and that of my noble friend Lady Hayter, calls for,
“a review into the impact of payment arrangements on claimants, to conclude one year after the coming into force of this Act”.
I will acknowledge that it might be more appropriately triggered by the universal credit provisions coming into force. We see this review focusing on the impact on claimants by looking at it from the claimant’s perspective. In Grand Committee on 10 October this year, at col. GC 440, the Minister referred to the research being undertaken, particularly around the frequency of payment. An obligation to undertake an early review of how things are working in practice and a report to Parliament would be entirely consistent with the Government’s evidence-based approach to this issue.
We know that at present JSA is paid fortnightly in arrears, that ESA is normally paid fortnightly in arrears, income support is normally paid fortnightly in arrears, and that tax credits are paid on request either weekly or every four weeks, although I think one would acknowledge that HMRC has an overriding discretion in that respect. Housing benefit is normally payable in arrears at intervals of a week, two weeks, four weeks or one month, but as I understand it, if the rent allowance is greater than £2 a week, the claimant can require it to be paid fortnightly. So in having for universal credit the norm as monthly payments, the Government are clearly not seeking to get the best fit with the current components that are to be displaced. Indeed, I think that the Minister and this debate have acknowledged that. He said on the same occasion in Grand Committee:
“With this system, we are one of the drivers of the way people behave and of social change”.—[Official Report, 10/10/11; col. GC 441.]
I support the comments that have been made by a number of contributors, including by my noble friend Lady Sherlock, about culture change, but culture change to what effect in this respect? We understand and accept the thrust of a system that encourages people into work and helps them to understand the benefits of work by seeing its financial rewards, but what is so important about trying to encourage people to get used to a monthly payment and budgetary arrangement rather than one on a different basis, even if they were in a position to do that? The noble Lord, Lord Freud, also referred in Grand Committee to his search for flexibility. If this is an acknowledgment that monthly does not have to be the rigid approach to payment, we may be closer on this issue than perhaps we thought.
We heard from the noble Baroness, Lady Meacher, my noble friend Lady Lister and other noble Lords about compelling reasons why payments on a monthly basis will create particular difficulties for some families, and not just a small minority of supposedly inadequate budgeters. As for mimicking work, which we have heard as well, while 75 per cent of those in employment are paid monthly, 25 per cent are not and half of those earning £10,000 a year or less are paid less frequently than monthly. We heard in Committee and again today about the growth in the business of payday loans. Recent surveys show that nearly half of the population struggles to make earnings stretch until payday, with 7 per cent considering taking out a high interest short-term loan within the next six months. The issue of how to stop the exploitation of poor people is a debate that I hope we will have on another day.
Amendment 1, eventually moved by the noble Baroness, Lady Meacher, would require regulations to be drawn up giving claimants the opportunity to require payment of their universal credit entitlement more frequently than would otherwise flow from Clause 7. We support this amendment and so, we hope, will the Minister, because it seems to fit foursquare with his acceptance of the need for flexibility. Obviously the regulations would have to set out practical parameters to the choice available to claimants, but this should include a fortnightly option. The Minister will know also that it would not preclude arrangements where a claimant could draw down against a monthly entitlement. It would be consistent with that. Neither would it preclude the Minister from retaining the distinction between the assessment period and frequency of payment, a point made by my noble friend Lady Lister.
It is understood that the Minister may argue that the issue of frequency of payment can be addressed by the development of new banking products and that he would not wish the Bill to preclude that. That is fair enough, but we consider that the thrust of the amendment moved by the noble Baroness, Lady Meacher, would not shut out those types of options provided that there are arrangements with parameters dealt with in regulation for claimants to choose. But we do not know today that these banking products can be delivered in time for the introduction of universal credit, whether they can be comprehensively available and without high cost. Without that certainty, it is right that something is included in the Bill along the lines of Amendment 1.
Perhaps the Minister will take the opportunity to update us on the Government’s thinking in this area, as other noble Lords have requested. In particular, do they support the proposition that there should be flexibility within sensible and practicable parameters of receipt patterns? Should there be a right for claimants to choose within these parameters? Can he confirm that the arrangements being considered are not just about drawing down on a monthly payment already made in arrears?
Amendment 2 is more clear-cut and, I think, more to the liking of the noble Lord, Lord Kirkwood. It sets down a requirement for amounts to be paid fortnightly. It has the merit of being clear and closest to the current patterns of receipt, making it slightly more manageable to exist from payday to payday. We support the amendment as an alternative proposition should Amendment 1 be rejected or fail today.
Lord Freud
My Lords, these amendments intend to provide for universal credit to be paid twice a month or, in Amendment 1, for a claimant to be able to choose to be paid more frequently than monthly. As with existing benefits, we will specify payment frequency in regulations made under existing powers in the Social Security Administration Act 1992. I am, though, grateful for the opportunity to set out why we intend for universal credit to be paid monthly.
We want universal credit to prepare people for work and to encourage them to move away from costly weekly and fortnightly budgeting. The present system does not allow people to take responsibility for their finances as the majority of people in work do, day in, day out. That is wrong. It means that the transition to work is more difficult than it needs to be as people have to adjust to monthly budgeting and managing their own rent payments, often with no support. We want to make the first steps into work easier by helping claimants to switch to monthly budgeting while claiming universal credit. Essentially, we are looking for a more empowering system.
The figures have already been raised in the debate. Some 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year are currently paid monthly. It is then right that we help families to deal with the reality of working life, whether they are in or out of work, by paying benefits in a way that mimics payment of a salary.
The noble Lord, Lord McKenzie, asked the straight question: what is so important about monthly payments? He went on to talk about the exploitation of poor people. That is what this is about. Save the Children has estimated that low-income families can face an annual poverty premium of £253 on their gas and electricity alone. Organisations including Consumer Focus, Church Action on Poverty and Family Action recognise the importance that access to the right banking products and sound advice can make in helping families to make the best use of their income. The simple point is that if you are managing on small gobbets of money weekly, it is very tough to match your budgeting process to utility bills or some of the larger or medium-scale capital items. That is why larger amounts paid monthly help people with this poverty premium.
However, I recognise that many people on low incomes are used to budgeting on a weekly or fortnightly basis and are concerned about moving to monthly payments. We absolutely need to support some families to budget effectively. That is why I am keen to develop effective budgeting support for families in this position. In some cases that is just a question of signposting to existing information and advice, in other cases it may require much more intensive, face-to-face support; but we need to take an innovative approach to these budgeting products if we are to stop the exploitation of the poor continuing, as the noble Lord, Lord McKenzie, said.
The universal credit and how we flow money to poorer people in our community is the main opportunity that we have to make a real difference for people in this area. We are working with the banking sector, credit unions, supermarket financial services and the Post Office to explore the opportunity to create cost-effective budgeting accounts. I am looking at accounts that my noble friend Lord Kirkwood will not be able to arrest at his whim, because there are some protections in the way in which we devise those accounts. In the next 18 months there will be an absolute focus of intense work to get this right. One example is the housing demonstration project next year, which will help us to understand the demand for budgeting support and the best ways to deliver it. I am not saying that it will all be easy; it is not. However, it is essential that we develop 21st century solutions to these issues and not think back decades and get in the mindset where we did not have these new ways of approaching things.
A simple system of payment on account will be made available to support claimants. Budgeting advances will provide an efficient means for eligible claimants to have access to interest-free credit, providing an alternative for those on the lowest incomes to high-cost, and even illegal, lenders. I must say that I was admiring a Wonga.com advertisement on the side of a bus this morning. In our system of budgeting advances, in the last year already over a million claimants received budgeting loans worth almost half a billion pounds. In the department we have a revolving fund of £1.1 billon, which will continue to be under our control for these purposes.
Clearly there is an issue, which we are addressing, about helping people move from fortnightly to monthly payments. We need to help with that migration period by stretching payment periods and providing the missing funding, if you like, as they move up, and I am looking at a system of doing that over three months. Many noble Lords have made the point that there are people with exceptional circumstances for whom a monthly payment is simply not appropriate. My noble friend Lord Kirkwood talked about the 15 per cent; my noble friend Lord Newton talked about those who will not cope. Clearly there is a group in this category. Where there is a risk of harm to the claimant or the household, we will of course want to make sure that safeguards for these people are in place. Nevertheless, we cannot set up a system to get the bulk of people in control of their finances and then take that control away from them when they can manage it. We need to look at it that way round, not devise a system which protects the 15 per cent of people that my noble friend estimated would be affected. We must not have the tail wagging the dog. We must include support but we must not have a system which stops people going into the workplace when they can. We have begun working with local authorities, housing associations and the relevant third sector organisations to develop guidance around who might qualify for more frequent payments or the direct payment of a proportion of an award to a third party, such as a landlord. Again, the housing demonstration projects will allow us to test the criteria for exceptions.
I appreciate noble Lords’ concerns about protecting claimants who have not previously been required to budget monthly. However, I truly believe that this is a fundamental part of what we are trying to achieve with universal credit. It is an opportunity to change the dynamic to design a system that is right for the majority but takes account of exceptional circumstances by ensuring that we have the means to make payments more frequently.
I wish to pick up a couple of questions. We can make universal credit payable more frequently. I say in answer to the point made by my noble friend Lord Hamilton that there is a small cost to doing it fortnightly rather than monthly but it is very small; it is about a penny. As regards the fallback position, the regulation-making powers which are used to determine the frequency of payment are not in this Bill but in the Social Security Administration Act 1992. The legislation on ESA and JSA, for instance, says that they are payable weekly. However, as we know, they are paid fortnightly. We have complete flexibility to pay as often as we think is appropriate.
Baroness Meacher
The noble Lord said that payments can be made more frequently. Will he assure the House that payments will be made more frequently, and that that facility will be available?
Lord Freud
I assure the House that where people cannot handle monthly budgeting, we will have arrangements to help them. However, I ask noble Lords not to tie my hands on this. This can make a major difference to poor people by creating banking and budgeting products that will help their lives. Tying our hands on this, particularly mine, will not help. Therefore, I ask noble Lords not to vote against this.
Lord McKenzie of Luton
We understand the enthusiasm that the noble Lord brings to this project and I think that we accept the thrust of it. However, will he make clear the following issue? If there is to be a degree of flexibility and if he wants people to be in control of their own finances, why is that inconsistent with them having a choice of how they get paid? Is he saying that the flexibility that he is prepared to countenance does not include the right for individuals to choose, within parameters, certainly perhaps to get paid on a fortnightly basis?
Lord Freud
My Lords, this is a technical issue about the level at which people choose and the extent to which we treat universal credit as a bank account—some would argue that that is what it is as regards budgeting advances, for instance—or drop it down into banking apps that will available for people on universal credit. I do not want those flexibilities to apply at the higher level in the formal process. I want those flexibilities, whether they are direct debits or anything else, to apply at a lower level in banking and budgeting products which will float away with people when they are outside universal credit. That is the issue. That is why I do not want my hands to be tied. I do not want to be forced to give the flexibility at the core level, not the lower level. Therefore, I beg the noble Baroness to withdraw the amendment.
Baroness Meacher
My Lords, I thank all noble Lords on all sides of the House who have contributed to this debate—the Conservatives, the Liberal Democrats, the Labour Party and Cross-Benchers. It has been a very powerful debate and strong concerns have been expressed about the impact of this amendment. The importance of the amendment lies in the mass of cuts to disability benefits, housing benefits—virtually every benefit that one can think of. Therefore, what the House is looking for is some sort of security for these very low income people to ensure that they can try to stay out of the way of these sharks who charge them hundreds and hundreds of per cents of interest over a year. I thank very much everybody who has spoken, in particular the noble Baroness, Lady Lister, who rescued the situation that I am afraid I caused.
The Minister referred to people managing small nuggets of money and having difficulty doing that because, of course, there are payments that need to be made monthly. I think the Minister is not familiar with the ways of very poor people in terms of having all their little jam jars on the mantelpiece and putting bits of money in as they can through the month to enable them to pay these bills. Obviously, in the middle classes we do not do that sort of thing. The Minister is shaking his head, but I am afraid this is actually the way things work. Therefore, it is all about the drastic cuts in benefits.
The Minister has referred to 21st century solutions. In fact, driving people into the hands of these sharks who charge them hundreds of per cents of interest is not really a 21st century solution. The Minister talks about the ability to make provision in exceptional circumstances. I am afraid we are not talking about exceptional circumstances; we are talking about huge numbers of people who are going to find it extremely difficult to manage. I do not have a sense of absolute assurance that there will be provision for these people to manage. This is not playacting; these are real concerns about what is going to happen to large numbers of people facing these cuts over the years ahead in difficult times. I know that the Minister does not want me to test the opinion of the House, but I feel an obligation to do that. I wish to test the opinion of the House.
European Council
(13 years ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, it may be a convenient time for me to repeat a Statement made 18 minutes ago in the House of Commons on the recent European Council. As it is a Statement of some importance, it has been agreed through the usual channels that if, after 20 minutes, there is still a number of Back-Bench speakers who would like to take part, we will increase the amount of time available to them to up to 40 minutes. I hope that that is met with relief by Members of the House.
The Statement is as follows:
“With permission, Mr Speaker, I would like to make a Statement on last week's European Council. I went to Brussels with one objective: to protect Britain's national interest, and that is what I did. Let me refer back to what I said to this House last Wednesday. I made it clear that if the eurozone countries wanted a treaty involving all 27 Members of the European Union, we would insist on some safeguards for Britain to protect our own national interests.
Some thought that what I was asking for was relatively modest. Nevertheless, satisfactory safeguards were not forthcoming, so I did not agree to the treaty. Let me be clear about exactly what happened, what it means for Britain and what I see happening next. Let me take the House through the events of last week. At the Council, the eurozone economies agreed that there should be much tighter fiscal discipline in the eurozone as part of restoring market confidence. That is something that Britain recognises is necessary in a single currency. We want the eurozone to sort out its problems. That is in Britain's national interest because the crisis in the eurozone is having a chilling effect on Britain's economy too.
So the question at the Council was not whether there should be greater fiscal discipline in the eurozone, but rather how it should be achieved. There were two possible outcomes: either a treaty of all 27 countries with proper safeguards for Britain or a separate treaty in which eurozone countries and others would pool their sovereignty on an intergovernmental basis, with Britain maintaining its position in the single market, and in the European Union of 27 members.
We went seeking a deal at 27, and I responded to the German and French proposal for treaty change in good faith, genuinely looking to reach an agreement at the level of the whole European Union, with the necessary safeguards for Britain. Those safeguards—on the single market and on financial services—were modest, reasonable and relevant. We were not trying to create an unfair advantage for Britain. London is the leading centre for financial services in the world, and this sector employs 100,000 people in Birmingham, and a further 150,000 in Scotland. It supports the rest of the economy in Britain and more widely in Europe.
We were not asking for a UK opt-out, special exemption or generalised emergency brake on financial services legislation. They were safeguards sought for the EU as a whole. We were simply asking for a level playing field for open competition for financial services companies in all EU countries, with arrangements that would enable every EU member state to regulate its financial sector properly.
To those who say we were trying to go soft on the banks, nothing can be further from the truth. We have said that we are going to respond positively to the tough measures set out in the Vickers report. There are issues about whether this can be done under current European regulations, so one of the things we wanted was to make sure we could go further than European rules in regulating the banks. The Financial Services Authority report on RBS today demonstrates how necessary that is. We have problems in this country that this Government inherited and need to sort out.
And those who say that this proposed treaty change was all about safeguarding the eurozone—and so Britain should not have tried to interfere or to insist on safeguards—are also fundamentally wrong. The EU treaty is the treaty of those outside the euro as much as those inside. Creating a new eurozone treaty within the existing EU treaty without proper safeguards would have changed the EU profoundly for us too. It is not just that it would have meant a whole new bureaucracy, with rules and competences for the eurozone countries being incorporated directly into the EU treaty, it would have changed the nature of the EU, strengthening the eurozone without balancing measures to strengthen the single market. An intergovernmental arrangement is not without risks but we did not want to see that imbalance hardwired into the treaty without proper safeguards.
And to those who believe this was not a real risk, France and Germany said in their letter last week that the eurozone should work on single market issues like financial regulation and competitiveness. That is why we required safeguards and I make no apologies for it. Of course I wish those safeguards had been accepted. But frankly I have to tell the House the choice was a treaty without proper safeguards, or no treaty. And the right answer was no treaty. It was not an easy thing to do, but it was the right thing to do. As a result, eurozone countries and others are now making separate arrangements for the fiscal integration they need to solve the problems in the eurozone. They recognise this approach will be less attractive, more complex and more difficult to enforce and they would prefer to incorporate the new treaty into the EU treaties in the future. Our position remains the same.
Let me turn to what this means for Britain. Britain remains a full member of the European Union, and the events of the last week do nothing to change that. Our membership of the EU is vital to our national interest. We are a trading nation and we need the single market for trade, investment and jobs. The EU makes Britain a gateway to the largest single market in the world for investors. It secures more than half of our exports and millions of British jobs. And membership of the EU strengthens our ability to progress our foreign policy objectives too, giving us a strong voice on the global stage in issues such as trade and, as we have seen in Durban this week, climate change and the environment.
So we are in the European Union, and we want to be. This week there will be meetings in the councils on transport, telecommunications and energy, and agriculture and fisheries. Britain will be there as a full member at each one. But I believe in an EU with the flexibility of a network, not the rigidity of a bloc. We are not in the Schengen no-borders agreement and neither should we be, because it is right that we should use our natural geographical advantage as an island to protect us against illegal immigration, guns and drugs. We are not in the single currency, and while I am Prime Minister we will never join. We are not in the euro area bailout funds, even though we had to negotiate our way out of it. And we are not in this year’s euro-plus pact.
When the euro was created, the previous Government agreed there would need to be separate meetings of eurozone Ministers. It is hardly surprising that those countries required by treaty to join the euro chose to join the existing eurozone members in developing future arrangements for the eurozone. Those countries are going to be negotiating a treaty that passes unprecedented powers from their nation states to Brussels. Some will have budgets effectively checked and rewritten by the European Commission. None of this will happen in Britain.
But just as we wanted safeguards for Britain’s interests if we changed the EU treaty, so we will continue to be vigilant in protecting our national interests. An intergovernmental treaty, while it does not carry with it the same dangers for Britain, none the less is not without risks.
The decision of the new eurozone-led arrangement is a discussion that is just beginning. We want the new treaty to work in stabilising the euro and putting it on a firm foundation. I understand why they would want to use EU institutions, but this is new territory and does raise important issues which we will need to explore with the euro-plus countries.
So in the months to come we will be vigorously engaged in the debate about how institutions built for 27 should continue to operate fairly for all member states, and in particular for Britain. The UK is very supportive of the role the institutions play in safeguarding the single market, so we will look constructively at any proposals with an open mind. But let us be clear about one thing. If Britain had agreed treaty change without safeguards, there would be no discussion. Britain would have no protection.
Let me turn to the next steps. The most pressing need is to fix the problems of the euro. As I have said, that involves far more than simply greater medium-term fiscal integration, important though that is. Above all, the eurozone needs to focus at the very least on implementing its October agreement. The markets want to be assured that the eurozone firewall is big enough, that Europe’s banks are being adequately recapitalised and that the problems in countries such as Greece have been properly dealt with.
There was some progress at the Council but far more needs to be done. The eurozone countries noted the possibility of additional IMF assistance. Our position on IMF resources remains the one I set out at the Cannes G20 summit. Alongside non-European G20 countries, we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world.
But IMF resources are for countries not currencies. They cannot be used specifically to support the euro, and we would not support that. There also needs to be greater competitiveness between the countries of the eurozone. But let us be frank—the whole of Europe needs to become more competitive. That is the way to more jobs and growth. Many eurozone countries have substantial trade deficits as well as budget deficits. If they are not to be reliant on massive transfers of capital, they need to become more competitive and trade out of those deficits.
The British agenda has always been about improving Europe’s competitiveness. At recent councils we have achieved substantial progress on completing the single market in services, opening up our energy markets and exempting microbusinesses from future regulations. This has been done by working in partnership with a combination of countries that are in the eurozone and outside it.
Similarly, on this year’s EU budget it was Britain in partnership with France, Germany and Holland among others that successfully insisted on no real increase in resources—for the first time in many years.
On defence, Britain is an absolutely key European player, whether leading the NATO rapid reaction force or tackling piracy in the Indian Ocean, and our partnership with France was crucial in taking action in Libya. Britain will continue to form alliances on the things we want to get done.
We have always had a leading role in advocating the policy of enlargement, and at this Council we all celebrated the signing of Croatia’s accession treaty. That is one European treaty I was happy to sign.
Let me conclude with this point. I do not believe there is a binary choice for Britain: that we can either sacrifice the national interest on issue after issue or lose our influence at the heart of Europe’s decision-making processes. I am absolutely clear that it is possible both to be a full, committed and influential member of the European Union and to stay out of arrangements where we cannot protect our interests. That is what I have done at this Council. That is what I will continue to do as long as I am Prime Minister. It is the right course for this country, and I commend this Statement to the House”.
Baroness Royall of Blaisdon
My Lords, I thank the Leader of the House for repeating the Statement on the EU Council made today in another place by the Prime Minister. In this House, Leaders of the Opposition tend to open their statements on normal, regular EU Council meetings in roughly that vein. This was a normal, scheduled EU Council meeting, even if it was taking place at a particularly difficult time. But this was no normal, regular outcome to a normal EU Council meeting. What happened in Brussels in the early hours of Friday morning was momentous. The implications of the Prime Minister’s decision may well take years, decades even, to unfold fully. It is clear that Britain is now travelling in a different direction from the rest of Europe.
The reality of where we are is this: the Prime Minister has given up our seat at the table; he has exposed, not protected, British business; he has got a bad deal for Britain. The Prime Minister told us that his first priority at the summit was sorting out the eurozone but the euro crisis is not resolved. There is no promise by the European Central Bank to be the lender of last resort. There is no plan for growth. There is little progress on bank recapitalisation, so can the Leader of the House tell us why the Prime Minister’s promise of a so-called big bazooka did not materialise and what that means for Britain? At the summit that was meant to solve these problems, the Prime Minister walked away from the table.
Let me turn to where that decision leaves this country. Many people feared an outcome of 17 going it alone. Few could have dreamt of the diplomatic disaster of 26 going ahead and one country—Britain—being left behind. The Prime Minister talks of isolation in the national interest but the truth is that this is isolation against the national interest. The Prime Minister rests his whole case on the fact that 26 countries will be unable to use existing treaties or institutions. Can the Leader of the House confirm that Article 273 of the European treaty allows them to use the European Court of Justice, and no doubt they will use the Commission’s service and, yes, even the buildings? In case anyone had any doubt, it is confirmed by what the Deputy Prime Minister said yesterday that it clearly would be ludicrous for the 26, which is pretty well the whole of the European Union, to completely reinvent a whole panoply of institutions.
The Prime Minister claimed in his Statement to have done what he did because this treaty posed a grave threat to our financial services industry. Can the Leader of the House point to a single proposal in the treaty that would have entailed the alleged destruction of the City of London? What was the threat? Can the Leader of the House now tell us? In any case, there is nothing worse for protecting our interests in financial services than the outcome that the Prime Minister ended up with. Can the Leader of the House confirm that there is not one extra protection that the Prime Minister has secured for financial services?
The Prime Minister has laid great stress since Friday on his claim that British interests would be better protected as a result of his decision in Brussels. Can the Leader of the House tell your Lordships the basis for such a claim? Can he say precisely what safeguards the Prime Minister asked for? Can he say what mandate the Prime Minister had, and from whom, for making those demands? Was it the full Cabinet or the Deputy Prime Minister? The Prime Minister wanted a veto on financial services regulation but he did not get one. The Prime Minister wanted guarantees on the location of the European banking authority but he did not get them. Far from protecting our interests, the Prime Minister has left us without a voice and the sensible members of the Prime Minister’s own party, including some Members of your Lordships’ House understand this as well as anyone. We on these Benches agree with the remarks made at the weekend by the noble Lord, Lord Heseltine, when he said:
“You can’t protect the interests of the City by floating off into the middle of the Atlantic”.
What about the rest of British business—the part of British business that the Prime Minister does not seem to have been thinking about? There is a danger for it, too, in that the discussions about the single market on which it relies will take place without us—a point that Sir Martin Sorrell, chief executive of WPP, the advertising company, is only the first from the business world to be making today.
The Deputy Prime Minister clearly does not agree with the Prime Minister. He says that this outcome leaves Britain “isolated and marginalised”. Does the Leader of the House agree with that assessment? Can the Leader of the House explain how the Prime Minister can expect to persuade anyone else that this is a good outcome for Britain when he cannot even persuade the Deputy Prime Minister? The Prime Minister believes that this decision was best for Britain, but the Deputy Prime Minister does not. Which is the Government’s position on this issue—the Prime Minister’s or the Deputy Prime Minister’s? With the Deputy Prime Minister saying that he is “bitterly disappointed” with the outcome obtained by the Prime Minister, can the Leader tell the House how the coalition can work properly with, at its heart, such a fundamental disagreement on such a fundamental issue?
The Prime Minister claimed to have wielded a veto, but a veto is supposed to stop something happening—it is not a veto when the thing you wanted to stop goes ahead without you. How did we end up with this outcome? Can the Leader of the House confirm that what the Prime Minister actually proposed was to unpick the existing rules of the Single European Act signed by the noble Baroness, Lady Thatcher? Given that it was changing 25 years of the single market, why did the Prime Minister propose it in the final hours before the summit, and where were the Prime Minister’s allies? If the Prime Minister wanted a deal, why did he fail to build alliances with the Swedes, the Dutch, the Poles—our traditional supporters? If the Prime Minister really wanted to protect the single market and financial services, can the Leader of the House say why no guarantees were sought that these issues would only be discussed with all 27 members in the room?
Can the Leader tell us why the Prime Minister walked away from a treaty negotiation even before there was a text on the table on which we could have negotiated? The treaty will take months and months to negotiate. The Prime Minister could have reserved his position and continued to talk, as other countries have done. We believe the real answer is that the Prime Minister did not want a deal because he knew that he could not deliver it through his Back-Benchers.
I usually start my day by having a loud, one-sided argument with the “Today” programme, either with the presenters or coalition Ministers espousing policies with which I disagree because of the detrimental effect they will have on the people of our country. However, on Friday morning I was stunned into silence when I heard that the Prime Minister had wielded the veto at the European summit. This was such an extraordinary failure of diplomacy. I simply could not understand why a veto had been used over a treaty that as yet has no text and which we are not even being asked to sign yet, and how our national interests could be best served by absenting ourselves from future discussions and negotiations. The implications of our isolation are huge and we are in danger of being sidelined on a vast number of issues, including the single market.
We now have no influence at all on the final form and content of the new intergovernmental treaty. Why is this important? It is about the future stability of our continent, the future stability of the euro and therefore the future stability of the UK economy. Of course, people are right to be concerned about the European Union and the situation in the eurozone because these have great implications for our country. However, by absenting ourselves from the negotiations, by leaving an empty chair, we are abnegating our responsibilities. We should have a voice in the discussions but we are choosing not to use it. This is clearly not in our national interest.
Nothing has changed in terms of banking, financial services and hedge funds. The decisions will continue to be taken by qualified majority because financial services regulation is part of the internal market rules. However, I suggest that the 26 will be less likely to listen to our concerns in future. In addition, the 26 will naturally develop the habit of working together on a broad range of economic policy, and our voice—the voice of the most economically liberal and free market member state—will not be heard until most of the discussions have taken place.
I have always believed, and continue to believe, that as a nation we are strengthened by membership of the European Union, not just in terms of trade but of our place in the world. Suddenly, with one fell swoop of a veto that was never even used by the noble Baroness, Lady Thatcher, we were sidelined, and our role in the world was diminished. It could mean that in future the Americans think doing business with Europe means doing business with Berlin, Paris and Brussels rather than London. This is a bad deal, which we have ended up with for bad reasons, and it will have long-lasting consequences. It is a decision that means that we are on the sidelines, not just for one summit but for the years ahead.
The Prime Minister told the other place on 24 October:
“At the heart of our national interest … is not only access to that single market but the need to ensure that we are sitting around the table … determining the rules that our exporters have to follow. That is key to our national interest, and we must not lose that”. [Official Report, Commons, 24/10/11; col. 38.]
However, that is exactly what the Prime Minister has done. He has done what no Prime Minister has ever thought to be wise before: to leave the room to others, to abandon our seat at the table. The Prime Minister says that he had no choice, but he did. The Prime Minister could have stayed inside and fought his corner. He should have stayed inside and fought his corner.
This country will rue the day that the Prime Minister left Britain alone without allies and without influence. The outcome obtained by the Prime Minister is bad for business, bad for jobs, and bad for Britain.
Lord Strathclyde
It is always good to hear the noble Baroness, the Leader of the Opposition, on such fine form. I strained to hear, in all her words, whether or not the Labour Party would have signed up to the agreement on Thursday night, and I have no idea if anybody else heard the answer—I certainly did not. I invite the noble Baroness to nod, or shake her head, and she is doing absolutely neither.
Baroness Royall of Blaisdon
My Lords, we are not the Government. The noble Lord is in the Cabinet and represents the Government.
Lord Strathclyde
It is very hard for the noble Baroness to criticise when she is not able to tell us what her party would have done in our position. When the Labour Party was in a position to stand up for British interests, it gave away the opt-out on the social chapter, signed up to the Lisbon treaty and refused to ask the British people for approval, and gave away something like £7 billion of the rebate and got absolutely nothing in return.
The Prime Minister was clear all along that he would protect our national interests. That is exactly what he did. It is in our national interest for the countries with the euro to fix their problems. We said that we could only agree a new treaty if certain modest, reasonable and relevant safeguards were obtained—safeguards for the EU as a whole, not just for the UK—but we could not get those safeguards. That is why the Prime Minister did not sign the treaty.
The noble Baroness asked specifically about the EU institutions. At this stage it is very difficult to know exactly what role is proposed for the EU institutions, and therefore to take a view as to what will happen in the outcome over the course of the next few weeks.
The noble Baroness asked, though she did not put it quite in these words, what we fear from the existing treaty. What concerned us was the huge damage that could potentially have occurred to the single market and financial services. We stopped Britain from signing up to something that was damaging.
The noble Baroness asked what has changed since Thursday. The answer is, very little between Wednesday and Friday. We are still firmly part of the EU, as I, or rather the Prime Minister in his Statement, explained.
The noble Baroness asked what safeguards we were asking for. We were not asking for very much. We were asking for legal clarity, that decisions on running and extending the single market would not be taken away from the EU as a whole and be made instead by the eurozone-led group. On financial services we asked for practical and focused proposals to protect the openness and competitiveness of the single market for all, especially for those outside the euro. We also asked for a proper role for our national regulators, scrutinising institutions from outside the EU which are present in Britain but nowhere else, and for freedom for our regulators to impose additional requirements on our banks, if we in this House, and in another place, so chose.
These are the most humble safeguards that we could possibly have asked for. The noble Baroness should not be asking why, in her words, we were isolated, but why the 26 countries did not agree with us, or agree to give us these safeguards. The noble Baroness says that we are isolated and marginalised. But no, we are one of the biggest economies in Europe and one of the biggest contributors to the EU. We are one of the most successful countries, and we will continue to be so. That, my Lords, is why we did not sign the treaty.
Lord Dholakia
My Lords, I thank the noble Lord for repeating the Statement in your Lordships’ House. I have two questions. First, the decision taken by the Prime Minister requires not just a Statement but an early debate in your Lordships’ House. Will the Leader of the House consult the usual channels so that such a debate can take place well before the Christmas Recess? Secondly, the Chancellor is reported to have said that,
“his officials were putting unprecedented effort into planning for all eventualities”.
Will the Leader make available information to indicate how the interests of the City of London are to be protected?
Lord Strathclyde
My Lords, I wholly understand why my noble friend would ask for a debate; obviously this is an area of great interest. Perhaps I may suggest that the usual channels should meet, perhaps with representations from all parties and groups in this House, to see whether we can find a time. As the House knows, we will rise for Christmas next Wednesday. It might be a little bit difficult to find a suitable date before then, and in any case it might be better to meet again in January to discuss these issues. We had a very successful debate on 1 December but I am not averse to having a further one.
My noble friend also asked a question about the Chancellor of the Exchequer saying that he was planning for all eventualities. The reality of our decision not to join the euro means that, for some time now, the eurozone countries have developed and continue to develop their own arrangements. For the UK and other countries that have not joined the euro, that means being vigilant in protecting our national interests. That will remain the case, but it is nothing new.
We will continue to exert our influence on financial services legislation and on single market legislation more broadly. But I am sure that, for reasons which I am sure the House will understand, the Government do not comment on the detail of their contingency planning in order to ensure that we can best protect the interests of the whole economy, including the City.
Lord Kerr of Kinlochard
My Lords, I congratulate the Leader on the ebullience of his response to the noble Baroness, Lady Royall. Perhaps I may ask that he include a little more content in his answers to the questions that I have for him. First, will he confirm that since 1988, when at the initiative of Prime Minister Thatcher we secured qualified majority voting for financial services regulation legislation, the United Kingdom has never been outvoted on a financial services proposal in the Council of Ministers in Brussels? Secondly, will he confirm that the financial transaction tax is a complete red herring because, as a tax measure, it is on a unanimity legal base and if we do not agree with it, we can block it?
I have three questions on institutions. I listened with great interest to what the Leader said about the Government looking constructively at any institutional proposals. First, if the Government consider that tighter deficit control arrangements among eurozone countries could somehow create a threat to City interests—and I do understand the concern—would this threat not be best contained if the arrangements that the eurozone countries make were required not to undermine the single market, not to create barriers to trade between all member states and not to distort competition between them? He will recognise the language of Article 326.
Secondly, as the Government constructively consider institutional proposals, will the Leader consider Article 136, under which eurozone member states may go for tighter control of their deficits, and only they may vote on measures imposing such controls, but all member states are entitled to be present and able to defend their interests? Thirdly, will he confirm that it is still the Government’s view that the survival of the eurozone, and therefore the “remorseless logic” of fiscal union among eurozone member states, is an important UK interest and that we therefore wish to help the eurozone quickly reach effective, enforceable arrangements for tighter deficit controls?
Lord Kerr of Kinlochard
I am sorry. This may be unwelcome to the Tea Party on the Back-Benches opposite but the country wants to know the answer to these questions.
Would requiring the invention of intergovernmental arrangements, as the French always wanted, not hand them victory, and be a loss to all our natural allies, such as the Dutch, the Danes and the Swedes, as well as a loss to efficiency, and thus an own goal?
I have two questions on tactics.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, this sounds very much like a speech for the coming debate.
Lord McNally
This is a Question Time. Even though we have 40 minutes, we have already used five and are only on the second question. In fairness to the whole House, I think that the noble Lord should now sit down.
Lord Kerr of Kinlochard
May I ask one question of tactics? I am grateful to the noble Lord. Will he confirm that, exactly 20 years ago, John Major secured the social opt-out and the euro opt-out by attaching his conditions to the conclusion of the negotiation, where unanimity is required, and not to the convening of a negotiation, for which only a simple majority is required?
Lord Strathclyde
My Lords, I know that the noble Lord, Lord Kerr of Kinlochard, is trying to be constructive and helpful in guiding the Government through all this. He asked a number of questions, but I will not be able to answer them all in the time allowed. However, he is right on the financial transaction tax, and I am sure that he is right about us never being outvoted under QMV over the past 20 years. As for the question that he posed at the end about John Major and the opt-outs, I supported the opt-outs. The opt-outs were an excellent thing. However, as soon as the Labour Party got into office it got rid of the opt-outs, and it got absolutely nothing in return. We want something far firmer and longer-term than that.
There are two key questions. First, on the EU institutional proposals and whether we should consider using Article 136, it is, of course, still the earliest possible days in how all this plays out. Even the French President and others have agreed that this process will last until March. There are at least three countries that need parliamentary approval before they can sign up to these treaties, so there is plenty of time to look at these things.
As I said earlier, the exact role being proposed for the institutions is not yet clear to anyone. We will need to look carefully at the detailed proposals as they emerge to ensure that Britain’s interests are safeguarded. The noble Lord also asked about our view overall of the eurozone. Let me say most emphatically that we hope that the new treaty can play a significant role in stabilising the euro and putting it on a strong, sustainable path. That is in the interests of Europe, and it is in British interests as well.
Lord McNally
I think that it is the turn of the Labour Party, and then we will come back to the Conservatives.
Lord Mandelson
My Lords, people will differ in their view about whether the Government’s negotiating position last week was tenable or realistic. Will the Government reflect on the utterly shambolic way in which they prepared their position and sought support for their proposals at the summit last week? Why were the Government’s proposals only shared with the legal service of the Council literally the day before the summit? Why were they not shared with, and why was support not sought from, more than a handful of German officials? The French were not informed or consulted at all about these proposals. In view of such lamentable incompetence, is it really surprising that we ended up in a majority of one?
Lord Strathclyde
My Lords, I cannot agree with the noble Lord, even though he brings immense experience to this House. We believe that we issued every signal possible by the Prime Minister, the Foreign Secretary and many others as to what we regarded as vital British interests. In the run-up to last Thursday’s summit everyone should have been entirely clear what the implications of that were.
Lord Lawson of Blaby
My Lords, I warmly support my right honourable friend the Prime Minister. He took an extremely difficult decision in the circumstances, but it was the right one, and I have no doubt that it will increasingly be seen to have been the right one as time unfolds. Is it not clear that the misbegotten venture of European monetary union has already proved a massive disaster for the whole of Europe and that, furthermore, this particular agreement, if that is the name for it, which was made on Friday has not solved any of the problems? I do not think it can, because I think that it is doomed. Indeed, as the financial markets have made clear today, it certainly has not solved any of the problems. All it will do is create increasing divisions within the members of the eurozone. They will interpret it in different ways and are concerned about many different aspects of it. Differences will also arise between the Governments of a number of eurozone countries and the peoples of those countries. This is not clever. As for—
Lord Lawson of Blaby
Finally, perhaps I may commend my right honourable friend on being determined to protect the interests of financial services both in this country and in Europe. Unconsidered and malicious regulation will lead to financial services companies going not to other European countries but to Hong Kong, New York and Zurich.
Lord Strathclyde
My Lords, I thank my noble friend for his unqualified support for what the Prime Minister has done and I strongly agree with much of what he says. As I said to the noble Lord, Lord Kerr, we wish the euro well, and we wish it to succeed, because unless we resolve the crisis that is facing the eurozone it will have an extremely negative effect on the British economy. I also agree entirely with my noble friend on his last point about financial services. There is a view that even if we could veto the financial transaction tax, it would affect only the UK. It would be too easy for many companies and organisations simply to relocate to the rest of the world, so it would be a loss to Europe as a whole, not just London. That was why the Prime Minister was trying to defend the financial services industry right across Europe, not just in the United Kingdom.
Lord Skidelsky
My Lords, there are three questions which the Prime Minister ducked, and I hope that the Leader of the House will do better. First, in which paragraphs were proposals tabled which required the British to use their veto of the treaty? Will he enumerate the paragraphs to which we took objection? Secondly, what safeguards of our interests were we trying to secure? Thirdly, why could we not have reserved our position, since this was a very early stage in the whole process? As I said, the Prime Minister ducked those questions. I hope that the Leader of the House will be able to do better.
Lord Strathclyde
My Lords, I spelt out in some detail what safeguards we asked for in reply to the noble Baroness the Leader of the Opposition, so I will not repeat them. However, the noble Lord has asked a good question to which people will want to know the answer: why did we exercise the veto at the start of the process? It is my understanding that the French made it absolutely plain that under no circumstances would they accept the safeguards that the Prime Minister was asking for. At that stage, the Prime Minister had absolutely no choice if he was going to continue in good faith. That is why he took the decision that he did.
Lord Pearson of Rannoch
My Lords, my gratitude is exceeded only by my surprise. I trust that the Leader of the House will forgive me if I congratulate the Prime Minister on his courage in standing alone and on taking what I hope will be the first small step towards the lifeboats on the “Titanic” which is the EU. I have two short questions. First, where do the Government now stand on the 49 proposals for new Brussels legislation in the financial area, some of which will be very serious for our financial industries and taxpayers, and which are already in the pipeline under qualified majority voting? Secondly, the noble Lord has said that we do not know what is on the way, so do not yet know the precise answer, but can he confirm that the other EU countries cannot use the institutions of the whole EU to further their ill-fated plans to prop up the euro without our consent?
Lord Strathclyde
My Lords, on all proposals emanating from the Commission on financial services, we will vigorously defend British interests. We will continue to do so. Indeed, we believe that we have protected our interests in being able to do so by not signing up to the treaty. On the second question, I hope that I have dealt with EU institutions. We do not rule out the use of the institutions outside the treaty. After all, we have agreed to that before, along with all the member states, for the EFSF treaty where we thought that made sense. There are other intergovernmental treaties that became part of the umbrella of EU treaties, such as on Schengen, where we have an opt-out. So it is too early to give a specific answer to the noble Lord but he will understand that in our vision of a flexible Europe there should be enough room to have different treaties at different times to deal with different issues.
Lord Brittan of Spennithorne
Would my noble friend agree that, as financial services regulation can be passed without unanimity, the only reason such regulation has not been passed in a way that is unacceptable to this country over the last 30 years is because we have been able to get sufficient goodwill from our partners? In order to retain the goodwill which will continue to be needed in future, would my noble friend agree that it will be necessary—if not today, certainly soon—to make it clear that we are not going to try to stop the 26 going ahead by denying them the use of European Union institutions? That would be regarded as an act of great hostility and would deprive us of that goodwill in future.
Lord Strathclyde
My Lords, we very much want to retain goodwill and there is no reason why we should not do so. I say again that it is not yet entirely clear what role is being proposed for the EU institutions. We will want to look carefully at the details of what is proposed. No doubt we shall do so over the course of the next few months.
Lord Davies of Stamford
My Lords, does it not beggar belief to suppose that anybody could be so stupid or incompetent, if he really believed that there was a threat to national interests from a prospective change in financial service regulation in the EU, as to engineer a situation in which henceforth such regulation will be discussed and in practice decided in a context in which we will not even be in the room? Is it not absolutely clear that it was not national interests at all that drove the Prime Minister but party political interest and the desire to curry back the favour of the Tory Eurosceptics who gave him such a hard time last Wednesday? Does the Leader not think that the country is intelligent enough to see through the propaganda that they have heard this afternoon and to realise that the Prime Minister has played with the national interest for party political reasons?
Lord Strathclyde
My Lords, only the noble Lord could come out with that particular quip. Of course we feared the dangers to our national interests or we would not have said what we did. It takes two to agree but it also takes two to disagree. The other 26 could have wholly accepted that we had a deep concern about our national interest and agreed with us. Then there would have been a treaty of the 27.
Lord McNally
I am trying to keep count here. We will have the Liberal Democrats and then the Cross-Benchers.
Lord Ashdown of Norton-sub-Hamdon
My Lords, given that we have now cast the veto without stopping anything; that in the name of protecting the City of London we have made it more vulnerable; that we have in a time of crisis given greater incentive to investors to put their money in northern Europe than in isolated Britain; and that we have reduced our leverage in Europe and diminished our voice in Washington, is it not now necessary that we take every step to get ourselves out of the position that we find ourselves in, make ourselves relevant to the argument and get back in the game? How do we intend to do that? Does my noble friend realise how much depends for this country—and for this Government—on our success in doing so?
Lord Strathclyde
My Lords, I cannot agree with my noble friend. We believe that we are very firmly in the game. Our voice is not diminished. It is strong. We have defended vital British interests and we will continue to do so in the single market at the level of 27.
Lord Hannay of Chiswick
My Lords, would the Minister confirm that, had the texts before the Council in Brussels been agreed by 27, not one word would have applied to this country because they solely concerned tighter arrangements for the eurozone countries? If that is so, it is a little hard to see why they were contrary to our interests. Would he also now perhaps answer the question that has been put to him quite a lot of times? There was a tried and trusted route used by the noble Baroness, Lady Thatcher. In 1985, when she was voted down on the procedural issue of starting a treaty-changing negotiation, she nevertheless decided that her Government would participate in that negotiation. She stated that if it did not come out in a way that safeguarded British interests, she would have no hesitation in vetoing it at the end. In the end it came out for British interests. Why on earth did we not do that this time?
Lord Strathclyde
My Lords, my right honourable friend the Prime Minister made an entirely appropriate and sensible decision on Friday night not to agree with the treaty that was going forward. He did so because he believed that vital British interests were at stake. Contrary to what the noble Lord said, our view is that the new treaty would have completely reshaped the whole basis of the EU treaties. We would have been dragged into a whole series of changes and evolutions that would not have served our interests well. That is why we vetoed it.
Lord Harrison
My Lords, would the Minister give one clear, crystal example—
Lord Clinton-Davis
The complacency of the Leader of the House is mind-boggling. Has he not managed to discomfort the majority of the Liberal Democrats? He appeals to the worst instincts of the British people. As far as I can see, there is to be no repatriation of powers, no European Union allies and no real protection of the City. The Government have not been courageous but desperately cowardly and, most of all, barren of influence. Is that not the case?
Lord Strathclyde
My Lords, I am bound to say that I disagree with all of that. This was not about party but national interests. It was not about—what did he say?—playing to the worst aspects of the British character. That is quite wrong. This is the problem that noble Lords opposite find themselves in. Time and time again, they feel that agreeing with our European partners on everything will protect our long-term interests. We disagree.
Lord Trimble
My Lords, we are not absolutely sure of this but is it not likely that the issue will come back to the European Council if there is any attempt or desire on behalf of the eurozone people to make use of the institutions of the Union? When the issue comes back, we will be there making our point of view known. Did the Leader of the House hear on Radio 4 this morning the comment by the distinguished American economist that if you are not prepared to walk away you will have no leverage?
Lord Strathclyde
My Lords, I did not hear that interview, but my noble friend is right. In any negotiation, particularly one as important and controversial as this one, you have to take a decision right at the beginning on whether you are going to negotiate in good faith. As I have already said, we put forward a proposal that was relatively humble, it was not agreed with, and that is why we said no.
On the question of EU institutions, I think I have covered that very fully this afternoon. Of course, it will come back as an issue and we will take a decision in due course.
Lord Bilimoria
My Lords, with the veto of the treaty, we are losing sight of the essence of this; it is about sorting out the eurozone mess. I have two questions. First, the Government seem to be encouraging greater fiscal union among the eurozone countries to sort out the eurozone problem. Surely the Government accept that the euro is dead in the water—in fact, it is under water—and that these countries will never be in sync, and fiscal union and handing of sovereignty realistically will never happen. If it were to happen, those countries would unite even more and we would be even more isolated.
Secondly, the Prime Minister insinuated in his Statement that the veto was almost a negotiating tactic, and that, if we did not use it, we would not be taken seriously as being able to protect our own interests. Surely, if that is the case and we intend to go back to the table, we might be seen not as a bulldog but as a dog returning with its tail between its legs.
Lord Strathclyde
My Lords, the noble Lord says that the eurozone is in a mess and that it will not succeed. That is not the view of the British Government. We believe that the countries of the eurozone have got themselves together. It is true that they face a crisis, but the issue that needs to be resolved is how to solve that crisis, and to do so as quickly as possible, since, as every week goes by, it becomes more expensive to be able to do so. We think that sensible steps were taken forward over the last few days, but only the markets will decide whether the euro is to succeed. We believe that it is in British interests that the euro should succeed, that there should be a greater fiscal union and that many of the things that were proposed late on Thursday night are the right things for the EU to do.
Secondly, as to question of whether this was a negotiating tactic by the Prime Minister, it most certainly was not. Of course we understand that at this level these summits end up in negotiations. Indeed, we put forward a very fair proposal that we wholly expected the other European countries to agree to. They did not do so, and that is why the Prime Minister could not agree.
Baroness Morgan of Ely
My Lords, does the Minister agree that, if the Prime Minister had not attempted to pacify his party when he was first elected by leaving the European People’s Party—a group to which both Chancellor Merkel and President Sarkozy belong—and hooked up with some pretty unsavoury parties from Eastern Europe, he would have been invited to the pre-summit meeting in Marseilles where he could have made his case? He locked his party out of the room and now he has locked the country out of the room.
Lord Strathclyde
My Lords, it is a nicely put question, but I cannot agree with the noble Baroness. We left the EPP for very good reasons to do with a different philosophical view of where the EPP was heading. I also cannot believe that, if we had been present at the Marseilles meeting, Thursday night would have ended up any differently.
Baroness Williams of Crosby
My Lords, does the Leader of the House recognise the huge damage done to Britain’s influence and reputation far beyond the European continent, as any reading of recent journals in the United States or, for that matter, in Russia indicates very clearly? Would he agree that, in the negotiating document that was put to the 26 by the Prime Minister, there were a number of issues that were already on the way to being resolved in ECOFIN, and some of them had already been resolved in ECOFIN 2009? Would he also agree that there were some issues that related to unanimous votes like the financial transfer tax, and therefore there was no threat to British interests? Finally, going back to the question asked by my noble friend Lord Ashdown, I ask whether the Prime Minister and the Government will now recognise fully the need to make a gesture towards the crucial importance of saving the eurozone, which is in our interests as much as in theirs, by making clear that the European institutions will not in any way be blocked from being part of the outcome of that difficult decision?
Lord Strathclyde
My Lords, I really do not believe that Britain’s influence or reputation have been affected in any way negatively by what was done at the end of last week. If anything, they have been enhanced. A British Prime Minister laid out very carefully what he was going to do to protect British vital interests. He went and negotiated, and when he could not get what he believed was right, he said, “I am not going to agree”. That is a position of courage, and he was absolutely right to make that decision.
On the question of the institutions of the EU, which I know are of great interest to many Members of this House, at this stage it is too early to take a view of what is proposed or all the detail of what is meant and what EU institutions are going to be asked to do at what stage. We will look very carefully at these proposals as they come out.
Baroness Symons of Vernham Dean
My Lords, there has been a lot of controversy about when exactly the British proposals were put before our colleagues in the European Union. May I follow up on the question raised by my noble friend Lord Mandelson and ask when exactly were these proposals put to the French?
Secondly, the text of the Statement twice refers to an intergovernmental arrangement being “not without risks”. Can the Minister tell us what are the risks that the Government acknowledge are inherent in the intergovernmental position that is now before us?
Lord Strathclyde
My Lords, I cannot give an exact date as to when the proposals were put to the French, but, if I can find out, I will be very happy to write to the noble Baroness. However, the generality of the Prime Minister’s position has been well known for some weeks, and particularly over the course of the days leading up to the summit. Of course, even within an intergovernmental treaty, there are some risks attached. To some extent, we will have to wait to see exactly how that works out. As to the kind of risks, I think that the noble Lord, Lord Kerr, spelt out that there are some countries that might feel the need to go along with what the big countries in the intergovernmental treaty want. Again, we shall have to wait to see. Nobody should be under any illusions that the British Government will not continue to fight very strongly for vital British interests, whether it is within an EU treaty or an intergovernmental treaty.
Lord Howe of Aberavon
My Lords, if I may strike a slightly more optimistic note, is my noble friend aware that our achievement in getting major headway on the Single European Act at the Luxembourg summit followed immediately after the Milan summit, in which our agenda scarcely received any attention at all? That is another rather surprising matter that went ahead without us having much enthusiasm for it. Is my noble friend aware that the future is not as gloomy or as difficult as some people might believe?
Lord Strathclyde
My Lords, I very much welcome the positive note that my noble and learned friend brings to all of us. He is also right about the Single European Act, which was a vital and game-changing initiative. I agree with him that nothing is ever quite as bad as you think it is, and perhaps some things are not quite as good as you think they are either. Nevertheless, the Prime Minister made the right decision on Thursday night and, if he were asked again, he would do the same thing.
Lord Wigley
My Lords, if the Prime Minister had secured the safeguards that he sought for the financial services, would he have supported the treaty going forward?
Lord Forsyth of Drumlean
May I congratulate my right honourable friend the Prime Minister on standing up for Britain and speaking for the people of this country, as opinions show? May I also congratulate the Deputy Prime Minister on establishing a new principle that a weekend is a long time in politics?
Lord Forsyth of Drumlean
I think this may be the last time that I get called. On the substance of the meeting, why did no one address the immediate crisis, which is what to do about repaying the debt? If anyone is isolated, is it not Germany because Germany needs to realise that she needs to write a cheque or allow the European Central Bank to be the banker of last resort and print money? We will otherwise go into deep crisis. This crisis is being used as an excuse for further integration and as such is deeply irresponsible.
Lord Strathclyde
My Lords, I entirely agree with my noble friend that the substance of the issue is to solve this economic crisis—an economic crisis which has a chilling effect on the rest of Europe, including this country. In the first instance in the short term, you have to have a firewall of money to stop contagion. Secondly, we accept that there need to be clearer fiscal rules so that countries cannot get into the trouble they have got into in the past. Thirdly, far more work needs to be done on competitiveness within Europe and between countries of the European Union. It is the only way that we are going to succeed in the long term.
Lord Lea of Crondall
Are the Government aware that the British press—the Daily Mail, the Daily Express and the Telegraph—are becoming more and more xenophobic in the way they treat this question? Is the Minister content with this trend whereby British public opinion seems to think that a “fight them on the beaches, fight them in the air, no surrender” policy is reasonable and one with which we can make friends and influence people around Europe?
Lord Strathclyde
My Lords, I do not at all agree with the noble Lord. This is not about the newspapers. I think that the British people generally accept and support what the Prime Minister did because they understand that he was standing up for vital British interests.
Lord Elystan-Morgan
My Lords, the Leader of the House has time and again stated the clear intention of Her Majesty’s Government to assist the eurozone. Does he accept the stark reality of the situation; namely, that 17 countries with different economies and utterly disparate economic circumstances formed a eurozone but, when bad weather came along, disintegration became a very real possibility? In practice, the only two real possibilities are either that there should be a draconian situation of considerable discipline imposed on the eurozone or that there should be a United States of Europe or a Republic of Europe.
Lord Strathclyde
My Lords, that is a huge question and one that requires a much longer debate on another occasion. However, I agree with the noble Lord that there is a mess. There needs to be discipline; whether that is in a United States of Europe is another question altogether.
Lord Garel-Jones
My Lords, does my noble friend agree that under the terms of Article 136 of the treaty of Rome, to which the United Kingdom is a signatory, those members of the eurozone have been entitled, and are entitled—we wish them well in doing so—to take measures specific to those member states whose currency is the euro, so in that sense nothing has changed? Furthermore, is it not the case that under Article 136, those measures must be taken ensuring that they are compatible with those adopted for the whole of the Union, of which the United Kingdom continues to be a member? Does he not agree that what we are witnessing is not the end of the European Union or of the eurozone, and it is certainly not the end of Britain’s influence in those matters?
Lord Strathclyde
My Lords, this is a good note on which to finish. I thank my noble friend for his constructive comments, with which I agree.
Welfare Reform Bill
(13 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
18:48 - Division on Amendment 4 - Ayes: 187 / Noes: 189 - Amendment 4 disagreed.
19:35 - Division on Amendment 5 - Ayes: 152 / Noes: 182 - Amendment 5 disagreed.
Baroness Grey-Thompson
“(ba) any amount of support for disabled children included under section 10 should be no less than the amount that was provided under the benefits and tax credits system prior to the introduction of the universal credit,”
Baroness Grey-Thompson
My Lords, this amendment would ensure that the disability additions for children provided under the universal credit are not cut compared with the disability additions provided through the current benefits and tax credits system. Families with children who have a disability are likely to have much higher costs than other families. I would briefly like to explain the current system. Disability living allowance is there to make a contribution to those costs. In addition, the means-tested system has also offered extra support to these families to help with these costs. Families with children who are judged to have the highest needs and receive the highest rate of the care component have an extra £76 added to their child tax credit to help with those costs. Families with children receiving any rate of DLA, except the highest rate of the care component, have an extra £54 added to their child tax credit to help with those costs.
The Government have announced that the disability elements of the child tax credit will be replaced with a disability addition and higher addition within the universal credit. However, all those who receive the higher addition will receive only half of the current rate. If the child is in receipt of the higher rate of the care component of DLA, the family will receive the higher disability addition, worth £77. Children who are registered blind will also now qualify for this higher addition. This means that those families who have a child eligible for the higher addition will receive £1.50 a week more than current claimants. However, households with disabled children who are not entitled to the higher rate and who claim benefit after the measure is brought in will receive only the disability addition worth about £27, which is about £27 less than the current rate.
As can be seen, the disability addition halves the level of support provided under the current system, so most families with a disabled child will lose around £1,400 a year. I have a number of concerns regarding which families will be affected by this. Only families of children in receipt of the higher rate of care component of DLA and severely visually impaired children will receive the higher addition. All other families of disabled children receiving DLA will receive the reduced level of support. In order to receive the middle rate of the care component of DLA, children have to need help frequently throughout the day or through the night. Those care needs have to be substantially in excess of the average care needs of a child the same age. To receive the higher rate of the care component, the child has to have frequent needs through the day and the night. Many children with a very significant level of impairment such as children with Down's syndrome or children who are profoundly deaf are likely to be in receipt of the middle rate of the care component as there is no reason why they would be likely to have substantial care needs in excess of other children at night. They will thus only be entitled to the lower addition.
Baroness Campbell of Surbiton
My Lords, I am happy to put my name to the amendment of the noble Baroness, Lady Grey-Thompson. Losing 50 per cent of the support currently provided by the disability element of child tax credit will be extremely difficult for many families who face considerable extra costs as a result of having a disabled child who may not meet the severe disability threshold.
The severity of one’s disability should not be the overall defining factor for eligibility to this financial entitlement. The impairment severity is a highly unreliable measure for financial support needed by families to offset the extra costs of raising these children. All manner of disabled children face the extra costs associated with overcoming socioeconomic and environmental barriers. Medical textbook impairment measures are only part of the picture. For example, according to the textbooks, as a child I was considered to be at the most severe end of the scale—very severe. This is still the case today. A person with moderate autism or cystic fibrosis, however, is deemed much less severe. But if you ask my mother who, in my school class, needed financial support the greatest, she would say without a doubt, “Lorna, Mark and Peter”. All would be deemed to have moderate impairments today. We all came from similar economic backgrounds; working class and money was extremely tight. So why were their needs greater than mine?
My mother explains much better than me—as always. Lorna, because she had a hole in the heart and needed expensive extra warmth, good nutrition and babysitting, as both parents needed to work to survive and no family friend or family members felt confident enough to care for her. They were scared: she had a hole in the heart; she was going to die at any moment. Actually she was not, but that was the assumption. Mark, because he had moderate autism, whose particular behaviours could not be financially accommodated by his disabled mother, who herself needed support financially to raise his other two brothers as well. Finally, Peter, whose asthma meant several emergency admissions to hospital per month making it almost impossible for his single parent mother, with two other young siblings, financially to bear the cost of transportation to the hospital and childminders for the other siblings. None of these children is considered to be textbook severe, yet compared to my family their disability-related financial need was much greater.
I believe the Government’s obsession with aligning certain benefits to be really hazardous—unintentional, of course. Such assumptions are not based on practical evidence, as we realised when the Government attempted to align hospitals with residential care homes when looking for areas to cut the significant DLA budget. Please do not let us make the same mistake again.
The noble Baroness, Lady Grey-Thompson, has given reams of evidence from various notable NGOs and charities which I do not need to repeat. Before finishing, I did contact the eminent Dame Philippa Russell for advice as to what to highlight today. Noble Lords will know of Dame Philippa. She is famous for advising successive Governments for nearly 40 years on disabled children, and she ran the Council for Disabled Children for 30 of those years. She is currently the chair of the Prime Minister's Standing Commission on Carers. She said to me:
“I am very keen (with my two sector hat on) to stress the need to move away from this categorisation of people as having severe, moderate, low needs. None of those categories make sense without screeds of explanation that tax credit assessors simply will not have. They completely negate the idea of prevention and support”.
Let us listen to the experts and accept the amendment, which I feel makes sense.
Baroness Thomas of Winchester
My Lords, I spoke to a similar amendment to this in Grand Committee, but it was grouped with various other amendments and the debate was therefore not as clearly focused on disabled children as it might have been. In this amendment, the focus is simply on ensuring that disabled children do not receive less support in universal credit than they did under the benefit and tax credit system. The two noble Baronesses from whom we have just heard said it all and I shall not repeat what they said. However, it may be worth reinforcing how this works.
The disability elements of child tax credit will be replaced under universal credit with either a disability addition if the child is on the lower rate of the care component of DLA, or a higher addition if the child is in the middle or top rate of the care component. Children who are registered as blind will now qualify for the higher addition. The difference in rates is significant. As the noble Baroness, Lady Grey-Thompson, said, the lower addition will be worth about £27 instead of the current £54. We know that children will still receive DLA, even after other disabled people have transferred to the personal independence payment, and there are three rates of care component within DLA—lower, middle and higher. In the benefits system, the middle and higher rates usually go together, but under universal credit the middle rate will be aligned with the lower rate. This means, as we have heard, that children with significant impairments, such as those with Down’s syndrome or who are profoundly deaf and who now receive the middle rate, will in future be entitled to only the lower rate. Thus, their families will lose out.
The bar is set pretty high for children to qualify for the highest rate of the care component. They either have to be visually impaired or need not only frequent care or continual supervision by day but prolonged or repeated care during the night. This means that children who are, say, registered as blind will be entitled to £77 a week, while children with Down’s syndrome or who are profoundly deaf will receive about £26 a week.
The rationale for the change is, as we have heard, supposedly to align the rates of support for adults and children and to simplify the additions—as well as to target those in greatest need. However, the gateways for children and adults are so different that the alignment is not really relevant. As for targeting those in greatest need, it is a matter of judgment as to whether it is better to help a greater number of families with disabled children or to give fewer families greater help. What worries me most is that families with disabled children are disproportionately more likely to live in poverty, as many studies have demonstrated, and as the noble Baroness, Lady Campbell, said. Parents of disabled children are less likely to be in work, so the so-called tidying-up and aligning exercise is likely to push already poor families deeper into poverty.
I would very much welcome some help regarding the transitional arrangements, which I failed to grasp when my noble friend described them in Committee. Perhaps he can tell us about them in his reply. We are having to cope with a difficult question.
Lord Wigley
My Lords, I support the amendment of the noble Baroness, Lady Grey-Thompson, which has been eloquently supported by the noble Baronesses, Lady Thomas and Lady Campbell.
I had an opportunity at Second Reading and in Committee to refer to the extra cost and burden placed on families with disabled children as a direct result of their disability. The extent of the extra costs will obviously vary with the extent of the disability. One does not argue about that, and the previous system has contained gradations that allowed that to happen. One accepts that those in the greatest need should have the greatest support. None the less, there are those in the intermediate category who have substantial needs and they would, without financial help, undoubtedly feel enormous stress arising directly from their financial position.
If the figures quoted by the noble Baroness, Lady Grey-Thompson, of a loss of up to £1,400 a year are true, such a sum cannot be ignored, and the stress that that would cause to the parents and families of disabled children would be immense. That surely cannot be allowed to happen. If as many as 100,000 families could be affected directly—presumably not to the extent of £1,400—that is an immense number.
I put it to the Minister that if one went out on to the streets in the towns and villages of these islands and asked whether people would be prepared to pay a little extra in tax to ensure that families with disabled children would not lose out as a direct result of government policy arising from this legislation, people would say yes. Surely in those circumstances, the Government must look at their priorities and ensure that families with disabled children are not left to carry the can for the financial mess in which we find ourselves.
Baroness Wilkins
My Lords, I strongly support the amendment and urge all noble Lords to do so. Are we really becoming such a mean-spirited nation that we are willing to take away funding from less disabled children as the only means by which more severely disabled children can benefit? That is what the Government are proposing to do with this clause, although we know from a recent Children’s Society report that 40 per cent of disabled children live in poverty, and that if there is more than one disabled child in a family the poverty rate increases to 50 per cent. As the noble Lord, Lord Wigley, suggested, might there not be some people with broader shoulders who could contribute and endeavour to raise all disabled children out of poverty?
In order to be eligible for the higher rate, a child must require care both day and night. Many disabled children with significant needs will not qualify. Think what the loss of that money means for a family on a very low income—that £1,400 a year would amount to £22,000 over the life of a disabled child. It can mean not buying another box of incontinence pads when your allocation runs out, so that the mother spends exhausting hours changing and washing bed sheets, day after day. It can mean not being able to replace a sibling’s toy that the disabled child has broken, perhaps in a temper tantrum or frustration or because he or she cannot control their movements. It means intolerable strains on families that too often lead to family break-up.
Much of the Bill is about changing behaviour by the imposition of penalties. However, having a disabled child is not a lifestyle choice. Parents desperately need financial help in order to give their disabled child an equal chance in life, or are we really willing to let this legislation increase the shameful number of thousands of disabled children already living in poverty?
Lord Boswell of Aynho
My Lords, it would be impossible to have served, as I have for a number of years, as party spokesperson on disability issues and maintain a continuing interest in my party’s disability group without a degree of sensitivity to the problems of disabled children and, of course, to those of their families. The noble Baronesses and noble Lords who have spoken about this issue are clearly right in drawing the House’s attention to it. All that I would say is that we need to pause for a moment in looking at the overall implications of these proposals, because my understanding of the position is that relatively—broadly over the past decade, and it may properly be attributed to the previous Administration—there has been significant acceleration in the support given to disabled children, reflecting the pressures to which we have referred that have caused their benefit rates to increase faster than those of adults.
The Government’s proposal is not, and indeed was not presented as being, simply a matter of cutting back the support for disabled children. The other aspect of the Government’s proposals is the alignment of rates, reflecting the position of adults and including some with more severe disabilities. All I would say, with respect, to those who have moved this amendment is that if we are going to make proposals that will increase or maintain the public cost in relation to children, it will be very difficult to provide the equivalent or additional increases for adults. Given the economic state of the country, we cannot proceed through the Welfare Reform Bill with what I might call the “highest common factor” approach to benefits of all kinds. We need the most appropriate and targeted system. I say that not in derogation of the case that has been made but simply with reservation about its sustainability.
There may be a glimmer of hope—indeed, there is already a chink of precedence—in relation to the arrangements for transition and run-on to the new system. I know that the Government have already indicated that they will maintain DLA with its three levels in relation to children rather than transfer them all to the personal independence payments. That is a start. The key to this—and this will not be the only case in the matters that we will hear tonight—is that there should be appropriate and sensitive transition arrangements so that people do not lose significant or very large sums in years one or two, but that nevertheless the overall objective—rebalancing the system and maintaining some coherence in public revenues and expenditure—is maintained.
Baroness Howe of Idlicote
My Lords, I support the views that have been expressed today. They were not as clearly enunciated in Committee, as we have already heard, but they have been spelt out pretty effectively today. I also accept that the money has to come from somewhere. The important thing may be the transition period and keeping an eye on just what the effect of the transition period is. However, when one thinks that 100,000 disabled children will be less well off as a result of some of these changes, one becomes worried. Four in every 10 lives will be lived in poverty—that was the figure given by the Children’s Society.
Although I accept that it is a difficult decision for the Government to make, I would like to think that there are other pockets from which rather more could be produced. I urge the Minister to look hard in those directions.
Baroness Turner of Camden
My Lords, I, too, support this amendment. I have been reading in newspapers lately that parents of disabled children have begun to get very worried lest the changes being brought about by this Bill reduce the benefits that they already get. This has made a number of them extremely nervous, with the result that we have had a fair amount of lobbying from the organisations that represent disabled people.
One of the attractive things about this amendment is that it seeks to ring-fence the benefits that people have at the moment so that they do not decrease as a result of this Bill. We have heard today from a number of speakers that bringing up disabled children is really quite difficult. Very often parents give up their work in order to care for them. It is often also extremely expensive to look after disabled children. It therefore seems to me that there is some merit in ring-fencing what people have at the moment, so that people who look after disabled children at least have some assurance that they are not going to be worse off as a result of the benefits being introduced under the welfare Bill before us this evening.
Baroness Sherlock
My Lords, I will detain the House only very briefly, but I feel I should say a word of support, having put my name to this amendment, put down by the noble Baroness, Lady Grey-Thompson.
I wish to say just three things. First, we have heard that the effect of these cuts is really quite severe. The noble Lord, Lord Wigley, is correct: parents could find themselves losing up to £1,400 a year, even if they have a family with just one disabled child. That is a very significant loss.
Secondly, the case for doing this is weak. The only case that I have heard over money is about alignment with adults. We have heard a very compelling argument from the noble Baroness, Lady Grey-Thompson, as to how that simply is not the case.
Finally, there is the question of money. I understand that the Government have said that the cuts are not intended to save money but to redistribute it, so that the money saved by these cuts will be used to raise the level of support for adults in the support group. This amendment lays down a marker; by saying that the support given to disabled children cannot be reduced below the current level, it makes the Government think again about that particular brand of rough justice. There is no particular reason why, in making these redistributions, disabled children should be asked to pay for money that is being given to other groups of disabled people. This amendment is not seeking an investment of billions of pounds; it is simply laying down a marker and saying that, when decisions are being taken, this group cannot be expected to bear that cost.
Lord McKenzie of Luton
My Lords, we support Amendment 4, so comprehensively moved by the noble Baroness, Lady Grey-Thompson, and spoken to by a number of noble Lords who are very knowledgeable about these issues. It deals with just part of the inequity introduced by the restructuring of support for disabled people: that affecting families with children. We will debate further issues affecting disabled adults and the removal of the severe disability premium in due course.
Like other speakers, I welcome proposals to increase, over time, the levels of benefit for those in the support group, but we do not think that this should be paid for by drastic cuts in support provided for families with disabled children. Leaving aside transitional protection, my figure is that some 200,000 could lose £27 per week. Whether it is 100,000 or 200,000, it is many children indeed.
We have heard about transitional protection, particularly from the noble Lord, Lord Boswell, but transitional protection is of no use to new claimants. It might stop you losing what you have, but it does not help if you are claiming for the first time. As it is a cash protection it will in any case reduce in real terms over time. Transitional protection will also cease on change of circumstances—the noble Baroness, Lady Thomas, pursued this point—and we have yet to receive clarity on quite what this means.
We are told that the restructuring of these benefits is to simplify the system and that aligning the rates of support for adults and children will ease the transition for disabled children into adulthood, but how does the Minister respond to the point that there is not true alignment? There is also the issue that the gateways are different: for adults it is the WCA process; for children, as now, it is via the DLA. Children who are severely visually impaired will receive the higher addition—a move that we welcome—but it is by no means certain that adults who are severely visually impaired will be allocated to the support group under the WCA. Furthermore, as the noble Baroness, Lady Grey-Thompson, pointed out, disability disregards in the universal credit proposals add to the support for adults.
In Committee, we had some knowledgeable contributions from noble Lords about the costs that families with disabled children face. We know that families with disabled children are disproportionately likely to be living in poverty. In Committee, we heard the very personal experiences of the noble Lord, Lord Wigley. We also heard detailed analysis. We have heard further details today from the noble Baronesses, Lady Grey-Thompson and Lady Campbell, and my noble friend Lady Wilkins. I shall list some of the potential extra costs faced by families: heating, which is a big issue; sensory equipment; special toys; special diet; transport; extra and special clothing; and help with siblings, who will not have their parents’ time and attention. To this must be added the lost opportunity for parents—or at least for one of them—to work.
For those in work, costs can be higher because of the increased costs associated with care and transport for disabled children. Those costs do not only or most heavily fall on families with the most disabled children—that point was tellingly made by the noble Baroness, Lady Campbell. As framed, the amendment need not have overall cost implications for the Government, but it would of course cause a rethink of the restructuring, a restructuring that currently redistributes resources away from children and towards adults.
Reversing a benefit loss of £27 a week for some of the neediest families in our country must be a priority. Failure to do so will inevitably increase poverty at a time when the Government are reneging on their commitment to upgrade the child element of the child tax credit by more than inflation—a measure that they proclaimed in their 2010 Budget would ensure that effects on child poverty would be statistically insignificant but that is a cloak that they can no longer hide behind.
If the noble Baroness is minded to test the opinion of the House, we will support her on the amendment.
Lord Freud
My Lords, I appreciate absolutely the intention behind the amendment, which is to protect the amounts currently paid to support disabled children. I also take the opportunity to thank the noble Baroness, Lady Wilkins, for her letter, which covers this matter. I will also address some of the points that she raises in this amendment.
This is not easy. We have a fixed financial envelope as we face these difficult times and we have to target resources, so we have some real choices to make. Our approach is to focus our support on the most severely disabled people, ensuring that we have the best support possible for those with the greatest need. I make it absolutely clear that we are not looking to make any savings in the changes. We are making a series of changes to make a coherent system; we are not taking money out of the system. We firmly believe that aligning the extra amounts payable for disabled children with those of disabled adults is the right and fair thing to do. We are aiming to focus our support for disabled people on their need, not on their age.
We know that the movement between support for disabled children and adulthood can be very difficult. The report, Improving the Life Chances of Disabled People, shows that the drop in income from childhood to adulthood can cause financial difficulties for young disabled adults. We want to smooth the transition from childhood to adulthood by removing that artificial divide. This is clearly also essential if we are to protect work incentives in adulthood.
To pick up the point raised the noble Baroness, Lady Grey-Thompson—that amounts for children and adults are meant for different things—support for families with disabled children is not limited to the disability addition. Families with disabled children also receive a disregard. The purpose of the disregard is to make work pay for the household. If the parent of a disabled child is working, they will qualify for a disregard at the appropriate rate for a couple or a lone parent. Our latest assumptions about earnings disregards mean that families with children will always have a disregard at least as high as the disability disregard.
I can take noble Lords through some of the figures. Large figures have been cited for the number of disabled children affected, which have not taken into account the overall effect of universal credit. When you consider what happens to a family with a disabled child where someone in the family is in work, the total return for that family goes up from £383 to £416. That is the effect of all the elements of universal credit coming together. That is for the disabled child, not the severely disabled child, who clearly gets more.
The noble Lord, Lord McKenzie, made a point about the number of children in working families receiving the disabled child element of child tax credit, which is 157,000, which is substantially more than the ones who are not working. The equivalent figure is 131,000. I share with other noble Lords a concern to get this right. When you look at the figures of what is happening under universal credit, a large number of the children about whom we are worried, when you look at the whole package, will benefit. For the minority who see a decline, there will be behavioural changes as they move into the other category, where they can—I accept that they cannot always.
To pick up a question from my noble friend Lady Thomas about what happens in universal credit to children on the middle rate of DLA care, they will get the lower of the two rates of current child tax credit. We are carrying forward the rule that the highest rate goes to those on the highest rate of DLA care.
As I have continuously reiterated through our debates, we are overhauling the entire support, so it is important not to fixate on one aspect of universal credit but to consider the entire package for families. That is why we need to look at that rather than to concentrate on individual components.
Lord Wigley
The Minister has acknowledged that whereas some will benefit from other sources of money and that that will counteract the loss of disability benefits, there will be a category who, unless something else is done, will lose out financially. Does he have any proposals to provide a safety net for those people?
Lord Freud
Yes I do, and I will come back to that if I may, because a whole series of questions was raised about transitional protection, which I need to deal with comprehensively.
Our impact assessments made clear that, overall, families are more likely to be better off on universal credit. In addition, departmental modelling estimates are that the impact of the reform of disability payments on the number of disabled children living in relative poverty will be negligible. We must remember that support for families with disabled children is provided by the universal credit package as a whole.
On the absolute figures of support, under universal credit, an out-of-work family with a disabled child will receive just over £8,000 a year in benefits for their child once universal credit has been introduced. That compares to just over £4,000 for an out-of-work family with a non-disabled child and about £1,000 for a family who receive only child benefit. The figure for a child on the severely disabled level is £12,000. That is the order.
Let me now turn to the really important point raised by many noble Lords about taking money away from families who have learnt how to build their lives around it. That is exactly why we have introduced transitional protection. My noble friend Lord Boswell has referred to an assurance on no losses for years one and two. The way transitional protection works is that where circumstances remain the same, people’s payment level is protected on a cash basis. That means that families currently receiving child tax credit will not see a cash reduction at all as a result of the move to universal credit, and we will provide cash protection for as long as the universal credit award is less than the previous benefit entitlement. I hope that represents a level of ring-fencing that the noble Baroness, Lady Turner, will recognise.
Baroness Hollis of Heigham
Perhaps I may ask the noble Lord about cash protection. Does that mean it will or will not be inflated each year by CPI?
Lord Freud
No, clearly there is an erosion factor. Cash protection does not also inflate it. But the point about the universal credit is that it is structured to provide adequate support for families overall, and on top of that where there are differences we have a reasonably long period of transitional protection.
We simply cannot maintain the existing rates for disabled children if we are going to increase the rates for severely disabled adults. I know it is hard to absorb lots of figures at once, but let me just try and capture it. What we are looking at is fundamentally paying a severely disabled child or adult £77 once the universal credit is introduced. That is a big leap for severely disabled adults today who are on £32.35. That is where we are trying to move to, and that is where we are trying to put our resource.
Lord McKenzie of Luton
Can the noble Lord say by when he expects to have moved to that figure of £77 for adults?
Lord Freud
As we move people on to the universal credit and take people off the other systems we will be gradually putting people on to that amount. But I am better off writing to the noble Lord on that particular matter of timing because it is quite a complicated equation. Basically, we are looking to maintain an overall fixed level of spend in this area, and as we pull down one element we can move up the other elements—that is essentially what is happening, so there is a periodicity there.
We are trying to get money to the most severely disabled in our community. There is a real decision here: maintaining the existing rates for children without doing that—without finding this money—would cost an extra £200 million a year. I simply do not have that money. If this amendment is passed, it will not be possible to increase the addition for the most severely disabled people to £77. So there is a decision to be made here: do you agree with the way we want to rebalance the system—
Lord McKenzie of Luton
I am sorry to interrupt the noble Lord again, but is it not right that that equation only follows if you look at those two together? You do not have to operate within that envelope; there are other envelopes, as my noble friend Lady Sherlock mentioned in her contribution.
Lord Freud
That is the envelope in which we are operating. If I could find £200 million more to add to that envelope then I could do it, but we are not in that position. As noble Lords know, we have put a lot of money into the universal credit. The overall gross figure going into people’s pockets—the poorest people in the country—every year once we get universal credit in is £4 billion a year. Of that £2 billion is net extra; £2 billion is through a more efficient system. That is the money we have found; that is the overall envelope that we are operating in. I do not have any more money, and there are some very difficult choices.
The question is this: does the noble Baroness want to maintain the rates for moderately disabled children at the expense of raising the limits for severely disabled people? That is really the juggle that we have to do. As I have said, this is not easy; these are difficult judgments. It has been very difficult to get to this position, and that is the decision that we think is best for people who we really want to help. We want to focus our support on the most severely disabled people regardless of their age; to simplify and to align the extra payments for disabled people; and to smooth the transition into adulthood. That is fundamentally the reason why I ask the noble Baroness to withdraw her amendment.
Baroness Grey-Thompson
My Lords, I thank the Minister for his response and I thank all noble Lords who have contributed to the debate on this vital amendment. The restructuring of support for disabled adults and children is taking money from disabled children who need it. The Government say that it is not a money-saving measure and that its main aim is to simplify the system and to give more to adults with the severest levels of impairment. However, the simplification is superficial and fails to give more to those with the greatest needs. I think that we should remember the words of the noble Baroness, Lady Campbell of Surbiton, who quoted Dame Philippa on the need to move away from categorising people based on severity of impairment.
Additionally, this measure is going to cause significant hardship to families with disabled children, who are already disproportionately likely to be living in poverty. It will make the situation much worse for those who are likely to have higher costs—those in the very group of adults whom this measure is meant to help. I believe that the Government’s proposals will undermine their own prevention agenda. There is no reason why an adapted form of the current levels of financial support could not be introduced into universal credit, with extra help being given to the support group when new moneys allow. It would not cost anything and would mean that families with disabled children were not among the biggest losers under the new system.
We have often heard it said that the devil is in the detail, and I agree, but I believe that the Minister is also making grand assumptions about the ability of parents of disabled children to work. We have heard much about the transition but this is about the new children who will be coming into the system. I believe that the measures that the Government are proposing will push more children into residential care.
I thank the Minister for asking me whom I would be most likely to support. That is not a question that I would like to answer on my own, and I therefore wish to test the opinion of the House.
Baroness Hollis of Heigham
My Lords, I am moving this amendment precisely because I strongly support universal credit. If the House agrees with me in supporting universal credit, I suggest in all decorum that it should also support this amendment.
At the moment, council tax benefit is a social security benefit—a national benefit—which responds to local need. The DWP reimburses local authority spend. If, for example, a factory closes, the need for council tax benefit in that community may increase, and that need is met because the benefit is national and needs-led. Sensibly, therefore, it should be part of universal credit, along with JSA, housing benefit, ESA and so on, because the need for council tax benefit runs alongside those other benefits and should be related to family need, as universal credit will be. Instead, the DWP’s need to include CTB within universal credit appears to have been trumped by the demand of the DCLG and other departments that it form part of a completely separate agenda—the localism agenda. These agendas—universal credit versus localism—clash, and so far the wrong decision has been made.
What is DCLG proposing? In future DCLG will award a fixed-rate grant to local authorities from which it will have to construct its own council rebate scheme. What is wrong with that, your Lordships may think? Quite a lot, and there are three reasons in particular. First, instead of one national scheme that is common across the country, understood by everyone—claimants, local authorities, staff and advice centres—there will be 400 different schemes. There will be a separate and different scheme for every local authority in the country. Norfolk, for example, will have seven schemes that are all different.
Think of the staff resources involved, when we are trying to save money, in constructing and running such schemes, especially when local authorities already outsource much of their work. Think of the complexity of giving advice to people who come into, say, the Norwich Citizens Advice office from all over Norfolk, trying to understand UC and then having to add on seven different taper arrangements according to which district council they come from within Norfolk. All of the admirable simplicity of UC goes out the window. Think of the possibility of underpayment, overpayment, error or even fraud because there is no standard scheme. Given that there will not be enough money to go round, why would any local authority encourage take-up? They will not.
We in this House are rightly building these problems out of universal credit, and the Minister is to be congratulated on that. But we will be building them back in again if this amendment is not accepted. DCLG has balkanised council tax benefit in the name of localism. It recognises this, and now DCLG urges local authorities to do the opposite of what it was calling for—to share common schemes—in which case, why balkanise it in the first place? It will be financed by a fixed grant and will not be needs-led in future. If a factory closes and local need increases, the grant will not go up. Presumably everybody gets less. Or, it will have to be topped up by the council tax that is already suffering 30 per cent cuts in services and a freeze. Think, my Lords, for a moment if that applied to jobseeker’s allowance, and that what you have if you are unemployed in your district depends not on your needs, or on any national standard, but on the needs of everyone else in your district. Your payment would go up and down according to local employment or unemployment figures in your district.
DCLG in its consultation paper recognises this risk, so it suggests—hopefully, idealistically—that local authorities should voluntarily help each other and bail each other out. Oh yeah? Why balkanise, as DCLG requires, if local authorities are too small to bear the risk, as DCLG recgonises? Worse, that fixed grant will be cut by the DCLG by 10 per cent, perhaps more in future. There will be a 10 per cent reduction in council tax benefit per head, but pensioners are to be protected, so the cuts that fall on others will be 20 per cent. However the council, under pressure from local charities, could decide to protect, say, disabled people—I could understand why they would—and give them the full CTB. The more vulnerable families you protect in devising your own local scheme, the more that families in low-paid work—the last man standing, so to speak—carry the cuts.
The Association of North-East Councils has calculated that once vulnerable families are protected, other working-age claimants will face cuts of up to 50 per cent in their council tax benefit. Then work will not pay and universal credit will be a waste of time. Severe cuts in other words are being smuggled in under the drapery of localism but are they essential? At the same time DCLG is spending £250 million on reinstating weekly bin collection or £800 million to freeze council tax, so that my council tax bills are protected while those with much lower incomes on council tax benefit will face cuts of 50 per cent.
Finally, what you will get in CTB will, of course, be determined by your income. Families facing the means test of universal credit will now find that they also face a second means test—that of CTB. How on earth will the value of moving into work be calculated, which is what universal credit is all about, when people face two means tests, two tapers—one with national rules and one with 400 separate local rules—that are layered on top of each other? As the noble Lord, Lord German, rightly said in Committee,
“if you believe in a universal credit, and you have a postcode lottery for what that amount of money might mean to you, how on earth are you going to be able to judge whether or not work is beneficial for you?”.—[Official Report, 6/10/11; col. GC 381.]
Exactly so; I could not have put it better.
UC was designed to bring all working-age benefits together into one so that every one of us would know what we would get and why work paid. Under the localism agenda, council tax benefit—a social security benefit—is being plucked out of UC, thereby destabilising it and balkanising the system. Forgive me, but this is administrative madness. All of this is being proposed in the name of localism but do local authorities want it? City authorities, like the one I used to lead in Norwich, hate it, as they will see some of their poorest citizens unable to pay their council tax and facing arrears and debts. Equally, some small rural districts are now wondering where they will get the staff resources to devise and run their own in-house schemes. East Devon district council’s cabinet has said that the scheme means: “costs, costs, costs”. A councillor said:
“This should be strangled at birth. It is a disgrace . . . We haven’t got the resources and we haven’t got the time”.
Nearly 6 million people receiving council tax benefit will in future not know what they will get because they will have no entitlement—just a handout from the local authority whose generosity or meanness will vary from district to district, from factory opening to factory closure, and from year to year. We took social security away from local authorities when we finally abolished the Poor Law after the Second World War. Now one of the worst effects of the Poor Law—the postcode lottery—is being reinstated for council tax benefit under the name of localism. That is wrong. To add extra means-testing on top of universal credit’s means-testing is insane. It will undermine universal credit without a shadow of a doubt. I and almost every other Member of your Lordships’ House want to see it working, so what then is the point of this Bill? Worse, this guise of localism will make poor people poorer, and local authorities, in whose name this is being done, will be powerless to help them. Council tax benefit needs to be brought back within UC. I beg to move.
Lord Newton of Braintree
My Lords, I shall be brief because I know that the House wants to get on. I am a supporter of the universal credit, so I am opposed to anything that is inimical to its success, and the exclusion of council tax benefit is exactly that; it is totally inconsistent with the Government’s proposals.
It is an open secret, although I do not expect the Minister to confirm this from the Front Bench, that the DWP does not want council tax benefit to be excluded, that there has been a battle with the DCLG and that for the moment, although heaven knows why, the localism agenda has prevailed. When anyone asks about 400 different social security systems, we are told that it will not be allowed to happen—so the localism agenda, we are told, will not be allowed to be localism because the local systems will be made to come into line in some sensible way. That is daft, but it is what we are confronted with.
I have two or three points to make. This is said to be cash limited, and indeed a cut. What is going to happen in an area where there is a big factory closure and the money has already been spread out? Does everyone already on council tax benefit have to take a cut in order to finance those who have just come on to it? In areas where, say, a big Tesco opens and 400 new jobs are created, does everyone get a bonus because a lot of people have been taken off council tax benefit? It is mad.
My first constituency boundaries straddled a parish boundary; number 36 Havengore was in Braintree and number 34 was in Chelmsford, but the houses were semi-detached. Can we really have totally different benefit systems for the people living in those two houses? Again, this is mad. Do the local councils want it? The answer is no, it is a nightmare for them. We should stop it, and if this amendment is pressed to a vote, for the first time today I shall not be able to vote for the Government.
Baroness Meacher
I support the amendment of the noble Baroness, Lady Hollis, on the importance of including council tax benefit within the universal credit structure and payments system, and I reinforce what the noble Lord has just said. As always, the noble Baroness has set out the arguments extremely cogently, and I know that the Minister needs no reminding of these arguments from me. I want only to reinforce the important point about the resentment of local authorities and their resistance to the proposal to leave them with the council tax benefit problem.
The head of the benefits department of a particular local authority explained on Friday that because they have so little time to change the council tax benefits system radically, they are going to have to use the current system with a 20 per cent taper. This means that they will have to impose a minimum percentage that every claimant of working age will have to pay. This will apparently vary from one local authority to another, depending, as the noble Baroness, Lady Hollis, has said, on the numbers of pensioners living in particular communities and of other vulnerable people who will have to be protected. This particular local authority will have a basic council tax rate of 25 per cent that will have to be paid—a sort of poll tax of 25 per cent of council tax. The local authority in question is far from happy about that, and I understand, as others have said, that anger on the part of local authorities is widespread.
Lord German
My Lords, I do not intend to turn my back on what I said in Committee; in fact, I intend to repeat some of it, so I hope that noble Lords will bear with me. If you believe that council tax benefit is a universal benefit and part of the social security system, clearly you need to ensure that it is delivered everywhere within our country and on a uniform basis so that people will know the rules and the benefit they are going to get.
The noble Baroness, Lady Hollis, has talked about England, but I want to talk, as noble Lords know I frequently do, about the other parts of the United Kingdom that will also be affected by this. I start with a big question to the Minister. He wrote to me about this issue when I asked him how it would work in Wales and Scotland. I was told that the money would be given with a 10 per cent saving—that is a crucial sentence because we can reflect on that and on how we can manage the budget within a council tax benefit structure—and that the saving would be given to the devolved Administrations to enable them to bring forward their own arrangements for help with council tax.
The next sentence was about the powers that they would need to bring forward their own arrangements for help with council tax, and it says that these arrangements must fall within existing competence. This is a crucial question; if there is one thing that I know about, it is that the demand for competence is very important. Clearly it is not primary competence because it is not primary legislation that is being transferred, but executive devolution powers must be being given to both the Scottish Parliament and the Welsh Assembly to be able to achieve that. I would like to know which executive powers have been given, because both Scotland and Wales could refuse to have those powers, which would be a perfectly reasonable thing for them to do. If they think that this is not something that they can manage or want to do, they can refuse to take those competences.
Even if Scotland were to accept those powers, and I have made this point in Committee, I wonder what game we would be playing into in Scotland alone. Remember that the basis of the Scotland Bill that is before your Lordships’ House is that social security should not be devolved; it is part of the glue that holds the United Kingdom together. Say that you do not give the social security competence but you obviously give some competence to the Scottish Government. If you give them that money, my guess, and it is purely a guess, is that they will take the money, convert it by putting a bit of Alex Salmond paste on top of it and make it into a Scottish system. They will then use that as an argument to say, “If you think you want a social security system in Scotland but that we can’t cope with it, here we are, doing a better job than they are in England”. There is a danger to the unity of the United Kingdom in this matter, which is why we ought to consider very seriously what the effects of this change will be.
I am told that Clause 11 gives powers to take the competences back. There is no doubt that there is considerable anguish about this matter, but if you believe that it is a universal system, surely it makes sense to use the funding as part of the universal benefit but also to take the hit that has to come with the budget reduction. After all, if the DCLG is going to be able to allocate the money with the budget reduction, that budget reduction could just as easily be done by the DWP. Obviously it would not be a nice, friendly or comfortable process, but as with all levers you have not damaged the social security structure of this country at the same time.
My question to the Minister is this: if you are to retrieve these competences from Wales and Scotland, which competences are you retrieving, and where does Clause 11 give the power to the other place to bring back the powers into the social security structure? The most important feature that we have to decide here in your Lordships’ House is whether it is better placed, with the appropriate cut, inside the universal credit or inside a social security system for our country as a whole, or whether we wish absolutely and once and for all to abolish council tax credit and have what might be called a local support scheme in whatever the local authority can provide with the money that is provided for it if you cannot even call it a benefit.
I worry greatly about this prospect, and I ask my noble friend the Minister to reassure me that we can bring this back and to tell me how we can bring it back and how we get it back from Scotland and Wales.
Lord McKenzie of Luton
My Lords, we support this amendment, and consider, as my noble friend Baroness Hollis does, that council tax benefit should be dealt with as part of the universal credit.
My noble friend delivered a devastating critique of the proposal in Committee and has done so again today. Indeed, I thought I saw the Minister nod in approval at one stage. If he did not nod in approval at my noble friend, perhaps he did for the contribution of the noble Lord, Lord Newton.
Lord McKenzie of Luton
Very good. Of course, this issue is having to be considered, as has been said, against the backdrop of the overall funding for council tax benefit being reduced by 10 per cent but with commitments to protect awards of council tax support for pensioners and possibly for other vulnerable groups. This means, as has been said, that support for working age claimants is to be squeezed dramatically.
The consultation on this proposition, the Localism Bill, closed two months ago, and perhaps we can know when the Government’s response to this will be forthcoming. Quite apart from the administrative consequences of the proposed localism of the benefit, there is, as my noble friend pointed out, a fundamental difference compared with what happens currently. Under present arrangements, council tax benefit is demand led. Whatever the calculation shows is due is made available to the claimant, by offset against the council tax bill, with full reimbursement from the DWP. It is, as my noble friend explained, the AME—annually managed expenditure—bit of government spending.
This will in effect change under a localised system. If claims under a localised system exceed the budgetary amount locally, authorities will have much more limited resources from which to meet the increased demand. They might dip into reserves, if they have any, or they might make the system less generous in a subsequent period. They might switch expenditure from other local authority spend, but given the savage cuts to local authority budgets that have been made recently, there does not seem to be much room for manoeuvre to do that.
It is suggested that local authorities might approach a localised system on some consortium basis, and therefore that other local authorities will help out. I suggest that the prospects for this are not strong. One consequence of these constraints will be that local authorities will inevitably budget on a prudent basis, building in contingencies that will further diminish the resources available to claimants of a localised system. That indeed is what the risk assessment will dictate.
The main reason advanced by the Minister, Grant Shapps MP, in evidence to the CLG Committee for the localisation of council tax benefit was that for local authorities,
“the big advantage is that they will have a stake for the first time in what people who live in those homes are doing; in other words, an incentive to help get the person back into work”.
This is a rather strange view: that it takes possible savings from a benefit pot for local authorities to have an incentive to help people back to work. It is a view that ignores, or is ignorant of, the proactive and imaginative work that many local authorities do to help local residents into work. However, in any event, the driver for having clear incentives to support work is supposed to be the universal credit itself. If there is any incentive in the system, there is a risk that local take-up campaigns will diminish, as any wider take-up will come from the resources of the council.
We have yet to know how much central direction there will be for a localised system. If the Government run true to form, there will be quite a lot. This was certainly the outcome of the Localism Bill, which espoused localism and gave additional powers to local authorities but came with lots of strings attached, as the noble Lord, Lord Newton, will recall, despite some of those strings being removed in your Lordships’ House. There will clearly have to be central direction if the position of pensioners is to be protected, and some form of direction to deal with tapers and work incentives.
We understand, to follow the line of questioning by the noble Lord, Lord German, that the Minister will say that he cannot support a change to the universal credit to include a council tax benefit now. However, there is nothing to stop it being included in the future, as the Bill now stands. If this is the Government’s position, will the Minister confirm that he considers that regulations under Clause 11 will be the route to effect this?
The noble Lord, Lord German, also raised some fascinating questions about how this works for Wales and Scotland. Can the Minister say whether the proposition that he will advance tonight will be, “Don’t worry about it now—you can get it all back in due course.”? What changes would have to be made to the systems that are currently being built to put this into effect? Including council tax support as part of universal credit is of course not without its challenges, particularly the payment issue, so perhaps we can hear whether there has been any thinking around that matter.
However, we support my noble friend’s strong contention that the sensible, practical and principled way to deal with council tax benefit is to include it as part of universal credit. We believe that the Minister, a very logical person, must have come to the same conclusion. If a strong vote today will help his cause, we are more than prepared to play our part.
Lord Freud
Beware Greeks. My Lords, noble Lords will be aware from previous debates that we are proposing to abolish council tax benefit before the introduction of universal credit and replace it with local schemes of support. Localising support for council tax is part of a wider policy of decentralisation, which will give councils increased financial autonomy and a greater stake in the economic future of their local area. Localisation also reintroduces the link between council tax levels and the costs of providing support, thus reinforcing local financial accountability.
This reform will give local authorities a significant degree of control over how a 10 per cent reduction in expenditure on the current council tax benefit bill is achieved, enabling them to balance local priorities and their own financial circumstances as they see fit. This saving is an important contribution to the Government’s vital programme of deficit reduction. We need to ensure that localisation supports the improved work incentives that universal credit will bring. However, the Government believe that the key principles required to incentivise work can be delivered through local schemes with the help of technical guidance provided by central government. Local authorities will have a greater stake in getting people back into work than ever before.
Lord McKenzie of Luton
My Lords, perhaps the noble Lord would reiterate a point. I thought I heard him say that a Bill for the localisation of council tax benefits or whatever it is called will be introduced in this Session. Does he have any more precise detail?
Lord Freud
I am afraid that I do not have any more precise detail but, although I do not think that in the consideration of the Welfare Reform Bill I can say soon, I can probably say that it will be between January and May or June, or something like that. I have no more precise information.
Baroness Hollis of Heigham
My Lords, I thank everyone who has taken part in this brief expedited debate. I beg your Lordships on the government Benches to hear the words of the noble Lord, Lord Newton, in their ears; namely, that 400 schemes are inane, insane, unwanted and unwelcome, and that council tax benefit should be brought back to where it belongs in social security in order to make universal credit work. The Minister tried to suggest—I would say manfully—that it is too late to change. I do not believe that. That is why we have this House of Lords and this Report stage. Universal credit will not come online until two years’ time in 2013. If your Lordships today support what I believe is the real view of everyone in this Chamber—that council tax benefit should be part of social security—they will support this amendment today. I should like to test the opinion of the House.
Saudi Arabia
(13 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Ahmed
To ask Her Majesty’s Government what is their assessment of the human rights and political situation in Saudi Arabia.
Lord Ahmed
My Lords, I would like to thank everyone taking part in this debate. I very much look forward to hearing the contribution of the Opposition Front Bench, as well as the Minister’s response.
On Saturday 10 December, we celebrated the 63rd anniversary of Human Rights Day. A few days before, we also received Amnesty International’s report on Saudi Arabia, Repression in the Name of Security. There have been a number of reports—from Human Rights Watch, the Islamic Human Rights Commission and others—in relation to the crackdown and torture with impunity.
I have great love and respect for the 27 million citizens of Saudi Arabia, as well as the holy places in both Mecca and Medina. For this reason, I believe that it is imperative to speak out against the oppressive, dictatorial and brutal practices exercised by the regime, which interprets its tribal Bedouin culture into religious doctrine in a way which is, in my view, quite contrary to the Sharia and to the practices of Islam.
Over 1,400 years ago, the Prophet Mohammed—Peace be upon Him—worked for a noble lady called Khadijah, who was an entrepreneur as well as a respected businesswoman in Mecca. His daughter Fatima and his wife Ayesha—Peace and Blessings be upon Them—both practised fully in life with men at work, at war, in the community and in business. They expressed their views and opinions, even sometimes against the khalifas—the rulers, who were companions of the Prophet—without fear of being prosecuted or locked up.
Today, women are not allowed to drive or vote; women remain subject to discrimination both in law and practice; women are not allowed to travel, engage in paid work, participate in higher education, or marry without the permission of a male guardian. I am sure that the Saudi authorities will say that women will be gaining their right to vote, even though there is no democracy or freedom in the country. The consultative Shura Council is still fully appointed by the king. Women “gaining the right to vote” will merely join their male counterparts in being able to elect only half of the local municipal seats—the other half of which are also appointed by the king. Women still do not have the same rights as men.
Some 1,400 years ago, the Prophet Mohammed—Peace be upon Him—said that no Arab is better than a non-Arab, and vice versa. Yet, in modern Saudi Arabia, the practices of pre-Islam are rampant, with white Europeans and Americans treated in a superior manner to Asian and African workers doing the same job. They justify this by stating that people are paid in accordance with the national salaries in the place of their origin. Asian and African people are treated with pathetically low wages, and are held in overcrowded accommodation with few or no basic facilities. Even the hard-working cleaners of the holy places are paid less than £100 per month in the most oil-rich country of the world.
Islam never practised sheikhdoms and kingdoms, the culture of the current Arab countries. Islam was based on democratic elections for candidates with the ability to perform and who had in mind the best interests of society. Even khalifas like Omer, Usman and Ali were elected by the consensus of the people.
According to the latest Amnesty International report, since March 2011, the Saudi Arabian authorities have launched a new wave of repression in the name of security. They have cracked down on demonstrations, protests against human rights violations and calls for reform. The number of people arrested is reported to be between 10,000 and 30,000. According to the Islamic Human Rights Commission, there are more political prisoners in Saudi Arabia today than there were in the USSR at its height. The actions of the Saudi authorities are a cause of concern for us all as they breach basic human rights. Thousands of people have been detained over the past decades on security grounds, many of them held for years without charge or trial, or tried and sentenced in secret with no means of challenging their detention. Some 63 years after the Universal Declaration of Human Rights and 1,400 years after the last sermon of the Prophet Mohammed—Peace be upon Him—guaranteeing rights for men, women, children, minorities and the weak, it shocks me that thousands of political prisoners are being held in Saudi Arabia without being charged or convicted.
One of those prisoners is an Islamic scholar who has been detained because he criticised the Ministry of the Interior for its handling of detainees. According to Human Rights Watch, Dr Yusuf bin Abdullah al-Ahmad was detained without charge the day after he published his criticism, apparently as a direct result of his internet post. The Islamic teacher, who is a Sunni and teaches at Imam Muhammad bin Saud University in Riyadh, also criticised the arrest of women who went to the ministry on 2 July and, as on previous occasions, protested peacefully against the long-term detention of their relatives.
There are many illegal imprisonments, including those of British citizens such as Abdul Hakim Gilani, who was recently released from prison due to the campaign run by Al Karama, a human rights organisation, after six years of terrible ordeal due to his political beliefs. Political prisoners include human rights activists, lawyers, members of political parties, religious scholars, bloggers and individual protesters. I can list many names which are all available on the internet and have been circulated by human rights organisations to expose the reign of terror in Saudi Arabia. Since 2001, abusive counter-terrorism methods have been used against political opponents of the regime and anyone expressing concerns in relation to their right to be able to express freely and without fear of prosecution their right to vote and to live in accordance with their traditions.
Noble Lords may be aware that Amnesty International has expressed deep concern in relation to a new anti-terror law which has been formulated. It will be used to silence discontent in the kingdom. For example, it will be a terrorist crime if you are said to have harmed the reputation of the state or its position. “Questioning the integrity of the king or the crown prince” will be punishable by a minimum of 10 years’ imprisonment, while holding a placard could result in a three-year sentence. Already people are tried and held in secret; people are sent to prison for “re-education” or “positive brainwashing”. Torture and other ill-treatment remains rife, and confessions are forced out of detainees using beatings, electric shocks and other forms of torture.
I am fully aware that the Kingdom of Saudi Arabia has more oil than any other country and that we depend on oil. I am fully aware of Saudi Arabia’s financial and political influence in the west and I have occasionally been told by colleagues about our interests, but in my view the principle of defending human rights is and will remain at the very highest level, and higher than any other issue. The Saudi authorities claim that they are now the “Arab moderate camp” and should be supported by the west without much reform or change to their way of governance, just because they claim that they provide consistency and security in the region. But we have supported the Tunisian people, and rightly so. We have just spent over $200 million as well as killing thousands of people in Libya to get rid of the tyrant Muammar Gaddafi. We have supported the people of Egypt even though Hosni Mubarak was a safer bet. We are supporting the people of Syria because of the oppressive tactics of Bashar Al Assad. We must not stay silent in the face of abuses of human rights and lack of political rights in Saudi Arabia by the Al-Saud family. Britain along with other countries should stand up and support the human rights and equality movements which are our basic principles. Our values of defending civil, political, social and economic rights should be universal and one.
Finally, I would like to ask the Minister: how many British citizens are held in the kingdom of Saudi Arabia and what representation Her Majesty’s Government have made to the Saudi authorities regarding this matter. Would he be prepared to support the isolation of those countries which use torture with impunity? Will Her Majesty’s Government support the following requests from Amnesty International, which I support: immediately release all prisoners of conscience, such as those held solely for the peaceful exercise of their rights to freedom of opinion, expression, peaceful assembly or association; end all arbitrary arrests and detentions; provide prompt and public trials meeting international standards of fairness without recourse to the death penalty for all detainees charged or held, including on suspicion of terrorism-related offences, or else release them; investigate thoroughly and independently all allegations of torture and other ill-treatment and bring those found responsible to justice?
It is important that we ask for considerable amendment to the draft penal law for terrorism crimes and the financing of terrorism and bring all of Saudi Arabia’s terrorism-related laws and practices into line with international human rights law and standards. I believe that we have a duty to uphold international law regardless of the perpetrators and their influences on western society. The people of the Middle East will say that Britain operates a double standard in relation to human rights if we remain silent over our friend’s actions. I believe that Saudi Arabia has an important role to play in the Muslim world and that if we fail to encourage wide-ranging reforms and respect for international norms, we will be failing in our long-term duty to create a peaceful world.
Lord Ahmad of Wimbledon
My Lords, perhaps I may say, in a personal moment of reflection, that it is a great pleasure to follow the noble Lord, Lord Ahmed, because he has told me that since my appointment to this House he follows me on every list by accident of my surname, which uses the letter “a” as opposed to his which uses the letter “e”. Nevertheless, it is a pleasure to follow the noble Lord in this debate.
The issue of human rights in Saudi Arabia is one that is very pertinent not just to the Middle East and the Arab world, but to the world as a whole. As the Arab spring is upon us, there are opportunities for greater democracy, increased transparency and a need for greater adherence to human and civil rights. Civil rights and human rights are often bandied about as litmus tests of parliamentary democracies and of countries, whichever model they may follow. It is therefore important that when we look around the world, make the challenges and raise the voice of human and civil rights, we do so with equality enjoining justice. Perhaps that role becomes even more important when we look to established states and to our allies. Where we see rights being usurped, we have two options. Do we turn a blind eye and hope it will go away, or do we do the right thing and raise our voices and, as has been shown in recent months, take action where necessary against discrimination and the usurping of human rights? Surely if these countries are our allies, we should play the role of a critical friend with constructive reasoning.
As the noble Lord, Lord Ahmed, has said, Saudi Arabia is the guardian of the holy shrines of Islam in both Mecca and Medina. It is the birthplace of Islam, a religion of peace by definition, and it is the birthplace of the noble Prophet Mohammed, Peace be upon Him. Much of what we hear about Saudi Arabia is equated to Islam not only for these historical and noble legacies but also because there are claims made by the authorities that the laws that govern the kingdom are drawn from the Holy scripture of Islam. Let me put this into context.
The Holy Koran recognises the right to religious freedom and all civil and human rights in the case of all—that is, in the case of other believers but also in the case of non-believers as well. In the context of human rights and the need to exercise religious freedom—or any freedom—it is important to mention a verse in the Holy Koran:
“Let there be no compulsion in religion”.
That has application not only to Muslims and non-Muslims alike but also those who perhaps renounce their faith after professing it. The Koran does not prescribe punishment—as is sometimes erroneously interpreted—for the renunciation of faith alone. Ultimately, according to Islamic doctrine—the right and true interpretation of Islam—that decision and a person’s ultimate destiny lie in the hereafter in the hands of God almighty.
Muslims believe that the Holy Koran contains the first and foremost universal declaration of human rights in the history of mankind. Let us refer to that for a moment. The Universal Declaration of Human Rights, as we know it, stands as a milestone towards the goal of freedom, justice and equality. Adopted in 1948, it contains the broadest consensus of contemporary civilisation on the subject of human rights. It contains all the important political and civil rights, such as equality before the law, the right to a fair trial, the right to own property, freedom of opinion and expression, and of thought, conscience, and religion:
“Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief”.
The broad values and standards laid down by Islam endorse these values that were adopted in 1948, which teach respect and tolerance for all people and all faiths.
Let me go forward to the Cairo Declaration on Human Rights. This was something to which Saudi Arabia subscribed in 1990. It offered a somewhat parallel declaration—an Islamic conception of human rights. With this objective, many Muslim countries, under the aegis of the Organisation of the Islamic Conference, signed the Cairo Declaration on Human Rights. That also sought to provide protections for the rights of women and religion but there were limitations. Perhaps when you look at the two declarations side by side those are glaringly obvious. The important thing is that it was a step in the right direction. Yet the Cairo Declaration refuses to give the most fundamental of human rights: the freedom of conscience and the right to change ones religion or belief. The Cairo Declaration is deafeningly silent about the right of a Muslim, for example, to renounce Islam in favour of other religions or atheism. We sometimes see the interpretation of that in its very ugly form in certain Muslim states.
I now move forwards to 2002, when the United Nations published the Arab Human Development report, which noted that the Arab region has the least freedom compared to six other key regions of the world, in areas that include the rights of women, civil liberties, political rights, the independence of the media and religious freedom. The noble Lord, Lord Ahmed, has already referred to many of those with direct examples of the current state of play in Saudi Arabia. This culture of intolerance gnaws at the social fabric of the Muslim world. It gnaws at the moral conscience of Muslims not just across the Muslim world but Muslims—and anyone—with human and civil rights at their heart.
I return to the Arab spring—a time of opportunity to build a new vision, for countries to embrace change and look again. For those Muslim countries—Saudi Arabia is an example—which seek to build a new vision of Islam and show that Islam recognises opportunities and the civil and human rights of all irrespective of religion, creed, colour or gender, it is important that they show leadership. It is then for these countries—for Saudi Arabia—to provide human and civil rights coupled with religious and political freedoms, where women do not play a peripheral role but a rightful, full and active role in not just partial elements of society but in all elements.
King Abdullah of Saudi Arabia announced recently that women will be able to participate in municipal elections in 2015 and become members of the consultative Shura Council. That is a welcome step. It is about the greater participation of women in life in Saudi Arabia. Yet the statement, which was made not so long ago in September, made no reference to other areas of discrimination against women, such as the guardianship system that has been referred to or—one that often hits the headlines—that women still cannot drive in Saudi Arabia on their own. That is not Islam. It is far removed from Islam. I can assure noble Lords that if I, as a Muslim, told my wife that she could not drive on her own, I would get more than just an earful.
On a more serious note, this is not reflective of the origins of Islam. The noble Prophet of Islam, Mohammed, laid down the principles of equal rights for women. Inheritance rights—the rights of daughters to inherit—were previously unheard of, and not just in the Arab world. So the Muslim world was a leading example of those rights. What has gone wrong? It is time to reclaim the true traditions of Islam. I reflect, perhaps appropriately, that this year’s Nobel Peace Prize is being awarded to three women. One of those is an Arab woman, Yemen democracy activist Tawakkul Karman, who will receive the Nobel Prize in Oslo. Indeed, I believe we will welcome her to this House over the next few days. Her example should act for Saudi women, for Muslim women across the Islamic world and for women across the world wherever they are—and for all people who suffer any kind of discrimination. It says that if you persevere, if you stay at it, you can ensure that your voice will be raised and recognised. It is important that we support those voices.
Many would say that this is an example of modern empowerment, that it is what Islam did not allow. No: if we go back to the origins of Islam, as the noble Lord, Lord Ahmed, pointed out, in the traditions and history of Islam, in the examples of Hazrat Khadija, Hazrat Ayesha and Hazrat Fatima, we find that those women who laid the basic foundations of Islam were great proponents of equality: the rights of women and equality within Islam. Perhaps those who lead Saudi Arabia today should reflect on the origins of Islam for the solutions that they need to provide.
Lord Avebury
My Lords, I am very glad that the noble Lord, Lord Ahmed, has given us the opportunity of discussing human rights in Saudi Arabia today, and I congratulate him on his very forthright speech introducing the debate this evening. In spite of its egregious human rights record, it is seldom discussed on the Floor of the House. I looked back over the present Session and found only two occasions. The first took place when the noble Lord himself introduced a debate at Question Time in terms very similar to the one that we are having this evening; the second was introduced by the noble Baroness, Lady Smith of Basildon, at the end of October. On that occasion, by the way, my noble friend Lady Falkner asked the Minister how the UK voted when Saudi Arabia was elected to the board of UN Women; the Minister has not yet complied with the undertaking to write to her on that matter. Perhaps he could tell us now, and at the same time explain how Saudi Arabia came to be a member of the UN Human Rights Council when human rights are non-existent at home.
The Foreign Office’s annual report on human rights and democracy shows that in Saudi Arabia the rule of law does not apply because judges apply their own interpretation of Sharia law, including their own arbitrary variations in punishments for the same offence. The death penalty is applied to many different offences, including sorcery, drug-smuggling, homosexuality and apostasy. Minors are not exempt, as we see from the case of the 17 year-old Sri Lankan housemaid, Rizana Nafeek, who was wrongly convicted of the murder of an infant left in her charge. Torture is widespread, but the FCO fails to mention the frequent use of the cruel and unusual punishment of flogging, as in the case of the Australian, Mansor Almaribe, who was on hajj when he was arrested and convicted of insulting companions of the Prophet and sentenced to 500 lashes and a year’s imprisonment, although he suffers from diabetes and heart disease and is very unlikely to survive that punishment. The US State Department gives details of reported cases of torture and flogging. Freedom of expression is strictly limited. Newspapers can be closed down without appeal. A journalist was sentenced to 50 lashes for reporting a protest against electricity price rises. There is absolutely no freedom of religion.
The Shia minority, which amounts to 20 per cent of the population, is severely repressed. Unfortunately, the FCO only devotes one short paragraph to this problem and gives no details. There is now major unrest among the 2 million Shia in the Eastern Province, and, as in Syria, demonstrators are being shot dead by the police. A 20 year-old student, Nasser al-Muhaishi, was killed on 21 November when live ammunition was used against demonstrators, also injuring a woman and a child. The young man’s body was not handed over to his family for burial, which triggered a further demonstration, during which another youth, Ali al-Filfil, was killed and seven others injured. After 70,000 took to the streets to protest against these killings, finally the bodies of the two young men were handed over, but, during the funeral processions, two more were killed, 26 year-old Abdullah Iqriris and 22 year-old Munib al-Adnan. Twelve further persons were injured, two of them critically. On 6 December, a group of 62 Saudi intellectuals issued a statement condemning the killings, holding the Government responsible, and calling for freedom of expression and an end to sectarianism. Now these human rights defenders are being threatened by the official media on the grounds that they are inciting violence and undermining national unity. I hope that my noble friend can say that we will condemn the use of lethal force by the authorities, as well as the use of torture against detainees and the arrests of thousands of political dissidents, which have been mentioned by the noble Lord, Lord Ahmed.
In April 2009, Bill Rammell MP, then Minister of State at the Foreign Office, wrote to me saying that we were,
“engaged with the Saudi Government to encourage their tolerance of, and respect for, the Shia community”.
Well, we have been singularly unsuccessful in this aim, because there is a constant stream of complaints from the Eastern Province about the prohibition on the building of mosques, arbitrary arrests of leading community dignitaries, raids on private houses where the Shia meet for prayer, and the prohibition on Shia worshippers joining in prayers at Sunni mosques.
As we have already heard, women are allowed to work only in a very few occupations, and then only with other women. All women are subordinate to a male relative, contrary to an undertaking given by Saudi Arabia to the UN Human Rights Council that it would abolish the male guardianship system. Girl children can be married off at the age of 12. I expect that the noble Baroness, Lady Smith, will have seen the report in the Sunday Telegraph a week ago about the cleric who said that if women were allowed to drive, they would be “driven to lust”. The highest religious council chipped in and said that it would be the end of virginity in the country, and a young mother convicted of persistently flouting the ban on women drivers was sentenced to 10 lashes in Jeddah in September in spite of the king's promise to grant her a pardon.
Anti-Semitism is rife and foreign workers, of whom there are almost 8.5 million in the kingdom, are often the victims of violent abuse by their employers, who enjoy almost total impunity. The FCO says that this issue is raised frequently with the Saudi Government, the Shura Council and the media, but it has nothing to say about the success or otherwise of all these representations. The FCO appears to think that we can alleviate the horrendous violations reported in its annual report and covered in far more detail and more effectively in the State Department equivalent, by remonstrations and cosmetic bits of aid which are supposed, for example, to encourage reforms at the Ministry of Justice, promote discussion in the Shura Council on the minimum age of marriage and adulthood, and to sponsor talks about the regulation of foreign workers’ rights.
If the Saudi Government had the political will, they could perfectly well undertake these initiatives themselves. It is not at all clear whether any of the glacially slow reforms that are actually or potentially occurring are in fact accelerated by the UK’s initiatives. On the contrary, it could be that the authorities play along with our no doubt well meaning attempts to influence them in the direction of human rights and democracy as a means of averting stronger criticism of the kind they have to put up with from human rights NGOs such as Amnesty International and Human Rights Watch. It would be very interesting if my noble friend the Minister could say something about the incongruity of spending UK taxpayers’ money on these puny initiatives when the Saudi hereditary dictatorship is rolling in billions of dollars of oil money. I would also like to hear from my noble friend what the Government’s attitude is to the use of those billions to fund the Salafist ideology which is being promulgated in mosques and madrasas throughout the Arab world and in south Asia that are the mainspring of terrorism and the indirect cause of the deaths of hundreds of British servicemen in Afghanistan. This ideology which sanctions the use of violence against all who think differently is the reason why the Christians of the Middle East are being squeezed out of the region, as the most reverend Primate said in your Lordships’ debate on Friday. He might have added that they are being squeezed out of Pakistan and other Islamic countries as well.
However, not only Christians are under fire throughout the Islamic world. Last Wednesday, 55 worshippers, celebrating the festival of Ashura, were killed by a suicide bomber in Kabul, while in the Pakistani city of Lahore, 93 worshippers at two separate Ahmadiyya mosques were murdered in terrorist attacks in May 2010. Dozens of assassinations of persons belonging to minority Islamic sects as well as attacks on their places of worship have been reported in recent years and yet there has been hardly any attempt to examine the ideological sources of terrorist movements such as al-Qaeda or al-Shabaab, or even to analyse the literature being used in the madrassahs where the leaders of these movements were educated. I would like my noble friend to say what the FCO is doing, together with the European Union and others, to counter the hate-filled propaganda which motivates terrorists and to expose those who are funding it.
Finally, I request my noble friend to use whatever influence we have with the Saudi regime to persuade it to withdraw its troops from Bahrain, where they are propping up another hereditary despotism. In 1956, when the Hungarian Communist Party invited Soviet troops in to quell unrest, the international community rightly decided that it was a breach of the UN charter. The same verdict was passed on Soviet intervention in Czechoslovakia in 1958, and on the Soviet invasion of Afghanistan in 1980, which followed an invitation by President Babrak Karmal. These incursions were violations of Article 2(4) of the UN charter because the Governments of the states concerned were manifestly not representative of their people, and the same is true of the situation in Bahrain. The Saudi troops there may have been used solely to guard critical installations but in so doing they released the local security forces to attack and murder demonstrators and to arbitrarily arrest and torture thousands of Bahraini citizens.
The Saudi regime cannot last indefinitely, any more than the dictatorships of Tunisia, Libya, Egypt or Syria. The ideal would be a managed transition over a period to a constitutional monarchy, or an elected shura with legislative power, and a Government of the majority with the right to appoint Ministers. However, if that is going to happen, I think it will be as a result of internal and regional forces and not because of the worthy but ineffectual attempts to reconcile Wahhabi absolutism with international norms of human rights and democracy. Whatever influence we do have should be directed towards preventing the spread of the pernicious ideology of the Saudi clerics to the rest of the Islamic world.
Baroness Royall of Blaisdon
My Lords, with the leave of the House, I will speak on behalf of my noble friend Lord Triesman who is still engaged in Grand Committee. I thank my noble friend Lord Ahmed for introducing this short debate and all those who have made invaluable contributions to it. I can think of no one better than my noble friend to speak out against human rights abuses in Saudi Arabia. He is a true friend to the 27 million people of that country.
I share the deep concern that has been expressed all around the Chamber about torture; about those who are at risk because they question the integrity of those in authority; about those who have sought to speak freely or associate politically; about those who wish to follow religions of their choice; and, of course, about the women of that country who are subjugated and, as so many have said, not even allowed to drive. As the noble Lord, Lord Ahmed, said, the Prophet, peace be upon him, was a proponent of equality, and the traditions of Islam celebrate equality and the rights of women.
As true friends of Saudi Arabia, I think it is our duty to speak honestly about what is happening in that country because that is the role of a true friend. This was always going to be a difficult debate in some ways. On one hand we are discussing an important ally in global and regional security, but we are also discussing a nation with whom we have very important trading relations, and those relationships impact on our most advanced, technically most sophisticated, areas of manufacturing. It is not surprising in these circumstances that the UK is cautious about the language it uses and the subjects it chooses to talk about in respect of its relations with Saudi Arabia. Those of us who are used to the warm and productive relationships with the diplomatic representatives of the country would always wish to avoid gratuitous or discourteous language even when discussing the most difficult issues.
However, those issues cannot and must not be avoided in a world where values truly count and where it is impossible to suppress news of the international events in any country. With almost every citizen with a mobile phone now a kind of news reporter and cameraman with the world wide web an instant and almost unstoppable publishing medium, all of our actions are available for inspection and comment. In short, everything is visible, not least the human rights and political landscape of almost every country. One of the values that I wish to endorse is the transparency that is created in the new world of media.
Before I ask your Lordships to consider some of the facts about repression in Saudi Arabia—a country with which, as I have said, we have friendly relations—I would like to deal with the two main arguments as to why we should be honest in our relationship with our friends in Saudi Arabia. As the noble Lord, Lord Ahmed, said, we have to be critical friends. Closing one’s eyes to real misdeeds by a friend is no basis for any set of shared values. We have to have shared values in order to nurture the friendship between our two countries.
The first argument for refraining from criticism is that it is nothing to do with us; it is a matter for any nation to determine its internal affairs without interference. Clearly that is not correct. Human rights in Saudi Arabia are specified in the basic law, Article 26. The basic law is grounded in Sharia law and it has been argued by Saudi representatives at the UN Committee Against Torture, for example, that law and sentences reflect local traditions, which have been adhered to since the inception of Islam. However, as we have heard clearly this evening, those are not the real traditions of Islam. Indeed, when criticised, Crown Prince Abdullah bin Abdul Aziz told the third millennium summit of the UN that:
“It is absurd to impose on an individual or a society rights that are alien to its beliefs or principles”.
Without any wish to be offensive to Saudi Arabia or to Islam, such a position is patently untenable. The nations of the world have moved on from defending atavistic brutality as a matter for each sovereign state.
This is not a matter which is advocated only in modern or liberal societies but it is the binding conclusion of the principal multinational bodies. It is the DNA of the responsibility to protect peoples from oppression, which is central to the UN doctrine. It is the purpose of the UN Committee Against Torture, the purpose of multinational bodies charged with protecting the rights of women, minorities, people in gay and lesbian relationships, and it is focal in international efforts to foster democratic practice. In short, these values have become as global as the communication systems that discover and report the denial and breakdown of such values. The world is entitled to comment. Under international law, there is an obligation to comment, whether in Parliaments, the International Criminal Court or the media. We have a duty to uphold international law.
The second argument against criticism is the case that progress is being made, slowly but surely, against the weight of tradition. Some things are changing. People cite the Association for the Protection and Defence of Women’s Rights in Saudi Arabia of 2002, recent announcements on women’s participation in elections—but, as we have heard, that is indeed a chimera—the funding of the Saudi Civil and Political Rights Association in 2009, and the ratification of the Arab Charter on Human Rights in 2008. Of course, these small moves in a better direction are welcome but progress is self-evidently painfully slow and if even these changes fly in the face of legal traditions and are alien to Saudi Arabia’s beliefs and traditions, it is likely that they will not be fully implemented and that they will appear to be more token than real.
Inevitably, we must look at the realities. Where political freedoms are concerned, including freedom of expression, dissent is routinely prosecuted as evidence of terrorism. In the past six months of galvanic change in the wider region, and at a time of opportunity and new vision, as noble Lords have said, Amnesty reports a wide-ranging crackdown targeting many thousands through arrests and detentions, and that these methods replicate those used in allegations of terrorism. Many are held without charge or are charged with offences such as inciting public opinion, which is what most of us in this Chamber do every day. Months spent in prison do not result in trials. Torture and ill treatment are rife. There is so much more that should not be tolerated by the global community—all those countries that signed the Declaration of Human Rights, whose anniversary we celebrate today. Where trials occur, there are authoritative reports of defendants in court being blindfolded, handcuffed and without legal representation. We cannot allow this to go on.
On human rights issues, the picture is still more bleak. The death penalty, including public beheading, stoning and occasionally crucifixion, can be imposed for a wide spectrum of offences which still include apostasy, witchcraft and sorcery. It is in the area of rights for women that it is argued that the greatest progress has been made. For example, 70 per cent of those enrolled in universities are women, yet women make up under 5 per cent of the workforce. Religious restrictions continue to be imposed on Christian, Jewish and Hindu peoples, and on Shia Muslims. I look forward to the Minister’s response to many of the issues raised by the noble Lord, Lord Avebury, about the ideology that is taught in some of the madrassas around the world and about the hate-filled propaganda that permeates them and emanates from them. Lesbians, gays, bisexuals and transgender groups are defined as criminals under the criminal code. While public execution on conviction is a possibility, courts may impose sentences of flogging and imprisonment. This is outrageous.
All these repressions go well beyond what can be justified by tradition. They lie wholly outside international human rights law and they could all be changed. Sometimes it falls to us, as critical friends, to say so. That is what we in this Chamber are doing this evening. We should strongly but respectfully urge the Saudi Arabian Government to respect in full international human rights and standards. The international community would greet with congratulation the immediate commutation of death sentences and a moratorium on this and other forms of judicial corporal punishment. We need to try to engage Saudi Arabia in discussion of a tangible programme to end capital punishment and corporal punishment of all kinds, movement to wider and durable political rights and involvement, and an end to discrimination against all segments of Saudi society. I have no doubt that these will be difficult discussions that require diplomacy. The movement towards modernity and basic values that are central to the world community will do Saudi Arabia no harm and great reputational good.
Nobody gives up tradition readily. Culture is a deep force—I recognise that—but future regard is an invaluable asset, economically, commercially and politically, and it is an asset worth having. We should not forget, as noble Lords have said, that the culture and traditions which are currently adhered to have no basis in Islam. I trust that today’s very welcome debate will assist our Government in their role as a critical friend.
Lord Wallace of Saltaire
My Lords, I thank the noble Lord, Lord Ahmed, very much for introducing this debate. I welcome the noble Baroness, Lady Royall, in the place of the noble Lord, Lord Triesman, who I also now welcome. I am speaking in the place of the noble Lord, Lord Howell, who was speaking in the Moses Room as she came up. Much mention has been made of the Arab spring and of change across the Arab world, in Tunisia, Egypt, Libya and we hope perhaps in Syria. The question is how this affects Saudi Arabia.
One hundred years ago, Saudi Arabia was, with Yemen, the most traditional, tribally based society in the Arab world. As a Christian from a country which has slowly moved, over 10 to 15 generations, from a traditional society to a modern, liberal society, I have to recognise that Saudi Arabia has been moving at immense speed—in two to three generations—from a very conservative, traditional society to one which is facing up to the challenges of modernity. It is, after all, still being governed by the sons of the founder of the kingdom.
I am not qualified to discuss what the authentic Islamic approach is to human rights. I am uncomfortably aware that the Christian tradition has advanced and embraced highly diverse assumptions about the toleration of minorities and of other faiths, the acceptable rights of women, and freedom of expression and dissent. I am conscious that the rights of women were very limited in Britain until less than 150 years ago. We have gradually reformed our laws and social attitudes over several generations since then, and we press the Saudis to pass through the same evolutionary process, but at a much faster pace. The progress that the Saudis are making with education, and in particular the education of women, carries its own dynamic. It is very praiseworthy that they are educating women: educated women are not going to accept, for themselves or their children, the continuing denial of their rights.
We therefore have to recognise that the human rights position in Saudi Arabia reflects widely held conservative social values, but there are indications that the Government and the media are trying slowly to encourage Saudi society to open up. The interfaith initiative that the Saudis are sponsoring is a good example, but it comes up against many Saudis of a more conservative tune, who are not supportive of this. We are attempting to work with those in Saudi society who are advocating reform in order to build support for a full application of human rights standards.
Her Majesty’s Government have serious concerns about the current human rights situation in Saudi Arabia. We have made our views well known, and continue to do so through the universal periodic review process. We make those concerns clear to the Saudis at the highest levels, just as they are frank with us on issues that concern them.
In 2011, we have maintained this frank dialogue, working both bilaterally with the Saudis and with the EU. We have encouraged progress in four priority areas, which for us are women’s rights, the death penalty, the rights of foreign workers, on which the noble Lord, Lord Ahmed, spoke with particular concern, and judicial reform. We funded a number of projects in 2010, including training for Saudi security forces in forensic analysis and investigative methods, including DNA analysis, which has helped to improve the treatment of suspects.
The British Council trained female entrepreneurs through its springboard training programme. On the question of funding, I say to the noble Lord, Lord Avebury that of course the British Government use our money, as do other wealthy countries, including the United States, to encourage what we value so highly and to encourage others to see Britain as a friendly country.
In September, the Saudi Government announced that women would be allowed to participate in both voting and standing in the next municipal elections. This is another small, but, we hope, constructive step forward and, as such, should be congratulated. Of course there can be further improvement. The next one is the rights of women moving around, including, of course in driving. That underlines the wider issue of the guardianship system, on which the UK consistently calls for modification to allow women fully to participate in society.
The Saudi Arabia All-Party Parliamentary Group recently visited the kingdom—last week, I think—led by Daniel Kaczynski, and discussed with the Saudi Government a draft law on terrorism, which is, I emphasise, only a draft law. A number of amendments have been proposed from within the Saudi Government and society. It reported back to the British Government that it sees the process of reform as slowly moving forward. The noble Lord, Lord Avebury, referred to the pace of reform as glacial. We would of course like it to go a great deal faster, but we think it is slowly moving forward.
A number of other questions were asked in the debate: how many British citizens are there in Saudi jails? I understand that there are currently four British nationals in Saudi jails. We are in regular contact with both them and the Saudi authorities to ensure that they have access to legal advice and to ensure their welfare. We are currently in the process of negotiating a prisoner transfer agreement with the Saudi authorities. This agreement will cover any British nationals held in our respective countries and, of course, the return of some Saudis in prison in British jails.
The rights of foreign workers are a major concern. I think that there are nearly 8 million foreign workers in Saudi Arabia and, as the noble Lord has remarked, many of them come from south and south-east Asia. They are clearly denied rights. The rights of maids and women workers are of particular concern. We have made our case to the Saudis on this, as do a number of other Governments, including the Governments of the countries from which those workers come. It is a matter of universal concern. The human trafficking law which the Saudis have just introduced provides some small progress in that direction, but it has still not been enough to move Saudi Arabia off the worst trafficking in persons rating. External pressure is still there, not only from NGOs but from international organisations, and the Saudis are responsive and deeply conscious of criticism which comes from the outside. I stress that the anti-terror law which the Amnesty International report focused on is a draft. It is highly likely that it will be considerably modified before it is introduced.
On the question of the Salafist ideology, raised by the noble Lord, Lord Avebury, it is correct to say that 10 to 15 years ago, a considerable amount of Saudi money was flowing through Zakat to Islamic charities which were funding madrassahs promoting violent views of Islam. I am told that those flows of money are now a good deal less; that they do not come from Saudi governmental sources; and that the Saudi Government are co-operating actively in attempting to promote a more non-violent and modern-oriented version of Salafism.
The noble Lord said that there has been very little attempt to analyse this movement and its motivation. I can assure him that, since 2001, there have been a number of active attempts to analyse the nature of Salafism and the various movements that we are now facing. It is not the case that it is a matter entirely of Saudi leadership and drive; there are now indigenous forms of Salafism in a wide range of Muslim countries. Part of what is driving the growth of Salafism among the young is, very often, reaction to modernity and what are perceived as incursions by the West.
On the death penalty, torture and mistreatment we continue to raise our concerns with the Saudi Government. On Bahrain, we were very concerned but we understand that the Saudi troops who arrived in Bahrain under a Gulf protection treaty have not themselves been involved in human rights violations. We are doing everything we can to promote dialogue between the Bahraini regime and its Shia minority and others.
We have an honest relationship with Saudi Arabia—we are a critical friend. We all know that it is not always easy to be a critical friend. Her Majesty’s Government have critical friendships with a number of other Governments with very different circumstances; these range from Israel to Pakistan. Many of the Governments with whom we have these critical dialogues do not like the things that we say, but we continue to be honest and frank. We share inseparable and intertwined interests with the Saudis, and we do our best to build on our long-standing relationship.
We wish to encourage evolution rather than revolution. The aftermath of the revolution in Iran, which some at first hoped would lead to a more open and liberal society but which has led instead to a narrower, more authoritarian and theocratic regime, strengthens our view that evolution through reform is preferable to pushing for the sort of revolution which would lead to destabilising what is still a relatively stable regime.
We recognise the steps that the King has already taken to widen discussion of key social, political and human rights issues through the national dialogue initiative. Through our Arab partnership, we stand ready to work together with Saudi Arabia as partners in building and increasing citizen participation as the only way, we assure them, to ensure long-term stability and prosperity.
Welfare Reform Bill
(13 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Bakewell
“Such amounts are to include an amount of earnings to be disregarded where a claimant has regular and substantial caring responsibilities.”
Baroness Bakewell
My Lords, this amendment seeks to make the lot of carers in our society, whose lives are often already difficult and sometimes miserable, less miserable than it would be if the Bill went ahead as proposed.
There are 6.4 million carers in the UK contributing an estimated £119 billion to the UK for the unpaid care that they provide. I reiterate those figures: 6.4 million carers saving the country £119 billion. What kind of lives do these people have? What kind of situation are they in that they are able to be so generous with their time and their care? They have a rough time. They face a precarious financial situation, with 72 per cent finding themselves worse off when becoming carers due to the combined pressures of reduced earnings, a low level of benefits and the costs associated with living with someone with a disability. A Carers UK survey of over 1,700 carers found that 74 per cent were struggling to pay essential utility bills, 52 per cent were cutting back on their own food to cope, 66 per cent were using their own income earned from very modest jobs to pay for care for the person they were caring for, and 54 per cent were in debt as a result. It is worth saying that people do not choose to be carers; somewhere along the line life has been unkind to them and they are making the very best of it in the interests of us all.
The amendment seeks to help those carers who wish to make their income more secure by taking part in some paid work. It would ensure that when universal credit was calculated, carers would be allowed to keep more of their earnings than those without such responsibilities in recognition of the additional barriers that they face in combining work and care. It is welcome that the Government have decided to keep the carers’ allowance out of the universal credit. That is to the good. It is also welcome that the additional support given to those in short-hours jobs under the universal credit scheme will help to make work pay for some carers. However, it is not clear why the Government do not recognise, with a specific disregard within universal credit, the particular difficulties for carers in holding down a job.
Currently, individuals in receipt of income support are eligible for a £20 a week earnings disregard. That is not a fortune. They are allowed to earn £20 a week before their benefit starts to be withdrawn. The Government have announced that there will be specific disregards for couples, single people, lone parents and disabled people, and they have stated that, taken together with the universal credit taper, these will leave those four groups in low-paying jobs significantly better off than under the current system. However, for some reason this does not apply to single carers, who currently have access to a £20 disregard in income support through the receipt of the carer premium but would be able to access only the basic single person disregard of around £13.50 a week under universal credit. This could leave carers who are juggling work and care over £200 a year worse off because their benefits would be withdrawn earlier.
It does not sound much, does it—£200 a year? What difference could that make? Let me tell your Lordships what difference that would make, and let me repeat that this difference could affect a large number of the 6.4 million carers who are saving the country £119 billion a year in unpaid care. They are the ones who will suffer worse than they already do—carers living on their own, those who do not have children and those who are caring for a disabled parent who is not considered part of their household for the purposes of universal credit. All those groups would be made deliberately worse off than they already are. This group includes those who look after a disabled or elderly friend or poor relative who does not live with them and those who look after, for example, an adult disabled child who lives with them but, because of the rules of universal credit, is not seen as part of their household.
Carers UK estimates that this is likely to affect up to 50,000 carers, leaving them worse off in work and breaking the promise of universal credit to make work pay. These carers did not choose the life that has rolled out before them. They did not make choices about jobs and opportunities. They did not make choices; they were faced with someone they love in a disabled and needful situation. Out of the love they bear them they have made the sacrifice of careers and opportunities to earn as other people earn, in order to give free of their love and to provide care to those in their family. As Carers UK put it, nearly three-quarters of carers on benefits are women. On top of the additional likelihood of childcare responsibilities and difficulties in accessing replacement social care, thereby reducing the financial return of work for women who are able to work for only a few hours alongside caring, this will act to further distance female carers from the workplace.
Carers UK gives the following case study of someone who would be affected by these measures. This is an example. Janet is 55, single and cares for her son Michael, who is 30. Michael is severely autistic, has multiple health conditions and needs constant support. He receives disability living allowance and Janet receives the carer premium to income support for caring for him. Several years ago Michael started going to a specialist day centre for one day a week. Janet has been able to start working for a few hours, earning £20 a week as a cleaner, while Michael is at the day centre. With the income support earnings disregard Janet’s benefits are unaffected by her earnings. However, under universal credit, because she would be eligible only for the basic single person’s earnings disregard, as Michael is not considered to be in the same benefit household as Janet even though they live together, this would mean that after the first £13.50 of earnings, Janet’s earnings would be tapered away at the 65 per cent taper. For £20 of earnings she would be £15.78 better off. Compared to her situation on income support, Janet would be £4.22 a week—£219.44 a year—worse off in work. Is this a situation that people can be proud of—that we should be penalising someone who is giving so much free labour to the country? Janet is unable to increase her working hours because additional day centres are not available and buying replacement specialist domiciliary care costs over £15 an hour, so that would actually leave Janet worse off.
Janet is trapped. She does not have any options—oh, but she does have an option: she could give up doing her caring and put the person for whom she cares into care. She could say, “This is enough. My contribution is not recognised. I am worn out and finding the stress of looking after someone disabled too much. I am going to give up, and someone else can cope. I am going to get a job and make my way of life more comfortable”. What percentage of 6.4 million carers might make such a decision? What would it cost the state if they all abandoned their role as carers? They already do not believe that they get much sympathy from society at large, but moves like this would alienate them still further. The Government should estimate what the cost would be if even a small percentage of 6.4 million carers gave up their role. I beg to move.
Baroness Pitkeathley
My Lords, I support this amendment, to which my name is also attached. Because of the scheduling of business in your Lordships’ House this is the first opportunity I have had to speak on the Welfare Reform Bill, but I know that many, indeed most, in the carers’ movement owe a huge debt of gratitude to the noble Baronesses and noble Lords who have been speaking throughout Committee stage.
The amendment proposed so ably and passionately by my noble friend seeks to ensure that the universal credit does not put up a further barrier for those people who want to combine caring with work. Given that the aim of the universal credit is to support people into work, it seems wrong to reduce the work incentives for one of the groups for which that support is most needed.
I agree with the Minister’s aim to encourage carers to combine paid work with their caring. Let us think of the reasons why we want to do that. First, it would increase their income; we have already heard that caring takes place in poverty. Secondly, if carers are not in work, they build up poverty for themselves in future through the reduction in their pension contributions. Thirdly, and perhaps most significantly, being in a paid job helps carers with the stress, which is often very great, of their caring role. It enables them to maintain social contact and skills and to have a bit of respite from the caring situation. So we want to help carers stay in work as long as possible.
We know, however, that carers already face significant barriers to work. According to research commissioned by Carers UK and the DWP for carers’ rights day in 2009, some 1 million carers—that is around one in six of the figure that we have heard of 6 million carers—have given up work or reduced their working hours in order to remain as carers. A major barrier is the availability of suitable replacement care. In a separate survey, over 40 per cent of carers who gave up work did so due to a lack of sufficiently reliable or flexible services. A similar number, 41 per cent, said that they would rather be in paid work but services available do not make a job possible. In addition to that, for those who are able to juggle work and care, stress and poor health are common. Nearly half of the respondents to a survey of working carers for Employers for Carers and Carers UK indicated that their work had been negatively affected by caring and that they felt tired, stressed and anxious. Employees with heavy caring responsibilities are two to three times more likely than those without caring responsibilities to be in poor health. For these reasons, carers are just the sort of claimants to be working a few hours a week in low-paid work. We estimate that 50,000 of them might be affected by this change.
I know that the Minister wants to encourage carers to start working more than a few hours, but because of the other issues I have mentioned, for many carers a small or even a tiny increase in working hours is impossible. Because the Government argue elsewhere in the Bill that increasing earnings disregards will incentivise work, it seems inconsistent here to suggest that reducing the carers disregard will encourage additional work. I hope the Minister will agree that there is no logic to discouraging carers from juggling paid work with caring as long as they can and leaving them worse off than they are. I very much support the amendment.
Baroness Lister of Burtersett
My Lords, I am not going to add to the very powerful case that has already been made by my noble friends Lady Bakewell and Lady Pitkeathley. I simply wanted to seek some clarification of what was said in Committee, when a number of us put the case for a carers disregard, and the Minister said in his reply:
“Rather than going through the complexity of the separate disregard route, we have provided an additional element that is included in the gross amount of the universal credit for carers. That is a change from carer’s allowance”.—[Official Report, 1/11/11; col. GC 443.]
I am rather confused by this, because it seemed to me that it was muddling up carer’s allowance—a very important benefit, which some of us would like to see higher than it is at present—and the support provided to carers through means tested benefits such as income support.
Because I worry about my memory for the intricacies of social security I did not challenge the Minister at that point, but afterwards I sought guidance from Carers UK. It, too, was very confused by what the Minister said, and wondered whether or not the Minister—I hate to say this—was perhaps confusing carer’s allowance and means tested support for carers. Because the position is not changing, I do not see how the removal of a disregard can be justified on the basis of what happens with carer’s allowance. Universal credit is not replacing carer’s allowance. There is an element in means tested benefits for carers that will continue, but it is nothing to do with whether there is a disregard or not. It wondered whether the Minister is promising a higher premium for carers under universal credit. That would be excellent news if it were the case, but I rather doubt it. Could the Minister perhaps clarify what he meant in Committee, because it did not seem to me that it was answering the kind of case that has been made by my noble friends; namely, why is it that carers are the only group to lose the disregard that they currently have?
Baroness Howe of Idlicote
I hope noble Lords will forgive me; I was a few minutes late in coming in, so I missed a little bit of what the noble Baroness, Lady Bakewell, said. As I was listening I wondered to what extent more carers would or could be encouraged to be carers if in fact such a situation as she was proposing existed. Perhaps I am looking at this in a slightly disorganised way, but if there is an answer to my question, I would like to know it.
Baroness Hayter of Kentish Town
My Lords, I know that the whole House recognises the important contribution that carers make, and that all will endorse the case made by my noble friends Lady Bakewell and Lady Pitkeathley. Both noble Baronesses know this field intimately—the former from her involvement with an ageing population, with all its aches and pains, and the latter from her sterling work with carers over so many years. Nobody can gainsay their experience in this field. This amendment in their names is a true acknowledgment of the work of all carers, whether for the young, the old, the sick or the disabled.
We know that the Minister has considered the needs of carers, and we welcome the announcement this afternoon—just minutes before this Report stage started, so it just hit the promised timescale—that caring for people receiving both a higher and lower daily living rate under the new personal independence payment will qualify for the carer’s allowance.
However, as yet we have absolutely no idea as to the threshold of disability that will place someone into PIP, nor do we know who will take the hit of the 20 per cent cut—a cut of one-fifth of all such payments—that the Government intend to make. Will fewer people be placed in PIP than into the current two higher rats of DLA? We similarly do not know whether carers themselves are safe from cuts. Indeed, it is noticeable, as was impressed on us today by the Joint Committee on Human Right in its scrutiny of this Bill, that the Government’s impact assessment makes absolutely no mention of the impact of some of the Bill’s changes on carers, even when the impact will be very significant. That is so too for those who might lose their DLA under the new PIP thresholds. Not only would they lose that income but would become subject to the benefit cap.
We must all understand the anxiety, even fear, that some are experiencing by this uncertainty over their future. We also do not know how the Minister intends to deal with carers under the new rules to impose in-work conditionality on universal credit claimants. Although some carers will fall into the no-conditionality group, those who do not may be asked to increase either their hours or their earnings. Although flexibility has been promised, it is not clear how that will work.
Finally, many carers look set to be hit by the benefit cap. Those who are caring for a DLA and, I presume, PIP recipient who lives in the same household will be exempt from the £500 a week benefit cap. But those who care for someone who lives independently—perhaps an adult or a child, as we have heard, or an elderly relative—will see the carers’ allowance, which recognises this responsibility, hit by the cap. If the carer is single, this means that their benefit to include their rent even in London will be capped at £350 despite their reduced ability to earn by virtue of their caring responsibilities.
We will discuss the various ways in which that cap is unfair at a later stage of the Bill but in our discussions of carers today, we surely need to remember that the desire to support carers is not always translated into reality in the detail of this Bill. When we debated this amendment in Committee, the Minister said that only a few carers would be made worse off by the lack of a disregard; that is, those working between two and five hours a week. But it is exactly those short-hour jobs that universal credit was intended to enable. It is precisely carers who are most likely to need these mini-jobs as they fit in with their caring responsibilities. Many people, perhaps 50,000, will be affected if the Government reject this amendment. They are people who want to work and who care.
In another case described by Carers UK, a 45 year-old man who lives and cares for his 65 year-old father who has dementia has had to give up work because the father needs 24/7 care and he has to be there. His sister has her own family and does not live close. She travels to look after their father for an afternoon and evening a week, which enables the son to go out to work. He can earn a little to supplement his income support. At the moment, if he earns £18 his benefits are not affected because of the £20 a week disregard, as has been mentioned. But, under universal credit, without this amendment and the earnings disregard, he would have only the basic disregard of £13.50, which is for everyone. There will be no special disregard for carers. After that, his benefits will taper away. He would keep only just over £15 of his earnings, compared with £18 now. That sum is serious money for someone living on benefits. We must remind ourselves that that person is living on benefits only to save the state a fortune should it have to care for the father at home.
To make use of the more generous taper in universal credit, or to overcome the loss of this reduced disregard, the son would have to work increased hours. However, he cannot do this. His sister cannot stay any longer and there is no one else to be with his father. It is a catch 22: he is receiving no recognition that his position as a carer restricts his employment potential. The whole thrust of universal credit, which we support, is to make work pay. This amendment seeks to do just that for carers, and thus has the support of this side of the House.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, we take the position of carers very seriously and, as the noble Baroness, Lady Hayter, pointed out, today I was very pleased to write a letter, as I had promised, about how the passporting arrangements from PIP would go in and how all of PIP passports into carer’s allowance. I have to apologise—I promised that letter three days before the first day of Report and I think that I am three days late. I hope my apology will be accepted. There was informal information going out, and so it was not too much of a surprise.
The noble Baroness, Lady Lister, asked me whether I was confused. This is an important point, because I sat and worked very hard on this element of carer’s allowance. Two things are happening here. The caring community—the carers—are very keen to have an allowance which is not means-tested, and which recognises their effort and work. I understand that. It is not a question of means-testing it. However, there is a cliff off which the whole allowance falls away, when the carers earn a certain amount. Clearly, that undermines considerably their incentive to work. Therefore, as we were refining the structure for carers, we looked to create, essentially, an additional element in universal credit on top of carer’s allowance, which in practice does not involve a cliff fall in the same way. It is probably easier for me to send a letter on this. I need to clarify this, particularly if the carers’ organisations are confused, as the noble Baroness has said. However, the structure is designed to get rid of these awkward “drop offs” and to be smoother. In fact, noble Lords will be shocked to know that I found a bit of money to put into the system to allow that. If I am not getting credit for that—and I need it—I shall try to earn it by writing a letter spelling out how that has worked.
Lord Knight of Weymouth
I am terribly grateful to the Minister. Could he tell us where he found the money?
Lord Freud
Finding money is a black art. I need say no more. If I were to reveal any more, it would just rebound negatively on me in every direction. Anyway, that is what has happened. I shall try to spell that out in a letter to the noble Baroness, Lady Bakewell. It is vital that the earnings disregards in universal credit are simpler than those in the current system, in order to achieve the core aim of making the system clear both to claimants and to administrators.
The earnings disregards in universal credit for carers who are in a couple, lone parents or themselves disabled will be more generous than the disregards in the current benefit system, thus enhancing work incentives for the great majority. As we discussed in Grand Committee, I have sent examples to the noble Baroness, Lady Hollis, and more widely, which clearly demonstrate the substantial gains at most earnings levels. I am deeply impressed by the example cited by the noble Baroness, Lady Bakewell, which got to within 3p of the worst possible point. There is a narrow band of between two and five hours where the absolute maximum you could lose is £4.25 a week. I think that the example used by the noble Baroness was £4.22, so she nearly hit it on the nose. I do not know how she managed to miss it by 3p. But the structure means that as you move up, there are some substantial gains. If you move off the small area of two to five hours, there are some big gains. At eight hours of work a week, a single carer would be over £5 a week better off under universal credit, and at 12 hours they would be nearly £15 better off. That is real money, worth £780 over a year.
It may be that the effect of the system is to drive people off the four-hour rate to the six-hour rate. I do not accept that the number of people in that narrow bracket is 50,000. It simply is not that figure and I do not think there is any reliable estimate of what the number is.
Baroness Hayter of Kentish Town
If the noble Lord has no idea of how many people are involved, but thinks that the number is less than 50,000, surely he cannot know how much it would cost, and therefore this may be another small amount of money. If the number is small, it cannot cost much to give these people an extra £4 a week.
Lord Freud
This is not directly a money matter; it is about the structure and the simplicity of the system. When you are changing from an inchoate system, which is what we have now, there are patches where people are a little less well off than they would have been, and that is why we have transitional protection. As you move to a simple, clean structure, there are problems in doing that, and that is what we are trying to address. By definition, it is not possible to overhaul and simplify a system and keep all the existing rules. Existing claimants will not lose because of the transitional protection, so those who have built their lives around a four-hour week will not lose by this, although within the structure there will be a drive to encourage people to do a little more.
I hope that noble Lords understand what we are trying to do here. I know that there is general support for universal credit, but we must maintain something that is tangibly more simple. With that explanation of why the Government cannot support this amendment, I would urge the noble Baroness to withdraw it.
Baroness Bakewell
My Lords, I thank the Minister for his response. I have only one or two points to make. The noble Lord challenged the figure of 50,000. It came from Carers UK, which is perhaps our most authoritative body when it comes to delivering data like this. I acknowledge completely that the system needs simplifying and that we want simplicity in the system, but you can have simplicity at different levels. You can have simplicity operating at the rock bottom of the ladder of pay or at a more generous level of pay. One relevant issue about this four-hour working borderline with this tiny slither of people—it is quite a large slither—is that we are an aging population. More and more carers are themselves old. A lot of people in their 60s care for people in their 80s. People in their 60s looking after someone disabled are quite likely to be eligible for something like four hours work a week. That may be all that they can manage themselves. Often you have those who are already ailing or slightly disabled looking after 90 year-old relations. This issue about hours and the flexibility really calls on the Government to examine and deal with that little niche. To that extent, I am disappointed but I beg leave to withdraw the amendment.
Baroness Drake
“( ) Regulations may specify that the pension contributions of single, or either of joint claimants, are to be disregarded when calculating either earned or unearned income.”
Baroness Drake
My Lords, I shall speak to Amendment 11 as well. Amendment 7 would allow pension contributions made by claimants to be disregarded in full when assessing their income for calculating entitlement to universal credit. Some 100 per cent of the value of pension contributions is deducted from income that is brought into account for calculating entitlement to tax credit. This amendment would allow that arrangement to continue under universal credit. Sadly, the Government have stated that in future only 50 per cent of pension contributions will be deducted from income when calculating entitlement. That is a mean measure. The Government state that they will save £200 million a year but this should be set against the near £30 billion saving from accelerating the increase in the state pension age to 66 and, to use the Chancellor’s words, the saving of a staggering £59 billion from accelerating the increase in the state pension age from 66 to 67. Those are very big numbers in comparison.
Pension reform was intended to strike a new deal between the state and the citizen, whereby: people work longer and the state pension rises; the state pension would be a flat rate to provide a firm foundation for pension saving; and private pension savings would increase through automatic enrolment into a workplace pension with an employer contribution. Those three elements are inseparable or the settlement becomes unfair to ordinary, hard-working people. The Government are accelerating the increase in the state pension age to reflect increasing longevity and to secure public expenditure savings of many billions, but they are backtracking—I stress, backtracking—on the pension saving and the incentive to save for ordinary, hard-working people. That is not fair. It is not a fair deal for the citizen and it breaks the consensus of the way forward.
The Government have suspended the introduction of auto-enrolment for workers in firms with fewer than 50 employees. They have delayed by at least a year—to 2017—the date by which workers will have access to the full 3 per cent employer contribution and tax relief. They have this mean measure of reducing to 50 per cent from 100 per cent the amount of any pension contributions disregarded from the assessment of income for universal credit. This will all hit responsible, hard-working people on modest incomes in receipt of universal credit who try to save for a pension.
It was very clear from official analyses that the way in which pension contributions were treated under the tax credit system was part of the incentive to save and the payback on every pound saved by low-to-moderate income earners. It provides an increase on their savings of up to a third because of the incentive-to-save effect. The Minister argued in Committee that it is necessary to take a balanced approach to the disregard of pension contributions as not all taxpayers who do not claim benefits have the advantage of a private or occupational pension scheme. However, with the introduction of auto-enrolment, it is the Government’s intention that they will all have access to a workplace pension; so that argument will not hold.
The Minister argues that the disregard for pension contributions is an area in which tax credits have been excessively generous. That is not a great message to send out to decent, hard-working people who play by the rules and are trying to save for a pension, and not one borne out by the facts. It also ignores the billions given in higher-rate tax relief—around £10 billion—to pension savings by higher-income earners. Universal credit is intended to encourage responsible behaviour. Policies to deliver an efficient benefits system and policies to enable pension saving by responsible people are not alternatives. This is a short-sighted measure, which withdraws valuable support to the incentive to save for a pension from responsible, hard-working people on lower incomes. This mean little measure should be set against the billions of savings from accelerating the state pension age. I really hope that I can persuade the Minister to reflect and reconsider this change in the treatment of pension contributions, and perhaps even to deploy his black arts again.
The purpose of Amendment 11 is to provide for regulation to allow for an additional amount in universal credit where a claimant is over the state pension age. Pension credit is targeted at low-income pensioners, to help them live above the poverty line. Currently couples can claim pension credit as long as one partner has reached the qualifying age. The effect of this Bill is to prevent pension credit claims in the future from couples where one partner is under that qualifying age. The couple will have to claim universal credit and be subject to conditionality. The impact of this change will be significant for many lower-income, older couples going forward. First, it may impact their income. I recognise that mixed-age couples, where one or both have earnings from work, can benefit from the system of universal credit due to the more generous income disregards and tapers, but there will be a range of possible outcomes depending on a couple’s circumstances, which will mean many being worse off.
Mixed-age couples claiming universal credit in the future could receive incomes that are £100 or more lower than under the current system. They may lose other sources of support—cold weather payments, help with health costs, warm home discount, and more. Standard payments under universal credit are just £105.95 for a couple. In contrast, the pension credit guarantee rate for a couple is £209.70 a week, and £137.35 for a single person. Without provision through regulation for additional support within universal credit where one partner is older, a pensioner could have a higher income living alone and claiming pension credit than receiving universal credit as a couple.
Secondly, it will impact their savings. The way the capital rules work under universal credit means that a pensioner with a low income and modest savings who has a younger partner could be excluded from pension credit and forced out of universal credit, or face a steep withdrawal of benefit. That is hardly the action to be taken for some who is about to commence living through their old age. Furthermore, it can impact their housing benefit. There are to be no exemptions to the size criteria for the receipt of housing benefit from April 2013, other than when the claimant or partner is over state pension credit age. However, the Government now want to reflect their decision, where one member of a couple is a pensioner and the other is of working age, on the housing benefit rules. That means that, unless mixed-age couples are protected from the restrictions, a pensioner with a younger partner could find their benefit cut if they have one or more spare rooms; if they live alone, the restrictions will not apply. It is a really peculiar form of couple’s penalty, which disproportionately hits older and poorer couples and their relationships. Should couples stay together or separate in future? That will be a real debate under the application of universal credit.
Pensioners in poorer households will have significantly different experiences because of differences in the age of their partners. It may not be unreasonable to expect some young partners who are able to work to be subject to work-related conditions and sanctions when they do not fulfil requirements, but why is it necessary to provide further incentives by restricting benefit to the pensioner partner in that couple? As to the thousands of grandparents who may not be receiving a carer’s allowance but who are looking after their grandchildren, do they lack incentive or responsibility? Should they be the ones who have their allowances cut significantly below that which they would receive under pension credit? Again, the Government show no affection for our grandmothers. So where neither partner is able to work or is unsuccessful in finding work, their basic level of benefit under universal credit should reflect the fact that one of them is a pensioner. As to the treatment of carers and disabled persons in mixed-age couples, it is not clear how the system will work in all circumstances and many will be worse off under state pension credit.
Pension credit is a very effective policy—it is probably the only effective policy—for targeting pensioner poverty. The effect of the change will impact a group of low-income older people, which is why, as proposed in this amendment, the regulations should allow for an additional payment under universal credit where a claimant is above state pension age. I beg to move.
Lord McKenzie of Luton
My Lords, I propose to speak briefly in support of Amendments 7 and 11 as my noble friend is a renowned expert on pensions and it is never possible to add much, if anything, of substance to what she has said. My noble friend has made an important point about the breaking of the consensus on encouraging saving. On the one hand she instanced the huge sums that will be garnered by the changes to the state pension age and, at the other end of the spectrum, the deferral of automatic enrolment and this measure, which changes the basis on which pension contributions are treated in universal credit compared with working tax credits.
I wish to probe again a point in respect of the 50 per cent only deduction, which I do not think that the Minister dealt with significantly in Committee. Universal credit will obviously be based on real-time information—the information which will flow from employer returns to HMRC, and the data flowing back. That data will be based on 100 per cent deductions of occupational pension schemes, so if universal credit is going to rely on a 50 per cent deduction only, there is going to have to be some other process or loop which is not naturally there in the data flows at the moment. I think the Minister instanced that this was something that was being commissioned. I can imagine the work involved in seeing how that might be derived. I hope that he will take the opportunity tonight to be a little clearer on that. Quite apart from the principle of the measure which my noble friend has raised, I raise the actual practicalities of implementing it. When we looked at recasting the child maintenance system, which we shall come on to on a subsequent Report day, what was determined and debated in your Lordships' Chamber was that it would be based on gross income data provided by HMRC but net of 100 per cent of employee occupational pension contributions, as that was the natural flow of data. I would be grateful if the Minister could deal with the practicalities of that point.
Amendment 11 seeks to ensure that measures can be put in place to address one of the significant couple penalties introduced by the Welfare Reform Bill—a penalty that means that a couple, where one person is over and one under pension age, could lose as much as £100 a week compared to the current system. This sits alongside the couple penalty introduced by the limiting of contributory employment and support allowance and that introduced by the benefit cap in a series of changes that, perhaps unintentionally, mean that couples may see themselves as better off financially, as my noble friend has said, living apart.
The policy change being introduced means that whereas at present couples where one member has reached pension age are eligible for pension credit, following the coming into effect of the Bill, if one member of the couple is below pension age, they will be forced to claim universal credit until both of them qualify for a pension. We have been given no specific figures on the impact of this policy although we know that there are currently 93,000 couples where one person is over and one under pension age. Not all of these will be affected as those who are already receiving pension credit will be able to remain on that benefit. However, as the revised impact assessment points out, those who are affected are likely to be hit hard, stating that the heaviest notional losers for couples without children,
“are in cases where one member is of working-age and one is currently eligible for Pension Credit”.
Perhaps the Minister can tell us how many people he estimates that this change will affect and how much they stand to lose. Bringing pensioners within the orbit of universal credit will also mean, as my noble friend has said, subjecting them to many of the new and harsher rules that accompany the new benefit. The Minister has not yet told us how he expects pensioners to be affected by the new capital limits that will be introduced for universal credit, and also for pension credit when housing benefit is abolished. As Age UK points out, nearly 150,000 people claiming pension credit have more than £16,000 in savings. In the future those with a low income but over £16,000 of savings who have a younger partner will not only be excluded from pension credit, they will not be entitled to universal credit due to their savings.
The Government have argued that the purpose of the policy change is to ensure that working-age claimants are subject to working-age conditionality and asked to look for work. However, many of the working-age claimants who fall into this group and have an older partner may in fact be subject to no work-related requirements—a matter we discussed in Committee—whether because they are caring for someone or have a disability themselves. These couples too will see a £100 a week hit on their income as well as potentially losing other support linked to pension credits, such as the winter fuel payments.
The Government have said that this is not a savings measure so there should be some flexibility within the system to ensure that couples in this situation have their income protected. This policy has not been consulted on and we have not received sufficient information fully to assess who it will affect and how. Therefore, the amendment proposed by my noble friend would give the Government the flexibility to look again at the options in this area and to ensure that couples in this situation do not lose out.
Lord Freud
My Lords, Amendment 7 would take a power to disregard the full amount of any pension contributions from the assessment of both single and joint claimants’ income. As I made clear at Committee, this is a matter for regulations and we do not need any additional regulation-making powers. Our stated policy since the Universal Credit White Paper has been a 50 per cent disregard of pension contributions, in line with the current approach in the benefit system, as opposed to the tax credit system. We are taking the middle path between supporting pension saving for people on low incomes and fairness to the taxpayer. It is important to remember that many taxpayers who do not claim benefits do not have occupational or private pensions. A full disregard of all pension contributions would cost an additional £200 million a year.
Noble Lords have characterised our approach as worsening the position when compared with tax credits, where there is a full disregard of pension contributions. However, this oversimplifies the comparison between universal credit, based on net income after tax, and tax credits, based on gross taxable income. Frankly, we are not comparing like with like. We also need to take account of the new employer contribution duties to be introduced from next year. We previously said that when taking account of employer contributions, the cost to an individual for each pound of pension would be 34 pence. Since Committee, we have looked again at these figures and I should like to take this opportunity to correct that one, which we have now calculated out at 38 pence. I apologise for that mistake, which I hope is not too substantial directionally.
If one considers putting £1 today into a pension, the cost in the tax credit system is 39 pence. One can see that that represents 61 pence pure universal credit. However, if one combines that universal credit calculation with the employer pension duties, the figure reduces to the 38 pence that I talked of. The middle way, when considered in combination with what else is happening, is actually not quite as mean or extreme as the noble Baroness, whose expertise I acknowledge and have suffered from in the past, might imply. If you are outside the system entirely, it costs you 80 pence for every £1 of savings. That provides a balance on why we have come to that figure.
Picking up the question from the noble Lord, Lord McKenzie, on the RTI feed, I can inform him that payroll data do identify pension contributions from salary. They have to do that because the pension contributions will be subject to national insurance. That is the feed element we will use to make this calculation, and we are currently working out the detail. Taking all these factors into account, we believe that a 50 per cent disregard is an appropriate balance between encouraging saving and a fair deal for the taxpayer.
Amendment 11 would amend the regulation-making power in Clause 9 relating to the standard allowance. This would allow us to provide an exception for couples with one member above state pension age by excluding the standard allowance from the calculation of their universal credit award. As I explained in Grand Committee, the Government have taken the view that couples with one member above and one under the qualifying age for state pension credit should claim universal credit. Following that debate, I sent the noble Baroness, Lady Hollis, and other noble Lords some worked examples showing the entitlement of different couples on the two benefits. They showed that there will be a range of outcomes depending on individual circumstances. We calculated that more than 90,000 couples with one partner under pension credit age are on pension credit—that was in answer to the noble Lord, Lord McKenzie. However, transitional protection will apply, and all those couples currently on pension credit will stay on it while circumstances remain the same.
We are not convinced that it is necessary to have special rules or different amounts of standard allowance where one partner is above pension age. Universal credit also includes additional amounts for those people who have limited capability for work or regular and substantial caring responsibilities for a severely disabled person. It remains the Government’s view that people of working age who are able to work should prepare for or look for work in return for receiving support from the state. The earnings rules and disregards in universal credit provide a clear incentive to do so. I therefore urge the noble Baroness, Lady Drake, to withdraw her amendment.
Baroness Drake
My Lords, I thank the Minister for that reply. I do not think that I am supposed to say that any more—I think the new rules say that I can dispense with that—but I will remain courteous and thank the Minister. Or is that only in Questions? I am trying to keep up.
I will deal with each of his points. First, I did not know that there was a middle path. That is a whole new concept to me. I thought the issue was that in-work benefits would support the incentive to pay for, say, low-to-moderate-income people by disregarding pension contributions. As to the concept of a middle path, I do not know what the merit of that middle path is other than the opportunity to save some public expenditure. I have never seen it publicly debated that it makes a big or meaningful contribution to the pension settlement.
I accept that we may not strictly be comparing like with like, because I am trying to lift from a set of rules under one benefits system to the one that will apply under universal credit, but I do not think that I heard the Minister say that the £200 million saving from this change had varied. As I understand it, the Government are still expecting to save £200 million. However the cloth is cut. That means that, for a particular group of low-to-moderate-income people, £200 million will be taken out of their incentive to save. At the same time, there will be a staggering increase in public expenditure reduction of £59 billion from accelerating the state pension age. I do not want to debate the acceleration of the state pension age—I am sure that there will be opportunities to do that.
Lord Freud
If I could just clarify this for the noble Baroness, £200 million is the extra cost of doing this, not the money taken out.
Baroness Drake
I am sorry. I thought that the Minister said that they would save £200 million from this change.
Lord Freud
No, no, my Lords, I said that the cost of this amendment would be an extra £200 million.
Baroness Drake
I will have to go back and check on the figures. None the less, there will be a saving from this which has the effect of reducing the incentive to save for this group of people. As they will not be able to access the benefit of auto-enrolment until later, the contribution from their employer will come online more slowly, and therefore their ability and incentive to save will be reduced.
The Minister said that he sent a series of worked examples to my noble friend Lady Hollis that produced a range of outcomes. That is my whole point—some people can lose quite significantly under these new rules. It is not clear as to what the rules would be in all circumstances. Although there are transitional protections, that simply means that there will be a cliff-edge impact on another group of older couples when these rules come in. This will continue to add to the couple penalty and to the differing treatment of older couples depending on when precisely their qualifying age falls or on the age of their partner. That is why the amendment sought to give the Government flexibility as to how to address the problem of people suffering a significant drop in income. It did not of itself say that in all circumstances a partner should not be subject to work conditionality. However, I beg leave to withdraw my amendment.
Lord McKenzie of Luton
“(5) Regulations are to specify the amount of tariff income from capital that is to be included as unearned income, including specifying different amounts for in work and out of work claimants.”
Lord McKenzie of Luton
This amendment raises the question of the amount of capital that will be taken into account when calculating universal credit. The Government's proposals at present are that those with savings of above £16,000 will not be able to claim universal credit and that capital above £6,000 will attract a tariff income of £1 for every £250 above the £6,000 floor.
Our amendment seeks to enable differential treatment of capital for those in and out of work, reflecting the current arrangements, under which the universal credit rules replicate current benefit arrangements. Tax credits claimed by those who are in work have no limits on capital nor assume any tariff income, but obviously take account of the actual or taxable investment income. The Minister has talked about universal credit encouraging a culture change in how people manage their money. We fear that the current proposals will discourage low-income people in work from accumulating savings and building assets.
This is not just our view about the capital rules, but that of one of the main architects of universal credit, the Centre for Social Justice. As Deven Ghelani, a senior researcher at the centre said when giving evidence to the House of Commons Bill Committee:
“It is fundamentally a disincentive to save. I think that the savings limit for people who are not working and are on benefits has been £16,000 for I am not sure how many years, but certainly rather a lot”.
It is nice to know that the centre has such precision.
“The limit has not been uprated for at least a decade I would say, and possibly a lot longer. By extending that to people who are working, people who get close to that threshold might suddenly realise that it does not pay to save and that there are perhaps other things that they should be doing with the money, whereas saving is in itself a protection against dependency”.—[Official Report, Commons, Welfare Reform Bill Committee; 22/3/11, col. 19.]
The proposals will act as a barrier for those on modest incomes who are trying to save, whether for a house, for their children's tuition fees for university or against the possibility that they may lose their job and need a cushion of income to fall back on. The Government propose to encourage more tenants to buy their council accommodation. Under these proposals, tenants who wish to save to take up the offer will first be penalised for those savings and then, if they are able to build up their savings sufficiently, barred from accessing universal credit at all. That does not seem to be in line with the Government’s message that, under universal credit, work will always pay.
The department’s briefing assessment of the changes suggests that there will be between 100,000 and 200,000 people who will lose eligibility to universal credit altogether because of the new capital cut-off rules, and that between 200,000 and 300,000 people will have reduced eligibility due to the rules on tariff income. The briefing note states:
“People with substantial savings or other capital clearly have sufficient income to meet their needs”.
It is right that they should draw on these resources before looking to the taxpayer for support, particularly as many taxpayers themselves have savings well below these limits, but the vast majority of low-income workers who are claiming universal credit will also be taxpayers, and their taxes will be used to support other incentives to save in the tax system, including, as we discussed in Committee, the considerable tax relief on pension contributions.
The current proposals punish those on low incomes who are working and trying to build assets for the future. The amendment proposes a modest change to enable differential treatment of capital for those in and out of work. When we debated the issues in Committee, the Minister told us that these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. By accepting the amendments, he could signal that he recognises the importance of enabling those who move into paid work to begin to build up their assets and avoid sending the wrong message that those on low incomes should not expect to be able to save. I beg to move.
Lord Freud
My Lords, Amendment 8 would require different tariff incomes to be set against the capital of people in and out of work. I understand the noble Lord’s desire to continue to treat the capital of people in work differently in order to encourage low-income workers to save. I remind the noble Lord and the House that I was able to provide somewhat more precision than the IFS on the last time the figure of £6,000 or £16,000 was raised. To be absolutely honest, I forget the date that I provided in Committee, but it is now on the record in Hansard. The date was 2006. I am pleased to keep just marginally ahead of the IFS every now and then.
This amendment is at odds with our shared ambition for a simpler system. It is also, as it stands, unaffordable. We estimate that it would cost around an additional £70 million a year to remove tariff income for everyone in work with capital up to £16,000. We estimate that it would cost an additional £30 million a year to set tariff income at £1 for every £500, instead of the current £1 for every £250, for everyone in work with capital up to £16,000. That gives you a context of cost. This is a cost matter, as I made clear in Committee. There are quite a lot of nice-to-dos in the universal credit; I would like to do many of them myself, I assure you, but we have got to focus on where we can put the scarce resource and where it is absolutely needed. The debate around that is based on the fact that we estimate that around 80 per cent of those claimants who will have a higher benefit entitlement under universal credit will be in the bottom two income quintiles. Now is not the time to do anything other than to retain the existing threshold of £6,000.
The shocking reality is that if you go to the median household with a working-age adult in it the figure of savings in that household is £300. That is across all working ages in the FRS. That is a shocking figure, but it just shows you where the debate is against the reality of what is happening in this community group. I am using median not average here, because I think it is a better figure.
That is the issue. We have limited resources; we need to focus them on those least able to support themselves. I hope that explains why we are where we are with these particular figures for tariff income and capital and why we cannot support this amendment, and I ask the noble Lord to withdraw it.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for his response. I should just say that it was not the IFS which gave that evidence; it was the Centre for Social Justice, which I thought was an organisation quite close to the noble Lord’s heart.
Lord Freud
I should have known I would never be ahead of the IFS; I apologise to it.
Lord McKenzie of Luton
I understand the Minister’s response. It really reiterated what he said in Committee: this is an issue of affordability, not necessarily one of principle. On that basis I do not see why he could not accept the amendment—it would signal the Government’s intent on this—but given the hour I beg leave to withdraw the amendment.