House of Commons

Monday 6th February 2012 Commons Chamber

Monday 6 February 2012

The House met at half-past Two o’clock

Prayers

Monday 6th February 2012 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 6th February 2012 Commons Chamber

The Secretary of State was asked—

[Jo Swinson (East Dunbartonshire) (LD)]

1. What assessment she has made of child detention for immigration purposes on arrival at UK ports; and if she will make a statement.

[The Minister for Immigration (Damian Green)]

We always need to hold some families at the border, either until the next available return flight or until further inquiries are made, or, in the case of unaccompanied children, until alternative accommodation is arranged. Not to do so would weaken border security, and would not meet our duty of care to keep children safe.

[Jo Swinson]

I thank the Minister for his reply and warmly welcome the Government’s efforts to end the detention of children in immigration removal centres such as Dungavel in Scotland. As he has said, some detention of children at ports and airports is necessary, and the average period of detention for children is currently about 10 hours. What is the Home Office doing to minimise the amount of time that children are detained for, and thus minimise the distress caused to the children involved?

[Damian Green]

I am grateful for my hon. Friend’s support for our general approach of ending the detention of children for immigration purposes. She asked specifically about ports, and we have introduced tighter governance, which means that a greater level of authorisation is now required for the detention of a family in a removal centre or when detaining them for more than 25 hours or overnight. Family cases at ports of entry are specifically prioritised and dealt with as quickly as possible in order to minimise the time that families are held in short-term holding facilities.

[Tom Brake (Carshalton and Wallington) (LD)]

Can the Minister confirm that detailed statistics on children at ports of entry are now being kept? Will he tell us what type of accommodation they are required to be detained in, and whether the Government have any specific plans to reduce the number of children being detained in that way?

[Damian Green]

As I have already explained, we detain children largely for their own protection. In practical terms, if an unaccompanied child arrives at Heathrow in the early hours of the morning, keeping them in the room at Heathrow that is set aside for them is a lot more sensible than allowing them to roam the streets of London. I hope that my right hon. Friend will recognise that the accommodation in which they are kept is being improved, and that they are kept there for the minimum amount of time that we need before moving them on to somewhere where they can be safe.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

2. What steps she plans to take to reduce the number of child victims of human trafficking who go missing.

[The Minister for Immigration (Damian Green)]

The Government’s new missing children and adults strategy provides a core framework for local areas to put in place better arrangements to prevent children and adults from going missing. The strategy highlights examples of good practice that have reduced the number of missing trafficked children, and we are working to spread that good practice.

[Mrs Hodgson]

Does the Minister agree with ECPAT UK that the provision of an appointed guardian would ensure that child victims of trafficking would receive all the support that they needed, and that that would vastly reduce the number of children who are going missing? If he does agree with that, why are the Government still refusing to legislate on guardianship, despite such legislation having been called for in an EU directive and by many child welfare groups?

[Damian Green]

I do not think that making statutory provision for adding a guardian is necessary, because every looked-after child is already allocated a social worker and an independent reviewing officer, and is provided with access to an advocate. Those children are therefore already given a considerable amount of support. Also, in factual terms, the number of such children who are going missing, while still too high, is considerably lower than it was a few years ago. Local authorities are therefore getting to grips with that underlying problem as well.

[Mr Peter Bone (Wellingborough) (Con)]

I haven’t the foggiest idea how the Minister can say that, because local authorities do not identify trafficked children. I have the greatest respect for what he is doing in regard to trafficked children, but this is none the less the biggest hole in the Government’s strategy. Child victims of human trafficking are looked after less well than adult victims. That cannot be right, and it has to be changed.

[Damian Green]

Let me explain to my hon. Friend how I arrived at those figures. They are not my figures; they are figures from the Child Exploitation and Online Protection Centre, a body that is specifically involved in the protection of children. It said that, in 2007, 55% of such children went missing from care. That was an appalling figure, but it has most recently come down to 18%. I agree with my hon. Friend that that is still far too high, but he can see that local authorities are making considerable progress. In that respect, I particularly commend Hillingdon council, which is one of the most experienced councils in this regard, as it covers Heathrow. In 2009, 12% of unaccompanied children were going missing from its care; it has now reduced that number to 4%.

[Chris Bryant (Rhondda) (Lab)]

Tackling human trafficking undoubtedly requires strong international organisations and, in some cases, an international power of arrest to apprehend these criminals. Will the Minister answer a very simple question? Will he guarantee that he, unlike many of his party’s Back-Bench Members who have called for it, will not withdraw from the European arrest warrant—yes or no?

[Damian Green]

I commend the hon. Gentleman’s ingenuity in putting that question. As he will recognise, the vast majority of trafficking comes from outside the European Union, so his question, though ingenious, is not strictly relevant.

[Henry Smith (Crawley) (Con)]

What specific support can be given to local authorities with children’s services responsibilities that have major ports, such as Gatwick airport in West Sussex, within their boundaries, particularly with respect to supporting 16 to 18-year-olds who are so often those who go missing?

[Damian Green]

My hon. Friend makes a good point in that local authorities that have major ports within them tend, obviously, to face bigger problems with trafficked children but also tend to develop greater expertise as well. That is why bodies like CEOP and the United Kingdom Border Agency do their best to spread best practice around the country so that every local authority can know that it is performing as well as possible in this important area—

[Mr Speaker]

Order. We are grateful to the Minister.

[Ann Coffey (Stockport) (Lab)]

Does the Minister agree that if we are to prevent children from being trafficked within the UK, local agencies and parents need to be more aware of the early symptoms of sexual grooming, including repeated missing episodes? What more can he do to raise such awareness?

[Damian Green]

I agree completely, and I know the hon. Lady rightly takes a great interest in this area. As I say, it is a question of spreading best practice around all the agencies—not just local authorities but the police as well. We try hard to ensure that all police forces are much more aware of the specific symptoms of these types of problem so that they can treat anyone affected in the appropriate way.

[James Morris (Halesowen and Rowley Regis) (Con)]

3. What recent assessment she has made of the level of cybercrime.

[Jessica Lee (Erewash) (Con)]

7. What recent assessment she has made of the level of cybercrime.

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

A report by Detica and the Office of Cyber Security and Information Assurance estimates that cybercrime could cost the UK as much as £27 billion a year. The Government published their cyber-security strategy in November, which sets out how we intend to tackle this threat.

[James Morris]

Tackling cybercrime requires a co-ordinated response across government, including liaison with the business community. What is the Minister doing to ensure that we get that level of cross-government co-ordination, and what is he doing to ensure that we get business involved in coming up with some of the solutions we need to tackle that growing problem?

[James Brokenshire]

I agree with my hon. Friend that this issue touches all sectors, whether it be Government, individuals, charities or the voluntary sector as well as business. We are working closely across government, including with the Office of Cyber-Security and Information Assurance, which co-ordinates the national programme. We said in the cyber-security strategy that we would create a forum, bringing together industry, law enforcement and Government. That is important, as we recognise that this is a broad and wide-ranging challenge. We shall take this forward in tandem with the Department for Business, Innovation and Skills.

[Jessica Lee]

Having recently dealt with an alleged victim of cyber-stalking in my Erewash constituency, I certainly welcome the specialist cybercrime units within the National Crime Agency, but does my hon. Friend agree that we must continue to work with Governments overseas to ensure that we continue to contain this threat?

[James Brokenshire]

My hon. Friend highlights a powerful and important point about the individual impact of these crimes. Although our legislation covers harassment—whether it happens on or offline—there is an international perspective to this challenge, with internet service providers potentially hosting material from overseas. We have recently been involved with a consultation on stalking, which closed yesterday, that asked for views on how to protect the victims of online stalking more effectively. We are now reviewing the submissions we have received; we will respond and publish the details of our response in due course.

[Mr Denis MacShane (Rotherham) (Lab)]

I am sure the Minister will agree that cybercrime is quintessentially a transnational crime. Although his colleague the Minister for Immigration seems to think that the Lithuanian, Slovakian, Romanian, Bulgarian and Polish traffickers in British prisons are not from the European Union, will he inform the House what the Government’s position is on the European arrest warrant? This issue has been widely covered in the press. We brought Hussain Osman back from Rome after 7/7—

[Mr Speaker]

Order. It is always difficult to interrupt the right hon. Gentleman’s flow, but I am sure he is asking this question with specific reference to its potential to address the issue of cybercrime.

[James Brokenshire]

I say to the right hon. Gentleman that we do recognise the international perspective in respect of online criminality. That is why, unlike the previous Government, we ratified the Budapest convention—the Council of Europe convention on precisely this issue—to ensure that there is better co-ordination and greater focus on legislation relating to online crime. We drew attention to that approach at the London conference, and we continue to highlight this message.

[Patrick Mercer (Newark) (Con)]

The Minister makes the point that cybercrime and cyber-attacks will be dealt with by more than one Department. What is the overlap between the Home Office and the Ministry of Defence and how will the costs be shared between them?

[James Brokenshire]

As my hon. Friend will be aware, this Government’s approach to cyber-security has included a commitment of £650 million to our cyber-security programme. We in the Home Office are focusing on the criminality aspects, for which £63 million has been identified. We also work with our colleagues across Government, including in the MOD, and the Cabinet Office co-ordinates the overall approach. There is a joined-up approach across Government, therefore, because we recognise that this issue must be addressed in that way.

[Chris Evans (Islwyn) (Lab/Co-op)]

4. What steps she is taking to reduce alcohol-related crime.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

8. What steps she is taking to reduce alcohol-related crime.

[Andrew Gwynne (Denton and Reddish) (Lab)]

10. What steps she is taking to reduce alcohol-related crime.

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

Alcohol should no longer be the driver of crime and disorder that it has been over the past decade. That is why we have legislated to give the police and local communities more powers to tackle late-night drinking problems and to crack down on those selling alcohol to children. We will set out further actions in our forthcoming alcohol strategy.

[Chris Evans]

The Gwent police “Town Safe” scheme has reduced violent alcohol-induced crime by 27% in the past year. Will the Minister meet me and a delegation from Gwent police to discuss how we might roll this scheme out?

[James Brokenshire]

I congratulate local initiatives and partnerships that make a significant difference in their communities. I remember travelling to Newquay to see a very effective partnership scheme addressing these problems in the south-west. I congratulate the hon. Gentleman’s community on taking the step he mentions, and I am certainly willing to consider a request to meet representatives of the scheme to hear more about it.

[Paul Maynard]

I welcome the launch of the public consultation on the regulation of late-night drinking venues. What powers does the Minister intend to place in the hands of my constituents so that they can minimise the disruption and harm caused by so much late-night drinking in town centres such as Blackpool’s?

[James Brokenshire]

My hon. Friend highlights a problem that we have identified: we must ensure that local communities have a proper say on licensing matters. That is why we have legislated to strengthen the powers of councils to clamp down on late-night drinking and sales after midnight, if they so choose. That is also why we are introducing the late-night levy to provide some element of cost reimbursement for dealing with the problems associated with late-night drinking. Equally importantly, on an individual basis we must ensure that people can make representations on licensing. These matters must not be subject to the over-restrictive requirements adopted by the previous Government.

[Andrew Gwynne]

Is the Minister aware of the Alcohol Health Alliance research suggesting that the Government’s proposed ban on the sale of alcohol at below the cost of duty plus VAT will increase the price of only one in every 4,000 drinks sold? What reduction in alcohol-related crime does the Minister expect to follow on from that?

[James Brokenshire]

It is interesting that the hon. Gentleman seeks to criticise the fact that the Government have recognised that the availability of cheap alcohol is a significant issue that needs addressing, because the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) certainly suggested that the previous Government did not do that. He said:

“I regret not doing more to tackle the problems caused by binge drinking”.

The Government recognise those problems and we are actually acting to do something about them, unlike the previous Government.

[Dr Sarah Wollaston (Totnes) (Con)]

What estimate has the Minister made of the extent to which cheap alcohol is fuelling the rise in domestic violence?

[James Brokenshire]

My hon. Friend highlights the very relevant issue of the connection between alcohol and domestic violence and abuse in the home. Studies have drawn attention to that, which is why we are seeking to take the action that we have been taking, through controls on licensing and addressing the issue of pricing. We will be providing further details on the Government’s alcohol strategy shortly.

[Keith Vaz (Leicester East) (Lab)]

As the Minister knows, alcohol-related crime costs £7.3 billion a year. Four years ago, the Select Committee on Home Affairs recommended that a minimum price for alcohol be introduced. The Scottish Government have accepted that, but neither the previous Government nor this one have done so. Is it not time that we told the big supermarkets that the level of cheap alcohol in supermarkets is actually fuelling this crime?

[James Brokenshire]

I certainly recognise the problems linked to alcohol-fuelled crime; there were about 900,000 violent crimes linked to alcohol in 2010-11. I also know that this issue has been flagged up before by the right hon. Gentleman in debate and by the work of his Committee. The Government are committed to tackling the harms of alcohol, and we recognise that the availability of cheap alcohol is a significant issue that needs addressing. He will recognise that some complex issues are involved in terms of regulation and other aspects. We are continuing to examine this matter carefully and closely, recognising that price is a relevant and important factor in dealing with this problem.

[Stephen Gilbert (St Austell and Newquay) (LD)]

In an earlier answer the Minister referred to the success of the Newquay partnership in tackling alcohol-related disorder. That partnership would be hugely more successful if there were a specific offence of urinating in the street. Will the Government consider the introduction of that offence?

[James Brokenshire]

My hon. Friend has highlighted an issue of wanton antisocial behaviour, and I was struck by how the police are having to deal with some antisocial problems in his community. There are offences on the statute book that could be used to deal with the problem that he has identified, but if he is willing to write to me, I will certainly look into this matter in further detail.

[Mr Frank Field (Birkenhead) (Lab)]

May I bring the Minister back to the issue of minimum pricing for alcohol? In Merseyside, the city region’s poverty and life chances commission has advocated a minimum price per unit of alcohol. Is that strategy, which is to cover six boroughs, one that he supports?

[James Brokenshire]

The Government believe that alcohol pricing and taxation are matters best handled at a national level, but where there are suitable local solutions we will welcome them. A number of challenges are involved in delivering local pricing policies, and we will work with local authorities and the trade to consider the legal and practical implications of this issue.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

5. When she last reviewed the operation of the Misuse of Drugs Act 1971.

[The Secretary of State for the Home Department (Mrs Theresa May)]

After a thorough review of drugs policy, the coalition Government launched their new drug strategy in December 2010. The Misuse of Drugs Act provides a strong legislative framework, but we have further strengthened it through the introduction of temporary orders to allow us quickly to ban so-called “legal highs” as soon as they are developed and become dangerous. We continually consider evidence and advice from the Advisory Council on the Misuse of Drugs on the control of emerging drugs.

[Simon Hughes]

I am grateful for the Home Secretary’s personal interest in this issue. Many people outside Parliament, and from all parts of Parliament, still believe that our drugs laws are not working nearly as well as they should. Will she consider the view taken by my party’s conference last year, which was that an independent panel should be tasked with reviewing the Misuse of Drugs Act and reporting back to her, and there should be a subsequent debate in Parliament?

[Mrs May]

I thank my right hon. colleague for his interest in this issue. As he knows, we have already, as a coalition Government, put a considerable amount of work into our new drug strategy, and I suggest to him that we need to see how that strategy, once it is fully rolled out, is having an impact. Other measures that the Government are taking will also have an impact, such as the introduction of the National Crime Agency, which will strengthen our ability to deal with the organised criminal gangs that bring in the drugs that end up causing so much damage to people on our streets.

[Jeremy Corbyn (Islington North) (Lab)]

The Home Office has undertaken a study into the use of khat, and into whether to make it illegal or to retain its current status. Will the Secretary of State say what progress has been made on the consultations within the community, and if and when there are to be any proposals from her Department?

[Mrs May]

I am grateful to the hon. Gentleman for raising that issue. The question of khat has caused concern to a number of people for some considerable time. I have asked the ACMD to consider the use of khat. It will conduct a study and expects to be able to report back to me and the Home Office later this year.

[Julie Hilling (Bolton West) (Lab)]

6. What assessment she has made of the level of crime since May 2010.

[Simon Danczuk (Rochdale) (Lab)]

9. What assessment she has made of the level of crime since May 2010.

[The Secretary of State for the Home Department (Mrs Theresa May)]

Crime remains too high. That is why we are reforming the police, so that they are free from paperwork and free to fight crime. We have also set up the national crime mapping website, police.uk, which now provides the public with street-level information about crime and antisocial behaviour on a monthly basis, allowing them to access crime and policing information in a way that is helpful to them.

[Julie Hilling]

With a 10% increase in robbery with knives, is this the right time to cut 16,000 police officers?

[Mrs May]

There is no simple link between the number of police officers and the level of crime. We can see that evidenced in the UK and elsewhere, with both police officer numbers and crime falling in a number of areas. I suggest to the hon. Lady that she might talk to the Chairman of the Home Affairs Committee, her right hon. Friend the Member for Leicester East (Keith Vaz), who last year said exactly this:

“We accept that there is no simple relationship between numbers of police officers and levels of crime.”

[Simon Danczuk]

Crime in Rochdale is now higher than the national average on nearly every indicator. Will the Home Secretary explain to my constituents how cutting 16,000 police officers will help to reduce that difference?

[Mrs May]

I have just responded to the point about the relationship between numbers of police officers and levels of crime. I believe that the hon. Gentleman’s constituency comes under the Greater Manchester police force, and that force has made some transformations in how it copes with the budget cuts it has to deal with, with the result that 348 police officers have been released from support areas so that those individuals can be out in front-line roles. That is what it is about. It is about the deployment of officers, not the numbers.

[Mr Philip Hollobone (Kettering) (Con)]

In the town of Kettering, from 2010 to 2011 overall crime has fallen by 4%, robbery by 11%, theft from motor vehicles by 20% and residential burglaries by 40%. Will the Home Secretary join me in welcoming those figures?

[Mrs May]

I do indeed welcome those figures, and I thank my hon. Friend for bringing them to the attention of the House. I also commend the local police and other local agencies that have been involved in ensuring that such a fall in crime can take place in my hon. Friend’s constituency.

[Robert Halfon (Harlow) (Con)]

Following on from my hon. Friend the Member for Kettering (Mr Hollobone), is my right hon. Friend the Secretary of State aware that in Harlow crime has also fallen since 2010, with 87 fewer burglaries and 63 fewer cases of criminal damage, among many other figures? Does that not show that community-led policing with limited resources makes a difference? Will my right hon. Friend pay tribute to Essex police?

[Mrs May]

I am happy to join my hon. Friend in paying tribute to Essex police, and to their work in his constituency and others covered by that force. We do indeed see the value of community-led policing, and that is why chief constables up and down the country are making every effort to ensure that they can get police officers out from back-office posts and on to the front line, where people want to see them.

[Mr David Hanson (Delyn) (Lab)]

The latest crime figures show that personal crimes of robbery, burglary and theft have gone up by 11% in the past year—the largest increase in more than a decade. Contrary to what the Home Secretary has just said, the independent inspectorate of policing has said that a 10% cut in police numbers will lead to a 3% increase in property crime. Quite frankly, the Home Secretary should be cutting crime, not police officers. Will she urgently revisit plans to cut 16,000 police from our streets?

[Mrs May]

Well, really, I have to say to the right hon. Gentleman that he knows full well there is no direct link—there is no simple link—between crime and—

[Chris Bryant (Rhondda) (Lab)]

Ooh, you slipped up there didn’t you?

[Mrs May]

The Immigration Minister is getting very excited.

[Hon. Members]

He’s a shadow Minister.

[Mr Speaker]

Order. May I just explain that the deal for an Opposition Front Bencher of the hon. Gentleman’s important but middling rank is one question a month—not one question and multiple heckles? I know he is trying to reinvent the deal but the deal is as I have just described it.

[Mrs May]

Thank you, Mr Speaker. I was going to say to the shadow Immigration Minister that he does, indeed, get excited very often about things that he need not get excited about. There is no simple and direct link between the number of officers and the level of crime. We see that in the UK and across the world. What Opposition Front Benchers need to focus on is the deployment of officers. They need to ask themselves why under the previous Labour Government so many officers were stuck in back-office posts in areas such as human resources instead of being out on the front line fighting crime.

[Kevin Brennan (Cardiff West) (Lab)]

11. What recent assessment she has made of the level of police morale.

[The Minister for Policing and Criminal Justice (Nick Herbert)]

The police do one of the most important jobs in this country with great courage and commitment. As the service faces challenges, we will do all we can to reduce bureaucracy, promote professionalism and make it easier for officers to do their job.

[Kevin Brennan]

“Put more police on the streets and they’ll catch more criminals. It’s not rocket science is it?”

So said the Minister’s party’s 2005 manifesto. We have morale at rock bottom, police numbers are to be cut by 16,000 and personal crime is up 11%. When exactly did his party become so weak on law and order?

[Nick Herbert]

What hon. Members still do not seem to understand is the importance of deployment and what officers are doing. According to the latest figures from Her Majesty’s inspectorate of constabulary, the proportion of the policing work force who are on the front line is increasing.

[Andrew Bridgen (North West Leicestershire) (Con)]

May I read the House a quote from the chairman of the North Yorkshire Police Federation? He said:

“I can never recall a time when officers were so angry. We have been betrayed by a morally redundant Government.”

Given that that quote comes from 2008, does my right hon. Friend agree that the Police Federation has long been worried about police morale and that the best way of improving police morale is to cut the paperwork and bureaucracy and get them out on the streets doing something that they actually joined the police force to do?

[Nick Herbert]

I strongly agree. Those of us who have experienced Police Federation conferences over the years know that they are always lively and robust events. The Labour party knows that too. I note that the chairman of the Police Federation, Paul McKeever, said last year:

“Reading some of their press materials one would be forgiven for thinking that if Labour were in power they would in fact be increasing the police budget”,

whereas we know that Labour is committed to cutting it.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

As we are listening to our chief constables, let us hear what they have been saying this year about the cuts. The chief constable of Dyfed Powys says that cuts to police budgets mean they will no longer be able to conduct cold case reviews such as the one that caught serial killer John William Cooper, and Gloucestershire’s chief constable says his force is on a cliff edge. What effect does the Minister think that will have on police morale?

[Nick Herbert]

The Opposition need to be plain with police officers and staff about the importance of dealing with the deficit and the fact that they too are committed to reducing police spending. They have admitted that they wish to reduce spending by more than £1 billion, and now we know that they wish to freeze pay as well. They cannot complain about these cuts and remain committed to the cuts themselves.

[Owen Smith (Pontypridd) (Lab)]

12. Whether she plans to reassess the police funding settlement for 2012-13.

[The Minister for Policing and Criminal Justice (Nick Herbert)]

No; the allocations of police funding were set out last week and will be debated in the House on Wednesday.

[Owen Smith]

I thank the Minister for that concise and to-the-point answer. He will know that the net effect of the spending cuts in Wales is a reduction of 750 in the number of officers on the front line. What guarantees can he offer the people of Wales that that reduction will not be attended by a corresponding increase in crime in Wales?

[Nick Herbert]

I know from talking with chief constables in Wales that they are absolutely committed to continuing to reduce crime. The important point is that, according to the latest figures, recorded crime in Wales continued to fall. It is very important that police forces focus on ensuring that the available resource is deployed effectively and that they prioritise the front line and drive out cost in those back-office functions. Forces up and down the country are showing that that can be done.

[Nigel Mills (Amber Valley) (Con)]

Does the Minister not think that it is time to review the damping mechanism in the settlement, which deprives forces such as the Derbyshire constabulary of large amounts of funding each year?

[Nick Herbert]

My hon. Friend will have an opportunity to raise that issue in the police funding debate on Wednesday. I know that that is a constant concern of forces that lose out from damping and that they want to move towards the formula. We are committed to doing that and will look at these issues carefully for the next years of the spending settlement. However, an equal number of forces feel that they would lose out as a result, so it is a very difficult issue.

[Diana Johnson (Kingston upon Hull North) (Lab)]

The Government have now admitted that they got police funding for London wrong with their U-turn on Metropolitan police funding and a £90 million bung for Boris’s re-election campaign, yet the Met is not the only force facing pressures from the Olympics and other issues. Will the Minister now reverse the cuts to other forces, such as West Midlands, Greater Manchester, Humberside and Merseyside police, all of which are cutting the number of officers? Cut crime, not the police.

[Nick Herbert]

It is hardly likely that the coalition Government would be acting in the way the hon. Lady suggests. Of course, in London we have recognised the special position of the Olympics and the royal jubilee through a one-off additional payment, which we can discuss further on Wednesday. I note that once again Opposition Front Benchers are pretending that they want to increase spending on police forces, but they have in fact admitted that they would cut police spending by over £1 billion a year and introduce additional cuts that would match our own.

[Jason McCartney (Colne Valley) (Con)]

13. What progress she has made in tackling metal theft.

[The Secretary of State for the Home Department (Mrs Theresa May)]

The Government take the growing problem of metal theft very seriously. Last week I announced legislative measures to the House that will significantly raise the penalties for rogue dealers and ban cash payments for scrap metal. These measures are part of a coherent package to tackle metal theft. We are strengthening the law, cracking down on rogue dealers and targeting the criminals who supply them, including through the funding of a £5 million national metal theft taskforce.

[Jason McCartney]

Last month I visited Schofield scrap metal merchants in Linthwaite in my constituency and heard that it, too, has been the victim of metal theft. What can my right hon. Friend say to reassure reputable scrap metal merchants that it will be the criminals who are punished, not the hard-working family businesses that play a key role in our economy?

[Mrs May]

Indeed, reputable scrap metal dealers play a role in our economy, and everything we are doing is intended to bear down on the rogue scrap metal dealers who receive stolen goods rather than on reputable dealers. We are working with the British Metals Recycling Association and other industry representatives to ensure that the interests of the law-abiding businesses are reflected in the work we are doing.

[Mr Wayne David (Caerphilly) (Lab)]

Does the Home Secretary believe that the police should be allowed into scrap metal dealers in order to gain a comprehensive view of what is happening in them?

[Mrs May]

We are looking at the whole issue of strengthening police enforcement, and one of the things we are doing is undertaking a number of exercises—an example has been seen in the north-east in recent weeks—where the police have strengthened their enforcement and gone into scrap metal dealers where they believe rogue dealing is taking place.

[Mr John Baron (Basildon and Billericay) (Con)]

14. What plans she has to reduce administrative burdens on police forces.

[The Minister for Policing and Criminal Justice (Nick Herbert)]

We have already announced a package of policies to reduce bureaucracy, saving up to 3.3 million hours of police time.

[Mr Baron]

Published reports confirm that under the previous Government only 11% of police officers were visible and/or available to the public at any one time. May I therefore urge my right hon. Friend to continue hacking away at the swathes of bureaucratic paperwork and release more officers for the front line?

[Nick Herbert]

We will do so, and I agree with my hon. Friend. We know from the inspectorate’s report that the level of availability and visibility of officers in the poorest performing forces was half that of the best. So there is room for improvement, even as resources decline, if the front line is prioritised, and the reductions in bureaucracy that we have announced will save 1,500 hours of officer time, showing how important the agenda is.

[Tony Lloyd (Manchester Central) (Lab)]

The Minister would get support for proper cutbacks in unnecessary bureaucracy, but does he accept that some things that are described as bureaucracy are necessary protections for the public and, importantly, for serving police officers?

[Nick Herbert]

In relation to my previous answer, I should have said 1,500 police jobs and 3.3 million hours of officer time.

We cannot defend the existing system on the basis that bureaucracy is important. Over recent years, there has been a huge growth in unnecessary red tape and box ticking as a consequence of the top-down direction of policing under the previous Government. We need accountable policing, but we need also to ensure that police officers are free to do the job and are trusted as professionals to exercise their judgment. That is the agenda we are pursuing.

[Fiona Mactaggart (Slough) (Lab)]

15. What steps the police are taking to tackle human trafficking; and if she will make a statement.

[The Minister for Immigration (Damian Green)]

Police forces deal with trafficking as part of core business. Every one of the UK’s 55 police forces has had an investigator trained in running human trafficking operations, and human trafficking is now part of mandatory training for all new police officers.

[Fiona Mactaggart]

Does the Minister accept that targeted police operations such as Golf and Pentameter led to some 1,000 arrests under the previous Government? His human trafficking strategy has no targets for police operations, apart from reporting that the National Crime Agency will lead to better co-ordination. Does that mean we will have to wait until 2013 and after the Olympics for effective police action against trafficking?

[Damian Green]

No. Moving on from only targeted operations to making anti-trafficking measures part of core police business was absolutely right and something I imagine the hon. Lady’s party would have wanted to do if it had stayed in office. She will be aware, I am sure, of the importance of the “Blue Blindfold” awareness-raising campaign, which has now been spread to all police forces, and “Stop the Traffik” cards have been issued to 10,000 front-line neighbourhood police officers. That kind of practical action will make anti-trafficking measures by the police much more effective and widespread.

[Karl MᶜCartney (Lincoln) (Con)]

16. What recent assessment she has made of the 101 non-emergency police telephone number.

[Mark Menzies (Fylde) (Con)]

17. What recent assessment she has made of the 101 non-emergency police telephone number.

[The Minister for Policing and Criminal Justice (Nick Herbert)]

The 101 non-emergency police number is now available in every force area in England and Wales, making it far easier for the public to contact their local police.

[Karl MᶜCartney]

I thank my right hon. Friend for that answer, and of course we all welcome this reform and the opportunity for front-line officers to prioritise and concentrate on emergencies, rather than on less important incidents. Does he agree that other reforms, such as the democratisation of our police forces with police and crime commissioners, may need to go further to limit the policy-driven Association of Chief Police Officers, which is unelected, undemocratic and, in some cases, does not provide the leadership needed by officers on the front line?

[Nick Herbert]

We are committed to setting up a professional body for policing and to ensuring proper accountability in policing. The non-emergency number is just part of our reforms to ensure that the public have better access to the police and can hold them to account, and the link between the police and the public will be strengthened.

[Mark Menzies]

Last year Lancashire police announced the closure of Lytham police station in my constituency. Does the Minister agree that the 101 number will not only make it easier for my constituents to get hold of the police, but free up police resources in order to get them on the front line serving my constituents?

[Nick Herbert]

Yes, I agree. It is important that we make available through new technology and better systems different ways of getting hold of the police. Another example is our street-level crime mapping service, to which the Home Secretary referred. It has received more than 450 million hits, or about 45 million visits, since it was launched, and it gives the public information about their local policing teams and how to contact them.

[Mr Rob Wilson (Reading East) (Con)]

18. What recent progress she has made in tackling serious and organised crime.

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

We are establishing the National Crime Agency to spearhead our response to serious, complex and organised crime. The director general of the NCA, Keith Bristow, is driving that work. Recent progress includes the establishment of a new organised crime co-ordination centre. We have also published the first genuinely cross-governmental strategy to tackle organised crime.

[Mr Wilson]

I congratulate Superintendent Stuart Greenfield and his team in Reading on their recent drugs bust in Orts road, which resulted in a drugs gang with a yearly turnover of £4 million being jailed for a total of 34 years. Will my hon. Friend join me in those congratulations? Does he agree that with focus, determination and resources directed at the front line, it is possible to tackle serious and organised crime and to clear up the fear in our local communities?

[James Brokenshire]

I am happy to congratulate the police on that work in Reading. My hon. Friend has highlighted the fact that serious and organised crime touches communities directly. The Government have recognised that in the organised crime strategy. Our focus on ensuring that organised crime is given a much higher priority has a significant effect on the crime that we see on our streets. Our work through the National Crime Agency will make an important difference and strengthen the response further.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

Does the Minister expect the switch from the Serious Organised Crime Agency to the National Crime Agency to result in an increase in the level of reclaimed criminal assets? What proportion of those proceeds of crime will he demand is returned to the communities that are most directly affected by crime?

[James Brokenshire]

The right hon. Gentleman highlights an important point on the proceeds of crime, about which I feel strongly as a Minister. We are already driving changes to ensure that there is a focus on this matter in policing. The Serious Organised Crime Agency already has responsibility for it. I am pleased to tell him that since we got rid of the previous Government’s target-driven approach, the performance has improved.

[Kevin Brennan (Cardiff West) (Lab)]

T1. If she will make a statement on her departmental responsibilities.

[The Secretary of State for the Home Department (Mrs Theresa May)]

Today marks the 60th anniversary of Her Majesty the Queen’s accession to the throne. I am sure that the whole House would wish to join me in sending Her Majesty our best wishes and congratulations. [Hon. Members: “Hear, hear!”] The diamond jubilee celebrations in June will be part of what promises to be an exciting year. They will be followed closely by the Olympic and Paralympic games. With less than six months to go until the Olympics, the Government remain committed to delivering a safe and secure games so that the whole country can celebrate and enjoy all these events.

[Kevin Brennan]

As the son of someone who would have regarded himself as an Irish republican, may I associate myself with the Home Secretary’s remarks about Her Majesty the Queen’s remarkable achievements and long reign?

Earlier, the Home Secretary spoke about metal theft and the action that the Government are taking. All Members across the House have had examples of such theft in their constituencies. Why will she not support an amendment tonight in the House of Lords that would give police the authority to search and investigate all premises owned and operated by scrap metal dealers suspected of dealing in stolen property, as well as the power to close them down when criminally obtained metals are discovered?

[Mrs May]

As the hon. Gentleman knows, we have announced a number of measures that we will take that will have a significant impact on metal theft. We are looking at further measures that might be needed. The most immediate impact will come not only from the increased fines, but from the removal of the ability to make cash payments for scrap metal.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

T5. Will my hon. Friend tell me how much will be saved by freezing police pay and whether the Opposition support those savings?

[The Minister for Policing and Criminal Justice (Nick Herbert)]

I am happy to tell my hon. Friend that £350 million a year will be saved through the freeze on police pay. I am also happy to confirm that the shadow Home Secretary endorsed that policy 10 days ago. The Opposition are therefore effectively committed to the same savings programme as the Government.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

May I join the Home Secretary not only in congratulating, but in paying our tributes and respects to, Her Majesty the Queen on the 60th anniversary of her accession? The Home Secretary has talked a lot today about the deployment of police and about increasing the number of police officers on the front line. Will she tell the House what has happened to the number of police officers in front-line jobs since the general election?

[Mrs May]

The shadow Home Secretary will know full well that Her Majesty’s inspectorate of constabulary is making it clear that the proportion of officers on the front line has increased and will continue to increase. The question that she has to ask herself, given that she and her colleagues are now supporting the spending cuts that the Government have been putting through, is why they will not be clear to police officers and members of the public about the impact it will have.

[Yvette Cooper]

The Home Secretary has ducked the question. I do not know whether she knows the answer. She will know that we are clear that there should be a 12% reduction in the policing budget, which would protect the number of police officers, not her 20% cut, which will mean 16,000 police officers being lost.

The Home Secretary needs to answer the question about the front line. I asked her about the number, not the proportion. The same HMIC report that she has been given includes data showing that the number of police officers in front-line jobs was cut by 4,000 in one year alone, following the general election. So will she now admit that her claims that she is protecting the front line are rubbish, and will she give the public a straight answer about protecting the police?

[Mrs May]

The right hon. Lady said that the Opposition supported a 12% cut in police budgets. They also support the pay freeze and the savings available through the outcome of the police arbitration tribunal. They said that we should accept the recommendations on those matters. The shadow policing Minister has also indicated that a significant sum of money should be taken out of overtime and shift patterns. That all adds up to a commitment by Her Majesty’s Opposition to a 20% cut in police funding—the same position as the Government. Now let us get on with talking about things like deployment rather than about the right hon. Lady’s failure to be clear with people about her position on supporting police cuts.

[Steve Brine (Winchester) (Con)]

T6. The Minister for Immigration will be pleased to know that UK Border Agency enforcement officers were active in my constituency shortly before Christmas, removing an illegal worker from one of our city centre restaurants and sending a clear message to business owners across Hampshire.I warmly welcome the Minister’s speech last week, especially his continued determination to raise the tone of the immigration debate. What new enforcement measures is the UKBA taking to stop illegal working?

[The Minister for Immigration (Damian Green)]

I am grateful to my hon. Friend for revealing how effective UKBA enforcement is in his constituency and elsewhere. Along with measures to bring down immigration and ensure that those who come to this country can contribute to it, enforcement against those here illegally continues to be important. I am happy to say that over the past year, the UKBA has conducted nearly 6,500 illegal working enforcement visits, making more than 4,000 arrests and serving more than 1,700 penalty notices to employers of illegal labour. Such tough action will send out the message that Britain is no longer a soft touch for illegal immigration.

[Sheila Gilmore (Edinburgh East) (Lab)]

T2. The Secretary of State has already explained what an exciting summer this is going to be for Britain. Can she reassure us that, given the cuts in the staffing of the UKBA, we will not see a repeat of the problems that took place last summer?

[Damian Green]

I am happy to tell the hon. Lady that, as we said at the time, the initial look at the pilot measures taken over the summer actually showed that the enforcement that was going on was more effective for being more targeted. As she knows, there were clearly difficulties, which are being looked at by the chief inspector. When his report comes in, my right hon. Friend the Home Secretary will report back to the House on what he has found.

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

T7. What advice did the Government receive regarding the police arbitration tribunal’s recommendation on police pay?

[Nick Herbert]

I can tell my hon. Friend that the Police Federation urged us to accept the recommendations of the police arbitration tribunal, and we did so. The official Opposition also urged us to do so. Once again, it is clear that although the Labour party campaigns against cuts, it supported another reduction in police spending without admitting it to police officers.

[Mr Jim Cunningham (Coventry South) (Lab)]

T3. What powers will police commissioners have?

[Nick Herbert]

That is set out in the Police Reform and Social Responsibility Act 2011. Police and crime commissioners will replace police authorities. They will be there to hold chief constables to account. Control and direction will remain with chief constables. It is notable that a number of Labour party figures, including some who remain Members of the House, have expressed interest in standing as police and crime commissioners despite the principled opposition to them by the Labour party.

[Several hon. Members]

rose—

[Mr Speaker]

Order. May I just say to the Minister that a lot of people are waiting to ask questions? Shorter answers and less of the repetition would be helpful.

[Jo Swinson (East Dunbartonshire) (LD)]

T8. The internet can be a great tool for broadening horizons, but as the campaign led by the hon. Member for Devizes (Claire Perry) shows, it can also pose great dangers, especially for children. Tomorrow is safer internet day. What are the Government doing to ensure that children are kept safe online?

[The Parliamentary Under-Secretary of State for the Home Department (James Brokenshire)]

My hon. Friend rightly highlights safer internet day, which is an important opportunity to show what steps can be taken to prevent harm online. This year’s safer internet day is on the theme of connecting generations and highlighting the role of parents. It is also an opportunity for the Child Exploitation and Online Protection Centre to launch new resources for parents. The UK Council for Child Internet Safety is also launching new standardised and simple online safety guidance for use by all internet service providers.

[Huw Irranca-Davies (Ogmore) (Lab)]

Last year, the Police Federation surveyed all four police authorities in Wales on the state of morale and found that 99% of its members were suffering from low morale. Is the Minister or the Secretary of State as shocked as I am that 1% were not suffering low morale under this Government’s policies?

[Nick Herbert]

We have already established that the Police Federation has expressed concern about policy and morale in previous years. It often does so. Police officers and staff know that difficult decisions must be taken to reduce the deficit. They are also increasingly aware that the Labour party would take exactly the same position on pay and funding.

[Philip Davies (Shipley) (Con)]

Is the Home Secretary aware that organisations using SmartWater have seen a huge reduction in the amount of metal theft? Does she agree that that kind of British forensic technology is essential not only to reduce the amount of metal theft, but to provide the police with the evidence they need to bring criminals to justice?

[Mrs May]

I am grateful to my hon. Friend for that contribution—he makes an extremely important and valid point. We are working with industry and others to see whether we can find other ways in which technology can help us to reduce metal theft by identifying metal and making it harder for the criminals.

[Hazel Blears (Salford and Eccles) (Lab)]

Today’s report from the Select Committee on Home Affairs on the roots of violent radicalisation highlights the twin threats from Islamist fundamentalism and the far right. Much of the most successful work has been done by the Hope Not Hate campaign, which empowers communities —the moderate majority—to isolate those extremists. Such community action is vital. Does the Home Secretary therefore share my concern at the delay in the publication of the integration strategy, for which we have been waiting for 11 months?

[James Brokenshire]

The right hon. Lady rightly highlights that communities play an essential role. The Government have recognised that extreme right-wing threats as well as Islamist-related threats need to be balanced equally within the Prevent strategy, which was why we took the decision on the change of emphasis. She mentions work on broader integration. Colleagues in the Department for Communities and Local Government will produce their strategy in that regard shortly.

[Margot James (Stourbridge) (Con)]

The police nationally have instructed local inspectors not to comply with routine requests from local authorities for checks on prospective tenants, which are an important tool in the battle against antisocial behaviour. Will my hon. Friend meet the Information Commissioner to see whether a solution to that problem can be found?

[James Brokenshire]

My hon. Friend highlights responsible tenancies. My right hon. Friend the Minister for Housing and Local Government is doing further work on that to ensure that those who commit antisocial behaviour are not the beneficiaries of social housing in inappropriate circumstances. I note my hon. Friend’s comments and will draw them to the attention of my right hon. Friend.

[John Cryer (Leyton and Wanstead) (Lab)]

In the light of previous answers, what exactly is the relationship between police numbers and the level of crime?

[Mrs May]

As we have made absolutely clear, there is no simple relationship between police numbers and the level of crime. The hon. Gentleman only has to look not only at UK examples, but across the world to see examples in which police numbers have gone up and crime has gone up, or police numbers have gone down and crime has gone down. There is no simple relationship.

[Tessa Munt (Wells) (LD)]

My constituent, Eleyda Rodrigues Torres, who is from Cuba and has been married for several years to an Englishman, has indefinite leave to remain in the UK. She made an application for a residence card last July, but catastrophic failures at the Border and Immigration Agency mean that 13 of her primary documents have been lost, including her passport, NHS letters, bank statements, with all the implications for fraud—

[Mr Speaker]

We need a question, in one sentence.

[Tessa Munt]

Will the Secretary of State meet Eleyda and me to explain what investigation is taking place—

[Damian Green]

If documents have gone missing, I obviously apologise to the hon. Lady and her constituent. I will happily talk with her to solve the problem as soon as possible.

[Amber Rudd (Hastings and Rye) (Con)]

Today is international day of zero tolerance against female genital mutilation. What assessment has the Home Secretary made of progress against this violent and dreadful crime?

[Mrs May]

Sadly, we see too many examples of this terrible crime continuing to take place. Most people would be shocked to know how many young girls in the UK are subjected to female genital mutilation. We need to redouble our efforts to ensure that we educate young girls about the prospect of being taken abroad and having this done to them, but we also need to ensure that we educate others so that they do not wish to do this terrible act.

[Mr James Clappison (Hertsmere) (Con)]

The Government are making good progress in reforming the immigration system. Perhaps that is evidenced by the fact that today the Opposition spokesperson on immigration has had something to say on absolutely everything except immigration. Will my right hon. Friend the Home Secretary keep under review the case for reforming intra-company transfers, given the level of graduate and youth unemployment?

[Mrs May]

My hon. Friend makes a valid point about the attitude that is being taken by the Opposition. It is difficult to hear the shadow Minister say anything about immigration. My hon. Friend will also know that we are looking at all aspects of our immigration policy and keep them under review as we continue to move towards our commitment to bring net migration down to the tens of thousands.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

Last week, North Yorkshire police announced a future Harrogate town centre co-location with Harrogate borough council to save costs. Is the Minister pleased to see such partnership initiatives and such cross-party support for saving money?

[Nick Herbert]

I am grateful to my hon. Friend for raising that example. It is a good one that shows that police forces can collaborate not just with each other, as they are doing increasingly, but also with other services to provide a better service and to save money.

[Joseph Johnson (Orpington) (Con)]

Will my right hon. Friend give an update on recent progress she has made in reforming the Criminal Records Bureau status checks regime?

[Mrs May]

I am happy to give an update. We are, of course, completely changing the way in which the Criminal Records Bureau, and the previous Independent Safeguarding Agency, operate. We are creating a new bureau that will ensure that those who need to be checked will be checked and, unlike under the previous Government, many people who are volunteers helping in their community will not have their records checked.

[Several hon. Members]

rose—

[Mr Speaker]

The hon. Member for Gloucester (Richard Graham) looks as though he is about to burst. Let us hear him.

[Richard Graham (Gloucester) (Con)]

Thank you, Mr Speaker. I am delighted that the Government, the police and the Opposition have all accepted the police arbitration panel’s recommendations on the first Winsor report. My right hon. Friend knows how important it is for the morale of police in forces such as the Gloucester constabulary to see agreement reached on the second Winsor report. Does she see this as an encouraging precedent?

[Mrs May]

We have yet to receive Tom Winsor’s second report on police pay, terms and conditions, but I would say that the process that we followed on the first report, which showed the importance of giving all parties the opportunity to make their contribution on the decision that was finally made, is one that we would expect to follow in future.

Petition

Monday 6th February 2012 Commons Chamber

Nic Dakin (Scunthorpe) (Lab)

- Hansard - - Excerpts

In just a few hours on a Friday lunchtime, the petitioners collected more than 300 signatures in Scunthorpe town centre opposing police cuts in the area.

The petition states:

The Petition of residents of Scunthorpe,

Declares that the petitioners are opposed to plans to cut £30 million from Humberside Police’s budget over the next four years; declares that the Petitioners reject the Government’s claim that these budget cuts will not have an effect on the quality of policing provided; and further declares that the Petitioners believe these cuts will mean the loss of 331 jobs, on top of the 780 staff who were already offered voluntary redundancy last year.

The Petitioners therefore request that the House of Commons urges the Government to reverse its decision to cut £30 million from the Humberside Police budget and reconsider the proposed funding allowance for Humberside Police.

And the Petitioners remain, etc.

[P001004]

Syria

Monday 6th February 2012 Commons Chamber

15:34

[The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)]

With permission, Mr Speaker, I will make a statement on Syria. The whole House will be appalled by the bloodshed and repression in Syria, which continues at this very moment. Over the last 11 months, more than 6,000 people have been killed. The Syrian regime has deployed snipers, tanks, artillery and mortars against civilian protestors and population centres, particularly in the cities of Homs, Idlib, Hama and Deraa. Thousands of Syrians have endured imprisonment, torture and sexual violence, including instances of the alleged rape of children, and the humanitarian position is deteriorating. It is an utterly unacceptable situation that demands a united international response.

Last Tuesday I attended the UN Security Council debate in New York, along with Secretary Clinton, the French Foreign Minister Alain Juppé and other Ministers. We all spoke in strong support of a draft UN Security Council resolution proposed by the Kingdom of Morocco on behalf of the Arab League. The resolution called for the implementation of the Arab League plan to stop all violence in Syria from all sides and to begin a political transition.

There was nothing in this draft resolution that could not be supported by any country seeking a peaceful end to the tragedy unfolding in Syria. It demanded an end to all violence, called for a Syrian-led political process to allow the Syrians to determine their future, and set out a path to a national unity Government and internationally supervised elections. It did not call for military intervention, and could not have been used to authorise any such action under any circumstances. It did not impose sanctions. It proposed putting the weight and authority of the United Nations Security Council behind a plan to achieve a lasting and sustainable peace in Syria.

As I said at the Security Council, it was the Arab League’s plan, not one imposed by western nations. It was co-sponsored by nations including Turkey, Tunisia, Jordan, Kuwait, Libya, Bahrain, Qatar, Saudi Arabia, the United Arab Emirates, Egypt and Oman. Their leadership, and their strong understanding of their region, deserve our support. I pay particular tribute to the secretary-general of the Arab League and to the Prime Minister of Qatar, who travelled to New York to brief the Council and played a vital role in the extensive negotiations that followed.

On Saturday the resolution was put to the vote. Thirteen of the 15 members of the United Nations Security Council voted in favour. Two did not: Russia and China both exercised their veto, despite extensive efforts to amend the draft resolution to address Russia’s specific concerns, and in the face of repeated appeals from Arab nations. Instead they chose to side with the Syrian regime and, implicitly, to leave the door open to further abuses. They did so while President Assad’s tanks were encircling Homs and shells were pounding the homes of Syrian civilians, killing up to 200 people, and on the 30th anniversary of the massacre in Hama.

We regard the veto as a grave error of judgment by the Governments of China and Russia. There is no need to mince words. Russia and China have twice vetoed reasonable and necessary action by the United Nations Security Council. Such vetoes are a betrayal of the Syrian people. In deploying them, China and Russia have let down the Arab League, increased the likelihood of what they wish to avoid in Syria—civil war—and placed themselves on the wrong side of Arab and international opinion.

By contrast, I thank the other members of the Security Council for the principled stand that they took, particularly the non-permanent members: Morocco, Azerbaijan, Colombia, Germany, Guatemala, India, Pakistan, Portugal, South Africa and Togo, all of which voted in favour of the resolution. Pakistan’s representative to the council spoke for all of us when he said:

“This resolution should not die; by being active and engaged, we should give hope to those who are expecting it from us”.

The Syrian regime might have drawn comfort from events at the UN Security Council, but we will do everything we can to make sure that that comfort is short-lived. It is a doomed regime as well as a murdering one. There is no way for it to recover its credibility, internationally or with its own people.

The UN Security Council’s failure to agree a resolution does not signal the end of our efforts to end the violence in Syria. I will set out how we will now proceed. First, we will continue our strong support for the Arab League. Earlier this afternoon I spoke to the secretary-general of the Arab League, Nabil El Araby, as well as the Foreign Minister of Jordan. I welcomed and encouraged the proposal to appoint a special envoy of the Arab League, and I commended the Arab League’s leadership and action so far.

Arab Foreign Ministers will meet this weekend to consider their options. The secretary-general was clear about the urgency of the situation, the Arab world’s continued determination to act, and the need to step up their efforts. I told him that the Arab League would have our complete support.

Secondly, we will seek to widen the international coalition of nations seeking a peaceful and lasting resolution in Syria. We welcome the concept of a new Arab-led group of Friends of Syria, which I discussed with the Prime Minister of Qatar last Tuesday in New York. The aim of such a group will be to demonstrate the strength of international support for the people of Syria and their legitimate demands, to co-ordinate intensified diplomatic and economic pressure on the regime, and to engage with Syrian opposition groups committed to a democratic future for the country. Britain will be a highly active member in setting up such a group with the broadest possible international support.

Thirdly, we will intensify our contact with members of the Syrian opposition. The House will recall that in November I appointed Frances Guy as an ambassador-level envoy to lead our discussions with them. We will continue to urge the Syrian opposition to come together and to agree a common statement of commitment to democracy, human rights and the protection of all Syria’s minorities.

Fourthly, we will maintain our strong focus at the United Nations, undeterred by Saturday’s vote, and we will continue to raise the situation in Syria at the UN Security Council. We will consider with other nations a resolution of the UN General Assembly, and, despite our disagreement with Russia and China, we will continue to discuss with them any possibility of an agreed but meaningful way forward.

Fifthly, we will increase pressure through the European Union, following the discussions that I had in New York with Ministers from France, Portugal and Germany. We have already agreed 11 rounds of EU sanctions, and will hope to agree further measures at the Foreign Affairs Council on 27 February.

Sixthly, we will work with others to ensure that those responsible for crimes in Syria are held to account. At the UN Human Rights Council meeting in Geneva in March we will work to ensure the strongest possible mandate to scrutinise human rights violations in Syria, so that those responsible know that there will be a day of reckoning and that they will be held to account.

Seventhly, we will use our remaining channels to the Syrian regime to make clear our abhorrence of violence that is utterly unacceptable to the civilised world. The Syrian ambassador to London was today summoned to the Foreign Office to receive this message. Despite our deteriorating relations with the Syrian Government, we remain committed to ensuring the safety of its embassy and staff in London, and we expect the Syrian authorities to provide the same protection to our embassy in Damascus.

In parallel, I have today recalled to London our ambassador from Damascus for consultations. He and his team work in extremely difficult conditions to ensure that we have an accurate picture of what is happening in Syria. I hope that the House will join me in paying full tribute to them and their families. Their safety and security is always prominent in our considerations.

The human suffering in Syria is already unimaginable, and is in grave danger of escalating further. The position taken by Russia and China has, regrettably, made this more likely, but the Government, the House, our country and our allies will not forget the people of Syria. We will redouble our efforts to put pressure on this appalling regime and to stop this indefensible violence.

15:42

[Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)]

I welcome this opportunity for the House to discuss the situation in Syria, and I am grateful that the Foreign Secretary agreed to make a statement this afternoon. It was made in the dark shadow of the brutal slaughter continuing even today, with news of scores more people murdered in Homs in the last 24 hours alone.

Let us all be clear that responsibility for the deaths of these innocent people lies at the door of President Assad and his murderous regime. There is clear agreement across the House and much of the international community that the regime has no future, and that Assad must go. The tragedy is that, notwithstanding that fact, the slaughter continues. For the international community, condemnation is not enough; comprehensive diplomatic efforts are required, which is why the recent failure to reach agreement in the Security Council, of which the Foreign Secretary has just spoken, is such a stain on the conscience of the world. I therefore welcome the points that he made setting out the next steps that the British Government will take to seek to resolve this grave crisis.

I have not, in recent days, made any criticism of the Government over their actions to date, and I will not do so in this response. Rather, in a spirit of shared abhorrence and determination, I want to ask the Foreign Secretary a few questions. I share his disappointment at the stance taken by Russia and China. Will he set out more fully to the House what steps are now being taken to convince them of the need for international consensus? In particular, will he tell the House what conversations he has had with Sergei Lavrov since the Security Council vote? In advance of the Russian Foreign Minister’s meeting in Damascus tomorrow with President Assad, has the Foreign Secretary sought or received any assurances that in that meeting the Russian Foreign Minister will at least reflect the wider will of the international community that Assad must go?

I welcome the emphasis that the Foreign Secretary has placed on the work of the Arab League in this crisis, and the prospect of a special envoy being appointed, and indeed a Friends of Syria Group being established. Will he now press for a joint Arab League-European Union summit to be held in the weeks ahead, in order to co-ordinate best the vital steps that now need to be taken? Can the Foreign Secretary give any more information about the level of ambition he is aiming for at the meeting on 27 February, where possible further sanctions will be discussed? Separately, will he inform the House how recently he has spoken to his Turkish counterpart about the steps that Turkey could—and we hope would—be taking to increase further peaceful pressure on Assad?

In his statement, the Foreign Secretary mentioned the human suffering now being endured in Syria. There are reports of even more people fleeing across the borders of Syria into neighbouring countries, and refugee camps set up along the borders are struggling to meet the increasing demands. Can the Foreign Secretary say what conversations he has held with the Secretary of State for International Development on this matter, and confirm to the House who in Government is leading on the humanitarian response to the crisis? Have the Government requested a meeting of the Council of EU Development Ministers to ensure a co-ordinated response to the growing threat of a full-blown humanitarian crisis?

I wrote to the Foreign Secretary at the weekend about the attack on the Syrian embassy in London. While we share an undoubted revulsion at the present actions of the Assad regime, I am sure that the Government would agree that the protection of foreign embassies on our soil is a basic principle of international law that must be upheld. Let me take this opportunity to praise the bravery of the officers on duty outside the Syrian embassy this weekend. Our thoughts are with the family and friends of the officers who were hospitalised. We wish them a speedy recovery. Will the Foreign Secretary outline what discussions took place between him, the Home Secretary and the Metropolitan police ahead of 3 February about protecting the Syrian embassy, in the light of reports of expected protests and attack? Were any specific measures taken or contingency plans put in place, in the light of the reports of Syrian opposition forces calling on Syrians living abroad to protest outside their embassies?

Shortly before today’s statement, word reached us that the US had closed its embassy in Damascus and withdrawn all diplomatic staff from Syria. The Foreign Secretary made it clear in his statement that our ambassador in Damascus had been recalled for talks. Will he outline to the House what the British Government’s assessment is of the utility of the existing diplomatic channels, in the light of the continuing violence?

We welcome the steps that the Government have already taken to try to increase the pressure on, and deepen the isolation of, President Assad and the Syrian authorities. However, I fear that this weekend’s Security Council veto has been taken as a green light for sustained slaughter by the Assad regime. That is why efforts must now be redoubled to end the violence and bring a peaceful resolution to the past 11 months of bloodshed.

[Mr Hague]

I am grateful to the right hon. Gentleman, who has referred, rightly, to the bloodshed over the last 24 hours and the agreement that exists across the House—and, indeed, across so much of the international community—that the regime in Syria has no future. He has spoken, as I have, of the need for comprehensive diplomatic efforts. He has no criticism of what the Government have done so far, and obviously I am grateful for that.

The right hon. Gentleman asked whether there should be an EU-Arab League summit. That is indeed one of the possibilities for bringing together a wider group of nations to address the crisis, but I think it would be preferable to have a meeting that went beyond the European Union and the Arab League, as there are also African nations that have been supportive at the Security Council, as well as Latin American nations. It is therefore probably best to have as inclusive an international gathering and group as possible, going beyond Europe and the Arab world. That would be my preference, and we are in discussion with the Arab League and others about that.

The right hon. Gentleman asked about the level of ambition for the EU meeting on 27 February. Most of the measures that we can take in relation to Syria we have now taken. We have had 11 rounds of sanctions, including a complete oil embargo, which we introduced some months ago. We have placed sanctions on well over 100 individuals and entities. There will be further tightening up of the sanctions that we can introduce, but I stress that most of the sanctions that we can introduce we already have introduced. I do not want to exaggerate what we will be able to do on 27 February,

The right hon. Gentleman asked about contact with some of the other Foreign Ministers whom I did not mention in my statement. I have very regular consultations with the Turkish Foreign Minister, Ahmet Davutoglu, about this matter. Last Tuesday I spoke to him from New York while I was there; that was my most recent consultation with him. Turkey was a co-sponsor of the resolution, and I expect it to be a very active participant in the new informal international grouping that we expect to be formed.

As for the steps to be taken with Russia and China, we have daily conversations with them at the Security Council, and I have had many discussions with my Russian counterpart, Sergei Lavrov, about the situation in Syria. Although I will not have spoken to him between the Security Council vote and his visit tomorrow, I shall want to speak to him after his visit. He has been speaking to the secretary-general of the Arab League, so I am well in touch with what he has in mind for his visit, but clearly the Russians are on a different track here from the rest of us, so it has been difficult to work with them on such contacts with Syria. My right hon. Friend the International Development Secretary gives regular attention to the matter, and Britain has contributed funds to the International Committee of the Red Cross to help people who have been displaced. My right hon. Friend is, of course, ready to work with other countries on any further developments in that regard.

The right hon. Gentleman correctly praised the Metropolitan police, who have been involved in protecting the Syrian embassy. There are regular meetings, including a monthly review meeting between the Home Office and the Foreign Office, on the protection of all embassies. There are well-laid contingency plans in the case of the Syrian embassy, which were put into operation this weekend. There were about 150 protesters there on Saturday, three of whom, by climbing up scaffolding, managed to enter a first-floor window of the embassy. The police presence was further reinforced, and has continued. It will be reviewed today, but I think that the police did a very good job in protecting the embassy, and the normal channels between the Foreign Office and the Home Office are working well.

The right hon. Gentleman asked for an assessment of the utility of our diplomatic channels. I was discussing that with our ambassador in Damascus on the phone just before I came into the Chamber. He has heard—as the House will have heard—the announcement that the American embassy has been closed. We have been aware for some days that it would close today. That was done primarily on security grounds. Our embassy premises are in a different situation, and their security is slightly easier to maintain. We will review all options. As I have said, we have recalled our ambassador, and clearly we are doing that so that we can review all options.

I should prefer us to act in concert with a wide number of other nations if we make a further change to our diplomatic relations with Syria, so we will stay close to our partners in the Arab world and the European Union. I am not ruling anything out, but the House will understand that there are advantages in maintaining an embassy for as long as we can, such as being able to understand the situation on the ground, being able to discuss the situation with a variety of people in Syria, and being able to impress on some members of the regime the gravity of the situation that they have got themselves into. I am not, at the moment, announcing any closure of our embassy, but we will keep the position under close review.

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

I am certain that the Foreign Secretary needs no point of information from me, but may I nevertheless urge him to bear these facts in mind? Inside Syria—which, as he knows very well, contains an immensely complex ethnic and religious group of people—there has lived for many generations a large Christian community, now estimated to number over 350,000. Its archbishop has publicly said that if the present regime is overthrown and replaced —as it almost certainly would be—by a regime of a different denomination, that community might suffer catastrophe, as the Christian community in Iraq did after the overthrow of Saddam Hussein.

[Mr Hague]

I cannot imagine ever not needing a point of information from my right hon. Friend. He has a deep knowledge of the region, and he is right to point out that there remains a thriving Christian presence in Syria. We have to consider the fact that the regime there is now doomed, one way or the other. It is a question not of whether, but of how and when, it will fall. That highlights the importance of our work with the Syrian opposition. I have met two opposition groups, and the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt) has had many meetings with them. We have impressed on them that if they are to form a future Government in Syria, they must recognise the importance of the protection of minorities, including Christians. We need to look to a future Government to give that protection, as this regime has no future.

[Tony Lloyd (Manchester Central) (Lab)]

During the course of the Foreign Secretary’s conversations in New York, was the subject of the International Criminal Court raised? I understand that it is still necessary to give the present regime an exit strategy, but its crimes now warrant that level of legal sanction.

[Mr Hague]

They are very serious crimes, and that is a wholly legitimate question. The hon. Gentleman will know, however, that when a country is not a signatory to the International Criminal Court—as Syria is not—the United Nations Security Council must put forward a reference to the prosecutor of the ICC. Given the difficulties of passing the moderate and sensible plan put forward by the Arab League, it will be even more difficult—indeed, currently impossible—to pass a resolution seeking a reference to the court. That is why I explained in my statement that we will make strong representations at the meeting of the United Nations Human Rights Council, where we will press for the appointment of a special rapporteur and the establishment of special investigations into the human rights situation in Syria, as an alternative track.

[Sir Malcolm Rifkind (Kensington) (Con)]

Will the Foreign Secretary consider speaking to the Russian Foreign Minister before Mr Lavrov goes to Damascus tomorrow, and reminding him of the serious damage that Russia is doing to its own long-term interests in the middle east? If he does speak to him, will he draw to his attention the statement that has been put out by the opposition Syrian National Council today, in which it accuses Russia and China of being

“responsible for the escalating acts of killing”?

It goes on to say that their use of the veto in the Security Council was

“tantamount to a licence to kill with impunity”.

Will not Russia bear a heavy responsibility if Syria now descends into a bloody and protracted civil war?

[Mr Hague]

I think that that is true; I agree with my right hon. and learned Friend. This is why I have used strong language of my own, at the weekend and in my statement today. I believe that the vetoes are a betrayal of the Syrian people: they make Russia and China increasingly responsible for the situation in Syria and for some of the slaughter that is taking place there. They must consider—on the basis of their own national interest, apart from anything else—whether it is a sensible policy to carry on in this way. They are turning their backs on the Arab world, which will reduce their influence in the middle east. It is my belief that they are backing a regime that is, as I have said, doomed in any case. As I said to the shadow Foreign Secretary, the Russians were left in no doubt of our well-expressed views after I had spoken to Mr Lavrov. They will also be conscious of the views being expressed in the House this afternoon.

[Chris Bryant (Rhondda) (Lab)]

With journalists being murdered with impunity and elections being rigged, is not Russia rapidly turning itself into a pariah state, as the right hon. and learned Member for Kensington (Sir Malcolm Rifkind) just said? Would this not be a good opportunity for the Conservative party, which sits in the same grouping as Mr Putin’s party in the European Council, to part company with that grouping?

[Mr Hague]

I do not think that I shall get into party matters during this Government statement. We emphatically disagree with Russia, and we are appalled at the veto in the Security Council. None the less, Russia is a member of the Security Council and it has a veto. We will therefore continue to discuss the way forward with Russia, just as we will with all other nations.

[Sir Menzies Campbell (North East Fife) (LD)]

Is it not clear that the exercise of the veto by any permanent member of the Security Council always comes at a cost? The shameful events of last Saturday will be no exception to this principle. In this case, is not the immediate cost being paid in the broken bodies of children wrapped in burial sheets and the anguish of their parents? My right hon. Friend clearly needs no urging about the urgency with which he should fulfil the objectives he has properly set out, but may I say that he is most well placed when he takes the view that there should be the widest possible coalition of the willing throughout the world—as, indeed, the vote in the Security Council emphasised—so that what the United Nations was unable to do might be achieved on a much broader basis through the maintenance of pressure on Syria?

[Mr Hague]

I absolutely agree with my right hon. and learned Friend, as he could gather from my earlier replies. This is why the international coalition should include nations well beyond Europe and the Arab world. I discussed the matter this morning, for instance, with the Foreign Minister of Australia, which is keen to be a participant. Across the Commonwealth as well as across the Arab and European communities, there will be a demand to be involved in that wide coalition. We will pursue that very energetically in the hours and days ahead.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

One country singularly absent from the Foreign Secretary’s statement was Iran. Will he say a little more about the extent to which he thinks the Assad regime feels supported and receives succour from the Iranians?

[Mr Hague]

The Assad regime certainly feels that. As we have discussed before, Iran has certainly given active support to the Syrian regime in the form of equipment as well as advice on how to deal with civil disorder and rebellion. There may be many other ways, of which we are unaware, in which the Iranian regime supports the Syrian regime. This is a classic piece of hypocrisy. The Iranians have supported revolution elsewhere in the Arab world, particularly in Egypt and Tunisia; they supported disorder in those countries, but they are against it in Syria. I think that the whole Arab world sees through that, which further widens the current widening separation between Iran and its Arab neighbours.

[Richard Ottaway (Croydon South) (Con)]

I share the Foreign Secretary’s approach and urge him to maintain the political, economic and diplomatic pressure that he has set out. The third step that he announced was that he would intensify contact with members of the Syrian opposition. Will he elaborate a little on that: is it on a multilateral or bilateral basis, and is there any limit to the level of resources that he is able to commit to helping that opposition in Syria?

[Mr Hague]

That is bilateral and multilateral. I have already mentioned some of the bilateral contact we have had and the fact that we have an ambassador-level representative dealing with the opposition. I also believe that one of the roles for the wider international coalition would be to meet the various groups of the Syrian opposition, which I think would be a catalyst for the opposition to propose their plans, to make clear commitments to a democratic future for their country and to set out their commitment to human rights and, indeed, the protection of minorities. It is also important for them to try to come together, since one of the challenges for the opposition is to develop a single platform and a single agreed body for taking forward their concerns. There is no limit on what resources we can provide. We have already provided training in the documentation of human rights abuses, in strategic communications and so forth. We may be able to do more in the future.

[Mr Denis MacShane (Rotherham) (Lab)]

The Foreign Secretary cannot be faulted in the handling of this crisis and, if I may say so, his Under-Secretary of State, the hon. Member for North East Bedfordshire (Alistair Burt), was very impressive on the BBC yesterday. However, before we go down the road of arming the opposition, should we not recall what happened when the west armed the mujaheddin and they turned into the Taliban and al-Qaeda? More broadly, this is the fourth major intervention in a majority Muslim country—and Iraq, Afghanistan and Libya are not happy examples to follow. Do we not need a broader strategic approach to this region of crisis?

[Mr Hague]

Well, I think that is what we have. I am grateful to the right hon. Gentleman for saying that he could not fault my colleague and me, although there was then a “but.” Let me reassure him further, therefore: we are not contemplating arming anybody. Indeed, one of the things we stressed in our meetings with the Syrian opposition was that they should remain peaceful. We have not been in contact with the Free Syrian Army, which is engaged in a different kind of struggle with the Syrian authorities. I would not classify this as an intervention, therefore. We are supporting the work of the Arab League, we are assembling the widest possible international coalition, and we are not calling for military action or intervention, so I think the right hon. Gentleman can be reassured and continue to be as effusively supportive as he was in the first part of his question.

[Nicholas Soames (Mid Sussex) (Con)]

I applaud the Foreign Secretary for the vigorous and energetic way in which he and his colleagues are attempting to deal with this matter, and I join in his tribute to the staunchness of our diplomatic staff in Damascus. What does he think animates the Chinese Government to support these butchers?

[Mr Hague]

That is an interesting question. As far as we could see at the Security Council negotiations last Friday, China had no easily identifiable objection to the draft resolution. Indeed, when it came to the vote the Chinese permanent representative was surrounded by Arab representatives urging him therefore to vote for the resolution. As it turned out however, his instructions were evidently to vote to veto the resolution along with Russia. It seemed that the desire to act with Russia on the Security Council outweighed any other consideration. I think that is a mistake on the part of China. We have a regular and full strategic dialogue with China, and I will certainly want to pursue the question of this decision vigorously in our next strategic dialogue, because I do not think it is in the interests of China; nor do I think it is living up to the full responsibilities of permanent membership of the Security Council.

[Ann Clwyd (Cynon Valley) (Lab)]

The Foreign Secretary has talked about the importance of Turkey. In his discussion with the Foreign Secretary of Turkey, was there any talk about setting up safe havens near the Turkish border, which I believe the Syrian opposition have asked for?

[Mr Hague]

This idea has been floated, although I think more in the media than by any of the Governments concerned. It can, of course, be an appealing idea when people are in such distress and suffering so much, but one then has to consider how safe havens would be created and how they would subsequently be policed. We know from experience in the Balkans in the 1990s that safe havens that prove not really to be safe are one of the worst things we can create. The creation of true safe havens inside Syrian territory would, in effect, require military intervention in Syria. That is not authorised by the UN Security Council and would require a massive military operation. The Turkish Foreign Minister was not proposing that, and that was not part of our discussion last week.

[Mr Edward Leigh (Gainsborough) (Con)]

While Assad’s actions are evil and those of the Russians and Chinese are woeful—my right hon. Friend is entirely correct on that—some of us warned during the Libyan intervention that we were in danger of playing into their hands and providing them with an alibi because we did not stick strictly to humanitarian action, such as when we were pursuing Gaddafi in the last hours of his life before he was executed by our allies. We are where we are, however, so where do we go from here? The fact is that the Chinese are impervious to grandstanding. The Foreign Secretary has been rather brief on the quiet diplomacy he is now going to engage in with them to get them to sign up to a resolution that, in terms, prohibits any repetition of the kind of action that took place in Libya.

[Mr Hague]

I disagree with my hon. Friend, in that I do not think that what happened in Libya provides an alibi; after all, there were countries on the Security Council, such as India, which did not vote for resolution 1973 on Libya, and South Africa, which did vote for it but was then very critical of its implementation, that were perfectly happy to vote on Saturday for this resolution because it is entirely different from what we contemplated and wanted in Libya. We are not calling for military intervention—these are different circumstances—so I do not think that that is an adequate defence for Russia and China.

My hon. Friend said that I was quiet on quiet diplomacy, but it is in the nature of quiet diplomacy that it is not pursued noisily. Of course, as I said in my statement, we will continue to discuss with Russia and China the way forward. We will do so in a rather vigorous way, but we will do so continuing to seek agreement at the UN Security Council. We will be very busy with that over the coming days and weeks.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Tunisia, the first Arab country to be liberated from a despot in the Arab spring, is expelling its Syrian ambassador and de-recognising the murderous and criminal Assad regime. The Syrian National Council has called on other countries to follow suit, so will the British Government be considering that?

[Mr Hague]

As I mentioned, I do not rule that out. If we were to do that, I would like us to act in concert with other nations. Therefore, what other nations do is a factor, and we will keep in close consultation with our European and Arab partners on this. But there are considerations to set against that and reasons to maintain an embassy, if possible, which I also mentioned earlier. So this is about a balance between those considerations.

[Mr Julian Brazier (Canterbury) (Con)]

A very dear friend of mine and his five-year-old son were butchered by the Assad regime in the days when it controlled Lebanon, so may I both commend everything that my right hon. Friend is doing and urge him to take a particular interest in what is going on in that country, which the Assad regime continues to try to destabilise, both through its own proxies and through Iranian ones, such as Hezbollah and Amal?

[Mr Hague]

Absolutely; we always take a close interest in what is happening in Lebanon, and Syria has indeed been, a great deal of the time, a malign influence in events there. In addition, events in Lebanon and what may happen in the future there are an important consideration in how we handle this crisis in Syria—this is one reason why it is quite different from the Libyan crisis, for instance. So my hon. Friend is right to point out the horrors of what has happened before and I am very conscious of the point that he makes.

[Mike Gapes (Ilford South) (Lab/Co-op)]

I welcome and endorse the Foreign Secretary’s remarks about taking action through the European Union, through the UN General Assembly and Human Rights Council and with the Friends of Syria group, but one organisation that he did not mention was NATO. Is it not time to have a discussion in the North Atlantic Council— including Turkey—about having some kind of no-fly zone, comparable with what was put in place to save the Kurds 11 years ago, over the northern part of Syria?

[Mr Hague]

I do not think that it is. I say so, first, because if NATO began planning for different eventualities in Syria, that would weaken rather than unite the international coalition. A no-fly zone would also require authorisation from the UN Security Council, and clearly that would not be obtained at the moment. In addition, although there are reports of Syrian aircraft being involved in the latest events, this is not the prime means of repression, so although a no-fly zone is an easy thing to call for, there is a danger that it would give the illusion of security when the prime means of repression of the civilian population is by tanks and troops on the ground.

[Sir Bob Russell (Colchester) (LD)]

I welcome the Foreign Secretary’s warm words about the countries of the Arab League. With the eyes of the world on Syria, will he give me his personal assurance that he will not close his eyes to what is happening next door in Israel, where United Nations resolutions and international law are being breached against the Palestinian people?

[Mr Hague]

My hon. Friend knows—again, we have discussed this in the House many times—the position on this. We may be getting a little wide of the statement, but of course we have condemned violence in the occupied territories and indeed the expansion of settlements in the occupied territories, which are illegal and on occupied land.

[Mr Speaker]

We are grateful to the Foreign Secretary for dealing with that point. Perhaps we can now keep the statement exchanges to the subject matter. I know that the hon. Member for Colchester (Sir Bob Russell) is now a Knight, but we must stick to what is right and that is the content of the statement.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

What is the Foreign Secretary’s assessment of the prospects of Russia agreeing to impose an arms embargo on Syria, given that Russia remains one of Syria’s principal arms suppliers?

[Mr Hague]

There is not much prospect at the moment of Russia agreeing to an arms embargo—that is the straight answer. Russia continues to sell arms to the regime. Russia has many close interests allied to those of the Assad regime and has a naval base there. Syria has been an important customer for Russian arms, and that is no doubt one of the factors behind Russia’s defence of the Assad regime and its veto at the UN Security Council. So, the prospect of Russia agreeing at the moment is very small.

[Sir Roger Gale (North Thanet) (Con)]

Given the cynicism of Russia’s veto of the draft resolution at the weekend, and the bloodshed since, will my right hon. Friend consider calling in the Russian ambassador and gently suggesting to him that Russia’s failure to support human rights in Syria might be construed by some as incompatible with Russia’s membership of the Council of Europe?

[Mr Hague]

I will give consideration to all the points that are being raised about Russia—that is, I think, the best thing for me to say—and I will ensure that the force of the views in the House of Commons about Russia’s veto is well understood by the Russian embassy. It will be understood there, anyway. My first preference in how we now conduct our discussions with Russia is for me to do so directly with the Russian Foreign Minister, as well as via any contact we may have with the ambassador.

[Mr David Winnick (Walsall North) (Lab)]

Although the action of Russia and China is completely inexcusable, and no one in this House has tried to defend or justify it in any way, may I take the Foreign Secretary back to a point made earlier? Is he aware that the resolution on Libya, which was brought forward to stop slaughter, was so extended to bring about regime change that it has inevitably played right into the hands of Russia and China, who have done what they have done and vetoed the UN Security Council resolution? Both countries have, of course, a pretty poor record when it comes to their own human rights.

[Mr Hague]

In my view, the resolution on Libya—resolution 1973—was faithfully implemented. If I remember rightly, the hon. Gentleman voted, in the end, for our action in Libya.

[Mr Winnick]

indicated assent.

[Mr Hague]

Yes, he did. So, we are united in agreeing with that resolution. I do not think that it provides an excuse for Russia and China, for the reasons I gave earlier to my hon. Friend the Member for Gainsborough (Mr Leigh). Many other nations on the Security Council disapproved of what we did in Libya but voted for this resolution on Syria.

[Mark Pritchard (The Wrekin) (Con)]

Notwithstanding the Foreign Secretary’s earlier comments on the International Criminal Court, if there is a subsequent UN resolution on referring President Assad and his regime to the UN and the ICC, does he agree that the timing of that will be very important? We know that many dictators, if they feel they have nothing to lose and nowhere to run, are likely to dig in, with more atrocities than there perhaps would have been. The timing is critical.

[Mr Hague]

Yes. My hon. Friend makes a valid and legitimate point. In any case, it is not possible at the moment to refer this to the prosecutor of the ICC. However, I think that the longer this goes on and the greater the atrocities committed, the more determined the world will be to find a way to bring to account and to justice those responsible. That should weigh heavily on those who are now participating in the atrocities of this regime.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Will the Secretary of State update the House on measures being taken to ensure the safety of British citizens in Syria?

[Mr Hague]

For a long time—for many months—we have said that British nationals should not travel to Syria and that those who are there should leave. Also, some weeks ago, when we reduced the staff of our embassy to the minimum level possible to maintain it, we made it clear that we were below the level at which we could conduct an evacuation of any remaining British nationals. We have made the position abundantly clear, and there should not now be British nationals in Syria. Some people who are dual nationals or are married to people in Syria will of course have remained, and whenever they are in difficult circumstances we will do our best to assist them, but we have made the position starkly clear.

[Bob Stewart (Beckenham) (Con)]

Having sat in the middle of a so-called protected area that was totally unprotected, may I re-emphasise to the House something the Foreign Secretary has said? Any protected area requires the presence of people on the ground with the ability to keep it protected, and if this talk of a protected area continues, we will have to think about how that can be done. At the moment, it certainly cannot be done by the British.

[Mr Hague]

My hon. Friend speaks with deep experience of these matters. Certainly, any future discussion about safe havens or humanitarian corridors must be accompanied by the will, authority and full means to make sure that they truly would be safe and humanitarian, rather than leaving people in a very difficult situation.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

On Friday, I attended a fundraiser in Newcastle at which over £30,000 was raised to provide humanitarian assistance to those terrorised by the regime. Many there expressed real fear about returning to Syria, especially now that they have shown their support for democracy and freedom. Can the Secretary of State assure me that he is working with his colleagues in the Home Office to ensure that no Syrians are forced to return to Syria from the UK at the moment?

[Mr Hague]

I congratulate the hon. Lady and her constituents on the funds they have been raising, and I shall draw her point to the attention of my colleague the Home Secretary. We have rigorous rules on these matters in terms of giving asylum to people and not returning them to countries that are in a state of great disorder. I will check on the point she raises.

[Conor Burns (Bournemouth West) (Con)]

I wish the Foreign Secretary well in his ongoing discussions with China, for if the use of the veto in these circumstances is a foretaste of things to come, it does not bode well for the future effectiveness of the Security Council. Returning to the Russian Foreign Minister’s visit tomorrow, regardless of the position that Russia is taking, does my right hon. Friend agree that if the Russian Foreign Minister is properly to convey the mood of the UN, the international community and the Arab League, he will tell President Assad that his days are numbered and that the only question is how much more blood will be spilled before he goes?

[Mr Hague]

I would love it if that were the message conveyed by Sergei Lavrov when he goes tomorrow, and my hon. Friend is quite right that that is what should be conveyed. However, I think Russia’s approach remains different from that, as we saw with its veto. It is still acting to protect the regime and standing by a long-standing ally despite everything that has happened. As I have said, we will underline to Russia’s representatives, including the Foreign Minister, the depth and strength of opinion in this country, as indeed they will hear from the Arab League and many other nations around the world.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

What assessment has the Foreign Secretary made of reports over the weekend that Abu Musab al-Suri, who until his capture in 2005 was a dangerously active terrorist, has been freed by the Assad regime in an apparent warning to the United States and the United Kingdom? If that is true, will it not be yet further evidence of the murderous activity of the Syrian Government?

[Mr Hague]

Yes, it would. I am awaiting reliable information about that. Clearly, the announcement was not designed to be helpful in any way and it is further evidence of what the right hon. Gentleman refers to, but if the Syrian regime honestly thinks that we, at the United Nations or anywhere else, are going to change our approach because of such announcements or the release of any reprehensible criminal, it is seriously mistaken.

[Jo Swinson (East Dunbartonshire) (LD)]

Russia is inflicting a double blow on the Syrian people through its UN veto and by continuing the $1.5 billion of arms sales to Assad’s regime, which enables the killing and maiming to continue. If the moral and humanitarian argument cannot get through, will the Foreign Secretary emphasise to his Russian counterpart that it is not in Russia’s strategic and economic interests, with its key trading partners in the middle east such as the United Arab Emirates and Saudi Arabia, to act as a roadblock to the protection of the Syrian people?

[Mr Hague]

Yes, I absolutely agree. This is an important consideration for the Russian authorities and it is not in Russia’s national interests to take the position it has taken. There will be a future Government in Syria who will remember what Russia has done. Its actions are causing outrage in the Arab world, which is deeply frustrated with Russia’s position, as the secretary-general of the Arab League said to me earlier this afternoon, so we will certainly employ the arguments cited by my hon. Friend.

[Jeremy Corbyn (Islington North) (Lab)]

The killings, murders and disorder in Syria are obviously dreadful and must be condemned. Notwithstanding the Foreign Secretary’s understandable anger with Russia at present, does he not think that it would be appropriate to have further negotiations with the Russian Foreign Minister and the Government of Iran, who are a near neighbour and in whose interests it cannot be for further disorder to spread to their country? Also, is he confident of the democratic and inclusive credentials of all the Syrian opposition? Surely we can learn from the example, given by many colleagues, of what happened in Libya, where in some quarters the abuse of human rights unfortunately continues, despite assurances given by the opposition there before the intervention.

[Mr Hague]

We shall certainly continue to have discussions with Russia, as I have mentioned many times, but I do not think that discussions with Iran on this subject would be productive at the moment. The views of members of the Syrian opposition vary greatly and, indeed, at least three different organisations could be classified as the Syrian opposition. That is why I stress the need for them to come to international gatherings with a clear statement of democratic and inclusive principles, including the protection of minorities in Syria. I think that they will have greater support in the world if they can articulate those things clearly and set out a clear vision for the future of their country.

[Claire Perry (Devizes) (Con)]

It is always the innocent who suffer in these situations, and anyone who has seen or heard of the collateral damage being inflicted on the innocent women and children in Homs cannot fail to think that this Sino-Russian veto is disgraceful and disgusting. Is there any way that we can use our remaining infrastructure and resources in Syria, or those of our allies, to provide humanitarian or medical assistance to these helpless victims?

[Mr Hague]

We are down to the smallest level of representation we can have that is consistent with diplomatic relations. Our staff are therefore able to maintain an embassy, but it is not easy for them to travel around the country, let alone deliver practical assistance to people, so we cannot do that with the remaining diplomatic staff. We support the work of the International Committee of the Red Cross in the region,as I have said, so we will have to deliver any assistance that way.

[Dr Julian Lewis (New Forest East) (Con)]

While the immediate priority must obviously be to maximise pressure to put an end to the slaughter, what longer-term assessments have been made about the likely complexion of any successor regime to the dictatorship?

[Mr Hague]

As I said in answer to the hon. Member for Islington North (Jeremy Corbyn), there are many shades of opinion among the Syrian opposition. When I met members of the Syrian National Council, they were very clear about their commitment to an open and democratic society and to the protection of minorities. I have no reason to doubt them on that, but there will be many influences at work, so it is very difficult to make a prediction or give an accurate answer to my hon. Friend’s question. All I can say is that we will continue to urge the various opposition groups to adopt the open and democratic principles in which we, too, believe.

[Dan Byles (North Warwickshire) (Con)]

May I press the Foreign Secretary on the issue of UK nationals and those holding dual nationality? What assessment has he made of the number of people falling into those categories, and what discussions has he had with those of our allies who, like us, are maintaining a diplomatic presence with regard to mutual aid for one another’s citizens should the situation deteriorate?

[Mr Hague]

Well, it is in any case the arrangement within the European Union that countries will provide assistance to each others’ citizens if one is unable to do so, but of course the embassies of other nations are also being slimmed down, so it would be wrong for people to rely on that. I think that they should take our advice very seriously. For months we have said, “Do not stay in Syria. Do not go to Syria.” I cannot make it clearer than that. Rather than expect practical assistance, they should leave, and leave now.

[Dr Phillip Lee (Bracknell) (Con)]

I have had the privilege of visiting Syria twice in my life: once in 1998 with a backpack on my back, and last year on a delegation ably led by my right hon. Friend the Member for Mid Sussex (Nicholas Soames). I was struck by the stark difference in access to news media within the country between the two visits. Does the Foreign Secretary agree that our foreign policy, and indeed that of all our partners abroad, should reflect that changed media environment and that the sooner the Russian and Chinese Governments understand and respect that, the better?

[Mr Hague]

Yes, I very much agree. People have access to media reports, particularly those carried by Arab satellite television channels, and what we say on our televisions and, indeed, in this House is heard and understood by many people in Syria. That is one reason why it is not possible to say to people in Syria, “There is no problem,” and that the Syrian Government are doing everything they can. The people can see that the Syrian Government are not acting in the interests of a peaceful transition in Syria, so we will continue to communicate, in many ways directly, with the people of Syria and the rest of the Arab world. There is a lesson in that for Russia and China, as my hon. Friend says.

[Mr Stewart Jackson (Peterborough) (Con)]

The actions of this despotic regime are merely the culmination of 30 years of human rights abuses under both Assad regimes, as we know. To return to the question put to the Foreign Secretary by my hon. Friend the Member for Croydon South (Richard Ottaway), we welcome the appointment of a special envoy to the Syrian opposition, but will it necessarily lead to the establishment of a contact group with the Syrian National Council, the Free Syrian Army and other individuals in lieu of the establishment of a free, democratic Government?

[Mr Hague]

We will have to see how the opposition groups develop. We are urging them to come together, but I stress that our contact has been with those advocating peaceful action. We have not had contact with the Free Syrian Army, which is in a different position and advocates a different course, but we want those groups to come together, and we will want them to be involved and to bring their ideas and future plans to the international grouping—of whatever kind—that is formed among Arab, European and other nations. That will be the forum for the opposition to present their ideas and to seek the support of the rest of the world.

[Stephen Gilbert (St Austell and Newquay) (LD)]

My right hon. Friend mentioned the possibility of securing a resolution at the United Nations General Assembly as a way of tackling the issue. What assessment has been made of the possibility of that, and on what timeline does he expect to operate?

[Mr Hague]

We are still making an assessment of that. Clearly, it was only on Saturday that the resolution was vetoed in the Security Council. A General Assembly resolution does not have the same weight as a Security Council resolution, but it can illustrate the strength of numbers behind a particular proposition, so we are discussing that now—whether it is a feasible way forward—with the Arab League and with our other partners on the Security Council. I therefore cannot give the hon. Gentleman a timeline yet, but it is a possibility.

[Mr John Baron (Basildon and Billericay) (Con)]

We all wish the Foreign Secretary well in his endeavours, but may I press him by suggesting that the regrettable decision to veto was at least in part caused by Russia and China believing that western powers had exceeded their mandate under UN resolution 1973, when pursuing regime change in Libya, as they made clear at the time?

[Mr Hague]

This is not an excuse for Russia and China, and as I pointed out earlier other nations that were very critical of our actions in Libya voted for the resolution, appreciating that it was put forward on behalf of the Arab League, and that it put forward an entirely different proposition from how we proceeded in Libya, because the situation is entirely different. This should not be advanced as an excuse for what is in my view an indefensible veto.

[Robert Halfon (Harlow) (Con)]

I welcome what my right hon. Friend has done thus far, but, just as we were right to intervene in Libya and to support with weapons and logistics those opposition movements that faced massacre, can he do more to work with other countries to give logistics, weapons and humanitarian aid to the opposition groups in Syria? Further, when will the stage be reached at which we need to expel the Syrian ambassador from the United Kingdom?

[Mr Hague]

I hope that I have covered those points. We are not engaged, and are not planning to engage, in arming the opposition forces in Syria, although we will help with advice and some logistics and practical support in order to ensure their ability to operate. It would not be in their interests in any case to be seen as an arm of western Governments, so there is a limit to what we can do in that regard.

On the question of the embassy, we will work with our partners throughout the world on that, but there are advantages in keeping an embassy, as well as in making the strong diplomatic statement of withdrawing an embassy. It improves our understanding of the situation on the ground to have an embassy there.

[Richard Harrington (Watford) (Con)]

Is the Foreign Secretary aware of reports of chemical weapons and other weaponry being moved by Hezbollah out of Syria? If so, is he concerned about the consequence that that could have for Israel and Jordan, and for the general stability of the region outside Syria?

[Mr Hague]

We keep a very close eye on any reports of the presence of chemical or biological weapons. I have not seen reports of such weapons being moved by Hezbollah, although the Syrian regime’s close connections with Hezbollah may give rise to concerns about what might happen in Lebanon if the situation continues in Syria. My hon. Friend can be assured that we are alert to this issue.

[Andrew Bridgen (North West Leicestershire) (Con)]

The impending elections in Russia and a weakened Mr Putin keen to bolster his domestic opinion polls through a show of strength have been put forward as a possible explanation for the use of the Russian veto. Does the Secretary of State agree with that explanation?

[Mr Hague]

The upcoming elections may be a factor in the Russian veto. I think that a stronger factor is that the Russians have had a long alliance with the Assad regime. As I mentioned, they have a naval base in Syria and have sold large quantities of arms there. They feel committed to supporting the Assad regime. That is something that they should change their mind about, in my view, given that the circumstances have changed. We will continue to work on them, before and after their election on 4 March.

[Joseph Johnson (Orpington) (Con)]

It is clearly welcome news that India came off the fence and supported the resolution, marking an end to three decades of that country’s ties with the Assad family. To what extent did New Delhi seek to dilute the final text so that it made no mention of automatic measures in the event of non-compliance?

[Mr Hague]

Like my hon. Friend, I welcome the fact that India voted for the resolution. It is true that several countries on the Security Council wanted a resolution that did not go beyond the draft resolution as it was put to the vote on Saturday. Certainly, India is one country that would not have wanted a stronger resolution with the authorisation of sanctions or other measures. I stress that the prime negotiations in the Security Council were always with Russia. The objections raised and amendments put forward came from Russia primarily, rather than from India, South Africa or Pakistan.

[Rehman Chishti (Gillingham and Rainham) (Con)]

I welcome the statement by the Foreign Secretary. He will know that there are more than 30 opposition parties in Syria, including the National Council, the National Co-ordination Committee, the Justice party and the Kurdish party. The work to unite them has been going on for a long time. How close are we to uniting them? Unless the opposition are united, the future for Syria looks bleak.

[Mr Hague]

The answer is that many of those groups have come together under the umbrella of the Syrian National Council. It is in their own interests for all the major groupings to come together under that umbrella. This is a national emergency. As I have put it to them, in this country, which is a thriving democracy, when we face an existential threat, all the parties come together, as with the coalition during the second world war. Syria faces one of the direst emergencies in its history, so they should all be able to come together for this period. We will continue to give that advice, but they have not all managed it yet.

[Sajid Javid (Bromsgrove) (Con)]

May I press the Foreign Secretary on another aspect of dual nationality? Many of the most energetic supporters and members of the barbaric Syrian regime have dual Syrian and British nationality, including members of President Assad’s immediate family. Will the Foreign Secretary make a commitment to consider how we might usefully frustrate this blatant abuse of British nationality and its use as a flag of convenience?

[Mr Hague]

Many people may share my hon. Friend’s view about the views expressed by dual nationals in this country. However, views expressed are no grounds to deprive anyone of their nationality. If I took that suggestion to my right hon. Friend the Home Secretary, I am sure that she would be very clear about that. I therefore cannot hold out any hope to my hon. Friend that we will be able to act in the way that he would like us to.

[Mr Philip Hollobone (Kettering) (Con)]

What role can Jordan play in helping to resolve this crisis?

[Mr Hague]

Jordan is playing a strong and constructive role. I discussed the situation a couple of hours ago with Nasser Judeh, the Foreign Minister of Jordan. It supports and is an energetic sponsor of the work of the Arab League, and it co-sponsored the resolution that was put to the UN Security Council. We welcome its active participation.

Financial Services Bill

Monday 6th February 2012 Commons Chamber

Second Reading

16:40

[The Chancellor of the Exchequer (Mr George Osborne)]

I beg to move, That the Bill be now read a Second time.

It is a pleasure to move Second Reading of the Bill. It is the product of many years of thinking, policy work in opposition, extensive consultation in government and impressive pre-legislative scrutiny in Parliament. I want to thank at the start the Joint Committee on the draft Financial Services Bill, which has made it a better piece of legislation, the Treasury Committee for challenging us to develop clearer lines of accountability in the Bill and the Treasury’s own Bill team, who have worked so hard for the past 20 months to produce the Bill before us.

The genesis of the Bill is obvious—the biggest failure of economic management and banking regulation in our country’s history. Its purpose is clear as well—to dismantle the disastrous tripartite system created 14 years ago and replace it with a structure of financial oversight that supports successful, competitive financial services while protecting the British taxpayer from the risk that those services run.

Of course, the Bill is not the complete answer to what went so spectacularly wrong. It should be seen alongside the Basel reforms to capital and liquidity, the living wills and resolution regimes that have been developed and the reforms to the structure of banking proposed by the Vickers commission. It is not by itself a sufficient response to the mistakes of the past, but it is absolutely necessary.

Let us remember what happened. Over the last decade before the crash, Britain experienced the biggest increase in debt of any major economy in the world. The total of household, corporate, financial and public sector debt in the UK reached a staggering 500% of gross domestic product. Our banks became the most leveraged in the world, and whether it was Northern Rock’s 120% mortgages secured on wholesale funding, Halifax Bank of Scotland’s catastrophic commercial property deals or the Royal Bank of Scotland’s reckless decision to buy ABN AMRO after the markets had frozen, such things did not attract the intervention or, it seemed, the concern of Britain’s tripartite regulatory system.

That system had been established as a by-product of the decision by the new Labour Government to give the Bank of England independent control of monetary policy. Without warning to the Bank, or anyone else, that institution was stripped of its historic responsibility for regulating the banking system, which was given to a new Financial Services Authority. It was a fateful decision, and one that we now know very nearly prompted the resignation of the then Governor of the Bank, the late Eddie George.

The comment 14 years ago by the Conservatives’ then shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), during the passage of the Bank of England Bill, which created the tripartite system, was remarkably prescient. If he does not remember it, I will remind him of what he told the House. He warned that

“with the removal of banking control to the Financial Services Authority…it is difficult to see how and whether the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.”—[Official Report, 11 November 1997; Vol. 300, c. 731.]

He was spot on. However, at the time he and the Opposition whom he led through the Division Lobby were lone voices.

Fourteen years later, the general consensus is clear. There were fundamental flaws in the tripartite system right from the start, which are today painfully apparent to the whole world. The first and most serious flaw was that no one in the tripartite system saw it as their job to monitor risks across the whole financial system. The Bank of England focused increasingly on its monetary policy responsibilities; the FSA looked at individual firms, but was more focused on tick-box regulation of individual products than on the prudential health of whole businesses, let alone the financial system; and the Treasury took the fatal decision to run down its financial services division, turning the whole area into an under-resourced backwater in the Department.

The tripartite committee did not meet once in an entire decade, so no one was looking at the whole system or at the staggering build-up of debt in the economy and leverage in the banking system. As Lord Turner said in his review of the regulatory response to the banking crisis:

“The failure to do this analysis and to take action on it was one of the crucial failures of the years running up to the financial crisis.”

[Claire Perry (Devizes) (Con)]

As my right hon. Friend is setting out what is essentially a political failure, will he enlighten the House on whether the report on one of the great victims of that failure—RBS—names any Members of Parliament as being specifically involved in the problem?

[Mr Osborne]

As my hon. Friend is aware—

[Chris Bryant (Rhondda) (Lab)]

That’s why she asked.

[Mr Osborne]

Well, the report names Tony Blair, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and the shadow Chancellor. One of the interesting things is that the shadow Chancellor was, of course, instrumental, as I understand it, in creating the tripartite committee. We will hear in his response a detailed defence of the decisions he took.

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

Will the Chancellor share with the House the contents of the conversation I had with him in Downing street in December following the publication of that report and following my conversation with the chair of the FSA?

[Mr Osborne]

Why does the shadow Chancellor remind us of that?

[Ed Balls]

I shall repeat. Does the Chancellor recall the conversation we had in Downing street following my conversation with the chair of the FSA and will he tell the House of its contents?

[Mr Osborne]

It sounds like the right hon. Gentleman cannot remember it himself. No doubt he will use the time allotted to him to tell us about the role he played both as the adviser at the Treasury during the years when the system was created and as City Minister when the ABN AMRO deal was signed off, and about his role in the Cabinet when it decided on its response to those things.

[Ed Balls]

When I asked the chair of FSA, he said he could have inserted into the footnotes of that 400-page report any number of quotes from the Chancellor, who was at the time in opposition. Will he remind the House of any of his quotes from that period on the dangers of excessive regulation that could have been included in the FSA report?

[Mr Osborne]

First, the FSA report on RBS is worth reading and stands by itself. The chairman of the FSA chose to put the right hon. Gentleman’s name in it, which clearly irks him. Secondly, in opposition, we not only voted against the creation of the tripartite committee but consistently warned about growing debt in the economy—not just me, but my predecessors as shadow Chancellor. We will see tonight whether the Opposition vote against our proposed arrangements. We made those warnings; we are now proposing reforms to ensure that those sorts of things do not happen again.

[Ed Balls]

Perhaps the Chancellor should remind the House that the shadow Chancellor at the time also voted against Bank of England independence. In November 2006, the then shadow Financial Secretary, who is now Financial Secretary, said:

“Effective light-touch, risk-based and principles-based regulation is in the interests of the sector globally.”—[Official Report, 28 November 2006; Vol. 453, c. 995.]

Could that quote have been included in the FSA report?

[Mr Osborne]

I think the key word is “effective”, which is clearly what was lacking. If the right hon. Gentleman wants me to read out the legion of quotes that we have from him as City Minister, how about this one? He said:

“I believe that we are right to avoid prescriptive, heavy-handed regulation in Britain. Indeed, I believe that while it is Bank of England independence that is regularly cited as the Government’s most significant financial reform, the establishment of the FSA has been as important for Britain”,

and that

“It is important the FSA continues to deliver a light-touch and risk-based regulatory approach.”

We have ended up having a ding-dong across the Dispatch Box, but if he is against what we propose to do to change the system he created, will he vote against the Bill tonight?

[Ed Balls]

The Chancellor also said in June 2006 that this

“regulation has been burdensome, complex and makes cross-border market penetration more difficult.”

In June 2005, he said that

“we need to build our capacity to deliver world-beating goods and services, whether it is complex financial derivatives pioneered in the City of London”.

Are those quotes that could have been included in the FSA report? There are many more.

[Mr Osborne]

This series of interventions is a little bit self-obsessed, and it reminds everyone of the right hon. Gentleman’s central role—

[Ed Balls]

You started it!

[Mr Osborne]

Well, that is a bit like the John Cleese sketch—the right hon. Gentleman started it by creating the biggest banking crisis in this country’s history. We are trying to clear it up. That is what this Bill is about. In all those interventions, we heard not one word about whether he will support what we are doing to clear up the mess he created.

[Mr Edward Leigh (Gainsborough) (Con)]

Does not the ding-dong of the last four or five minutes illustrate the dangers of political interference in regulation? Once we get back to the subject of the Bank of England, and given that the top 1% of taxpayers provide 28% of total taxes, can we have regulation in the future less by populism on bonuses, salaries and the rest, and more by the raising of the right eyebrow of the Governor of the Bank of England?

[Mr Osborne]

The key issue in our regulatory system that we are seeking to restore is judgment by the regulator, and I will explain how the Bill will enable us to do that. I agree with my hon. Friend that the financial services are an incredibly important industry for this country. They employ more people than any other industry in Britain and, crucially, its proper regulation is not only good for the economy, but essential to prevent taxpayers from being exposed to what they have been exposed to in recent years.

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

As we are in the mood for recollection, and I am one of those who strongly opposed the tripartite system of supervision when it was introduced, may I say that I very much welcome the Bill? However, the whole strategic object of what we should be doing now is to ensure that we get rid of the shibboleth of the bank that is too big to fail. I doubt whether this admirable Bill, even combined with the Vickers report, will go anywhere near to restoring Glass-Steagall. We will not get rid of banks that are too big to fail until we get back to Glass-Steagall.

[Mr Osborne]

My right hon. Friend has been entirely consistent in the views he has expressed, and he was right all along about the weaknesses of the tripartite system. On the explicit issue of whether to introduce the actual physical separation of retail and investment banking—in other words, to introduce Glass-Steagall- like legislation in Britain—I asked John Vickers, who everyone accepts was an independent and extremely expert person for the job, to look specifically at this issue with his commissioners. Some of them were probably inclined at the start to believe that physical separation was the right way to go, but when they examined the issues—and they took an enormous amount of evidence—they believed that the same objective of protecting retail customers from the collapse of an investment bank, and giving the authorities of the day greater powers to protect retail customers as they resolved problems in a retail bank, could be achieved through the ring-fencing proposal that the Vickers commission put forward. That would also maintain some of the benefits of one part of the bank being able to support another part in trouble.

The commission explicitly considered the Glass-Steagall issue, but decided that ring-fencing was a better approach. We will introduce legislation that I hope and intend will have pre-legislative scrutiny in the House during the coming Session. I hope that that will be an opportunity for Parliament to examine the issue that my right hon. Friend rightly raised. As a country, we must decide once and for all how to proceed with the structure of our banking industry.

[Charlie Elphicke (Dover) (Con)]

Will the Chancellor give way?

[Mr Osborne]

Yes, but then I should make some progress.

[Charlie Elphicke]

I hesitate to take the Chancellor back to the FSA report on the failure of RBS, which says that political pressures to be light-touch were partly to blame for the bank’s collapse. What exactly were those political pressures, in his understanding, and what lessons can be drawn from them?

[Mr Osborne]

My hon. Friend is tempting me back into the fertile territory of the shadow Chancellor’s role in the banking crash, but not least because I do not want to provoke a reaction, I think that I should probably move on to the flaws of the system that the right hon. Gentleman helped to create as Treasury adviser.

[Ed Balls]

Will the Chancellor give way?

[Mr Osborne]

Maybe we should just exchange our notes; then we could spare the House.

[Andrew Bridgen (North West Leicestershire) (Con)]

To take the Chancellor back to my experiences in 1997, I was in business, and my bankers at the time were at the Royal Bank of Scotland. Shortly after the general election in which the Labour Government were elected, I had a meeting with my bankers. I expressed my disappointment at the election result, but they were extremely upbeat. I asked them why, and they said, “Labour Governments are never any good at regulating the financial services industry. We’re going to make a lot of money in the banking industry.” Were not those words prophetic?

[Mr Osborne]

For a while, they did make an awful lot of money. Unfortunately, they then lost an awful lot of money, which is one reason why we are here talking about the legislation.

Before any Minister comes to the House of Commons to ask for an existing regulatory regime to be replaced, it is incumbent on him or her to explain why it is felt to be necessary, so let me explain. Another flaw of the current system is that when the crisis hit in 2007 and 2008, no one knew who was actually in charge. The Treasury Committee of the last Parliament, led by John McFall, said in its report:

“The biggest failings of the Tripartite’s handling of Northern Rock were that it was not clear who was in charge, and, because the Tripartite took a minimalist view of their respective responsibilities, necessary actions fell between three stools.”

The House of Lords Committee, which also did some excellent work on the matter during the last Parliament, said that

“the tripartite authorities in the United Kingdom…failed to maintain financial stability and were found wanting in dealing with the crisis, in part because the roles of the three parties were not well enough defined and it was not clear who was in charge”.

In other words, a whole system of financial regulation had been created by the previous Government, yet no one knew who was in charge.

That led to the third fatal flaw that became apparent. The Government of the day, accountable to Parliament and the public for the use of taxpayers’ money, simply did not have the powers to do what they felt necessary when the crisis hit. My predecessor as Chancellor said in his recent memoir:

“The whole system depended on the chairman of the FSA, the Governor of the Bank and the Chancellor seeing things in exactly the same way. The problem was that in September 2007, we simply did not see things in the same way.”

That, of course, led to the confusion in the autumn of 2007. As he said,

“I could not in practice order the Bank to do what I wanted”,

even when taxpayers’ money was at stake.

On top of all those flaws in the tripartite system, it is not as though customers were being better protected from the mis-selling scandals that have beset the industry for the past 30 years. The payment protection insurance saga happened on its watch. In 2001 alone, firms were forced to pay more than £1 billion-worth of redress to consumers who were mis-sold products.

Those are the flaws of the tripartite system—flaws that cost this country in output more than 10% of our entire gross domestic product, flaws that have led to hundreds of thousands of people losing their jobs, flaws that wiped out the savings of millions of small shareholders, and flaws that saddled an entire country with more than £1 trillion of debt. The British people need to be confident that mistakes have been acknowledged and that lessons have been learned. The legislation that we have put before the House today shows that they have been learned.

[Ed Balls]

Without wanting to disrupt too much the Chancellor’s political narrative, I ask him to remind the House of the regulatory structure and of who was in charge of regulation during the scandals involving the Bank of Credit and Commerce International, Barings, Equitable Life and Johnson Matthey. Were those scandals all the result of the tripartite structure, or might some of them have preceded it, at a time when the Bank of England had the lead on banking and financial regulation?

[Mr Osborne]

I would make this important point to the right hon. Gentleman: of course those were failures of regulation, and of course the Bank of England was in charge of banking regulation when they happened, but they were failures of regulation in individual firms—detailed work was done afterwards to find out what went wrong and to try to put it right—not failures across the system. The collapse of Barings did not bring down the whole system, whereas the run on Northern Rock created shockwaves around the world. The decision in 1997 to remove the Bank of England’s macro-prudential role was a fatal mistake.

[Ed Balls]

Rubbish.

[Mr Osborne]

The right hon. Gentleman calls it rubbish, but let me say this: he was instrumental in a way that no one else in the Labour party was in designing the system that I am proposing to dismantle. He is well within his rights to get up and say, “I defend the system that I created. I think that it is the best way of regulating financial services, and what you have come up with is wrong”, but if he believes that, he should have the courage to vote against the Bill tonight. If that is his view, he should get up and say, “I’m going to vote against your approach because I don’t think it’s the right one”, but I do not think that he has the courage to do so, because he is trying to escape his past, rather than defend it.

[Ed Balls]

I will set out our position in my speech, but the idea that by making the Bank of England independent and adding a second deputy governor with responsibility for macro-prudential financial stability on both the Monetary Policy Committee and the FSA board, the Bank’s role in macro-prudential stability is diminished or removed is plain wrong. The Chancellor should not be allowed to state things that are outwith the facts.

[Mr Osborne]

The right hon. Gentleman is perfectly entitled to that view, but it is not shared by the Select Committees that have considered the matter, including during the previous Parliament; it is not a view shared in the work by the FSA on what went wrong and the failure to conduct macro-prudential analysis; and it is not a view shared by almost everyone who has looked at the failures of the British regulatory system during the period in question. He is perfectly entitled to his view—I am not surprised that he holds it, given that he was responsible for creating the system—but if it is his view, he should have the courage to vote against our proposals to dismantle it.

[Claire Perry]

Nor was the view of the right hon. Member for Morley and Outwood (Ed Balls) that of the Governor of the Bank of England, who said:

“All we can do at present…is to write our Financial Stability Report and give speeches.”

The Bank was completely emasculated by the right hon. Gentleman's reforms.

[Mr Osborne]

My hon. Friend reminds me that in the Mansion House speech in 2009, I think, the Governor, appointed by the previous Government, said that the Bank was being asked to do things that it had not been given the powers and tools to do. It was a striking speech—I cannot remember whether the right hon. Gentleman was there—but the difference between the views expressed by the Chancellor and the Bank Governor in the space of one evening was striking.

I will now go through the details of the Bill and see whether it commands all-party support. I shall go through what we are doing to address the flaws that I have identified in the existing system. First, we are going to establish a new macro-prudential authority in the Bank of England to monitor overall risk and levels of debt in the financial system. Secondly, we are making the Bank of England the single point of accountability for financial stability, ensuring that there is a decisive answer to the question, “Who is in charge?” Thirdly, the Bill ensures that in a crisis, when taxpayers’ money is at stake, the power to act sits with the Chancellor of the day, accountable to Parliament. Fourthly, the legislation creates a strong conduct regulator that is able to give its undivided attention to promoting competition and protecting consumers. Let me take each in turn, and in some detail.

First, the responsibility to monitor risks across the system falls to the new Financial Policy Committee in the Bank of England, established by clause 3 and entrusted with responsibility for the stability of the whole system. Its job will be to identify bubbles as they develop, spot dangerous interconnections, warn about poorly understood financial instruments and take action to stop excessive levels of debt building up before it is too late.

[Jonathan Evans (Cardiff North) (Con)]

My right hon. Friend will be aware that the risks in the banking sector have been shown by the recent crisis to be rather different from those in the insurance sector, for instance. He will also know that the Joint Committee on the Bill recommended that a member of the Financial Policy Committee should be someone with insurance experience, but that does not appear in the Bill. Perhaps he could explain why not.

[Mr Osborne]

We do not want to prescribe in the Bill the qualifications of the external members of the Financial Policy Committee. That would be a mistake. However, I would obviously want to ensure that the external members—I will say something about this shortly—have broad and current experience of the financial system. There is an issue, as I will set out, about how this House—and, indeed, the political system—approaches conflicts of interest. In other words, we have to make a trade-off between appointing as external members to such bodies people who actually know what is going on in financial services and, at the same time, wanting to direct conflicts of interest, being careful not to rule out anyone simply because they work in financial services. The Select Committee on the Treasury and the Joint Committee that looked at the Bill have made an important recommendation for us all: to be careful about creating a system in which no one who has current experience of financial services sits on the bodies that regulate individual firms or, more importantly, system-wide risks, and that includes insurance.

[Charlie Elphicke]

With the tripartite system, of which I believe the shadow Chancellor was the architect, a tick-box culture of regulation grew—a one-size-fits-all approach, and that sort of thing. Will the Chancellor tell the House a bit about how we will get rid of that tick-box culture and move towards a culture of more individual and tailored regulation?

[Mr Osborne]

The key thing is to empower the regulators both to exercise judgment and then to be able to do something about it. One reason for locating both the macro-prudential role and, when it comes to individual firms, the micro-prudential role in the central bank is the culture in central banks—not just in the Bank of England, but in central banks generally—of exercising judgment and acting on it. I very much want to encourage that. My hon. Friend is right: there was no shortage of regulation, in that sense, in 2006-07. RBS complied with every bit of regulation in its decision to try to take over ABN AMRO; it is just that no one felt empowered to say, “Is this the right thing, for this firm and for the financial system, at a point when the financial markets have already frozen up?”

Rather than wait for this Bill to pass through Parliament, we have gone ahead and created the Financial Policy Committee on an interim and non-statutory basis. It is already meeting regularly to assess risks across the financial system, such as the need for banks to provide for adequate capital before determining the distribution of profits, as well as drawing attention to specific products, such as exchange-traded funds, whose excessive use may be a cause for concern. It has already produced two impressive financial stability reports.

[Kerry McCarthy (Bristol East) (Lab)]

At the time of the collapse of Barings, I was working at Abbey National Treasury, which was involved in a joint venture trading derivatives with Barings. I was one of those brought in to clear up the mess, for which—I hasten to add—I was not responsible.

It was clear from what happened at Barings that there was a huge gulf between what the traders understood about their trading activities and what the management understood, and an even bigger gulf between the management and the regulators at the Bank of England. The Chancellor has said that the new committee will look at exotic and complex financial instruments, but how can he guarantee that its members will really understand what is happening on the trading floor?

[Mr Osborne]

That is the task that we are giving them. They must ensure that they have the necessary expertise and resources. The interim committee is looking across the piece—I will deal later with the role of regulating individual firms—but it is interesting that its two financial stability reports highlighted a specific financial instrument, the exchange-traded fund, and expressed concern about its rapid growth. I am not aware that the regulatory system that existed in 2006-07 spotted, for example, the rapid increase in the use of collateralised debt obligations. It did not warn about specific instruments and the growth in their use. The financial stability reports of the committee that we have already set up demonstrate an attention to particular complex market instruments and their potential systemic risks.

[Ed Balls]

Will the Chancellor explain why, if the key is locating regulation in the central bank, those pressures before 2007 were not spotted by the US Federal Reserve, which was the central banker and the regulator? He is giving a very UK-specific analysis. What about all the other examples of central banks failing to spot these growing problems?

[Mr Osborne]

There are examples of central banks, such as the Canadian and Spanish central banks, which were much more aggressive in counter-cyclical regulation, and which felt empowered to make the decisions. In the United States—I am sure that the right hon. Gentleman has had conversations about this with the United States Treasury Secretary and the Federal Reserve chairman—things have been taken to the opposite extreme. There is a plethora of regulators—too many different regulators. The single biggest problem in the United States probably occurred in the insurance industry, in the American International Group. There was an insurance regulator based in one particular state and it was not something for which the Federal Reserve had a responsibility. Ben Bernanke has talked about the role of central banks, and I shall say something about his view later.

I think it right for us to create a Financial Policy Committee that is on a statutory footing. I have talked about the importance of its having external independent members who are able to provide market expertise and challenge received opinion, but I believe—and this may be something that we can tease out in Committee—that we should think about how we can get the balance right, and avoid conflicts of interest while also bringing in people with real expertise.

What makes the Financial Policy Committee that the Bill will establish such a radical departure in terms of policy making is that we are not only asking it to assess the risks throughout the financial system, but proposing to give it powerful tools with which to do something about those risks. The Monetary Policy Committee assesses the risks of inflation and whether it will overshoot or undershoot the target, and then alters interest rates as appropriate. The Financial Policy Committee will be given macro-prudential tools with which to hit the financial stability objectives set out in the Bill, and to reduce and remove systemic risks to the stability and resilience of the UK financial system.

[Sir Peter Tapsell]

The shadow Chancellor raised the question of both Barings and BCCI, and it underlines the nature of the regulatory problem. The Barings failure was largely a failure of the Singapore regulatory authority. I was closely involved with Singapore as an adviser to the monetary authority at the time. The Government in Singapore were horrified by the fact that a British rogue trader had not been spotted, but it was the responsibility of Singapore to find him.

As for BCCI, which I also knew well in my stockbroking days, its regulator was in Luxembourg, which was the reason why the Bank of England did not spot the problem until too late. That problem will continue. There are considerable limits to what any regulator can ever achieve. In worldwide banking, there will always be people overseas who are up to mischief, and no regulator based in London can ever conceivably know what they are all up to.

[Mr Osborne]

My right hon. Friend makes a very good point about the international nature of this business. We must try to design a regulatory system that protects the British taxpayer from rogue traders and illegal activity in individual firms that might create broader systemic risks. We must also be alert to broader risks building up in the system—for example, when trying to moderate the impact of a credit boom. This is not just a question of dealing with individual risks and individual firms; it is also a question of dealing with risks across the financial system.

My right hon. Friend is completely right to draw our attention to the need for regulators to work together better internationally. The least well-developed piece of the financial regulatory system, post-crash—the one lesson that has not yet been taken far enough—involves the way in which we can better protect the world from large international businesses that live internationally but die nationally, such as Lehman Brothers. Co-ordinating resolution regimes across the different jurisdictions will be the work of international bodies such as the G20 and the Financial Stability Board in the year ahead.

[Stephen Gilbert (St Austell and Newquay) (LD)]

My right hon. Friend has talked about the macro-prudential powers that the Bank of England will have, beyond its monetary policy powers, to step in and help to cool down the economy. Those powers will include setting the ratio for the multiples of earnings that can be borrowed to secure a mortgage, which could have serious consequences across the country. However, those regimes have not yet been published or discussed. Can he give me an assurance that, when those macro-prudential powers are published, the House will have a debate on them?

[Mr Osborne]

Yes, I can give that assurance. This is an important point that I want to flag up so that the House understands what we are collectively embarking on. We are seeking to give the Financial Policy Committee the tools to help to dampen down a credit boom or to help in a credit crunch. As my hon. Friend has said, it will be able to alter the maximum loan-to-value ratios in mortgage lending in order to curb an unsustainable rise in house prices. It will also be able to do the reverse, should we face unwanted house price deflation. It will also, potentially, be able to alter capital requirements for banks, in a counter-cyclical way. I should say that these are just possibilities; they are potential tools that the committee might want to use.

One key feature is that the measures will be independently applied, so there will be no political pressure to, say, keep a housing boom stoked up as an election approaches. Another key feature is that the Financial Policy Committee should act symmetrically—that is the intention of Parliament. Its job will be to act not just to moderate a credit boom but to try to alleviate a credit bust. The precise tools that we give the FPC have yet to be determined, as my hon. Friend has just said. We have sought the advice of the interim organisation that we have created, and it will come to us with proposals for the kind of tools that the permanent body will need. We will then seek the approval of both houses of Parliament through the affirmative resolution procedure—which will of course involve a debate—before we pass those tools over.

I freely accept that we are in largely uncharted policy- making territory, here or anywhere in the world. Many other jurisdictions are considering such measures, but we are ahead of most of them. Surely the experiment of making no attempt to moderate the credit cycle—letting the bubbles grow and burst, then cleaning up afterwards—has been an unmitigated disaster, and we would be failing if we did not look for an alternative approach.

[Mr George Mudie (Leeds East) (Lab)]

One suggestion from the Treasury Select Committee was that the Chancellor should not send the proposals to a statutory instrument Committee. That would involve a 90-minute discussion and the proposals would not be amendable. He should instead allow the matters to be debated seriously on the Floor of the House. I wonder why he would think it attractive and helpful to send them upstairs where they cannot be amended; that would suggest a foregone conclusion by the governing party that they would be accepted.

[Mr Osborne]

I would certainly be happy to have a debate about that on the Floor of the House. It is a decision for my colleagues, the usual channels and so forth, but in my opinion the important tools given to this body will have a real impact on our constituents. It will affect the kind of house they are able to afford on their income—the bread and butter of people’s daily lives—and it is important for us all to understand that as we create instruments of policy.

We are seeking to address another flaw in the system by making the Bank of England the single point of accountability when it comes to the prudential regulation of banks, large and complex investment firms, building societies and, as my hon. Friend the Member for Cardiff North (Jonathan Evans) reminded us, significant insurance companies. A new prudential regulation authority will be established within the Bank to perform that major new function.

As the shadow Chancellor pointed out, the Federal Reserve in the US already has responsibility for the prudential regulation of major banks, but not of other financial firms. Let me cite what Ben Bernanke said in what I believe was testimony before Congress:

“The Federal Reserve’s role in banking supervision complements its other responsibilities, especially its role in managing financial crises...During the current crisis, supervisory expertise and information have repeatedly proved invaluable in helping us to address potential systemic risks involving specific financial institutions and markets and to effectively fulfil our role as lender of last resort...The Fed’s prudential supervision benefits, in turn, from the expertise we develop in carrying out other parts of our mission—for example, the knowledge of financial and economic conditions we gather in the formulation of monetary policy.”

I raise this matter because at the heart of the new arrangements we are seeking to establish an understanding that today’s financial markets are so interconnected that the failure of a single firm can bring down the whole system, and risks across the system can bring down many single firms. These feedback loops are what proved so devastating in the crisis.

Some critics of the legislation now accept the need for a macro-prudential Financial Policy Committee, but still doubt whether we should give the Bank responsibility for the micro-prudential regulation of individual firms, too. I would argue that because the interconnections are so great, the FPC could not do its job without knowing what is going on in firms, and a prudential regulator could not do its job without knowing about risks across the system. The best way to combine the insights is to put them both under the aegis of the same institution—the central bank.

I understand that the shadow Chancellor is concerned that our Bill does not create additional lines of communication between the deputy governors of the Bank and the Chancellor, bypassing the Governor, so he might like to explain what he meant. I considered the idea, but rejected it. I think we need to force the Bank of England itself to reconcile its internal differences rather than create additional lines of accountability between the Chancellor and a deputy governor. Perhaps the right hon. Gentleman—[Interruption.] He says, “Dear me”, so perhaps he will explain why he wants to institutionalise a regime in which the No. 2 constantly undermines the No. 1.

The Joint Committee and the Treasury Select Committee have raised what I regard as a far more relevant concern—the accountability of the Bank of England, given its important new responsibilities. We have listened carefully to the recommendations from both Committees and while I do not propose to abolish the court of the Bank of England, I do propose to give it important new powers to hold the executive Bank to account. The Governor and the court of the Bank of England have agreed that a new oversight committee, consisting of the non-executive members of the court, should be created. This group of external independent people will ensure that the Bank discharges its financial oversight responsibilities correctly; it will be able to commission both internal and external reports on the Bank’s policy makers’ handling of particular events and particular periods of policy making. Those reports will be published, with market-sensitive information protected, if necessary.

The Governor is of course, as is the case today, a key figure in the arrangements. It is important that he or she is not only independent of the Government of the day, but seen to be so. The recent experience of reappointing Governors after their first five-year term has expired has not been a very happy one. It has created unnecessary uncertainty and called into question political confidence in the Governor. Although I would hope that this Government would handle the whole thing better than their predecessors did, it makes sense simply to eliminate the possibility of discord entirely, so schedule 2 provides that the next Governor of the Bank of England and his or her successors will serve a single eight-year non-renewable term. That is a sensible reform.

The third flaw in the current arrangements was the fact that the Chancellor of the day felt he did not have the necessary powers to act in the interests of taxpayers. This is another area where the work of the Joint Committee and the Select Committee have proved invaluable. The Bill makes it clear that the day-to-day responsibility for financial stability lies with the Bank of England. We do not want the Treasury second-guessing that work. Beyond setting the parameters for the regulatory system, the Chancellor should become involved only if there is a material risk to public funds. The responsibility in this regard is made clear in the Bill, and in the memorandum of understanding that we have drawn up with the Bank. The Bill makes it clear that the Governor has a responsibility to inform the Treasury immediately as soon as there is a material risk of circumstances arising in which public funds might reasonably be expected to be used.

The Bill is also rightly clear that the use of public funds is entirely a decision for the Chancellor, as he or she is the person accountable to Parliament, and through Parliament to the public. My predecessor is, again, revealing about the limitations of the current arrangements in his book:

“My frustration was that I could not in practice order the Bank to do what I wanted. Only the Bank of England can put the necessary funds into the banking system…I asked Treasury officials if there was a way of forcing the Governor’s hand. The fact that we had given the Bank independence had a downside as well as an upside.”

Of course my predecessor had, as any Chancellor does, the general power of direction over the Bank that the Bank of England Act 1946 provides, but that general power of direction has never been used, so it is a nuclear option that might blow up anyone who tries to use it. That was the conclusion that my predecessor reluctantly came to.

That is unsatisfactory. The Bank must, of course, be protected from politicians who want to use its balance sheet against the wishes of the Governor simply because those politicians want to avoid using the Government’s balance sheet, but the Bank should not be able to use that as an excuse to withhold its services as an agent from a Government prepared to use its own Government balance sheet. Otherwise, in many situations that becomes, in effect, a veto on an elected Government’s fiscal decision making.

The Bill and the memorandum of understanding give the Chancellor of the day not only the right to be informed when there is a material risk to public funds, but the right to ask the Bank to analyse different options that might be available to deal with the risk, and in the newly added clause 57 the Bill gives the Chancellor a defined power of direction to require the Bank to provide liquidity to a particular firm or to put a particular firm into resolution or to provide liquidity to the general system, provided that the Chancellor does so using the Government’s own balance sheet, and makes that clear.

[Ed Balls]

Can the Chancellor envisage a situation in which the Governor of the Bank of England may judge not to inform the Chancellor that there is both a material threat to stability and the need for the use of public funds—and if a Governor were to make such a judgment not to inform the Chancellor, would that be his personal judgment?

[Mr Osborne]

First, the Bank Governor will have a statutory obligation to inform the Chancellor, so they would be failing in their statutory obligations—

[Ed Balls]

rose—

[Mr Osborne]

Perhaps I have misunderstood the question.

[Ed Balls]

This is important, so I will ask the question again. Can the Chancellor envisage a situation in which the Governor of the Bank of England would choose not to inform the Chancellor because in the Governor’s view there was not a material threat to financial stability, and therefore no need for the use of public funds? And if the Governor chose not to come to the Chancellor in such a situation, would that be the Governor’s own personal judgment—for example, if the deputy governor for financial stability or the head of the Prudential Regulation Authority took a different view?

[Mr Osborne]

The legislation makes it clear that that is the Bank’s responsibility. Of course, the Governor is chair of the key committees—the Financial Policy Committee and the Prudential Regulation Authority—that would make these judgments, but we have to require the Bank to resolve its internal differences. Obviously the Bank has its own procedures to deal with any dispute, which it will develop, but we have deliberately created boards and committees that have independent members and external oversight. Of course there are three deputy governors, but ultimately—perhaps that is just going to be a point of disagreement between me and the right hon. Gentleman—I do not think it is right to create different lines of accountability from the Bank of England to the Chancellor of the day. The Chancellor has to deal with the Bank, and with the person of the Governor. However much legislation we write and however many clauses we put in place, those who do my job and that of the Governor also have a very important responsibility to get on with each other and to try to make that arrangement work.

[Ed Balls]

The problem is that in the legislation, in the memorandum of understanding and in the Chancellor’s own answers there is a gap, a hole and an ambiguity. In his speech he referred to the judgment of the Governor, then he talks about the judgment of the Bank and then he says that the Bank must resolve whether the Governor’s view is the same as that of the rest of the Bank. I repeat my question: can the right hon. Gentleman envisage being concerned by a situation in which the Governor chooses not to come to him asking for funds because the Governor believes that there is not a systemic risk, even if it is coming to the Chancellor’s attention that other senior statutory office holders in the Bank have a different view? Can the right hon. Gentleman envisage such a situation, when the Governor chooses, for example —as he said, this is a judgment for the Governor—that the moral hazard overrides the systemic potential threat?

[Mr Osborne]

As I say, it is the responsibility of the Bank to inform the Government: that is what the legislation and the memorandum of understanding make clear. The Bank, of course, has its own procedures for coming to a view within the Bank. Creating a system where a deputy governor could bypass the Governor and go directly to the Chancellor would be a recipe for division at the Bank. We have to force the Bank to come to a collective view and then deal with the Government of the day.

[Ed Balls]

This goes absolutely to the heart of the issue. The reality is that if we have a tripartite or quartet system in which the statutory regulator is not the same as the Governor, the head of the PRA or the head of the Financial Services Authority can have a different view and say that in their judgment the threat to the company and to the system is so great that it justifies action, even if the Governor judges that the moral hazard risks from intervention override that threat, and that therefore there should not be a request for public funds. In the current system, the Chancellor would hear from the head of the FSA—from Adair Turner—whereas under the new system and the memorandum of understanding he will not hear, other than from the person of the Governor. My question to the Chancellor is: does he worry about that and about the potential instability and misinformation to him that could come as a result of the memorandum of understanding that he has drafted?

[Mr Osborne]

The first point I make to the right hon. Gentleman is that the Bank Governor does not come to the Government when he thinks public funds should be used; he does so when—this is set out in the legislation— there is a material risk that public funds may be required. Of course the decision to use public funds would be one for the Chancellor of the day.

The second point that I make is that the problem with the tripartite committee was one set out in my predecessor’s book: in autumn 2007 there were three different views and there was no way of reconciling them—and there was no clarity about who had power and responsibility. What we are talking about here, and what I am explaining, is a new power of direction. Of course any Chancellor would think very carefully before using it, but this power makes it absolutely clear that once there is a material risk to public funds, the Chancellor of the Exchequer has not only a power, as the current person doing the Chancellor’s job has, to authorise the use of public funds—that is what my predecessor did in respect of the Royal Bank of Scotland—but a power of direction to provide liquidity to an individual firm and liquidity to the system. Those were not powers that my predecessor had. Of course, as I will come on to discuss, there are certain constraints and things that have to be done to inform people before they are used, but these are new powers that we are giving so that the Chancellor of the day does have powers, provided that he or she is prepared to use the Government’s own balance sheet.

[Ed Balls]

rose—

[Mr Osborne]

I will give way one final time, but then I will conclude.

[Ed Balls]

The whole point—this is so important, and goes to the heart of one of the debates in the Committee—is that in the historical examples given by the Chancellor, when the then Chancellor wanted to act and others in the regulatory system did not, the Governor of the Bank of England was one of those who did not. In the situation that the Chancellor has now set up—article 20 of the memorandum of understanding states this clearly—there will be a personal relationship between the Chancellor and the Governor. This ‘twin-peaks’ system is a personalised conversation, in that the Chancellor hears the Bank’s view from only one individual. I ask him again: would he be worried if he did not hear a view in such circumstances? Is this really a matter for the Governor’s judgment, as the MOU says, or should the statutory office holders—the head of the Prudential Regulation Authority, the Financial Services Authority and the deputy governor from the Financial Policy Committee—have not only a view but a right for that view to be heard by the Chancellor and then by Parliament? That is my question.

[Mr Osborne]

We can explore this at greater length in Committee, but I say to the right hon. Gentleman now that we are trying to avoid a situation in which different people in the Bank think they have a direct line to the Chancellor. We are trying to require the Bank to resolve its internal differences, and we are creating various committees, balancing the membership between external and internal members, but we absolutely see a central role for the Governor of the Bank—and I do not make any apologies for that.

I was not in the room when some of these conversations happened in recent years, but as far as I can see, and as has been reported since, it is clear that personal relations between the Bank Governor and some of the very senior members of the Government completely broke down. That is not a situation we want to see in the future, and I think that the person who does my job and the person who does the job of the Governor of the Bank of England have an obligation to get on with each other and maintain the personal relationship; that is a very important part of both our jobs. No amount of legislation or MOU—[Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) says that it is not about getting on with each other. Frankly, it is about working at this very important relationship at the top of our financial system, and not getting into a situation in which those involved are not able to pick up the phone and talk to each other. Yes, of course we are institutionalising the arrangement, creating memorandums of understanding and so on, but I do not want to detract from the fact that there is also a personal responsibility for the Chancellor of the day and for the Bank of England Governor to ensure that they can work together in the national interest.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

I hate to intrude on this Socratic dialogue between the Chancellor and my right hon. Friend the Member for Morley and Outwood (Ed Balls), but can the Chancellor not see that in these critical decisions there will be differences? I do not draw a direct comparison with the military, where the Chief of the Defence Staff has a right of appeal or a direct line of communication with the Prime Minister, but in these critical decisions it is not enough for a hard-headed, narrow-minded or too-forceful Government to insist on a point of view. A release valve is needed to reach a balanced judgment, and the No. 2s in all the crucial areas should have the right to come straight to the Chancellor. Good foresight and good judgment are involved in that.

[Mr Osborne]

The other point that I would make—the Financial Secretary to the Treasury is reminding me of it—is that the Treasury sits on all those committees as a non-voting member. It is in on all the discussions, with a Treasury official sitting in on and understanding the debate.

[Several hon. Members]

rose—

[Mr Osborne]

I give way to my hon. Friend the Member for West Suffolk (Matthew Hancock), who has worked in the Bank of England.

[Matthew Hancock (West Suffolk) (Con)]

Does the Opposition’s proposal not seem to be an attempt to re-create a tripartite structure in which there is more than a relationship between one and one other? We have problems with the concept of “too big to fail”, and the example of Barings has been cited. That bank did not bring the rest of the system down: the directors ended up losing their jobs and the person responsible went to prison. Will the Chancellor consider the scale of that failure, compared with what happened in 2008 when the whole system collapsed?

[Mr Osborne]

My hon. Friend is absolutely right. There was a failure of regulation with Barings, but the collapse of Barings did not bring down the financial system, either in the City of London or more broadly.

[Mark Field (Cities of London and Westminster) (Con)]

My right hon. Friend is absolutely right about this. Surely the issue is the clarity of the relationship between the Governor and the Chancellor of the Exchequer in relation to the confusion in the tripartite system. That would not prevent, and should not prevent, any Governor worth his salt from at least making it clear that there were other views within the Bank, albeit that it was his judgment in the advice to the Chancellor. That gets away from some of the confusion about whether we are looking to sweep away an integral part of the tripartite system.

[Mr Osborne]

My hon. Friend makes an extremely good point. This is all about the Governor’s responsibility to do his or her job in managing the Bank, and about the Bank coming to a collective view. The job of the Chancellor of the day is to manage the relationship with the Governor. For all the virtues of the tripartite system that the shadow Chancellor seems to be extolling, I understand that those at the principal level in the tripartite system did not meet for 10 years; perhaps he can correct me, as he was there.

[Ed Balls]

The tripartite standing committee met every month at the deputy level, from its inception until the crisis. The responsibility for triggering a full meeting of principals was in the hands of the Governor and the head of the FSA. Throughout that entire period either the systemic regulator, the Bank, or the individual firms regulator, the FSA, could have triggered a meeting, but did not. There were two people who could have triggered that, but in the Chancellor’s world there will be only one trigger. That is my concern.

[Mr Osborne]

The right hon. Gentleman keeps saying there were two people, but there were three principals in the tripartite committee. It was chaired by the Chancellor of the day—the Chancellor whom he advised—but as I understand it, that Chancellor never convened the tripartite regime at the principal level. [Interruption.] I can tell the shadow Chancellor that under the tripartite regime now—that is still the current arrangement—there are meetings on at least a monthly basis with myself, the Governor of the Bank, the chairman of the FSA and so on. In the tripartite system that the shadow Chancellor saw at first hand, the principals, including the Chancellor of the day, never in 10 years—we are not talking about 10 weeks or 10 months—convened a meeting of the principals. The fact that he says that it was entirely the job of the Governor of the Bank of England or the chairman of the FSA to call a meeting, when the chair was the Chancellor, who could have called a meeting at any time he wanted, is very revealing about what went wrong.

[Mark Durkan (Foyle) (SDLP)]

Is the power to direct, to which the Chancellor has referred, contingent on the Governor of the Bank of England formally advising the Chancellor of a material risk, or could the Chancellor exercise that power to direct on the basis of his own concerns, which may have been conveyed to him from the industry, Parliament or any other intelligence? The Bank might be loth to advise the Chancellor formally in that way if doing so would trigger the power to direct, because it might want to avoid that, and the wider concerns that it might raise. Once the Bank has had the “Shall we tell the Chancellor?” discussion, what should the Treasury representative do during that discussion and after it?

[Mr Osborne]

As I have said, when the Bill is passed, the statutory responsibility will be on the Bank of England to inform the Government if there is a material risk that public funds might be used. We are trying to get away from a system in which it is the Treasury’s responsibility to try to regulate the financial system on a day-to-day basis in peacetime. We are giving the responsibility and clear accountability to the Bank of England so that it will trigger the arrangement by informing us of a material risk. As is set out in the legislation, twice-yearly meetings between the Chancellor and the Governor to discuss these things are required, although there could also be further meetings. Once the Bank has informed the Treasury of a material risk, which it will have a statutory responsibility to do, there will be a power of direction. I should just say, for the sake of completeness, that if we wish to keep the details of the use of this power confidential, I or my successors would have to inform, on a confidential basis, the Chairs of the Treasury Committee and the Public Accounts Committee, so that representatives of Parliament were informed.

The fourth and final flaw in the system that we are trying to address is that customers and consumers too often get a raw deal from the regulation of financial services. The disappearance from the high street of names such as HBOS and Bradford & Bingley has inevitably reduced competition in an industry that was becoming more and more consolidated even before the crash. The existing regulator’s dual prudential and consumer remit means that it cannot give consumer interests its undivided attention. In response to the Vickers commission and the Joint Committee, the new authority will have an explicit responsibility to promote competition. We have listened to the Joint Committee and announced that we will also bring the regulation of consumer credit into the authority’s remit so that, for the first time, the regulation of all retail financial services will be under one roof, and things like payday loans will be subject to tougher regulation.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

The banks that have gone from my high street have been replaced by high-cost credit companies that offer exorbitant rates of interest. I know that the Financial Conduct Authority will have powers over competition. Does the Chancellor accept the argument, made by many Opposition Members, that price inevitably reflects competition, so it is absolutely right that the FCA should look to regulate the price of those products and finally tackle the legal loan sharks?

[Mr Osborne]

The Department for Business, Innovation and Skills has commissioned a review of the cost of credit, but I think that the Bill takes a significant step on that, partly because of the Joint Committee’s recommendations, because the regulation of all retail financial services will now come under the remit of the FCA. It will have the power to ban specific products, to name and shame particular firms and to publish details of misleading promotions, so there will be considerable new powers that were not previously available. On the hon. Lady’s specific concern about the price of credit, that is something the Government are looking at. Of course we are also looking at the recommendations of the FSA’s recent report on RBS—I do not wish to reopen that issue—in relation to legislation on the sanctions available for bank directors who fail in their role.

The Bill is an important piece of legislation. I believe that it replaces the confused and dysfunctional system that presided over the biggest banking crisis in our modern history. It creates clear lines of accountability by putting the Bank of England in charge of monitoring and dealing with debt levels in our economy. However, no amount of new clauses, powers or institutions can substitute for something for which Parliament cannot legislate: judgment. There were thousands of pages of financial regulation in existence in 2007, but that did not stop the queues forming outside Northern Rock or prevent RBS from making its final, fatal, bid for ABN AMRO. I hope that we have learned that financial stability depends not simply on a checklist of regulation, but on individuals within our regulators feeling empowered to trust their judgment, and our giving them the power to act on it. By putting our central bank in charge of monitoring overall levels of risk and the soundness of individual firms, we are trusting in its judgment. By giving the elected Government of the day the power of direction in a crisis, we are trusting in their judgment, and that of Parliament, to which they are accountable.

Britain has paid a higher price than most for what went so badly wrong in our banking system. The errors of the economic policy that led to such a boom have cost every taxpayer dear. Today we show that we are learning the lessons and passing on to our successors a better system than the one we inherited. I commend the Bill to the House.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Before calling the shadow Chancellor, I indicate to hon. Members who wish to take part in the debate that there will be a 10-minute time limit on Back-Bench contributions, with the usual procedure for interventions.

17:45

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

Let me start by striking a rather different tone from that of the Chancellor’s performance in the House this afternoon by setting out where the Opposition agree with what he and the Government are trying to achieve and offering some constructive proposals to tackle the flaws in the legislation before us and help make it a better Bill. Financial stability and the effective regulation of our banking and wider financial services industry are vital for stability, for consumers to save and for businesses to invest. Getting the balance of regulation right is an important task for any Government, especially when hundreds of thousands of jobs depend on the industry. That is a task in which all Governments throughout the world failed during the previous decade.

We can all agree that the irresponsible actions of the banks themselves caused the crisis, but there were major failings in financial regulation, in law, in corporate governance, in procedure and in judgment in America, Asia, throughout Europe and here, too, in Britain. We did not regulate the banks in a tough enough way and stop their gross irresponsibility here in Britain or throughout the world, and after a financial crisis on that global scale we need to learn the right lessons and to put in place the right reforms in order to do what we can to stop such a crisis being repeated.

In that spirit, we welcome aspects of the Bill before us and, in particular, the establishment of the new Financial Policy Committee and the competition and consumer focus of the Financial Conduct Authority, but we are worried that the Bill falls well short of being fit for purpose.

In an excellent report, the Joint Committee that scrutinised the draft Bill stated:

“To be successful reforms will have to change the regulatory culture and philosophy,”

which is

“not something that legislation can guarantee but legislation can influence the culture of a regulator by: setting objectives; allocating and aligning powers and responsibilities; establishing appropriate systems of accountability.”

Despite the changes that the Government made in response to the Joint Committee’s report, the Bill as it stands does not meet the objectives that the Committee set. What the Chancellor proposes in the Bill and in statute is essentially to move from the current tripartite system of regulation to a new quartet system—the Treasury, the Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority, with the Monetary Policy Committee sitting alongside—with, at best, opaque structures for decision making and accountability under the Bank of England umbrella, albeit now with not two deputy governors but three, and all with overlapping responsibilities.

Unless we get the detail of that quartet system right, we risk delivering a more complex and less transparent system that is harder for the Chancellor and for Parliament to navigate and understand than the current arrangements. Several of those substantial misgivings have been echoed in recent weeks and days by the Treasury Committee and by many City, business and consumer groups. The responsibilities are confused; there is insufficient accountability in the new, more cumbersome system; there is insufficient focus on consumer protection, financial education and exclusion; and, as the CBI has highlighted, there is no objective for the Financial Policy Committee proactively to support growth and employment.

We intend to work with the Government and the Treasury Committee to amend the Bill in Committee to deal with its many shortcomings. To that end, we will not vote in opposition to the Bill in its entirety on Second Reading today; we will see whether we can make progress in Committee and then decide our Third Reading vote only when we have seen whether we have been able to make the progress and the change that is needed in the Bill.

[Kelvin Hopkins (Luton North) (Lab)]

Does my right hon. Friend accept that the crisis was caused in very large part by a complete failure of the auditing industry? If the auditors of all those companies and banks had spotted that worthless bits of paper, claimed as assets, were flooding the world, we might not be where we are now. Does he agree that we need to do something fundamental about auditing?

[Ed Balls]

There were failures in auditing, in corporate governance, in regulation—

[Sajid Javid (Bromsgrove) (Con)]

In government.

[Ed Balls]

In Government regulation, in credit rating agencies and in Governments throughout the world. I shall come to some of the wider failures in a moment.

[Charlie Elphicke]

rose—

[Ed Balls]

But I will take another intervention. Let us hope that this one is better.

[Charlie Elphicke]

Does the shadow Chancellor accept that it was a failure of regulation when, to buy a home, people were lent more money than that home was worth? Was it not wrong to have mortgages of more than 100%, and was that not a failure of regulation?

[Ed Balls]

The problem was the US sub-prime mortgage market, and that the failure of regulation there rippled around the world. There were failures also of lending and regulation at Northern Rock here in Britain. I do not in any way deny that there were failures here in Britain and failures of regulation, but I do not accept that it was solely a UK failure, because it happened in America, France, Germany, Japan and all around—

[Harriett Baldwin (West Worcestershire) (Con)]

rose—

[Gordon Birtwistle (Burnley) (LD)]

rose—

[Ed Balls]

I will make some progress and take both interventions in a minute.

I understand why politically the Chancellor is so keen to blame the structure of UK regulation—the tripartite relationship between the Bank, the Treasury and the FSA. He wants to claim that his particular institutional reforms are the solution, but my advice to him is to be very careful indeed, because this was not a peculiarly British crisis; it was a global crisis. It hit countries with tripartite systems of regulation, quartet systems, twin peaks, more powerful central banks, less powerful central banks and statutory and non-statutory regulators alike, and it was not a failure of regulatory structure, but a collective global failure to see the risks inherent in the structure of the global financial services industry.

We heard from central bankers earlier, but Alan Greenspan, the former chair of the US Federal Reserve and architect of the US system, when asked by The New York Times about his and the world’s understanding and management of risk, said:

“The whole intellectual edifice…collapsed”.

He was right. It was not simply a failure of structure, but a flaw in the way regulators understood the financial system, and that is why the British Bankers Association is right in its submission on the Bill to say that

“we consider that successful regulation depends more on regulatory culture, focus and philosophy than structure.”

[Harriett Baldwin]

On that very point, I should like to understand where the right hon. Gentleman is coming from in his objections to the Bill. What was his philosophy in terms of separating the supervision of banks from the Bank of England, which has day-to-day responsibility for monitoring that canary in the goldmine—their day-to-day funding operations?

[Ed Balls]

I am going to come on to explain my analysis. I am not sure I fully understood the question, but I might as time passes.

At its heart, the regulatory failure of the global financial crisis was not a failure of one approach to the institutions of regulation, but a failure of understanding and risk assessment which covered central bankers, regulators and Treasuries throughout the world. That line is not in the Conservative party Whips’ briefing, but it is absolutely true none the less.

[Charlie Elphicke]

Will the right hon. Gentleman give way?

[Ed Balls]

In a second.

And yes, it was a failure shared here in the UK, across the Treasury, the FSA, the Bank of England—and I have to say the then Opposition, too.

Let me remind the House that the legislation to give the Bank of England independence, and to shift from self-regulation to statutory regulation after 1997, for the first time established a Bank of England deputy governor with explicit responsibility for systemic financial stability and with an ex officio seat on the FSA board. As the seeds of the crisis were sown in the years before it, neither the FSA nor the Bank of England nor the Treasury rang the alarm bells, despite meeting every month in the tripartite standing committee.

The Chancellor, in a second breath a moment ago, said that we are now rightly taking the Treasury out of making such decisions, having criticised the Treasury for not triggering a crisis meeting that neither the Bank of England nor the FSA asked for—a point that seemed to be deeply confused. That demonstrates not that structures do not matter, but that there is no evidence from Britain or throughout the world that a different and arguably more complex structure, the new quartet structure before us, would have spotted a crisis that neither the Bank of England, the FSA, the Treasury, the Federal Reserve, the European Central Bank nor anybody in a regulatory position of responsibility spotted.

[Gordon Birtwistle]

Will the right hon. Gentleman explain the regulatory things that went on when the previous Prime Minister pushed Lloyds bank into buying HBOS, which was a catastrophe in itself? How much regulation went on then, and how much discussion went on between the Bank of England and the previous Government before it was pushed through by the previous Prime Minister?

[Ed Balls]

Those were decisions for the Chancellor and the Prime Minister of the day. I cannot give the hon. Gentleman a blow-by-blow account or any detail of what happened between the FSA, the Treasury and the Bank of England, because at the time I was the Secretary of State for Children, Schools and Families and was dealing with the failure of the test administrators to deliver the standard assessment tests for year sixes at the end of key stage 2.

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

Is the shadow Chancellor telling us that he accepts absolutely no part, bearing in mind his key role in the Treasury at the time, in the failure of the financial structures in the banking sector in recent years?

[Ed Balls]

I have apologised to the country and have asked the Chancellor of the Exchequer to do the same. Did this Chancellor ring the alarm bell in the crisis? No, he did not. Did he worry that regulation was insufficiently tough? No; he said in 2006 that financial regulation was

“burdensome, complex and makes cross-border market penetration more difficult”

and that it

“threatens the global competitiveness of the City of London.”

If the hon. Gentleman wants to have a debate about who should apologise and who should accept responsibility, he should look at the evidence and the judgments of the past 10 years. Let us not forget that it was the Conservative party that voted against Bank of England independence and the move from self-regulation of the City by the City to statutory regulation for the first time in this country. It was this Chancellor who personally opposed the rescue of Northern Rock, saying:

“I am not in favour of nationalisation, full stop.”—[Official Report, 19 February 2008; Vol. 472, c. 186.]

It was this Chancellor who opposed the rescue of RBS; who negotiated the flawed and foolish Merlin deal; who refuses to enact proposals on transparency for bonuses of more than £1 million; who resists the reform of remuneration committees; who is selling off Northern Rock at a loss, prompting a National Audit Office investigation; and whose decision to cut the deficit too far and too fast has choked off the recovery and led to us borrowing £158 billion more. We will take no lectures on judgment from this Chancellor of the Exchequer.

[Charlie Elphicke]

A few moments ago, the shadow Chancellor told the House that he had no involvement in the merger of Lloyds and HBOS. Will he confirm that he was not consulted, that his advice was not sought and that he provided no advice in relation to that matter?

[Ed Balls]

Yes.

I will set out what needs to be done to turn this bad Bill into a good Bill and to put the public interest, not party politics, in the driving seat in financial regulation. I will set out four objectives that should guide this legislation. The first is stability. We must ensure that we have a system of financial regulation that is robust in good times and in bad times. The second is to protect the taxpayer. We must guarantee that the public purse is protected from irresponsible decision making and wider systemic failures. The third is to be on the side of the consumer. There must be effective regulation, more competition and action on financial education and exclusion. The fourth is to support growth and employment. Let me take each objective in turn.

On stability, provisions to improve the structures for financial regulation and financial stability are at the heart of the Bill. As I have said, we support the FPC and we look forward to debating its powers. We are pleased that the Chancellor has today done a U-turn and decided that the Government will take up the recommendation of the Joint Committee that the macro-prudential tools to be used by the FPC should be properly scrutinised by Parliament. I hope that he will ensure that that happens not just when they are introduced, but when they are subsequently changed and updated. We believe that a new scrutiny committee should be established in this House to play that role. We will propose such an amendment.

On the splitting of the PRA and the FCA from the FSA—I know that these acronyms are hard to keep up with, but this is quite a complex system—it is fair to say that there are advantages and disadvantages. The jury is out. The Chancellor’s decision to put all this new and more complex architecture under the umbrella of the Bank of England, and arguably under the personal direction of its Governor, raises serious questions of accountability and clarity in decision making, as has been highlighted by the Treasury Committee and the Joint Committee.

We share the Treasury Committee’s concerns about accountability within the Bank and accountability to Parliament. As the Committee stated,

“the governance of the Bank needs strengthening and…it needs to be more open about its work. The Bank must be held more clearly to account”.

The Committee has proposed that

“the role of the Court of the Bank of England should be substantially enhanced. It should be transformed into a leaner and more expert Supervisory Board, with the power to conduct retrospective reviews of Bank policies and conduct.”

The Chancellor has said that he does not want to go down that road. He has made some moves, but we think that there is further to go to ensure that there is proper accountability. Again, we will propose reforms in Committee.

It is on the issue of crisis management and the processes for deliberation and decision making within the new, more complex structure, that we have misgivings. The Joint Committee was right to state:

“The powers and responsibilities of the Bank of England and the Treasury during a crisis are key.”

However, the Bill and the memorandum of understanding are deeply confused and opaque, as we have just heard from the Chancellor. We welcome the fact that the Chancellor has accepted the Treasury Committee’s recommendation that the Chancellor should be provided with a discretionary power to direct the Bank when there is a material risk to public funds. The British Bankers Association also welcomed that in its submission, but stated that it was

“unclear that the assignment of powers now proposed is consistent with the strategic division of responsibilities envisaged by the Government, including the proposed power of direction over the Bank.”

Article 20 of the memorandum of understanding exposes the hole. I will quote it in full:

“During a potentially fast-moving crisis, it will become especially important to ensure close and effective coordination so as to maintain coherence in the overall crisis management process. At the heart of institutional coordination during a live crisis will be frequent contact between the Chancellor and the Governor. However, the Chancellor and the Governor may agree to establish ad hoc or standing committees at other levels to support this process.”

Under the Bill, there will be three deputy governors at the Bank, a new Financial Policy Committee, two new sub-agencies at the Bank—the PRA and the FCA—and a new quartet of relationships, in which there are separate statutory responsibilities for the Treasury, the FPC, the PRA and the FCA, as well as for the MPC. Will the Chancellor hear any of the views in a crisis, or pre-crisis, from the statutory office holders? Only, according to the MOU, if the Chancellor and the Governor decide that he should. It states that there will be frequent contact just between the Chancellor and the Governor. It is inevitable that there will be a variety of views and dissenting voices, not only at senior levels within the Bank, but between the different statutory agencies, because those agencies have overlapping and, in certain types of crisis, contradictory objectives. Those different statutory responsibilities are being put under one umbrella organisation—the Bank of England.

[Matthew Hancock]

Will the right hon. Gentleman give way?

[Ed Balls]

In a second. I will make the argument and the hon. Gentleman can then ask a question.

Senior and responsible figures who hold statutory offices will get to put their views to the Chancellor only if they are on one of the ad hoc or standing committees, which do not yet exist. It seems as though the Governor will decide whether they should exist at all and who should attend them. My advice to the Chancellor is that one cannot just rely on Treasury officials or gossip by the water pump. Unlike many of the Back Benchers who have intervened, I am not seeking to play a party political game; I want him to change the Bill. [Laughter.] Honestly. This is a deeply confused and highly dangerous ambiguity.

[Matthew Hancock]

rose—

[Ed Balls]

I will give way in a minute. Let me just make the argument, and then the hon. Gentleman, with all his experience of crisis resolution meetings at the Bank, can share his intervention with us.

In the run-up to a crisis or during a crisis itself, having such a high degree of ambiguity in the structure and placing such a concentration of power and access to the Chancellor in the person of the Governor would be highly unstable. If the deputy governor and head of the PRA—a statutory individual, but not the Governor—the head of the FCA or the majority on the FPC believed that there would be a systemic risk from one troubled company without support from public money, the Chancellor must know about it, and in time so must Parliament. They must know about it whether or not the Governor agreed. Whether or not the Governor believed that there was or might be a risk, and whether or not he believed that the moral hazard outweighed the risk, the Chancellor must know about it.

If the Chancellor wants a personalised, twin-peak system with all the responsibilities and accountabilities of the Bank of England located in just one person, the Governor, as is set out in the memorandum of understanding that he has negotiated with the Bank and as it seemed he did at times during his speech, the Bill is flawed. The new system will be unstable and the taxpayer will potentially be more exposed. All the statutory architecture of the FPC, the PRA and the FCA will be for the birds.

If, instead, the new committees and agencies are to have a separate statutory identity with clear and separate purposes that may sometimes conflict, and with leaders who must be properly heard, that must be clarified in the Bill. That was what the Chancellor seemed to suggest at other times in his speech, and the Bill seems to suggest it in places. It must be clarified not just in the memorandum of understanding but in statute.

The Bill sets out clearly the statutory identities of the FCA, the PRA and the FPC, which seems to suggest that the Chancellor intends to move from the tripartite system to a quartet system under the umbrella of the Bank of England—the Treasury, the FPC, the PRA and the FCA. If so, he should say so clearly in the memorandum of understanding and in legislation, for reasons of accountability, financial stability and effective decision making in a crisis. We will table amendments to that effect in Committee.

[Matthew Hancock]

I know that the right hon. Gentleman is desperate to defend the tripartite structure that he designed—

[Ed Balls]

Is that the best you’ve got?

[Matthew Hancock]

It is not, by far.

The accusation that the right hon. Gentleman makes undermines his point that the Bill sets out a quadripartite system. It sets out a bipartite system, involving the Governor of the Bank of England and the Chancellor. The fact that it will be delivered through the person of the Governor, who has to manage his own institution with appropriate accountability to court, means that it is a binary system rather than a tripartite one. It will therefore be better at resolving crises at the rushed times when they occur.

[Ed Balls]

I made it very clear that I was not defending any particular regulatory structure. I do not think the crisis was caused by institutional structures in particular, because other countries with different structures had a crisis as well. We will seek to support the Government in reforming and strengthening the system of financial regulation, including through the addition of the FPC and the new powers of the PRA and FCA. However, all those individual agencies are being given statutory authority in the Bill.

The Bill cannot be setting out a binary or twin-peak system, because there will be the Treasury and the Governor of the Bank of England, then underneath him there will be a deputy governor who is also the head of the PRA, another who is also on the Financial Stability Committee, the head of the FSA—also a statutory office holder—and another deputy governor on the Monetary Policy Committee. The Bill is designed to bring in not a twin-peak system but a quartet system, which will be more complex than a tripartite one.

There may be very good arguments for having a quartet system and for splitting the FSA into the PRA and the FCA, and I support the FPC, but the system will be more complex, not simpler. The Chancellor is trying to fudge the matter by giving the impression in the memorandum of understanding that it will be not a quartet system but a twin-peak system, because things will be sorted out between him and the Governor.

That is not an ad hominem point. Other Chancellors and Ministers from Governments through the ages have known very well that there is an inevitable conflict in financial regulation between the regulator, examining systemic risks from individual firms, and the guardians of the system, who worry about potential systemic risks on the one hand and moral hazard on the other. The Chancellor’s role is as the guardian of the public purse and wider financial stability, so there are different points of view.

My advice to the Chancellor is that to try to subsume all those points of view into a separate institution away from him, without transparency and with multiple and overlapping roles for different statutory office holders, but then say, “I’m only going to deal with the Governor,” is ahistorical, deeply foolish and flawed. If the Chancellor changes and clarifies the Bill, we will be pleased, but at the moment it is a terrible fudge.

[Mr George Osborne]

I hear the right hon. Gentleman’s criticism of our proposals, but what is his response to what my predecessor says? He has written:

“The whole system depended on the chairman of the FSA, the Governor of the Bank and the Chancellor seeing things in exactly the same way. The problem was that, in September 2007, we simply did not see things in the same way.”

My predecessor, who went through the banking crisis, says that he was dealing with a system in which differences of opinion were not accommodated. The system could not adapt to them, and there was no power of override. What is the shadow Chancellor’s response to my predecessor’s criticism?

[Ed Balls]

My response to the current Chancellor, who has not yet dealt with such a crisis, is “Welcome to the real world.” In reality, there will be times, as there have been, when the regulator, and potentially the deputy governor for systemic stability, will say, “We are really worried about the potential read-across from this particular large institution to the financial system more widely.” However, the Governor will say that for reasons of moral hazard and the desire not to set false precedent, he does not believe funds should be provided.

As the Chancellor has said, it is really hard when there is a disagreement between the regulator and the prudential systemic overseer or the Governor. The Chancellor has elected to take the power to make the decision in those circumstances. I agree with that strengthening of his powers, but—

[Mr Osborne]

You had the powers.

[Ed Balls]

The Chancellor does not listen. He wants to play this game so much that he does not hear. I agree with the increase in his powers. He is right to take them, but he cannot use them unless the Governor comes to him and says, “I fear a crisis may be building,” having made a judgment about moral hazard outwith the views of the heads of the PRA, the FCA and the FPC.

In the structure set out in the Bill, the statutory office holders will be formally kept out of the room under the Chancellor’s own memorandum of understanding, which is foolish. I understand why it has happened—it will be easier to negotiate. In all the years when previous Chancellors wanted clarity, it was hard to negotiate. However, negotiating the wrong clarity in a way that keeps information away from the Chancellor is not stabilising and in the public interest but destabilising, opaque and against the public interest. The Chancellor should take some advice from people who have seen that not working and ensure that he hears the views of the people to whom he is giving statutory responsibility in the Bill. That is my very strong advice, and I hope he will listen to it.

[Mr Brian Binley (Northampton South) (Con)]

The shadow Chancellor is telling us something illuminating—that if a Chancellor does not want to listen, no system will have any impact at all. Under the last Government, siren voices started in 2002, and the then Chancellor refused to listen. We had a systemic deficit problem, and again he did not want to listen. The shadow Chancellor has been through all this, so would he advise the current Chancellor to listen more than the last Chancellor did during the crisis?

[Ed Balls]

My very clear advice to the Chancellor is that when he gives people a clear statutory responsibility for a particular function and legislates for three deputy governors who are the heads of individual agencies, he should also design his crisis resolution and decision-making procedures so that his experts are in the room and he can hear the array of their views. The idea that it is better for the Chancellor to require the Bank to resolve such issues internally and come to him with one voice—one Governor, one decision maker—is a flawed structure of regulation. The point, however, is that that is not what the Bill intends. It intends for the FCA and PRA to be important institutions, in which case the Chancellor should get them in the room.

[Mr Robinson]

Does my right hon. Friend agree that the further decision to install the Governor for eight years will make the inherent difficulty of dealing with only one person more difficult?

[Ed Balls]

I understand my hon. Friend’s point, but to be honest I do not have strong views on that. The reality is that there was not cross-party support or support more widely in civic society for Bank of England independence when we established it. The Conservatives voted against it. In those circumstances, it would have been difficult for the then Government to pass legislation for one eight-year term—there would have been a lot of opposition to the idea of giving one unelected individual such power for an eight-year term. This Bill moves us not only from a four-year to an eight-year term, but gives one individual massively more power than they ever had. That is what concerns me.

[Charlie Elphicke]

rose—

[Matthew Hancock]

rose—

[Ed Balls]

Oh God! It is a choice of two evils. Whom do I choose?

[Matthew Hancock]

rose—

[Ed Balls]

Go on then. I will give way to the hon. Gentleman.

[Matthew Hancock]

I am very grateful to the right hon. Gentleman for giving way again. Does not his argument—that we cannot have an umbrella regulator under which inevitable tensions are resolved, and that we must instead have separate organisations—show exactly the thinking that led to the problems in the tripartite system, under which responsibilities were segregated and separated and problems fell between stools? The FSA and the Bank were told that one was to look at the regulation of individual banks and the other at the macro-economy, and never the twain shall meet. That is precisely the problem that needs to be addressed.

[Ed Balls]

The Chancellor referred to his years of thinking about this legislation. I am afraid that his former adviser demonstrates the kind of muddled thinking that has got the Chancellor into this difficulty.

I am not saying that the tripartite system is the best one. I am quite happy to go along with the shift to the quartet system—I can see the advantages of the FPC and the split of the FCA and the PRA. I am not worried because individual statutory agencies will be under the umbrella of the Bank of England; I am worried because the deputy governor and head of the PRA, who has a clear responsibility, is not part of the decision-making process. That is what I am worried about. I want the MOU to say that at the heart of the system—in pre-crisis and crisis—there will be a “clear view” group, in which the Governor and his key deputies, who will have separate and sometimes contradictory statutory responsibilities, come together with the Chancellor to make the decision.

Even if the Chancellor—this is not an ad hominem point—has the umbrella of the Bank of England and the quartet system, he should want to hear from the person whom he appoints on a very large salary and in law to be the head of the PRA. What I do not understand is why that would not be written into the MOU. Actually, I sort of do understand. There is a history in the Bank of England of the Bank equalling the Governor of the Bank—of wanting to personalise the appointment—as the Chancellor has described. However, we cannot personalise something as complex as the proposed system. It is not just that the system is complicated; there are also tensions and differences of view.

My right hon. Friend the Member for Edinburgh South West (Mr Darling) is quite right that it is hard to operate a tripartite system in which there are different views, but those differences will not be avoided by burying them under the table and pretending they do not exist. Had that happened at key moments in the previous crisis, the wrong decisions would have been taken.

[Charlie Elphicke]

I thank the shadow Chancellor for giving way once more. The Chancellor’s plan is for the financial and prudential regulation buck always to stop with the Bank of England. The shadow Chancellor has concerns about moral hazard on the part of the Governor, which suggests that he is not as strong a fan of the independence of the Bank as he has previously made out. Should we not trust a Governor of the Bank of England to work effectively with the Chancellor?

[Ed Balls]

The hon. Gentleman does not understand that the buck does not stop with the Governor of the Bank of England, but with the Chancellor of the Exchequer, who, in the end, is the guarantor of the public purse and taxpayers’ money, and of the wider stability of the system.

If the Governor comes to the Chancellor and says, “In my view, and based on the views of my deputies, our collective view is to intervene,” the Chancellor has the power to do so. Rightly, the Chancellor has given himself the power in the Bill to override the Governor if the latter says we should not act. The concerning situation, which I am trying to explain—the hon. Gentleman does not quite get it—is that there will be different views within the overarching Bank of England, because it will be huge, with different, overlapping and sometimes contradictory statutory responsibilities for systemic stability, prudential regulation of individual firms and managing risks to consumers, let alone monetary policies.

In those circumstances, my strong advice to the Chancellor, with whom the buck stops, is that he should not allow the decision to be made in the Bank of England. He should not allow the Governor to say, “I know you want to act and that you want to us to act. Thanks very much, but I’m the Governor, and I don’t think we should.” We should not allow the Governor to tell the Chancellor, “The Bank does not propose action.” I would not put myself in that position.

The idea that such a situation is okay because the Chancellor will have heard before the meeting—from Treasury officials or on the grapevine—what those other office holders want is unbelievably naive. We are talking about the Bank of England’s legislative responsibilities and the statutory power of the office holder. In that key meeting of only the Chancellor and the Governor, the Chancellor cannot say, “I’m sorry, Governor, but other people take a different view from you.” That is not how it works.

Shall I move on, Madam Deputy Speaker? [Hon. Members: “Hear, hear!”] That is a very important argument to which we will return in Committee.

On Europe, that problem of complexity is mentioned in the Treasury Committee report, which states that there is

“a risk that the single UK regulatory voice in some cases is weakened by the fact that two or more organisations will share the representational role in the various international regulatory committees.”

The Chancellor has proposed a new committee, which is welcome, but I urge him to look harder at that arrangement. The Opposition will table amendments on that in Committee.

Let me move on quickly, because it is important to get other things on the record on Second Reading. As I have said, on consumers, the Opposition welcome the recognition of the need for a single regulator for all retail financial services, but we will highlight a number of concerns in Committee. In particular, we want to ensure that the FCA has the powers it needs to require providers of financial services to understand its fiduciary duties.

On disciplinary action, the Joint Committee has recommended a requirement to consult before disclosing the fact that a warning notice has been issued. We think the Government are wrong to reject that recommendation. That transparency should be in the Bill.

The Joint Committee has also recommended that the FCA should be given concurrent powers alongside the Office of Fair Trading to make market investigation references to the Competition Commission. We do not understand why the Treasury has rejected that.

We are also disappointed that the Government have not used the Bill to bring forward the Vickers recommendation for a review of progress on competition. We propose having one in 2013, rather than in 2015, as Vickers proposed, not least because the Lloyds divestiture has so far not produced the strong, effective challenger that we sought.

The Chancellor says that he is in favour of financial education in schools and the Prime Minister says he is reviewing it, but they vetoed that proposal when a Bill was before the House. There is cross-party support on financial education. The all-party parliamentary group on financial education for young people is the largest such group and will propose an amendment for statutory financial education in schools for all young people.

The Opposition are worried that the Government are allowing the banks to go backwards on financial exclusion, with charges for basic bank accounts being increased in the case of Barclays, and with new charges on basic bank account holders using automated teller machines in RBS and Lloyds. We want to strengthen the obligation on the banks to produce a universal service for all retail banks. My hon. Friend the Member for Walthamstow (Stella Creasy) will no doubt push us to ensure that the Government agree to our amendments to give new powers to the FCA to restrain the ability of firms to charge ultra-high interest rates for prolonged periods.

On growth and employment, the CBI was right to say in its submission that

“the Bill should ensure that the new regulatory authorities have a specific objective to focus on—and support—economic growth.”

As it points out, the macro-economic tools used by the FPC could by their nature have a significant impact. The CBI says that the FPC should be required in statute to act

“in a way that is consistent with promoting the medium and long-term growth of the economy”.

The Joint Committee also proposed a strengthening of the growth obligation for the FPC, and we will propose amendments to that effect. I hope that the Government will look at this issue again, because it is important, not least for the supply of credit to small and growing businesses. Even the British Bankers Association says:

“We would suggest that the legislation underpinning the FPC should specify that its objective is to maintain a sustainable supply of credit to the economy”.

Bank of England figures show a £10 billion fall in lending to small businesses, and in November the Chancellor said that his new credit easing scheme would relieve constraints in the supply of bank lending in the short term. The short term is becoming the long term, because there is still no sign of that credit easing scheme. No wonder, with small business lending down and bonuses high, the Merlin deal is looking rather tawdry. At least the Chancellor has recognised that executive pay needs to be covered in the Bill, but as the Institute of Chartered Accountants said in its briefing,

“at the moment the Bill is drafted too broadly to be effective in encouraging proportional executive pay.”

We will look at amendments in Committee and tomorrow the House will have the chance to debate the Opposition’s call for a repeat of the bank bonus tax to provide 100,000 jobs for young people.

This is a badly drafted Bill. On stability, there are gaping holes in decision making and accountability. On protecting taxpayers, there are flaws in the advice the Chancellor will receive. For consumers, there are flaws in the powers for referral to the Competition Commission and a worrying lack of action on financial education and exclusion. On growth and employment, there is a gaping gap that must be filled. We will not oppose Second Reading, but we want big changes in Committee. Otherwise, to protect stability, taxpayers, consumers, growth and jobs, we will have to vote against the Bill on Third Reading.

18:32

[Mr Peter Lilley (Hitchin and Harpenden) (Con)]

It is a pleasure to follow the shadow Chancellor, who began by promising us—somewhat uncharacteristically—a speech that would not be partisan or adversarial. I am sure that the House would have been as disappointed as much as surprised had he fulfilled that promise. I shall endeavour to do so for him because, as Chairman of the Joint Committee scrutinising the Bill, I had to adopt a more consensual approach than is sometimes my wont.

I am grateful to the Chancellor for responding so positively to the Joint Committee’s report and taking on board the substance and spirit of most of our recommendations. I hope that we have helped to make the Bill better. This was my first experience of the Joint Committee procedure, and I found it extremely productive, not least because the members, Chairman apart, were all of an immensely high calibre, brought great experience and approached their task in a thoroughly constructive way. However, it is salutary to remind ourselves that the first ever Joint Committee was set up to scrutinise the Financial Services and Markets Bill, which this Bill effectively replaces.

My Committee was conscious that, despite the eminence of our predecessor Committee, it did not diagnose the problems that subsequently ensued—above all the lack of focus on banking supervision and systemic stability. I hope history will not show us to have missed the elephant in the room.

The Bill is essentially about changing the structure of regulation from the tripartite system to a twin-peaks model in the light of the recent banking crisis. However, the Committee was struck by the weight of evidence for two things. First, no system of regulation can guarantee that there will never be another banking crisis. Consequently, it is essential to have a process in place to resolve the situation if banks get into problems. I urge the new FCA to make it a priority to see that major banks draw up their living wills as soon as possible. It is also essential to know who is in charge if a serious crisis erupts. We heard from the previous Chancellor that during the last crisis there were serious differences between the Treasury and the Bank of England and no easy way to resolve them. We recommended that, once the Bank has identified that a problem could lead to a call on public funds, the power to exercise responsibility should lie with the Chancellor, even though he may continue to leave that power in the hands of the Governor. I am pleased that the essence of that recommendation has been adopted.

The second point made by many witnesses was that regulatory structure is less important than the culture, focus and philosophy of the regulator, as the shadow Chancellor reminded us. That culture will depend crucially on the leadership, staffing and training of the new regulatory bodies, which are beyond the scope of this Bill. The only way in which legislation can influence the culture and focus is by setting clear objectives, powers and responsibilities, and systems of accountability for each of the new bodies. We made a number of detailed recommendations to clarify those and I am glad that most have been taken on board.

The House will be relieved to hear that I do not propose to go through all 70 recommendations item by item, but the biggest change of culture is from what has been described as box-ticking regulation to discretionary or forward-looking supervision. The Government advocated that change before the Joint Committee was established, but we found it hard to see where in the Bill the approach was given legal backing, especially for the Prudential Regulation Authority. I hope that the Chancellor is confident that regulators will be fully empowered under the legislation to behave in that way.

As our work progressed, the Committee became increasingly aware that, however well drafted, the Bill will have a decreasing impact on how the British financial system operates, as regulations are increasingly being set at a European level. A veritable tsunami of EU regulation is about to wash over the City, so it is vital that the UK exercises the maximum influence on decision making in Brussels. However, the architecture of the regulatory structure being created in Brussels is different from that in the UK. It’s is based on sectors and ours will be based on prudential and financial conduct. There is a danger that our lobbying input to the EU regulators will be fragmented, divided and weakened as a result. We therefore proposed the establishment of a high level committee, chaired by the Treasury and reporting to the Chancellor, to co-ordinate the UK lobbying effort in Europe of all the bodies created by the Bill, and in international forums such as Basel. I am glad that that recommendation has been adopted in the memorandum of understanding between the various bodies, but it is obviously also important closely to consult financial firms—both British and foreign—that do business in London, Edinburgh and elsewhere in the UK, whose lobbying power also needs to be deployed in Brussels.

I should mention that while I was in Brussels last week on other business I had the opportunity to meet Monsieur Barnier, the commissioner responsible for most of the proposed financial services legislation. I am grateful to him for seeing me. When I told him that many of us on the Committee had been surprised to learn about this tsunami of financial services legislation descending upon us, he rightly said that we should not have been. The measures were in the public domain and followed from the decisions of the College of Commissioners and the Council of Ministers. He is correct. Mea culpa—or nostra culpa: the fault is ours in this House if we pay too little attention to what is brewing across the channel until it is too late. The European Scrutiny Committee does sterling work, but I wonder whether our procedures need to integrate its work more closely into our process of scrutiny on the Floor of the House, bringing Ministers here to explain our negotiating position at an early stage.

[Kelvin Hopkins]

As a member of the European Scrutiny Committee, I appreciate what the right hon. Gentleman is saying, but does he not agree that it would be strengthened if the European Standing Committees had permanent instead of ad hoc membership which means that the work is not taken so seriously?

[Mr Lilley]

That is probably a good point, and I hope that the relevant powers will listen to it.

When Monsieur Barnier came to London a few weeks ago, he defended his legislative programme as necessary to creating a single market. If it would create a single market, most Members on both sides of the House would wholeheartedly support it—I certainly would—but I cannot see how any of the measures will open up a single new opportunity for financial companies to trade outside their own national markets across the single market beyond what is already open to them. Most if not all of the directives are about centralising regulatory powers over the financial sector in Brussels rather than in nation states.

Monsieur Barnier did not dispute that, but he argued that the financial crisis had been caused by lack of regulation of “British and American banks”, so it was essential to impose regulation at an EU level. I gently reminded him that the credit crunch had been sparked when a French bank, BNP Paribas, announced it could no longer put a value on its property funds, that it subsequently emerged that continental banks had far higher levels of gearing than Anglo-Saxon banks, and that the current euro crisis is, at its heart, a banking crisis, as continental banks are so under-capitalised that they cannot absorb the losses on their holdings of sovereign debt and their Governments cannot afford to recapitalise them openly and immediately, as British and American Governments did.

Monsieur Barnier also argued that a single market requires a single rule book. However, that was promptly negated by his promise that that does not mean a one-size-fits-all regime and that

“we also need to allow considerable flexibility for national supervisors”.

Either there are separate national rule books, or there is a single EU-wide rule book. We cannot have or pretend to have both—or rather we can, and in a sense we do. Under the second banking directive, any bank or similar financial firm can operate anywhere in the EU under the supervision of its home authority, so any individual bank can operate under a single rule book throughout Europe. Of course, that rule book must obviously meet minimum requirements agreed at EU level. I believe that that is the model that we should retain and encourage across Europe within the single market.

That brings me to the issue of the draft fourth capital requirements directive, which will implement the Basel III agreement. The Committee discussed it at length with Mr Enria, chairman of the European Banking Authority, who strongly defended the EU’s decision to set not only a minimum level of reserve that each country must require its banks to hold, but a maximum level that banks can be required to hold. We subsequently wrote asking for clarification of his reasons for setting a maximum, but found his arguments unconvincing. His claim that our setting a higher rate would somehow siphon off funds from other countries, or that it would be unfair if we made our banks safer than those of other countries, were not entirely convincing.

In the light of the Committee’s experience, my interview with Monsieur Barnier and the evidence from Mr Enria, I believe strongly that the Prime Minister was right to seek to reintroduce what Monsieur Barnier called a dose of unanimity in decision making on financial markets. I hope that the Prime Minister will continue to press that with the support of both sides of the House.

18:43

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

Along with my hon. Friend the Member for Leeds East (Mr Mudie), I represented the parliamentary Labour party in the Commons on the Joint Committee of both Houses that gave the Bill pre-legislative scrutiny. It was a pleasure to serve under the chairmanship of the right hon. Member for Hitchin and Harpenden (Mr Lilley), whom I thank for his fair-minded chairmanship. I also thank the impressive array of witnesses who gave up their time—in some cases very valuable time—to help the Committee in its deliberations.

I echo the right hon. Member for Hitchin and Harpenden in commending the Joint Committee’s report to the House. The Bill essentially addresses itself to the structure and powers of the financial services regulator. It does so at a time when the whole world is facing up to a debt and liquidity crisis and when the financial services sector is viewed by the public with even more distrust than is normally reserved for politicians and journalists.

I do not want to spend much of my remaining eight minutes dealing with the point on which the Chancellor focused. He certainly decided not to waste a good crisis. He focused on the structural questions involved. I do not think that it is primarily a structural question, and that view was shared by the Committee. Structures and architecture are not the root cause of the problem. As my right hon. Friend the shadow Chancellor said, other countries with different regulatory structures faced similar problems. It is not a structural question alone; it is also about the power, scope and information available to the regulator.

It is also—dare I say it—about the behaviour of the regulated. Effective regulation flows from getting the culture, focus and philosophy of the regulator right, as we concluded in the pre-legislative scrutiny report. We as a House should be far less tolerant of the evasive and litigious behaviour of some of the regulated. We should expect the regulator to take an interest in gathering market intelligence and anticipating emerging problems. The focus on that is one of the strengths of the proposed new architecture. It will involve co-operating closely with the regulatory authorities in other jurisdictions, particularly the United States.

If we believe that it is necessary in the broader public interest to regulate the financial services sector trans-nationally, why are we so acquiescent in the existence of a flourishing shadow banking marketplace? What defensible public purpose does that marketplace serve? What is the justification for the almost impenetrable complexity of its transaction structures? Surely the only two possible reasons for it are to avoid transparency and therefore evade the regulator or, somewhere in the details of the complex structures, to turn a small additional margin of profit on very large sums of money at the expense of the unwary. I ask again: why is that in the broader interests of society?

The Committee went to some trouble to establish the balance of power between the proposed new European regulatory architecture emerging from the Basel III process and the new United Kingdom structures. The question is important, and I am pleased that the Chairman of our Committee referred to it. The Commission’s intention is that the European Union’s regulatory regime will be mandatory for all European member states, including us, and will be asserted centrally, not legislated for by national legislation.

The Prime Minister has assured the House that it is the Government’s intention that the European Union regulatory regime should apply to the United Kingdom. The European Union regime will act as a constraining factor on UK regulators, a point that the right hon. Member for Hitchin and Harpenden made in his speech and that I hope the Minister will address when he winds up the debate.

As I argued earlier, the forward-looking, judgment-based regulatory regime must be well informed if it is to function adequately. I thought that the Governor of the Bank of England was clear on that point when he argued that the Financial Policy Committee should have the power to request information from regulated firms and determine the time frame in which that information should be sent. The Chancellor, in his address to us, seemed to support the regulator having that power. If that is his view, it is mine as well, but to the Committee, the Government seemed to be arguing for a more tortuous process that would require Treasury consent and even parliamentary approval. That does not capture the sense of urgency and the need for firmness. We should back the regulator.

While I am on the subject of timely intervention, the Bill is said to be admirably clear on who is in charge during a crisis. The Chancellor made much play of that in his address to the House. The trigger will be the potential need to call on public funds. It is essential, though, that the Chancellor be alerted, at the earliest possible moment, to an emerging situation of that kind. If there is any doubt about that, the Chancellor should get the benefit of the doubt. If he is told only at the last minute, the Chancellor will not be left with a wide range of choices, and none of them will be particularly palatable.

The effectiveness of judgment-led regulation will rest on the quality of the individuals working for the regulator. The Governor argued for a dedicated team of public servants working in a public-service culture who are able to look to a dedicated career in regulation. I believe in public service and share the Governor’s point of view. Such a career should be well-paid and the public servants should be beyond corruption and intimidation. They should be protected by transparency, powerful criminal sanctions and a new parliamentary committee acting as Parliament’s interface with the Governor and his deputies as regulators.

The regulatory system should focus on the protection of consumers and the taxpayer.

[Kelvin Hopkins]

Everything that my right hon. Friend is saying suggests that we are re-empowering Parliament when it comes to how our economy is run, which is the opposite direction from the one in which we have been moving in recent years. Is that not welcome, and does it not strengthen our democracy?

[Mr Brown]

We need to go further. How Parliament interacts with the Governor in his new role as regulator has not been properly addressed in the Bill, but we need to think about that carefully. Although finding fault with every other structural problem with financial services, the Government propose no change to the arrangements for the accountability of the regulator to Parliament. Accountability, therefore, is through Ministers, primarily Treasury Ministers, or through the work of Select Committees, primarily the Treasury Committee, which is one of the hardest-working Select Committees in the House of Commons. We should consider whether that is adequate. As the new arrangements come into effect and settle down, alongside the recommendations from the Independent Commission on Banking, surely there is a need for an authoritative forum in which emerging issues can be examined, ideas explored and recommendations made. Public discussion and transparency are important safeguards.

The other place, too, has a legitimate role in these arrangements. Acting as a check and balance on elected representatives, and public life more generally, is what the other place, as currently constituted, does well. In any event, we should consider very carefully whether we are satisfied with the present arrangements alone. Perhaps this is a suitable subject for a separate debate.

Private sector financial services in the United Kingdom are underpinned by the public sector in a number of important ways. The most significant are the £85,000 deposit compensation limit guarantee; even more importantly, the Bank of England’s role as lender of last resort; and the need to intervene when private sector misjudgments threaten a collapse of the banking system. We, as the people’s representatives, should take an interest in this democratic deficit.

There is a third point to consider. Each of us is elected to represent our fellow citizens. There is nothing more frustrating and upsetting for a constituency MP than to know that individual constituents are faced with an injustice and that there is no effective remedy. Such situations occur far too frequently in the financial services sector. One thinks of the present Arch Cru scandal as the latest of a depressingly large number of similar scams.

I welcome the fact that the Bill gives the FCA powers to intervene in the case of individual products and their promotion. The Bill allows consumer bodies to make super-complaints to the FCA and facilitates a reform of consumer credit with a view to better protecting consumers. That is welcome too. It is important to ensure, however, that the FCA’s strategic objective is clearly stated. I was taken by the suggestion from Which? of

“ensuring a fair and transparent market in financial services”,

which is reflected in the Joint Committee’s recommendation that the FCA’s strategic objective

“should be amended to focus on promoting fair, transparent and efficient financial services markets that work well for users.”

That is more specific than the Bill, as drafted, which refers to

“ensuring that the relevant markets function well.”

The phrase is too general—how else would one want markets to function? There are still concerns that section 348 of the Financial Services and Markets Act 2000 is too restrictive and discourages the publication of information. I hope that the Minister will have something to say about that, because I know that the Government propose to address the matter in Committee.

We are expecting a lot of the new structure and are placing yet more responsibility on the shoulders of the Governor of the Bank of England. The new role has been described as similar to that of a sun-king presiding over an empire. There is clearly a democratic deficit in the new structure that ought to be addressed—

[Madam Deputy Speaker (Dawn Primarolo)]

Order.

[Mr Brown]

I say: “Every man a king, but no man wears a crown.”

[Madam Deputy Speaker]

Order. The right hon. Member is not supposed to take up other people’s time.

18:55

[Mr David Ruffley (Bury St Edmunds) (Con)]

It is a pleasure to follow the right hon. Member for Newcastle upon Tyne East (Mr Brown), most of whose comments I endorse. The regulators failed to see the crisis coming and were asleep at the wheel, so it is entirely right that the Bill abolishes the Financial Services Authority. In so doing, however, it gives new extensive powers to the Bank of England, and that poses a problem: will the newly created bodies—the Financial Policy Committee and the Prudential Regulation Authority—be as accountable as possible? In that respect, the right hon. Gentleman was right to touch on the democratic deficit.

I had the privilege of sitting under the chairmanship of my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) on the Joint Committee, and I also sit on the Treasury Committee. Those two bodies have one thing in common: in respect of the Bill, both are concerned more than anything with the accountability of the Bank in its new form and with its new powers.

I want to raise three points that the Government have not yet taken on board—they have taken on board some good points raised by the two Committees, but some are outstanding. First, to whom exactly will the PRA and the FPC be accountable? Let us remember how important and powerful these two bodies will be. The FPC will have an overarching responsibility to maintain financial stability, and it will be chaired by the Governor of the Bank of England. The PRA, also chaired by the Governor, will have macro-prudential responsibility for supervising significant financial institutions, particularly the banks. They will also have all sorts of macro-prudential tools, the details of which are yet to be designed—but they will include things such as loan-to-value ratios for mortgage lending, leverage ratios and so on. Those are hugely important tools that will affect the livelihoods and household finances of all our constituents.

We are vesting that great power in two bodies, both of which will be sub-committees of the court of the Bank of England. The Treasury Committee was concerned about that and suggested that the court was not fit for purpose when it came to scrutinising the work of the FPC and the decisions of the FPC and the PRA, and it suggested abolishing the court and replacing it with a supervisory board with a greater spread of technical expertise on monetary and fiscal policy. At the moment, the court—I do not wish to be rude or impolite—is a rag-bag of industrialists, trade unionists and consumer champions, most of whom, frankly, do not have the skill, expertise or background knowledge to judge whether the FPC and the PRA are making sensible decisions. That is why we need a supervisory board to replace the court.

As the Chancellor said in his opening speech, there will be a new oversight committee for the FPC and the PRA. However, that does not meet the concerns of the Treasury Committee, for one simple and stark reason. The terms of the oversight committee to which the Chancellor referred make it quite clear that it cannot pass judgment on, or conduct ex-post reviews of, the decisions that the FPC and PRA have made. All that the members of the oversight committee can do under the Bill is see that the FPC and PRA arrived at their decisions in a proper fashion. They cannot make a judgment on their merits. That point was returned to again and again in the evidence taken by the Joint Committee on the Bill and the Treasury Committee, and the Bill does not answer it.

The second point that I wish to raise is about the role of the premier Committee in Parliament, the Treasury Committee, which is charged on behalf of Parliament with scrutinising the new bodies, the FPC and the PRA. The Treasury Committee has made it quite clear that there should be a statutory responsibility for either the court, if it remains, or, as we would prefer, a new supervisory board, to respond to any request for information made by the Treasury Committee, on behalf of Parliament. The Bank’s record on responding to requests from the Treasury Committee is not bad, but it is not perfect. I adduce as evidence for my proposition the fact that at the end of last year the Governor—quite wrongly in our view—did not think it appropriate to produce the minutes of the court of the Bank of England for the Treasury Committee, to show us what it was saying and doing at the time of the RBS meltdown.

My third and final point relates to the composition of that terribly important body, the Financial Policy Committee. The Treasury Committee strongly recommended—and still recommends—that a better balance must be found between the internal and external members of the nine-person Financial Policy Committee. My Committee proposed that the ratio of internal to external members should change from 5:4, which is what the Bill says it should remain, to 4:5—in other words, that a majority on the Financial Policy Committee should be external members. Why? For one simple reason. One of the besetting sins of the regulatory regime and the regulators who worked in it up to and during the crisis was that they were subject to group-think. They were all reinforcing each other’s prejudices and established views. It was disastrous for UK regulatory management. My Committee believes that one way of countering that propensity towards group-think is to have externals who are not full-time executive members of the Bank of England, such as we have at the moment. Of the six professionals—so to speak—all of them except the chairman of the FCA are Bank of England officials. Many of us think that that is simply not a sustainable proposition.

The Government have made concessions and done some thinking since the first publication of the Bill, as well as listening to the two Committees, which have made some powerful suggestions about the better accountability that the two powerful new bodies in the Bank of England must demonstrate to Parliament and the British people. Progress has been made, but there are three issues, which I have highlighted, that are still on the table. The Government have not taken them up, and the Treasury Committee insists that they need to be recognised in the new regime and new settlement. It is in that spirit that I make those points—speaking, I might add, for my Treasury Committee colleagues who are in the far east on an important fact-finding mission and who would make these points if they were here. Those points need addressing, and I am sure that in the Public Bill Committee they will be, but it is important that the record should show that the Treasury Committee is still not satisfied.

19:05

[Mr George Mudie (Leeds East) (Lab)]

May I first align myself with the remarks that my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) made about the Chairman of the Joint Committee on the Bill, the right hon. Member for Hitchin and Harpenden (Mr Lilley)? The fact that I was still on the Committee at the end of its sittings shows that he was indeed tolerant and patient. I would like also to put on record my admiration for, and thanks to, the Chairman of the Treasury Committee, who is in China at the moment. We have had an arduous 18 months on the Committee going through the regulations. The fact that there are three members of the Committee here today is nothing to do with our being unable to get on the plane to China; it is more that we are so dedicated to regulation that we chose to be here.

I want quickly to raise three matters. I welcome the Chancellor’s open-mindedness—it was not a U-turn; that was an unfair description—in accepting the point about secondary legislation being inappropriate for the macro-economic tools. I hope that he will show the same open-mindedness on the three matters that I will raise, because so far the Government have not accepted the Joint Committee’s or the Treasury Committee’s views on them.

The first issue is the objective of the Financial Policy Committee, which is to ensure the financial stability of the financial sector. One difficulty raised by many of the witnesses before the Treasury Committee and the Joint Committee was that no one can come up with a definition of “financial stability”. That clearly presents those responsible for oversight of the FPC with obvious difficulties. On what basis do they judge the committee’s activities and performance? Is the issue stability alone? As the Chancellor himself stated in evidence, we should not be seeking the “stability of the graveyard”. I think of the unfortunate individual in hospital who is seriously ill in the high-dependency unit, but whose relatives are assured that he is in a stable condition. Just as in that example, stability in economic terms does not equal a healthy economy.

Arising from that—and equally important—the relevant question for all sectors to emerge from our witnesses was: in exercising its power to seek financial stability in the financial sector, will the Financial Policy Committee ignore the effect that that might have on the other sectors, in the real economy? To be fair, the original suggestion that the Government advanced was that the Financial Policy Committee could not take decisions to achieve financial stability if it believed that those decisions risked medium to long-term economic growth. An interesting and important point is that it was originally left to the FPC to make that judgement itself, with no mechanism for the Chancellor to have his say. The negativity of that formulation led HSBC, the British Bankers Association and several other witnesses to the Joint Committee to suggest that the relevant clause be redrafted, to give the FPC a positive duty to support economic growth.

I would like to put on record what was said by Stuart Gulliver of HSBC and Bob Diamond, neither of whom would immediately be recognised as friends of mine, or otherwise. Stuart Gulliver said:

“the…Treasury should be setting out what the Government’s goals are for growth, employment and job creation and saying to the FPC, ‘Use your macro-prudential tools to ensure that you achieve the Treasury’s goals.’”

Just as interestingly, both he and Bob Diamond cited the experience of the Pacific economies that actively manage the flow of credit and even its sectoral allocation, using a variety of macro-prudential tools. The people in small businesses and medium-sized enterprises would be very interested in that. The Joint Committee agreed a recommendation that the Bill be redrafted so that, like the MPC, the FPC must have regard to the Government’s growth objectives and other economic objectives. The Government have responded to the Joint Committee’s points on other related items in this area, but have not responded in favour of the more positive and widely supported suggestion that the FPC should be given a brief to have regard to the Government’s growth and economic policies. That is a real worry, and I hope that the Government will approach it with an open mind in Committee.

[Mr Ruffley]

I am following the hon. Gentleman’s argument closely. Does he agree that it is imperative for the Governor of the Bank of England to return to Parliament to explain in detail the indicators that he thinks should be used in the attempt to get a handle on the definition of financial stability, and that we need a full and frank debate on what those indicators should be?

[Mr Mudie]

That is an important point. I think that it was Charles Goodhart who raised the question of indicators. They are certainly interesting, but on a wider scale, I think it more important to establish that, given that the Monetary Policy Committee is linked to a target of 2% inflation, the Financial Policy Committee should be linked to growth employment measures that ensure that there is no “safety low level” of stability, and be forced to have a look at the problems of the real world out there.

[Steve Baker (Wycombe) (Con)]

The hon. Gentleman’s speech seems to allude to a search for an equilibrium that never exists in the real world. Does he think that that disconnection between the reality of life as a dynamic process and the search for stability is at the heart of the inability to define financial sustainability?

[Mr Mudie]

I think that it is more an indication of the way in which the banks have moved away from the real world into the investment world, computer schemes, and making money by using money, rather than funding the small and medium-sized enterprises on which we depend for a rebalanced economy.

This is a very similar—Madam Deputy Speaker, I think that I have thrown away my speech. However, the second issue that I want to raise is that of accountability. I want to draw the Chancellor’s attention to the danger of giving great powers to unelected officials, which can have a significant effect. One of the witnesses drew a parallel with the responsibility given in the sphere of health to the National Institute for Health and Clinical Excellence. NICE determines the availability of drugs and treatment, and when a particular decision is made, elected politicians are under great pressure to reverse it. It does not wash with most constituents to tell them that the decision is one for the regulator. They may understand that politicians have given up the power, but they rarely accept that we do not retain the ability to alter a decision that is painful to them—and why should they?

That is very similar to what will happen when powers are given to the Bank of England and the Financial Policy Committee. The Chancellor is handing power to the Bank on matters that will inevitably extend beyond the financial sector to the real economy. One example is interpretation of the financial stability objective. The Chancellor is given the opportunity to set an annual remit for the FPC, but to ensure the Bank’s independence, the Bill accepts that the FPC may refuse to accept the Chancellor’s remit. The Joint Committee recommended that the Treasury, not the Financial Policy Committee, should have the final say on the interpretation of the remit. It did suggest, however, that the FPC should make public its objections to the annual remit, and should alert the Treasury Committee. Giving evidence to the Joint Committee, Lord Burns said:

“if there is any part of this set of proposals that concerns me, it is probably to do with the governance of the FPC in relation both to its accountability to Parliament through the Treasury and the extent to which it can be defined as ‘independent’.”

That is a stark reminder of how much is being conceded by the Chancellor. His annual remit on how the Financial Policy Committee should interpret and pursue the financial stability objective can be disregarded by the committee. To illustrate the importance of that, I cannot do better than to read out the words of the Joint Committee:

“The tools available to the FPC could allow a reversion to a level of central intervention in credit flows that has not been practised in the UK since the period of ‘Competition and Credit Control’ in the early 1970s. Such interventions would, for example, often affect mortgage availability and loans to households and companies. Given the wide range of possible interventions, and absence of any quantifiable target for financial stability corresponding to the inflation target for monetary stability, the FPC’s decisions will be more politically controversial than those of the MPC.”

Bizarrely, the Government have not accepted that when there is a difference, the FPC must accept the will of the elected Government, but have accepted that the FPC may make its defiance public. The Chancellor is not only allowing the FPC to defy him, but encouraging those unelected officials to tell the world that they have done so. That strikes me as a very strange working method.

The third issue that I wish to raise concerns a different aspect of a matter that has been discussed by those on the Front Benches. Who is in charge in a crisis? That is the question that was asked by Lord McFall at the time of the Northern Rock crisis. It shook the regulators, and it voiced the thoughts of the general public. There is a genuine wish to prevent such a situation from arising again. The accepted answer is that the Chancellor is responsible, and that therefore he should be in charge when there is a crisis. That seems sensible and straightforward to most people, but not to the territorially sensitive Bank of England. Nigel Lawson heard about the Johnson Matthey crisis, and the need for him to commit Government money, on the morning when it broke. He was understandably upset. Before the resort of using public money is accepted, the Chancellor should be made aware of the difficulties.

I shall now depart from my script, because I have only a minute left. We in the Joint Committee and in the Treasury Committee were trying to be helpful to the Chancellor. We made a recommendation, which the Chancellor accepted, that when a crisis arose or he was warned of one, he should take direct command. The memorandum of understanding—this is a different point from the one raised by the shadow Chancellor—has been nicely arranged, by the Bank, I presume, to ensure that even in those circumstances he does not have direct control. The Bank remains operationally in control, and the Chancellor can speak only about matters relating to the public funds to be used to deal with the crisis. We wanted to give him the opportunity to make a full range of decisions to avoid the use of public funds, and I hope that the Minister will consider that.

19:17

[Stephen Gilbert (St Austell and Newquay) (LD)]

It is a pleasure to follow the eloquent contribution of the hon. Member for Leeds East (Mr Mudie). He declared to the House that he had dropped his speech, but I do not think that anyone noticed. I intend, for all our sakes, to hold on to my own speech.

I want to raise three issues. First, I want to speak about the enhancement of consumer protection that the Bill provides, and I hope that my comments about that will be echoed by the hon. Member for Walthamstow (Stella Creasy). Secondly, I want to discuss the relationship between the FCA and the PRA. Thirdly, I want to develop a theme introduced by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley): the representation of British interests overseas.

Let me say in passing, however, that I share the concerns of other hon. Members about the oversight of the new macro-prudential powers which may need to be handed to the Bank of England, and which I believe could fundamentally alter vast swathes of the UK economy. It has already been mentioned that the ratio of mortgage lending may be one of the macro-prudential powers that the Bank of England wants to take on. It may be necessary to regulate an individual’s debt levels, and to regulate the debt exposure of small and medium-sized enterprises. All that needs proper parliamentary scrutiny, and I was pleased with the Chancellor’s response to my intervention on that point.

Let me begin with consumer protection. As we know, the Bill will establish a new code of conduct business regulator, the Financial Conduct Authority, which aims to protect consumers, promote, competition, and ensure that there is integrity in markets. Many consumer groups, including Citizens Advice and Shelter, have welcomed the FCA’s proposed objective of promoting competition in the interests of consumers. It is welcome that the FCA will have additional tools to deal with business conduct that is causing, or is likely to cause, consumer harm, to take action on products, to promote greater regulatory transparency, to tackle misleading financial promotions and to enforce the requirement to satisfy the regulator that a business model is suitable.

[Lorely Burt (Solihull) (LD)]

Does my hon. Friend agree that short-term consumer credit, payday lenders and the managing of consumer debt companies will now be much more strongly regulated, as has been called for by Members on both sides of the House?

[Stephen Gilbert]

My hon. Friend is quite right; that is a welcome step forward, although there are some bits that still need to be tidied up. I shall come to those later.

It is particularly welcome that the FCA will have a super-complaint power. This will allow Citizens Advice and other consumer bodies to use their evidence of widespread consumer harm to make complaints on behalf of all consumers, including those who might not know how to complain, and those who do not understand that their rights have been infringed. To make this new era of consumer protection effective, however, the Bill should require the FCA to respond quickly and effectively to super-complaints concerning widespread consumer harm, and I ask the Minister to consider what improvements could be made to the Bill in that regard when it goes into Committee.

As we know, the Bill sets out a framework for moving the regulation of consumer credit lending to the FCA. That, too, is welcome. But it is vital that not only lenders but debt collectors, brokers, debt managers and retail lenders that sell insurance products are regulated by a single, strong regulator. I believe that the responsibility for all that regulation should go to the FCA. In recent years, we have seen a succession of widespread consumer problems with financial products and services, including the mis-selling of payment protection insurance, poor lending and arrears collection practices in sub-prime mortgage markets, unacceptable debt collection practices by major credit providers, irresponsible lending of unsecured credit, and the ongoing saga of bank charges. It is clear that a change in the way in which consumer credit is regulated is necessary to protect consumers better in the future. I am looking at the hon. Member for Walthamstow as I say that.

Under the Consumer Credit Act 2006, the Office of Fair Trading has too little power or policy autonomy to respond quickly to emerging consumer harm, particularly when it concerns new products, services and business practices. That makes it easy for firms engaged in bad practices to target vulnerable consumers. It also undermines attempts by the sector to police itself, and makes the task of regulatory enforcement much harder. The level of financial penalties is also too low to act as a deterrent.

The OFT does not have the power or resources proactively to supervise regulated firms, or to identify and stop bad practice at an early stage. OFT guidance does not have the quality of rules, the breach of which could lead to a sanction, so enforcement is also slow. In respect of payday lending problems, for example, the OFT appears unable to make a specific rule limiting the number of times a loan is rolled over, or binding provisions on how a payday loan firm should ensure that it is lending responsibly, or to require a firm to deal with borrowers in financial difficulty in a specific way.

The Consumer Credit Act conduct regime is highly enforcement focused. There are few powers to pre-empt causes of consumer harm, or even to require firms to compensate consumers who have suffered harm. I think that all Members would agree that the consumer credit market needs a regulator that can regulate products and prevent consumer harm before it becomes widespread.

[Stephen Lloyd (Eastbourne) (LD)]

I strongly agree with the direction of travel that my hon. Friend is taking, but does he acknowledge that there is a slightly slanted argument on this matter, because the APR on bank overdrafts that have not been arranged is often far higher than that charged by the better known and perhaps more reputable payday loan companies?

[Stephen Gilbert]

I am grateful to my hon. Friend for making that point. I believe that all financial services should be underpinned by two principles: one is transparency, in that the consumer needs to know what they are getting; the other is that interest needs to be proportional to the length of time and the amount borrowed. I am sure that the record will reflect what my hon. Friend has added to the debate.

Transferring responsibility for consumer credit regulation to the FCA will also have the advantage of providing one umbrella regulator for credit, insurance, broking and debt management. It is vital that we do not allow a two-tier system to develop, with mainstream credit being regulated through the FCA and a reduced number of licensable firms being regulated under the CCA by a small successor to the OFT with lesser powers and diminishing resources. I am therefore pleased to see the direction of travel that the Government are taking on this matter.

My second point relates to the Prudential Regulatory Authority and the FCA. It seems anomalous to give the PRA a veto over the FCA. This could have the effect of putting the prudential strength of banks above consumer protection. The Bill might allow the PRA to veto the FCA taking action against a party for market abuse. If the PRA were to veto the FCA’s taking action to protect consumers, it would have to tell the Treasury that it had done so, but it could also prevent the Treasury from informing Parliament. In my view, that provision needs to be reversed.

Turning to the need for the United Kingdom to maintain effective representation abroad, it is clear that the proposed new supervisory bodies will need to co-ordinate in order effectively to represent our national interests at European and international levels, including with the new European supervisory authorities. The financial services industry, the Government and the UK regulatory authorities all have an important role to play in representing the UK in international discussions on financial regulation.

The Financial Services Authority and other UK regulatory bodies have a strong record of constructive engagement with, and influence in, European and other international bodies. Indeed, to give the House just two examples, the former head of the FSA’s international division now leads the European Securities and Markets Authority, and the Governor of the Bank of England has a leading role on the European Systemic Risk Board and on the governing committees of the Bank for International Settlements. The International Monetary Fund’s recent report on the future of regulation in the UK has also said that the effective international co-ordination of the UK’s position is important.

I therefore welcome the Government’s recent statement that they accept the case for a committee on international co-ordination, and I want to underline to the Minister the need to get that right. There will not be a perfect match between the scope of the responsibilities of the new UK bodies and those of European and other international groups, so there is a requirement for co-ordination between different UK bodies to represent the British interest effectively. The proposed measures in the Bill will oblige the new UK regulatory bodies—Her Majesty’s Treasury, the Bank of England, the PRA and the FCA—to sign a statutory memorandum of understanding and to work together.

I believe that TheCityUK was right to say that effective international co-ordination is so important to the broader UK economy, as well as to the financial sector, that a dedicated group or committee should be appointed to give sufficient priority, resources and responsibility to mobilising the UK’s European and international representation. It proposes the formation of an international co-ordination committee with specific responsibility for leading the UK’s representation on European and international committees. I commend that approach to the House.

I welcome the Bill, but I ask Ministers to look again at the balance of power between the FCA and the PRA, at the inclusion of all CCA activities within the remit of the FCA, and, above all, at the need to ensure that the United Kingdom retains a strong and coherent voice externally.

19:28

[Stella Creasy (Walthamstow) (Lab/Co-op)]

This is the third time that we on this side of the House have proposed legislative action on the high-cost credit market in the UK. As Mae West said:

“I’ll try anything once, twice if I like it, three times to make sure.”

I can tell the House that we are absolutely committed to the argument that something needs to change drastically in our consumer credit markets. This Bill offers the potential to address some of those concerns. We have had a positive debate today about some of the large-scale problems in our financial markets, but I want to set out the other picture. I shall talk about those people at the other end of our financial markets, the people who are called the “under-banked”. There is now irrefutable evidence that millions of people in this country are unable to access credit in a manner that is positive and constructive to their financial health. We should consider that one in six of us is now what are called “zombie debtors”—paying off the interest on our debts, not the capital.

A perfect storm has hit UK consumers in the last couple of years as pay freezes, rises in unemployment, rises in the cost of living and a lack of regulation of the consumer credit market has made us a fertile territory for the high-cost credit industry. It is not by coincidence that these companies have flourished in Britain in the last couple of years, as there has been a 200% increase in the numbers of people borrowing from payday loan companies and a similar increase in the amount of money they are making from British consumers in the last 18 months alone.

With a mind to what we could do to the Financial Services Bill, let me set out what the prices are and what they mean to British consumers. Many Members will be familiar with my own personal travails with a company called Wonga whose rates are 4,214% representative APR in a year. Some may be familiar with QuickQuid whose rates are 1,734% representative APR, while some may have come across the Money Shop in their constituencies, with a mere 219% representative APR. Some may be familiar with some of the newer players in the market—for example, Ferratum, a major European payday loan company, which has a mere 3,113% APR. Then there is Peachy Loans, which will lend people £100 at a time, with £15 interest every 10 days. That works out at a representative APR of 16,381% every year. This is not to mention companies like Borrow, recently advertising themselves on the radio and TV, which encourages people to borrow £10,000 a year at an APR of 68%.

Before we discuss any legislation, it is worth thinking about this industry and how it operates. It wants to paint itself as the new industry, the new form of financial credit that Britons are crying out for, that the Facebook generation wants, that is online, quick, easy and consumable. There is another side to this story, however, as many will have seen the people who are struggling because of the toxicities in this market. When we know that 30% of payday loans are taken out to pay off other payday loans, that should tell us that something is going drastically wrong that needs addressing.

Payplan, a debt charity company, says that 46% of its clients had six or more payday loans in the last year alone. This is not a short-term temporary measure; this is a way of life for millions of people in our country nowadays. More than half the people going to Payplan for debt advice owed more than £500 to these companies, and 61% had more than one at a time. Most crucially, 86% of its clients were using the loans for basics—food, transport and the basic costs of everyday living, not luxuries. This is not a market that is working for British consumers; it is not an industry that wants to lend people money and have them pay it off within a reasonable length of time. It is an industry that wants to lend to people, to keep lending to them and to keep taking money from them, drips at a time, raising the interest rate as it goes along, and adding money to the bill every single month.

The rates in themselves mean that debt is more likely. That is the challenge we have to address with our consumer credit regulations. We are talking about people who are short of cash now. They are not using it as a temporary stop-gap; they are struggling in Britain today. We need to be aware that 7 million Britons last year put their mortgages on their credit cards and 1 million people used payday loans to pay their mortgages. That is the sort of challenge we have to address. It is also the opportunity we have with the new Financial Conduct Authority.

I welcome the fact that Ministers have listened to the advice I gave them on 16 June last year when I suggested that the FCA could indeed take over this role and look at this industry. I welcome that, as I say, but I know there are issues over how the FCA should deal with the promotion of competition and over the real powers that the FCA needs to address these companies and to regulate this market. Indeed, I note that other consumer organisations such as Consumer Focus, Citizens Advice and the Financial Services Consumer Panel have written to the Minister asking for the FCA to have specific powers for product intervention. This must go beyond the point, which I recognise the hon. Member for St Austell and Newquay (Stephen Gilbert) mentioned, about the paucity of the response that the Office of Fair Trading has been able to make to these companies. I know all too well myself from when I tried to get the OFT to act on companies that did not display their APR how difficult it is to make progress. This goes beyond advertising and people knowing what the price is. It is about the fact that the prices reflected in the APRs I mentioned show that this is not a free market and that competition in itself is unable in this market to ensure that consumers are not put in detriment.

I know that many Members agree that things could be done, so let us give the FCA the power to intervene to make sure that there is competition and to use price as an indicator of competition. Let us give the FCA the real power it needs finally to address this country’s legal loan sharking. I agree with the hon. Member for Eastbourne (Stephen Lloyd) that there is a challenge with unauthorised overdrafts and credit cards, so let us use the FCA finally to make good on this Government’s broken promise to tackle the exorbitant rates on credit cards and unauthorised overdraft charges and cap those prices.

[John Hemming (Birmingham, Yardley) (LD)]

I share the hon. Lady’s concern about the very high levels of interest rates charged on certain debts. Does she share my concern about the effect of continual late payment fees, which have exactly the same effect?

[Stella Creasy]

Yes, I agree, and I hope that Government Members will join me in condemning those banks and credit card companies that, at the very time when millions of British consumers are struggling, are ratcheting up their interest rates, following the lack of regulation on excessive interest rates on our credit cards.

[John Hemming]

rose—

[Stella Creasy]

I hope the hon. Gentleman is on his feet to agree with me that this must be stopped.

[John Hemming]

I wanted to make reference to my entry in the register, as I have certain banking shares.

[Stella Creasy]

I hope that the hon. Gentleman will use the fact that he has shares to make representations to his bank about the consumer credit market in the UK.

The consequence of doing nothing about this industry and doing nothing about how British families are being made to struggle because of the cost of credit are far too great to see. Frankly, it is not good enough for the Chancellor and the Minister to say, “Well, we have to wait until we see the research from BIS.” We have been waiting years—yes, years—for action on this issue since it was first put to Ministers.

[David Mowat (Warrington South) (Con)]

I am following the hon. Lady’s argument closely, and many Government Members are equally concerned about these practices, but will she clarify what rate of APR she thinks should be the maximum for a loan of, say, one week?

[Stella Creasy]

I have answered this question in previous debates. I do not think that we should set a single rate of APR and I do not think we should have an interest rate cap: I believe we should have a total cost cap. In the absence of the Government making progress on such a cap, however, I view the FCA as offering an opportunity to start the more effective regulation of this industry. I hope that the hon. Gentleman would agree that the opportunity to have the industry and consumers setting rates and clarifying what is excessive and what counts as consumer detriment in the listing of these products represents a way forward. That is the argument of Labour Members, and we shall seek to table amendments on that basis. It is no wonder that the number of complaints about these companies and these loans is sky-rocketing in the UK.

[Alun Cairns]

Will the hon. Lady give way?

[Stella Creasy]

I am sorry, but I will not, as I do not have much time left and I have already taken some interventions.

Between October and December last year, there was a 25% increase in the number of people complaining about these companies, and three quarters of those complaints were upheld by the financial services ombudsman. Demand for these products will only get stronger. Two in five people are expecting a pay freeze this year, and one in five expect to lose their job. Inflation rates might slow, but that will only slow the pace of the cost of living, especially in the capital city. Six million people are already considered financially fragile; if one more bill goes up—their mortgage, transport costs or even their food bills—they will be pushed further and further into debt. With banks not lending to these people, it is these legal loan sharks who will pick up the pieces.

We should reflect on the fact that the one industry growing in this country is these legal loan sharks. Cash Converters proudly says it is going to open another 40 new shops—at 1,413% APR; while Albemarle is opening 300 new shops, charging 853% APR. This is also a serious issue for our economy. If millions of families have thousands of pounds worth of debt that they cannot escape, it is clearly going to impact on consumer confidence. This will be the new economic crisis that will come to Britain in the years to come if we do not deal with this problem, as we have concentrations of communities with thousands of pounds of debt hanging around their necks, limiting the choices they can make for their futures and limiting the kind of lives they can lead. The failure to tackle these issues will leave millions of people with unmanageable debt, yet we have an opportunity to make progress through this Bill.

This problem is not going to go away. It is right to look at the industry and for consumers to be involved in setting the rates and determining what is consumer detriment. Let me tell the Minister that the public clearly want action on legal loan sharks. His own Back Benchers want action on them. I welcome the conversion of Government Members to this cause. I just hope that it is a conversion that will continue all the way through to voting in favour of our amendments. Even the industry wants action. It does not want the current uncertainty.

My simple question to Ministers, if they will not accept our amendments, will not send out the message and will not finally tackle legal loan sharking is this: how much worse does it have to get for the people affected in our communities? We know that 4 million people in Britain are already borrowing from these companies, and there could be as many as 10 million if we do not deal with these problems within the next year. That will be 10 million people stuck in a cycle of toxic debt that will damage them and their families for years to come.

I therefore ask the Minister to take on board the suggested amendments and to take account of the desire of Members on both sides of the House for action on legal loan sharking. Let us finally make the third time a charm.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before I call the next speaker, we moved rather swiftly on from a recent intervention and I wonder whether, for the sake of clarity and accuracy of the record, the hon. Member for Birmingham, Yardley (John Hemming) might like to make his final point again.

[John Hemming]

Yes, I wanted to refer the House to my declaration of interests and the fact that I hold certain bank shares, which will obviously be affected by limits on sums that can be claimed per letter.

19:40

[Matthew Hancock (West Suffolk) (Con)]

It is a pleasure to follow the hon. Member for Walthamstow (Stella Creasy). She speaks with passion and determination about consumer credit issues.

We have heard much about consumer credit and accountability, and, indeed, about culpability for what went wrong. Those are important questions, but I want to concentrate on the substance of the Bill and its impact on financial and economic stability. We did not hear much from the Opposition Front-Bench spokesperson about the question of substance, but I think this Bill is one of the Government’s most important pieces of legislation so far. It is an attempt to draw the right lessons from the economic crisis, and to set out a regulatory structure that will last for years to come. I am therefore very pleased that the debate has taken place almost entirely—almost, I repeat—in a spirit of constructive criticism.

It is said that the next financial crisis occurs when the last person to witness the previous crash retires. I hope that that will be a long time from now—and I also hope that that last person may be sitting here in the Chamber today. It is important that there is a long time frame, because the Bill must be right not only when memory of the recent crash is vivid, but when the boom is booming again and once more people are saying, “This time it’s different.” Our aim must be to embed a culture of responsibility into the big balance-sheet banks, while also encouraging and supporting the broad multitude of smaller, energetic, innovating, enterprising, exporting, wealth-producing, vitality-bringing, tax-paying City firms and companies that are not underwritten by the taxpayer and that make up the vast majority of firms in the City—and that ensure that our financial services industry leads the world.

Before turning to the substance of the Bill, however, I want to deal with the two questions that have dominated the media debate: accountability and culpability. To those concerned about accountability, I add only the following few comments to the long exchanges that have already taken place. The Bill represents an important step forward. At present, the Governor of the Bank of England reigns imperial on questions of financial stability. Executive action is vested in him and him alone. By creating the Financial Policy Committee, the Bill ensures that the Governor will be the chairman of a powerful committee, but instead of his being imperial, a committee decision will carry the day.

On the question of culpability, I do not know whether the Opposition admitted that they got things wrong, but it falls to us to learn the lessons from the failures, as well as the successes, of the past. My central argument on this question is as follows. Our financial system is complex, ever-changing and interconnected. We must therefore treat it as a system and understand the human behaviour of the people in it, rather than treat it like a textbook.

First, instead of segregating the regulation of the banks from the management of the economy as a whole, as the tripartite system tried to do, we must treat them as one part of the whole system. The attempt to turn the Bank of England into a monetary authority and to leave the FSA as a micro-regulator was bound to fail because no one was in charge of the size of bank balance sheets not only in the bust—as we well know—but in the boom, too. Monetary policy works through the banking system. Banks create money and transmit interest rates to the wider economy. As finance and money are deeply intertwined, their regulation must also be intertwined. That is the first lesson to be learned from the crisis, and this Bill addresses that point.

The second lesson is not about who regulates; it is about how they regulate. The debate about whether there was too much or too little regulation is sterile and defies the facts. Instead, we should be seeking the right regulation. Between 2001 and 2008 the number of pages in the Financial Services Authority rulebook increased from 2,700 to 9,300, yet, as we know from the report into the failure of RBS, not a single FSA rule was broken at RBS. There are some vivid examples of the FSA’s box-ticking mentality. In 2006 the FSA noticed that certain financial institutions were conducting biased stress tests on their balance sheet strength. In 2004 the FSA identified Fred Goodwin’s management style as a risk for RBS, yet nothing was done. No one was held to account. The FSA also failed to regulate balance sheets or check that business models were sustainable. There were 9,000 pages of rules, therefore, but there was no view on the sustainability of the business models of banks. In fact, FSA chiefs hardly ever met senior management. The FSA had meetings with Northern Rock’s senior management eight times in the two years before the crash. Two of those interviews were conducted by phone, while five of them took place on the same day. In 2007 when Northern Rock went bust, it was on the at-risk register but the next set of meetings between its senior management and the FSA was scheduled for two years later, in 2009. The pendulum between sticking to the rulebook and allowing the authorities to exercise discretion had swung to the extreme end of using the rulebook and leaving no room for judgment.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

My hon. Friend is making a powerful case. Does he agree that a key point is that flexibility is required for effective regulation of the financial services sector, and that one of the problems with the previous regulatory system was that the monolith that was the FSA simply imposed more and more rules without there being the flexibility to be able to tailor the rules to the circumstances?

[Matthew Hancock]

That is absolutely right, and I should also pay tribute to my hon. and learned Friend’s profession outside this House, because, as in the common law, every successful system of oversight that has stood the test of time allows room for both rules and judgment. The common law is an example of a system that has built up over time and that understands the complexities of human behaviour. It has strict rules in some regards, but it also allows the exercise of judgment in order to be able to adapt to modernity and circumstances. If we move entirely towards rules and away from the exercise of any judgment, we take away that ability to adapt.

[Steve Baker]

My hon. Friend makes an interesting point in comparing the approach under discussion to the common law. Does he agree that a key difference is that whereas in the common law anybody can look at previous judgments and know how the law will respond to their behaviour today, under this proposal to have flexible forward-looking, judgment-based regulation we cannot necessarily be sure today how the state will treat our current actions at some point in the future?

[Matthew Hancock]

It would be better if we had an embedded and long-standing system in which there were those precedents, but as we do not have about 800 years to put it in place it is better to have a forward-looking system. If my hon. Friend has a suggestion as to how we can use precedent built up over time, given that we are starting from a system that catastrophically failed, I would be very interested to hear it.

[Steve Baker]

I hope that my hon. Friend will stay for my speech.

[Matthew Hancock]

As I said, this pendulum swung too far, but why do we need to allow the authorities to exercise discretion? It is because the world we face is as we find it, not as it is written in the rulebook. Indeed, the very complexity of the system calls for simple rules, because the more complex the rules applied to a complex system, the more likely somebody is to try to game it and, therefore, the more complex the set of rules that will need to be imposed again on the system to try to account for that behaviour. We see the same thing in respect of other areas of Government policy, not least the tax system, where complexity has led to avoidance activity, which has led in turn to complexity, and so we now have the longest tax code in the world. This attitude towards regulation and oversight makes no sense in the modern world of complexity. Complex systems need simple rules.

Complexity also adds cost to businesses not targeted initially. Worse still, the complexity leads to a moral abdication, because the rules become a substitute for personal responsibility. Just as we need to allow for the exercise of discretion by regulators, we also need, within a system that promotes responsibility, to allow for the discretion of management. That is why I have concluded that we need to ensure, especially in such a high-paying business, that the sanctions for failure and for irresponsibility are strong. It is not a good enough sanction for someone simply to lose their job in an industry where it is easy to move into another one.

In the first instance, we need to move to a system where the debarring of directors is made easier, not least because when a bank is rescued it technically does not go through the current debarring rules. The FSA is right to regulate pay and introduce claw-back, but we also need, in extremis, to introduce a measure to ensure that for recklessness at the helm of a systemically important bank there is a stronger and, if necessary, criminal sanction. I hope that such a measure would never be used but, as with other areas of life where these measures are hardly ever used, it greatly concentrates the mind to know that a deep sanction exists for reckless and deeply irresponsible negligence. I hope that such a measure would be a check on hubris and would last the test of time so that it would be in existence next time there is a boom and the associated hubris.

I hope that that change, the changes in this Bill and other changes will allow those of us who support the free market, enterprise and innovation to support, unabashedly and with enthusiasm, the wealth creators, who make our prosperity possible.

19:53

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

I wish to make a relatively brief contribution. I do so without the degree of expertise that has been exhibited by a number of right hon. and hon. Members who have spoken, particularly those who have served on the Joint Committee and on the Treasury Committee. I know that they have examined the detail of this Bill and have taken evidence on it over a period of time. My expertise on and knowledge of financial services has largely come about as a result of issues raised by constituents since my election to this House. That is why I wish to spend a little time discussing part 2 of the Bill, which creates the Financial Conduct Authority, which we have heard referred to as one of the successor bodies to the Financial Services Authority, and part 5, which deals with independent inquiries into investment schemes, among other things.

I come to those parts of the Bill as a result of what I suspect will become known soon enough as the latest in a long line of mis-selling episodes, to which the Chancellor and shadow Chancellor referred. My right hon. Friend reminded the House that there have been a number of these episodes over the course of 30 years and under various different regulatory regimes and set-ups. The issue that I refer to is the collapse of the Arch Cru investment vehicle in 2009 and the interests of the 20,000 individuals who have, almost certainly, been adversely affected by it. As many hon. Members will be aware, Arch Cru was established in 2006 and was sold as a vehicle to provide low-risk, cautiously managed funds that were sold through independent financial advisers and, like all investment funds in the UK, were regulated by the FSA. The authorised corporate director was Capita Financial Managers, part of the Capita group, and the two depositories of the fund were the Bank of New York Mellon and HSBC, whose activities were, again, regulated by the FSA. Many of those who invested in Arch Cru did so on the basis that it was managed cautiously, and the use of those household names gave people comfort that the regulator was overseeing those bodies and that people’s money was indeed being invested cautiously and wisely.

As many hon. Members will know, the fund was suspended in March 2009. At the time, it was worth £363 million but by March 2011 its value was estimated at £148.8 million, which means that many people have suffered losses as a result. Far from being cautiously managed, funds were invested in cells registered in Guernsey in a cavalier manner. Investments were made in off-plan property, in real estate in Dubai, and in Greek shipping and ferries. It remains highly dubious as to what level of recompense investors are likely to receive.

The collapse of a supposedly low-risk collective investment scheme such as Arch Cru has caused a high degree of anxiety. Although we accept that no regulatory system can provide absolute protection, the failures of the FSA, in many respects, in this case mean that it is important that the measures being put in place give consumers the right amount of protection. That is why I particularly welcome clauses 64 to 68, which deal with independent inquiries into regulatory failures in respect of collective investment schemes. However, clause 64(5) has the effect of meaning that events occurring before 1 December 2011 will not be subject to the power of inquiry, and Arch Cru’s collapse occurred well before that cut-off date. The Government have the power under section 14 of the Financial Services and Markets Act 2000 to institute an inquiry, and I hope that they will still make use of that power.

Clause 67 deals with the conclusion of an inquiry, noting that the person holding that inquiry must

“make a written report to the Treasury”.

The existing legislation contains a provision stating that the Treasury may publish the whole or any part of a report and, should it decide to do so, the report should be laid before Parliament. However, a similar provision appears to be missing from the Bill, so perhaps the Financial Secretary will enlighten the House on whether I have missed it or whether we will need to make an amendment in Committee to ensure that that degree of transparency is in place for such inquiries.

If we are to minimise the chances of another episode such as the Arch Cru collapse happening again, the people who invest their retirement nest eggs on the basis of being told that a fund is cautiously invested need to be adequately protected by the regulatory regime. There should be some governance over the terms used to describe investment vehicles, especially where, as in this case, the reality turns out to be very different from the description.

[Alun Cairns]

I pay tribute to the work that the hon. Gentleman has done on Arch Cru. Does he share my concern that the risk category of any financial product is assessed by the Investment Managers Association and that there is no regulatory framework or matrix by which such an organisation conducts its work on assessing the risk of a product?

[Tom Greatrex]

I thank the hon. Gentleman for his intervention. I do not wish it to appear as if we are just congratulating each other, but I want to place on the record my appreciation of all the work that he has done on Arch Cru as co-chair of the all-party group on Arch Cru. It is my pleasure to co-chair that group with him and he makes an important and significant point.

As the Bill goes through Committee, we need to consider that issue in detail as it relates to the set-up of the FCA, to ensure that we are never again in a position in which descriptors with no value are attached to investment opportunities, almost as a marketing exercise, with nothing behind them. I hope that the Financial Secretary hears the hon. Gentleman’s important point, and that we can return to it in more detail.

One way in which to prevent a repeat of the experience is fully to learn the lessons of the Arch Cru collapse, and to ensure that, as a result, the consumer is protected by a more robust regime. The Financial Secretary will no doubt recall that in a Westminster Hall debate on Arch Cru last October, many Members on both sides of the House asked the Government to instigate a section 14 inquiry. The Financial Secretary replied that he did not think such an inquiry appropriate at that point and he continued:

“The powers are available where it appears that significant damage has been done to the interests of consumers that might not have occurred but for a serious failure of regulation. It is worth pointing out that the power has never been used.”—[Official Report, 19 October 2011; Vol. 533, c. 285WH.]

First, I am not quite as convinced as the Financial Secretary is that the fact that the power has never been used means that it should not be used. Secondly, to my mind, Arch Cru is an example of regulatory failure. The FSA failed properly to regulate the fund, and let down my constituents and thousands of others across the country by not stepping in earlier. The FSA was statutorily responsible for regulating Capita Financial Managers, which was the authorised corporate director for Arch Cru, yet Capita failed to see what was going on until it was far too late.

As the intervention by the hon. Member for Vale of Glamorgan (Alun Cairns) illustrated, there is cross-party consensus on the issue, and the all-party group extends across the whole House, with members from every party other than the Scottish National party—that might be pertinent. When answering questions in December, the Prime Minister was receptive to the idea of considering what more the Government could do to address this important issue. One course of action could, and I would argue should, be to establish a section 14 inquiry, the findings of which could be used to inform a detailed discussion of the proposed FCA, and to ensure that the body is established with the resources, expertise and powers necessary to minimise the opportunity of anything like the Arch Cru failure happening again.

Even at this late stage, I ask Ministers—the Economic Secretary is now on the Front Bench and might be less familiar with the issue than the Financial Secretary, who was there when I started speaking—to reconsider the position on a section 14 inquiry, so that this part of the Bill can be as robust as possible. When the current regulator admits that it did not know what was happening, because of the structure of an investment vehicle and the nature of some of the investments in Guernsey and elsewhere, in my mind it becomes the responsibility of the Government to minimise the risks of the same thing happening again. The Government have an opportunity, as do we, through the Bill, to ensure that the successor body is better placed to ensure such a result.

It is sometimes easy, when getting into the weeds of an issue such as Arch Cru—as I and others have done over recent months—to forget that ultimately this is about people. It is about my constituents and others who deserve the right consumer protection, and we must be confident that in dealing with the consumer aspects of regulation, the successor body does not fail in the way its predecessor did. To ensure that, we need to know what did not work under that predecessor regime, so that there is confidence in the successor body and people are protected in the right way. That is why it is still relevant and important that the Government consider a section 14 inquiry into Arch Cru under the current legislation, and I hope that Treasury Ministers understand that this point is being made in the best interests of scrutiny, of effective regulation and of the consumers who expect, and deserve, to be protected when purchasing financial services products.

19:59

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to speak in this debate, partly because in a previous existence I spent a number of years on two occasions as a compliance officer under three different regulatory regimes, and also because I am the third of the three Treasury Committee musketeers who did not go on the trip to Shanghai and who were left behind to hold the fort.

What is abundantly clear—I do not need to repeat it—is the utter uselessness of the current regulatory regime and how the FSA operates. That can be illustrated by the exchange of words between my right hon. Friend the Chancellor of the Exchequer and the shadow Chancellor about the operation of the day-to-day running of the tripartite regime. Only last week we heard from Hector Sants, the chief executive officer of the FSA, that while he was a managing director of wholesale and institutional markets at the FSA, he had no discussions whatever about the Royal Bank of Scotland’s investment bank. Lord Turner went on to add that the FSA was singularly incapable of meeting the expectations placed on it given the breadth of its regulatory responsibility. Given that, the need for a new regime is unquestionable. I am certainly satisfied, in the broadest sense, that the Bill makes great progress, not least in response to Lord Turner’s comments. We are dividing up regulation between the Financial Conduct Authority, which will be charged with protecting the consumer, the Prudential Regulation Authority, which will look after the nuts and bolts of the system, and the Financial Policy Committee, which has been set up to look at systemic risks.

As the third member of the Treasury Committee to speak in this debate, I fear I might repeat some of the points that have been made. If I do so, it will be to reinforce those points. One thing that has not been talked about, however, is the speed and complexity of the Bill. It is complex and has very far-reaching implications for the long-term security of our financial system as well as for the competitiveness of this country. It is worth remembering that financial services employ more than 1 million people in the UK and raise more than £50 billion a year in tax revenue.

The Bill seeks to amend three previous Acts. The Treasury Committee recommended that the Government start afresh with a new Bill dedicated to addressing all the myriad points discussed since the financial crisis and, indeed, before. The Governor of the Bank of England agrees; he said to a meeting of the Committee last year that

“our first preference had been to have a clean, new Bill, spelling out the new system rather than just amend FSMA.”

He continued, and on this point I wholeheartedly agree:

“We are losing the simplicity and the ability to have a cleaner debate about the…framework.”

The more complex a system, the easier it is for it to go wrong and the more difficult it is to find out why it went wrong in the first place and to repair it.

One of the most profound elements of the Bill is the creation of the FPC, and we have heard a lot about that this afternoon. The FPC is charged with making sure that systemic risks do not emerge and that bubbles, such as credit bubbles, are not allowed to develop. That is unprecedented in our financial system and will have far-reaching implications. The interim FPC, as we have heard, has been in place for some time and the Treasury Committee has spoken with its members about how it is moving along, but its final format is yet to be set in stone.

At the FPC’s disposal will be a range of macro-prudential tools that it can use to control the financial system and markets, and I was pleased to hear the Chancellor say that we would be able to debate the matter on the Floor of the House and decide which tools will be available. The tools will fall into two categories, however. Those in the first category, which will be debated in the House, will be the tools of direction and might include such things as loan-to-value ratios for mortgages, liquidity requirements and capital ratios for banks, which could be directed on to the system via the PRA or the FCA. The measures in the second category, which have not really been talked about this afternoon, will be powers of recommendation and they can be absolutely anything. The actions of the FPC, however, will have the most effect not just on our economy but on our society.

Let me take one of the simplest cases by way of an example. The FPC, in its wisdom, might decide that a credit-fuelled asset bubble is emerging so it wants to tighten up loan-to-value ratios on mortgages. Instead of a 10% or 15% deposit on a house purchase, it will direct that lenders move to a 30% deposit. That is all very simple and fair enough. However, those who are affected first and most deeply will almost certainly be first-time buyers who will suddenly find they do not have the deposits to make a house purchase. People who have only recently bought a property and who therefore probably have relatively low equity might find that they are now not in a position to move house, which will have implications for the mobility of our work force. For a property developer, the tightening of the loan-to-value ratio alone might influence a decision not to develop their land bank. The tightening of that potential supply could lead to exactly the opposite effect on house prices to that which is desired. I hope that illustrates that the implications of such a simple move are widespread and can, indeed, be unpredictable.

As we have heard, the FPC will have a financial stability objective, which will develop from recommendations by the Treasury. The FPC will need to monitor indicators of financial stability, but we do not yet know what those will be. Nor do we know at what levels they will start triggering intervention. The interim FPC has given us a guide, but it gives little indication as to what will actually happen. Were it to publish its dashboard of limits in relation to where it does intervene, the markets would, to a certain extent, be self-correcting. However, there will be occasions on which it will not want to publish because it wants to be discreet or even secretive about its interventions. Under those circumstances, the Treasury Committee will find it difficult to scrutinise such secret interventions.

That brings me to my next point, which is incredibly important, on the governance of the Bank of England. Let me address the good news first: the Treasury Committee very much welcomes the move to a single eight-year term for the Governor of the Bank of England, as opposed to two five-year terms. However, that raises the possibility of a Governor crossing Governments of two flavours, and we on the Treasury Committee think it would make sense if Parliament, through the Treasury Committee, had a power of veto over the Governor’s appointment. The Chancellor took the unprecedented and extremely welcome move, after the election, of giving the Treasury Committee a power of veto over the appointment of the chairman of the Office for Budget Responsibility. Now we have seen how well that works in practice, we think the Governor’s appointment is another occasion for which such a power of veto would be appropriate.

More widely, the Treasury Committee is concerned about the governance of the Bank of England. I welcome the Chancellor’s comment about the new oversight committee, but currently the court is responsible for essentially administrative matters—pay and rations. We want the Bank to have a proper board with a new name that reflects its updated role. We recommend that the board should have a majority of external members, as we have heard from my hon. Friend the Member for Bury St Edmunds (Mr Ruffley), who must have more relevant skills and experience. The Treasury Committee wants the board to be able to conduct retrospective internal reviews of the Bank’s policy decisions. In its response to these calls, the Bank envisages limiting that power to commissioning external reviews or conducting internal reviews only of the decision-making processes of the Bank.

The creation of the FPC makes this governance issue particularly important. As we know, the MPC uses just two tools—quantitative easing and interest rates—and the minutes of its meetings are published so we know exactly what is going on, which is a very good thing. The FPC, however, has many measures at its disposal, both directive and recommendational—potentially an infinite range. By their nature, those measures might on occasion be implemented in a secret way, which means that the FPC might not be able to give a full and open account to the Treasury Committee or to publish entirely transparent minutes. Moreover, it might be years or even decades before we know that an intervention has taken place or even that an intervention has become necessary. That is why the governing body of the Bank needs to be able to look at the merits of the FPC’s policies and not just at the methods. The Bank’s board must not be restricted to finding out whether the wrong decision was made, but in the right way.

Crisis management is a crucial area about which much has been said this afternoon. I certainly welcome the creation of a new power of direction for the Chancellor over the Bank in a crisis, which was recommended by the Treasury Committee. The Bill requires that the Governor must formally notify the Chancellor in the event of public funds being at a material risk. The Chancellor cannot direct the Bank unless there is a threat to financial stability as well as a threat to public funds, and the scope of the power of direction is narrowly defined. The arrangements for crisis management are something that could be discussed in Committee, but clarity is vital. For me, the answer to this simple question is crucial. If I see an unhappy bunch of customers outside a bank in Kidderminster high street, who should I telephone? I think the Bill answers that question.

I have voiced a number of concerns from the Treasury Committee and they include my personal feelings. However, I welcome the aims and thrusts of the Bill and the fact that the Government have moved some way towards the Treasury Committee’s recommendations. Let me finish on this point: the financial services industry is incredibly important to this country in terms both of employment and of economic and fiscal contribution. It represents around 11% of gross domestic product, but it is already under widespread attack, including from the press and politicians. Over the next few months there will be a change to the regulatory regime, which we are debating today, followed by a change in the banking regulations, all mixed in with a plethora of new rules from Europe. It is vital that we sort out the current regulatory framework to ensure that we can spot and resolve the crises of the future, but it is just as important that we provide a stable regulatory platform to allow all the firms and individuals involved in this industry to continue to be profitable, to plan for the future with confidence and to be sure of regulatory stability.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Twelve Members seek to catch my eye so I am going to drop the speech limit to eight minutes to ensure that every Member gets in. If hon. Members do not take too many interventions, I hope we will make sure that happens.

20:14

[Chris Evans (Islwyn) (Lab/Co-op)]

This Bill will amend a series of pieces of legislation. When we talk about reforming financial services, we have to think about innovation and how fast society and markets move on. When I think about the reform of financial services, I always think we should tread with caution. This Bill is very important in that it has to reform a system that has clearly failed. I worked in the financial services industry myself, many years ago, and when I want to judge a Bill such as this one, I think of three tests on financial education, financial inclusion and disclosure.

On the first test, it is highly important that we bring about not only statutory financial education in schools but a duty on banks to provide some sort of financial education. I use an example from my own life. Many years ago, when I first had my student grant, in the days when we had student grants, long before student loans, I remember jumping off the train with a cheque for £500 in my hands, almost shaking with nerves about what to do with it. I went straight into the first bank I saw, the name of which I shall not mention—I do not want to embarrass it, as I have not been a great customer. The bank opened a student account for me, gave me a £50 voucher to spend in Burton, with which I bought a pair of jeans, and gave me a magic bank card, which meant I could go anywhere I wanted and buy anything. I could go to the bar or a clothes shop and have all these wonderful goods. By about December of that year, I had a letter through the post saying, “Mr Evans, we’d like to talk to you about your unauthorised overdraft charges”.

When I worked, the same things seemed to be going on. There were people even in their 40s and 50s who did not understand that when they wrote a cheque it would come out of their bank account. They would ask me, “Mr Evans, how am I spending this money when I’m using my card?” I think that banks ought to have some fiduciary care for their customers and ensure that people understand what they are taking out. Things should be simple and understandable.

I want to make a second point about financial education. When people talk about financial education they mention consumers and people at the bottom end of the scale who get services from the bank, but when I was working in banks I often found that people who called themselves bankers did not understand the banking system. They did not understand what a clearing house was, what a CHAPS, or clearing house automated payment system, payment was or what a BACS, or a banker’s automated clearing services, payment was. I was very nervous about the fact that those people were serving people and selling them products but did not seem to understand how the banking system worked. When I spoke to management about that, they said, “Years ago, we had banking exams and this was a profession, but they have fallen by the wayside now as we have moved towards a sales model.” I have some sympathy with the banks, because they are not benevolent institutions—they have to make profits and sell their products—but consumers need to have confidence that the person selling to them understands what they are talking about.

That leads me to another point about consumer protection. Consumers need to understand the products they are being sold. I can think of many occasions on which people were sold products that they did not understand. For example, banks’ financial advisers said to people about bonds, “Oh, it’s okay—a bond is just a savings account, but you do not have a bank card to draw out on it and you have to keep it there for five years.” When people found out that bonds were being invested in risky ventures such as the dotcom boom, which eventually went pop, the banks had a number of complaints about that. It is very important that people understand what they are being sold and that everything is clear.

I also think there should be some framework for the sellers. I remember when the financial planning certificate came about. The very first paper asked, “If somebody came into the bank and wanted to protect their family if they died, what would you sell them—A: life insurance, B: general insurance, or C: send them home?” That is quite simple and there is no knowledge in knowing that they must be sold life insurance. It is important that we have some sort of framework.

The most important part of the Bill, which does not go far enough, concerns disclosure. In America there is the Dodd-Frank Act, which says that every financial transaction made in the US has to be documented through an office of financial research. I would like to see that added to the Bill at some point. It comes to this: the financial crisis happened as a result of myriad problems—we cannot pinpoint one—but one weakness in the system was that we did not know about financial transactions.

I will give two examples. First, Barclays wanted to buy Lehman Brothers. The board said yes, but the regulator, which had so much on its plate, said no. Then Lehman Brothers went bust and was no more. Four years later, the bank and the regulator still do not have access to that information. Secondly, RBS, which has been mentioned a lot today, said to the regulator and to its board in March 2007, “We do not have any toxic debt or bad-book mortgages.” Yet it was later found to have £1.7 billion of bad-book lending. It, too, went bust. It is therefore important that we have some sort of financial audit, which would have an advantage for the consumer, as we would know how many bad basic bank accounts we have and who the banks are lending to. It would also help with community lending.

I will digress a little, if you will allow me, Mr Deputy Speaker. I have a personal bugbear with the basic bank account. It was brought about for financial inclusion, and it is important that everyone has access to financial products, but my experience of the basic bank account when I worked in the bank was that often the people with that account were on benefits or moving jobs. When it came to lending, they found that they did not credit score and often sellers were not interested, because those people did not credit score for credit cards, bank loans or any other financial products. They were then simply left to their own devices and often fell into the hands of payday lenders and legal loan sharks, as my hon. Friend the Member for Walthamstow (Stella Creasy) has mentioned.

I believe that through the FCA we have a chance to bring about financial inclusion audits and to map where each financial transaction takes place. It would be very dangerous to say that a financial crisis will never happen again, but I hope that we can put things in place to ensure that, if it does happen again, it might not be as bad as it was this time. The US has the tool, so why can we not have it?

20:21

[Mark Field (Cities of London and Westminster) (Con)]

To be frank, I still regard too much of this legislation as deficient, and I shall touch on some specific concerns, but it would be remiss not to give the Treasury significant credit for some of the work it has done. The extensive and broadly constructive pre-legislative consultation by the Joint Committee is a positive step. The outstanding and ongoing contribution of the Treasury Committee will help to focus the Government’s mind on some of the key institutional pitfalls. There is also an increasing recognition by the Treasury that this is an area of public policy where political judgments will need to be made, and that ultimately the buck must stop with it, not with the Bank of England, however good a Governor we may have.

My general dissatisfaction relates first and foremost to the inevitable guillotine in this House, which means that the high-level sophisticated scrutiny will have to come from the other place, and I fear that that shows our House in a poor light. It is not that we lack collective experience in this crucial field, but the wish of Governments, throughout my 11 years in the House, to get legislation through by whipped votes means that we continue to fail to hold the Executive to account, particularly on such important pieces of legislation.

This is probably the only area where I have some sympathy with the shadow Chancellor. The genesis of the Bill was perhaps a rather simplistic political analysis surrounding the financial collapse of 2007-08. It was not really the tripartite system of regulation that was at the heart of those concerns, but an old-fashioned debt and credit bubble and the global imbalance between the east and the west. It is important that we recognise that, because the result was not simply the failing of banks, bankers and Labour politicians; the simplistic analysis also fails to answer the core question that has dogged regulators ever since the financial crisis began: “When the crash came, who was in charge?” The risk is that we will replace an unsatisfactory tripartite system with a potentially even more complex four-way system. I think that there is a risk that that will come to pass, although I do not buy into the shadow Chancellor’s entire analysis. In truth, the new FCA will have too few people of the requisite expertise and sound judgment. Unsurprisingly, it remains very unloved and unrespected by too many professionals in the City, and I am afraid that that matters, given the important role that it will have.

Let me touch on some of the more substantial political issues that the press have not focused very much on. There is an overall concern about how prescriptive the new regime will be, and to what extent the Bill will recalibrate things in a way that will have unintended and potentially damaging consequences for the industry, the UK and the consumer. I will give a few examples. On the warning notice publicity, the Bill will change the current position whereby enforcement action becomes public only at the end of the process, after the firm has decided whether to go to tribunal, and before that stage has had two opportunities to make representations. The new approach means that there will be negative publicity at the stage of the warning notice—the first notice—and the firm will have no right to make representations before that. The reality is that, essentially, the Daily Mail test means that all the damage to the firm’s reputation will be done before any due process has been gone through. The argument in favour of the change is that this is similar to a criminal case, but that misses the important difference between the cases, and represents a worrying trend in the thinking, to the effect that everyone in the industry is somehow a would-be criminal.

[Mark Garnier]

Will my hon. Friend give way?

[Mark Field]

I am afraid that I will not.

Product regulation and financial promotion powers are another issue. There are powers to intervene earlier in the product life cycle and ban financial promotions. There is an argument that the FSA already has the power to do this. The big political point is the balance between market and regulatory failure. All the debate has been about how the powers are needed to prevent market failure and how the regulator will be far more involved in product design and in the business. It is difficult to argue with the concept, but the position that there is no moral hazard in going down this route is arguably naive, and fails to recognise that the regulators never have perfect vision.

The cost of regulation is in many ways the dog that has not barked. There is nothing in the Bill to apply more financial discipline to either the PRA or the FCA, so the cost-benefit analysis does not apply to the rules that they have in place. We must also ask how the new regulators will work together. The Bill sets out certain principles for the memorandum of understanding between the PRA and the FCA, which is perhaps all that can be expected. However, that leaves on trust a lot of the detail of how the new organisations will work together. That is a key practical issue for firms if this is not to lead to new and inconsistent regulation.

One good example relates to threshold conditions. The Bill provides the PRA and the FCA with the power to make threshold condition codes, which will elaborate on the conditions and how they will apply to different classes of firm. Those codes will be binding. What will happen if the two regulators take inconsistent approaches on, for example, explaining what they mean by the suitability condition? The last thing anyone wants is the development of an industry engaged in arbitrage between the two inconsistent approaches to regulation for different parts of the industry. That is a particular worry for dual- regulated firms, and firms left under the FCA, such as fund managers, are concerned that they could suffer from more heavy-handed regulation, rather than the more senatorial style that it is assumed the PRA will adopt.

Will there be enough of the secondary framework to be able to consider the new structure properly? That is a general question, and one example is whether investment firms are within the PRA’s scope. Firms do not yet know, and things keep changing. For example, the Government agree that the risks posed by investment firms and the concerns arising from last autumn’s MF Global failure should continue to be subject to scrutiny by the authorities, which might change the boundary. The point about MF Global is that it did not take proprietary positions, and so would have fallen on the FCA side. The argument is that the organisation has caused great systemic problems, and so surely should have been regulated by the PRA.

That question has now been partly—but only partly— addressed, through the draft designation order published on the Treasury’s website, setting out the criteria that the PRA will apply when considering whether it should designate individual firms as “dealing in investments as principal” for PRA regulation. Has enough thought been given to that issue, however? There is a parallel debate about large hedge fund managers, who deal only as agents, and therefore stay on the FCA side, yet arguably pose a systemic risk themselves. It is hard to look at the new framework in the round until all such details are sorted out.

I shall conclude soon, because I appreciate that other Members have more to say. Indeed, there is so much more that I could say myself. One issue that has been widely discussed is the competition objective, which was especially well dealt with in the Joint Committee’s report. The point often missed is that the whole discussion is about competition within the market, and whether that itself should be an objective or principle to which the FCA ought to be compelled to have regard. It is not about the more fundamental issue of the competitiveness of the UK as a financial services centre, important though that is. That says something about the new approach to the industry.

I fear that we risk throwing the out baby with the bathwater. Why should the UK not have regard to the competitiveness of one of its most important industries, subject to the other important goals of market stability and consumer protection? Rebalancing the economy is all well and good, but it should not mean undermining the vital importance of the City and of financial services to the UK as a whole.

20:29

[Mr William Bain (Glasgow North East) (Lab)]

This Bill makes certain changes to the supervision of the banking and wider financial services sector, and Opposition Members can give guarded support to them, but it falls far short of taking the much-needed action to regulate payday lenders and the total cost of credit, to secure growth and jobs as goals of the new regulatory bodies, and to make the necessary reforms in the banking sector’s excessive pay and remuneration, which was one of the key factors driving the financial crisis in the first place.

A growing body of research, from the OECD to White House economists, shows that societies with a smaller gap between the richest and the poorest achieve higher long-term growth. This Bill could have taken real steps to tackle inequality and the culture of high bonuses and pay in the financial services sector by implementing in full the recommendations of the High Pay Commission to put an employee representative on the remuneration committee of firms in the banking sector, to require the publication of the pay ratios between highly paid financial services staff and those on average wages, to ensure that all publicly listed companies in the sector produce fair pay reports, and to establish a permanent body to monitor high pay.

The High Pay Commission recently discovered that in Barclays, between 2009 and last year its top executives’ pay was 75 times that of its staff on average pay, and the ratio in Lloyds Banking Group was precisely the same. Since 1979 the pay of the top Barclays executive has gone up by 4,899%, to £4.365 million last year.

There appears to be a growing mood on the political right, particularly in the United States, to take the view that those issues do not matter, but in Britain they do, and the Government could have done far more in the Bill to show that they stand with the 99%, rather than with the top 1%.

The Bill could also have secured more justice for the young and poor in our society by introducing a tax on bank bonuses for the next two years—the first step in tackling the youth unemployment crisis, the scale of which the excellent report by the Association of Chief Executives of Voluntary Organisations exposed this morning. Youth unemployment costs the economy £10.7 billion, and the loss in tax revenues amounts to £2.2 billion per year. How disappointing that the Bill has not taken the first step to end that injustice today.

The Bill also wastes a golden opportunity to introduce controls on payday lenders and to impose caps on the total costs of credit. Shelter published research last month which found that almost 1 million people have taken out a payday loan to help pay their rent or mortgage in the past year, and that almost 7 million people rely on credit to meet their housing costs. The Bill could have limited the number of loans that a borrower might take out at any one time or on a repeat basis, as Consumer Focus recommended two years ago. Campbell Robb, the chief executive of Shelter, said on 4 January:

“Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness.”

On the structural changes to the supervisory framework for financial services, the Bill provides greater clarity through clause 57, so, in the event of a major crisis affecting the financial system, the Chancellor of the Exchequer will have the power to issue to the Bank of England directions on support for the financial system, including the use of Government funds. That is important in emphasising political accountability to this House.

The Bill is important to the people of Scotland. The financial services sector amounts to 7% of Scottish GDP, employs 150,000 people in Scotland and contributes £7 billion to the Scottish economy. Scotland has the headquarters of RBS, Clydesdale bank and Tesco bank, and it remains a key location for Lloyds Banking Group and other financial institutions. The future regulation of the sector is therefore critical in the momentous decision that the people of Scotland will soon make on their constitutional future.

The benefits of Scotland’s full participation in the UK financial system were keenly felt in 2008. The report of the Independent Commission on Banking made it clear that the total financial support, including loans and guarantees, provided to the banking sector throughout the United Kingdom during the crisis was of the order of £1.2 trillion. Two of the major beneficiaries of that support were banks based in Edinburgh.

There is a noticeable lack of clarity in the Scottish Government’s views on the Bill. It is unclear what their proposals for separation would mean for the protection of savings deposits in Scotland. There is a complete absence of detail on who the prudential regulator of banks based in Scotland would be if Scotland voted for separation and on the ability of the banking sector to sustain the levels of lending to Scottish businesses. The Scottish National party has said that it would still wish to receive the benefits of the Bank of England’s support for a separate Scottish financial system, but it has not been forthcoming on whether it would accept a continuing remit for the new Financial Policy Committee in the regulation of the banking sector.

Cross-border financial regulation is good for Scotland and for the UK as a whole. Our system would be weaker on all sides if RBS was split and regulated under one set of rules and institutions in Scotland and under another set of institutions here, along with the other major banks in the UK. Under its preferred post-separation model of establishing a currency union with the United Kingdom, with the Bank of England as lender of last resort, the SNP has not come clean on whether there would be a Scottish central bank, what its functions would be, what its relations with the Bank of England would be, or how banks in Scotland would be regulated in future. Would the SNP seek to regulate the banks and the financial services sector within Scotland, or would it leave that with the Bank of England? If it does plan to have a separate regulatory structure, what form would it take? There is a plethora of unanswered questions, and it is time that the people of Scotland had the answers from the Scottish Government.

The Bill has some satisfactory elements, but overall it does not meet the scale of the challenge of establishing a more socially responsible financial services sector. If it is to command support in the country, the Government will have to be open to amendments in Committee to restore confidence to the banks and credibility to the regulatory structure across the United Kingdom.

20:38

[Stephen Barclay (North East Cambridgeshire) (Con)]

It is a pleasure to follow the hon. Member for Glasgow North East (Mr Bain). I pay tribute to my hon. Friend the Financial Secretary to the Treasury for what is a very good Bill. It displays the diligence and expertise that he brings to his ministerial duties.

I am sure that the Financial Secretary would be quick to recognise—and here I have some sympathy with the line pursued by the right hon. Member for Morley and Outwood (Ed Balls)—that no regulatory structure is a panacea for regulatory risk. We saw that with the Bank of Credit and Commerce International and the Bank of England. The Bill does not address the core lesson from the recent regulatory failure, which is the failure of capital and liquidity rules. In essence, what we are debating is the supervisory arm of an EU regulatory policy agenda. Fortunately, my hon. Friend the Member for Stone (Mr Cash) is not in his place or he would be intervening at this point.

For all the strengths of the Bill, I will touch on three areas where I fear the expectations of our constituents may be raised, but where the regulator may not have the power to meet them. The first is the extent to which the Financial Conduct Authority will have an interventionist approach and its objective of promoting competition. The second is its ability to achieve speedy resolution, which was addressed briefly by my hon. Friend the Member for Cities of London and Westminster (Mark Field). The third is whether it will achieve effective enforcement against individuals and whether there should be strict liability. Indeed, my hon. Friend the Member for West Suffolk (Matthew Hancock) touched on whether there should be criminal sanctions, a point that was floated in Lord Turner’s RBS report but not answered. If time allows, I also wish to put forward a proposal on which there may cross-party consensus about how fines imposed when there is a regulatory breach are redressed and what is done with the funds.

I would be grateful if my hon. Friend the Financial Secretary addressed the risk-tolerance of the new consumer regulator. There has often been a misconception that regulators are about ensuring zero failure, and I would welcome some sense of the point at which the new regulator will be judged as having failed to intervene, and what size and scale of failure in the regime is tolerable.

On the competition objective, some Members have referred to the lack of a power for matters to be referred directly to the Competition Commission. They have to be referred via the Office of Fair Trading. There is potential for two regulators to have different interpretations, and therefore for duplication of costs and confusion about where the power of one regulator ends and that of another starts.

My hon. Friend the Member for Cities of London and Westminster touched on the need for speedy resolution. To take the example of payment protection insurance, a firm can appeal to the regulator and seek a 90-day review, and then it can have the decision judicially reviewed, which can stretch things out for about a further 18 months. A firm can stretch out proceedings in a mis-selling case for tactical reasons, so that it can use the funds in question in the short term. The thoughts of my hon. Friend the Financial Secretary on that would be welcome.

The key issue, which always arises in my constituency, is the sense of grievance that there has not been enforcement action against individuals. That was at the heart of the Treasury Committee’s reason for requiring a report from Lord Turner, but nothing in the Bill really addresses the issue. It does not say whether there will be strict liability, and there are no proposals to frame criminal sanctions. For what it is worth, I believe they would be very difficult to frame.

Within banks, the real problem is that senior executives protect themselves through complex management structures, such as by devolving control functions lower down the organisation so that there is a buffer between them and the decision making and they are knowingly blind. Risk functions often report into finance directors, meaning that there is a potential conflict of interest, and compliance officers often get to shape meetings with supervisors, notwithstanding the more intensive regime that the regulator is currently following.

A key issue that we need to address either in this Bill or in future legislation is how individuals at the top of banks are held accountable when there are mistakes. My hon. Friend the Financial Secretary might need to have discussions with the Lord Chancellor about that, because judicial review and the risk appetite of the tribunal need to be addressed. Given their judicial nature, those points fall within the Lord Chancellor’s responsibility. They go to the heart of whether people get a sense of justice being done when there are serious failures.

I move on to a matter on which I would welcome comments from both Front Benchers in the winding-up speeches, and on which there could be scope for positive reform. That is what happens when a firm pays a regulatory fine. It may surprise Members that currently, under paragraph 16 of schedule 1 to the Financial Services and Markets Act 2000, when there is a fine for a regulatory breach the money does not go to good causes, or even to the Treasury—my hon. Friend the Financial Secretary might think that the Treasury is a good cause in itself. It goes towards reducing the levy paid by other financial firms. When a bank breaks the rules, it reduces the levy for other banks. Over the past two years, such money has amounted to £166 million. I know that a number of Members are keen on financial education—the all-party group on the subject is the biggest in the House. Perhaps such a fund could be hypothecated for use in a more constructive way, and I would welcome comments on that in the winding-up speeches. I recognise that firms are contributing more to financial education now, but it is odd that they benefit from the regulatory breaches of other firms.

I shall conclude, because I am aware of the time limit and want to allow time for others to contribute. The Bill is a good one, but as I said at the beginning of my speech, there will be failure. When there is, an independent report is the most reasonable of expectations. It is instructive that Lord Turner is not a neutral player. Will the Minister clarify how much his report cost to compile? I would like scope in the Bill for an independent report in future if we are in the unfortunate position of having a further regulatory failure. That the Treasury Committee had to seek private experts so that it could comment on Lord Turner’s report speaks volumes. That small matter could be tightened up in Committee.

Overall, this is an excellent set of measures, and I will have great pleasure in supporting my right hon. Friend the Chancellor in the Lobby this evening.

20:45

[Mark Durkan (Foyle) (SDLP)]

Like the hon. Member for North East Cambridgeshire (Stephen Barclay), I shall address areas in which we need to proof and improve the Bill before it goes to another place.

I first want to express support for the hon. Member for Walthamstow (Stella Creasy) in respect of consumer credit protection. Not only lenders of consumer credit should be under the FCA, but debt collectors, brokers, retail services that sell insurance products and those offering debt management services.

Similarly, I support the hon. Member for Rutherglen and Hamilton West (Tom Greatrex). Contrary to suggestions made earlier in the debate that the Bill is about putting Parliament back in charge, it is notable that inquiries and investigations under part 5 go to the Treasury. There is no reference whatever to Parliament in that measure, unlike in section 14 of the Financial Services and Markets Act 2000, which clearly states that any such report will be laid before Parliament.

The Financial Secretary no doubt anticipated that I would mention credit unions in Northern Ireland, because their regulatory status will change in the wider context of the changes heralded by the Bill. He was good enough to receive a pick-up band of Northern Ireland MPs last week to discuss our outstanding concerns on the detail. I can assure him that we are pursuing those. We have not yet eliminated him from our inquiries, but we are making the necessary representations to the FSA and will make them to its successor, the FCA.

I wanted to talk not just about the implications of the Bill in terms of the lessons of the banking collapse, but about other provisions. The launch of auto-enrolment means that millions more people will save for a pension through the capital markets, including many low-paid workers. In recent months, we have seen that pension savers’ interests are not always put first by the industry. The spotlight has been turned on to excessive and untransparent charges, and conflicts of interests.

The fund management industry’s duties to savers are poorly understood and observed. The Law Commission has confirmed that when firms manage other people’s money or give financial advice, they have strict fiduciary duties to act in their clients’ interests—both individuals and institutions, such as pension funds, that represent large numbers of underlying savers. That fact is, of course, not generally accepted or reflected within the industry. In addition, as we have heard, because those are common law duties, they do not form part of the FSA’s regulatory approach. An explicit reference to fiduciary duty in the Bill would give the FSA a powerful tool to ensure that consumers’ interests are protected.

Examples of where consumers have suffered from those duties not being observed include unauthorised profits, and recent research shows that some fund managers made significant profits from lending out clients’ shares with only two thirds of the income from those activities returned to the fund. Of course, under fiduciary duties, any such profit should go back to the underlying investor. Another example is in relation to the exercise of shareholder rights. Asset managers, acting on behalf of pension savers, should exercise their voting rights at major companies in the best interests of the savers, without regard to the interests of the firm, but we have anecdotal evidence of fund managers being told by superiors to wave through excessive executive pay to avoid upsetting potential clients. So the interests of the business are placed ahead of the savers whose money is at stake.

[David Mowat]

I agree with the hon. Gentleman’s point about the market failure that we have seen in the pension and fund industry in the last decade or so, which is close to being a scandal. He is right that the Bill does not include a fiduciary duty, but it would give the FCA a competition requirement that, if applied properly, would prevent the market failure and the non-transparent charges that are the core of the issue.

[Mark Durkan]

The hon. Gentleman has more confidence in the extensive effect that he expects from the competition requirement. I believe that that should be complemented by this other insertion in the Bill.

During pre-legislative scrutiny—about which we heard earlier—the Joint Committee heard that the Bill was unbalanced. On the one hand, it enshrines the principle that consumers are responsible for their decisions, but on the other it does not place any equivalent responsibility on firms. The Joint Committee recommended that the Bill should

“place a clear responsibility on firms to act honestly, fairly and professionally in the best interests of their customers.”

Meanwhile, the Financial Services Consumer Panel recommended that this should take the form of an explicit fiduciary duty to clients.

In response, the Government have inserted a new principle to which the FCA must have regard, which is that

“those providing regulated financial services should be expected to provide consumers with a level of care that is appropriate”,

having regard to the risks involved and consumer capabilities. But that new wording does not provide a high enough level of protection for customers. It clearly lacks clarity on what might constitute an appropriate level of care and stops short of confirming that those managing other people’s money owe fiduciary duties. We need an explicit clarification in the Bill.

Another area in which the Bill is remiss is the whole principle of stewardship. In the aftermath of the financial crisis, it was widely recognised that major institutional investors had behaved as absentee landlords, not doing enough to challenge risky behaviour at the banks that they owned. This had direct consequences for many of the pension savers whose money those shareholders invested. According to the OECD, in the year after the crisis pension funds lost an estimated 17% of their value.

After the crisis, we had the Walker review, and the Financial Reporting Council established the UK stewardship code, designed to encourage investors to behave as active owners of the companies in which they invest. This agenda is increasingly recognised by both the Government and the Opposition in all the recent, highly publicised arguments about executive pay and what can be done to curb it. Both leading parties in this House have placed great emphasis on more shareholder responsibility. But to date the FSA has treated this as a fairly marginal issue, appearing not to regard it as a consumer issue. It is not clear that it will be regarded any differently by the FCA.

There is no mention of stewardship in the Bill, although it is clearly relevant to the objectives of the PRA and the FCA. In particular, there is a danger that stewardship will continue to fall through the cracks in the new regulatory architecture. The PRA is likely to take little interest, because the ordinary asset managers of the firms in question are FCA-regulated, yet there is little reason to assume that the FCA will accord the issue any higher priority than the FSA does at present.

The proposed duty of co-ordination mentioned earlier by the hon. Member for Cities of London and Westminster (Mark Field) will do little to resolve that issue, because it will focus purely on reducing the burden of regulation on dual-regulated firms, rather than on preventing gaps in regulation between the new authorities. That measure will deal with an overlap as it affects the business; it will not deal with the gaps affecting consumers. Again, there is a hole in the legislation as far as consumer protection is concerned.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. There are still seven people who wish to catch my eye, and we are struggling with interventions. Time is ticking away, so I will have to drop the limit to seven minutes. Hopefully, I will not have to drop it again.

20:55

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

I will endeavour to say as much of what I planned to say as I can in the existing time frame.

There is no doubt that the Bill should be welcomed and that it will help right the wrongs of the former tripartite structure that contributed to the banking collapse. The tone of this debate is important. It would be easy to labour the failures of the previous Administration and highlight why Opposition Members, particularly those on the Front Bench, must accept their part in the financial crisis of 2007 onwards and the subsequent fallout. It is all too easy to use the banks as whipping boys, but in reality it was politicians and Governments who allowed many questionable practices to go on.

I regret the tone of some recent news stories about bankers, whether they relate to bonuses or to other controversial issues. We must consider how such matters destabilise an extremely valuable sector that employs more than 1 million people across the United Kingdom, amounts to 10% of our GDP and contributes between £35 billion and £63 billion to the Treasury every year.

I do not seek to defend the indefensible, but let us at least consider the longer-term consequences of what is said and done, and the tone in which it is said. In considering last week’s debate on bonuses, for example, I hope that Stephen Hester does not choose to leave RBS any time soon, as it could cost a significantly greater sum to attract someone to fill the post, particularly in this difficult public climate. A mature debate is needed on remuneration, which many in this debate have mentioned, but we should be level-headed and remember that how we conduct the debate, as well as its outcome, will affect our economy and growth prospects.

To the Minister’s credit, a huge amount of work has been done on the Bill. Not only have there been several opportunities to pursue the matter here in the Chamber, but the pre-legislative scrutiny Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) developed the Bill further, as did the Vickers report and the scrutiny of the Treasury Committee.

My first substantive point relates to structure and culture. The tripartite structure had to end; we are all aware of its deficiencies. The twin-peaks approach and the establishment of the FPC, the PRA and the FCA also make sense, but it is important to recognise the need for the legislation to be forward-looking rather than focused on the mistakes of the past.

It was interesting to read evidence from a number of witnesses who supported the proposals but still refused to commit to saying that if the new structure had been in place in 2007-08 or before, the banking collapse would not have happened. It is important that we seek to develop a regulatory framework that can adapt. A simple tick-box approach—we have heard much about that—or an isolated approach set up to prevent the recurrence of the last crisis will do nothing for a dynamic industry always seeking to evolve, to be innovative and to generate income for the country and its shareholders.

The Minister is taking the right decision to set up those bodies, but much will depend on the leadership that their members will offer. Several times in the past the House has been involved in the establishment of new agencies only to have to return to their shortcomings within a year or two.

The culture that each chairman or chief executive develops with the Governor will be crucial to the success of this legislation. The relationship between each organisation is also important and, as ever, will inevitably depend on the Governor, chairmen and chief executives. Such relationships need to be open, and there needs to be a clear understanding of the part that each person plays. They should not operate in isolation, and there needs to be clear accountability, with the ultimate test of knowing who should get fired.

I want to highlight the issue of concentration risk or groupthink, given the huge emphasis that is placed on the Governor. In that respect, amendments suggested by the Joint Committee to strengthen ties with the Treasury and Parliament are welcome. I am grateful that the Minister has accepted some of them.

It is clear that, within the proposed structures, the judgments of individuals will ultimately make the difference. The Bill provides the FPC with considerable powers of direction, but the levers generally used by the PRA or FCA will also determine the fate and future of the industry. That is the area of greatest concern across all three bodies, yet there is no alternative if we are opposed to the inflexible tick-box approach criticised tonight. Regular parliamentary scrutiny will be essential, and the role of Treasury officials on many of these bodies will be crucial for feedback to the Treasury and parliamentary scrutiny.

In making their judgments, the PRA and the FPC will need to respond to the evidence. A one-size-fits-all approach will not serve the economy or the financial services sector well. Their engagement with the organisations that they regulate will need to be risk-based, but that flexibility, which is needed, must not lead to inconsistent actions. Sir Mervyn King stated that judgments are undermined when we end up with a game in which regulators are continuously rewriting the rules as firms devise new products to get around the detailed legal rules in place before. A tiered approach is needed, therefore, to allow certainty and due process that also reflects the risk and culture of the organisation.

The FPC and regulators do not operate in isolation, and international factors need to be considered. It is fair to be concerned, therefore, that UK authorities could seek to raise the bar, and the risk of super-equivalence is real and always worries the leaders of many of these organisation.

Mr Deputy Speaker, I am sorry that time does not allow me to complete my remarks about the FPC.

21:02

[Sheila Gilmore (Edinburgh East) (Lab)]

The hon. Member for Vale of Glamorgan (Alun Cairns) referred to what he thought was the regrettable negative public opinion towards bankers, but we have to accept that over a considerable period the banking industry has changed so dramatically that perhaps it needs greater regulation.

My mother-in-law remembered that when as a student she went overdrawn, the bank would write to her father, and that when she got home for her summer holidays, she would be in big trouble. In contrast, my children were automatically given a £1,000 overdraft as soon as they presented their new student cards at the bank. Before I could say, “Hang on a minute, perhaps that isn’t terribly wise,” they found themselves unable to refuse this largesse. That demonstrates the change that has taken place over a couple of generations. To that extent, the banking industry has to look to itself, not just to external regulation, and ask where things have gone wrong.

At the beginning of this debate, when things were a bit livelier—they are often livelier at the beginning than near the end—much was made of whose fault it was, who did not regulate, and whether the Opposition would apologise for failing to regulate and for the financial collapse. That is rich coming from a party that, even when the financial crisis was beginning to crash around us, spent so much time saying that there was too much regulation. There are clear quotations to that effect, with the current Prime Minister saying in 2008:

“As a free-marketeer by conviction, it will not surprise you to hear me say that a significant part of Labour’s economic failure has been the excessive bureaucratic interventionism of the past decade…too much tax, too much regulation, too little understanding of what our businesses need to compete in the modern world.”

There are many other quotations like that. It is not just that the then Opposition were not standing up and saying that we needed more regulation; it is that they were going beyond that and saying that there was too much regulation.

We all have to reflect on that. I have no hesitation in saying that I believe the last Government did not sufficiently regulate the financial services industry and should have done more. We have seen many of the difficulties caused by that. The FSA has been roundly criticised by many of the victims of financial collapses. My hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) talked a lot about Arch Cru and how it worked. Many of us in have had people come to us affected by the Equitable Life collapse, which was due to the failings of both the FSA and its predecessors. We know how people’s lives can be affected. It is extremely important that the new regulatory architecture, as it seems to be called, should grapple with the kind of situations that have arisen and how they affect people.

We also need regulation that looks at the most vulnerable, which is particularly important. Citizens Advice, which deals with a lot of people’s problems, has suggested that the FCA be placed under an explicit duty to be proactive in preventing and responding to consumer detriment, and to have particular regard to the needs of low-income and otherwise vulnerable consumers. Earlier we heard about high-cost credit and what it does to people, but Citizens Advice has suggested that the problem goes much further. It includes, for example, the way that cheques have been phased out of the banking system, with little regard for the needs of those with little choice but to use them, and the way that people have perhaps been encouraged to bank online and not otherwise, which could be to the detriment of those who cannot do so. Indeed, it might even include the way that banking itself works. Many of us think it is wonderful to have free credit for having a current account and not to have to pay fees. However, there is a downside to that, in that it is often funded by what those who become overdrawn—not necessarily because they are wholly irresponsible; rather they may simply be hard up and experiencing difficulties—have to pay for that. Those are all things that we should be considering, but if the new body does not have an explicit duty to consider such matters, they might simply not be dealt with properly.

We have heard, too, that some of the things that the Office of Fair Trading does on consumer credit—things that most of us probably feel it has not done very well over the years—will be transferred to the new organisation. Again, we need to know as much about that as possible, and as soon as possible. It is not good enough to say, “That will all come along in due course.” There have been clear failures in the system to look at the issue in enough depth, to act quickly enough and to ensure that people are not faced with poor banking and credit practices. Basic bank accounts is another area. The current Government appear not to want to place an obligation on banks to provide a right to a bank account, for which the previous Government had proposed to legislate. I hope that the Minister might take this opportunity to reconsider the position that he expressed when I had a Westminster Hall debate on this very subject some months ago, and to decide that he will go ahead with such a proposal, because the position on basic bank accounts has deteriorated since that debate.

[Nic Dakin (Scunthorpe) (Lab)]

My hon. Friend is making a clear and powerful case for regulation in appropriate places, and I would be grateful if she continued her exposition.

[Sheila Gilmore]

Although it is widely believed that regulation for the poorest is particularly important, those of us who have witnessed the kind of financial failure that so many people have had to put up with are aware that it is important not just to the poorest, but to a number of those with reasonable incomes. Our Work and Pensions Committee has been discussing pension auto-enrolment. One of the fears expressed was that people would not want to save because they did not trust the financial services industry. If we want people to save properly we must ensure that they feel that trust, and it could be re-created through proper regulation.

21:10

[David Mowat (Warrington South) (Con)]

I agree with those who have said that we are here to make a good Bill better. The financial services industry is vital to our country, and it is possible that we lead the world in that industry more than in any other, yet it is an industry that lost us near enough £200 billion three or four years ago. We need to chart a course between not locking the door after the horse has bolted and ensuring that we establish a regulatory framework that looks to the future.

Some have said that the most important aspect of regulation is not the structure, and that may cause us to wonder why we are moving from a tripartite structure to a twin-peaks system. Many words have been used tonight, but I believe that one that has not yet been used provides the most important explanation for the failure of the tripartite structure. I refer to the word “underlap”. The structure failed because none of its three components felt wholly responsible for taking the action which was needed and which they suspected might be required. That is why the twin-peaks system is sensible. It is not a “quartet”. I think that the shadow Chancellor’s point about a quartet indicated that he did not understand the issue of underlap or take it at face value. Undermining the responsibility of the Governor of the Bank of England by asking his deputies to act as whistleblowers takes us back to that structure of underlap.

The Bill could be improved in three respects. First, I want to talk about the importance of international and European co-ordination, about which my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), the Chairman of the Joint Committee, talked at some length. I have a little more sympathy for Mr Barnier than he has. Secondly, I want to talk about competition. Thirdly, I want to talk about the link between the Bill and the work of the Independent Commission on Banking and the Vickers report.

We are regulating two types of entity in the banking sector, those that are predominantly in the United Kingdom and those that are international, and I believe that the UK entities have been regulated to death. Apart from the ring fence, the capital requirements, all the buffers, the tier 1 and tier 2 capital and all that goes with it, I believe that we have fixed the problem, but one issue is still out there. If I were to predict where the next crisis will come, I would say that it will come in the international banks that straddle boundaries and continue to grow in complexity and scope: the investment banking and brokering parts of organisations such as Goldman Sachs, HSBC, Deutsche and BarCap.

Collectively, those organisations control $4 trillion of derivatives. I do not fully understand the economic purpose of $4 trillion, but I do know that regulating those entities is outwith the competence of a nation state, and we must be careful that we do not think we are doing it by passing a banking Act within our nation state. The organisation within those banks is global, the way in which they look at themselves is global, and the way in which they move capital around is global.

The Joint Committee took evidence from the Governor of the Bank of England, who explained that he would supply liquidity to an overseas bank with a subsidiary in the United Kingdom that wishes to fund activity in South America. The issue is global, and I want to talk about MF Global, the derivatives trader that went bust in the middle of October. Amazingly, the organisation was considered to be outside the scope of the PRA, yet its balance sheet was more than £40 billion. The capital flows between the USA and the UK were huge, and there now appear to be issues of insider dealing. Between £1 billion and £2 billion of customer funds have been lost. What happened to that bank is a model for the kinds of problems that we will have in controlling the financial system over the next two decades, and we need to focus on such organisations. It was a relatively small bank, only a tenth the size of Lehman Brothers, but its problems crept up on us and took us completely by surprise. There are many more banks and shadow banks like it. I would like the Minister to acknowledge this issue. It is not enough simply to say that we have colleges of regulators. I believe that this is the area in which the next crisis will arise. If I am right, I could be made Business Secretary.

The hon. Member for Foyle (Mark Durkan) mentioned the pensions industry. The important aspect of the Bill is the competition objective. The City and the financial services industry would benefit from the systematic application of competition. The problem with systemically high salaries is not, in my view, the bonus culture; it is that there has not been enough competition in the industry to bring the salaries down. That can occur when the barriers to entry are too high, when there is market dominance or when there is asymmetric information—that is, when the organisations have much more knowledge than the punters. That is particularly true of the pensions industry. The hon. Gentleman mentioned fiduciary duty. The fundamental problem is that the charging is too high, but the fiduciary duty requirement will not take that away, because the organisations think that the charging is all part of their applying their fiduciary duty. The funds industry needs to reach a point at which something like 31% of a pension pot no longer goes on charges in the private pensions industry, and it needs competition to achieve that. Such charging is one reason why this country is so massively under-pensioned, and the issue needs to be fixed before auto-enrolment provides a further subsidy for the industry.

21:17

[David Rutley (Macclesfield) (Con)]

Thank you, Mr Deputy Speaker, for giving me the opportunity to speak in this important debate. Financial stability is the foundation that every economy requires for sustainable growth, so it is critical that we rebuild trust in the financial system and address the continuing crisis of confidence surrounding it. The Bill will play a pivotal role in achieving that objective, and I give it my wholehearted support.

It has been well documented in the debate that the tripartite system, of which the shadow Chancellor was one of the chief architects, comprehensively failed when the credit crunch came along. A lack of clear accountability created real confusion and, instead of seeing an overlap of competing powers—the usual challenge that occurs in bureaucracies—we saw what my hon. Friend the Member for Warrington South (David Mowat) described as an “underlap”, a potent power vacuum. The Bill rightly seeks to address that problem.

Even before the credit crunch began in earnest, Dr Willem Buiter, a former member of the Monetary Policy Committee, raised his concerns with the Treasury Committee in 2007. He said that the tripartite system was “risky”. He went on:

“It is possible, if you are lucky, to manage it, but it is an invitation to disaster, to delay, and to wrong decisions.”

Sadly, Dr Buiter’s concerns fell on deaf ears. The previous Government failed to heed such warnings and, just a few years later, they were completely unprepared to cope with the credit crunch. It has been left to this Government to clean up the mess, and to put in place a framework for financial stability that will work through the financial cycles. The Bill will play a critical role in that task.

The Bill will move the British financial services sector on from the failed model of the past and, most importantly, seek to address the issue of accountability that was so confused under the previous arrangements. The new framework addresses the key flaw in the old system by putting the accountability back where it belongs—to the Bank of England. Just as the Bill has a clear focus on monetary policy through the Monetary Policy Committee, it will provide a clear focus on financial stability through the Financial Policy Committee. Its job will be to monitor the overall risk in the financial system, to spot dangerous trends and to stop excessive levels of leverage before it is too late. The creation of the FPC is a vital step on from the previous system.

I also welcome the Chancellor’s announcement today about the new oversight committee. The Bank of England will continue to be accountable to Parliament, and the Treasury Committee will play an important role in guaranteeing oversight of the Bank’s new powers, about which I know some colleagues have expressed their concerns.

With greater accountability and the right tools for facing a crisis, a clearer and more coherent framework will be in place to create the financial stability for which there is this overarching need. We should not forget, however, the importance of the European Union dimension to this debate. As my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) explained earlier, it is vital not to let the EU tie our hands in regulating Britain’s financial services sectors, and vital, too, for the capital requirements directive, currently making its way through Brussels, to give Britain the flexibility to take a robust approach to financial regulation. Britain should work with interested member states to ensure that any future EU regulation respects the rights of individual member states, including Britain, to set their own terms for financial stability.

The Bill’s structures should be designed to achieve that objective, and I know that the creation of the committee that we have discussed today will be a vital step in this direction. Now is not the time to replace a domestic box-ticking agenda, which was so prevalent in the previous Government’s framework, with an EU one, which would be a further disaster.

In my remaining time, I would like to talk about one of the most damaged parts of the existing system—the Financial Services Authority. Plainly, it is no longer fit for purpose. Even the FSA’s own report on the failure of the Royal Bank of Scotland acknowledged its own woeful capability in meeting its dual obligations of oversight and consumer protection. Clearly, it is time for change.

The new framework will help to create a Prudential Regulation Authority and, most importantly for my remaining remarks, the Financial Conduct Authority. I believe that the FCA will help to protect consumers and drive competition. In the UK today, the big four banks have a staggering 77% of personal current accounts, which illustrates how concentrated market power has become in retail banking. All serious commentators recognise that it is time to instil greater competition in the sector.

The barriers to entry for new entrants have simply been too high for too long. This problem must be tackled; I feel very strongly about it. For several years before I was elected as a Member of Parliament, I led Asda’s move into financial services. In so doing, the company genuinely sought to do something more than just add a new brand to familiar products. It was a very challenging process, and it is good to see relatively new entrants there nowadays, such as Metro Bank, the Co-op, Virgin Money and Tesco, working to do things differently from the established high street banks. There is much more work to be done; it is vital that the FCA encourages activity in this area.

Beyond competition, the FCA will have important powers to protect customers from predatory behaviour. Again, it is vital for the FCA to be involved; it must name and shame the firms that are causing the problems. Without that, customers will not have the confidence in the financial markets that underpins an active, productive and, hopefully, world-beating financial services sector here in the UK.

In conclusion, I give my support to this critically important legislation. It has been an honour to be involved in scrutinising parts of the Bill in my capacity as a member of the Treasury Committee. I hope that Members of all parties will support it this evening.

21:25

[Jackie Doyle-Price (Thurrock) (Con)]

It is a great pleasure to have an opportunity to speak in what, in the main, has been a well-informed and thoughtful debate, and I pay tribute to all who have contributed to it. I want to pick up on some of the themes in the Joint Committee report, which my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) has highlighted.

While the proposed structural reforms are welcome, there must also be changes in the culture and behaviour of the regulators and the firms they are dealing with if we are to deliver an appropriate system of financial regulation. We need a change in the regulatory culture and philosophy that will enable regulators to tackle issues as they emerge, rather than after the event.

We also need a culture in which politicians allow the regulators to do their jobs. I will be looking for reassurances from Ministers that they will not interfere with regulators and that regulators will be empowered to do the job given to them in law. As we have seen from the FSA report into RBS, under the last Government politicians were all too keen to tell the FSA to back off from being overly intrusive in its regulation. There can be no accountability if politicians get in the way of regulators doing their jobs as set out in law.

We must also ensure that the new regulators do not fall victim to regulatory capture. There was much criticism of the FSA following the collapse of HBOS and the revelation that a whistleblower had warned about the management of risk within the business. The FSA did write to HBOS and asked that action be taken in response to the issues highlighted by the whistleblower, but clearly the action taken was not sufficient. It might be noted that Sir James Crosby, the former chairman of HBOS, became the deputy chairman of the FSA. There are, of course, advantages in attracting senior practitioners to the boards of the new regulators. As we have discussed, we need people in place who understand the models of business and the financial products. However, we must not allow relationships between firms and the regulator to become too cosy and thereby to prohibit effective challenge.

I particularly welcome the creation of the new Financial Conduct Authority, which gives an opportunity to deliver much stronger protections for consumers. I say that as somebody who used to be a regulator in the consumer division at the FSA and an adviser to the Financial Services Consumer Panel. One of the comments made at the time of the financial crisis was that the FSA had spent too much time looking at conduct issues and not enough time considering prudential issues. In my experience however, it was not particularly good at conduct either. Again, we return to the point about the FSA not being empowered to do its job. It took five years for the FSA to deal with payment protection insurance mis-selling. The industry hired lots of lawyers to argue that there was no regulation to stop what it was doing, leaving the FSA powerless to take action without legal challenge even though it was blatantly obvious that the industry was mis-selling and ripping off consumers.

In such an environment, the regulator needs real teeth. It also needs the support of politicians and Ministers. It does not need politicians getting in its way; instead, it needs their support. The regulator will never be able to match the legal resources that the amassed banks can mobilise and it will therefore face an unequal fight unless we stand behind it when there is consumer detriment. Ministers need to be prepared to set out what behaviours they consider to be unacceptable. We have talked about naming and shaming. We need to think about how much further we might go in that regard. We might learn from what the Prime Minister did with the energy companies just a few months ago. If we were to give a signal that such behaviour will not be tolerated, that would give the regulator the clout to encourage firms to change their behaviour.

Clearly, that has been absent from our financial services regulatory regime. Instead, we have had an environment where the Prime Minister, the Chancellor and the City Minister were calling for light-touch regulation. That led to pressure on the FSA. We have heard today about the 8,000 rules that led to calls for light-touch regulation, but that focus on rules clouded the issue. What was needed was an environment where the regulator could tackle the risk of consumer detriment within the business it was supervising. We needed fewer rules, not a less active regulator.

That is where we come back to the whole issue of culture and behaviour by the regulator and the firms. We need a regulator that provides an appropriate challenge, and one that can exploit the source of profit in the business model and ensure that institutions treat their customers fairly. We need a regulator that challenges the behaviour of the firm, not its compliance with individual rules, and which will make it clear who is accountable for what in the regulatory system.

Finally, I wish to give my support for the transfer of the regulation of credit to the new Financial Conduct Authority. Consumer debt is probably the biggest cause of detriment to our financial industry and it has always lacked any transparency; it was not clear who was responsible for regulating that. The Office of Fair Trading has been a rather anonymous organisation to the public. As we have heard, the proposal also gives us the opportunity to ensure that the new high-cost lenders can be tackled. We have heard lots of discussion about the need for price regulation and caps, but this is about having responsible lending rules and making sure that a suite of products are offered to fit every consumer’s circumstance. I look forward to engaging in the debate further as the Minister develops those proposals, and I give my wholehearted endorsement to the Bill.

[Several hon. Members]

rose—

[Mr Speaker]

Order. The wind-ups from the Front Benchers begin at 9.40 pm, but before then two remaining Members are seeking to catch my eye, both of whom can be accommodated if they thoughtfully divide the time roughly equally between them.

21:31

[Steve Baker (Wycombe) (Con)]

Thank you, Mr Speaker. I refer the House to my interest in Cobden Partners, which has been established to help nations solve their banking crises.

I very much welcome the Bill, which I hope and believe will prove to be the zenith of contemporary thought on bank reform. With due deference to my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), I wish to talk about three potential elephants in the room. First, I wish to make some remarks about accounting, then I wish to discuss the conduct of individuals and liability, and finally I wish to talk about financial stability.

I know that the Minister has heard my views on the international financial reporting standard, but I draw his attention to a letter in yesterday’s Financial Times by Lord Lawson, under the headline “Forget Fred and focus on the real banking scandal”. He stated:

“The auditing of banks’ accounts, however, is fundamentally flawed in itself. The IFRS accounting system itself has proved to be damagingly pro-cyclical, and the ability to pay genuine (and genuinely large) bonuses out of purely paper profits, which are never subsequently realised, is at the heart of both the bonuses that cause such public and political outrage, and the reason why bank management consistently does so well when bank shareholders do so badly.”

Andy Haldane, the executive director for financial stability at the Bank of England, gave a speech in December. I shall not read out all the remarks that I meant to cover, but he concluded by saying that

“if we are to restore investor faith in banking sector balance sheets, nothing less than a radical rethink may be required.”

He was referring, entirely, to accounting standards. I therefore refer the Government to my private Member’s Bill introduced on 13 May 2011, which seeks to introduce parallel prudent accounting for banks. It is a couple of pages long and I hope that it can be added to this Bill.

I also refer the Government to “The Law of Opposites”, a paper produced by the Adam Smith Institute and written by my colleague Gordon Kerr, who has spent 25 years “gaming accounting rules”, as he would perhaps say, in order to make a profit. The banking system is in a far worse state than is generally believed. I do not see how either the Financial Policy Committee or the Prudential Regulation Authority can operate without a true and fair view of the state of financial institutions, and I do not believe for a moment that the international financial reporting standards give that to us.

On the conduct of individuals, we fail too often to think about the pattern of regulation in which we have engaged. It seems that the first thing that legislation does is damage the incentives and disciplines of the market. Having thereby created moral hazard, regulators come along to try to mitigate the consequences of that moral hazard. A banking licence today is a licence to lend money into existence, at interest, with the risk socialised. When we look at central banking, deposit insurance and limited liability, we find that moral hazard is absolutely rife in the banking industry, even before we consider investment banking. I suggest to the Government that it is time to increase the liability of banks’ directors. There should be strict liability for them, and bonuses should be held in a pool and treated as capital for at least five years. I will introduce a private Member’s Bill to that effect on 29 February.

We have talked about financial stability and the difficulty of defining it. There has been a sense that there is some kind of equilibrium economy—an evenly rotating one—in which there could be a sustainable and stable quantity of credit. Indeed, on pages 14 to 16 of the Joint Committee’s report there is an interesting discussion about the need to regulate credit.

To leave time for my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), I will just say that if we were talking about any other commodity and were discussing adding to a failed regime of price control a regime of quantity control, we would certainly reject the idea out of hand. In Lord George’s testimony to the Treasury Committee before the crisis, he made it absolutely clear that the Bank of England had created a credit bubble to avoid falling into recession, yet we are going to give the Bank even more powers, more tools, more risk of ruin and more big-player effects and distortions of economic expectations.

I congratulate the Government on introducing the Bill, and I sincerely hope that it represents the absolute zenith of contemporary thinking on interventionist bank reform.

21:35

[Jacob Rees-Mogg (North East Somerset) (Con)]

I thank my hon. Friend the Member for Wycombe (Steve Baker) for being so brief. I refer Members to my entry in the Register of Members’ Financial Interests.

We should welcome the great reform that is restoring the Governor of the Bank of England’s eyebrow to its rightful place in bank regulation. It is, quite seriously, an important thing to be doing, as banks will see by the supercilious movements of Sir Mervyn King’s brows when they are doing things wrong. That has been a useful test in the past. More important is the FPC, which will have a very wide-ranging role in ensuring stability, and I wonder to what extent the Government have considered how that role will interact with that of the Monetary Policy Committee. One of the risks through the early years of this century was interest rates remaining very low because of an apparently low inflation background, and that was probably a mistake because of the growth in China and its import effects, with very high domestic and asset price inflation. Could the FPC have overruled the MPC on interest rates if it had viewed that as a serious risk? I wonder whether Her Majesty’s Government might consider giving a broader set of instructions to the MPC to allow it to co-operate with the FPC’s wider role.

The other important aspect of the FPC’s role will be its working with international regulators and having proper flexibility, particularly with bank capitalisation rates. Europe is going for very high rates as the economy is turning down and that is quite wrong. We probably need low bank capitalisation rates now and high ones in a boom. It is important that the FPC should have that flexibility to adjust bank capitalisation rates for this economy. Just as we set our own monetary policy because we have our own currency, so we should set our own regulatory framework, suited both to our monetary policy and to the risks we are taking, and what is happening in Europe might cause problems for the FPC in dealing with that.

Overall, the FPC of course has an impossible task, because the credit cycle will wax and wane over the next century, whatever we set up. We can go back to the tulip mania and the South Sea bubble and so on; these things always happen and people always warn of them. Dr Peter Warburton warned in 1999 of the coming credit crisis, saying that central banks of the world had

“inadvertently created the potential for widespread debt defaults and economic disintegration on an epic scale.”

Economists were warning of the crisis, but people did not take any notice. The FPC will have to be very robust and Cassandra-like to be able to say, “There is a bubble; we must prick it.” When the FPC is set up, one of the first bubbles it might have to deal with will be in the gilt market, because a 2% gilt yield, without a gold standard, is an historic low for yield since the 1890s and is something that many would consider a bubble. We must bear in mind that indexed gilt links were producing a negative return about a fortnight ago. Will the FPC have the courage to say to the Government, “We think your own Government stock is in a bubble”?

I want to speak briefly about the Financial Services Authority, which regulates me, and to say a very little about it, which is that it is very expensive. I encourage the Treasury to take its fees into the Treasury and fund the new body from the Treasury. The FSA is asking for a 15% increase in its budget this year in order, among other things, to increase pay by 3.5%. No other arm of government is doing that and it is why hypothecated taxation and fees are fundamentally bad. It would be better to go through the Treasury. I also happen to think that the FSA is rather arbitrary in its rules—but you have been kind in calling me, Mr Speaker, and I know that we must have the wind-ups.

21:40

[Chris Leslie (Nottingham East) (Lab/Co-op)]

First, I congratulate hon. Members who have taken part in the debate this evening, particularly those who served so diligently on the pre-legislative scrutiny Committee and on the Treasury Select Committee, many of whom are in warmer foreign climes at present. I thank in particular the right hon. Member for Hitchin and Harpenden (Mr Lilley) for chairing the pre-legislative scrutiny Committee and my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) and my hon. Friend the Member for Leeds East (Mr Mudie), who contributed to the debates, for their work.

My hon. Friends have spoken on a number of topics this evening, but it would be invidious in the short time left for Front Benchers—only 10 minutes each—to try to discuss them in more detail. But do not worry Mr Speaker, because we will have about 10 hours in every one of the four weeks when we consider this Bill in Committee, so we can elaborate on each other’s comments then. Let me just note that my hon. Friend the Member for Walthamstow (Stella Creasy) rightly spoke about the need for reforms to high-cost credit and that my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) spoke about the collapse of Arch Cru and the need for lessons to be learned, and made a reasonable call for a Treasury inquiry into those matters. My hon. Friend the Member for Islwyn (Chris Evans) emphasised the need for more action on financial education and my hon. Friends the Members for Glasgow North East (Mr Bain) and for Foyle (Mark Durkan) talked about the current difficulties in the banking sector, particularly with high executive pay. Also, my hon. Friend the Member for Edinburgh East (Sheila Gilmore) spoke about the importance of addressing financial exclusion and access to basic bank account services.

The Bill is a significant piece of legislation and we support the moves to a prudential regulatory approach with improved systemic oversight, but there are serious misgivings about the proliferation of agencies and the confused responsibilities in the Bill, which are far from ideal. As we have heard, we are moving from a tripartite system to a quartet system, and the acronyms abound. That might work, but we need clear lines of accountability. That was the point that my right hon. Friend the shadow Chancellor was making. There are issues with complexity, and risks associated with putting all our hopes on placing regulation in the hands of the Bank of England. The formation of the Financial Policy Committee is sensible, but we need to ensure that it has the right composition, with fewer Bank of England officials in its membership, and that appointments reflect the balance across the economy.

We have touched on a number of issues relating to the economy, such as responsibility and long-termism, and we have heard about consumers of financial services, many of whom are, after all, constituents of ours, for whom we have an obligation to speak. There will undoubtedly be a debate about the objectives of the Financial Conduct Authority and whether they are sufficiently focused on the fairness, transparency and efficiency we need in the system. There is some confusion in the Bill regarding the FCA’s powers when it issues a warning notice, and the extent to which such notices will be published. Will it be known to consumers or will there be a nod and a wink, with notices going privately to the companies concerned? Is that the right balance? I am not entirely sure that that works.

We have to do a lot more to emphasise other consumer protection matters. We must surely grasp the nettle and take this opportunity to do what we can to improve financial education in all our schools up and down the country. We must also make sure that the information available to customers more generally is accessible, intelligible, clear and understandable so that we can try to do something about the asymmetry of information that hon. Members have discussed.

My hon. Friends the Members for Islwyn and for Foyle suggested that a fiduciary duty of care should be placed on providers of financial services, and we think that there are compelling arguments in favour of such a change, particularly as some important points about pensions and charges need to be brought out in the debate, as the hon. Member for Warrington South (David Mowat) mentioned.

My hon. Friend the Member for Walthamstow continued her campaign to introduce a time limit and a limit on high charges for credit, particularly for the vulnerable in our constituencies. I agree that it is time to ensure that the FCA has powers to take action in that regard and on fee charging, debt management plans and further safeguards for depositors.

When it comes to responsibility and the long-term changes that are needed to ensure that financial services address the real economy as well as the needs of consumers and constituents, it is important that we learn the lessons of the past. Therefore, we must look at the FSA’s report on RBS and take action in the Bill to end the bias in advisory fee structures in takeovers. We must take the opportunity to reform acquisition and merger rules, as the FSA has recommended. To what extent can we use the opportunity presented by the Bill to enhance the role of the Financial Reporting Council, and possibly the FCA, to support sound stewardship and shareholder accountability and to improve the corporate governance that many hon. Members have talked about, never mind the reforms that are so overdue to executive pay, the bonus culture and the remuneration committees that have been so much in the news in recent days? It is also important to take the opportunity to do more to support a diverse financial services sector, supporting mutuals and building societies, many of which do not fit into the neat capital requirements and plc structures imposed on them by current regulatory arrangements. Those are some of the changes that we will want to introduce in Committee.

It would be wrong not to take this opportunity to talk about one of the fundamental vacuums in the Bill: the insufficient attention to jobs, growth and finding ways to support our economy. The action taken by the Financial Policy Committee and the Bank of England will undoubtedly have a big impact on the availability of credit, not least because the Government have signally failed to do anything to encourage bank lending: Project Merlin has already fallen by the wayside and credit easing has still not commenced. The FPC has the objective of protecting and enhancing stability, but we believe that it should also be guided by the objective of promoting employment and the long-term growth prospects of the economy. That is something that the CBI has argued for, and it happens in similar situations elsewhere around the world.

Perhaps the Government’s difficulties stem from their partisan design of these structures when the Chancellor was in opposition. As we heard in his speech, the Government have tried to tell a domestic political narrative that pins the failures of the credit crunch solely on the previous Administration, and suggest that it is something that happened only in this country. In his revisionist attempt to re-write history, not even once did he mention the problems in other countries, or the fact that there was a global financial crisis. He suggested that what happened, happened only here in Britain—as if the then Prime Minister got on a plane and caused all the problems in America, Spain, Germany and elsewhere, as well as in the UK. The Chancellor’s analysis of the history of the credit crunch is lacking, to say the least. It would have been better if he had redesigned regulation in a way that recognised the casino culture of the global banking sector at the time of the financial crisis.

We are faced with a Bill that contains a number of problems, but ones that we hope can be amended and improved. The regulatory structure fails to sit adequately with the international and European regulatory environments. The EU’s supervisory bodies are split thematically to deal with banking, pensions and insurance, rather than mirroring the conduct and prudential arrangements set out in the Bill. Given that the EU drives the vast bulk of the regulatory agenda that will be able to overrule the domestic regulators that we are debating, it is important that the Government state clearly how they will ensure that our voice is not marginalised in those regulatory environments—if, indeed, it is possible to be even more out in the cold than the Chancellor is at present.

[Mark Field]

Will the hon. Gentleman give way?

[Chris Leslie]

I am afraid that I have only one minute before the Minister has to speak, in which time I shall also emphasise the points that my right hon. Friend made about the lack of Bank of England accountability in the proposals before us.

The hon. Member for Bury St Edmunds (Mr Ruffley) correctly pointed out the problems of a lack of a proper supervisory function in the court of the Bank of England, and they absolutely have to be addressed. There are problems also with the regulatory structure, which on the one hand describes itself as twin peaks, but looks as though it has at least four elements to it—the quartet model, which we have heard about today. Will we hear the voices of those four institutions in their own right, or will they be subjugated to the voice of the Governor of the Bank of England?

One of the most important issues for us in the House of Commons is accountability to Parliament. We are investing an enormous amount in the Bank of England, with quasi-legislative powers being placed in its hands, and my hon. Friend the Member for Leeds East was absolutely right about the need for us tread carefully in relation to those accountability questions.

We will not object to the Bill this evening, and we hope that it gets a Second Reading, but it is right that we shall spend time debating its contents in detail. Some serious amendments are needed, and we want stronger regulation that is fit for purpose, has sufficient checks and balances, delivers financial stability, promotes employment and growth, protects consumers and safeguards the interest of the taxpayer. The whole country wants to see banks that serve the best interests of the wider economy and society, and we hope that Ministers will listen and amend their Bill accordingly.

21:51

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

This has been a thoughtful debate. We have had 21 speeches, led by the Chairman of the Joint Committee, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), who was supported by his colleagues on the Committee, including my hon. Friends the Members for Bury St Edmunds (Mr Ruffley) and for Warrington South (David Mowat), the right hon. Member for Newcastle upon Tyne East (Mr Brown) and the hon. Member for Leeds East (Mr Mudie).

We have also heard from my hon. Friends the Members for St Austell and Newquay (Stephen Gilbert), for West Suffolk (Matthew Hancock), for Wyre Forest (Mark Garnier), for Cities of London and Westminster (Mark Field), for North East Cambridgeshire (Stephen Barclay), for Vale of Glamorgan (Alun Cairns), for Macclesfield (David Rutley), for Thurrock (Jackie Doyle-Price), for Wycombe (Steve Baker) and for North East Somerset (Jacob Rees-Mogg). There were some thoughtful speeches from Opposition Members, too, of which I would highlight those made by the hon. Members for Islwyn (Chris Evans) and for Foyle (Mark Durkan).

I shall deal with some of the issues that have been raised in the debate, and first with Europe, which hon. Members on both sides raised several times. It is absolutely right to ensure that, at a time when Europe is becoming increasingly important in determining the regulatory framework, we engage in the debate about Europe. We took on board the Joint Committee’s comments, and it is fair to say that the regulators and the Treasury already co-operate effectively on influencing the shape of European regulation, but it is also important that we get the regulation right to enable the FSA’s successor bodies to supervise firms based in the UK.

That is why, in the debate about capital requirements directive 4, for example, we seek to achieve a single rule book through high common minimum standards of capital, and to give the supervisors in the UK the flexibility to go further in imposing high levels of capital if they think it appropriate, given the structure and nature of banking in the UK. That will also enable them to introduce the reforms proposed by Sir John Vickers and his commission.

Several hon. Members raised the issue of the Financial Policy Committee, so let me explain why we have set it up. It is a fundamental part of the architecture, it ensures that there is a body tasked with identifying risk to financial stability and, crucially, it remedies a flaw in the architecture that the previous Government set up, giving it the power to tackle those risks.

Those powers are important. We talked about the macro-prudential tools that the FPC will have, but it will also be able to give advice on where the regulatory perimeter should be in order to tackle issues such as shadow banking. It is also worth pointing out, in response to a comment made two or three times this evening, that its objective is symmetrical: it is about financial stability and considering the impact of its decisions on the prospects for growth in the economy. That symmetry is absolutely important, and we have gone a long way to address the concerns that have been raised today.

As well as the FPC, we will also see a move to unite key parts of micro and macro-prudential supervision in the Bank of England, joining it to the Bank’s existing responsibilities for stability and monetary policy and removing a structural flaw that helped such disastrously unsustainable levels of risk to build up in the run-up to the financial crisis.

The reforms answer the question posed during that crisis: “Who is in charge?” There is currently confusion over who is in charge in a financial crisis, and that cannot continue. The Treasury Committee, the Joint Committee, the Governor and the previous Chancellor of the Exchequer all recognise that. The Government will end that confusion. The Bill makes it clear that as soon as there is a material risk to taxpayers’ money, the Chancellor will have targeted power to direct the Bank to take action. The responsibility for each part of that action is clear, whether it is with the PRA in triggering the use of the special resolution regime or with the Bank in the day-to-day responsibility for crisis management. As soon as there is a threat to public money, the Bank must notify the Chancellor of the Exchequer. That happens when there might be a risk. It does not prejudge what the decision should be. I think that that deals with the point that the shadow Chancellor raised early in his speech.

On consumer protection, the old regulatory structure not only failed to maintain financial stability, but let down consumers. As the FSA’s report into RBS made clear, the remit given to the FSA by the previous Government was too broad, covering both prudential and conduct-of-business regulations. Those require different cultures, experience and expertise. That is shown most acutely by the FSA’s failure to prevent the payment protection insurance mis-selling scandal. With prudential supervision at the Bank of England, we will have a regulator that is focused on conduct issues and driven by consumer protection, market integrity and promoting effective competition.

The FCA will be more proactive, transparent and accountable. It will have new powers to deliver better consumer outcomes, including the power to ban toxic products. It will promote effective competition so that consumers get a better deal. My hon. Friend the Member for North East Cambridgeshire talked about the risk appetite of the FCA. Let me make it clear that it will be much more likely to intervene to tackle consumer detriment than it has been in the past. That is an important advance that will protect consumers.

Across the House, there has been widespread concern about consumer credit. That matter has been debated this evening. The hon. Member for Walthamstow (Stella Creasy) took a narrow view about what one can do to protect consumers and focused on the total cost cap. Like my hon. Friends the Members for St Austell and Newquay and for Thurrock, I think that we need a broader range of powers to ensure that there is proper consumer protection for those who take out loans. There should be the same level of protection that people take for granted when they buy an insurance policy or take out a mortgage. The Bill gives us the power to transfer the regulation of consumer credit from the Office of Fair Trading to the FCA, giving a better deal for borrowers.

As my right hon. Friend the Member for Hitchin and Harpenden and others have said, our reforms are as much about the style of regulation as about the structure. They are about culture, focus and philosophy. A key failure of Labour’s regulatory system was its focus on tick-box regulation. The financial crisis demonstrated the inadequacies of that approach to bank regulation. That approach also helps to explain failures of conduct regulation, such as with PPI. Judgment and discretion will be at the heart of prudential and conduct supervision. We expect the PRA and FCA to be pro-active, to challenge and to intervene.

I believe that we will see a significant change in conduct regulation and prudential regulation, moving away from the detailed prescriptive rules of the past to giving the regulators the power and authority to intervene, exercise their judgment and spot problems as they emerge, rather than waiting to resolve them once the crisis has broken. That will tackle the broken system that we inherited. That style and structure of regulation let down consumers who were sold toxic products, taxpayers who paid the bill for the banking crisis, and those who relied on banks to finance their business or to enable them to buy a home. Our reforms will change the structure and style of regulation.

The Bank of England and the PRA will have clear responsibility for the stability of banks, insurers and the financial sector. The FCA will have the power to ban the sale of toxic products and to name and shame those who have let consumers down. The FPC, the PRA and the FCA will exercise the judgment and discretion that are needed to supervise financial services better across the UK. The Bill will help mend our financial system to benefit families, businesses and the taxpayer. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Financial Services Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Services Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 20 March 2012.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Bill Wiggin.)

Question agreed to.

Business of the House

Motion made, and Question put forthwith (Standing Order No. 15),

That, at this day’s sitting, the Second Reading of the Consumer Insurance (Disclosure and Representations) Bill [Lords] may be proceeded with, though opposed, until any hour and Standing Order No. 41A (Deferred divisions) shall not apply.—(Bill Wiggin.)

Question agreed to.

Financial Services Bill (Money)

Queen’s Recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Financial Services Bill, it is expedient to authorise—

(1) the payment out of money provided by Parliament of—

(a) any expenditure incurred under or by virtue of the Act by a Minister of the Crown or government department (apart from any expenditure to be met from the National Loans Fund), and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided, and

(2) the payment out of the National Loans Fund of any increase attributable to the Act in the sums so payable under any other Act.—(Bill Wiggin.)

Question agreed to.

Financial Services Bill (Carry-over)

Motion made, and Question put forthwith (Standing Order No. 80A(1)(a)),

That if, at the conclusion of this Session of Parliament, proceedings on the Financial Services Bill have not been completed, they shall be resumed in the next Session.—(Bill Wiggin.)

Question agreed to.

Business without Debate

Monday 6th February 2012 Commons Chamber

Consumer Insurance (Disclosure and Representations) Bill [Lords]

Motion made, and Question put forthwith (Standing Orders Nos. 59(3) and 90(5)), That the Bill be now read the Second time.—(Mr Hoban.)

Question agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Senior Courts of England and Wales

That the Civil Procedure (Amendment No. 3) Rules 2011 (S.I., 2011, No. 2970), dated 14 December 2011, a copy of which was laid before this House on 14 December, be approved.—(Bill Wiggin.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Court of Judicature, Northern Ireland

That the Rules of the Court of Judicature (Northern Ireland) (Amendment No. 4) 2011 (S.R. (N.I.), 2011, No. 422), dated 14 December 2011, a copy of which was laid before this House on 15 December, be approved.—(Bill Wiggin.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Council Tax

That the draft Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012, which were laid before this House on 11 January, be approved.—(Bill Wiggin.)

Question agreed to.

Delegated Legislation (Committees)

Ordered,

That the School Admissions (Admission Arrangements and Co-ordination of Admission Arrangements) (England) Regulations 2012 (S.I., 2012, No. 8), be referred to a Delegated Legislation Committee.—(Bill Wiggin.)

Business of the House (7 February)

Ordered,

That, at the sitting on Tuesday 7 February paragraph (2) of Standing Order No. 31 (Questions on amendments) shall apply to the Motion in the name of Mr Edward Miliband as if the day were an Opposition Day; proceedings on the Motion may continue, though opposed, for three hours and shall then lapse if not previously disposed of; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Bill Wiggin.)

Business of the House (8 February)

Ordered,

That, at the sitting on Wednesday 8 February, notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of Secretary Theresa May relating to Police Grant Report not later than three hours after the commencement of proceedings on the Motion, and shall put the Questions necessary to dispose of proceedings on the Motions in the name of Secretary Eric Pickles relating to Local Government Finance and Council Tax not later than six hours after the commencement of proceedings relating to Police Grant Report; proceedings may continue after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Bill Wiggin.)

Justice

Ordered,

That Mrs Linda Riordan be discharged from the Justice Committee and Seema Malhotra be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

Police Cuts (Humberside)

Monday 6th February 2012 Commons Chamber

22:02

[Nic Dakin (Scunthorpe) (Lab)]

In just a few hours on a Friday lunchtime, the petitioners collected more than 300 signatures in Scunthorpe town centre opposing police cuts in the area.

The petition states:

The Petition of residents of Scunthorpe,

Declares that the petitioners are opposed to plans to cut £30 million from Humberside Police’s budget over the next four years; declares that the Petitioners reject the Government’s claim that these budget cuts will not have an effect on the quality of policing provided; and further declares that the Petitioners believe these cuts will mean the loss of 331 jobs, on top of the 780 staff who were already offered voluntary redundancy last year.

The Petitioners therefore request that the House of Commons urges the Government to reverse its decision to cut £30 million from the Humberside Police budget and reconsider the proposed funding allowance for Humberside Police.

And the Petitioners remain, etc.

[P001004]

Early-day Motions

Monday 6th February 2012 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Newmark.)

22:03

[Graham Evans (Weaver Vale) (Con)]

I am delighted to have secured this Adjournment debate. Indeed, Adjournment debates are a useful opportunity for us Back Benchers to raise issues that might otherwise not be discussed. The quality of speeches and debates that we have heard on a wide range of fascinating topics in all the many Adjournment debates since the election has really showed that this is an excellent tradition that should be maintained. However, this evening I am here to talk about another parliamentary tradition that is of considerably less worth—early-day motions.

Nearly 3,000 early-day motions have so far been tabled in this Parliament. It is estimated that they cost the taxpayer around £1 million every year. Given that the spending review has looked carefully at every aspect of our public expenditure, it is only right that we take time to reflect on the cost-effectiveness and value of early-day motions. We should ask ourselves whether it is value for money to spend so much taxpayers’ money on a mechanism that has no legislative effect and rarely has any influence whatever. We should consider whether a mechanism that does not ensure a parliamentary debate on a subject, no matter how many Members sign a motion, is an effective mechanism for Back Benchers to raise important issues.

[Robert Halfon (Harlow) (Con)]

An answer to my hon. Friend’s suggestion might be for all early-day motions to be published only on the internet, rather than on the Order Paper, which would save a fortune. Would it not be better to call early-day motions “The Book of MP Petitions”, because that is what they are in essence? That does not negate the fact that they are useful instruments for campaigning.

[Graham Evans]

I shall mention saving costs on printing by publishing online later in my speech, but my hon. Friend makes a good suggestion on how we should reform early-day motions and what we should call them, which should be considered along with other things.

We should think about the future role of such a mechanism now that the Backbench Business Committee has been successfully established. The truth is that early-day motions have been devalued by the sheer volume that have been tabled—nearly 3,000 were tabled during the last year. Early-day motions have been devalued by the utter ridiculousness of many of them. There are motions congratulating football teams on promotion; motions congratulating two celebrities on their engagement; motions arguing about the origins of Robin Hood; motions suggesting a common hash tag to be used by MPs on Twitter; motions praising Ann Widdecombe’s dancing ability; and even a motion expressing support for an asteroid wiping out the entire human race.

[James Wharton (Stockton South) (Con)]

As my hon. Friend is eloquently setting out, does not the sheer quantity of early-day motions on such a range of topics, which are often rather inconsequential, undermine the function that they were designed to serve?

[Graham Evans]

I wholeheartedly agree with my hon. Friend. The cost to the House, including in time, means that it is time to consider reform.

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

Does my hon. Friend also agree that pressure groups and individuals believe that early-day motions have value, and are therefore disappointed when they discover, despite their best efforts, that they come to nothing?

[Graham Evans]

I absolutely agree with my hon. Friend. Many organisations such as charities employ lobbyists, and early-day motions are often used to justify their existence. I shall come to that shortly.

[Paul Flynn (Newport West) (Lab)]

Will the hon. Gentleman give way?

[Graham Evans]

I will give way to my hon. Friend.

[Paul Flynn]

I am grateful, and I welcome our new friendship.

Is the hon. Gentleman aware that it is now forbidden in the House to read out the names of the fallen in Iraq or Afghanistan? The only way that the House can confront the results of its own decisions—by reading those names—is through early-day motions. He might have seen 24 early-day motions that record the names of those who have fallen in Afghanistan. What would he do to change the system so that he does not block the only way in which the House can record its respect and gratitude to those who have fallen in battle?

[Graham Evans]

Other mechanisms can be used to pay respects in the House. For example, the Prime Minister and the Leader of the Opposition pay their respects at the beginning of every Prime Minister’s questions.

The reputation of the House is damaged even further by the mountains of early-day motions that are drafted by lobby firms who use them as little more than a tool to justify their services to naive clients. Plenty of willing Members are more than happy to oblige and table such motions on behalf of lobbyists. All hon. Members know that to be true, because we get bombarded by the same pro forma requests from lobbyists to table this or that early-day motion.

[Andrew Bingham (High Peak) (Con)]

We are besieged by e-mails from our constituents asking us to sign early-day motions that we know are of little consequence because of the volume of them. We have to send a letter disappointing our constituents because they are led to believe that early-day motions will change the world, whereas we know that they will not.

[Graham Evans]

My hon. Friend raises another good point: the sheer volume of early-day motions means that many constituents do not get the outcomes they seek.

We need to be totally frank about this. We have lobbyists trying to convince their clients that they are being very influential and making progress on their issue by getting an early-day motion tabled with lots of signatures. We have Members who want to convince constituents that they really care about a particular issue and have even taken the important-sounding step of tabling or signing an early-day motion. And we have local journalists who, desperate for copy, use the press release from the Member bragging about how they are backing an early-day motion. The cycle repeats, but nothing actually gets achieved.

[Jason McCartney (Colne Valley) (Con)]

Like my hon. Friend I was inspired to give up signing early-day motions in August 2010 and the world has not stopped turning. He proposes some good ideas to take matters forward. For example, my hon. Friend the Member for Wycombe (Steve Baker) and I went to the Backbench Business Committee and got a debate on Kashmir, which was a much better way to raise that issue than just tabling an early-day motion. I like the way in which my hon. Friend the Member for Weaver Vale (Graham Evans) is coming forward with alternative ideas.

[Graham Evans]

My hon. Friend raises the point that there are now other mechanisms. The Backbench Business Committee is one and Westminster Hall debates, in which Ministers are held to account and have to give answers, are another. There are new avenues for Back Benchers now.

It is this frustration that led me to table my own, admittedly tongue-in-cheek, early-day motion 432, calling for early-day motions to be reformed or abolished. I believe that the other 44 Members who have kindly signed my early-day motion share my frustration—

[Steve Baker (Wycombe) (Con)]

If I signed early-day motions, I would have signed my hon. Friend’s early-day motion.

[Graham Evans]

I am grateful to my hon. Friend.

As I was saying, the signatories include Members from both sides of the House, with several senior Members and former Cabinet Ministers and, astoundingly, my hon. Friend the Member for Worthing West (Sir Peter Bottomley). When I first discovered he had signed my early-day motion, I wondered whether it was perhaps by accident—

[Sir Peter Bottomley (Worthing West) (Con)]

I acknowledge that I have signed a number of early-day motions—[Laughter.] I think we should consider the issue along with parliamentary questions. Questions take up more space in Hansard than early-day motions do, and most of them are pretty useless. Of the early-day motions that I have signed, one helped to get Krishna Maharaj off death row in Florida, and another helped to get cervical cancer vaccinations to include genital warts, which will save 125,000 people a year from having an unpleasant, antisocial disease. So there are purposes that can be met by early-day motions, but I am enjoying my hon. Friend’s speech.

[Graham Evans]

I am most grateful for that intervention.

There is considerable and growing support from colleagues from both sides of this House for this issue to be looked at. Personally, I am very much open to debate on whether we simply abolish or dramatically reform early-day motions. I have had a number of conversations with colleagues and the staff of the Table Office and there are plenty of ideas floating around about how early-day motions can be improved. They must be made more cost-effective, but we could also look at limiting the number that an individual Member can table and sign in a single Parliament and perhaps guarantee that the few early-day motions with the most support are guaranteed to be debated.

[Sir Bob Russell (Colchester) (LD)]

Following the hon. Gentleman’s theme, would he also put a limit on the number of parliamentary questions an MP could table?

[Graham Evans]

I am not sure what the answer is to that question. Perhaps we could discuss it over a cup of tea in the Tea Room later.

It might be possible to formalise the mechanism of early-day motions within the framework of the Backbench Business Committee. The hon. Member for Nottingham North (Mr Allen) has suggested that Members should be able to add their name to only one early-day motion each week, with the most popular one being debated the following week. The remaining early-day motions would then fall off the agenda. That way, Members would be forced to think very carefully about which early-day motion to back, rather than mindlessly tabling and signing dozens at a time. Members would be most unlikely to want to waste their single early-day motion on something daft or a pro forma drafted by lobbyists.

As I mentioned, the current cost of EDMs could also be slashed dramatically. Last year, printing costs alone accounted for £776,000. On top of that, substantial staffing costs add up to more than £1 million a year. There is no need to print multiple copies of every EDM each sitting day. EDMs could be kept largely electronic, with paper lists printed only on request. That is nothing complicated, only common sense to help save the taxpayer substantial sums over the course of a Parliament.

I hope that I have set out a clear case why EDMs are unsustainable in their current form and how we might go about reforming them. I also hope that this debate will help inform constituents about the reality of EDMs. Perhaps many charities and businesses that spend millions hiring lobbyists will listen to tonight’s debate and be more sceptical when public affairs consultants try to convince them of their effectiveness by getting an EDM tabled. Most of all, I hope that members of the Procedure Committee are listening carefully and realise how much support there is for change. I urge them to consider EDMs carefully and begin the process of reform as soon as possible. If we get it right, we can improve Back-Bench Members’ ability to raise topical issues, get better value for taxpayers’ money and restore faith in the House. There is no better time than the present.

22:15

[The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)]

I congratulate the hon. Member for Weaver Vale (Graham Evans) on securing this debate, and on securing such a sparkling attendance by colleagues for a late-night Adjournment debate. Since entering the House in 2010, he has shown consistent interest in reforming early-day motions, most notably by tabling—with tongue in cheek, as he said— an early-day motion entitled “Early-Day Motions” in July 2010.

I ought to begin by saying that there are, rightly, limits to the Government’s responsibilities for the matters under debate. That was not always so. Between 1994 and 2010, the Government had a very large element of control over whether motions tabled by Back Benchers could be debated on the Floor of the House. The Government were thus the proper recipient of requests for debates on or arising from early-day motions. I seem to recall that that was often a feature of the weekly business question.

Since the welcome advent of the Backbench Business Committee following a decision of the House in June 2010, it now rightly falls to that Committee to decide what subjects will be debated in Back-Bench time and what form motions for debate should take. Of course, the Government, and particularly my right hon. Friend the Leader of the House, continue to examine early-day motions as barometers of opinion on public policy and matters meriting debate.

When the Procedure Committee last considered early-day motions in 2007, seven categories or purposes for early-day motions were identified: first, to express opinions on matters of general public interest, often to assess the degree of support among Members; secondly, to continue a political debate, for example by criticising the Government or the Opposition; thirdly, to give prominence to a campaign or the work of some pressure group outside the House, and I will return to that in a moment; fourthly, to highlight local issues, such as the success of a local football team, the achievements of constituents or the need for a bypass; fifthly, to pray against a statutory instrument subject to the negative procedure, both to draw attention to opposition and to encourage referral of the instrument for debate; sixthly, to criticise individuals, including other hon. Members, whose conduct can be criticised only on a substantive motion, and I think that the hon. Member for Newport West (Paul Flynn) has raised that matter before now; and seventhly, to set out detailed criticisms, such as of a company or body, under the protection of parliamentary privilege.

As the above categories suggest, the scope for early-day motions is wide. Individual hon. Members’ freedom to table them is great. EDMs can be viewed in some ways as a safety valve when Members find their ability to express views limited by the availability of time or by the rules of the House.

[Dr Julian Lewis (New Forest East) (Con)]

I am grateful to the Deputy Leader of the House for outlining that helpful list. Does he agree that many of those categories also apply to business questions every Thursday, when hon. Members ask for statements or debates on subjects close to their hearts in the full knowledge that no such statement or debate will follow but because it enables them to make a point? That is what the EDM does, but it has the additional feature that many Members can sign up to it, which enables them to make a point and show that it is widely supported. Would that not be a loss to hon. Members?

[Mr Heath]

It was for precisely that reason and connected reasons that the Procedure Committee in the previous Parliament decided against recommending the abolition of EDMs or their substantive reform. However—there are several “howevers”—a major area of discontent for many years, as reflected in the Procedure Committee’s report in the last Parliament, concerned the lack of connection between EDMs, whose ostensible purpose was to set down a motion for debate in the House on an unspecified day, and the provision of time on the Floor of the House. The House has taken a major step to respond to this problem with the establishment of the Backbench Business Committee, as I mentioned at the outset.

[Robert Halfon]

To be fair, the Backbench Business Committee is slightly different, because any MP can ask for a debate regardless of whether they have tabled an EDM. As I have suggested to my hon. Friend the Member for Weaver Vale (Graham Evans), is not the answer—I say this as someone who supports EDMs—to change their name to “MPs Books of Petitions” and to publish them online? That way, no one would be misled over whether they might be debated.

[Mr Heath]

I will return to that point in a moment. Yes, the Backbench Business Committee considers any matter brought forward by Back-Bench Members, but it has shown its willingness to enable EDMs to be debated. It demonstrated that by providing time for a debate, on 10 March last year, on an EDM concerning the work of UN Women.

Drawing on a Procedure Committee recommendation in 2007 that was endorsed by the House on 25 October 2007, the Committee also enabled an EDM to be tagged as “relevant” to the debate on parliamentary reform, which took place in Westminster Hall just over a year ago, on 3 February 2011. The Committee can also draw on EDMs to provide evidence of the breadth of support among Members for a subject of debate, as it did in the case of the Fish Fight campaign. Were they to be named something else, their effectiveness at introducing subjects, with the support of Members, for the Committee to consider would not be reduced. It is a fact that EDMs have that function.

Although the Committee has fundamentally changed how business in the House is determined—and changed it for the better, in my view—some myths about EDMs linger on, although the hon. Member for Weaver Vale exploded some of them this evening. We are concerned about the propensity of pressure groups effectively to mislead our constituents into thinking that EDMs are something that they are not—an avenue to a procedure in the House—and to suggest that there is a magical number of signatories on an EDM that will cause it to be debated, which of course there is not.

That notion has persisted over the years, despite the absence of evidence to support it. It might be expedient for some pressure groups and lobbyists to perpetuate that myth and to raise false expectations among our constituents. We have all received e-mails stating that such-and-such an EDM is of critical importance and that we must sign them—I, as a Minister, cannot sign them any more, so I have a ready excuse, but I know that other Members sometimes feel pressurised by that sort of campaign.

The new House, selected in 2010, seems to have many more Members sceptical about the value of adding their names to EDMs. The average number of new signatories per week fell from 3,704 in the last financial year of the previous Parliament, to 1,965 in the first financial year of this Parliament. More Members have decided to adopt a policy of not signing early-day motions—I think we heard an example earlier. Indeed, I understand that Members can record that view with the Table Office. Above all, the Backbench Business Committee has demonstrated through its work that the link between early-day motions and debates is not a crude numbers game. For those reasons, I hope that all Members agree that the myth of a magical number of signatories should be confined to the dustbin, where it belongs.

The hon. Member for Weaver Vale identified a further problem—others have amplified it—in the triviality of some early-day motions. He referred to what he saw as some examples of early-day motions that devalued the currency. I certainly do not want to comment on any individual cases, but I agree with him that it seems highly questionable whether some early-day motions are appropriate, and that Members should pause for thought about the reputational and cost implications of their actions.

[Sir Peter Bottomley]

Might not the same thing have applied to William Wilberforce when he first had the rather revolutionary idea of abolishing the slave trade, or Samuel Plimsoll and his idea of painting a white line on the side of ships so that they would not be overladen with sailors who would otherwise go down to Davy Jones’s locker?

[Mr Heath]

If I may gently say so, I think there is a difference of kind between those causes, which I think most people would consider to be serious causes, and the fortunes of the local football club on a Saturday afternoon. I think there is a difference, perhaps, in scale of import between those topics.

[Sir Bob Russell]

Will my hon. Friend give way?

[Mr Heath]

I will, but I will have to make progress soon.

[Sir Bob Russell]

Perhaps I can ask the Deputy Leader of the House to consider these examples: the Gurkha rights campaign and the Royal British Legion’s military covenant campaign, on which I tabled early-day motions, or indeed early-day motion 1—I think—in 2009, which I also tabled and which the then Conservative Opposition thought was so brilliant that they brought it to the House and we had a vote on it.

[Mr Heath]

There is no doubt that some early-day motions are of considerable importance in the topics they raise. What I think the hon. Member for Weaver Vale was saying is that there may be better ways of bringing those matters to the House than the current system. There are also things that, frankly, I would be amazed if the House spent its time debating in real life, as opposed to the application that an early-day motion purports to be.

There are ways in which the issue could be dealt with. The hon. Gentleman suggested that limits might be imposed on the number of early-day motions that an individual Member could table or sign. Those are matters for the Procedure Committee to consider, should it decide to do so, but numerical limits, which were also suggested in an intervention, might be seen as an unexceptional constraint on hon. Members’ freedom of action. The implementation of a limit might encourage the syndication of motions. Limits would certainly provide an incentive for hon. Members to ensure that they used their right to table or support motions wisely, but at a cost, in terms of the limitation of their action.

[Chris Heaton-Harris (Daventry) (Con)]

Will the Deputy Leader of the House give way?

[Mr Heath]

I do not think I can really take any interventions at this point, because of the time.

[Mr Greg Knight (East Yorkshire) (Con)]

Will the hon. Gentleman give way?

[Mr Heath]

I will give way to the Chairman of the Procedure Committee, because he has a role in taking this matter forward.

[Mr Knight]

Let me place on record the fact that I am here listening to the debate; I am not here as an advocate. I am happy to give an assurance that I will take hon. Members’ views back to the Procedure Committee.

[Mr Heath]

I am extremely grateful to the right hon. Gentleman, who rather pre-empts the final comment that I was going to make. I was going to ask him and his Committee to take this matter forward. I now know that when I make that request, the answer will be in the affirmative, for which I am grateful.

[Chris Heaton-Harris]

As there is now time, will the hon. Gentleman give way?

[Mr Heath]

All right, yes—very clever.

[Chris Heaton-Harris]

I am a Member who refuses to sign early-day motions, as I believe they are the tool of a very poor lobbyist. Will the Deputy Leader of the House reflect on whether a campaign is devalued if a vast number of Members do not sign the relevant early-day motion? If I were someone who signed these things, I would dearly like to sign early-day motion 2637, on diabetes care, which has achieved only 27 signatures. I would say that the EDM devalues that campaign, rather than adding to it.

[Mr Heath]

I understand the point that the hon. Gentleman makes, and I think there is some substance to it, as it in no way undermines the fact that it is an important issue that—

[Dr Julian Lewis]

Will the Deputy Leader of the House give way?

[Mr Heath]

I really cannot give way again, because we are coming to the end of what is normally an Adjournment debate between one Back-Bench Member and a Minister, and tonight we have had a cast of thousands.

The hon. Member for Weaver Vale mentioned the cost of early-day motions. The House service estimated that the cost of administering EDMs in 2009-10 was approximately £1 million. The annual cost may have fallen somewhat as a result of the decision not to print the weekly compilation of EDMs, but those costs should certainly give hon. Members pause for thought before they table motions.

One possible solution is the one suggested by the hon. Gentleman, who proposed that EDMs should only appear electronically. The cost estimate to which I referred earlier indicated that about three quarters of the costs of EDMs were attributable to printing. It is clear that the database is now the main means by which people outside this place, as well as many inside it, access EDMs. My own view is that the time is fast approaching when more categories of business papers can be made available primarily or exclusively in electronic form—I imagine that some will gasp with horror at that suggestion, but I believe that it is one way in which we can actually save the taxpayer money—and that early-day motions may be in the vanguard of change in that regard.

I think the debate has demonstrated that the time may soon be ripe for the Procedure Committee to look again at the subject of early-day motions, and we have just heard its the Chair, the right hon. Member for East Yorkshire (Mr Knight), say that he would be more than happy to put the matter to the Committee. It is for the Committee and for the House, rather than the Government and this Minister at the Dispatch Box, to specify the appropriate procedure. If proposals for reform were presented—either along the lines advocated by the hon. Gentleman, or in another form as a result of the Procedure Committee’s considerations—it would be for the House to decide on the appropriate solution following a debate in Back-Bench time. In the context of a reformed House with more control over its own affairs, it is not for the Government to present proposals for change in this area. However, the hon. Gentleman has raised an important issue relating to the way in which we as a House conduct our business.

Perhaps I might surprise the hon. Member for New Forest East (Dr Lewis) by telling him that I now have time to allow him to intervene, if he does so quickly.

[Dr Lewis]

What a marvellous Deputy Leader of the House we have! I just wanted to record the fact that my hon. Friend the Member for Daventry (Chris Heaton-Harris), who opposes the signing of EDMs, secured my signature, along with those of more than 100 other hon. Members, to a letter that he wanted to send to the press. If it is good enough to send a letter to the press, it is good enough to get a large number of MPs’ signatures on an early-day motion.

[Mr Heath]

The hon. Gentleman has done very well to get his intervention in.

Let me end by thanking the hon. Member for Weaver Vale for raising the issue. We have had an interesting debate, and I look forward to hearing the views of the Procedure Committee in due course.

Question put and agreed to.

22:32

House adjourned.

Written Ministerial Statements

Monday 6th February 2012 Written Statements

Monday 6 February 2012

National Minimum Wage

Monday 6th February 2012 Written Statements

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)]

I am pleased to announce that I have published the final evidence that the Government have provided to the Low Pay Commission on the national minimum wage. This report updates the evidence that the Government provided in September 2011.

The report reflects the latest information on earnings and economic forecasts, as well as recent announcements on workplace pension reforms, young people and the participation strategy, and the employment law review.

A copy of the final evidence will be placed in the Libraries of both Houses and will be available from the BIS website at: www.bis.gov.uk.

London Reforms

Monday 6th February 2012 Written Statements

[The Secretary of State for Communities and Local Government (Mr Eric Pickles)]

I have today finalised a funding settlement for the Greater London Authority to reflect its new housing and regeneration responsibilities from April 2012. These new responsibilities, as a result of the London reforms in the Localism Act 2011, represent a major decentralisation of power away from Whitehall to London government, enabling the capital to manage its own affairs.

The London reforms will:

devolve the activities of the Homes and Communities Agency in London to the authority;

abolish the London Development Agency and fold in its activities to the authority; and

enable the Mayor of London to establish a mayoral development corporation to oversee the long-term development of the Olympic park and surrounding area.

My Department will provide £3 billion funding to the Greater London Authority for its new responsibilities over the spending review period up to 2014-15, incorporating relevant funding from other Departments. The funding will enable the authority to support the housing programmes it will inherit from the Homes and Communities Agency, the closure of the London Development Agency, and Olympic park transformation and legacy, as well as its existing functions.

This funding will consist of £390 million resource funding (including funding already determined for 2011-12 through the general grant to the authority) and £2,593 million capital funding, of which £1,941 million has been made available to support the housing programmes being transferred from the Homes and Communities Agency. £141 million of the resource from future years will be provided this financial year to enable the authority to restructure the £360 million Olympic land debt it will inherit from the London Development Agency.

The current Olympic land and debt deal, first agreed in March 2010, will also be replaced by new receipt sharing arrangements for the Olympic park to reflect the devolution of Olympic legacy to the Mayor. These new arrangements will enable:

the Greater London Authority to fund any further capital investment in the park and surrounding area, as well as cover the repayment of the residual debt the authority will inherit from the London Development Agency; and

national lottery distributors to be reimbursed for their additional £675 million contribution to Olympic public sector funding package.

The Homes and Communities Agency’s land and property assets in London (other than Greenwich peninsula) will be transferred to the Greater London Authority at nil consideration on the basis that this reform is a machinery of government change. Receipts from Greenwich peninsula will be shared equally between the authority and my Department reflecting significant national investment in this major site.

A copy of the funding settlement letter from my Department to the Greater London Authority, which provides further details, has been placed in the Library of the House.

Danish Presidency of the EU

Monday 6th February 2012 Written Statements

[The Minister for Europe (Mr David Lidington)]

I am keen to keep hon. Members fully informed on developments in the European Union and their implications for the United Kingdom and our priorities. I would, therefore, like to draw hon. Members’ attention to a paper on the priorities of the Danish presidency of the European Union, which has been placed in the Library of the House.

I have also deposited a copy of the Danish presidency strategic framework, which includes a timeline of key events and information on key Danish personnel for the presidency.

Family Justice

Monday 6th February 2012 Written Statements

[The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)]

My right hon. Friend the Secretary of State for Education and I will today lay before Parliament the Government’s response to the family justice review. The family justice review offered an extensive set of recommendations on how to reform the family justice system. We offer our gratitude to all of the panel members, and in particular to the chair, David Norgrove, for their dedication, creativity and hard work. The range and boldness of its recommendations offer a significant opportunity to improve the resolution of disputes in the best interests of children and their families.

In the first place, I wish to address the issue of shared parenting. This is a sensitive issue with strong opinions on both sides of the debate. The review rejected any legislative provision in support of shared parenting. Instead, it offered a range of recommendations, focused on education and parenting agreements, to help promote shared parenting—we will be taking these forward.

However, many people continue to have concerns about the proper recognition of the role of both parents by the courts. The Government accept the need to clarify and restore public confidence by a legislative statement emphasising the importance of children having an ongoing relationship with both their parents after family separation, where that is safe, and in the child’s best interests. The Government are mindful of the lessons that must be leant from the Australian experience of legislating in this area, which were highlighted by the review and led them to urge caution. We will therefore consider very carefully how legislation can be framed to avoid the pitfalls of the Australian experience, in particular that a meaningful relationship is not about equal division of time, but the quality of parenting received by the child.

The debate over shared parenting, however, must not be allowed to delay the implementation of the many other changes recommended by the review. As the review made it clear, the family justice system is under great strain. It is a system, characterised by distrust and delay. We must begin to work immediately on tackling these problems.

In public law, where the state intervenes to take children into care, our overriding priority must be to reduce significantly the unacceptable level of delay that currently exists. The average care case now takes 55 weeks and many take much longer. This delay, in practice, means months of uncertainty for a child, trapped in a difficult situation and with little stability in their life. This cannot continue.

We have already announced our intention to legislate, as soon as parliamentary time allows, for a six-month time limit on care and supervision proceedings. This will send a powerful and unequivocal message that the current level of delay is unacceptable. It will also provide a focal point for the broader changes to the system.

This six-month limit will not be achieved without fundamental changes to the way the system works. We will be introducing a number of other changes to create a more efficient and co-ordinated system. These changes include refocusing the courts on the core issues within the local authority care plans, removing duplication between the courts and adoption panels scrutinising cases already before the courts and ensuring that expert reports are only commissioned where they are essential to the case.

In private law, we are determined to provide a procedural framework that will support separating couples to resolve their disputes more reasonably and more quickly, without the need to resort to litigation in court, where it is possible to do so. To do this we will legislate to make attendance at a mediation information and assessment meeting compulsory for a person wishing to make an application to court in certain private law family proceedings unless a limited number of exemptions apply.

We will also work to make specialist parenting programmes available to separating parents earlier, rather than waiting until they come to court At the same time, we have begun to work across Government to create online support that can provide the range of information that separating couples need and will consider how parenting agreements could be used to emphasise the need for parents to consider how the child can maintain a relationship with other close family members including grandparents.

The review was also clear of the need to create a more coherent system, characterised by trust and co-ordination between the different courts and agencies involved. As the first step towards this, we will create a Family Justice Board to provide greater leadership and co-ordination across delivery agencies nationally and locally and prepare the system for the changes to come.

This Family Justice Board will bring together key Departments, delivery bodies, local authority representatives and the judiciary into a single forum to oversee the delivery of family justice. Its priority will be on driving improvements in the system’s performance, with a focus on greater cross-agency coherence, tackling variations in local performance and making progress against the six-month time limit for care cases. Additionally, the board will be tasked with driving the cultural change which is essential to transforming the family justice system. This will include better quality and more integrated training and increased information sharing across agencies. We will also bring court social work closer to other courts services by transferring CAFCASS to the Ministry of Justice.

Taken together, these steps represent a significant agenda for change. We are convinced that through this agenda we can transform the family justice system, improving the lives of thousands of children and families.

The document is also available online at:

http://www.justice.gov.uk/publications/policy/moj/family-justice-review-response.htm.

Queen's Diamond Jubilee

Monday 6th February 2012 Written Statements

[The Prime Minister (Mr David Cameron)]

I would like to make a brief statement about Her Majesty the Queen’s diamond jubilee.

Today marks the beginning of the Queen’s 60th year on the throne and the start of Her Majesty’s diamond jubilee. It is therefore a truly historic day for our nation.

I know that the House will want to join me in paying tribute to the Queen today and thanking Her Majesty for 60 years of dedicated service and inspirational leadership to all the countries of the United Kingdom, the Realms, Overseas Territories and the Commonwealth.

We expect this to be a year full of celebrations and reflections on the Queen’s remarkable achievements. During the diamond jubilee weekend in June we will enjoy a river pageant on the Thames, featuring a new specially designed royal barge and a flotilla of 1,000 other vessels. There will be a Big Jubilee Lunch up and down the country, a concert at Buckingham palace and a chain of 2012 beacons will be lit throughout the Commonwealth. We will also see the more traditional ceremonial events, including a national service of thanksgiving at St Paul’s Cathedral, a carriage procession, and an appearance on the balcony at Buckingham palace on Tuesday 5 June.

In addition, the Queen and the Duke of Edinburgh, supported by other members of the royal family, will undertake a series of regional visits and engagements throughout the United Kingdom. Members of the royal family will also travel overseas representing the Queen in visiting every realm as well as a number of Commonwealth countries, Crown dependencies and British Overseas Territories.

There will be many more special diamond jubilee events taking place throughout the year, including Her Majesty’s address to both Houses in March.

The Government and devolved Administrations are working closely with the royal household to ensure it has the best possible support in this important year and that we play our part in the celebrations.

We have, in partnership with the devolved Administrations, commissioned the diamond jubilee medal. It is being manufactured by the Worcestershire medal service and is being delivered in time for all recipients to wear during the ceremonial events of the central weekend.

At the end of this month, we will be launching a new diamond jubilee category for the Queen’s award for voluntary service, which will celebrate its 10th anniversary in jubilee year, and we will also be announcing the winners of the two civic honours competitions in March.

At the Commonwealth Heads of Government meeting in Perth last October, I was delighted to welcome the establishment of the Queen Elizabeth Diamond Jubilee Trust under the chairmanship of Sir John Major. Today, Sir John has officially launched the trust. He has also announced that the Commonwealth Secretary-General, Mr Kamalesh Sharma, will be one of its trustees.

I am pleased to confirm that the British Government will make a significant contribution to the trust of up to £50 million. This will help the trust undertake activities to transform the lives of the Commonwealth’s poorest citizens, and we hope it will attract other contributions from other Governments and members of the public across the Commonwealth. The arrangements for the UK Government’s support, which will be made through the UK’s Department for International Development from its official development assistance budget, will be finalised soon.

The Government will also be providing operational support to the key events over the diamond jubilee weekend, including policing, crowd control, and transport management, as well as support for the ceremonial events.

Further details of these events and other plans for the diamond jubilee are available online at: www.direct.gov.uk/diamondjubilee, as well as from the official diamond jubilee website, www.thediamondjubilee.org, which launches today.

Above all this will be a year when each and every one of us can come together in our communities to celebrate our gracious Queen’s long and glorious reign.

Grand Committee

Monday 6th February 2012 Grand Committee

Monday, 6 February 2012.

Arrangement of Business

Monday 6th February 2012 Grand Committee

Announcement

15:30

[The Deputy Chairman of Committees (Baroness Gibson of Market Rasen)]

My Lords, before the first Motion is considered, I remind noble Lords that in respect of each statutory instrument to be considered today, the Motion before the Committee will be that the Committee do consider the statutory instrument in question. The Motions to approve the instruments will subsequently be moved in the Chamber in the usual way. If there is a Division in the House, the Committee will adjourn for 10 minutes.

Local Digital Television Programme Services Order 2012

Monday 6th February 2012 Grand Committee

Considered in Grand Committee

15:31

Moved By

[Baroness Rawlings]

That the Grand Committee do consider the draft Local Digital Television Programme Services Order 2012.

Relevant documents: 37th Report from the Joint Committee on Statutory Instruments

[Baroness Rawlings]

My Lords, the UK’s media and public service broadcasting is widely regarded as among the best in the world. We enjoy plurality in newsprint at all levels and have a diverse commercial and community radio sector. Yet the UK’s media market has never properly developed in one significant respect: that is, local television. This is despite Ofcom research showing significant interest from UK consumers—80 per cent of people rate local news as important to them.

The Government have carried out extensive consultation and studies to identify how local TV can work in the United Kingdom. This culminated with our recent announcement of the first 20 locations expected to receive a local TV licence this year. The Government are now taking the necessary steps to implement an innovative new framework, some of the components of which are before the Committee today. We are not imposing new burdens on business but, instead, removing barriers to entry and creating new incentives. The two instruments before the Committee today need to be considered collectively. A third instrument to secure electronic programme guide prominence for local TV has also been laid by the Government but is not before the Committee today. We hope that the local television channel will be channel 8 in England and Northern Ireland.

For local TV to feature on the digital terrestrial television platform—that is, Freeview in lay man’s terms—it needs access to suitable spectrum. Therefore, the Secretary of State is directing Ofcom, through the Wireless Telegraphy Act 2006 (Directions to OFCOM) Order, to make sufficient spectrum available for local TV. Spectrum is already available to public service broadcasters. The beauty of our proposals is that we will be using spectrum available in the space between existing transmitters. This “geographic interleaved” spectrum allows different services to be broadcast in different locations—perfect for local television—instead of reserving portions of valuable nationally available spectrum. However, this spectrum does vary in signal strength across the UK. The list of pioneer local TV towns and cities identified by Ofcom are those with good spectrum coverage. Where spectrum coverage is inadequate, the Government expect that local TV services will develop online and, in the future, be carried through internet protocol television as this market develops. This instrument will meet the needs of local TV, which is low-cost and offers incentives to potential local multiplex operators. In most places, the amount of interleave spectrum being made available for local TV purposes is less than 10 per cent overall—meaning that there is plenty of spectrum remaining for other purposes.

The Local Digital Television Programme Services Order modifies the Broadcasting Act 1996 by creating a new licensing regime for local television, administered by Ofcom. The order provides for licensing the operator of the multiplex that will hold the spectrum being made available and for licensing the individual local television services. The multiplex operator will manage the spectrum and associated infrastructure to enable transmission of local TV services. We are preventing the multiplex operator from taking advantage of the local TV providers. It cannot charge local TV services transmission rates above cost recovery. The multiplex licence holder must also co-operate by meeting the minimum coverage obligations. Local service licensees will be obliged to provide content of interest to local audiences, suited to the local population’s needs and public service in nature.

Finally, the instrument provides for the establishment of an industry body for local TV. This could take a number of functions, such as measuring audience viewing numbers, and it could even bid for the multiplex licence if it became available, thereby helping to align the commercial interests of the multiplex operation with those of local TV services.

Collectively, the measures in these two instruments offer certainty of access to spectrum and equip Ofcom to license local TV. I hope the Committee agrees it is essential that we address the local TV deficit in the media marketplace, help create new opportunities for business and give audiences the plurality in content that they desire. I assure the Committee that we are satisfied with the orders and that they are compatible with Convention rights. I commend these orders to the Committee. I beg to move.

[Baroness Jones of Whitchurch]

My Lords, I thank the noble Baroness for her explanation of the two statutory instruments. The theory behind local TV is laudable; people are interested in what is happening in their local community and should be encouraged to become more knowledgeable and play a part as active citizens, including holding their local representatives to account. If local TV can successfully go some way to achieving those objectives, then it should be supported and welcomed. However, decisions like these are not made in isolation: we also have to look at the wider context—particularly as in this case, where there is public money involved through the proposed subsidy from the BBC.

In particular, I would like to explore further whether the demand for this service really exists. Would the service stand any real likelihood of long-term success once the subsidy is removed? Would a local TV service have a negative impact on existing local media outlets? Are there any adverse media ownership and plurality issues? What guarantees of quality would really exist when the scheme is up and running?

First, I would like some further evidence that there is sufficient demand for local TV to make it viable. The Minister said—and it is recorded in the impact assessment—that the Ofcom research identified that 80 per cent of people rate local news as important. I do not doubt that to be the case. However, does this not need to be measured against the evidence of consumer behaviours where local TV has been on offer in the past? The previous experiments with local TV in the UK have all failed, in part because they could not sustain the viewing figures. At the same time, local newspapers around the country are closing or being produced less often. Surely if there really was sufficient demand, this would not be the case.

Given that the Government have supposedly championed evidence-based policy, I am surprised that the department has not carried out more specific research into demand for this model of local TV. The Minister referred to extensive research. I should like more information about that. For example, what proportion of the local population do we know would seek out one or two hours of local TV programmes on a channel on which the overwhelming level of content was unconnected to the local area? Is there a preferred time for local programmes and can these slots be guaranteed when they will be competing with more commercial productions in primetime? If we do not know the answers to these questions, would it not have been safer to pilot the initiative in one or two cities rather than roll out the scheme nationally to 20 providers and then a further 24 conurbations with the associated costs? What research exists and what reassurance can the Minister give us that the scheme is viable?

Secondly, I should like to pursue the issue of the longer-term sustainability of these programmes. As we know, the BBC is providing £40 million over four years, including £25 million start-up costs. As I understand it, this money will be used to set up the infrastructure of the multiplex system, the licensing system and local production start-up costs. Meanwhile, the report from Nicholas Shott identified that, in the longer term, local TV would probably be delivered by internet protocol TV—the Minister made reference to this—and this is a widely held industry view. This begs the question of why we are investing so many of our scarce resources in a local TV system which will be overtaken by changes in digital technology almost before it has had time to become established. Would we not have been better off working with the sector to embrace these changes and be prepared for a new digital age rather than setting up what appears to be a convoluted bidding system, which will then have to go through an awkward transition into the eventual internet protocol scheme?

Incidentally, the Shott report also places great emphasis on the viability of local TV depending on high listing in electronic programme guides—again, the Minister made reference to this. I know that we are not debating this today, but I am not sure that that would be easy to achieve, as the listing system is highly competitive and there are other worthy candidates for front-page listing. I am not sure that we can guarantee that local TV stations would be given a listing on the first page of EPGs.

Thirdly, I should like to explore further the impact of the proposals on existing local media outlets. The reason that many local newspapers are struggling is that advertising revenues are down, as people switch to the internet to access details of local shops and services. I understand the argument that some businesses might be more attracted to advertise on, let us say, Brighton local TV than on Meridian TV, as the catchment area is more aligned to the smaller Brighton area, but we are talking about the same consumers who no longer read the Brighton Argus or look for adverts in it. I am not sure that it would make commercial sense. How will existing media outlets, including local newspapers and commercial radio, avoid fighting over a declining pool of advertising revenue, putting them all at greater commercial risk?

This brings me on to ownership and plurality. In a number of debates in your Lordships' House, there has been a cross-party consensus that plurality in media ownership is the bedrock of a healthy democracy. On the face of it, local TV could add to that diversity, which would be welcome, but is there not a danger that it could have the opposite effect? The relaxation of the cross-media rules, combined with more intense local competition for market share, could result in one organisation or one person controlling all the local commercial media outlets—newspapers, radio and TV. The Shott report seemed to suggest that this would be welcome, as there could be pooling of news gathering and advertising resources. Is that a potential or desirable outcome? Perhaps the Minister can clarify what controls will be in place to guarantee local plurality.

15:45

That brings me to my next point, which is about quality and standards. The proposals make great play of the role of local TV in strengthening local democracy and holding local representatives to account. Of course we are keen to encourage appropriate measures that inform and inspire people to play a greater part in their local communities, but if there is a threat of a monopoly control of local news and current affairs, can we really be assured that the rules of impartiality will be applied fairly across the board? Can the Minister clarify how the total 24-hour output of the new channels will be regulated? On the one hand, there are the factual news programmes, and I understand that the rules of impartiality will apply to them. Then there is the other local coverage of, say, one or two hours a day, which Ofcom foresees as stimulating cultural identity and local democracy. That could cover sensitive issues. How will it be regulated and the channels held to account?

As I understand it, the remaining output of the channel may cover, say, 22 hours a day—in other words, the vast bulk of the output—which is not envisaged necessarily to be local in nature. Apart from a ban on pornography, are there any other restrictions on what can be shown? How can we be assured that there will be any commitment to quality programmes in the main programme outputs of the day, which, after all, we are effectively subsidising?

Finally, I have a specific question about the decision to include London in the first tranche of sites. Is it intended that the London licence will be coterminous with the existing London regional news output? Is the idea that they will go head to head? Although the London local TV slot will, I am sure, be one of the most commercially desirable, I struggle to see how it can play a part in the objective to help struggling local community development when it is covering such a wide area. Perhaps the Minister can explain the thinking behind that.

In conclusion, I do not object in principle to the concept of local TV. As I said at the outset, any initiative which seeks to build on local democracy should be welcomed. Depending on the answers that the Minister can give today, I remain concerned that the proposals have not been properly researched, that it will not be commercially viable in the longer term, that it could have a negative impact on other local media outlets and that the government subsidy could have been better spent. I look forward to hearing what the noble Baroness has to say on those issues.

[Baroness Bonham-Carter of Yarnbury]

My Lords, I, too, thank my noble friend for her presentation. The provision of local news is very important, and we support steps being taken to promote the local democratic process through greater access to information, but there are a few areas of concern which it would be helpful if my noble friend could clarify.

It is clear that local television stations, as commercial enterprises completely unsubsidised by government, will be very much dependent on advertising revenue. Can my noble friend tell us what is being done to promote local television to advertisers? It is also clear that the key motivation for advertisers will be the audience viewing figures, but, at present, there is no trusted audience measurement system proposed, as I understand it. It would be helpful to know whether there are any plans for the creation of a local audience measurement system.

As the noble Baroness, Lady Jones, mentioned, many are concerned that any local television advertising revenues which are realised will come from cannibalising existing local providers operating in radio and print. Although we recognise the importance and potential benefits of local TV services, they must not come at the cost of other forms of local media.

Finally, the department has said that £25 million of local TV infrastructure costs will be met from the BBC licence fee, with a further £5 million of licence-fee money to be spent annually for three years on local content. Can the Minister offer any insights as to what will happen after those three years? How can the Government ensure that taxpayers will not continue to fund these stations if they are unable to earn sufficient advertising revenue? Does the noble Baroness agree that BBC local radio must also be protected, and does she support the chairman of the BBC Trust’s recent direction to the executive that cuts to BBC local services should be reassessed? Have any discussions taken place with the BBC to encourage it to share its skills and knowledge with local television services as they are set up? Given that the BBC as an organisation holds a wealth of creative and technical talent that uniquely is spread across the country, it would seem sensible for such a resource to be shared, where possible.

[Lord Clement-Jones]

My Lords, I entirely agree with everything that my noble friend Lady Bonham-Carter has said, and perhaps I may ask the Minister a quick question about detail. Will local television be entitled to an average of nine or seven minutes’ advertising an hour?

[Baroness Rawlings]

My Lords, I thank all noble Lords who have contributed to this short debate with many very valid points and interesting questions. I will try to respond to as many as possible.

The noble Baroness, Lady Jones, asked about the declining pool of advertising revenue. Local television is expected to take less than 3 per cent. We are creating new opportunities for existing local media to diversify their business through television. Local television has the potential even to grow in the television advertising market.

Why do we include London, which has a large population compared to many other places? London’s local licence is separate from the BBC and ITV regional offer. London TV will be required through licence obligations to meet the needs of local London viewers. Like all such programmes, they will be tailored to local needs and requirement.

Regarding ownership of local television services, the Ofcom beauty contest, which will be starting quite soon, means that the bidders offering content that is most relevant to local viewers will be more likely to win a local licence. Licence conditions will include localism criteria, so that licensees will need to provide content of interest to local audiences that will support local democracy. Any local cross-media mergers will be subject to competition law and to the media public interest test.

The noble Baroness asked several questions about regulating the content of local TV. The broadcasting code will apply to local TV services, which will therefore have to make certain that any news programmes are impartial and accurate—the same as applies to other television news programming. These new services will be a way to increase the provision of quality local content supported by licence conditions imposed by Ofcom.

Regarding the impact on the wider local media, we do not expect local television to take away large amounts of local newspaper advertising revenues. Research by Enders Analysis, which the noble Baroness might have seen, suggested that local TV could take approximately 3 per cent of the existing local advertising market. We also expect that local newspapers may well be interested in bidding to run local television services as a way of diversifying their portfolios.

The noble Baroness asked about quality and impartiality. Ofcom’s scrutiny process will produce incentives to competition and to bidding for local television licences, thereby driving up quality. All news shown by local television will have to be impartial and comply with the broadcasting code, which is very important.

The noble Baroness asked whether there was demand and why previous attempts failed. Ofcom research clearly shows high demand for local content. As she mentioned, Nicholas Shott looked very carefully at commercial validity. Previous local television providers were available but low on the EPG list, and on analogue. Our proposals secure high EPG listing and create incentives through the spectrum and licensing. This is a new framework, which was not previously available.

What happens when the BBC funding runs out? We have worked hard to understand the issues around commercial viability for local television. The framework that we are putting in place offers the best chance for viability, with assistance from the BBC, EPG prominence, an appropriate licensing framework and the reservation of spectrum. With all these factors in place, and an enthusiastic local market, we expect local television to be viable.

My noble friend Lady Bonham-Carter asked about audience measurement. Through the licensing regime, we are enabling the creation of and participation in a local TV body. This body will be able to invest in audience research, such as BARB. My noble friend also asked what will happen after three years. Local television will be in a commercial position and the advertising offer should be in place after three years to make long-term sustainability certain.

My noble friend Lord Clement-Jones asked about timing. No decision has yet been made. Whether local television will be entitled to seven or nine minutes of advertising an hour is a matter for Ofcom. It will rule on that, along with all the other areas on which it will be rule.

Finally, I reiterate that this legislation creates new opportunities for businesses and audiences. The strategic framework being put in place means support from the BBC, prominence on electronic programme guides, allocated spectrum and a new fit-for-purpose Ofcom licensing regime. This will help local television to become a fundamental part of the broadcasting landscape in the UK, which will in turn support local democracy, increase local public service content and act as a driver for growth in the local media market. I am most grateful for all the clarifying questions that the noble Baroness asked.

[Baroness Jones of Whitchurch]

Could I press the noble Baroness on one point, which I asked about but which I do not think she answered? I understand that when the licences are given out, it will be to a provider who will then be able to broadcast 24 hours a day. The local element is envisaged to be only ever a couple of hours a day, give or take one to three hours. Certainly, the provider will not just broadcast local news over that 24-hour timescale. I am still not clear as to what controls will be on the producers to guarantee quality for the other—let us say—20 or 22 hours a day. They could end up on the front page of the electronic programme guide for producing cartoons or something of poor quality—not what we would regard as decent-quality public service broadcasting. I just want some clarification on what controls there will be on that element of a channel’s broadcasting.

[Baroness Rawlings]

That is a very important point and one that should be considered. This will vary according to the local TV provider and Ofcom will assess bids on the basis of the offer. Local content could run over 24 hours but there are quality controls, and this will be part of the Ofcom licensing regime. If there are any further details that I have not addressed fully, I shall of course write to the noble Baroness. I commend the order to the Committee.

Motion agreed.

Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2012

Monday 6th February 2012 Grand Committee

Considered in Grand Committee

16:00

Moved By

[Baroness Rawlings]

That the Grand Committee do consider the draft Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2012.

Relevant documents: 37th Report from the Joint Committee on Statutory Instruments.

[Baroness Rawlings]

My Lords, I have already spoken to this order.

Motion agreed.

Housing (Scotland) Act 2010 (Consequential Provisions and Modifications) Order 2012

Monday 6th February 2012 Grand Committee

Considered in Grand Committee

16:01

Moved By

[Lord Wallace of Tankerness]

That the Grand Committee do consider the draft Housing (Scotland) Act 2010 (Consequential Provisions and Modifications) Order 2012.

Relevant documents: 37th Report from the Joint Committee on Statutory Instruments.

[The Advocate-General for Scotland (Lord Wallace of Tankerness)]

My Lords, the draft order was laid before your Lordships’ House on 10 January 2012. In asking your Lordships to agree that it should be considered, I shall provide the Committee with a brief summary of what the order seeks to achieve.

The order is made under Section 104 of the Scotland Act 1998, which allows for necessary or expedient changes to UK legislation in consequence of an Act of the Scottish Parliament. The order is made in consequence of the Housing (Scotland) Act 2010, which I shall refer to as the 2010 Act. The Lords Merits Committee has reviewed this order and has not noted it as being of special interest.

The 2010 Act made provision for the regulation of social housing in Scotland, including the establishment of the Scottish Housing Regulator. The 2010 Act repeals Scottish Ministers’ regulation and inspection functions under Part 3 of the Housing (Scotland) Act 2001. In their place, it establishes the Scottish Housing Regulator as an independent body with the objective of safeguarding and promoting the interests of persons who are or who may become homeless, of tenants of social landlords, and of recipients of services provided by social landlords. The Scottish Housing Regulator will operate within a set of priorities agreed with Scottish Ministers but will be accountable to the Scottish Parliament for the efficient use of public resources.

The order will make the Scottish Housing Regulator a part of the Scottish Administration. An important effect of this arrangement is that staff of the agency who presently discharge functions on behalf of Scottish Ministers under the Housing (Scotland) Act 2001 and are currently civil servants will transfer to the Scottish Housing Regulator and continue to be civil servants. The order will ensure that UK legislation is updated to reflect the changes made in the 2010 Act, and will ensure that UK legislation can continue to operate where it interacts with the new devolved legislation. It will also ensure that the Crown Suits (Scotland) Act 1857 does not apply to the Scottish Housing Regulator, with the effect that the Lord Advocate cannot be sued in the place of the Scottish Housing Regulator.

The order demonstrates the Government’s commitment to working with the Scottish Government to make the devolution settlement work. I hope that the Committee will agree that this order is a sensible use of the powers in the Scotland Act to achieve a practical outcome. I commend the order to the Committee and I beg to move.

[Lord Browne of Ladyton]

My Lords, I thank the noble and learned Lord for his words of introduction. I should say at the outset that I have no issue of principle with, or any objection to, the order before the Committee. I shall take only a few minutes of the Committee’s time to make some points of context and to raise one point for clarification.

As the noble and learned Lord and indeed the Explanatory Memorandum make clear, the order is consequential on the provisions of the Housing (Scotland) Act 2010—unusually, I suppose, for an Act of the Scottish Parliament, which among other things makes provision about the regulation of social housing in Scotland. It is unusual to the extent that it is not normal for regulations to be made here in consequence of an Act of the Scottish Parliament when there are provisions, as the Minister has pointed out, to ensure that where necessary consequential provisions require Acts of this Parliament they will be carried out in the context of the Scotland Act 1998.

In turn, the 2010 Act is just the legislative leg of a journey that started back in October 2007 with the publication of Firm Foundations, the discussion document on the future of housing in Scotland that set out the new SNP Scottish Executive’s proposals for reform and their policy ambitions for Scotland. The SNP entered government with an ambition to increase the rate of new supply of housing in Scotland to 35,000 units per year from the 25,000 per year that they inherited from the previous Scottish Executive, and they had an election pledge to build 6,000 socially rented houses for each year in government. However, they are far from realising their primary target; indeed, today the website of Shelter Scotland, drawing on the Scottish Government’s own statistics, shows that in 2010-11 just over 16,000 new homes were built in Scotland, which, as anyone who knows basic arithmetic will see, is 9,000 per year fewer than what they inherited. As a result of the SNP’s cuts to the affordable housing budget, the social sector will fall by 30 per cent this year, which will choke off growth in social housing. At the same time, the SNP has rejected Labour’s five-point plan for jobs and growth in Scotland that would use the revenue generated from the bank bonus levy to create jobs and fund the construction of 2,500 affordable homes in Scotland. Instead, the nationalists have slashed new build approvals to an unprecedented low and seem to have scrapped their manifesto promise and previous targets.

My second general point is that, to the extent that the order reinstates the independent regulation of social housing in Scotland, we support it. However, the real disappointment of the 2010 Act is the missed opportunity to improve the regulation of the private rental sector in Scotland. A strong and responsible private rental sector is vital to delivering affordable housing, and we are committed to rooting out rogue landlords and placing stronger duties on all landlords to maintain standards in the properties that they rent. Those who have represented constituents in Scotland will know that the conduct of these landlords is the bane of many communities there.

I make all these points because, despite the fact that a whole chapter of Firm Foundations was devoted to the rented sector, since then the SNP Government have focused on restricting the right to buy and restructuring the administrative arrangements, of which the set of regulations before the Committee are but a part. They have avoided completely the problems that arise from the private rental sector in every single community in Scotland, and have substantially failed to address the fundamental problem of the crisis in social housing in Scotland.

Despite all that, the changes that the order makes are uncontroversial from the perspective of these Benches. Primarily the changes ensure that civil servants who at present perform the regulatory functions of the existing Scottish Housing Regulator as an agency of the Scottish Executive continue to hold the status of civil servant when they transfer to the new Scottish Housing Regulator, which will be a body corporate. As the Minister has said, this is done by making the new Scottish Housing Regulator a part of the Scottish Administration.

As your Lordships will realise by now, the serious questions that I have in relation to this whole policy are not properly addressed to the Minister at all; rather, they are addressed to the Scottish Executive. As there is an opportunity to put them on the record, though, I could not resist it. I have one relatively simple question for him regarding the second part of the regulations. Article 3 relates to the application of the Crown Suits (Scotland) Act 1857. As I understand it, as this is a body corporate—an independent body, part of the Scottish Administration but not part of the Executive—if one has to sue it, one will not have the benefit of being able to sue the Lord Advocate. In other words, one will not have the option of suing the Government for any action that one has against them.

I should just like the noble and learned Lord to take the time to ensure that those who may at some stage have to read this record are clear that it is the Government’s expectation that that body will have sufficient resources to meet any liabilities generated in relation to anybody who has cause to sue it. It may not be an issue that he is able to address directly without some form of inspiration, so I should be happy for him to write to me about it.

[Lord Wallace of Tankerness]

My Lords, I thank the noble Lord, Lord Browne of Ladyton, for his response and for generally welcoming the principle that underlies the order. As he indicated, it has three functions. One is to ensure that the Scottish Housing Regulator becomes part of the Scottish Administration. That is something that the Scottish Parliament does not have the legislative competence to do—hence the need for this order. Again, the Scottish Parliament does not have the competence to change UK legislation beyond the devolved competence, and an order such as this allows that to happen. We will come back to the point about the disapplication of the Crown Suits (Scotland) Act 1857.

The noble Lord said that he thought it was somewhat unusual for us to be here discussing secondary legislation that is essentially an Act of the Scottish Parliament. I understand that since 2000 there have been 51 orders under Section 104 of the Scotland Act. Indeed, I think that since I took office I have brought to a Committee orders under Section 104 on at least three or four occasions. In spite of some of the furore and some of the headlines that one sees about relationships between the Westminster and Holyrood Governments, there is in fact considerable co-operation between the two Governments over a large area of work. There is certainly also a willingness to give the legislation of the Scottish Parliament full effect in areas which it has not been able to tackle as they have been beyond its legislative competence. In such cases, through co-operation and negotiation it is possible to bring forward orders such as this to give effect to the intention of the Scottish Parliament.

The noble Lord clearly raised matters of policy. Tempted though one may be to follow him down that path, although I have many responsibilities, one is not to answer on behalf of the Scottish Government, for which mercy I should probably be very grateful. However, he has taken the opportunity to highlight important housing policy issues relating to building to meet housing need and the importance of ensuring that the private rented sector is well regulated. From his former experience as a constituency Member, he has obviously identified many cases where proper regulation is needed.

It is also fair to point out that when the consultation took place on the Firm Foundations document there was overwhelming support from the stakeholders who responded that there should be a high degree of support for the principle of independent regulation, which of course is what is sought to be done by the establishment of the Scottish Housing Regulator.

The noble Lord, Lord Browne, also asked a specific question about the Crown Suits (Scotland) Act 1857. As he indicated, as a result of the body becoming a body corporate, it was deemed more appropriate that legal action should be taken against the body itself and not against the Lord Advocate. He asked what would happen. I am more than willing to write to the noble Lord with a fuller answer but the short answer is that the public purse would pick up the costs if, for example, there was a judicial review. Clearly, that would be a matter for budget negotiations. It would be a question of whether the Scottish Housing Regulator had the resources for that and whether the budget would have to be adapted in other ways. However, I shall certainly give greater clarification to the noble Lord on that point. I think that only if the board acted well beyond its competence or unreasonably would the costs would fall upon it, but I shall seek to clarify that point.

I hope that I have responded to the noble Lord’s points and I therefore ask the Committee to agree that it has considered this order.

Motion agreed.

Revenue and Customs Appeals Order 2012

Monday 6th February 2012 Grand Committee

Considered in Grand Committee

16:16

Moved By

[Lord Sassoon]

That the Grand Committee do consider the draft Revenue and Customs Appeals Order 2012

Relevant documents: 38th Report from the Joint Committee on Statutory Instruments.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the order before us today makes a small but important change to the Tax Credits Act 2002. It inserts a reference to the First-tier Tribunal in Great Britain into Sections 63(5) and 63(8) of the Tax Credits Act. This corrects an error in the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009.

As the legislation currently stands, the settlement process at the review stage of the appeals process for tax credits applies only to appellants living in Northern Ireland. This order will update the legislation so that appellants in Great Britain are also covered, just as they were before the functions were transferred from the former appeals bodies to the new tribunals.

Let me provide further detail on the appeals review process. There has been an appeals review process in place since April 2003, when tax credits were first introduced. When a claimant lodges an appeal against a tax credit decision, the first step is for HMRC to confirm whether the information used to make the tax credit decision is correct. This is a substantial undertaking on the part of HMRC. In 2010-11, for example, HMRC had to deal with around 40,000 appeals against a tax credit decision. By actively seeking settlement, however, around 80 per cent of those cases have been revised and agreed at the settlement stage. Where HMRC’s review indicates that the original decision is incorrect, HMRC will revise it, but if the appellant does not agree to settle then the appeal will be sent to the tribunal to decide.

Once the tribunal receives the appeal request, it will contact all parties to arrange for the case to be heard and may require the appellant to present his case. Even at this stage, if the parties involved agree a settlement, then the case will not proceed to the tribunal and the appeal is withdrawn. Of the 20 per cent of cases that go to the tribunal, HMRC’s decision is upheld 87 per cent of the time.

This brings me to the need for this order today. According to the appeals process as it currently stands in legislation, all tax credit appeals in Great Britain should be sent directly to the First-tier Tribunal, without HMRC having the opportunity to review the case and offer the possibility of a settlement. As I am sure your Lordships will appreciate, the settlement process saves appellants from going through what can be an emotionally demanding and challenging process in the tribunal. I reassure the Committee that HMRC none the less has continued to review cases since 2003 and has aimed for settlement of appeals in the normal way.

The order before us today embeds that process in law for the whole of the United Kingdom, not just Northern Ireland. It ensures that the legislation is restored to the intended policy position in the whole of the UK, when the former appeals bodies in Great Britain were abolished and their functions transferred to the new First-tier Tribunal. This important reference to the First-tier Tribunal in Great Britain was inadvertently omitted when tax tribunal functions were transferred to a new tribunal system in 2009. The omission occurred when amendments were made to the Tax Credits Act 2002, and came to the department’s notice only early in 2011.

I therefore hope that noble Lords will recognise the need for this order so that individuals appealing tax credit decisions in Great Britain do not by law have to have their case heard by a tribunal. It ensures that we embed a fair, efficient and transparent system of tax credit appeals across the entire UK, and it avoids the unnecessary and burdensome process of taking tax credit appeals to tribunal, freeing HMRC time to focus on its core function of collecting tax revenue. I commend the order to the Committee.

[Lord Eatwell]

My Lords, I am most grateful to the Minister for introducing the order in such a thorough manner. Of course, no impact assessment was made in the explanatory information but there was a helpful reference to the impact assessment made at the time of the Transfer of Tribunal Functions and Revenue and Customs Appeal Order 2009. The questions that I wish to put to the Minister arise from assessing the arguments made in that impact assessment, or from attempting to project them on to this case.

First, the impact assessment made the point that the transfer to the new tribunal system would involve what it described as,

“a slight increase in administrative burdens on small businesses and individuals”.

Here, with respect to tax credits, we will be talking predominantly about individuals. The description of the regularisation of the process of tax credit appeals that the noble Lord has put forward will still contain the 20 per cent of appeals going on to the tribunal. Has there indeed been an increase in administrative burdens on tax credit appeals and, if so, how significant is that burden assessed to be? Moreover, since it is now nearly three years since the general transfer was made, I wonder whether the recognition that there has been an increase in administrative burden in general for income tax appeals was indeed forthcoming; and what the impact on appeals has been.

Secondly, at the time of the transfer, a strong case was made by many stakeholders that the transfer from the general commissioners of income tax to the tribunal system involved a significant increase in the burden on appellants, given that there was a reduction from 400 geographic divisions to just 130. Has this affected the appeals with respect to tax credits? If so, what is the assessment of the impact on appellants?

Thirdly, in the impact assessment there was some general assessment of the economic advantages of the new appeals system. It was argued that costs would be reduced from £3 million to £2.75 million per year. Has that cost saving been realised? It was also argued that the set-up costs would simply be £1.25 million. Was that the figure, or was it greater or lesser? What is the estimated cost, if any, of the introduction of this order?

[Lord Sassoon]

My Lords, I thank the noble Lord, Lord Eatwell, for his focused contribution, even if it sets me some challenging questions about the burdens involved.

The easy question to deal with is the one on burdens. There has been no increase in administrative burdens or in the burden and costs on appellants. That is key, I think, for the narrow discussion this afternoon—

[Lord Eatwell]

My Lords, can the noble Lord tell me how he can confidently assert that there has been no increase in burden on appellants? What evidence does the Treasury have?

[Lord Sassoon]

My Lords, these things are tracked by HMRC, which put together the underlying information in the original impact assessment.

In essence, I think that we need to look at two aspects of these questions. First, what continued to be done as a matter of administrative practice by HMRC was in line with what had happened before the new system came in and what was intended by the policy set out by the previous Government. In that sense, what we are doing this afternoon is neutral in terms of burdens and costs, as the noble Lord, Lord Eatwell, recognises—I see him nodding. I hope that he accepts that that is indeed the case. The assessment is that there has been no increase in burdens on appellants and no increase in costs.

On the question of the set-up costs and annual costs given in the original impact assessment, which is a perfectly fair and more broadly relevant question but does not, I suggest, touch on the narrow question of costs relating to sorting out the wording provided by the order this afternoon, if it would be acceptable to the noble Lord, I will see what other information is available at reasonable cost. I hope that he will understand that, on the narrow point, I have given him the assurance and, on the wider one, we will look at the matter and, if the information is available without inordinate cost, I will see what other information I can give him on the costs of the new regime.

The critical issue, which I come back to, is to reassure the Committee that no claimants have been affected by this missing reference in the Tax Credits Act. HMRC has continued to seek settlement for appeals in the normal manner in Great Britain as well as Northern Ireland. Where the appellant agrees with the settlement, the appellant is asked to withdraw the appeal; it is only in cases where the appellant does not wish to settle a case that it is passed to the tribunal to decide and, even then, there remains the option of reaching a settlement. So, in that sense, this is a neutral piece of tidying up. This order seeks legally to embed that process for the whole of the UK and to ensure that legislation is restored to the intended policy position for the whole of the UK. I commend the order to the Committee.

Motion agreed.

[Lord De Mauley]

My Lords, in view of the absence of the noble Lord, Lord Carter of Coles, who is to open the next debate, I suggest that the Committee do adjourn during pleasure until 4.40 pm.

16:29

Sitting suspended.

EUC Report: Agriculture

Monday 6th February 2012 Grand Committee

Motion to Take Note

16:44

Moved by

[Lord Carter of Coles]

That the Grand Committee do take note of the report of the European Union Committee on Innovation in EU Agriculture (19th Report, HL Paper 171).

[Lord Carter of Coles]

My Lords, I declare an interest as a farmer in receipt of payments under the common agricultural policy.

“Sometimes we talk about agriculture as something very old and traditional; it is not competitive and we can forget it. We really don’t understand how strategic agriculture will be in the future … We have left the era of surplus and come to the era of scarcity. We need to refocus what an Innovation Union is … agriculture is at the centre of an Innovation Union and the new global challenge”.

Those of your Lordships who have our Innovation in EU Agriculture report to hand will know that these are not my words but those of Mr Paolo de Castro MEP, the chair of the European Parliament’s Agriculture Committee, who gave evidence to our inquiry. We quoted Mr de Castro’s words at the start of our report because they encapsulated the key concerns of the committee, which I am sure are widely shared in the House.

The committee sees a future characterised by risk and uncertainty. The first risk is that of climate change, which threatens more extreme weather events; the second is that of demographic change, which means more mouths to feed and more complex diets to satisfy; the third is the multiple uncertainties which surround the economic health of states in Europe and elsewhere. It is imperative that policy-makers in all areas have their eyes open to these risks. Our inquiry left us in no doubt that agricultural policy is no exception; indeed, we suggest that it is of central importance in meeting the challenges ahead.

Since our report was published, the European Commission has presented its proposals for the common agricultural policy from 2014. I shall say more about that and our assessment of it later on. For us, the key test is how they measure up against the need to orientate the CAP towards the thoroughgoing support of innovation in agriculture, because, if we do not increase productivity, we face some very serious challenges.

It is almost exactly a year since the Government Office for Science published the Foresight report on global food and farming futures. I was pleased to chair a seminar here in the Palace last February at which Sir John Beddington, the Government Chief Scientific Adviser, presented his findings to us. Against the background of projections that foresee an increase to 9 billion in the world’s population by 2050, the Foresight report highlighted six important drivers of change. The first, obviously, is the global population increase; the second is the size and nature of per capita demand; the third is the governance of the food system; the fourth is climate change; the fifth is competition for key resources, as we can see in Africa now; and, the sixth, is changes in consumers’ behaviour.

The committee was able to take evidence from Professor Charles Godfray, one of the lead experts for the Foresight report, about the need to bring about what we call the “sustainable intensification” of agriculture. Your Lordships will no doubt recall that the Royal Society has supported this aim and explained it as the process of increasing agricultural yields without adverse environmental impact and without the cultivation of more land. We also supported it when we reported on adapting EU agriculture to climate change in March 2010. In his evidence to us, Professor Godfray said that, given the certainty of increasing demand for agricultural output, sustainable intensification was,

“almost a deduction rather than an argument”,

and he described innovation as critical to sustainability.

As your Lordships know, CAP represents more than 40 per cent of the EU’s budget expenditure. For the period 2007 to 2013, the agricultural policy budget is around €400 billion, which is split roughly 80:20 between direct payments under Pillar 1 and rural development measures under Pillar 2. There are, of course, powerful arguments that this level of EU expenditure is too high, but we must face the political reality that while the overall level may be reduced, the EU will continue to offer major financial support to European farmers over the next budgetary period from 2014.

Our report maps out ways in which future CAP expenditure should be directed towards promoting innovative agriculture, and, in particular, we call for money to be switched out of the CAP and into increased funding for agriculture and the EU’s research programme. We argue that when payments are made under Pillar 1 of the CAP, this should be in return for the delivery of environmental benefits by the recipients. We also call for a higher share of CAP funding to be reallocated towards innovation under the rural development fund in Pillar 2. I should like to talk about each of these changes in turn.

First, regarding agricultural research, we were struck by information making global comparisons in agriculture. The OECD and the FAO co-operate in analysing agricultural markets over a 10-year horizon. In our report, we quote the OECD-FAO Agricultural Outlook 2010-2019 and highlight projections for increased agricultural production over the next decade in different parts of the world. We found the numbers particularly compelling. In Brazil, the forecast increase is more than 40 per cent; in the United States, growth of between 15 and 20 per cent is forecast; yet the projected increase in Europe is a mere 4 per cent—hardly adequate to deal with the challenges that the continent faces.

A mix of factors underlies these comparisons and the starting points for farming in these different areas vary widely. However, anyone looking at these comparisons must surely share our view that the options for the future of EU agriculture would not include a steady-as-she-goes approach. It is just not good enough to carry on as we are. Again, I use a quotation from one of our witnesses—a most impressive witness— Mr Georg Häusler, Head of Cabinet of the Agriculture Commissioner. He spelt out the need for the European Union to look beyond its boundaries and respond to the fast-changing world we are in. He said:

“We in Europe are sitting here saying, ‘Agriculture is the old economy’, in what I call an innovation-hostile environment”.

We have heard this before. He continued:

“A lot of political groups are telling us to farm as we did in the 19th century, selling our tractors and doing it in the old way because it will be good for the environment”.

Yet, he continued:

“This is the strategic debate. Does Europe say that it can provide food for 500 million rich Europeans and import what we do not have, or does it play a role in feeding 9 billion people, including 1 billion people in China and India who are starting to eat meat?”.

As a committee, we are in no doubt that Europe has the intellectual resources to kick-start EU agriculture into the 21st century. Witnesses described the UK and the EU as a powerhouse of creating knowledge. In this country, the Biotechnology and Biological Sciences Research Council, the BBSRC, spends around £470 million a year on research in biotechnology and biological sciences. In France, the National Institute for Agricultural Research, INRA, has an annual budget of just over €800 million—that is, about £670 million. In the EU’s current framework agreement for the years 2007 to 2013, funding of some €2 billion is earmarked for food, agriculture and biotechnology. These are very large sums, but our report makes it clear that it is not enough.

As far as this country is concerned, we received compelling evidence that while the quality of basic research in biotechnology is high, much of the potential for its practical impact is being wasted because gaps occur in the research pipeline. We are clear that the Government urgently need to support efforts to translate scientific findings into agricultural practice much more consistently.

As regards the EU, we said in our July 2011 report that we found it unacceptable that the research budget allocated just under €2 billion to agricultural research over seven years while the agricultural policy budget was around €400 billion. The ratio is just not appropriate.

Your Lordships may know that, in the proposal which the European Commission has more recently published for the EU’s financial framework from 2014, funding of €4.5 billion has been proposed for research and innovation on food security, the bioeconomy and sustainable agriculture. That is a step in the right direction, but we remain of the view that there needs to be a much more radical shift in funding away from simple farm support payments towards the promotion of agricultural innovation.

I turn to the Commission’s proposal on what is called the European innovation partnership on productive and sustainable agriculture. Your Lordships will know that in 2010, the Commission presented its commitment to making the EU an innovation Union. European innovation partnerships are to be established under this commitment in a range of policy areas. They are intended to strengthen co-operation in innovative research, bringing together all the key stakeholders across the EU, from those conducting basic and applied research all the way through to the final users, such as farmers and businesses, and every step in between.

There will be those who understandably question the need for yet another pan-European initiative; we have a lot of those. Our inquiry shows, however, that there is still a considerable lack of co-ordination across Europe among those many excellent researchers whose efforts are key to the future success of our agricultural sector. We have seen the issue of unnecessary duplication. The problem—and the potential solution to it—was clearly described to us in evidence we received from the InCrops enterprise hub at the University of East Anglia. We support the idea of a European innovation partnership which is characterised by effective action-based co-operation. It should not be an aspiration: we need to see the action attached to it and we urge the Government to play their part in bringing this about.

I turn to the CAP itself. Here, I think it makes sense if I link what we said in our July 2011 report with the views that we have now expressed on the reform proposals published by the European Commission in October last year. In their totality, the proposals seem to us to fall short of the commitment to radical change which we think is needed. We consider that the Commission has missed the opportunity to introduce the new approaches to EU agriculture policy which current—and, above all, future—circumstances call for. As I have said, we favour both a reduction in the overall budget and, within a smaller budget, a redistribution of funding away from direct payments towards environmental protection and sustainable innovation.

As for the Commission’s proposals for the greening of Pillar 1 payments, we sympathise with its underlying objective, which is close to our report’s recommendations that payments under Pillar 1 of the CAP should be made in return for delivery of public goods, responding to issues such as climate change, protecting biodiversity, and encouraging agricultural innovation. However, as we see it, it is problematic that the Commission’s greening proposal is a one-size-fits-all approach because it lacks flexibility. Our view is that it would be far better if greening measures for direct payment were identified at the national or regional level and if they build on the cross-compliance requirements while recognising the substantial efforts already made by farmers.

There is understandable concern in the farming community that stepping up the environmental considerations attached to Pillar 1 could result in greater bureaucratic complexity; that is a great concern across Europe. Our answer to that rests on our conclusions about what are called agricultural knowledge transfer systems.

In drawing my remarks to an end, I want to mention those conclusions, particularly on knowledge transfer. Across the EU, there are many channels through which advice flows to farmers, and those include public sector agencies and commercial providers. Our report acknowledges the diversity of methods used to transfer knowledge—this most important thing—and recognises that no one single solution is applicable everywhere; knowledge transfers must be fine-tuned, as I have said, to national and regional practice.

Under the CAP, member states are required to operate a system for advising farmers on land and farm management—the so-called farm advisory system—for which some financing is available under Pillar 2. The FAS was set up at the time of the last CAP reform in order to offer advice, which must relate to cross-compliance but may go beyond that. However, we understand that in practice, in most member states, the FAS’s role has not developed beyond providing just minimal levels of advice. The FAS cannot become the sole source of advice to farmers, but we are clear that the time has come to extend its role beyond cross-compliance. Given the importance of effective knowledge transfer, we consider that, under the CAP, member states should be required to ensure that comprehensive farm advice is available throughout their territories, geared towards meeting the new challenges of food security, climate change and the need for sustainable intensification.

We are pleased that the Commission’s proposals from last October echo this call and foresee that the FAS should extend beyond cross-compliance, and we look to the Government to work with the grain of this proposal. However, our report was particularly critical of the position in this country. We are concerned that the provision of farm advice in England has become fragmented and overly complex. We see the urgent need for the levy boards to play a central role in broadening and deepening the range of advice currently offered in England. In this context, we very much welcome the Government’s recent announcement that, from January of this year, the new farming advice service in England will provide advice on competitiveness, nutrient management and climate change adaptation and mitigation, in addition to continuing to offer advice on cross-compliance. We also look forward to hearing in due course about the outcome of the integrated advice pilot project that the Government launched last year, which we regard as very important. The pilot shows that the Government are listening to us. We think that that is good and, if it shows that they are listening to the farmers, frankly, that is even better.

I offer your Lordships one final thought on this topic. Our report highlights that agriculture innovation is a complex business. It is complex and difficult because it requires interaction among scientists, the farming community, food processors, retailers, government and consumers. That requires systems to be put in place that promote communication among all those actors. When the EU level group on agricultural knowledge and innovation systems reports, it will be very important that member states give that group’s conclusions the highest priority.

In conclusion, having spoken today on behalf of my committee, I pay particular tribute to the committee’s members, whose engagement with the subject gave our inquiry both great energy and great effect. I also thank the committee’s specialist advisers on the inquiry— Dr Julian Clark, of the University of Birmingham; and Dr Jonathan Wentworth, of the Parliamentary Office of Science and Technology—whose support was invaluable. In the months that have passed since the report was published, we have seen encouraging reflections of a number of our recommendations in proposals from the European Commission and in announcements made by the Government. However, we remain concerned that the changes now envisaged to the CAP and to the support given to agricultural innovation, in the lab and on the farm, fail to rise to the challenges that we see in the future. Of course, we support the steps being taken towards innovation in EU agriculture, but, frankly, those modest steps need to turn into determined strides if we are to reach the right destination. I beg to move.

17:04

[The Earl of Caithness]

My Lords, it is a pleasure to follow our chairman. In doing so, I declare my interests as a member of the EU committee on agriculture that produced this report and as a trustee of a trust that owns agricultural land and receives payments from the EU in relation to its agricultural activities.

I also thank our chairman for the very comprehensive way in which he introduced this report. It is, as he said, a hugely complex subject, and I do not think that he could have produced such a good report without the help of our clerk and specialist adviser, whom I should like to thank, as well as those who gave us evidence. It was a fascinating subject on which to take part and a fascinating report to put together in a comprehensive framework.

I always think it is rather sad that Europe is increasingly becoming the granny of the world. We realise that as we get a little older we become a bit more granny-like and the rest of the world passes us by. The chairman, the noble Lord, Lord Carter of Coles, explained exactly what was happening in other countries with the growth of agricultural production. I believe that what is happening in Europe is utterly unacceptable. If we do not have radical change, we will get left behind even more and that will lead to disastrous consequences.

Farming is increasingly in the spotlight, as your Lordships know. It is facing pressure from all sides and from many different interests. Besides the Foresight report, which concentrates not just on producing more food but on producing food sustainably, there are the other interests of biodiversity, habitats, energy and indeed water, which is the subject of our current report and is vital to all of us. Therefore, farmers are in the pressure pot yet again with the world looking on.

That highlights that any future help and support for the farming industry and in a wider sense must be much more co-ordinated than it has been to date. You cannot look at farming separately from the impact of forestry, biodiversity or habitat, because that solution has failed. There has to be a much more comprehensive approach to see the implications of carrying out reform in one sector and how that might affect our needs. The situation is therefore much more complicated, and the EU bureaucratic structure is ideally placed to stymie anything going down that line.

The EU has to change. The noble Lord, Lord Carter of Coles, was absolutely right to say that CAP reform was a fundamental factor in all this. All of us in the committee were disappointed at the lack of imagination in the CAP reform. It is all very well to perpetuate the current system—to an extent, it has worked tolerably well, given the position from which we started—but in moving from an era of surpluses to an era of scarcity one has to adapt and be much more bold in one’s thoughts, particularly if there are to be the added pressures of coping with water shortages and different temperatures.

Where does this leave the farmer? It leaves him with one key ingredient: he needs good scientific advice and he needs his hand to be held at the right time—not to restrict him but to help him to adapt and produce the food that we all need in a sustainable way, as well as keeping the environment healthy.

It was interesting to see how the research for this science varied within the UK. It was evident that, in Scotland, liaison with universities and with the Scottish Agricultural College is much better and takes place on a much higher place than is the case in England. However, we are hugely spoilt in the UK. If one looks at appendix 1 on page 88 of the report, one will read some devastating comments about work that has been carried out on the constraints on agricultural innovation cross Europe. I refer to the two extracts from a report by the European Standing Committee known as SCAR in 2008. Our report comments on this:

“The lack of co-ordination between national agricultural knowledge systems is a significant weakness for Europe and means that the potential of its investment in World class research is not being optimised”.

That is a condemnation of the current system but it is very hard for the Minister to reply positively to it because it is a charge against the EU. It is the Commission that must adapt.

Albeit that the research budget has been doubled, that is not enough. There is not enough within the CAP reforms to make certain that the right research is being linked and can be produced on the farm. There is not just one way. A huge amount of research is being undertaken on farms that needs to be transferred back to the universities to be enlarged and developed. It is very much a two-way process.

My noble friend the chairman—if I may call him my noble friend—mentioned the CAP reform and the emphasis that we would like to see on Pillar 2, with more greening of it and more environmental benefits coming that way. I totally support that but I have a worry at the moment. With much of Europe bankrupt, one must remember that ‘under Pillar 2’ 50 per cent of the cost must be paid by the member state. Although we are right in principle to say that there should be more in Pillar 2, I cannot quite see how Greece and other countries will be able to give it the right amount of attention. It is laudable in its aims but I fear that we will not get quite the advance that we wanted there.

I turn to something that the noble Lord, Lord Carter of Coles, did not specifically mention in detail—GMOs. Immediately, memories come to one’s mind of headlines in some of our worst tabloids. That is one end of the spectrum. The other is that this could help us. I do not by any means say that GM is the complete answer but it is a possible way forward and would help us to some extent. It is very depressing that the EU has taken the line that it has so far. I was interested in the Government’s response to our recommendation on this—recommendation 33. I thoroughly support what the Minister said in his response, which was, “By allowing decisions”, to be made against producing GM crops “on non-safety grounds”, the EU,

“would undermine the current science and evidence-based assessment process”.

This takes me back to where I started. It is utterly key that we move forward in a scientifically proven and acceptable way. If the EU is going to put further spanners in the works, we will certainly not make any of the progress that we should. This is far too important a subject for us not to focus our minds. I hope that today’s debate will be read in Europe and that it will help the Minister in his negotiations there. It is in Europe, rather than in Westminster or Holyrood and the other devolved areas, that decisions have to be made.

17:14

[Baroness Parminter]

My Lords, I declare an interest as a member of the sub-committee. As our chairman, Lord Carter of Coles, said, our starting point was the issue of feeding the rising global population—as he said, rising to 9 billion by 2050. We should not forget that in the UK the population by 2030 will have risen to more than 71 million. In response to that challenge and the challenges of climate change, it is clear that we will have to use fewer of our planet’s finite resources to feed our nation. However, the challenge is also an opportunity in the UK. One opportunity is to grow our food and drink industry, which buys two-thirds of all that our UK farmers produce, has a turnover of more than £76 billion and a growing export market, and is the largest manufacturer in all sectors in the UK. Innovation in agriculture will be key to meeting that challenge, and our committee’s report is, I believe—as I suppose one would say with slight self-interest—a timely response to that debate. I look forward to hearing the Minister’s closing remarks and hope that he will address the four issues that I shall highlight.

The first is how in this difficult economic situation, as my noble friend Lord Caithness mentioned, we will find the necessary extra funding for innovation. Science is key and the Government should be congratulated on protecting the science budget in the 2010 spending review. That was a welcome sign of the Government’s commitment, but none of us is under any illusion that that will be sufficient funding. The sub-committee was pleased by the Commission’s proposals for the reform of CAP that were published subsequent to our report, which double the funding for innovation in agricultural research under the Horizon 2020 budget, and by the cap on the level of single farm payments. The cap is important because of the signal it sends to the public on how their money supports small and medium-sized farmers delivering public goods competing in a global market. It could deliver extra funds into innovation. With what appears to be growing support across member states in Europe for the idea of capping single farm payments, can the Minister outline the Government's views on any capped funding payments being hypothecated towards innovation-related measures under Pillar 2?

Secondly, does the Minister agree with our report’s reference to the innovation-hostile environment of Brussels? I think it is fair to say that there was some debate in our committee about the language that we might choose with which to term that issue. Does the Minister believe that the precautionary approach to developing new technology still holds good? If so, how does he feel that the legitimate views of public citizens can be effectively heard in debates about innovation which will impact on their lives every day through the food they eat? Is it the role of the British media to articulate strongly held views about the impact of innovation in agriculture, or should a more sophisticated debate be held with European citizens at an earlier stage of developing new technologies? To that end, what are the UK Government doing now to make clear to the public their support for growing GM crops in the UK, given the current debate in the EU on the national decision-making proposal that could in future allow member states to grow crops in their countries, unlike the present EU-wide ban?

Thirdly, in order to deliver food security, does the Minister agree that innovation in tackling waste in the food chain should be an equal priority to innovation in increasing food production? Estimates show that 30 per cent of all food grown worldwide may be lost or wasted before or after it reaches consumers—30 per cent. As Europe considers introducing biowaste targets, the Government are urging the adoption of a voluntary approach to reducing food waste. In doing so, results here are being closely watched by interested parties around the globe, including the UN, which is looking at the global potential of our Courtauld agreement. But could more be done? Recently announced phase 2 results of the Courtauld agreement show glacial progress by the supply chain in delivering waste reduction. Despite the commitment and hard work of WRAP and the progress of individuals, it is in the agriculture and food supply chain where there has to be further progress. Large manufacturing companies, often with European and global reach, must be used to put pressure to ensure that supply chains deliver progress from top to bottom. Without that, the case for European targets to reduce food waste will be strong as a means to deliver food security, alongside a focus on greater agriculture innovation.

Finally, and perhaps with a rather more UK-centric view than this debate might allow, I beg leave to mention the issue of whether the Government can do more to support further innovation in UK agriculture, which, in addition to contributing to our food security, supports public health goals. We know that, with the rising tide of obesity and health problems, we want more people to eat fruit. To that end, it is welcome that the Government are investing in a strong “five a day” campaign to promote it. We know that people want to buy British fruit and support local producers. Indeed, Sainsbury’s is now looking to source 50 per cent of its fruit from the UK by 2020; the figure is presently only 10 per cent. We know that rising temperatures in the UK, as identified in the UK 2012 climate change risk assessment, could mean an opportunity in future to grow blueberries, apricots, grapes and peaches. We know that people want more convenient food, such as bagged and easy-peeling fruit.

Knowing all this, surely we should be investing in further research into innovation in fruit growing here in the UK. However, one of our principal research centres for fruit and vegetables, East Malling, now employs 40 staff, as opposed to 400 staff 30 years ago. It is true elsewhere, such as in Warwick, where we once had a much greater staffing capacity than we have now. Clearly, we cannot turn the tap on just like that. However, I would ask the Minister what the Government can do to co-ordinate the work of all partners, in both the public and private sectors, to identify gaps in research in areas that not only will increase the production of food with fewer resources and increase the tax to the Exchequer from a highly successful food and drink manufacturing sector, but will meet public health goals. If funding choices in innovation have to be made, both here and in the EU, it is those areas of agriculture that should be prioritised.

17:21

[Lord Curry of Kirkharle]

My Lords, I am very pleased that this report is being debated today and grateful to the committee for its publication. It is not only timely but on an extremely important subject, as we have heard, and is worthy of debate. May I say what a great honour it is to be a Member of this House and to find myself in the company of so many eminent and highly respected noble Lords? May I also add how grateful I am to the many friends I have on all sides of the House for the very warm welcome I have received? I am particularly grateful to my friends, the noble Lord, Lord Plumb, and the noble Baroness, Lady Byford, my supporting Peers, for their wise counsel and enthusiastic support. The noble Baroness is, I am thankful to say, still rescuing me when I get lost or step out of line.

I should like, with noble Lords’ permission, to say a little about myself. I gather that it is not uncommon to do so on the occasion of a maiden speech. I come from a farming family background in Northumberland. In 1971 my wife and I secured the tenancy of a farm situated in mid-Northumberland in the hamlet of Kirkharle, hence my title. I assume that many noble Lords will know that Kirkharle is the birthplace of Lancelot Brown, who became known as Capability Brown, the great landscape architect—a notable heritage indeed. However, what may not be as well known is that I am not the first Baron of Kirkharle. A family named Loraine owned the lands of Kirkharle for centuries and was granted the barony. William Loraine gave Capability Brown his first job in 1728, clearly recognising his emerging talent. There is a stone in the middle of a field to mark the death of one of his predecessors, a Robert Loraine, who was,

“barbarously murdered … by the Scots in 1483 … returning home from the church where he had been at his … devotions”.

Family records state that he was chopped into pieces, put in his saddle bags and the horse sent home.

Kirkharle was, and still is, in border country. I remind those who, as a contribution to the current debate on Scottish independence, suggest rebuilding Hadrian’s Wall, that most of Northumberland, including Kirkharle, lies north of Hadrian’s Wall and we wish to remain part of the United Kingdom. Sheep stealing was the cross-border currency then, and my early business experience at Kirkharle was in farming sheep and beef cattle—not stealing them, I hasten to add. My wife ran a very successful farmhouse bed and breakfast business during that time. We were there for 12 very formative and enjoyable years, and it was then that my interest in agricultural, food and rural policy was determined—which brings me to the debate before us today.

I compliment the sub-committee for this valuable report and the recommendations contained in it. This topic is of critical importance and needs to be taken very seriously indeed by the House. As has been mentioned, it follows a number of recent reports: the follow-on from the foresight study led by Professor Sir John Beddington, the EU Commission’s Horizon 2020 document, the Royal Society report, and others, including one for which I was responsible 10 years ago, which drew our attention to the huge global pressures we face and the need to find sustainable solutions.

Innovation is certainly going to be required and the recommendations in the report are important. The well documented rise in the global population has been referred to already; it is now 7 billion and is forecast to rise to 9 billion by 2050. In addition, there is the impact of climate change, leading to increased desertification and weather volatility. There is a direct link between global weather patterns and commodity price volatility. Even here in Britain with our temperate climate, the Environment Agency is deeply concerned about water table levels in the south and east of England in the depth of winter. River flows are exceptionally low and rainfall has been between 30 per cent and 40 per cent lower than normal, which has led to restrictions on extraction that will have serious consequences for this year’s growing season, unless the position changes.

These issues have rightly heightened our concerns about food security. As Professor Bob Watson reminded us, the challenge is not one of feeding the world today. There is enough food, although the margin between supply and demand is finely balanced. Sadly, there are still more than 1 billion undernourished people in the world and about 1 billion who are obese. We waste more than 30 per cent of our food here in Britain, and I suspect that the figures are similar throughout the western world. The challenge today is one of governance, logistics and distribution, and of finding ways of providing today’s technology to sub-Saharan Africa.

We have been incredibly successful in our ability to increase food production in parallel with the increase in the global population, and I am fairly confident that we will continue to do so, provided that we increase our investment in science and technology, as suggested in the report. The subject of research—how we determine our priorities, and how we mend the pipeline to ensure that scientific knowledge is translated into practical solutions—is of course a high priority in the report, and rightly so. I know that it is a high priority for the Minister, who conducted his own study. For that, we should be very grateful. As he knows, I am keenly interested in this subject and will be doing what I can to further the cause. The impact of these global challenges and the role of science will need to be front of mind as the imminent CAP reform negotiations begin in earnest. The eventual outcome will be critical in shaping how we respond to these issues. As the noble Lord, Lord Roper, and other noble Lords know, I chair the Better Regulation Executive, and one of my deep concerns is that out of the CAP reform process we may find ourselves lumbered with significant additional bureaucracy. That, under the current proposals, is a serious risk that will itself stifle innovation—the very subject that we are trying to encourage.

No, in my view the challenge is not just whether we can grow enough to feed the world but whether we can reduce our environmental impact at the same time. Our ecosystems are fragile; our greenhouse gas emissions, including carbon emissions, are too high; and we are too reliant on expensive inputs to support current production levels. We need to find new tools and innovative solutions to help us produce more from less. To address this challenge, we need to continue to invest not only in science but in people. Investing in one and not the other will not achieve the outcomes that we are looking for. We need to invest in schoolchildren so that they have an understanding of these issues, and we need to invest in career development opportunities so that we attract young people who can help deliver the sustainable systems necessary—whether they be scientists, teachers or technicians who want to work in agriculture because it is such a fascinating challenge, and an exciting opportunity at such a pivotal point in history.

17:30

[Baroness Byford]

My Lords, it is a huge joy, if I may use that expression, to follow a friend of mine of many years’ standing, the noble Lord, Lord Curry of Kirkharle. I first met him many years ago when he was chairman of the Meat and Livestock Commission. Noble Lords who have had a chance to look at his CV will have seen that his slightly casual introduction of himself very much understates his record over many years.

The noble Lord said that he came from a farming family, but he has held many important positions for us within the wider context. He was first appointed a commissioner of the Meat and Livestock Commission in 1986. He then went on—he did not mention this—to become a board member of the NFU Mutual insurance company. He became its chairman, a post from which he has only recently stood down. He also chaired, as he did mention, the commission on the Future of Farming and Food, reporting to the Government in January 2002. It was very important and the first one of its kind at that stage. He chaired other things as well, including the Leckford Estate Management Committee and the Better Regulation Executive, to which he referred. His work within his own particular interest and, even more, within the community has been recognised on two other occasions. He was awarded the CBE for his services to agriculture in the 1997 New Year’s Honours List and a knighthood in the Birthday Honours List of 2001. He was appointed a Cross-Bench Peer in the House of Lords in October 2011. I am sure that the noble Lord, Lord Curry, is in no doubt that he is warmly welcomed to this House and we look forward to hearing from him on many future occasions.

I should go back to the beginning and declare my family’s farming interest and the fact that we receive money from the CAP allocation.

It was a great pleasure to be part of this group and, although I was missing for some months because I was unwell, I congratulate the chairman, my noble friend Lord Carter of Coles, and all our advisers who supported us. I particularly congratulate those who gave us evidence. Some did so via an inter-country link, which was quite an interesting way of doing it rather than fetching people over. One of the challenges faced by EU committees is how to take evidence when looking at an EU problem without being able to get people from those countries to give direct evidence. I think it is something that the committee needs to reflect on a bit more overall. I am well aware of the cost and time involved, but certainly the telelinks help, and we were grateful for that opportunity.

I should like to put this report into the context of where we are on producing food and, in particular, on food security. Last May, the NFU briefing stated that agriculture provides £7.169 billion of gross added value and supports some 500,000 jobs in this country. In addition, the food chain contributes over £88 billion per year—7 per cent of GDP—and is responsible for over 3.7 million jobs. Sadly, agriculture and farming are often talked of in a silo but they certainly should not be. The facts and figures speak volumes and they really should get better recognition than is currently the case. It is a huge challenge for all of us throughout the EU and the world to produce enough food in a sustainable manner in the long term.

The Government’s response to the report, however, is not quite as clear on some aspects as it might be, so I have some questions for the Minister. In their response, they say that £400 million will be allocated for research and development, but I am not clear how it will be spent, which people are responsible for it and who will oversee the efficacy of it. The Minister may not have the precise figures with him today but it would be enormously helpful to all of us if a timetable could be brought forward. The response talks very much in terms of “this is going to happen” and “that is going to happen”, but from reading it—and I read it quite carefully—I could not quite tie it up as I would like to have done.

As other noble Lords have said, in the UK we face falling or static yields in crops and in milk and protein production. Water shortage is with us in large parts of the country; water excess in others. The effects of Europe—all the other regulations, the NVZs, the pesticide rules, animal recording systems and so on—place increasing costs on farmers and on the Government.

Sixty years ago today, when the Queen acceded to the throne, agriculture was a genuinely labour-intensive employment area. Automation has drastically reduced the numbers involved. The sectors providing inputs, such as seed suppliers and fertiliser and machinery manufacturers, and those handling outputs—food processors and retailers—employ a high proportion of graduates, and research is an important part of their activities.

The number of specialist agricultural colleges has declined over the years and the proportion of places available for agricultural, as opposed to small animal or pet-related, studies has fallen. I wonder how often schools’ career advisers recommend agriculture as something for students to follow. The noble Lord, Lord Curry, referred to that. FACE, whose strategy group he chairs, tries to put information into schools to help teachers, let alone their pupils, understand how food is grown. It is an enormous challenge not just for our Agriculture Minister but for those involved in education to encourage young people to come into the industry, which offers a tremendously wide variety of opportunities in the long term. More people should be enthused to come into it and given information as to how to go about it.

The world is facing starvation. During the past two or three years, high-level investigations have resulted in several reports, already mentioned, and they all agree. The Lords’ committee stressed three areas of great concern: the need to increase spending on scientific research in agriculture; the communication of its findings to those working in agriculture; and the alteration of the attitudes of Brussels bureaucrats—I hope that I am allowed to say that.

Reforms coming to the CAP give us an opportunity to think again. I pay tribute to the EU Select Committee, which has just issued a fairly strongly worded press release supporting our thoughts on the opportunities for innovation that lie in looking at the way in which the CAP is delegated. The government response acknowledges the problems, but I should be grateful if the Minister could go further and tell us about what is proposed and how it will be implemented.

The quality of evidence given to the committee, the depth of the analysis of the problems, the revelation of the range of work that is going on and the levels of achievement are enlightening and heartening. One finds in any journal related to food production articles on pest-resistant crops, water-saving cultivation methods and the use of inedible plants for the production of energy. There is no shortage of innovative ideas. However, as the report states, bringing them to fruition is fraught with difficulties, not least of which are duplication in development and fragmentation in application. One obvious route is to encourage larger-scale farming, where most of these innovations will take place, but that produces the problem of what happens to smaller farmers. They, too, are a vital part of producing food, particularly in eastern European countries.

I am well aware of the difficulties being experienced in establishing such concerns even within the EU regarding large versus small, and I wonder whether there is a role here for government. I particularly refer the Minister to the whole question of large-scale animal husbandry, which is one way in which we could produce more food. However, there is huge resistance and education will have to play an important role as a result. That is within our own country but I suspect that it is replicated across the whole of Europe.

My noble friend Lord Caithness raised the question of the GM debate. GM crops have many advantages to offer, but I would be glad to hear whether European co-operation has resulted in the start of an investigation that will add greater balance to how GM may develop in the longer term. It has been suggested that member states can make those decisions for themselves, but that is not the basis of the argument; rather, it should be about whether the science is right, whether it will produce the right food and how we should go about it. I should be glad if the Minister could reflect on that a little from the UK perspective and also from his experience of it across Europe.

I am proud to be president of LEAF—Linking Environment and Farming—and I am convinced that UK agriculture has demonstrated that it has the right tools to increase yields, improve animal welfare, preserve biodiversity and conserve natural resources, all with the enthusiastic backing of consumers. However, progress needs to be faster. One way that we can make this happen—to go back to the point that my noble friend raised—is to think about how to attract more people into this industry. I also raise the question of how we give them continuous professional development in the same way that people in other trades and professions expect. I should like to see a recognised route from school through GCSEs to apprenticeships to a diploma and, if wished, to graduate status to match the opportunities being offered by other industries such as the Armed Forces, retail and manufacturing.

If I may digress, I have the great honour of being a liveryman of the Worshipful Company of Farmers. I should also reflect to the Committee that here is a practical example of the way in which the livery tries to encourage and support young people coming through. We give awards each year to students at agricultural colleges. We also run two leadership courses. One has just been completed and the other is still going on. They are for the more mature student, if I may reflect it in that manner. This point is crucial, and although we did not touch on it quite so much in the report, I hope that my colleagues recognise that somehow we have to make agriculture and food production a much more lively and desirable vocation to follow. It is crucial because all the other industries depend on us producing worldwide enough food for future populations.

I would like to see an increase in the movement of people between the various sections of food and production, particularly between research and practical farming. I have no doubt that it can and will be done, but we need to move from the old image of farming in the early 1920s with long hours in the dirt and the cold to reflecting the industry as it is—one that responds to innovation, that uses technology and relies on science. We have a wonderful opportunity, and I thank the Committee for giving us a chance to look at this important report on innovation in agriculture.

17:43

[Baroness Sharp of Guildford]

My Lords, I, too, declare an interest as a member of the sub-committee that produced the report. As the noble Baroness, Lady Byford, has just said, it is an extremely interesting report to participate in. In many senses it was a logical development from some of the other reports that we have been working on in the sub-committee. This is my fourth session on the sub-committee so I shall roll off. During this time we have looked at, among other things, the development of forestry and the impact of climate change on agriculture. Central to our deliberations has been the common agricultural policy and the reform of that policy. Innovation fitted in extremely well with all those reports and now we are looking at water, which is yet another aspect of the problems that we currently face and fits in with the whole question of innovation in agriculture. Above all, this report picks up on the challenge of climate change to agriculture. Our previous report on climate change and agriculture led us to be aware of the need to renew the research effort, not only in this country but in Europe as a whole, and to develop new processes and new technologies for agriculture.

We have been very much aware of the challenges facing the global environment. As the sub-committee chairman the noble Lord, Lord Carter, mentioned, we began by looking at the Foresight report on global food and farming futures, on which one of our witnesses, Professor Charles Godfray, had been the leading researcher. Of course, that report picks up what the Chief Scientific Adviser, Sir John Beddington, has described as the “perfect storm” now confronting the global environment through the combination of four elements: global population growth, which we have already mentioned and which is expected by 2050 to increase to 9 billion from the current 7 billion; the fact that climate change will shift the potential of different areas around the world to produce food; the exhaustion of fossil fuel energy sources; and the increasing competition for water resources. As all four of those issues coincide and come together in the course of the next 30 to 50 years, that will create a real urgency about how we are to feed all these people.

Therefore, the whole question of food security will become not only an issue but a very urgent issue. It is interesting that when we came to look at our report summary, we strengthened some of the conclusions. In relation to this challenge, we said:

“The response to this challenge has to start now. Decisions have to be taken, and actions implemented, with urgency”.

The issue of food security is an urgent issue that needs to be addressed and we have not time to dilly-dally for too long in responding to it.

It is interesting to reflect that, in the course of the 20th century we faced a similar population increase and, during that century, we fed that population really very amply. We used fossil fuel energy and made extensive use of fertilisers, but we also brought into play large amounts of land—on the one hand, through the destruction of rainforests and, on the other, through the expansion into wilderness areas. In much the same vein, we have used water to irrigate agricultural areas where water is scarce. For example, one need only look at how important irrigation is to Spanish agriculture and the Spanish fruit and food industry to recognise the difficulties that people will face as a result of climate change, given the problems that arise even with current water resources. However, we can no longer resort to the solutions that we had in the 20th century, as we now need our forests and our wilderness areas to absorb the CO₂ emissions that we are creating, and we are running out of fossil fuel energy. In any case, the pollution caused by the excessive use of fossil fuels creates its own problems and, in terms of CO₂, our water resources are increasingly scarce and costly to clean up.

Nevertheless, as has already been reflected in our discussion, those who have studied this issue are relatively optimistic that we can feed the increased population. As my noble friend Lady Parminter mentioned, one-third of the food we produce is wasted. If only we made use of what is wasted, we would have little difficulty feeding the mouths where hunger currently pervades. There is an enormous amount to be done. As the noble Lord, Lord Carter, mentioned, what is termed sustainable intensification of agriculture is required. Essentially, we can produce more from the same resources. The definition given of sustainable intensification is increasing agricultural yields without adverse impact on the environment and without bringing more land into cultivation. As Professor Godfray told us, it makes innovation critical to sustainability. If only we make use of the technologies and the processes out there, the combination of saving what we currently waste and making use of new technology gives us the answer to how we can feed the increasing population. If we can harness the potential of those new technologies and developments in agriculture, we are quite capable of feeding the growing global population.

The noble Lord, Lord Carter, mentioned projections of agricultural productivity: in Brazil, an increase of 40 per cent, in the USA, of between 15 and 20 per cent, but in Europe, 4 per cent. We asked ourselves: why is the potential productivity increase in Europe so low? Why, as Mr Häusler mentioned, is Europe such a hostile environment for innovation? The answer we came to is that it is a complex issue, a mix of very different things.

Traditionally, the CAP aimed to increase production more or less regardless of cost in order to make Europe as self-sufficient as possible—indeed, at one point, Europe was well more than self-sufficient—hence the heavy direct subsidy to the production regime. That was not broken until the early 1990s, 15 or 20 years ago, since when, if anything, the swing has been in the other direction towards limiting production and increasing the emphasis on public goods of agriculture: carbon sequestration, landscape and biodiversity. The new support mechanisms in that direction—Pillar 2, as we call them—were nevertheless still dominated by the old support mechanism, Pillar 1, which paid farmers directly in relation to their production. That gives farmers a degree of security—one issue that we have been debating in our committee in relation to CAP reform—but does it also breed complacency, and is that complacency in itself a barrier to innovation?

Another barrier to innovation is that Europe has a large number of small farms in relation to North America, South America and Australasia—but not in relation to Asia, which has many very small holdings—so despite subsidies, there are low incomes. Farmers cannot afford to innovate and experiment with new ideas; they are innately conservative. The European Commission is well aware of this challenge and currently consulting on reform of the CAP. Our report has been grist to that mill. It sees it as a timely input into the debate.

The report came up with five main solutions, which have already been mentioned. The first was to boost research; mention has been made of the fact that of the €400 billion spent on the CAP in the current financial framework, only €2 billion is spent on agricultural research. As we have also heard, in the next framework, which will be called Horizon 2020 instead of “Framework Programme 8”, it is projected that that will more than double to €4.5 billion and will be characterised not only by joint programmes but by the development of the European innovation programmes and various joint programme initiatives that are to take place.

That will still be just over 1 per cent of the total spend on agriculture. As a whole, the EU has a target of spending 3 per cent of GDP on research and development. If we were to spend 3 per cent of what is spent on agricultural support by the CAP, it would be something like €12 billion. If we were looking to spend 3 per cent as a whole, the total within the EU would rise considerably.

Much research is financed at member state level rather than funded by the Commission. As others have mentioned, the BBSRC, spending somewhere in the region of just less than £500 million a year, is one of the big spenders. France and Germany spend more. In the UK, much of the money from the BBSRC is for what I call the top end of the research—a great deal of genetics and genomics research—and not very much is for applied research. We highlighted the fact that it would be a good idea if more were spent on microbiology and research into soil.

Much money is spent at member state level but there is not nearly enough co-ordination. This was something that we were very much aware of, particularly the concept of the European innovation programme and the joint programme initiatives. As I understand it, the joint programme initiatives are bilateral whereas the European innovation programmes are promoted by the Commission and are essentially to bring member states together and allow them to co-ordinate and collaborate. We were aware of how very fragmented the effort was at the moment, and for that reason we very much welcomed the input of Incrops and the model that it suggested for how the European innovation programmes might be put to work and how they might work themselves out.

Is collaboration itself enough? We noted the example of the Netherlands, which has targeted excellence in the agrifood sector as a national objective and developed a very clear strategy nationally to achieve this. Do we want something stronger from the Commission, a European strategy for the agrifood sector that puts agricultural innovation within the broader context?

Is research itself enough? If it is going to be useful, it must be used—hence the emphasis that we put on knowledge transfer and, above all, knowledge exchange. Those using the developments in science and technology must be able to understand and, for that matter, influence the research so that it is user-friendly. That is why we put so much emphasis on the development of the Farm Advisory Service. Here, it is a mixed picture across the European Union and within the UK itself. Some countries, such as Denmark, France and the Netherlands, have very strong advisory services that help farmers adapt and develop new products and processes. In the UK we found much disappointment at the dismantling of the old ADAS service and its replacement with the mixed-consultant industry-based services, and much hope that the new levy-based AHDB and the new integrated advice pilot would work themselves out.

Generally, the government response seems to have been positive, backing up our recommendations. As the noble Lord, Lord Carter, has emphasised, the key issue is that of carrying through the recommendations into the reform of the CAP. I am particularly glad that the Government have responded so positively to our suggestion that we need to look at research within the broader strategic framework and the reorganisation of farm advisory services.

There is danger in assuming that the market will deliver when necessary. Sadly, the market has chosen the way often only after crises have overtaken events. To go back to where we started, innovation is the key to developing a sustainable agriculture sector, which in turn is the key to future food security.

[The Deputy Chairman of Committees (Lord Colwyn)]

My Lords, there is a Division, but I have a feeling that the noble Baroness is coming to the end of her remarks. Would she like to finish in 30 seconds?

[Baroness Sharp of Guildford]

Yes. If we wait too long, we may have lost the opportunity to prevent that crisis.

18:01

Sitting suspended for a Division in the House.

18:09

[Lord Cameron of Dillington]

My Lords, I am delighted to be speaking in the debate in which the noble Lord, Lord Curry, has made his maiden speech. As we have already heard, his CV in the agricultural and rural world is both comprehensive and stellar in quality. It has long been known that there are few to compare with him in terms of knowledge and experience of all parts of our agricultural and food industry, but equally important, to me, is the way in which he understands how all these parts fit together and how important they are to the economic, social, cultural and environmental fabric of life in both our rural and urban communities. I feel sure that we will all benefit from his words of wisdom on many future occasions, as we have done today.

I must first declare an interest as a farmer in receipt of a single farm payment and as a Lawes trustee at Rothamsted Research Station. I also chair the Strategy Advisory Board of the Government’s Global Food Security programme. However, today I want to explain that the problems facing the agricultural industry are global and that the solutions lie not only in pan-European and trans-world partnerships but in a variety of cross-discipline research projects that must cover the whole length of the food chain. Innovation is not just about growing two blades of grass where there was once only one.

Other noble Lords have mentioned the problems facing the world and, if the Committee will forgive a bit of repetition, I should like to put a bit more flesh on the bones of some of them. The first is the growth in the world’s population from 7 billion to 9 billion-plus. The more serious problem here is the fact that the population of sub-Saharan Africa is going to rise from 1 billion to 2 billion over the next 30 years. This is serious because there are very grave agricultural shortcomings there.

Secondly, world GDP is going to rise by 400 per cent between now and 2040. It sounds good but it means that most people will be changing to a more meat-eating diet, with more consumption of resources—much more than with a vegetarian diet. China is a prime example. Over the past 40 years, its arable area has almost halved and its meat-producing area has more than doubled. In spite of that, its balance of payments now suffers from major imports of both milk and beef, not to mention soya to feed its beef herd. In fact, the current annual trade of soya from Brazil to China is the biggest movement of a single food product from one country to another in the history of the world.

Climate change is another threat which has been mentioned by other speakers. The equatorial belt may become too hot to farm and, if sea levels rise, some of our most productive deltas will disappear. With only a 15 centimetre rise, in India alone some 150,000 farmers will be displaced.

Another problem area is world water supplies. Even with today’s population, the reality is that a child dies as a result of poor sanitation every 20 seconds. Total world water demand is projected to rise by over 30 per cent by 2030 and there are problems even now. Many river systems already run dry due to excess irrigation. Indian farmers, for example, are now taking 100 cubic kilometres per annum more from their aquifers than are being recharged by rains. The most important aquifer under China’s grain belt is falling at the rate of 3 metres per annum. In Africa, already people die in skirmishes between tribes over water. The trouble is that water and rivers do not recognise political boundaries. There are between 250 and 300 rivers and lakes in the world that transcend national boundaries. The dangers are enormous.

There is now a realisation that political unrest might be caused by water and food shortages in the future and that these possible conflicts or anarchy represent a greater danger to the world than the actual shortages themselves. The Government’s new co-ordinating research programme is well named as the Global Food Security programme because, while food shortages in the EU probably feel remote to most people, its citizens’ security could well be threatened by nutritional problems in the wider world.

The point of my very brief coverage of some of the future concerns is not only to show how serious they are but to show how multifaceted and global are the issues. These are worldwide problems. We have to ensure that we are all pulling together. We need scientific partnerships and co-ordination not only between research establishments in the UK—and I am very pleased to say that that is happening with this Global Food Security programme—but across the world. We need trans-European co-ordination and information exchange. We need partnerships in the wider world such as with the US, Brazil and China, where some of highest spending takes place.

I like to think that we in the UK can still contribute in scientific excellence, even if our budgets have been slashed over the years. Judging by the international partnerships that already exist, it would seem that others on the world stage share my confidence.

We also need north/south partnerships, so we can all focus on some of the developing world’s problems and at the same time hopefully enhance the credibility and importance of its scientists, particularly in the eyes of its politicians, so that they, too, pick up on the agenda.

As I said at the beginning, the food chain touches on a wide range of disciplines. Clearly, we need soil scientists, plant pathologists and others involved in the actual growing of the crop; we need hydrological engineers to provide us with water; we need mechanical engineers to provide us with efficient machinery; we need veterinary scientists to maximise livestock production while minimising livestock inputs and greenhouse gas outputs; we need a range of biologists and chemists to cut down on waste both before and after harvest; and we need social scientists to cut down on waste at the consumer end of the food chain, mentioned by several other noble Lords. I came across some research recently indicating that every year in the USA, which also wastes 30 per cent of its food at the consumer end, 300 million barrels of oil and 25 per cent of all man-used water go to produce food that is then thrown away. That is a pretty horrifying statistic.

We also need nutritionists to help achieve the right food intake at the right price to prevent millions of youngsters in the developing world remaining physically stunted or cognitively damaged for the rest of their lives. In this respect, many people think the GM debate is all about producing more food for less cost, but to me the most exciting aspect of these potential scientific advances is where the food is being improved for better health. Of the 10 million-plus kids who die each year in this world, 2 million die from shortages of iron, proteins and vitamins in their diet, while, for instance, only 1 million die from malaria. There is much potential for improvement here, and innovation could be at the heart of it.

We need land-use and planning research to ensure that we optimise our production of food and energy from land while not endangering other species and their habitats. Incidentally, that includes the responsible use of our marine environment, a whole area of research that is probably related more to the art of the politically possible than cutting-edge science. We have to get all these scientific disciplines working together if we are to address the perfect storm outlined by our chief scientist. We have to co-ordinate and ensure that there are no gaps in the chain. That is one of the roles of the global food security programme and the strategy advisory board that I chair.

Talking of gaps in the chain brings me finally to one of the conclusions of our sub-committee report which has been mentioned by several noble Lords already. As the Minister is only too aware—and we thank him warmly for his previous interest in this subject—there is no point in doing any science unless the information gets out to the practitioners, nor will the science be of much use unless the scientists have learnt what is needed from the practitioners. I chair the All-Party Parliamentary Group on Agriculture and Food for Development, which has recently produced a report on African agriculture called Growing out of Poverty—for all those interested, it can be found in the Printed Paper Office. During the evidence-taking sessions, we were again and again reminded that the greatest poverty in Africa is a poverty of information, yet agricultural extension services remain absurdly underprovided for in almost all African and other developing countries. Furthermore, as Sub-Committee D discovered, this underprovision is not limited to Africa but is only too apparent across much of the UK and EU. As others have said in this debate, this situation needs to be urgently rectified if the recently revived interest in agricultural and land-use science is, if you will excuse the pun, to bear fruit.

18:19

[Lord Plumb]

My Lords, first I share the joy and pleasure on this occasion in having the noble Lord, Lord Curry, with us. He is an old friend of mine; we worked together and shared many platforms over many years. We have not always agreed, but we have been mighty near agreeing most times. It is great to see him here and I know, as do all who know him well, that he will make a great contribution to this House, not just on agriculture but on many other issues as well. We are delighted to have him here on this day.

I declare my interest as a farmer, one who has witnessed working in the dirt and the cold many years ago, and I have seen all the changes in policy, structure, technology, science and production methods since the 1947 Act and under the CAP since 1973. I was often told that it was my fault that we had all those surpluses of food not so many years ago; no one can claim the credit for bringing that into some sort of balance, so that we now talk about not surpluses but security. That is a big change—not just a change in attitude, but a change in the general situation.

I did not have the privilege of sharing in the preparation of this report, but I congratulate the chairman, the members of the committee, the clerks and their adviser on producing what I believe is an excellent document—a wide, proactive report on the importance of science, technology and innovation in the practice of farming and horticultural systems. The team of witnesses, as one reads the document, is very impressive. The contribution they made and the way they have been reported has been absolutely first class, and it makes this one of the best documents I have read on agricultural development for some considerable time.

As has been said already in this debate, the European Union has to be competitive in the global marketplace, not forgetting its social and environmental responsibilities. It cannot be assumed that innovation will happen incidentally, due to the nature of farming, different sizes of farms and different techniques and methods. When one assumes that they are all in one lot, I always say that the only sensible definition of a “small farmer” is a chap about five feet tall.

Farming as we know it is often risk averse and isolated, facing difficulties in investment and producing unbranded commodities. I often regard fellow farmers as frustrated research workers, instinctive experimenters and innovators who are prepared to use new products and practices to be more efficient and productive, following of course—as they do—scientific approval.

One impressive side of farming that is not just related to this country is our agricultural colleges and universities. They are providing excellent training and skills for a new generation of farmers, many of whom are keen to become leaders in the industry, with conviction and passion. Nothing gives me more pleasure than to visit those colleges, to talk to young people—and to wish that I was 40 years younger. Both the noble Lord, Lord Curry, and my noble friend Lady Byford have said it was important that we do not just relate this to product. It is investment in people, particularly young people—Care was mentioned as an organisation that is doing a great job in that respect.

My son has near his farm 44 schools, which have adopted, if not him, the farm. They visit it on a regular basis, which I know gives him a lot of pleasure. He has two people carriers, which take the children around the farm while he talks to them. The same schools come back time and again. He even gets them planting potatoes, other vegetables and all sorts of things. They put their names on the plants so that they can come back and see the growth of the product, which they are keen to do.

We see those changes. Today we talk about the use of precision farming with satellite-guided machinery, yield mapping, conservation tillage, which is increasing, on-farm bioenergy equipment, heat and power units, anaerobic digestives—all the sort of things that were unheard of a few years ago but are now becoming commonplace on many farms. In future we will see new crop varieties developed through the process of further improved management and possible use of genetic modification and so on.

We know that, to be innovative, farming must be profitable so that it can invest in the future. Farmers have to be confident that they can remain in business. As I read this document—and I have read it more than once—one thing struck me in particular. It is worth quoting from box 2, above paragraph 40, which cites three theories of innovation as applied to agriculture. I thought that they said it all and they are:

“Innovation as a top-down dissemination of new technologies … Innovation as a bottom-up process”,

in which,

“local context and farm-level networks shape innovation outcomes”,

and, thirdly,

“Innovation as a socio-technical process”,

in which farm businesses mix with all the other bodies and organisations that are involved in the business. That is the big change as I have seen it over recent years. It is a welcome development because different producers can better see the part that each of them plays in the production of food.

Therefore, I hope that in replying to this debate the Minister will agree that there is cautious optimism for the future. It will depend a lot on the simplification of policy under the CAP. We want less red tape and fewer regulations. Above all, in the reform of the CAP— I agree entirely that it must be radically changed this time, rather than tinkered with, as it has been over the years—it is imperative to keep a sensible balance between the support of Pillars 1 and 2, which allow famers a margin to compete in the global marketplace.

18:28

[Lord Bilimoria]

My Lords, there are some out there who would raise their eyebrows at the idea of a report about innovation in agriculture. Far too many people, in both business and politics, consider agriculture to be an antiquated, backward industry with no place in the 21st century economy, to which the noble Lord, Lord Carter of Coles, alluded in his opening speech. This view is, of course, completely wrong. I am delighted that the EU Committee has tackled the subject of innovation in agriculture and produced a report that makes the case for a reinvigorated, stronger British farming industry.

My business is of course beer. I am sure that many noble Lords know that the most important ingredient in any beer is barley. I can proudly say that 100 per cent of the barley used in Cobra beer comes from Britain. The second most important ingredient is water. Needless to say, the water for the beer that we produce in Britain is 100 per cent British, too—there is no Evian in our beer. As the noble Baroness, Lady Parminter, told us, the food and drink industry consumes two-thirds of what our farmers grow in the UK.

In a recent debate on the creative industries, I mentioned that I was brought up throughout my childhood being told that I was not creative because I was useless at art. I have realised that being creative and innovative are two crucial skills for business. That applies whatever industry you speak of, including agriculture. Over the past three decades, Britain has evolved into one of the most open economies in the world. That has been wonderful and one of our great competitive advantages. However, one of the downsides of that evolution is that we have an economy based far too heavily on services, where manufacturing makes up barely 13 per cent of our GDP, and agriculture barely 1 per cent.

We constantly complain about too much power being exerted on us by Europe and Brussels. The extreme example, the industry that is most crushingly regulated by Brussels is agriculture; and the single area of expenditure in the EU budget that is bigger than all others and makes up well over 40 per cent of the budget is agriculture. As has been pointed out so many times in this debate, of that, the budget for research is a mere €2 billion for five years. It is good news that it will be doubled, but surely we all agree that that is a drop in the ocean. Do the Government agree that more should be invested by the EU and the UK in R&D in agriculture and, if so, what are the Government going to do about it?

There is no question that we have to innovate to cope not only with the increasing global population, as has been pointed out, but the rise of India and China, whose consumption of food, especially meat and dairy products, will rise exponentially as they grow wealthier. We know that Malthusian theories have been proved wrong. In the so-called green revolution of the 1960s in India, a country which for centuries had catastrophic food shortages, innovative farming methods were used to increase crop yields and almost completely eliminated famines forever. One of the key catalysts of the green revolution was widespread adoption of genetically modified crops.

Fast forward to today, and we see that some of our European partners are seemingly blind to those innovations and insist on sticking to a backward precautionary approach. Rather than promoting innovation in GM, the current practice of the EU forces GM to prove that it is 100 per cent safe beyond any reasonable doubt before it can be used. I fully agree that caution must be a priority, but one must look at the scientific evidence and weigh up the risks and benefits. In a court of law, you are innocent until proven guilty. In the case of GM in Europe, the perception is that it is guilty until proven innocent. Are the Government for promoting research and use of GM crops?

Global food security is a serious issue, and I have personally seen the havoc created by food inflation, which unfortunately has existed regularly in India over the past few years. The European Union has been fantastic in promoting trade and peace between our member nations, but there is no doubt that one of its worst manifestations has been the CAP, which has been unbalanced and unfair within the EU, with countries such as France benefiting disproportionately compared to countries such as Britain.

Furthermore, although the EU has been one of the best manifestations of globalisation, the CAP has made us in the European Union hypocrites. We preach free trade to the world and yet, through the CAP, we practise protectionism. We subsidise our cows in the European Union by $2 a day, when we know that there are 1 billion people globally living on less than $1 a day. The European Union is the second-largest overall agricultural producer in the world after China, but our output would increase so much more if we could be more productive. That means investing in innovation and research and encouraging our youth to enter agriculture

On that note, I congratulate my noble friend Lord Curry of Kirkharle on his excellent and authoritative maiden speech. He informed us that Kirkharle is where Capability Brown hails from. Some of us may have noticed that there has been a resurgence and renaissance in Capability Brown gardens in Britain today. I hope that there will also be a renaissance in agriculture in Britain today.

Of the 7,000 plant species that have been used for food in the world, just 150 have been commercialised on a large scale and only three—wheat, maize and rice—supply half of the world's daily food. There is so much potential here. The noble Lord, Lord Plumb, spoke of young people. Just look at how the world has changed. Now, young people aspire to be techies and geeks, thanks to the internet revolution. In the same way, it is great to see the new policy encouraging the youth in Europe to go into farming. However, they have a lot of competition. Last month, I was speaking at an annual conference in India—the Pravasi Bharatiya Divas, the Indian Government’s conference for the 30 million-strong global Indian diaspora—to an audience of 700 members of India’s youth, including university students, senior schoolchildren and medical college students, and I was utterly inspired by their enthusiasm, brightness and aspirational attitude. This is India’s future. This is the future with which we in Britain and Europe will have to compete.

When people say that British manufacturing is dead, I and others like me in the manufacturing sector defiantly say that it is definitely not dead, and that we have world-class, cutting-edge, high-end advanced engineering, be it in aerospace, automobiles or pharmaceuticals. This enables us to partner on an added-value basis with the growing economies of the East. We must ramp up investment and innovation drastically if we are to do the same with agricultural innovation. In fact, just yesterday the Chinese Premier, Wen Jiabao, said:

“Now that Europe is facing a [sovereign] debt crisis, we must consider our relations with Europe strategically … On the one hand, our largest export market is Europe. On the other hand, Europe is our biggest source for importing technology. From this perspective, helping to stabilise the European market is actually also helping ourselves. We must let all parts of the society understand this”.

The noble Earl, Lord Caithness, pointed to a lack of co-ordination, and the noble Baroness, Lady Sharp, also spoke of this. Britain and Europe should be at the cutting edge of innovation and research, exchanging ideas between our 27 nations, making Europe the most fertile hotbed of agriculture creativity. We have the diversity of all our nations, and in Britain we have the best higher education institutions in the world, along with the United States. In spite of higher education funding having been cut—and I am sorry to say I hugely disagree with this; I think it was very short-sighted of the Government—and in spite of our R&D expenditure being a fraction of that of a country such as the United States, we continue to punch above our weight. As the noble Baroness, Lady Parminter, said, protecting the science budget is not sufficient. Do the Government, on reflection, agree with this?

Last year, I was privileged to write the foreword for Big Ideas for the Future, a book by Research Councils UK and Universities UK illustrating about 200 world-beating, world-changing innovations in several sectors from universities throughout the UK, including in the area of food security. In fact, I quoted from this book earlier, referring to the 7,000 varieties of food-bearing plants, of which just a fraction have been commercialised; and the book points out some examples. Reaping the Benefits by the Royal Society in 2009 predicted that, as we have heard, the global demand for food will double by 2050. A great deal of innovation is necessary to tackle this challenge. The report refers to a “virtual root” which has been developed by a group of researchers at the University of Nottingham, supported by the BBSRC, as a predictive model to simulate root growth accurately. Results from the model are already being translated for crops such as barley, which of course is of great interest to me. This could result in improved varieties being available to farmers in 10 years’ time. Another example is that at the University of Birmingham researchers, also supported by the BBSRC, have been identifying key genes that control meiotic recombination, a process that allows genetic modification to occur. Once identified, this information will be an important tool for plant breeders, enabling them to breed improved plant varieties in a shorter period of time. Just imagine the effect of that.

This sort of research is going on all over the country and, indeed, across the European Union. However, in order to face the future we need to invest in it multifold. The developing world, led by India and China, needs innovation in order to feed its growing populations. The question is whether Britain and other EU members will be leading partners in this process or whether we will let over-regulation, politics and underinvestment keep us on the sidelines.

In conclusion, I should again like to quote, because it is so important, the excellent report of which we are taking note. The introduction to Chapter 6 cites Georg Häusler, Head of Cabinet, DG Agriculture at the European Commission, who asks this question:

“Does Europe say that it can provide food for 500 million rich Europeans and import what we do not have, or does it play a role in feeding 9 billion people, including 1 billion people in China and India”,

many of whom,

“are starting to eat meat?”.

It is indeed a pressing question, and one that only the EU itself can answer. I am hopeful that we will choose the latter path but I am worried that the EU may be wandering the wrong way.

I shall end where the report begins:

“Regulation should help, not hinder. Politicians … must not be afraid of new properly tested technologies … Benefits and risks must be clearly articulated, recognising that too precautionary an approach may pose risks to global food security”.

18:40

[Lord Knight of Weymouth]

My Lords, I start by warmly thanking the European Union Committee for what was an extremely interesting and, as I found out over the weekend, highly readable report—that is not always the case. In particular, I thank my noble friend Lord Carter of Coles for leading on this piece of work and for leading the debate so ably earlier this afternoon. I certainly join in the joy in welcoming the noble Lord, Lord Curry of Kirkharle, and in complimenting him on his excellent maiden speech. As the noble Lord, Lord Bilimoria, has just reminded us, Capability Brown was also from Kirkharle, so it would appear that capability is in the water there, and we look forward to many more capable speeches and contributions from the noble Lord, Lord Curry. I also take the opportunity to pay tribute to the work that the noble Lord, Lord Taylor of Holbeach, has personally done in the area of science and agriculture, and I very much look forward to hearing his wisdom when he winds up.

I do not want to provide a commentary on all the many and interesting areas covered by this report— I am sure that we have other things that we want to do this evening—so I will pick out just a few themes. First, this is clearly a report about not just the future of agriculture but the future of food, where it comes from and how we consume it. The report is about more than just guarding against the future; it is about how we shape the future of agriculture. That is the basis on which I have been trying to think about this—the Foresight report was also certainly very welcome in helping us to think about these issues.

We face an uncertain future: world population growing, as we have heard, from 7 billion to 9 billion; increasing food prices; changing diets; more pressure on land and water; and climate change—I take this opportunity to thank the Minister for the briefing that we had a week or two ago on the department’s assessment of the implications of climate change. Agriculture needs to contribute by less input and more output, and it needs to make a contribution to sustainable energy production and consumption. In addition, there is the uncertainty over future CAP reform, which has been discussed and debated this afternoon. All this was excellently set out by, in particular, the noble Baroness, Lady Sharp, who reinforced the sense of urgency on these issues.

To shape this future and to harness the potential for growth and jobs in the agriculture and food manufacturing sectors, I think that we need: a pro-science climate in which to discuss these issues; international co-operation; and active, strategic government. Those are the three things that I want to touch on in my comments. Paragraph 183 of the report states:

“We welcome the fact that greater prominence is being given to agriculture in the deliberations of the European Commission, and we urge that it should be given a similar priority in political debate in the UK”.

I would be interested to hear both whether the Minister agrees and, beyond the high profile given by a debate in the Moses Room on a Monday in February, how we should do that. If we are to move forward and discuss issues such as GM and biotech, do we not need to try to fashion a more pro-science environment in the media in particular? I do not underestimate the challenge in doing so, but any comments on how we might do that—given the Government’s excellent ability to spin for the media—would be most welcome.

At paragraph 130, the report states:

“Many of our UK witnesses considered that the UK Government should take the lead in communicating scientific innovations as regards food. Professor Moloney was clear that the only way to offer clarity to consumers ‘is through national leadership’ and Dr Bushell suggested that politicians have ‘an amazing opportunity to shed light on the real risks associated with food and not the imaginary ones’”.

The report goes on to say that the Minister in the other place, Jim Paice,

“took a contrary view, suggesting that Government are the worst source to offer such advice”.

I have some sympathy with the view that perhaps trust in politicians is at its lowest possible ebb, but there is certainly a role for government in trying to stimulate that debate and ensure that we give a platform to scientists—government scientists—in trying to extend and inform the debate.

The report also wanted more done in schools. Of course, as well as spending a year as a Defra Minister, I had three years as Schools Minister. Paragraph 177 of the report talked very much about the importance—as did the noble Lord, Lord Plumb—of engaging with young people and attracting them into the industry. Does the Minister think that the narrowing of the curriculum in the English baccalaureate predicates against that engagement and makes it even tougher for schools? What are the Government doing, probably in combination with Lantra, and perhaps with the Minister’s noble friend, the noble Lord, Lord Baker, to develop university colleges for agriculture? They are an interesting development in 14 to 19 education, but I have not yet heard whether more is being done with the land-based industries in trying to go upstream and attract younger people into the industry than we are doing through the FE sector and its land colleges.

The report states in paragraph 61:

“When we put this concern to Mr Paice, he agreed that there was a need to make the food and farming industry an attractive industry, but saw the Government’s role as to ensure that the industry could ‘deliver a satisfactory income and terms and conditions’”.

I agree with the committee when it states:

“We see this as necessary, but not sufficient”.

We need to go further than what the Minister said in his oral evidence. Like the noble Baroness, Lady Byford, I very much support the work of FACE led by the noble Lord, Lord Curry. I should like more of this in our education system.

I move on to international co-operation. The EU’s framework programme for research is the world’s largest research programme, with funding of €1.9 billion earmarked for the area of food, agriculture and biotechnology. There is differential development in this sector across Europe, given its different geographies, and it is certainly the case that no one size fits all. However, different development needs a more sophisticated differential approach by the EU. The UK has an advanced and relatively mature sector, and we have heard about the interesting work that the Netherlands is doing. However, such work in parts of eastern and southern Europe is far less developed, and we have heard about the very small farm units in some of those areas. Like others, I feel frustration at the projections of only a 4 per cent growth in productivity across Europe. The continent as a whole needs to meet future challenges, grasp opportunities and work together to ensure that the single market area achieves sufficiency.

How much is the Minister concerned about UK food security in isolation? If that is the aim, how will he shift consumer demand to seasonal UK food, especially given that what is seasonal and local changes with the climate? How can the UK use what residual influence it has left on the margins of the European Union to encourage co-operation and convergence of the agricultural economies across Europe? Surely, it is only then that we can do more for less, as is essential, and achieve food security within the single market. As the climate changes and the geography of food production migrates north, how can we develop co-operation between producers across borders so that we can learn from each other’s innovative practice? That sort of co-operation is essential.

Finally on international co-operation, what are the Government doing to encourage higher education co-operation, perhaps through the Bologna process, in these areas? I understand the scepticism articulated by the noble Earl, Lord Caithness, and others, but we need to redouble our efforts on co-operation rather than on isolation so that we can address these challenges.

I turn to the question of active, strategic Governments. There was a difference between the evidence given by the Minister of State, Jim Paice, and the Government’s official response to the report, which read very well. One was the voice of the Minister and the other, from my experience, was the voice of officials signed off by the Minister. The Government’s response to the report is helpful but I would rather look at the Minister’s choice of words.

Like the noble Baroness, Lady Parminter, and the noble Lord, Lord Bilimoria, I was concerned about continued government spend on research. I note that the response to a Parliamentary Question in the other place on 20 January at col. 925W of Hansard was that core Defra research and development spend for the last five years is contained within the evidence budgets, and that while the proportion of R&D and the evidence budgets is to remain the same as a proportion of the total programme, that will reduce by 29 per cent in real terms. The figures show a reduction from £210 million in 2010-11 to £167 million in 2014-15. The department’s evidence investment strategy also shows reductions in spend in this area, and that has to be a concern when we are thinking about these issues.

I also have a concern about whether there is a difference in philosophical approach. Paragraph 27 of the report says that the Minister—not the noble Lord here but Jim Paice—said that,

“the present Government had no plans to publish any new document, and that he did not believe in ‘some Government-determined plan’; and he saw no conflict between the Government’s emphasis on localism and the need to respond to the challenges outlined in the Foresight report”.

I disagree with that. It suggests a hands-off Government who believe in getting out of the way rather than enabling, but we need a more strategic approach than is reflected in the Minister of State’s words. I acknowledge the dominance and the vital importance of the private sector in this industry, but surely there is a role for Government in this area, as I detect being strongly argued in this committee’s reports.

The committee says that most farmers are understandably risk-averse. The committee quotes in paragraph 109 Philip Richardson, who said:

“the great deal of uncertainties (weather, disease and price volatility) inherent in farming … make farmers more risk-averse than other business people”.

We all understand that, hence the committee’s view that innovations need a sound business case for farmers to take them on, but innovation needs a higher appetite for risk to make necessary investment than farmers are going to be willing to make in that sort of environment. Hence the importance of the supply chain—and I noted the interesting evidence given by Morrisons. We need either direct top-down investment or investment via the common agricultural policy. We also need other activity from government. I would be interested to know whether there is any progress on the grocery adjudicator to help give us some leverage over that supply chain and address some of the waste reduction issues that the noble Baroness, Lady Parminter, rightly raised.

I will not take any more of your Lordships’ time. This is an interesting area that needs action from the EU and from the UK Government. It needs the urgency that the noble Baroness, Lady Sharp, talked about. I very much commend the report and look forward to the Minister’s response.

18:54

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Taylor of Holbeach)]

My Lords, it is my personal pleasure as well as my governmental responsibility to reply to the debate. I join others in congratulating the noble Lord, Lord Carter of Coles, and the committee, as well as those advising it, on the thoroughness of their inquiry and the subsequent report on innovation in EU agriculture. It really is a first-class report which has informed this debate, as I hope it will the wider public.

I was pleased to be able to attend part of the seminar in November. As I indicated then, and as noble Lords have generously pointed out, this subject is very much up my street. It is an important one, too, and I hope that the response from Defra, which is full and detailed, does credit to the quality of the report. The report will also be useful in reinforcing the Government’s position vis-à-vis their European colleagues, as my noble friend Lord Caithness hopes.

I had intended to start my speech by quoting from the opening paragraph of the introduction to the report. The noble Lord, Lord Carter of Coles, used those words to open his speech today. Mr Paolo de Castro encapsulated the essentials of our current position, and the report is unafraid to present the challenge that faces all policy-makers and innovators in science and on the farm. This debate, too, has risen to the challenge, not least because it has served as an opportunity for us to hear the maiden speech of the noble Lord, Lord Curry of Kirkharle, who brings to this Grand Committee, as he will to the House in general, knowledge, expertise and an ability to inform. This will be of great value to the House on this and, I hope, many subjects. The noble Lord is welcome as a Member of this House. He reminded us, as did my noble friend Lady Byford, that we must not in our enthusiasm for innovation forget the people and the skills that we need in addressing this topic—I hope to come to that shortly.

Many noble Lords pointed out that but a short while ago we saw ourselves as being in a land of plenty, but Sir John Beddington’s Chatham House speech changed all that, showing us the threat that mankind faces from a perfect storm of resource pressures, climate change and population increase. This was followed by the Royal Society’s Reaping the Benefits, which showed how science could provide solutions if we were prepared to take the opportunities that it offered and, ultimately, by the Foresight report, which placed the challenge in a global context. Many noble Lords talked of this, none more graphically than the noble Lord, Lord Cameron of Dillington. My own Taylor review was designed to look at the need to provide on-farm solutions here in the UK. The sub-committee not only recognises that but also points to the pan-European dimension of its solution.

At the seminar in November, I was given the opportunity to put forward to the European Commission the Government/Defra position on agricultural R&D and to ask for more information from it, particularly on European innovation partnerships and operational groups. Innovation in agriculture is very important to the UK Government. The Government Office for Science’s Foresight report on the future of farming clearly laid out the global challenges for the agriculture sector. Investment in research and innovation at both national and EU level will play an important role in supporting sustainable intensification and climate-smart food systems that will improve food security for Europe and globally.

If I may talk about one of these systems, my noble friend Lady Byford asked about animal welfare standards as a factor in good farm management, independent of the size of the unit. Animal welfare standards and business efficiency can be mutually supportive. We recognise the concerns about such standards creating a competitive disadvantage; we have had discussions in the House about the egg-laying directive, and I have pointed out that the department is concerned to ensure that the sow stall directive is properly enforced. These initiatives and high standards are something that we in this country are not prepared to jeopardise, but they do not necessarily conflict with the strategy for larger-scale production units.

The Government invest £400 million a year on agrifood research, including collaborative work with industry. As noble Lords have pointed out, that is mainly through BBSRC. Defra itself spends £65 million per annum on agricultural R&D, including animal health and welfare. I will not deny that I wish that as a department we had more, but deficit reduction must be addressed. Meanwhile, I assure the noble Lord, Lord Knight, that we are actively leveraging our limited funding.

This investment is coordinated by the UK cross-government food research and innovation strategy published by the Government Office for Science. The cross-government and research council programme on global food security will be a key vehicle for driving this agenda forward.

Perhaps I may comment on my noble friend Lady Parminter’s view, which she expressed very cogently, about the precautionary principle and how it fits with a policy of innovation. The Government agree with the committee that the precautionary principle remains relevant to decisions on food and environmental safety, but it must be applied sensibly and not as an unjustified barrier to new technologies. The noble Lord, Lord Bilimoria, reminded us eloquently about our global responsibility to use technologies to address food supply throughout the world.

I would like to think that we can build on the shared respect for science that has been evident in this debate to move forward in the court of public opinion. I thank the noble Lord, Lord Knight, for his willingness to develop cross-party consensus on these issues.

Through the Technology Strategy Board, Defra and BBSRC, the Government invest in the Sustainable Agriculture and Food Innovation Platform, worth £90 million over five years, which matches funding by industry. It is worth noting that the TSB’s contribution of £50 million to this pot is new investment in innovation. The Government are also reviewing R&D tax credit support for innovation as part of the Dyson review recommendation to boost innovation in Britain.

It might be useful at this point to talk about agricultural skills. Several noble Lords mentioned this, and I shall build on the question that my noble friend Lady Byford asked. The national curriculum review is currently looking at essential knowledge that should be studied pre-16. Studying agriculture should be seen as a front-line activity of central importance to ensure that its relevance to the challenges of food security and sustainable intensification can be supported by a skill base. Lantra, the skills council for the environmental and land-based industries, offers information and careers across the agri sector and determines standards to ensure that qualifications meet both employer and learner needs. I know how important this is. Motivation and enthusing people to enter our industry will be vital if a new generation is to take this agenda of change forward. I should like to point out that in Holbeach itself there is a secondary school, which has now developed academy status, working alongside Lincoln University and the National Food Research Centre—an educational institute—to try to develop this in the heart of perhaps one of the most productive areas of UK agriculture. Therefore, I have first-hand knowledge of what is being done and what can be done on a much broader scale.

However, to tackle the challenges of creating a more innovative, profitable and competitive EU farming industry that can better withstand shocks and recover from them quickly, we also need to work in partnership with other countries in Europe and further afield. This is a factor that runs through the report and was reinforced by contributions throughout this debate. We therefore welcome European Union mechanisms that support this approach, including the European Research Area Networks—ERA-Nets—as well as supporting the Commission in its provision of the joint programming initiatives, or JPIs, of the member states.

My noble friend Lady Sharp mentioned the importance of awareness in the Commission of the need to remove complacency and to invest in innovation. At a wider international level, the UK’s proactive engagement with the Global Research Alliance on Agricultural Greenhouse Gases is an example of where a partnership approach can be used to address common global challenges and add value to our own £12.6 million greenhouse gas R&D platform to identify greenhouse gas mitigation options and monitor them more effectively.

The noble Lord, Lord Cameron, talked about global research partnerships. The Global Research Alliance on Greenhouse Gases includes the USA and Brazil, as well as many EU member states. UK researchers, including those from Rothamsted, which the noble Lord will know well, are actively collaborating with their counterparts in New Zealand and Australia as well as the US. This is all co-ordinated by Defra, which is also collaborating under the sustainable agricultural innovation partnership through the action plan for UK-China co-operation on food security. The noble Lord, Lord Bilimoria, reinforced the importance of this global approach to research projects if we are to meet the global challenge of feeding the world.

As we enter the final years of the EU’s seventh research and development framework programme, we welcome the Commission’s recent proposals for Horizon 2020, a research and innovation programme for Europe between 2014 and 2020. Horizon 2020 should play an important role in addressing the key societal challenges that we face today. We are pleased that food security and sustainable agriculture are among the grand challenges to be addressed by the programme. Indeed, my right honourable friend the Secretary of State, Caroline Spelman, is due to sign it off today.

EU-funded research must deliver value over and above that of our national programmes, and the impact of Horizon 2020 will depend on the active translation of research outputs as part of effective knowledge-exchange mechanisms. We therefore welcome the aim for Horizon 2020 to cover the knowledge spectrum from fundamental research through to demonstration activities.

Importantly, ambitious CAP reform would provide opportunities for agriculture to become competitive with less reliance on subsidies, releasing funds to encourage the cost-effective delivery of public goods and stimulate innovation in the agricultural sector as it grapples with global challenges to provide sufficient food to feed a growing population in a way that impacts less on the environment. I believe that the current package of proposals will fall short of this aim. I assure my noble friend Lady Parminter that we recognise the need for the identification of funding within the CAP for research and innovation.

We therefore broadly welcome the Commission’s proposal to establish a European innovation partnership, or EIP, for agricultural productivity and sustainability that will bring together relevant actors across the research and innovation chain. We also support the establishment of operational groups—OGs, as they are called—to test out emerging findings and to drive forward the adoption of new ideas and technologies. However, we await further clarification from the Commission on how the EIP networks and OGs will operate in practice and how they are to be funded, and we look forward to working closely with the Commission and others as these proposals are developed.

A number of noble Lords challenged our position on GM. I include my noble friends Lord Caithness and Lady Byford, but it was mentioned in a number of noble Lords’ speeches. The EU controls are the strictest in the world and robust enough to ensure that any approved GM products will be as safe for people and the environment as their conventional counterparts. Although ensuring that safety is paramount, we also need to be open to the potential benefits of GM technology. That is important, given the challenges ahead on food security and sustainability. My noble friend Lady Byford is right in her appraisal of the current proposals. A sustainable resolution of this issue must be based on science and be established across all 27 countries of the European Union.

In its inquiry, the committee has also examined the provision of farm advisory services to support agricultural innovation and competitiveness. I am delighted by this as it featured in my own report to the Government, then in opposition, to encourage greater collaboration between the public and private sectors in funding research and ensuring that a more effective knowledge transfer takes place.

A number of noble Lords mentioned the climate change risk assessment. I see this as an opportunity. Published last week, it presents the very real challenges posed by climate change. The scenario as painted for British agriculture is that there are opportunities within this agenda, but the assessment points particularly to the resource challenges of water. This will continue to be an increasing challenge not only in this country but across the world if we are to increase the capacity of our existing arable soils to produce crops and our grasslands to sustain livestock.

I am pleased to report that, as from 1 January—as noble Lords have mentioned—the new farming advice service will provide advice on competitiveness, nutrient management, climate change adaptation and mitigation and cross-compliance. The provision of the new service, secured by open competition, will be delivered by AEA Technology in active partnership with industry-related bodies such as the NFU, the CLA, the AHDB, LEAF, the West Country River Trust and ADAS. Farmers wanting professional advice will no longer have to ring round dozens of organisations before getting through to the right source. After all, good advice is essential to the running of any business, and this new advice service will make sure that farmers can get the most out of their farms.

I therefore wish to encourage any future industry-led initiatives that will stimulate co-operation between industry bodies, innovation, applied research and the effective translation of science and technology into practice. I understand that the noble Lord, Lord Curry, will be chairing a meeting shortly to encourage the levy bodies, colleges and other stakeholders to work together to deliver innovation. That mission has my blessing.

I have not gone into a lot of detail about something that was mentioned by my noble friend Lady Parminter and the noble Lord, Lord Knight: the reduction of waste in the food chain. I see that as a very important aspect of any strategy to increase the efficiency of the food chain and reduce the needless waste of important foodstuffs. As noble Lords will know, this is also a part of my portfolio. I am working very much towards this end and have the considerable resource of WRAP, an excellent body that has provided advice throughout all of this. My noble friend Lady Parminter also mentioned nutritional and health values in foodstuffs. We should also not ignore the quality of food and its effectiveness in nutritional terms when talking about the capacity of industry to produce food.

It was good to listen to my noble friend Lord Plumb and to have the debate that we are conducting today put into a historical perspective. My noble friend is rightly credited with presiding over this industry in its golden age. I would not describe the future in quite such terms but the noble Lord, Lord Bilimoria, talked of a renaissance in this industry. I share with him and the committee a sense that we have an opportunity—a renewed opportunity—to address the challenges of the future to build a sustainable and more productive agriculture by the use of science, technology and innovation. The committee, along with our farmers and growers, looks to the Government to provide a lead both here and in Europe to do just that. I thank the noble Lords for their participation in this report; it has served as a very useful catalyst for us to be able to reiterate that objective.

19:18

[Lord Carter of Coles]

My Lords, I conclude by thanking all noble Lords for their contributions. We have been debating a very important issue this evening and all the contributions have served to underline that fact.

I noticed a number of themes emerging from noble Lords’ remarks. The first is the issue of people: the fact that the population of the world is going to rise and requires feeding imposes a moral, political and economic responsibility on everybody who can help in this. That is one of the noblest things we could focus on. The noble Lord, Lord Curry, and the noble Baronesses, Lady Parminter and Lady Byford, mentioned how we can get people to engage in agriculture, how we can motivate them, educate them and up-skill them. These are very important factors; those things together drive that along.

The second theme is the issue of science: the point made by the noble Baroness, Lady Sharp, about the renewal of science, and the fact that renewal of interest in agriculture generally is a wave to ride, something to pick up on and to drive forward. On the subject of science, the noble Earl, Lord Caithness—in his usual to-the-point way—drew our attention to GMOs. This is not to be ducked; it is an issue to be debated and it is an issue the European Union needs to get clear on. We need to address the issue of GMOs if we are to close that gap between productivity in our continent and in other parts of the world.

The noble Lord, Lord Cameron, drew our attention to the challenges we face on a global scale, as did the noble Lord, Lord Bilimoria: the challenges of moral responsibility, of feeding Africa and involving Europe beyond its boundaries by actually going out and serving and helping solve the problems of the world. The noble Lord, Lord Plumb, with his great experience, raised the most pressing question of all: how is it going to be made to happen? How will it happen? How will we influence the CAP and how will it go forward?

The noble Baroness, Lady Parminter, in her questions about research and waste, asked for specifics about how we are going to address those issues, which are really pressing. We need to maintain the pressure—both on our Government and through the Governments of the European Union—to deal with those challenges and not to duck the issues that we have to deal with out there. That is very important.

Looking beyond that, we have the sense of urgency referred to by a number of noble Lords. There is a time, and it is now, and we have to make the voice heard, most specifically around the CAP. We are not going to get another chance for another seven years if we do not do it now. It needs to be pressed on extremely hard to get this done—a point made, again, by many noble Lords. It is pretty straightforward; the policy is pretty simple, but it is the Government’s responsibility as well as ours to come up with the strategy in order to deliver those aims.

In thanking noble Lords, I would also like to echo the welcome extended to the noble Lord, Lord Curry of Kirkharle. I just read a biography of Capability Brown, so it did not come as a surprise about that. I would really like to thank him for his erudite remarks; they were very insightful and clearly, like other Members, I look forward to hearing more of his views in the Chamber as we go forward. I would also like to thank the noble Lord, Lord Taylor of Holbeach, for setting out the views of the Government. Some may refer to the noble Lord as a poacher turned gamekeeper, but I think I am not alone in hoping that his role in Government will actually be a game changer for us here—to get out there and do this and drive towards the innovation in agriculture that we have discussed.

Finally, I am going to seek your Lordships’ indulgence to quote from Ecclesiastes 1:19 in the King James Bible:

“The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun”.

It may well be that all the changes we want to see in agriculture have all been done on a small scale. We will find these examples in one area or another in different parts of the world and things like that. However, to bring these changes together, to build on them with intellectual and financial support and apply them across the EU agriculture generally—and then out into the world—that would be a new thing under the sun, under the rain, and under the changing climate that we are going to have to live under.

Motion agreed.

Committee adjourned at 7.24 pm.

House of Lords

Monday 6th February 2012 Lords Chamber

Monday, 6 February 2012.

14:30

Prayers—read by the Lord Bishop of Chichester.

Cities: Economic Development

Monday 6th February 2012 Lords Chamber

Question

14:35

Asked By

[Baroness Quin]

To ask Her Majesty’s Government what proposals they have for economic development in city regions.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

The Government want powerful, innovative cities that shape their economic destinies—engines of growth that will boost entire regions. We have already created 38 local enterprise partnerships, invested £2.4 billion in the regional growth fund and created enterprise zones in 24 cities and their wider local enterprise partnership areas. We are working with cities and their surrounding areas to agree bespoke city deals, supporting innovative local strategies to deliver growth.

[Baroness Quin]

My Lords, while I agree that cities can do much to drive our economy, there are other areas that do not fit well into city regions and that need economic development. I am thinking, for example, of parts of the former northern coal-field areas which, geographically, are not close to cities and which are not well linked with effective public transport, even though they include areas of high youth unemployment hotspots as identified in today’s ACEVO report. Given that, and given that regional development agencies which were able to address the needs of such areas have been abolished, will the Government give a firm commitment that areas on the fringe, or, indeed, outside city regions, will not be overlooked in their policies?

[Baroness Hanham]

My Lords, as the noble Baroness knows, we are currently developing city regions which will be within the local enterprise partnerships and will cover most of that. We are aware, of course, of the problems that the noble Baroness identified. I am sure that there will be further discussion on that in due course.

[Lord Shipley]

My Lords, while I strongly support what the Minister said about the Government’s approach to city regions, perhaps I may draw her attention to the fact that public expenditure per head is higher in Northern Ireland, London, Scotland and Wales than in any English region. Might not one possibility be for the Government to look again at rebalancing public spending and consider what the Lyons report said about decentralising Civil Service jobs from Whitehall to the English regions?

[Baroness Hanham]

My Lords, as I am sure the House knows, the noble Lord, Lord Shipley, has been appointed as a government adviser on cities, and so will speak with authority. I want to look further at the matters he has raised and, if necessary, I will write to him.

[The Lord Bishop of Birmingham]

I welcome the noble Baroness’s creation particularly of the Birmingham-Solihull local enterprise partnership under the chairmanship of Andy Street, of John Lewis Partnership, with whom I am having a fruitful discussion about social inclusion. Will the Minister comment on the importance of social well-being for the achievement of the LEPs’ goals and indicate to which areas of social policy we should give priority in achieving a high quality of life for all?

[Baroness Hanham]

My Lords, the first thing that we must do is to get growth in the cities and get our economy moving. Without that we will not be able to do what the right reverend Prelate is suggesting. Social well-being is part of the life that we hope to lead in the cities and their regions and I know that that will be taken into account. As I say, however, first we must ensure that we get the economy moving. That is what the cities programme is about.

[Lord Davies of Oldham]

My Lords, it is all very well for the Minister to say that we must get growth in the cities, but she will be all too well aware that the distribution of resources from central government is to the disfavour of our northern cities, in particular, in favour of southern shire counties. Is she not greatly concerned that northern cities are not only losing out on the devolution settlement, which helps Wales and Scotland, but in fact are being disfavoured compared with the rest of England?

[Baroness Hanham]

My Lords, there are many northern cities that are involved in the cities programme—the cities deal. I know that consultation discussions are taking place with them on what is required for the future. The distribution of the grant, of course, is done against our formula.

Health: Children and Young People

Monday 6th February 2012 Lords Chamber

Question

14:40

Asked By

[Baroness Hughes of Stretford]

To ask Her Majesty’s Government what assessment they have made of the NHS Confederation report Children and Young People’s Health—Where Next? on the impact of the Health and Social Care Bill on children’s health.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, last month my right honourable friend Andrew Lansley launched the development of a health outcomes strategy for children and young people. An independent children and young people’s health outcomes forum will inform the development of this strategy and will consider the findings of this report alongside the wider views of children, young people, their families and the professionals who support them. It will report back to government by the summer.

[Baroness Hughes of Stretford]

I thank the Minister for his Answer. However, as this report makes clear, under government proposals up to six different commissioning bodies will have responsibility for commissioning child health or child public health services. Will the Minister tell the House how the Government will prevent the fragmentation of those services to ensure that children do not fall through the gaps, and whether the Government will therefore now consider placing a specific duty on all those commissioning bodies to improve outcomes and reduce inequalities in children’s and young people’s health?

[Earl Howe]

My Lords, the outcomes framework that I have just referred to should assist in the latter regard. I think the noble Baroness would agree that the system we have at the moment is not sufficiently joined-up, and in that sense does not adequately serve the needs of children. The approach we have taken to the proposed NHS reforms is to promote the importance of the integration of care and service provision for everyone, including children. We believe that strong partnerships at a local level, supported by professionals and local leaders, are the way forward, not top-down direction. The health and well-being board provides the forum for repositioning the joint strategic needs assessment into a truly joined-up strategy for local people.

[Baroness Walmsley]

I welcome what my noble friend the Minister has said about getting the views of children, but does he think that giving the commissioning of the excellent Healthy Child programme to local authorities is going to bring about the universal dissemination and delivery of that programme?

[Earl Howe]

The role of local authorities will be pivotal in this because it is at local-authority level that public health, social care, and indeed the discussions that will go on in the health and well-being board context will bring together policy in a way that informs NHS commissioning. I think that the approach we have taken has been widely welcomed, and we are absolutely determined that all sectors of society, including children, are included in these processes.

[The Lord Bishop of Blackburn]

My Lords, my northern diocese of Blackburn scores heavily on the deprivation indices for children’s health outcomes. Does the Minister share my concern that if phase 3 children’s centres become self-financing—as I understand they are to—and a children’s centre is deemed not viable, surely the health impact on the community and of course on the health services will be immense?

[Earl Howe]

The right reverend Prelate is right to draw attention to this issue. I simply say to him that the process that I have described at health and well-being board level is specifically designed to enable local people to determine the priorities that they see as most important for their area. It is right that these decisions are taken locally. I do not argue in the slightest with his analysis of the importance of these centres; I think they do a tremendous amount of good. I am sorry to hear that there may be some threat to the one that he mentioned, but I hope he will also tell me that discussions are going on at a local level to try to find a way forward that will suit the needs of local children.

[Baroness Finlay of Llandaff]

My Lords, given the emphasis on local-level decision-making, will the Minister explain how the Government intend to monitor fairness of access for children with less common conditions who at a local level may not appear to have a great need because there is a lack of awareness of the complex nature of their needs but whose outcomes can be greatly improved with highly specialised care?

[Earl Howe]

The noble Baroness raises an important point. She is right that it is all too easy for children or indeed any patient with a less common condition not to have their voices heard. That is why we are absolutely clear that local healthwatch should be configured in a way that reaches out to hard-to-reach groups. We are looking in particular at patients with specialised conditions to ensure that there is a mechanism for them to have their voices heard at the local level.

[Baroness Massey of Darwen]

My Lords, first I will say how much I welcome the new outcomes framework for children. Will the Minister say which proposed structures in the Health and Social Care Bill will benefit children, and who will have overall responsibility for child health?

[Earl Howe]

My Lords, the Secretary of State will retain ultimate accountability for children's health services. Under the Bill, as the noble Baroness knows, the functions will be conferred directly by Parliament on specific organisations. That will strengthen accountability. In answer to the first part of her question, the reform of the health system offers a real opportunity to address some of the well documented challenges that the current system presents. We are moving, through the Bill and through our reforms, to a system that will focus on promoting good health, which we see as important as delivering good care. Informed and expert knowledge will underpin the commissioning of integrated services, where we will measure success on improvements in the outcomes that are achieved. Treatment will be evidence-based and children will be involved in decisions about their care. All these things are embodied in the Bill.

[The Countess of Mar]

My Lords, recent research at Bristol indicated that as many as one in 100 children who are absent from school long-term suffers from CFS/ME. There is a dearth of centres for the treatment and diagnosis of children with CFS/ME. Does the Minister envisage this improving under the new proposals?

[Earl Howe]

My Lords, it is yet to be decided finally which services will be commissioned at a national level. I cannot give the noble Countess a definitive answer on where services for CFS/ME will be commissioned. However, we are sure that the arrangements will provide much better, more locally responsive ways of commissioning services generally. Whether clinical commissioning groups join together in commissioning services, whether lead commissioners do that or whether commissioning takes place at a higher level, we are clear that in all services this needs to improve.

[Baroness Gardner of Parkes]

Will the Minister tell me what the position is with accident and emergency services? We have all read in the papers that we should not get sick at weekends and how desperately people are treated in some hospitals. Are children’s services as adversely affected as those of adults, or are no figures kept on the difference? What does the Minister propose to do to increase cover, because misdiagnosis is a major worry in some cases?

[Earl Howe]

My Lords, accident and emergency services will be commissioned at a local level. I am afraid that I do not have in front of me detailed information on the split between adult and children's services in an emergency context. If I can get the information, I will be happy to write to my noble friend.

[Baroness Thornton]

My Lords, given that responsibility for commissioning for 0 to five year-olds will be at a national level, and commissioning for six to 19 year-olds will be the responsibility of local arrangements, as the noble Earl described, what are the risks for the continuing responsibility for safeguarding the health of the most vulnerable children in our society?

[Earl Howe]

My Lords, the two main outcomes frameworks relevant to this are the NHS and the public health outcomes frameworks, which we are trying to align as far as possible. They set a clear direction for the health and healthcare of children and young people, but there is more to do. As our data improve, we need to ensure that the outcomes measured are the ones that matter most to children and young people. That is why we are developing a health outcomes strategy for children. This will be the first example of an outcomes strategy as part of the health reforms model.

[Baroness Tonge]

My Lords, would the Minister remind us—in fact, more than that, would he make it absolutely clear—who will treat children whose families are not registered with a general practice?

[Earl Howe]

My Lords, as my noble friend knows, it will be the legal responsibility of clinical commissioning groups to commission care on behalf of all patients living in their geographic area, whether or not they are registered with a GP. That means that arrangements have to be made to ensure that those patients are treated when needed.

Universities: Non-EU Students

Monday 6th February 2012 Lords Chamber

Question

14:51

Asked By

[Viscount Hanworth]

To ask Her Majesty’s Government what assessment they have made of the impact of the UK Border Agency’s activities on the ability of non-European Union students to study at United Kingdom universities.

[The Minister of State, Home Office (Lord Henley)]

My Lords, the latest figures published by UCAS show an increase of 13 per cent in the number of university applications from students resident outside the European Union. Our original impact assessment forecasts no impact on universities.

[Viscount Hanworth]

I thank the Minister for his reply. Does he not recognise that the measures designed to combat bogus institutions are also having a severe effect on reputable institutions in the higher education sector? Would he not agree that, if the Government wish to reduce the headline figure of net immigration, it is inappropriate to include non-EU students in these figures? Under normal circumstances, without the impediments created by the Government, their numbers would be expected to follow a steeply upward trend, which would be highly profitable for the UK.

[Lord Henley]

My Lords, I thought that was exactly what I just said in announcing a 13 per cent increase in those applying for universities. That strikes me as a very good thing indeed. It is quite right that we should stamp down on what the noble Viscount refers to as “bogus institutions”—I use his words, but I have previously used them myself. It is not fair on individuals coming to this country to come to an institution that is not providing them with proper education, and is being used merely as a vehicle to get around the immigration rules. What we have done is quite right. We are getting a grip on net migration figures but we are also seeing a growth in the number of genuine students coming to genuine universities.

[Lord Taverne]

My Lords, is it not true that there has been some decline in the market share of overseas students, particularly from India, who are a very important section? If students were not treated as migrants for the purposes of immigration policy, as happens in Australia and the United States, would this not be of great benefit to industry and to our universities; make it possible for the Government to meet their immigration targets comfortably; and make a difference of billions of pounds to the Treasury? Is this not a no-brainer?

[Lord Henley]

My Lords, it is right that we should stamp down on those institutions which are trying to get round immigration by means of the bogus college route. My noble friend is also right to draw attention to the fact that there are some areas, such as the Indian sub-continent, where we are losing market share. There are, however, areas where there have been significant rises, particularly from Australasia where there has been an increase of some 20 per cent and from Hong Kong of some 37 per cent. We wish to continue to see those students coming in, but I also think they should be treated as part of the migration statistics. It is important that we get to grips with those, but we want to see them because they are a valuable export for this country.

[Baroness Warwick of Undercliffe]

My Lords, the Government have recognised the considerable economic and wider benefits that international students bring to this country and that is enormously welcome. However, in a speech on 2 February, the Immigration Minister, Damian Green, suggested that,

“the debate on student immigration needs to move on”.

He also said:

“There needs to be a focus on quality rather than quantity. The principle of selectivity should apply to student migration just as it does to work migration”.

Can the Minister explain what is meant by “selectivity” in relation to student migration and reassure the House that, on the basis of what he has said previously, it does not herald a further tightening of visa arrangements for international students in bona fide institutions?

[Lord Henley]

My Lords, I welcome the intervention from the noble Baroness, particularly as she used to chair Universities UK. I will remind her that Universities UK said recently that our reforms will allow British universities to remain at the forefront of international student recruitment. We want that to continue, and that is what my honourable friend was making clear in his remarks. I want to underline again why we have seen an increase in the number of undergraduates coming in, but at the same time, we think it is right to tighten up on those coming in for other reasons and trying to get around the immigration rules.

[Baroness Coussins]

My Lords, will the Government support student mobility in the opposite direction and extend the fee waiver to students who want to spend a year studying or working abroad in a non-EU country in the way that is available now under the Erasmus scheme only to students spending their year abroad within the EU?

[Lord Henley]

My Lords, the noble Baroness will appreciate that that is a completely different question from the Question on the Order Paper. We are discussing the actions of the Home Office and the UK Border Agency and the effect they are having on students coming in. If the noble Baroness wishes to put down a Question on that subject, I am sure that one of my noble friends will be more than happy to answer it.

[Lord Flight]

My Lords, when talking to the Cambridge Vice-Chancellor’s office a few months ago, it raised with me a problem about senior research students aged 28 or 30 who it wanted to attract from India, but who were mostly married. The problem was about their spouses coming in and I encountered the same issue in India. Has this issue been resolved?

[Lord Henley]

My Lords, the restriction on bringing family members applies to undergraduates. The sort of senior research students who my noble friend refers to would be allowed to bring partners or members of their family with them, so I think I can say to my noble friend that that issue has been resolved.

[Baroness Blackstone]

My Lords, is the Minister aware that contrary to what he has said some bona fide institutions—universities—have lost as many as 20 per cent of their overseas students, particularly from India? Is he aware that the restrictions on employment when graduating will put us in a very unfortunate position compared with our main competitors, the United States and Australia, which have much more generous arrangements for students who wish to work in the UK, for a temporary period, when they graduate?

[Lord Henley]

My Lords, as I said, the overall figures show an increase, particularly in undergraduates. It might be that some particular institutions are losing out, and particularly on those from the Indian subcontinent, but we have seen proportionate increases elsewhere. I do not know whether the noble Baroness is old enough to remember the changes we announced back in the early 1980s when, again, there were cries that they would cause fatal damage to all the universities for ever. However, as the noble Baroness might be able to remember, on that occasion we saw an increase in the numbers of those attending universities, just as we will see one now.

Tobacco

Monday 6th February 2012 Lords Chamber

Question

14:59

Asked By

[Lord Faulkner of Worcester]

To ask Her Majesty’s Government how they are ensuring the cross-government implementation of the World Health Organisation Framework Convention on Tobacco Control.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, the Government take very seriously their obligations as a party to the Framework Convention on Tobacco Control. The convention encourages parties to take a comprehensive approach to tobacco control to improve public health. The United Kingdom is a recognised leader for tobacco control internationally. The Government’s tobacco control plan sets out a government-wide approach to tobacco control, as well as what will be done to support local authorities to reduce rates of tobacco use.

[Lord Faulkner of Worcester]

My Lords, the Minister will be aware that the reason that the United Kingdom Government and 173 other Governments have become parties to the WHO’s Framework Convention on Tobacco control is because the tobacco industry has had a uniquely malign influence on health policy in all countries where tobacco is sold. Does he agree that its record in the United Kingdom since the 1950s has consisted of first denying the link between tobacco smoking and ill health, then suppressing the results of its own research on the addictive properties of nicotine, then denying the harmful effects of second-hand smoke and now funding front organisations to oppose tobacco control legislation such as the point-of-sale restrictions, which I am delighted that the Government have embraced? Are not all these powerful reasons for sticking to the framework convention and ensuring that the tobacco industry has no influence whatever over the formulation of health policy relating to tobacco?

[Earl Howe]

My Lords, yes, the vested interests of the tobacco companies are well recognised. The Department of Health is careful to ensure that the Government’s obligations under the framework convention are met, including the treaty obligation to protect public health policies from the vested interests that he referred to. For example, I hasten to reassure him that the tobacco industry was not involved in the development of the Government’s tobacco control plan, which was published last year.

[Lord Ribeiro]

Can my noble friend outline what steps the Government are taking to reduce the promotional impact of tobacco packaging, particularly that which is targeted at vulnerable young girls?

[Earl Howe]

My Lords, we shall shortly be announcing a consultation on the subject of plain packaging for tobacco. We wish to hear views from all interested parties on that subject.

[Baroness Thornton]

My Lords, it was as a direct result of the evidence of the underhand tactics of the tobacco industry that the UK very wisely adopted Article 5(3) of the Framework Convention on Tobacco Control. In 2008-09, the noble Earl’s noble friend Lady Northover successfully asked the then Secretary of State Alan Johnson to write to all his ministerial colleagues drawing attention to and outlining the importance of Article 5(3) and asking for their assurance that they were abiding by the article in their dealings with the tobacco industry. I invite the Minister to agree to ask his right honourable friend the Secretary of State to do the same with this Government.

[Earl Howe]

My Lords, I can reassure the noble Baroness that my right honourable friend the Secretary of State, and indeed all Ministers in the department, have had no direct dealings—or indeed indirect dealings—with the tobacco industry since coming to office. However, I am sure that the noble Baroness’s message will be very warmly received by my colleagues.

[Baroness Hussein-Ece]

Is my noble friend aware that almost 50 per cent of loose tobacco sold in the UK comes from illicit and illegal traders on the streets, which makes it more affordable for children and young people? What progress is being made in cracking down on the illicit tobacco trade? As my noble friend will know, it is an industry controlled and funded by an international network of organised crime gangs.

[Earl Howe]

My Lords, Her Majesty’s Revenue and Customs and the UK Border Agency published a renewed strategy in April last year to tackle the illicit trade in tobacco products. Our tobacco control plan complemented that strategy by stressing the importance of cracking down on illicit tobacco sales, which will in turn reduce tobacco consumption and organised crime, and support legitimate retailers. In fact, the latest figures show that fewer and fewer people are using illicit tobacco. The market for illicit cigarettes was down to 10 per cent in 2010 from 21 per cent in 2000.

[The Countess of Mar]

My Lords, some years ago I was given a statutory instrument, the Sheep Scab Order, which was dated about 1914 and had an excellent recipe for sheep dip made from tobacco. I wonder whether the current tobacco problem could be relieved by diverting tobacco from smoking to sheep dip.

[Earl Howe]

My Lords, I wonder too.

[Lord Naseby]

My Lords, the Minister says that the control of illegal importation of tobacco is showing progress. Is it not the reality that the vast majority of illegally imported tobacco and cigarettes is being consumed by young people, and that while the official statistics may show one thing, all the evidence, when I inquired of the tobacco industry on this particular aspect, is that this is still the major problem in terms of young people taking up smoking?

[Earl Howe]

My noble friend is absolutely right that that is where the problem principally lies: 320,000 young people experiment with smoking or take it up every year. That is a very serious rate of incidence and it must be tackled at every possible level. The tobacco control plan sets out a concerted programme of action to try to do just that.

[Lord Rea]

My Lords, on 11 July this year the noble Earl said to the House,

“we will make sure that we publish details of policy-related meetings between the tobacco industry and government departments and we are currently exploring the most effective and appropriate mechanism for doing that”.—[Official Report, 11/7/11; col. 560.]

Could the noble Earl please say what that mechanism is, and whether it is now being implemented?

[Earl Howe]

My Lords, since 2010 the Government have published details of hospitality and gifts received by Ministers and special advisers, ministerial meetings with external organisations, and all overseas trips by Ministers across government. These details are published on each department’s website. The information is published quarterly to promote transparency and to provide the public with up-to-date information.

Protection of Freedoms Bill

Monday 6th February 2012 Lords Chamber

Report (2nd Day)

15:06

Clause 40 : Adding safeguards to powers of entry

Amendment 35 had been retabled as Amendment 37ZA.

Amendment 36 had been retabled as Amendment 37ZB.

Amendment 36A had been retabled as Amendment 37ZC.

Amendment 37 had been withdrawn from the Marshalled List.

Amendment 37ZA

Moved by

[Lord Marlesford]

37ZA: Clause 40, page 33, line 33, at end insert—
“(3) A further safeguard shall be that, unless explicitly provided for in the statute providing for the power of entry, all powers of entry shall be exercised by agreement with the premises occupier or by warrant.”

[Lord Marlesford]

My Lords, in moving Amendment 37ZA, and speaking to Amendments 37ZB and 37ZC, on powers of entry, I must say at once that, crucially, the three amendments all go together.

I am grateful to my noble friend the Minister for circulating to us all on Thursday the Home Office view on my amendments. Normally one learns of objections only in the winding-up speech of the Minister, but this useful form of pre-debate negotiation has enabled me to meet at least two of the Home Office points with changes to my amendments. However, I did notice one rather surprising statement in the Home Office brief, and in fact if it were not in both the summary and the main argument I would have been tempted to see it as a misprint. The brief states:

“The Government supports action to remove necessary or unjustified powers of entry”.

That is not what I seek. It is perhaps rather sad to note that the Home Office retains its historic belief in its own omniscience, which I well remember from my days in Whitehall, but it seems to be losing its reputation for accuracy.

The first amendment makes the main point that powers of entry should be used only by agreement with the occupier of premises or with a magistrate’s warrant. The second amendment allows for exceptions where it is obviously necessary to continue with routine inspections and checks without notice being given. The third spells out specific areas where I am not seeking to change existing practice in the use of powers of entry: trading standards, the police and security services, protection of children and vulnerable adults.

The Trading Standards Institute explained to me why it needs its existing powers for its job of protecting consumers; for example, by checking goods in shops or the accuracy of a petrol pump at the petrol station, and so on. I am glad that the institute has been able to assure me and the Official Opposition that it is now content with the amendment, which would enable it to continue with its important and valuable work.

Although the essence of my argument is that powers of entry should be subject to the same constraints as the police who normally and traditionally have to have a warrant, the Home Office has helpfully pointed out to me that the Terrorism Prevention and Investigation Measures Act 2011 has given constables certain new powers to enter without a warrant. That is why I have added Amendment 37ZC to cover the police and security services.

It is also, of course, necessary to continue to allow unannounced entry to those charged with responsibility for the protection of children or vulnerable adults. Thus inspecting old people’s homes, checking on children at risk or similar crucial monitoring functions must be allowed to continue without either warrant or agreement. However, I feel I must emphasise the principle underlying my amendments and why I am doing this at all.

In our country, the right to privacy and to enjoy property or conduct legitimate businesses without state intrusion has been a long-standing freedom. Indeed, it has echoes going back 800 years to Magna Carta, which sought to protect individuals from the Crown and from officials of the Crown. The fact that the police cannot, in general, enter people’s homes or businesses without a magistrate’s warrant is a cherished freedom well-known to the public and has given rise to the ancient phrase, “An Englishman’s home is his castle”, which was coined by the great English jurist Sir Edward Coke, who was responsible for the Petition of Right in 1628.

The law should protect the individual and must never be defied. In 1977, that great icon Lord Denning quoted Thomas Fuller’s 1732 dictum, “Be you ever so high, the law is above you”. The lesson in that, of course, is the huge responsibility that legislators have to ensure that the laws they make enhance and enshrine liberty rather than erode freedom. This, of course, is what this Protection of Freedoms Bill should be seeking to do.

I was disappointed, but perhaps not surprised, that the Minister should have so completely rejected my first two amendments on powers of entry when they were debated, with support from all sides, in Grand Committee, but I am well aware that the Home Office expects to have the monopoly of any improvements to its legislation. However, it is a pity that Ministers in this coalition Government should not have seen their prime duty when this Bill was drafted as being to extend real freedom rather than seeking to protect the territorial rights of the bureaucracy.

For years legislation has surged liked a tidal wave. No Government seem to have the power or even the will to stem it. More and more laws have been passed which give officials of every rank and type the right to enter premises without so much as a by your leave to inspect, check, observe, search or test whatever perfectly honest citizens are doing in their own property. This is something that the public are increasingly aware of and apprehensive about.

The real hero behind my small attempt to reinforce our ancient liberties is my noble friend Lord Selsdon. Over a period of more than a decade he has been accumulating details of the legislation which justifies my amendment. In spite of starting with some obstruction rather than co-operation from Whitehall, he has succeeded in producing a dossier in which there are more than 1,200 separate pieces of legislation giving powers of entry, in most cases without the safeguards we have the right to expect and indeed demand. They cover every sort of issue, right down to demanding entry to a private house to see whether a TV is switched on or, where a person has left a child with the people next door while they go to the cinema, to check whether those people have got a child minder’s licence. I hope that my noble friend will tell us something more about the legislative background to this debate.

Most of these provisions are in secondary legislation—statutory instruments—and it is only recently that Parliament has had the power to examine the merits rather than just the vires of statutory instruments. It does so through the House of Lords Merits of Statutory Instruments Committee, which was established in 2003. This supplements the Statutory Instruments Joint Committee of both Houses. The Merits Committee is doing an excellent job and, interestingly, it has had cause to draw the attention of the House to proposals for fresh powers several times during the past few months.

On 15 December 2011 in Grand Committee the Minister told me that the Home Office felt that my amendments were,

“going a bit too far”,

and suggested that,

“we want to look at all the powers we have and are asking all departments to do so”.—[Official Report, 15/12/11; col. GC 379.]

With more than 1,200 pieces of legislation, noble Lords will realise how little progress would be made. Indeed, I anticipate that the bureaucrats would find a reason why powers should be retained in their existing form in nearly every case. There has been widespread support for my amendments from Liberty, which I much welcome.

I would remind my noble friends on this side of the House that the Conservative manifesto specifically undertook to,

“cut back the intrusive powers of entry into homes. Public bodies (other than the police and emergency services) will require a magistrate’s warrant, and approval for such a warrant will be restricted to tackling serious criminal offences or protecting public safety”.

My amendments seek to support and implement that commitment. I would have expected my noble Lib Dem friends, with their proud commitment to civil liberties, to be chasing the Government on this issue.

Following the principles of the 18th century Whig statesman Edmund Burke, I fervently believe in the role of the state to hold the ring: to protect the population from ill treatment or exploitation. Those who may need such protection include the old and the infirm, children, employees, consumers, savers, investors and many other groups. I would never deny to the state the powers that it needs to provide this protection, but many of the powers of entry as they exist today can intrude, intimidate and even oppress. That is why they need to be constrained.

As this will probably be the last occasion for a decade or so that we have a Bill which is tailor-made for this reform, I shall, if necessary, ask your Lordships to support me in the Lobby on what I hope we can all agree would be a significant step forward for the right of privacy, individual freedom and democracy. As always, the wording of my amendments may not be precisely what the Home Office needs, but provided I can get a commitment from the Minister to do so, I will be happy for the Government to tidy them up at Third Reading. I beg to move.

15:15

[Lord Borrie]

My Lords, first, I declare an interest as having been honorary president of the Trading Standards Institute, the trading standards officers’ professional body, for a period of five years, since which I have also been one of several vice-presidents.

Secondly, I congratulate the noble Lord, Lord Marlesford, on two things. The first is his persistence, both through the work on this Bill and earlier, in questioning the rights and powers of entry by numerous public officials. He has correctly congratulated his noble friend Lord Selsdon on the massive amount of work that he put in over the years in working out how many powers of entry exist. The second thing I congratulate the noble Lord, Lord Marlesford, on is his evident willingness, both in Committee, which I regret I was not able to attend, and at this stage, to compromise, especially by reference to trading standards officers, whose powers of entry are obviously in the public interest. The powers of entry of trading standards officers are, to my mind, a necessary complement to powers to prosecute traders of all kinds, big and small, for misleading claims and descriptions, including pricing and the selling of unsafe and counterfeit goods. Trading standards officers could hardly do a decent job for the consumer unless they were able to make unannounced visits. However, local authority trading standards officers are undoubtedly proud of the fact that good relations with traders in their locality enables them to make, by agreement, many visits and changes in the descriptions and so on of goods being sold. The power of entry—unannounced, from time to time—is a necessary complement to those occasions. I hope that trading standards officers’ need to enter premises without previous agreement would be on a minority of occasions.

In Committee, the noble Lord, Lord Marlesford, was willing to say that trading standards officers should not need the agreement of the occupier of the premises or a warrant if they could demonstrate that that would frustrate their powers. The noble and learned Lord, Lord Scott of Foscote, also spoke in Committee, and I hope that we will hear from him in the debate this afternoon. He was rather less amenable to compromise than was the noble Lord, Lord Marlesford, and seemed to suggest that it was so easy to get a magistrate’s warrant that there should never be any real problem—warrants would be forthcoming as and when they were needed. The noble Lord, Lord Marlesford, realised that trading standards officers would still be weakened in their work unless, today, on Report, a further concession or compromise was made—hence his new amendment. He realised that they are in a special position, as I have sought to indicate myself. He sets that out in Amendment 37ZC.

There is a slightly odd reference to a “Constable”, with a capital letter. The noble Lord probably meant any police officer, not just someone with the honorific title “Constable of Dover Castle” or those who have capital letters to describe their particular job. If he meant a trading standards officer and any member of the police force or Security Service acting under legislation that permits a person to exercise power of entry, then that would have no restriction. My worry here is why trading standards officers have been picked out. As I explained in my declaration, I have a special interest in their consumer protection powers and so on. Most of us know that local authorities also have, for example, environmental health officers concerned with health and safety in their area. They have powers of entry and they are not specially mentioned.

I understand and value the real willingness of the noble Lord, Lord Marlesford, to compromise, but reference to the Home Office to tidy things up before Third Reading does seem to have some merit. From what I know of trading standards officers—and I know them quite well—I have no doubt that they have been assiduous in discussing matters with the noble Lord. However, that does not necessarily suggest that they ought to be picked and others, thereby, just as obviously left out. I welcome what the noble Lord is doing but would not wish to support him in any vote that we might have today on the unamended, or not fully amended, version of what he has concerned himself with.

[Lord Butler of Brockwell]

Before the noble Lord sits down, could he give the House an example of a situation in which a trading standards officer would need to enter premises without a warrant?

[Lord Borrie]

One has to examine the word need. Trading standards officers are given powers by various statutes for the public benefit—usually consumer protection—and the benefit of other legitimate traders who are not engaging in what appears to be illegal conduct. The trading standards officer wants to examine that. He needs to do it to fulfil his duty.

The noble and learned Lord, Lord Scott of Foscote, has suggested that because magistrates are available literally night and day in order to get warrants when needed, there is no problem. However, the trading standards officer still has to prove something. No magistrate worth his salt is going to accept what a public official says without question in all circumstances. Therefore the amendment that the noble Lord, Lord Marlesford, seeks to introduce is good for trading standards. It might also be good for other equally legitimate work done by other public officials.

[Lord Scott of Foscote]

My Lords, this is an important series of amendments. In particular, the first proposed amendment seems essential to a country that believes itself to be governed by the rule of law. Your Lordships have heard 1,200 mentioned as the figure of the separate powers of entry on to private property granted by primary or secondary legislation. That figure is confirmed by the Explanatory Memorandum produced to accompany the Bill. Therefore, it is not a figure which is contentious or simply argumentative.

The 1,200 separate powers of entry were conferred by 580-odd pieces of primary or secondary legislation. The powers of entry are not simply powers of entry. They almost invariably include powers of search so those who enter can rummage through the premises in question. The powers apply not only to business premises where they may very well be needed, but also to homes—to domestic premises. The law of this country has developed so that it is well recognised that the police may sometimes need, without notice to the owner of the premises, to enter private premises to enforce the law and for the purposes of search and removal of material from the premises in question.

However, the powers of entry in the Bill are not the powers of the police; they are powers of officials and regulators in numerous areas of public life, conferred by various instruments of public law. The notion that officials can be given power to enter the premises of private people, search those premises and remove what they believe to be relevant to their regulatory function without any authority from a judicial body seems quite contrary to how the rule of law ought to operate. For that reason, I particularly welcome the first amendment proposed by the noble Lord, Lord Marlesford.

I believe that the public will understand the need of the police to exercise powers of entry without warrant. Less well understood and certainly less acceptable to the public at large is the need for general regulatory officials to have those powers. My noble and learned friend Lord Browne-Wilkinson said judicially in a case that was heard in 1991:

“Search and seizure under statutory powers constitute fundamental infringements of the individual’s immunity from interference by the state with his property and privacy”.

In my respectful opinion, those are incontestable statements of opinion. It follows that proper safeguards to be associated with the exercise of these powers of entry, search and seizure are essential if the rule of law is to be available to retain the respect that a healthy society requires.

15:30

Clause 40 has the heading, “Adding safeguards to powers of entry”. For my part, I very much welcome that clause in that it addresses, I believe for the first time in comprehensive legislation, the need for there to be safeguards attached to powers of entry. Subsection (1) states:

“The appropriate national authority may”—

and I draw your Lordships’ attention to the use of the word “may”—

“provide for safeguards in relation to any power of entry or associated power”.

Therefore, the provision of safeguards is discretionary only; it says not “must” but “may”. The proposed discretionary safeguards are listed in subsection (2). Paragraph (d) lists as one of the discretionary safeguards,

“a requirement for a judicial or other authorisation”.

What the “or other authorisation” is supposed to comprehend, goodness knows, but that the requirement for a judicial authorisation is recognised is clearly correct. But why should that be simply a discretionary safeguard? Why should it not be an essential, invariable safeguard, except in the rare circumstance where the time to go and get the judicial authorisation is simply not present, given the urgency of the situation?

Your Lordships have heard remarks about the obtaining of warrants. A warrant to enter premises to search and remove material found there of an incriminating character can be obtained ex parte—that is, without notice to the owner of the premises from a magistrate or, in some cases, a judge. There is no alerting the believed miscreant to the imminent entry and search. That seems a situation that ought to cater for any reasonable contingency other than the very rare contingency whereby the need for immediate steps is apparent. It is difficult to envisage a situation whereby the police would not in any event have the right to make an immediate search—with the pursuit of criminals, for example, or when life and limb was in imminent danger. In those situations, no one could object to a right for the police or any other well meaning people, regulators or otherwise, to enter premises for the purpose of saving the situation that would appear to have arisen.

Subject to that exception, I can see no case for not requiring a judicial authorisation always to be obtained. The notion that notice to the owner or occupier of the premises would alert the individual to what was afoot and lead to the removal of incriminating material is unreal. The warrant can be obtained from the magistrate without notice. In civil law, procedures have been evolved—and I think that their evolution is of relatively modern origin—under which a so-called search and seizure order, which used to be called Anton Piller orders, can be obtained from a judge enabling an applicant who believes that he has some civil cause of action against the owner of a premises to have a search of those premises for incriminating material to support his or her case—or its, if it is a company. The entry without notice is well understood in civil law, but only with judicial authorisation. Why on earth should that not also be the case in the criminal law? I cannot see the argument to the contrary, except in the very rare case to which I have already referred, namely where the imminent emergency and risk is so great that an immediate entry is required. Where that is the case, I cannot concede that the police would not have the right to enter anyway.

The indignation that people might feel, to have faceless regulators demanding entry and rummaging through their cupboards and papers without any judicial authorisation, would be huge, and justifiably so. That is not the way in which the law ought to operate. For those reasons, it seems to me that the first amendment proposed by the noble Lord, Lord Marlesford, is thoroughly deserving of support and I would submit that the House ought to support it.

As to the second amendment, I am not so clear about that, because, as I say, I can see very little scope for the need for any other requirement than judicial authorisation, except in a case where the emergency is so acute that there would not be time to get to a magistrate to get the search order and then search the premises accordingly. I therefore feel a little dubious about the second amendment.

As to the sense behind the first amendment, I am wholeheartedly in favour of it. I support it and submit that the House should do likewise. The “may” in Clause 40(2)(d) ought in my opinion to be a “must”. It is quite inadequate for the requirement to obtain judicial authorisation to be simply discretionary. For all those reasons, I wholeheartedly support these amendments.

[Baroness Eaton]

My Lords, I declare an interest as a vice-president of the Trading Standards Institute and of the Local Government Association. I wish to raise some concerns regarding Amendment 37ZC, which is in the name of my noble friend Lord Marlesford.

I share the anxieties of my noble friend and many others of your Lordships about the perception that is held by many people that too many officials have access to the homes of private individuals. I welcome the fact that he has amended his original amendment to try to deal with one of my key concerns, which was that trading standards officers could no longer enter premises unless they had a warrant. Unfortunately, this area of the law is remarkably complex. I am not a lawyer, but the proposed amendment would not be feasible, as trading standards officers are not defined in the law and therefore could not legally be made exempt. Technically, in the law, they do not exist.

Even if they did, the problem itself also relates to environmental health officers, who equally need access to premises for the same reasons. As the noble Lord, Lord Borrie, has said, councils use powers of entry to protect the public across a range of statutory activities. Powers of entry are essential in order for councils to carry out their responsibilities and to seek evidence to prosecute offenders, thereby protecting individuals and local businesses from harm. Without a routine power of entry on to business premises, council officers would not be able to carry out their basic day-to-day functions, protecting the public and their local communities. Officers would also not be able to act in a swift manner where necessary.

Councils cannot enter premises used solely as a private residence without a court order or the owner’s permission, and only routinely have the power to enter business premises to collect evidence. Most existing legislation already contains safeguards to ensure that the existing powers of entry are not used inappropriately: for example, where premises are used solely as a private dwelling place, council officers can enter those domestic premises only with the consent of the occupier or when a warrant to enter has been obtained from a justice of the peace to do so. Council officers do not currently have, and have never had, a routine power of entry into premises used solely as a private dwelling place. Equally, should the premises owner refuse entry, the council must leave and seek a warrant before returning. In instances where the business premises are also a personal residence, councils will often obtain a warrant to ensure privacy is protected.

It might be helpful if your Lordships had some examples of just how these investigations take place. I should like to refer to events in North Yorkshire County Council, where the trading standards team receives around 260 reports of doorstep crimes a year: namely, traders cold-calling at the homes of consumers—most often elderly and vulnerable people—offering to carry out property repairs such as roofing or gardening work, or to sell products such as fish or mobility aids. Given the number of incidents and the fact that many of the offenders target a specific area and then rapidly move on, the service introduced a rapid response service to incidents. Two officers are therefore on call every day to immediately attend incidents where offenders are still at the home of elderly victims, still in the vicinity or are due to return to collect payment. Often, multiple offences are committed, such as: failing to issue the householder with a notice of their cancellation rights; and making false, misleading statements regarding what work is required or what a reasonable price for the work is.

When a call is received by the rapid response unit to attend such an incident, officers will often want to carry out a search of the vehicle being used by the offenders. In such circumstances, a vehicle is defined as “premises”. A search will be conducted to identify and seize evidence relating to the business or to other potential victims, et cetera. Officers are solely reliant on their powers to enter the suspect’s vehicle as “premises” to do this. The need to attend such incidents immediately is very clear; if suspects were aware that a report had been made to the police or trading standards, they would just disappear.

There is no time in these situations or in a situation where a vehicle has been stopped to consider an application for a warrant. It is also extremely unlikely where suspects often deny any connection to the alleged offence that any permission would be given to carry out a search with consent. Removing the powers of entry for enforcement staff in such situations would thus be seriously detrimental to their ability to tackle such offences, which often involve elderly and vulnerable victims being targeted for their life savings, often on a repeat basis.

Multiple complaints were received by the trading standards team over a number of months from consumers regarding a business that operates a council tax refund service. The complainants alleged that they had not been provided with copies of any paperwork by the firm; they were not told what percentage of any rebate recovered would be taken by the company, or that VAT would also be charged by the company. Repeated efforts were made by the council’s business advice team to get the company to comply with its legal obligations. However, complaints continued to be received. Action under the Enterprise Act was then commenced, but that did not prevent numerous further complaints being issued.

A decision was taken to institute an investigation into the company, and the files were passed to the fraud and financial investigation team. Warrants for the registered offices of the business were obtained to facilitate the seizure of paperwork and because it was anticipated that the company would obstruct any investigations. During the warrant executions, it became apparent that the firm was also making use of a further unit in the same building. Officers therefore used their statutory powers of entry to access the unit, which was not covered by the original warrant, and seized relevant documentation. It also became apparent that company staff were keeping documents in their vehicles and at their home addresses, including copy contracts. As a result of the definition of “premises” including any vehicle, again officers were able to use their statutory powers to enter the related vehicles and homes to seize relevant documentation. This would not have been possible without the power of entry. Had they required further warrants to access these additional premises, it would have given the company and their employees an opportunity to remove or destroy relevant evidence in the period of time required to obtain warrants.

The evidence seized during the use of powers and the warrant application has substantiated the claims made by consumers regarding the companies’ failure to comply with their statutory duties and proved that multiple offences have been committed. This would not have been possible without the use of these powers. I welcome the wish of my noble friend Lord Marlesford to address the needs of these services by this amendment but, regrettably, it would not solve the problem. I hope that he and the Minister will be able to reach an accommodation and understanding of his concerns and find a solution.

15:46

[Lord Lester of Herne Hill]

My Lords, I am a member of the Joint Committee on Human Rights. We reported on this Bill last October. I do not know to what extent Members of the House have had a chance to read that report. I do not think that it has been referred to in previous debates on this subject, but we dealt with this issue in chapter five of the report. The noble Lord, Lord Marlesford, and the noble and learned Lord, Lord Scott of Foscote, have reminded us of my next point. It is ancient common law that there should be effective protection of our right against arbitrary search and seizure. For me it goes back at least to Entick v Carrington in the days of George III and the famous statement of principle by Lord Camden, which was adopted last week by the American Supreme Court in interpreting the Fourth Amendment to its constitution. Everyone knows that the sanctity of the home and the right to be protected against arbitrary search and seizure is enshrined in our common law. It is also enshrined in our constitutional law through the Human Rights Act and Article 8 of the European Convention on Human Rights. Article 8 guarantees the fundamental right to be protected in respect of one’s private life, one’s home and one’s correspondence. That has been repeatedly interpreted by the European Court of Human Rights as giving effective safeguards against abuse of the powers of search and seizure. Section 3 of the Human Rights Act requires all statutes, including this one, to be read and given effect, if possible, so as to comply with that convention right. Therefore, we are not legislating in a vacuum.

The Human Rights Act ensures that anything in this Bill which becomes law is subject to the right of protection in Article 8 of the convention. In addition, Section 6 of the Human Rights Act requires every public authority—this would apply to a police officer, a trading standards officer or anyone else exercising public powers—to use those powers in a way that is compatible with the convention right in Article 8. Therefore, the fears that have been raised in this debate should be understood in the context of the safeguards that have been put in place across parties by the enactment of the Human Rights Act.

The Joint Committee on Human Rights drew attention to that in its report. Paragraph 116 states:

“We welcome the recognition in the Bill that powers of entry should be strictly limited to those circumstances in which such a power is justified, necessary and accompanied by appropriate safeguards. The decision to review all existing powers of entry is a welcome one … We consider that a review of existing powers of entry offers a clear opportunity to identify where powers of entry continue to be justified, proportionate and necessary”.

We also consider that it would provide greater legal certainty. We said that,

“at a minimum, each power of entry should be strictly defined, including clear limits on the circumstances when the power may be exercised and the identity of the person or body exercising the power”.

That, of course, would be a way of giving more concrete support to what is already in the Human Rights Act and the convention. I should be grateful if the Minister were able, even though I have not given him notice, to deal with this in his reply. We regretted,

“that the review of existing powers was not completed”,

before this Bill was introduced, and in paragraph 118, we said:

“We are concerned that since the review has not yet been completed, the legislation proposed is overly broad and creates a risk that delegated legislation may be used in future”,

in ways that are basically against the public interest.

It would be helpful to know, if possible, the Government’s response to that review. Nothing that I have said leads me to support the amendments tabled by the noble Lord, Lord Marlesford, even though I understand his reasons, which I fully respect, for tabling them. I do not think that they are very well drafted or necessary. I think that the safeguards referred to are sufficient but I would be grateful to know more about the review that we asked for as long ago as last October. If the House were asked to divide on this, I would have to vote against the amendment.

[Lord Neill of Bladen]

My Lords, I would have wanted to vote for the noble Lord’s first amendment, but I can see that there are difficulties and that maybe more time for thought is required. It is perfectly true, as the noble Lord, Lord Lester, said, that a report has been produced that emphasises the sovereignty, as it were, of the human rights convention, which intrudes—I mean that in a good sense—into earlier legislation and the rights and the protection that are not visible there.

My concern is that the ordinary man or woman in the street does not understand the scope of the Human Rights Act and would be outraged to hear that there are 1,200 instances when officials can enter your house—your home—and certainly your business and would wonder how that could have arisen over the years. In the absence of a ministerial explanation, I would be inclined to infer that it would become a habit that if you wanted a power that might be useful one of these days for some of your officials, you stick in a power of entry. Parliament is bereft of any power either because that power is in a statutory instrument and we do not amend statutory instruments, or it is in a bit of primary legislation that goes through with that clause unattacked.

Something clearly has to happen as a result of the amendment moved by the noble Lord, Lord Marlesford, the research by the noble Lord, Lord Selsdon, which has produced the figure of 1,200, and 500 separate pieces of legislation, as I understand it, from the noble and learned Lord, Lord Scott of Foscote. My present state of mind is that I am very anxious to hear what the Minister has to say and what amelioration of the situation can be produced. It is not satisfactory at the moment and some quite sweeping amendments will be required, no doubt making due reference to the points raised by the noble Lord, Lord Lester.

[Lord Cope of Berkeley]

My Lords, I, too, have sympathy with my noble friend Lord Marlesford’s amendment in principle. At the same time, I also observe that the review to which the noble Lord, Lord Lester, referred a few moments ago is not required by statute until after this Bill is passed. It is in Clause 42 of the Bill, and Secretaries of State then have two years in which to review the 1,200 powers or however many it turns out to be. It would be helpful to your Lordships' House if my noble friend the Minister could tell us whether the review is already in progress and how many of the 1,200 powers have so far been reviewed in addition to the 15 that are due to be knocked out by Schedule 2. Clearly, the review has reached 15 of the 1,200 in a negative sense, but how many of the others have so far been reviewed?

[Baroness Hamwee]

My Lords, I am sorry not to be able to support what the noble Lord, Lord Marlesford, has described as his package. Reference has been made to individual amendments, but he rightly put them forward as a composite. I know the effort that he has applied over a long period, along with the noble Lord, Lord Selsdon, and indeed the noble and learned Lord, Lord Scott of Foscote. I have been privileged to observe him in the Merits of Statutory Instruments Committee, conducting with great assiduousness what I can only describe as a campaign against rights of entry that continue to crop up in statutory instruments on which we are asked to comment.

I wrote down “presumption” in the non-legal sense; I agree that every power of entry should require a warrant, and my noble friend has reminded us of both the common law and the Human Rights Act. I welcome what is in the Bill, and I am glad that the noble Lord, Lord Cope, referred to it, because I think we have rather tended to overlook what is proposed for our consideration.

I welcome Clauses 39 and 40. The noble and learned Lord, Lord Scott, may not be a veteran, as some of us are, of the continuing debate over “must” and “may”. I also welcome Clause 42. To pick up the terminology used by the noble Lord, Lord Marlesford, I am certainly one who would normally chase the Government—I tend to be on the rather cynical wing. However, I take the two years for the completion of the review at face value, particularly as we can assume that the reports required of Ministers—a duty under Clause 42—will include not only a conclusion but an explanation for each decision, and Parliament will be able to debate these. I note of course that the noble Lord, Lord Marlesford, is not seeking to delete these clauses.

I add one short point. I have another difficulty with the drafting of the second amendment. It would require an authority to,

“demonstrate that the aim of the use of the power would be frustrated if a warrant or agreement were sought”.

I am not entirely sure that I know what is meant by “demonstrate”, but I suspect that we could be heading down a road to judicial review, which would mean that the High Court rather than magistrates became involved in many of these instances.

The noble Lord, Lord Borrie, has mentioned environmental health officers; I think we have the Environment Agency. I say to the noble Baroness, Lady Eaton, that like her I found the examples from the Local Government Association very powerful and helpful. However, I must agree with other noble Lords that this work cannot be allowed to rest.

[Lord Stewartby]

My Lords, I want to add only a small footnote. I begin by expressing our gratitude to the noble Lord, Lord Marlesford, for the diligence that he has shown, not only on this occasion and in this context but because he is constantly on the lookout for failures or delays by government departments or other public bodies. He has made rather a specialisation of taking the opportunity to raise these in this forum. Currently, as always, it is an interesting and not entirely straightforward problem that comes before us.

My noble friend Lord Henley circulated a note last week on a possible exception to the requirement to demonstrate that entry would be frustrated if a warrant or agreement were sought. He argued that the Home Office considered that such an exception would be unworkable. I would be very grateful for more explanation of what “unworkable” means in this context.

16:00

[Lord Vinson]

My Lords, first I apologise to the House for arriving late; my train was very late. I was particularly anxious to come to what I regard as an extremely important debate on fundamental freedoms. I join those who congratulated my noble friend Lord Marlesford on what he has done. It is apparent that the Minister, too, is sympathetic. However, his solution of a review carried out by the departments that have these powers is rather like asking a druggie to prescribe his own dose. Knowing the Civil Service, I predict that it will simply perpetuate the status quo. Frankly, that is not good enough. I suggest to the Minister that when he sums up, he should promise to strengthen the review mechanism so that other eyes, outside the quangos and departments concerned, can look at the necessity of the rights of entry and bring fresh thinking to the matter.

[Lord Selsdon]

My Lords, I hope that I may be able to help the House. This has been a 10-year journey for me. Three Private Member’s Bills have gone through the House. I have thoroughly enjoyed myself. Having worked in one of the biggest bureaucracies in the world—Midland Bank—I enjoy the relationship with bureaucrats.

Those who work in trading standards are great people. I have written to them many times. A few days ago they sent me an e-mail at 4.13 pm. When I rang back at 4.30 pm they had gone home. However, we are good friends now and I am inviting them all to tea. If a trading standards officer goes into a restaurant or food shop, they go in either as themselves to buy something or, if they are going in to inspect, they have to be completely schizophrenic.

I wanted to see if I could help. As a Minister, the noble Lord, Lord Henley, knows well, and will probably let us know in his response, exactly how many powers of entry his department has at this time. There was a problem when Ministers did not know what their powers of entry were and numerous Parliamentary Questions failed to get an answer. Finally, with the great help of the party opposite, we got the final part of the Bill through. It was difficult because no one really knew what it was about. I then thought we should have a period of consultation. I had not raised the matter before. I wrote to the LGA, every local authority in the land, every bishop and vicar and everybody at a local level, saying that we had a new private website and that if they wanted to know what the powers were they could contact the website. We did that with considerable difficulty. I also got in touch with Citizens Advice.

I kept coming back to try to give advice to people. The noble Lord, Lord Henley, does not accept advice willingly because he sees the end game very quickly. He has a very quick mind and found me rather a nuisance. Therefore, I introduced a few amendments in Grand Committee but have decided not to introduce any now.

The main objective of the three Bills was to promote the introduction of legislation after the election that would prevent officials from entering people's homes, land or places of work without permission or a warrant, and would introduce a suitable code of practice. We drafted such a code; the noble and learned Lord, Lord Scott, will remember it. The Minister does not seem to want a code of practice at the moment. He just says, “We’ll put one in”. If we do not have a code of practice now, we will have a problem with powers of entry.

The second thing I asked for was a list. The Home Office stated that it could not put this into the Bill because by the time it was put in, a piece of secondary legislation might have changed it. I said, “Can we not have a list?”. We could not really have a list, so I thought of another solution. In preparing the Bills I had great help from a professor at Lincoln University. With Oxford University Press, he regularly publishes the laws of search, seizure and entry. A new edition is coming out. They have agreed to co-operate with the Home Office, which has already been in touch with them. Naturally, I am not necessary in the loop. However, we will have an official publication that will be updated from time to time, and a website. I would like to be able to put that in the Library. It is, however, extraordinarily difficult, as a Back-Bencher is not allowed to put anything in the Library. The only person who can do so is the Minister. If I do get these things together, could the Minister arrange for me to have permission to put it in the Library? Could he also agree that there will be a code of conduct and that he will produce it before this Bill is finished?

This has been a most interesting time. I have bored to death not everyone—because there were not a lot of people around—but I have certainly bored Hansard. Again and again one has to re-type every Bill. Being on the Information Committee, I have the benefit of PICT. In the latest list I managed to transpose three Bills, but the Home Office has not picked up which ones they were.

I am very grateful to all those who have helped on this. I support my noble friend Lord Marlesford because I support him on almost everything he does. I am extraordinarily grateful to the party opposite for raising some serious problems. They looked at me with a certain cynicism to begin with, but I think we are good friends.

[The Earl of Erroll]

The point about passing at least two of these amendments is that at least we can come back and tidy them up at Third Reading, because certain people have criticised their wording. If you do not pass them now there is no pressure to put anything in at Third Reading. This happens quite frequently and stalls the whole thing.

The whole point is that householders need to know what their rights are. They cannot possibly begin to know if there are thousands of different powers of entry, so there need to be some very simple rules that apply universally, which is what we have to come up with eventually. I support the first two amendments in particular.

The first amendment is about giving permission for entry, which I fear slightly because there is always a danger of people being bamboozled on the doorstep or being threatened by “If you don’t let us in we know you are guilty” and letting them in out of fear. Amendment 37ZB is therefore particularly important. It states what we understand the position to be in common law and in other things, but why not restate it? These are the things that must be taken into account when powers of entry are being examined and there is no harm in restating something when people have clearly forgotten. People expect a warrant unless there is a very good reason why not. To my mind that is quite reasonable and I cannot see why it is a problem.

I was most intrigued by the third amendment because it reserves certain powers and I could not understand why the noble Baroness started off by saying that trading standards officers did not exist, then said what a good job they did and then said that she disapproved of this amendment as it reserved powers to these non-existent people. I could not understand why the amendment was not a good idea because it would keep the powers of these people—whoever they might be—as they were. Although the amendments have defects, we should pass them and the Government can tidy them up at Third Reading.

[Baroness Royall of Blaisdon]

My Lords, I am grateful to the noble Lord, Lord Selsdon, who raises a very important issue in relation to the use of these powers. I note what he has said and his excellent work leading to the very welcome safeguards that are already in the Bill but would certainly not be there without his work. However, I must tell him that I think he is being a little tough on the excellent people from the Trading Standards Institute. I am sure that, while one person was at tea at 4.30 pm, the majority of them were out doing their business at that time.

[Lord Selsdon]

They telephoned me back and were extraordinarily helpful. We are going to meet. I had not realised the depth of their experience and knowledge.

[Baroness Royall of Blaisdon]

Good.

It is important to recognise the rights of premises owners and occupiers when it comes to the use of these powers and to ensure that they are exercised, in the absence of the consent of the owner or a warrant, only when truly necessary. The noble Lord has introduced very important safeguards into his amendments. Last week, I was extremely anxious about the amendments that had been tabled because, like many other noble Lords, I had been contacted by the Trading Standards Institute, for whose work I have long-standing admiration, and was very worried about its concerns. The amendments which have been retabled by the noble Lord have assuaged many of my fears and the Trading Standards Institute clearly now feels comfortable with them.

The amendments leave a number of outstanding issues, the first being, as I believe the noble Lord himself said, as did the noble Baroness, that “trading standards officers” is not a recognised term. Therefore, the amendments would have to come back to the House at Third Reading because there would have to be some sort of tidying-up exercise.

I am also concerned about whether the amendments would hamper the legitimate use of these powers by local authority officers who are not currently provided with an exemption by the amendment, such as environmental health officers. I listened very carefully to the case made by the noble Baroness, Lady Eaton. Having said that, I believe that the noble Lord includes important safeguards in his amendment which specifically allow for the use of those powers when it can be demonstrated that the purpose of their use would be frustrated by having to seek permission from the premises owner or to apply for a warrant, which is a jolly important safeguard.

I am therefore in a bit of a difficult position here. I heard the discussion about the review. I think that the noble Lord, Lord Vinson, was right to say that the review mechanism must be strengthened. I wonder why the review is taking so long, and I would like to hear from the Minister. I will be interested to hear the Government’s response to these amendments and, specifically, whether the Minister believes that the amendments provide sufficient safeguards to enable, for example, environmental health officers to undertake their work. I have to say that I am inclined to support these amendments, especially as it is clear that they will have to come back to the House at Third Reading in order to be technically correct. That would give Members of the House another opportunity, if necessary, to bring forward another amendment in order to safeguard the powers of, for example, environmental health officers.

[Lord Lester of Herne Hill]

Is the noble Baroness not satisfied that the Human Rights Act, which her Government introduced, ensures that all these powers have to be prescribed by law in a legally certain way and that they must be exercised in a proportionate way in order to protect our rights of personal privacy, home and correspondence? Why is that not good enough as a general standard which applies to future legislation as well as to past legislation?

[Baroness Royall of Blaisdon]

My Lords, the Human Rights Act is an extremely important Act which provides the safeguards that the noble Lord suggests. However, I think that when some of these powers are being exercised, they are not always exercised according to the standards that should be imposed by the Human Rights Act. I also know that the very fact that there are these countless powers gives a lot of people concern that their very rights are being infringed. We have to look at all these things in the round.

16:15

[The Minister of State, Home Office (Lord Henley)]

My Lords, we return to an issue that my noble friend discussed in some detail in Committee. He has brought forward his two amendments, Amendments 37ZA and 37ZB, marginally amended in that he has, I think, changed from “owner” to “occupier”, which is probably an improvement in the amendment, and has added Amendment 37ZC, which disapplies the restrictions imposed by Amendments 37ZA and 37ZB in particular circumstances; I will get to that in due course.

I made it quite clear to my noble friend in Committee that I have some sympathy with what he is trying to achieve in dealing with the 1,200 or so powers of entry that we have. We agree—my noble friend and I, and others—that there is a need to add further safeguards to the exercise of those powers of entry. That is why, as part of our coalition agreement—I emphasise that this is part of that; this is a coalition desire—we brought in Clauses 39 to 53 to provide some safeguards relating to the exercise of powers of entry. Where I differ from my noble friend is over his general approach; in particular, we continue to question the wisdom of adopting what would be a blanket, one-size-fits-all approach, which is what he is seeking to do.

I believe that the provisions already in the Bill offer a better way forward. Clause 42 places a duty—I stress that this is a duty—on the responsible Ministers to review each and every power of entry within two years of Royal Assent. I appreciate that there were some complaints from my noble friends Lord Cope and Lord Vinson about just how long that was going to take, but I have to make the point that there are some 1,200 of these powers of entry—of which getting on for half were introduced by the party opposite, the party in which the noble Baroness, Lady Royall, was such a luminary, and therefore I find her remarks on this subject somewhat interesting.

It is important that we review those powers of entry carefully and go through them and we have given ourselves the job to do that within two years of Royal Assent. Clause 40 enables new safeguards to be added to particular powers of entry by order. Again, I make no apology for that, but I remind the House that many of these powers—the majority of them—will already have in them a need to obtain a warrant or some other consent. The idea that all these powers are giving unnamed officials broad powers of entry without having to seek a warrant is just not the case. The majority of them already require that. My noble friend and others have expressed a degree of scepticism that that review will be undertaken. However, I can assure him that it is down there in the Bill; it will be a requirement on us to make sure that review is done within the two years, and that is why it has been written into legislation.

My noble friend Lord Lester also worried about the fact that we were bringing in various Henry VIII powers to make amendments, and felt that that was not in line with what the Joint Committee on Human Rights had asked for. I should make it clear to my noble friend that we responded to the Joint Committee’s report in November last year, and in that reply we pointed out that the Delegated Powers Committee had made no recommendation in respect of those delegated powers that we are assuming. Clause 40 allows us to add safeguards, as proposed by my noble friend Lord Marlesford, in appropriate cases, and we will certainly do that.

I will focus my detailed remarks on Amendment 37ZB, as it was in respect of this amendment that my noble friend’s arguments were, on the face of it, the most seductive. This amendment offers persons exercising a power of entry three options: first, they can obtain the consent of the occupier; secondly, they can obtain a warrant, usually from a magistrates’ court; thirdly, the power may be exercised without a warrant or the agreement of the occupier in any case where it can be shown that the aim of the use of the power would be frustrated if a warrant or agreement were sought.

I hope that there is general agreement that we cannot, in every case, demand that entry is effected only with the consent of the occupier or on the authority of a warrant. To illustrate that point, the House will recall the outbreak of foot and mouth disease where, had requirements such as these applied, I fear the consequences for livestock may have been much greater. Obviously, consent could have been withdrawn, and that carries its own risks.

To take another more recent example, the new Terrorism Prevention and Investigation Measures Act contains a number of powers that grant constables the right to enter and search premises without warrant. For instance, there is a power to enter and search premises if a constable has a reasonable suspicion that the individual who is subject to a TPIM has absconded. In such circumstances, the police clearly must act quickly to check whether the individual has absconded, and if he has, to try to find evidence to help locate him. The law is designed to protect our national interest and provide security to the public but could very well be frustrated by these amendments.

We must also consider the very serious questions of delay, where the exercise of overcaution or prolonged deliberation by the authorities might place at risk the health of animals, individuals or the wider public. Similarly, the need to obtain a warrant or, for instance, locate the occupier of the premises in question in order to get their permission to enter could lead to the loss of valuable time in some cases.

That is not to say, as I made clear at the beginning, that we do not support the use of warrants and seeking consent where that is appropriate. However, as we are all aware, there are a large number of powers of entry that exist today, and operational imperatives differ widely. We do not want to impede an authority’s ability to respond to matters effectively and to take decisive action, and so we consider that such operational decisions are best taken by the relevant authorities.

My noble friend has argued that his Amendment 37ZA caters for such circumstances by providing a let-out in stating that,

“where the authority using the power can demonstrate that the aim of the use of the power would be frustrated if a warrant or agreement were sought”.

However, I do not accept that this provides the answer. It is not entirely clear to whom any urgent or unannounced need to enter premises should be demonstrated and proven. The approach taken in this amendment could lead to endless, time-consuming and expensive litigation, with aggrieved persons challenging the lawfulness of the exercise of a power of entry in a particular case, as my noble friend Lady Hamwee made clear. Such a challenge could be mounted on the grounds that the public authority in question had not demonstrated that the given exercise of the power of entry would have been frustrated if the agreement of the occupier had been sought or a warrant obtained. I hope that was not what my noble friend was intending when he drafted his amendments, but I fear that it could be the likely outcome.

I appreciate that there have been concerns, expressed by the noble Lord, Lord Borrie, and my noble friend Lady Eaton, relating to the Trading Standards Institute and the Local Government Association, which raised some concerns about Amendment 37ZA and 37ZB along the lines that I have set out. I appreciate also that my noble friend Lord Marlesford was trying to deal with those concerns by tabling Amendment 37ZC. In a sense his amendment makes my case for me, because at its heart is an acknowledgment that one size does not fit all, and that there must be exceptions to the blanket restrictions that my noble friend is seeking to impose by means of his Amendments 37ZA and 37ZB.

However, in providing exceptions purely for trading standards officers—undefined, as my noble friend Lady Eaton said—constables and members of the Security Service, or in pursuance of the protection of a child or a vulnerable adult, Amendment 37ZC simply highlights the fact that there will be other circumstances where the exception should apply. What about the powers of entry under the Gas Safety (Rights of Entry) Regulations 1996? I carefully took an example from a previous Conservative Government rather than from the previous Labour Government. These regulations offer powers of entry to premises for the purposes of preventing gas escapes, surely something that is very important—it would be necessary to move very quickly and there might not be time to obtain a warrant.

What about the powers to enter and search for evidence on premises occupied or controlled by a person who is under arrest for an indictable offence? Such powers are not just exercisable by constables but also by customs officers, immigration officers and members of the Serious Organised Crime Agency. To give another example, what about the powers of firefighters under the Fire and Rescue Services Act 2004 to enter premises without consent for the purposes of protecting life and property? I put it to my noble friend and to the House that the exception should apply equally in those cases.

I could provide more examples—I am sure there will be others—but until we have conducted the review I have promised, and which the statute makes clear will happen, it will be impossible to say with confidence that these amendments would not seriously inhibit the ability of law enforcement officers and others to protect the public.

As I have indicated, we wish to achieve an aim similar to the one my noble friend suggests. The new Home Office gateway has already removed in some cases—I can give this assurance to my noble friend Lord Cope—the right to enter private homes unless accompanied by a warrant. These include regulations relating to forestry law enforcement, wine manufacture and inspecting animals for disease. We have said that notice must be provided where it is reasonable to do so and appointments must be made with home owners and businesses before powers are exercised.

As I have mentioned, we will be reviewing all 1,200 or so powers of entry, and Clause 40 allows us to add necessary new safeguards on a case-by-case basis. The new code of practice, about which my noble friend Lord Selsdon was cynical, will be introduced under Clause 47 and will govern the exercise of powers of entry and set out further safeguards to protect the rights and civil liberties of individuals and businesses.

I put it to my noble friend that this is a preferable approach which provides greater legal certainty. I therefore ask him to withdraw his amendment. However, if he should seek the opinion of the House, I would encourage your Lordships to reject the amendment.

[Lord Marlesford]

My Lords, I thank everyone who has taken part in this interesting and useful debate. I was drawn to the clarity with which the legal mind of the noble and learned Lord, Lord Scott, approached the issue; there is much attraction in it. However, the concessions I have made, which have been referred to, were intended to meet some of the points raised.

The noble Lord, Lord Borrie, was able to produce many arguments about why, in some way or other, the proposal had not gone far enough—even in the case of trading standards officers, who have expressed complete satisfaction with what I have done.

I listened with great interest to my noble friend Lady Eaton, who gave a full account of a case in Yorkshire. I am sure it was an important, useful and maybe typical case, but I found myself thinking that had the people involved needed to get a warrant they would have been able to execute the case every bit as effectively as they did without one because the timescale she described would have made it perfectly possible.

The noble Lord, Lord Neill of Bladen, made a good point. The tendency at the moment, which has grown up over the years, is that if you want an extra power of entry you just stick it in. That has been the culture which, in a sense, we are trying to counter.

The noble Lord, Lord Lester, produced, as he so often does, the human rights legislation as being the solution to it all. I would remind him—well, not remind him because he knows it as well as I do, as do most of your Lordships—that human rights legislation, although desirable in theory, is about the slowest and most expensive route for correcting wrongs as can be imagined. The European Court of Human Rights is absolutely bunged full and is years and years behind. I would strongly recommend that we find a better route for anything which depended on using it. I see that the noble Lord is about to make a further defence of the Human Rights Act. I give way to him.

[Lord Lester of Herne Hill]

I was not going to do that; I was going to point out that the remedy is in our courts, not in Strasbourg, to get an injunction or compensation under the Human Rights Act.

[Lord Marlesford]

Of course, if people do not like what our courts say, they go to the European Court of Human Rights. Most astonishingly trivial cases have been put to it. My right honourable friend the Prime Minister had some phrase for the multitude of cases going to the European Court of Human Rights. With the greatest respect and affection for my noble friend Lord Lester, I suggest that we do not use the European Court of Human Rights as a solution to these particular problems.

The Minister produced the same arguments as last time. He expressed a degree of sympathy but he did not answer in any detail the concerns of my noble friends over the progress of this review. All this debate has done, in a sense, is illustrate the way in which people will always find some ingenious argument or other to support a position. I remember my noble friend Lord Hurd, when he was a junior diplomat in Beijing—I think it was his first posting—writing a letter, which I was shown, to a certain noble Lord about a visit to Beijing of a senior politician who he described as being inclined to take up an impossible position and then cast around for clever ways of supporting it. The noble Lord, Lord Hurd, saw this as the sure mark of a second-class mind. I thought that was pretty damning but there is a danger of trying to find arguments against this. I do not feel that any substantial argument has been put forward.

The noble Earl, Lord Erroll, got it right when he said that if we do not pass this now, nothing will happen. We have had years of nothing happening. I was grateful for the support of the Leader of the Opposition when she said that we must at least get the Government to come back at Third Reading with something. Otherwise, this whole issue will clearly go to sleep again. Over the past few years we have had a surfeit of ill prepared legislation. It is our duty to improve it, whatever the Whips may say. Otherwise, it is hard to justify the survival of your Lordships’ House. I would like to test the opinion of the House.

16:32

Division 1

Ayes: 206

---

Labour: 145
Crossbench: 40
Conservative: 8
Independent: 4
Bishops: 2
Plaid Cymru: 1

Noes: 194

---

Conservative: 102
Liberal Democrat: 61
Crossbench: 23
Ulster Unionist Party: 3
Labour: 1

Amendments 37ZB and 37ZC

Moved by

[Lord Marlesford]

37ZB: Clause 40, page 33, line 33, at end insert—
“(4) A further safeguard shall be that, notwithstanding the statute providing for the power of entry, a power of entry may only be used without warrant, or without agreement with the occupier of the premises to be entered, in cases where the authority using the power can demonstrate that the aim of the use of the power would be frustrated if a warrant or agreement were sought.”

37ZC: Clause 40, page 33, line 33, at end insert—
“(5) The safeguards set out in subsections (3) and (4) above shall not apply in any case where the authority exercising the power of entry is—
(a) a Trading Standards Officer acting under any legislation which permits the Officer to exercise such a power; (b) a Constable or a member of the Security Service acting under any legislation which permits such a person to exercise such a power; or(c) doing so in pursuance of the protection of a child or a vulnerable adult.”

Amendments 37ZB and 37ZC agreed.

Syria

Monday 6th February 2012 Lords Chamber

Statement

16:45

[The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)]

My Lords, with the leave of the House, I would like to repeat a Statement on Syria.

“Mr Speaker, the whole House will be appalled by the bloodshed and repression which continues at this very moment. Over the last 11 months, more than 6,000 people have been killed. The Syrian regime has deployed snipers, tanks, artillery and mortars against civilian protestors and population centres, particularly in the cities of Homs, Idlib, Hama and Deraa. Thousands of Syrians have endured imprisonment, torture and sexual violence, including instances of the alleged rape of children, and the humanitarian position is deteriorating. This is an utterly unacceptable situation, which demands a united international response.

Last Tuesday, I attended the UN Security Council debate in New York, along with Secretary Clinton, the French Foreign Minister Alain Juppe and other Ministers. We all spoke in strong support of a draft UN Security Council resolution proposed by the Kingdom of Morocco on behalf of the Arab League. The resolution called for the implementation of the Arab League plan to stop all the violence in Syria from all sides, and to begin a political transition.

There was nothing in this draft resolution that could not be supported by any country seeking a peaceful end to the tragedy unfolding in Syria. It demanded an end to all violence; it called for a Syrian-led political process to allow the Syrians to determine their future; and it set out a path to a national unity Government and internationally supervised elections. It did not call for military intervention, and could not have been used to authorise any such action under any circumstances. It did not impose sanctions. It proposed putting the weight and authority of the United Nations Security Council behind a plan to achieve a lasting and sustainable peace in Syria.

As I said at the Security Council, this was the Arab League’s plan; it was not a plan imposed by Western nations. It was co-sponsored by a large number of nations from the region, including Turkey, Tunisia, Jordan, Kuwait, Libya, Bahrain, Qatar, Saudi Arabia, the United Arab Emirates, Egypt, and Oman. Their leadership, and their strong understanding of their region, deserved our support. I pay particular tribute to the Secretary-General of the Arab League and to the Prime Minister of Qatar, who travelled to New York to brief the council and played a vital role in the extensive negotiations that followed.

On Saturday, the resolution was put to the vote. Thirteen of the 15 members of the United Nations Security Council voted in favour. Two did not; Russia and China both exercised their veto. They did so despite extensive efforts made to amend the draft resolution to address Russia’s specific concerns, and in the face of repeated appeals from Arab nations. Instead, they chose to side with the Syrian regime and implicitly to leave the door open to further abuses by them. They did so while President Assad’s tanks were encircling Homs and shells were pounding the homes of Syrian civilians, killing up to 200 people, and on the 30th anniversary of the massacre in Hama.

We regard this veto as a grave error of judgment by the Governments of China and Russia. There is no need to mince words about this. Russia and China have twice vetoed reasonable and necessary action by the United Nations Security Council. Such vetoes are a betrayal of the Syrian people. In deploying them, they have let down the Arab League; they have increased the likelihood of what they wish to avoid in Syria—civil war—and they have placed themselves on the wrong side of Arab and international opinion.

By contrast, I thank the other members of the Security Council for the principled stand they took, in particular the non-permanent members of the council—Morocco, Azerbaijan, Colombia, Germany, Guatemala, India, Pakistan, Portugal, South Africa and Togo—all of which voted in favour of the resolution. Pakistan’s representative to the UN Security Council spoke for all of us when he said:

“This resolution should not die; by being active and engaged, we should give hope to those who are expecting it from us”.

The Syrian regime may have drawn comfort from events at the United Nations Security Council, but we will do everything that we can to make sure that that comfort is short-lived. This is a doomed regime as well as a murdering regime. There is no way it can get its credibility back internationally or with its own people. The UN Security Council’s failure to agree a resolution does not signal the end of our efforts to end the violence in Syria, and I want to set out how we will now proceed.

First, we will continue our strong support for the Arab League. Earlier this afternoon I spoke to the Secretary-General of the Arab League, Nabil el-Araby, as well as the Foreign Minister of Jordan. I welcomed and encouraged the proposal to appoint a special envoy of the Arab League, and I commended the Arab League’s leadership and action so far. Arab Foreign Ministers will meet this weekend to consider their options. The Secretary-General was very clear about the urgency of the situation, the continued determination of the Arab world to act and the need to step up their efforts. I told the Secretary-General that the Arab League will have our complete support.

Secondly, we will seek to widen the international coalition of nations seeking a peaceful and lasting resolution for Syria. We welcome the concept of a new Arab-led group of Friends of Syria, which I discussed with the Prime Minister of Qatar last Tuesday. The aim of such a group will be to demonstrate the strength of international support for the people of Syria and their legitimate demands, to co-ordinate intensified diplomatic and economic pressure on the regime and to engage with Syrian opposition groups committed to a democratic future for the country. Britain will be a highly active member in setting up such a group with the broadest possible international support.

Thirdly, we will intensify our contact with members of the Syrian opposition. The House will recall that in November I announced the appointment of an ambassador-level envoy, Frances Guy, to lead our discussions with them. We will continue to urge the Syrian opposition to come together and to agree a common statement of commitment to democracy, to human rights and to the protection of all Syria’s minorities.

Fourthly, we will maintain our strong focus at the United Nations, undeterred by Saturday’s vote. We will continue to raise Syria at the UN Security Council and we will consider with other nations a resolution of the UN General Assembly. Despite our disagreement with Russia and China we will continue to discuss with them any possibility of an agreed but meaningful way forward.

Fifthly, we will increase pressure through the European Union, following the discussions I had in New York with Ministers from France, Portugal and Germany. We have already agreed 11 rounds of EU sanctions and will hope to agree further measures by the Foreign Affairs Council on 27 February.

Sixthly, we will work with others to ensure that those responsible for crimes in Syria are held to account. At the UN Human Rights Council meeting in March in Geneva we will work to ensure the strongest possible mandate to scrutinise human rights violations in Syria, so that those responsible know that there will be a day of reckoning and that they will be held to account.

Seventhly, we will use our remaining channels to the Syrian regime to make clear our abhorrence at violence that is utterly unacceptable to the civilised world. The Syrian ambassador to London was today summoned to the Foreign and Commonwealth Office to receive this message. Despite our deteriorating relations with the Syrian Government we remain committed to ensuring the safety of their embassy and staff in London. We expect that the Syrian authorities will provide the same protection to our embassy in Damascus.

In parallel, I have today recalled to London our ambassador from Damascus for consultations. He and his team work in extremely difficult conditions to ensure that we have an accurate picture of what is happening in Syria. I hope the House will join me in paying fulsome tribute to them and their families. Their safety and security is always prominent in our considerations.

The human suffering in Syria is already unimaginable and is in grave danger of escalating further. The position taken by Russia and China has regrettably made this more likely. However this Government, this House, our country and our allies will not forget the people of Syria. We will redouble our efforts to put pressure on this appalling regime and to stop this indefensible violence”.

That completes the Statement.

16:55

[Lord Triesman]

My Lords, I thank the Minister for repeating the Statement that was made by the Foreign Secretary. There is clear agreement right across this House, as I know there was in the other place, and I hope that the House will feel that the questions which I would like to ask contain no criticism whatever of the Government, because they do not. We are unequivocal in our condemnation of the continuing, mounting acts of violence against the people of Syria by a Government who have long since lost their legitimacy and, like the Minister and the Foreign Secretary, I congratulate our ambassador and staff on working in an environment of that kind.

President Assad is, plainly, not the ruler who is wanted by the people of his country and that is because of a history of brutal and murderous dictatorship. Between him and his father there are 40 years of dictatorship backed, for the larger part, by another dictatorship—in particular, the Soviet Union. All of us will have seen on our televisions horrific scenes, in many ways alike to those when Gaddafi made his push on Benghazi. Does the Minister have any firm knowledge of the numbers of deaths and injuries inflicted on the Syrian people? Estimates that I have seen run from between 6,000 and 15,000 deaths, and if there was just one week like yesterday that would add 1,400 deaths. How confident are the Government of the information that they have?

I welcome the efforts made by the Foreign Secretary at the United Nations Security Council and the coming together of 13 democratic nations in their expression of outrage. It is wholly disgraceful, in the view of the Opposition, that Russia and China vetoed the resolution. It is shameful that even when extensive efforts had been made to reflect and resolve their anxieties, they could not back a resolution which instigated no further sanctions, and certainly no use of force. In Russia’s case, it had circulated a draft resolution last December which described the regime’s concerted violence as no different from the protests on the street of the Syrian people—protests which have remained overwhelmingly peaceful. That draft resolution was of course inadequate to the needs of the situation and could not command support among leading western states in the Security Council.

Russia and China have now shown their hand. They have prioritised their own interests over any fundamental duty to the world community. They have ignored the vital participation of the Arab League, critical to any potential for success in the region. It was, as the Foreign Secretary said in the Statement, an Arab League initiative and the Government are right to pursue all of their work with the league. The Arab League, deploying a relatively small number of observers—far smaller than was really needed because of Syrian objections to the proper delegation—took its decisions when it had made an assessment on the ground. It was painfully aware that it could not provide physical or political protection to the citizens, or even soften the brutality of the regime.

We are under no illusion. The consequence of this veto is to sanction greater violence and more blood-spilling. Yesterday’s events were the first instalment of the liberty granted to President Assad to murder more of his own people. I note that the Foreign Secretary used the word “betrayal” of the Syrian people. That is the right word. I take the Russian and Chinese decision as being still more regrettable because we have all laboured hard, right through the UN millennium process led by Kofi Annan, to build into the United Nations mandate the responsibility to protect people whose Governments were the aggressors. Where does the Minister now think that UN obligation lies?

The international community must plainly plan a co-ordinated and coherent response. It may be unlikely but efforts to bring Russia and China onside, as the Statement says, must continue. They cannot sidestep their obligations and duties. Do the Government have a view on how to engage with these two recalcitrant powers? Does the Minister agree with me that whatever the obvious shortcomings of the United Nations machinery, the United Nations remains the major theatre for diplomatic effort and international co-ordination? Does he also agree that the EU continues to have a vital role? Will the Government consider seeking a joint EU/Arab League summit to get a greater degree of co-ordination? If the Minister does agree, how will Her Majesty’s Government now approach the work at the UN, recognising that there has obviously been a significant set-back?

We support the extension of sanctions by the EU regarding travel bans and asset freezes so long as they can bring into scope a wider group of individuals and organisations. The EU is to be congratulated, as are the Government of the United Kingdom. We are keen to know what potential anybody feels there is to draw the Russians into the application of these sanctions. Are there elements of the Danish presidency programme in the EU which the Minister believes might assist?

I appreciate the difficulties of embarking on such a course but it may well be that the evidence of crimes against humanity or, to use the wider generic expression, crimes of concern to humanity has so obviously placed President Assad outside and beyond international law that other steps may become possible. Has the Minister a view on how Her Majesty’s Government might obtain international support, if possible, for international warrants against those named in the EU sanctions list? In the event that they travelled outside Syria in those circumstances, it might be possible in due course to seek their arrest and their trial at The Hague for international crimes. What scope is there for one of the clearer courses of actions that may be available to us—detailed investigation of all of the assets held here or, as I understand it in one or two cases, on the Côte d’Azur?

As regards the assessment the Government make of the issues inside Syria, I understand that the Syrian air force has not flown missions since the start of the conflict. Were it to do so and use military airplanes against the Syrian people, would the Government consider seeking the support of the Arab League for a no-fly zone? It is sometimes said that the Syrian opposition are not in the same state of readiness as was the case with the opposition in Libya. It is not entirely clear to me—perhaps it is not clear to everybody in your Lordships’ House—that the new Government of Libya are entirely united in all their purposes. I make no criticism of that; they are a new Government operating in difficult circumstances. However, it certainly seems to me that the Libyan opposition were united in one respect—they did not want Gaddafi to continue to rule Libya; they wanted that regime out. The Syrian opposition plainly want Assad out, but that might not be enough to convince the world that an alternative government are in waiting.

What is the United Kingdom Government’s assessment of the cohesion or otherwise of the Syrian opposition? Has Frances Guy formed even a preliminary view at this stage? The opposition, through the Syrian National Council, have also called for safe zones to be created. I have read of the potential for that, with several regions being named. I claim no knowledge of the practicality of this proposal. I make no pretence of knowledge in that regard. However, have the Government considered possible non-interventionist methods of securing the safety of Syrians on the ground where they are being pursued to their deaths?

President Assad has no future. He has lost the legitimacy to rule and he cannot reassert it through the barrel of a gun indefinitely. He is backed internationally at present by nations which should know better. Although I suspect that on balance it remains better to have a Syrian ambassador in London, under what circumstances would Her Majesty’s Government consider the issue of that ambassador’s future? As regards that ambassador, from these Benches I congratulate the Metropolitan Police on their efforts at the Syrian embassy—never an easy undertaking but conducted with typical professionalism, as we would all expect.

As this crisis matures—and it certainly will—I hope that the Minister will feel that it is appropriate to report back to this House on appropriate occasions. I do not ask for a running commentary, of course, but a chance to review matters if they deteriorate. Once again, I thank the Minister for repeating the Statement.

17:05

[Lord Howell of Guildford]

I thank the noble Lord for his very robust support and expert analysis of the overview of the situation, which is very welcome. To take his last point first, I would be very prepared to keep the House as fully informed as possible, as I know my colleagues would in both Houses, on the unfolding tragedy and situation. I will, if I may, take his questions in order. On the number of those who have been killed, we have the figure of 6,000, which seems to be a fairly widely accepted estimate, but of course I cannot possibly guarantee that that is the precise number in the blood, smoke and horror of what is going on. There may be many more; there may be cover-ups or hideous atrocities going on at this moment that are not recorded. We just have to accept that as the figure for the moment, but it could be larger.

The noble Lord’s next question was about how we engage with Russia and China and bring home to those great powers and to the policy-makers in Moscow and Beijing that they have misjudged the situation. It is now a global order, brought together by the miracle of modern communication—a transformed world in which the upkeep of certain basic standards must be supported by all responsible nations. If they want to be in that category they must take a responsible position. We know that Russia has its interests, such as its huge naval base at Tartus, and its long-standing commitment to Syria. We know that China has its interests, which are rather different but broadly in sympathy with the Syria of the past. I believe that the time has come for them to rethink their position and we will remain in constant contact, indeed almost every day, with Russian and Chinese officials and Ministers to bring home to them the inadequacy—more than inadequacy: the unacceptable nature—of the position into which they have driven themselves in opposing the Security Council resolution.

Meanwhile, given that opposition, we have to operate outside the United Nations. We have to look for every possible means of mobilising pressure outside the UN framework for the time being in the hope of getting the process back there some day. The noble Lord raised the question of a joint summit with the Arab League and the European Union. Our thinking is that any such summit should be wider than that. I repeat that this is a global issue and that all responsible nations are ready to step up to the plate, as it were, and voice their views in favour of increased pressure on the Syrian regime and the need for the present killer authorities to go. My right honourable friend would certainly look for wider participation than just the Arab League and the European Union.

The next meeting on 27 February, mentioned in the Statement, is an opportunity to turn the screws further. Of course, an enormous range of sanctions has already been introduced. There are targeted sanctions and every kind of detailed sanction on the Syrian regime. There is a ban on imports of Syrian oil, of course, and on any investment in the Syrian oil industry; a ban on European Union investment construction of new power stations in Syria; and a whole range of other financial and detailed embargos on the export of Syrian banknotes, coinage, and so on. It is possible that there could be more, and we will constantly search for more, and tighter, sanctions, but we must bear in mind the enormous range already in place. A no-fly zone is possibly a read-across from Libya, which may not be entirely relevant at this point because the Syrian air force is not flying. These horrors are being conducted without aircraft overhead adding to the strafing and the killing. There are no operations in the sky to be checked at this stage.

On the Syrian opposition, my right honourable friend met leaders of the Syrian oppositions—in the plural—in November. We are in touch with them, and we are constantly urging them to become more united and to formulate a coherent position, but we are not yet there. The opposition in Syria is many sided and does not yet have the coherence and organisational power to give it the semblance of an alternative, replacement Government. However, we shall continue to work on that.

On safe zones, this would be difficult given that it is not the policy to work for any kind of detailed military intervention. Of course, our Turkish colleagues and allies have considered that idea in view of their position right up against the Syrian border. However, that is not in our catalogue at the moment.

My right honourable friend described how the Syrian ambassador had been brought into the Foreign Office to see officials very recently—this morning, I think. His status is something we keep under review. On the whole, at the moment he is a line of contact and a line to pass through to the Syrian regime should it be prepared to listen for a moment to just how strongly the world feels and to just how determined we are to increase the pressure.

Finally, the noble Lord rightly praised the Metropolitan Police for their action in protecting the Syrian embassy. I make it absolutely clear that it is our policy always to protect foreign embassies in accordance with the highest diplomatic standards, and of course—as my right honourable friend said in his Statement—we expect that the Syrian authorities will do the same. I think that that covers all his points. I thank him again for his and Her Majesty’s Opposition’s strong and reassuring support in reaching a point at which we are all united.

[Earl Attlee]

My Lords, I remind the House of the benefit of short questions to the Minister in order that my noble friend can answer as many as possible.

[Lord Alderdice]

My Lords, this is a serious, sensitive and solemn Statement from my noble friend, and I welcome it very strongly. As we have seen the standing of the Arab League rising in recent times, it is particularly disappointing that the standing of the UN Security Council has fallen because of the actions of Russia and China. Can my noble friend reassure me that while we cannot depend on the United Nations for the present, we will use our good offices within the General Assembly to help Russia and China understand the gravity of their mistake?

My noble friend mentioned co-operation with other European countries and with the Arab League, and I welcome that. However, we of course have our ally in Turkey right on the front line—as he has said. While I do not advocate any military adventures from us at this stage, can I be reassured that we will co-operate, in whatever way we can, with our allies in Turkey, directly as well as perhaps through the auspices of NATO? Can I also be reassured that members of President al-Assad’s family will not be permitted to use their close relationship with this country either to protect themselves or their assets at this time, or indeed for anything they might plan for the future? This is something for which our own Government can perhaps take some responsibility, and on which they can act.

[Lord Howell of Guildford]

My noble friend made three points. First, on how we can help to make the UN more effective, we are of course living with the legacy of the Second World War and a UN structure that is frozen in time. Many people, including many of your Lordships, have worked hard over the years to try to break the deadlock on UN reform to get a more effective regime that is not vulnerable to the kind of vetoes that we have seen over this affair. However, it is very difficult, and every time we have tried, people have disagreed with each other and no progress has been made. None the less, we will certainly keep trying.

Secondly, co-operation with Turkey will be close. We are working very closely with the Turkish Government on this and indeed on many other issues as well. We will certainly continue to do so.

Thirdly, President Bashar al-Assad’s family will get no special protection. There will be no special relationship, despite the fact that some of them have direct origins in this country. The matter will be kept under very careful review. However, there will be no special favours for the families of any members of the regime who are guilty of the kind of atrocities that are now occurring.

[Lord Wright of Richmond]

My Lords, first, I declare an interest as a former British ambassador to Syria and a member of the British/Syrian council. When the Minister responded to my intervention last Thursday, in which I talked about the precedents of Libya and Egypt, he rightly said that the cases of Syria, Libya and Egypt were very different. I will draw attention briefly to the precedent of Iraq. Before there is any question of intervening in Syrian internal affairs—I accept with gratitude the statement that there is no present intention to do so, and the fact that the resolution in the Security Council did not argue for military intervention—the matter needs very careful thought.

The precedent of Iraq is nasty. We did not take adequate account of what the outcome was likely to be. One outcome that is very relevant to Syria was the decimation of the Christian population of northern Iraq, where some of the oldest Christian communities existed. Half a million Christians are now refugees in Syria. Will the Minister assure the House that we have enough intelligence to know not just the figures for those who have died but the situation of the opposition? There are reports that the opposition in Syria is severely dysfunctional and that there is strong disagreement between its various parts. Do we have enough intelligence to work out what the consequence of the action against Syria will be? I ask the Minister to consider in particular the situation of the minorities there, including the Christian population, who are extremely nervous about the prospects of a change of regime, and the very small remaining Jewish minority.

[Lord Howell of Guildford]

The noble Lord is absolutely right to cast his expert eye over the internal complexities of Syria and the uncertainties of the outcome of the immense turmoil that is gripping its society. He is right to say that although there is no question of military intervention, the outside world is putting pressure on Syria for the very good reason that an imploded Syria, or a Syria turning one way or another politically, or into a rogue state, would have major implications for the entire region and would affect us all. There is a responsibility to put on pressure, but no one at this stage is proposing military intervention, although some members of the Arab League have certainly talked about assisting opposition groups.

It is a very delicate scene. I wish I could stand here and predict exactly how things will unfold. The noble Lord is absolutely correct that among the many minorities is a very large Christian minority. The numbers vary. I have heard a figure of 250,000; the noble Lord mentioned 500,000. We are encouraging Syrian opposition groups to reach out, engage with minority communities and maintain a clear commitment to a peaceful and non-sectarian approach. They should reassure all Syrians that they are working towards a Syrian state that is democratic, inclusive and respectful of ethnic and religious minorities. That is the point that we have realised and are urging, but I repeat that anyone who says that they can predict exactly how this will turn out will not be believed because the uncertainties are very great. Syrian society could fragment into many pieces and its unity could be destroyed for many years to come.

[Lord Anderson of Swansea]

Does the Minister agree that Russia and China have put themselves on the wrong side of history by vetoing a very diluted UN Security Council resolution and that it must be very difficult for them now to retreat? I welcome the Minister’s six points on the way forward but these are, essentially, further diplomatic pressures at the United Nations and at the European Union and further potential sanctions. There is, however, great urgency in the situation. Delay surely means further carnage, particularly among the civilian population. What is the evidence of any intervention by Iran with military matériel or personnel to assist the Syrian regime? Where does its supply come from, or does it have sufficient stocks? The reality is that the rebels are massively outgunned. Will Turkey or the Arab League have on the agenda at their meeting this weekend the possibility of assisting in this disparity of weaponry? The Minister has said that a no-fly zone is not in the catalogue at the moment. May I express the hope that, if it is not in the catalogue at the moment, there is contingency planning in case the Syrians use their air power against the rebels?

[Lord Howell of Guildford]

I am grateful to the noble Lord. Information about Iranian supplies of weaponry to the Syrian regime is difficult to pin down precisely. There are certainly fairly substantial reports of such a supply of weapons. He asks whether, on the side of the allies, Turkey, Qatar or even Saudi Arabia, although he did not mention that country, could supply weapons to the opposition groups. They have said publicly that they are considering such moves. This is, however, a matter that the Arab League will have to deliberate on very carefully and reach their decisions on as soon as possible. As the noble Lord says, there is not much time. That is the position and I fully take the point that, as every day goes by, with delay more people are dying. This is an horrific pattern and although it is very hard to see how it can be stopped we have to find the best possible ways of doing so.

[Lord Eden of Winton]

My Lords, I thank my noble friend for repeating the robust and measured Statement of the Foreign Secretary in the House of Commons. As these appalling events are unfolded by the Syrian Government on the civilian population of that country, is it not remarkable the extent to which people are prepared to go, even at the risk of their own life, to make sure that their cry, their voice, their opinion, is heeded and heard throughout the world? Can my noble friend give any further information to the House about the attitude of Russia and China? Was it indicated, in their representatives’ comments in the United Nations—both in session and in the corridors—what, if anything, their end game might be? What are their objectives, or are they just making mayhem wherever the opportunity occurs?

[Lord Howell of Guildford]

My Lords, my noble friend makes two points. First, he drew attention to something that we are inclined sometimes to forget, with the tumult of pictures on the television and so on—the staggering courage of people who are prepared to go into the streets, knowing that bullets will be flying, knowing that murder and mayhem will take place. That staggering courage is something that we should all salute and brings hope that the Syrian people—as opposed to the regime that is oppressing them—have got a strength and endurance which will see them through in the end. It is indeed a remarkable thing.

As to the Russian agenda, Mr Lavrov, the Russian Foreign Minister, is going to Damascus, I think either late today or tomorrow, and he is going to see Bashar al-Assad. He is going with his secret service chief, I see. There appears to be a view in Moscow that they have their agenda and their own path that they want to pursue for bringing some amelioration to this horrific situation. I think that they are mistaken. I think that that is a complete misjudgment, but that is what they are doing and my right honourable friend the Foreign Secretary will be speaking to Mr Lavrov as soon as he returns from Damascus.

[Lord Jay of Ewelme]

My Lords, I join others in paying tribute to our ambassador and his staff and their families in Damascus who are doing an extraordinarily good job in very difficult circumstances. In that context, will the Minister confirm that our ambassador has been withdrawn only for consultations and will soon be back in Damascus? It has always struck me as a curious diplomatic convention to withdraw ambassadors from post when situations get bad, which is precisely the moment when they can be the most use.

[Lord Howell of Guildford]

I fully share the noble Lord’s remarks about Simon Collis, our excellent ambassador. He is recalled here for consultation. We are not closing the embassy at this stage. Obviously it is a matter under complete review, as is the question of the security of embassy staff and everyone concerned. I can confirm what my right honourable friend said in his Statement—that the ambassador has been recalled for consultation. We are not closing the embassy at this stage.

[Lord Hannay of Chiswick]

My Lords, will the Minister also accept congratulations on the work of the UK mission in New York? To have got 13 people to vote for this resolution is no simple matter, particularly since some of the countries that voted for it are very careful not to get involved in “undue interference” in other countries’ business—so that gives the lie, frankly, to the Russians and the Chinese, who regard this as being that. Could the Minister perhaps say whether the Government are contemplating providing any humanitarian assistance to the rebels and to those who are wounded in this fighting, and also whether any thought is being given to the application of the convention on torture to people who are involved in the regime?

[Lord Howell of Guildford]

On the first point, the noble Lord speaks with experience, because he has done that job himself and knows exactly how difficult it is. His praise for the success of the UN team is very valid and very worth while receiving, and I hope that the team will note it. DfID is engaged and is working with the International Committee of the Red Cross on various aspects, and it is very active in seeing in what other ways it can help. I do not think that I can say more at the moment on that matter. I have to ask the noble Lord for the third question again. I wrote it down but I cannot read my writing.

[Lord Hannay of Chiswick]

I asked whether the Government are giving any consideration to the application of the convention against torture to those in the regime who are undoubtedly using that practice.

[Lord Howell of Guildford]

This is obviously one of the many matters under consideration. Of course, it is related to the broader matter of whether there will be a UN resolution in relation to the reference to the International Criminal Court. It requires a UN resolution because Syria is not a signatory to the ICC. As I have raised that matter, I should just make it clear that the commission of inquiry quite clearly stated its concern that crimes against humanity have been committed in Syria, which may be a matter for the International Criminal Court. The UK would not rule out referral to the ICC, as suggested by Mrs Pillay. The commission of inquiry report does not specifically recommend referral to the ICC, nor does the Human Rights Council have the power to refer cases. It would be for the UN Security Council to refer the situation in Syria to the ICC prosecutor. I would add that I am absolutely sure that issues about torture and other gross human rights abuses would certainly arise in that context.

[Baroness Hussein-Ece]

My Lords, perhaps I can ask my noble friend the Minister for some further clarification. In his response to the question asked by the noble Lord, Lord Triesman, on safe zones, I think he said that these had not yet been agreed or discussed. After the statement Turkey made over the weekend that its borders would now be open for people fleeing persecution, for refugees wanting to go across into Turkey for sanctuary, have there been any further discussions and deliberations on the creation of the buffer zone that was being discussed a few months ago?

[Lord Howell of Guildford]

I do not think there have. This is a matter that appeared in the public press some weeks ago but I am not aware of it coming up in the agenda of our discussions with the Turkish Government. I may be wrong about that, but I certainly have no reports in my briefing on that particular issue.

[Lord Tugendhat]

My Lords, does the Minister agree that a major motivation for the Russian and Chinese vetoes is their fear of internal dissent in their own countries and of international eyes being cast upon their own misdeeds?

[Lord Howell of Guildford]

That is absolutely true. My noble friend is completely correct that both Governments have problems—shall we put it like that—with certain areas that are seeking either secession or a degree of autonomy that they do not want to accept, and they have this fear of fragmentation of their own national boundaries. That is a very strong motivation. On top of that, as I said earlier, Russia has huge interests in Syria, including its colossal naval base at Tartus.

[Lord Stirrup]

My Lords, the terrible events in Syria may have consequences well beyond the borders of that country. Can the Minister say what discussions the UK has had, both internally and with its international partners, on the potential implications for the Lebanon, and how these might be mitigated?

[Lord Howell of Guildford]

Yes, we keep in very close touch with partners, and indeed the Lebanese authorities and the Lebanese Prime Minister, Mr Najib Mikati, over the situation. It is a delicate and very difficult one for the Lebanese Government, who have problems internally with Hezbollah and with their relationship with Syria, which is complex and has been in the past extremely difficult. These matters are under very close review at all times.

[The Deputy Speaker (Lord Skelmersdale)]

My Lords, the time for the Statement has now elapsed so we return to the Protection of Freedoms Bill.

Protection of Freedoms Bill

Monday 6th February 2012 Lords Chamber

Report (2nd Day) (Continued)

17:33

Amendment 37A

Moved by

[Lord Rosser]

37A: After Clause 41, insert the following new Clause—
“Rewriting powers of entry to address metal theft
(1) Section 26 of the Theft Act 1968 (search for stolen goods) is amended as follows—
(2) In subsection (1), after “goods” insert “or that admission to a place specified in the information is reasonably required in order to ascertain whether provisions under section 22A(1) are complied with,”.
(3) After subsection (1) insert—
“(1A) A warrant granted under subsection (1) for the purposes of ascertaining compliance under section 22A, shall authorise that person to enter that place at any time within one month from the date of the warrant.”
(4) After section 22 insert—
“22A Handling of stolen metal
(1) Subject to the provisions of section 26, any constable shall have a right at all reasonable times—
(a) to enter and inspect any place for the time being a place which is occupied by a scrap metal dealer wholly or partly for the purposes of such business, or any place which he reasonably believes is occupied for such a purpose, irrespective of whether or not it is entered on the register;(b) to require production for inspection, of any scrap metal kept at that place and any record which the dealer has in his or her possession.(2) A magistrate may grant, on application by a senior police officer, a closure order or, where such an order has already been granted, an application to extend a closure order in relation to a place, subject to the following conditions—
(a) the senior officer reasonably believes that the trader is encouraging, supporting or facilitating the trade in stolen metal whether knowingly or not, and (b) in his or her view such closure is necessary for the prevention of theft or handling of stolen goods or for the further investigation of those offences.(3) For the purposes of this section a person shall be deemed as carrying on business as a scrap metal dealer if—
(a) a place in that area is occupied by him or her as a scrap metal store, or(b) no place is occupied by him or her as a scrap metal store, whether in that area or elsewhere, but he or she has his or her usual place of residence in that area, or(c) a place in that area is occupied by him or her wholly or partly for the purposes of that business.””

[Lord Rosser]

My Lords, the purpose of this amendment is to provide for strengthened and new powers of entry for the police to enter and inspect known or suspected scrap metal dealer premises, and any metal and records kept on the premises, as well as powers to close down dealerships should those premises be suspected of being used for knowingly handling stolen material. At present the police are able to enter only registered premises but this amendment will give the right to enter premises irrespective of whether they are entered on the register, as well as the power to close dealerships.

Considerable concern has been expressed in the light of the increasing incidence of metal theft related to the rise in its value, with the price of copper having doubled to more than £5,000 a tonne since 2009, and the value of scrap metal at an all-time high. This has become a highly organised crime. Metal is stolen to sell on to dealers who will probably smelt it down before selling it on. The impact of such thefts on many people, buildings and organisations is considerable, not least on the railway network and railway passengers and on churches and indeed war memorials, with at least one war memorial a week being stripped in London.

The cost of metal theft is now estimated to be running at £1 billion a year and causing some 16,000 hours of train delays. In total, Network Rail says the cost of such thefts has amounted to some £43 million across the United Kingdom. It is also apparently resulting in the deaths of two thieves a month as they attempt to strip cabling from electricity substations or railways. That last point may not arouse much concern or sympathy, but it is still the loss of two human lives a month which could be avoided and is perhaps a consequence of the current spate of metal thefts that is not often raised.

It is important that action is taken as quickly as possible. At least one major recycling firm has moved to cashless payment, and on Thursday we shall be debating my noble friend Lord Faulkner of Worcester’s amendment to the Legal Aid, Sentencing and Punishment of Offenders of Bill, which provides for cashless transactions to be compulsory in the scrap metal trade. This would be an important action in the drive against metal thefts and I commend my noble friend for his robust campaign on this issue.

We know that police forces are stepping up their activities against this lucrative crime but they need to be given further powers to combat it with maximum effectiveness. One such power is provided for in this amendment, namely stronger and new powers of entry for the police to premises suspected of being used for handling stolen metal and the power to obtain a closure order against a dealership where there is a belief that such criminal activity is taking place. This amendment, providing new powers to the police to enter and close down unregulated scrap metal dealerships, is in line with the recommendations of the Association of Chief Police Officers’ metal theft working group.

Combined with the amendment tabled by the noble Lord, Lord Faulkner, to the Legal Aid, Sentencing and Punishment of Offenders of Bill to ban cashless transactions, this amendment presents a robust package of measures to tackle this growing epidemic. I hope the Government will indicate their support for this amendment and ensure that the police are properly equipped to deal with the increasing incidence of metal thefts. I beg to move.

[Lord Faulkner of Worcester]

My Lords, I have added my name to Amendment 37A, tabled by my noble friends Lady Royall and Lord Rosser, because the new powers that it confers on authorities to enter and inspect scrap metal dealerships represent, as my noble friend Lord Rosser says, an important element in the comprehensive overhaul of the Scrap Metal Dealers Act 1964, which I have been calling for in your Lordships’ House since I asked my Oral Question on the subject on 3 October last year. It also fits perfectly with the move to cashless transactions, which the Home Secretary said in a Written Statement on 26 January that the Government now support. This is the subject of my own amendment to the Legal Aid, Sentencing and Punishment of Offenders Bill, which the Committee will be considering on Thursday, possibly alongside the Government’s own amendments, the details of which we are awaiting.

This morning I met Deputy Chief Constable Paul Crowther of the British Transport Police to discuss this amendment. As the House will be aware, the BTP has been in the lead on the metal theft issue and I again commend it for what it is doing to tackle it. It has asked me to tell your Lordships—and I quote directly from a message it has given me—that:

“The power of closure is something that we would really want for a number of reasons, not least so that we can support legitimate businesses who will comply with the cashless system when it is introduced”.

Over the last four months I have been overwhelmed by the representations that have been made to me about the necessity for government action to tackle what is now a metal theft epidemic. The Transport Select Committee in another place says that the theft of signalling cable was responsible for the delay or cancellation of over 35,000 national rail services last year. There are eight actual or attempted thefts on the railway every day. My friends in the heritage rail sector—and I declare an interest as the president of the Heritage Railway Association—report weekly thefts of metal objects from their yards, depots and sheds, the value of which runs into thousands of pounds. Almost no aspect of our national life has escaped unscathed: manhole covers; war memorial plaques; even huge pieces of art like the Barbara Hepworth sculpture in Dulwich Park or the statue of Dr Alfred Salter in Cherry Gardens, Bermondsey; lead from church roofs and sacred objects from within churches; electricity and telecom cables—the list is endless.

Many of your Lordships will have seen the open letter published in the Times on 11 January that was signed by an impressive array of business leaders, including the chairmen or chief executives of BT, Network Rail, the Energy Networks Association and the Ecclesiastical Insurance company. They called for a complete update of the Scrap Metal Dealers Act 1964. Among the long list of changes they want to see were police powers to close unscrupulous scrap metal dealers, and police authority to search all premises owned and operated by scrap metal dealers—the measure proposed in this amendment. In my view, the police should be given powers to inspect any articles and records kept on site and to close down dealerships should there be reasonable suspicion that they are handling and dealing in stolen metal.

It is abundantly clear that the law needs to be completely rewritten. In the other place tomorrow there will be a debate initiated by officers of the All-Party Parliamentary Group on Combating Metal Theft—I declare a very modest interest as one of its vice-chairs. In addition to the move towards cashless transactions they will call for a robust licensing scheme for scrap metal dealers to replace the present registration scheme, as well as all the measures that have been put forward by industry, the church and the police.

I shall be very interested to hear what the Minister has to say when he responds. I know that we will achieve a cashless regime either on Thursday or at Report stage of the LASPO Bill, but I hope that he will be able to give a commitment that there will at least be comprehensive legislation in the next Session which will rewrite the Scrap Metal Dealers Act 1964.

[Baroness Browning]

My Lords, I rise very briefly to endorse what noble Lords have said about the seriousness of metal theft, and I know that my noble friend the Minister is fully aware of the importance of this issue in addressing the existing legislation, which is clearly out of date.

Last year, when I had the privilege to serve in the Home Office, I became acutely aware not only of the breadth of this crime but also, as we have heard, of its effects. Stolen cables not only disrupt but cause chaos on railway lines, and also in telecommunications. I know that the Church of England has also carried out a very important report that looks at what has happened to its churches and cathedrals that have been affected by this.

The point I want to make—I know that my noble friend is aware of it—is that although we see these matters reported in the press, and some people have first-hand experience of the outcome of this crime, it is organised crime. These are not individual actions taken at random. Serious organised crime, on a large scale, is behind the metal theft that is taking place in this country. When, for example, cables are removed, or lead is removed from roofs, all too often the people concerned are not scurrying about; they are wearing the proper safety jackets, looking like workers who should be carrying out these functions. They steal vehicles that have commercial insignia on the side to make it look as though a legitimate vehicle is being loaded with the metal. A lot of thought, a lot of money and a lot of organisation goes into this. I hope that when my noble friend replies—he and I have discussed this very serious matter—he will be able to reassure the House that the Government are looking holistically at all the elements mentioned this evening. This whole question is about the seriousness of breaking through organisations that clearly find it financially viable to continue this very destructive activity.

[The Lord Bishop of Chichester]

My Lords, from these Benches, I want very briefly to give my whole-hearted support to this amendment. In the year from 2010-11 thefts from churches went up by one-third, resulting in a loss to the church of £4.5 million in that one year alone. I want to speak particularly because of the importance of rewriting the right of entry. Without that being done, the means of enforcing the otherwise noble aspirations about cash-free and limitless tariff cannot be enforced. That is why the right of entry is extremely important.

17:45

[Baroness Butler-Sloss]

My Lords, following on from what the noble Baroness, Lady Browning, said about this being organised crime, it is urgent that the legislation is in place for the police to be able to go out there and act effectively. As I understand it, they do not have effective means at this stage. Whatever may be done holistically at some future date, now is when we need to have something for the police to deal with this business.

[The Minister of State Home Office (Lord Henley)]

My Lords, I am most grateful to all noble Lords who have spoken. I will start by referring to the remarks from my noble friend Lady Browning. It is no secret that, only two days before she left the Home Office, I went to visit her, along with other Ministers, to discuss the whole question of metal theft, because she had identified this as a problem and wanted to get action throughout the whole of government. I suggested then, as a Minister in Defra, that I might be able to help by offering some assistance through the work of the Environment Agency. Two days later I found myself in the Home Office and was very nearly in the position of writing a letter from myself to myself. In the end, the letter came from my successor the noble Lord, Lord Taylor.

I am very grateful to the noble Lord, Lord Rosser, for setting out what exactly is the problem. I think that we all understand what it is. I am grateful to him for starting off by emphasising that this is driven by second-hand metal prices. If he cares to look at the way that metal prices have gone over the last few years—sometimes up, sometimes down—he will find that the crime rate for metal theft has more or less exactly followed that line, and that it is on a distinctly upward curve. For that reason I was interested in his new figure for the possible cost of this whole problem to the country, which he put at about £1 billion. I have seen other figures which count the cost to the country and to business, one of about £220 million, another of around £700 million, and I would be interested to know where his figures have come from.

The important point to remember is that very often the actual value of what is stolen is relatively small; the issue is the knock-on effect of that particular crime. For example, when the lead is taken off a church roof, the lead has a value, and a value that is going up, but the real damage then comes from water leaking in and damaging the church. If you remove the wiring that deals with signalling from the railway line, you will have hundreds of hours of delays and major disruption caused to a large number of people—and as someone who spends an awful lot of time on the west coast main line I understand that as well.

We have examples of hospitals which have had to cancel operations as a result of power cuts caused by metal theft. I could give examples relating to the police and others, who have had their communications disrupted as a result of metal theft. Then on top of that we have the further elements of heritage crime. Not only war memorials are being taken; the example that the noble Lord, Lord Faulkner, gave of the Barbara Hepworth statue being stolen and melted down is an example of something that went in the opposite direction. Here was something that was of very great value, should one have been able to put it on the market at Christie’s or Sotheby’s, but which when it went into the scrap metal yard suddenly became worth relatively very little indeed, and in fact would very quickly be ground up into bronze granules to be smelted.

The important point to remember about that particular theft is that it indicates just where the problem is. It is obvious that the first person to handle the statue—the first scrap yard owner who took it in—must have known that it was, as they say, hot. You do not often get Barbara Hepworth or Barbara Hepworth-like statues legitimately coming into scrap metal yards. Someone knew that it was stolen property and that they would be able to convert it into cash, while removing most of its value. On a number of occasions I have made the point that we believe that the Scrap Metal Dealers Act 1964 is—how should I put it?—beyond its sell-by date. We wish to see a reform to that Act as soon as is possible, and we will make sure that we do it.

I am grateful to the noble Lord for tabling this amendment and allowing us to have a debate on the damage that this practice is doing to our infrastructure. I am also grateful to him for highlighting the fact that there have been a number of deaths as a result of this. Although the noble Lord says that it was the perpetrator being killed, we should have some sympathy. For example, a 16 year-old was recently killed taking copper cabling from a power substation. He only did so because it was easy for him to take that copper wire and convert it into cash; and, in the process, someone who did not understand these things killed himself. Moreover, not only are some of the perpetrators being killed; it is likely that, fairly soon, innocent individuals could be killed as they try to sort out the mess caused by these problems.

The House will be aware—the noble Lord, Lord Rosser, referred to it—of my right honourable friend the Home Secretary’s Statement on 26 January, when she announced that we will be bringing forward amendments to the LASPO Bill to strengthen the law in this area. I can assure the noble Lord, Lord Faulkner, that we hope to do this on Report rather than tomorrow or on Thursday, which are the other days when we will debate these matters. This is specifically to deal with the problem of cash. As I say, the real problem is the ease with which people can convert stolen metal into cash, with no questions being asked and no traceability whatever.

In that Statement my right honourable friend indicated that the amendments would create a new criminal offence to prohibit cash payments to purchase scrap metal and to significantly increase the fines for all offences under the Scrap Metal Dealers Act 1964, which regulates the scrap recycling industry. In effect, once the amendments to the LASPO Bill have been agreed and the Bill has been passed, rather than having a maximum fine of £1,000 for offences under the Scrap Metal Dealers Act, the fine will be unlimited. We will go from an average fine of the order of £350 to a more realistic figure which might encourage some scrap metal dealers to act in a responsible manner.

[Lord Campbell-Savours]

I understand that there has been some consultation on the proposal for a cashless arrangement. What has been the extent of that consultation? Have the many thousands of small scrap yard operations been consulted? I am not opposing what the Government are doing. I just want to know what the basis is and to what extent it can be justified as a result of any consultation—in other words, that this is not another panic response.

[Lord Henley]

My Lords, this is not a panic response. It has been discussed in this House and in another place on a number of occasions and we are all keen to move forward.

I have had discussions with the British Metals Recycling Association, a body which represents scrap metal dealers of all sizes, great and small. It—dare I say it?—not surprisingly, is not keen on the idea of going cashless. That might indicate something about the effect of this measure. We shall obviously have to have further consultations with the BMRA and others in the industry before we bring these measures into effect after they have been introduced into the LASPO Bill.

I was formerly a recycling Minister in Defra. We have a very successful industry and I want to see high levels of recycling of metal continue. However, I want to make sure that the metal that is being recycled is legitimate and has not been stolen in one way or another. We do not want to kill off a successful industry but to properly regulate the criminal elements within it. We will certainly have further consultations with the BMRA and others before we bring the measures into effect after the Bill has received Royal Assent.

[Lord Campbell-Savours]

Are we absolutely sure that we are not driving this business into the hands of the cowboys?

[Lord Henley]

My Lords, I could refer the noble Lord to discussions that I have had with other people in the industry, who have pointed out that the high levels of cash in the industry are driving criminality. If we can remove a lot of that cash then we can possibly remove a great deal of the criminality. I am not saying that it will be a magic wand that will solve all the problems—just as revising the Scrap Metal Dealers Act 1964 will not solve all problems, as his noble friend Lord Faulkner knows well. However, they are steps on the road to better regulating this industry, which is needed.

We are looking for a coherent package of measures to tackle metal theft. Obviously there will have to be further measures and regulation in due course, possibly along the lines of the amendment of the noble Lord, Lord Rosser. I do not want to rush into that at this stage. There is an opportunity to go cashless and to increase what are, at the moment, the derisory fines available under the 1964 Act, and we obviously need to do more to that Act in the future.

I congratulate the noble Lord, Lord Rosser, on his ingenuity in finding a way of bringing forward amendments to this Bill on this subject. His noble friend Lord Faulkner tried to do so but failed. We also gave it some thought, but the drafting of the Bill is such that it is rather difficult.

[Lord Faulkner of Worcester]

The noble Lord is half right: I attempted to get cashless into this Bill and was told that I could not. I will help to get cashless into LASPO instead.

[Lord Henley]

My Lords, we have cashless in the LASPO Bill and I hope that it will deal with this problem.

We have to consider the other important points that need to be dealt with. One of those—and, again, this is why I am interested in how the Opposition voted on the previous amendment—is whether the powers of entry are adequate and what powers of entry need to be given to the police. We can look at these matters, first, in the LASPO Bill and consider further regulation in due course.

I welcome the support of the Front Bench opposite for further action in this area. Obviously, there is more that we can do. I do not think that this is the right way of going forward at this stage because, as I said, we want to bring forward amendments in the LASPO Bill on Report. I can give an assurance that as soon as possible thereafter, by whatever legislative means is appropriate, we will bring forward the further amendments that need to be made, particularly to the Scrap Metal Dealers Act 1964. With those assurances, I hope the noble Lord will feel able to withdraw his amendment.

[Lord Rosser]

The Minister asked me where my figure on the cost of metal theft, at £1 billion a year, came from. I would not say that the figure necessarily came from the most authoritative of sources, but it appeared in a fairly prominent newspaper article last December.

[Lord Henley]

Is the noble Lord prepared to mention which newspaper he relies on?

[Lord Rosser]

I am trying to remember which one it was. As the Minister has asked me which one it was, I intend to tell him. I may be wrong, but my recollection is that it was the London Evening Standard.

It is clear that the current level of metal thefts has caused a considerable increase in the cost of security arrangements. It is already costing businesses, organisations and local authorities money and we need action. This amendment, along with the amendment from my noble friend Lord Faulkner of Worcester which is to be considered on Thursday, provides for action now—action which we badly need against this serious, organised and growing crime. As my amendment goes further than the Government appear to be contemplating in respect of police powers of entry and closure of dealerships—powers that are needed now—I wish to test the opinion of the House.

17:59

Division 2

Ayes: 195

---

Labour: 148
Crossbench: 34
Independent: 3
Bishops: 2
Democratic Unionist Party: 1
Liberal Democrat: 1

Noes: 201

---

Conservative: 122
Liberal Democrat: 64
Crossbench: 12
Ulster Unionist Party: 1

18:10

Clause 44 : Procedural and supplementary provisions

Amendments 38 and 39

Moved by

[Lord Henley]

38: Clause 44, page 35, line 24, after “41” insert “which neither amends nor repeals any provision of primary legislation”

39: Clause 44, page 35, line 25, leave out from “Wales” to end of line 27 and insert—
“(8) In subsection (7) “primary legislation” means—
(a) a public general Act, and(b) a Measure or Act of the National Assembly for Wales.”

Amendments 38 and 39 agreed.

Clause 49 : Alteration or replacement of code

Amendment 40

Moved by

[Lord Henley]

40: Clause 49, page 38, line 31, after second “the” insert “alteration or”

Amendment 40 agreed.

Schedule 3 : Corresponding code of practice for Welsh devolved powers of entry

Amendment 41

Moved by

[Lord Henley]

41: Schedule 3, page 127, line 22, after second “the” insert “alteration or”

Amendment 41 agreed.

Clause 54 : Offence of immobilising etc. vehicles

Amendment 42

Moved by

[Baroness Hayter of Kentish Town]

42: Clause 54, page 40, line 24, at end insert—
“if there is no charge for unauthorised parking or if the following conditions are met—
(a) one or more notices which were clearly displayed when the vehicle was parked and—(i) specify the sum of the charge for unauthorised parking; and(ii) are adequate to bring the charge and parking requirements to the notice of drivers who park vehicles on the relevant land;(b) the consent of the driver of the vehicle to the restriction was indicated by the positive acceptance of appropriate documentation before parking on the relevant land; and(c) the owner or occupier of the land or those authorised to act on their behalf are unable to take steps to enforce the payment of parking charges against the driver because they do not know, and the driver has refused to provide, both their name and a current address for service for the driver.”

[Baroness Hayter of Kentish Town]

My Lords, in moving Amendment 42 I shall speak also to Amendments 43, 44, 45, 47 and 48. I confess that Amendment 43 is the handiwork of the noble Earl, Lord Lytton, although it appears in my name as I beat him to the Public Bill Office. He anticipated that we would reach these amendments last week and he cannot be here today, but he has asked me to signify his support and, indeed, has furnished me with what would have been his speaking notes, which I have incorporated into what I am going to say.

The Bill aimed to tackle rogue clampers but instead it outlaws all clamping on private land and opens the door to rogue ticketers. Our amendments seek to mitigate this risk, concentrating on the people who misuse ticketing or clamping rather than the tickets or barriers themselves. There are four issues that I wish to raise: first, car parks, where people pay to park; secondly, residents’ own parking areas and similar private parking spaces not let for hire or use by anyone but their rightful owners, visitors or similar invited drivers; thirdly, public spaces, which again are spaces that do not make a charge, but are open to the public for particular purposes; and fourthly, bays for disabled drivers.

First, however, I should make it clear that I deplore unauthorised or unreasonable clamping, be this of extortionate charging or unfair usage, and that also goes for unauthorised or unreasonable ticketing, but that is what we are already seeing in a number of places. As many have warned about this Bill, without the amendments I am proposing, rogue clampers will simply become rogue ticketers, as we have already seen in Scotland. So while those who run car parks will now be allowed to ticket rather than clamp, it is essential that, first, the driver is still protected from rogues by ensuring that there are adequate signs and warnings of the likely charge for any overstay or use of the parking area, and on the rights of appeal.

Secondly, there should be in place an ombudsman scheme—independent dispute resolution—for anyone who is issued with a ticket they wish to dispute. Amendments 44 and 45 provide for this to be set up and paid for by the industry. It would exist for all motorists challenging a ticket for parking on private land. It is not sufficient for a voluntary scheme to be set up. If a particular car parking firm breaks its code of conduct or fails to implement a ruling, it can simply leave the scheme and carry on without a redress facility. It would then be “good firms in”, “rogues out” of the complaints scheme, leaving the driver unprotected from the cowboys. The scheme must have legislative backing so that drivers would not be liable to pay a charge to a ticket issuer who was not signed up to the scheme. The development of a code of conduct to cover reasonable charges and adequate signage and warnings would raise standards in the industry and enable drivers to know their rights as well as the expectations on them.

These amendments build on the tried and tested model devised for estate agents, one that is independent of but paid for by the industry, and without the requirement for the Government themselves to set up any such scheme. Indeed, I envisage that existing ADR schemes would bid to run it, so that it could be up and running without inordinate delay. This model is fully supported by Citizens Advice, which has long campaigned against rogue clampers. Indeed, it is to the careful drafting by Citizens Advice that these amendments owe their clarity.

18:15

I turn now to the second and third categories: residents’ own parking areas and similar private parking spaces not let for hire or use by anyone else except their rightful owners, visitors and similar invited drivers. Essentially, this relates to blocks of flats and sheltered housing schemes. This is private land for which no charges are made and no money is levied, but simply where wheel clamping has been used very successfully to deter rogue parkers. This deterrent will now become illegal even on one’s own private land. Similarly, there are private spaces open to the public which do not charge visitors for particular purposes for parking in them. I have in mind GP surgeries, day centres, churches, cinemas and offices, especially those close to a tube or train station, or convenient for the shops. Or like the one I saw yesterday near Hampstead Heath, a bowling green and allotment area with parking for club members and gardeners only. But, needless to say, it is very tempting for people walking their dogs on the heath and feeling no shame in parking on someone else’s land. Clear signs with warnings of clamping can successfully deter such drivers, but I would bet that car park owners do not know that they will shortly be criminals should they use a clamp.

The House may well feel that the proposed new criminal offence is fundamentally unjust as it offers protection to rogue parkers that is not available to the victims of rogue parking, and it will draw the police into awkward situations. The Government’s suggestion that the landowner could arrange to move the unwanted vehicle is completely inappropriate. Even if an elderly person in sheltered accommodation could do so, or get someone physically to move the car, they cannot simply dump it on the main road where there is obviously no easy parking or it might cause an obstruction or be on double yellow lines. Further, the elderly person might well be charged with the offence of taking and driving away as they would undoubtedly be taking the car without the driver’s consent.

The noble Earl, Lord Lytton, has devised an ingenious scheme which is set out in Amendment 43. It would allow local groups such as churches, day centres, the residents of a block of flats, sports clubs and village halls to be designated by their local authority so as to meet the Bill’s exemption from the clamping ban. Without this, we are going to see an enormous number of very angry residents, GPs and health visitors, as well as wedding guests or those attending funerals who will be inconvenienced by rogue parkers who decide that their need to pop into a shop overrides the right of landowners to use their own property for their desired purposes.

I come finally to the fourth group: bays for disabled drivers. Alas, I have failed to find an amendment that will help, despite the urging of the Blue Badge charity which represents disabled drivers and which, in answer to the noble Earl, Lord Attlee, has said that it would far prefer the car of one of its members to be clamped when a blue badge is not showing than for all its other drivers to be inconvenienced with the ending of clamping, because clamping has played a key role in protecting the bays from encroachment by able-bodied drivers. As even the noble Earl acknowledged, clamping is the great deterrent. Without it, rogue parkers will take places never meant for them. I hope the Minister can provide some assurance on how the Government propose to make good the protection of disabled bays on private land, given that the outlawing of clamping will no doubt remove the best disincentive to any driver to encroach on these protected spaces.

We do not want rogue clampers but nor do we want rogue parkers leaving their cars on private property where they have no right to be and interfering with other people’s freedom and use of their own land. These amendments seek to restrict rogue ticketers, protect consumers, set up an ombudsman scheme and safeguard the rights of small, private landowners who never wanted to run a car park but just want to be able to park by their own home. I beg to move.

[Lord Rosser]

My Lords, my noble friend Lady Hayter of Kentish Town has set out the arguments in favour of these amendments. I certainly do not intend to repeat them all. The first amendment aims to close a loophole created by the government amendments tabled in Committee in another place. It ensures that rogue operators will not be able to extort money from drivers by way of barriers rather than clamping.

My noble friend also referred to the amendment that allows for limited licensing of parking enforcement schemes by the Secretary of State to recognise residents and community groups who suffer a serious problem with unlawful and obstructive parking. She explained the reasons why this amendment is necessary and we certainly support it. It retains the clamping ban but allows local resident and community groups to apply for the provision of a parking enforcement scheme to address specific problems with unlawful parking in their area.

Then there are amendments that deal with the introduction of an independent dispute resolution scheme, funded by the industry and available to all motorists—it is important that it is available to all motorists. Cases where mistakes are made or consumers feel that they have been unfairly treated, such as being pursued for excessive charges, can be decided fairly, quickly and cheaply. Rogue ticketing is already a serious problem. It is only likely to get worse once rogue clampers are put out of business. Citizens advice bureaux are dealing with increased numbers of parking inquiries, queries and complaints. Last year, compared with the previous year, they saw an increase in people visiting their website seeking information and advice about parking issues.

The amendment establishes an independent ombudsman system that avoids costs and clogging up of the courts by challenges to parking fines brought by consumers. The issue is that it is not the members of the BPA who are most likely to operate outside the bounds of good practice. In order to protect consumers from unfair and disproportionate charges, all parking operators must be required to meet minimum standards for clear signage and proportionate charges. There must be an independent complaints process for consumers.

That is one of the purposes of these amendments. They give those parking their cars a better deal. They also give a better deal to those in certain locations who have parking on their own particular private property and will apparently be unable to seek effective redress.

I hope that the Government will give sympathetic consideration to these amendments and indicate that, even if they are not prepared to accept them, they will take the matter away and come back to it on Third Reading with amendments of their own covering the same issue.

[Baroness Randerson]

My Lords, I do not share all the noble Baroness’s concerns but still remain concerned about some aspects of the situation. I thank the Minister for the time he gave us in discussing these problems in a meeting. The Government are showing that they are aware of the issues. Some of their proposals—that places suffering from this kind of inappropriate parking can employ a parking company—would be suitable in large situations where the parking was widespread, regular and frequent. However, often these problems take place in, for example, the car parks of churches or community centres, or in residential car parks associated with blocks of flats. The problem is not on a large enough scale for an organisation which exists for a totally separate purpose from parking. It does not suit that kind of organisation to engage a parking company to sort out its problems. The Government have to look at a different resolution to the problem. There are still some questions to be answered.

In my speech in Committee, I asked the Minister what the situation was in Scotland, where there is no clamping. I am strongly in favour of the purpose behind this Bill in that respect: clamping should not be allowed to continue. Scotland has not had clamping for many years. Are there problems there associated with rogue ticketing? There do not appear to be massive problems with that but there appears to be an increase in the number of complaints about ticketing brought to consumer organisations in recent years. The Government need to address the issue of how they will deal with any problems which may emerge as a result of this change in legislation which will undoubtedly go ahead.

What are the Government proposing to do in relation to the forthcoming EU directive on ADR—the alternative dispute resolution procedure? I gather that that will be required in the near future for all traders providing goods and services. That would include parking companies. We need reassurance about the independent appeals process. There is still this gap in the situation where we can expect supermarkets and so on to find a satisfactory alternative to clamping. It is not reasonable to expect a small community-based organisation to employ a parking company and issue tickets. That is not their purpose. It adds bureaucracy and concerns for them.

[Lord Wills]

My Lords, I support my noble friend Lady Hayter on this matter. I should declare an interest as someone who suffers fairly regularly from the kind of selfish behaviour that she so compellingly outlined. She set out the arguments so well that I do not intend to rehearse them again. I only ask the Minister to reflect on the sentiment of the House that, in dealing with the very real problems of clamping by private operators that it is widely accepted need to be dealt with, the Government do not create another set of problems. The risks that my noble friend outlined are real. I hope that the Minister in his reply can give the House some reassurance that the Government are going to tackle them.

[Lord Lucas]

My Lords, I am thoroughly in favour of Amendment 42, or at least the intention behind it. It is quite clear that the Bill as it stands will allow a continuation of current abuses in different forms. All you need is a couple of posts with a chain coiled next to one of them and you have a barrier that you can put whenever you want. Anyone caught within it might have to pay a large fine to be released. We will have the same people indulging in very much the same practices as at the moment but they will use a barrier rather than a clamp. Clearly this section is designed to exempt local authority car parks and others with a raised barrier and a ticket on entry. I entirely agree with that. However, it must be reworded, and Amendment 42 seems a pretty good way of doing it. It would be desirable to improve the arrangements in the Bill for appealing against unjustified tickets. I have no objection to the way in which the noble Baroness has set about doing it although I suspect she has taken on a hopeless cause when it comes to allowing more people to clamp. The Daily Mail will use that one, I suspect.

18:30

[Earl Attlee]

My Lords, we have already debated these issues at some length in Committee and I am grateful to noble Lords for taking time to meet with me and my officials since then to discuss these matters further. As the noble Baroness, Lady Hayter, has so expertly and temptingly set out, Amendment 42 seeks to allow the use of fixed barriers in certain circumstances and to specify certain conditions that must be met.

We consider the amendment to be unnecessary as Clause 54(3) already requires that there is express or implied consent by the driver of the vehicle to restricting its movement by parking where there is a fixed barrier. In practice this means that the existence of the barrier must have been apparent to the driver, either visibly or through clear signage, when they parked. Secondly, in order to establish a contract as a basis for payment, the terms for parking would have to be clearly displayed. Therefore, if the landholder demanded a fee for release of the vehicle without such a basis, he would be committing an offence under Clause 54(1). In answer to my noble friend Lord Lucas, I am convinced that we have drafted these provisions correctly.

Amendment 43 seeks to create a new power for the Secretary of State to grant lawful authority to clamp and tow vehicles to those who request it, with the expectation that applications would not be refused if made by local authorities, residents’ associations and community groups. Again, we consider the amendment to be unnecessary because there are existing powers for local authorities to take a controlling interest in the management of parking on private land with the agreement with the landholder.

Section 33(4)(b) of the Road Traffic Regulation Act 1984 states:

“A local authority may, on such terms as they think fit … arrange with any person for him to provide such a parking place on any land of which he is the owner or in which he has an interest”.

The phrase,

“provide such a parking place”

refers to a Section 32 parking place, which is the general power for local authorities to provide off-street parking places. As a result, the local authority could make provisions as to the conditions for the use of the parking places and manage and enforce those conditions under the Traffic Management Act 2004. This would enable local authorities to use their lawful authority to clamp or tow those vehicles that have contravened the terms and conditions for parking on that land.

The amendment would also introduce regulation of wheel clampers overseen by the Secretary of State who will also presumably be responsible for enforcement, rather than the Security Industry Authority or another body. The requirements set out in Amendment 43 could lead to a patchwork system of regulation in that each application made would have to set out how they meet the requirements, including in respect of an appeals process. However, the amendment does not provide for national standards which any local scheme must adhere to, so the amendment could lead to a system where wheel clamping schemes are different throughout the country. I am sure that is not the noble Baroness’s intention.

We have seen that following seven years of licensing by the Security Industry Authority, rogue wheel clampers continue to carry out their unscrupulous practices and we do not consider that further regulation of the industry will deter them, no matter how much the noble Baroness, Lady Hayter, deplores their activity. An outright ban on wheel clamping without lawful authority is the only way to deal with rogue wheel clampers. Wheel clamping and the towing away of vehicles by private individuals or businesses without lawful authority in order to force payment of a charge are unacceptable and should be prohibited. As well as causing motorists significant distress and anxiety, the clampers in effect hold the vehicle to ransom—or at least threaten to do so as a deterrent. No one can justify or defend the exorbitant release fees and intimidatory tactics employed.

Throughout our debates, many noble Lords have strongly made the point that clamping is a particularly effective deterrent to inconsiderate and unauthorised parking on private land. It may be, but is it also disproportionate. Supposing I was attempting to deter motorists from speeding: if I proposed that the police have the power to clamp an errant motorist’s car for a couple of hours without recourse to an independent tribunal, I expect your Lordships would have something to say.

There can be situations where, in the circumstances, the motorist who is clamped has acted reasonably. What about a midwife who is seeing a patient in a large block of flats and reasonably believes that permission to park has been granted? How can it be right to clamp his or her vehicle in such circumstances? One only has to ask what the knock-on effect could be. What about police operations? I spoke to a pal of mine who undertakes covert police duties, dealing with very serious matters. He said in an e-mail:

“I can speak from first-hand experience on this. On several occasions this happened to me whilst on duty on covert operations. On every occasion I had to park my police vehicle quickly and deploy on foot from the vehicle. The vehicle was always left in open parking spaces on private land and subsequently clamped. Whilst I cannot quote the figures, I know this happens on many occasions in similar circumstances”.

The fact is that a clamping company operative, no matter how well meaning, cannot possibly know whether what he is doing is reasonable. Therefore private clamping on private land is fundamentally flawed.

Turning to Amendments 44, 45—-

[Lord Lucas]

My Lords, why would it be any different for the policeman if a barrier had been placed across his car? He still would not have been able to use it. Why is that acceptable and a clamp not?

[Earl Attlee]

The noble Lord makes a very good point. The policeman would have to take that risk. However, he would be aware that he was taking the operational risk that his vehicle might be clamped.

I turn to the other amendments. As the noble Baroness, Lady Hayter, has explained, these amendments seek to provide an alternative dispute resolution mechanism. The Government would be required to prescribe and enforce the system, which would need to be funded by the industry. It is a bit odd that in this group of amendments the noble Baroness proposes retaining clamping without any effective means of appeal while in other amendments she is insisting on a system of appeal.

As indicated in previous debates, the Government are committed to providing an independent appeals service, which will cover all tickets issued on private land by members of an accredited trade association. In practice, this body will cover all ticketing by members of the British Parking Association’s approved operator scheme, who are the major private parking providers in the sector with accredited access to the DVLA keeper data, and will therefore be able to pursue vehicle keepers for unpaid parking charges after the measures in Schedule 4 come into force. However, we have made absolutely clear that we will not commence the keeper liability provisions in Schedule 4 until this independent appeals body is in place.

The amendments tabled in the name of the noble Baroness, Lady Hayter, propose much broader regulation covering all parking on private land which, we believe, would impose a not inconsiderable burden on smaller landowners, including those who wish to manage perhaps only a handful of parking spaces, or even one.

I fear that I am not in full agreement with the noble Baroness, Lady Hayter, regarding Scotland, where wheel-clamping has been banned since 1992. We have seen no convincing evidence that levels of rogue ticketing are a particular problem. However, we are not being complacent; we have given these amendments very careful consideration and, in this respect, I am particularly grateful to noble Lords who have taken the time to meet me to discuss the Government’s proposals. I have also had very helpful and informative meetings with the British Parking Association, Citizens Advice and Consumer Focus.

Some noble Lords raised the issue of Citizens Advice Scotland dealing with more than 1,500 parking inquiries, which represents a big increase on previous years. The figures need to be reviewed in the context of the number of parking tickets issued each year; I do not have the figures for Scotland to hand but, in England and Wales, local authorities issued over 4.2 million penalty charge notices for on-road contraventions alone in 2009-10.

Following discussions, we have agreed that part of our commitment to monitoring the impact of the provisions will be to continue to liaise closely with consumer protection groups to ensure that if rogue ticketing activity does occur such groups can feed back to us. If it becomes a significant problem, we will consider further measures, including wider regulation, if it proves necessary in the light of experience. I hope that that meets the needs of the noble Lord, Lord Wills.

As I have said, we have already established a new system for parking management companies—

[Lord Wills]

I am very grateful to the Minister, who is genuinely trying to offer reassurance on these issues. I think that the whole House is grateful to him for that. But is he saying that he will continue to monitor the effects, so that if the Government see an increase in the sort of selfish behaviour by motorists on private land that my noble friend has outlined, they will be prepared to introduce new regulations to tackle it?

[Earl Attlee]

No, my Lords. Where I am making the absolute commitment is to monitor the effect of rogue ticketing very carefully and, if necessary, introduce further regulation. I will not fall into the temptation offered by the noble Lord.

As I said, we are already establishing a new system for parking management companies that have accredited access to DVLA data. We intend that the independent appeals service will be able to report back to the industry on appeals, so that precedents can be established and drivers do not have to continually appeal on the same grounds. In this way, the appeals body will help to drive up standards in the industry and provide greater clarity to both the motorist and parking operators. The accredited companies operating under this new regime will be able to offer their services to smaller-scale landowners and parking providers, and we believe that in many circumstances that will be an attractive option for landowners with perhaps only a handful of parking places, knowing that parking on their land will be managed by a professional and responsible company with all due safeguards in place. I think that there would be serious reputational issues if an individual or an organisation took the option of not using an ATA operator, but we have left that option open to them.

The noble Baroness, Lady Randerson, asked about the European legislation in gestation at the moment. The Government believe that their proposals offer the right balance between the rights of motorists and those of landowners, for the reasons I have explained. We have agreed to return to the issue if rogue ticketing proves to be a problem, but the question of possible future European legislation is a little academic at this stage, although we will obviously need to pay due regard to any commitment to which the UK Government sign up.

My noble friend Lady Randerson also raised the problem of small and dispersed parking facilities. It is entirely possible for the landowner or user to take a photo of the offending vehicle and the warning signs and pass them on to an ATA parking operator, assuming that they have the necessary enabling contact. That ATA company would be able to do the administration.

I hope that in the light of these clear assurances the noble Baroness will feel free to withdraw her amendment.

18:45

[Baroness Hayter of Kentish Town]

When the noble Lord, Lord Lucas, said that I was on to a hopeless cause, I thought of not pushing it to a Vote—but when the Minister starts to use a midwife as the example of why the amendment should not be accepted I felt that he was clutching at straws. Far more midwives will be inconvenienced if they cannot park near to a patient.

I have three points. First, the Minister has not answered the question about the small places that are not making a charge. The noble Baroness, Lady Randerson, spoke of those—small, private areas with no charges being made, where the problem is the deterrent, not trying to put a fee on afterwards. The second matter is where there has been a unanimous agreement in having some sort of independent appeals process. It is simply no good to say that it is only for BPA members; if a member is expelled, that member can carry on running a parking area and will be completely outside any code of conduct. Finally, Disabled Motoring UK is concerned that this Bill will not stop rogue clampers from becoming rogue ticketers. They see it as a real risk to disabled drivers, who are in the main vulnerable people. I do not think that the Minister has answered that point at all. He says that he will wait for problems to occur to see whether to do anything; I do not advise the Government to do that because they will get all the flack. But so be it. I beg leave to withdraw the amendment.

Amendment 42 withdrawn.

Amendments 43 to 45 not moved.

Schedule 4 : Recovery of unpaid parking charges

Amendment 46

Moved by

[Lord Henley]

46: Schedule 4, page 138, line 45, at end insert—
“( ) In sub-paragraph (5)(d) the reference to arrangements for the resolution of disputes or complaints includes—
(a) any procedures offered by the creditor for dealing informally with representations by the hirer about the notice or any matter contained in it; and(b) any arrangements under which disputes or complaints (however described) may be referred by the hirer to independent adjudication or arbitration.”

Amendment 46 agreed.

Amendments 47 and 48 not moved.

Clause 58 : Emergency power for temporary extension and review of extensions

Amendment 49

Moved by

[Lord Armstrong of Ilminster]

49: Clause 58, page 42, line 3, leave out “and” and insert “or
(iii) at any time when Parliament is sitting or is in recess the Secretary of State, with the concurrence of the Attorney General, considers that it would be inexpedient to introduce primary legislation to authorise a temporary extension of detention either because of time constraints or because of the risk of prejudicing the possibility of a fair trial of a person suspected of or charged with a terrorist offence or because of unacceptable risk to public safety or to security, and”

[Lord Armstrong of Ilminster]

My Lords, I beg to move the amendment standing in my name and in the names of the noble Baroness, Lady Royall of Blaisdon, the noble Lord, Lord Rosser, and the noble Baroness, Lady Liddell of Coatdyke.

Clause 57 establishes clearly the principle that a terrorist suspect should not be detained without being charged for longer than 14 days. Over the years, there has been much debate about how long that period should be. I have no wish to reopen that debate; the only question is whether there are any circumstances in which a terrorist suspect should be able to be detained for longer than 14 days. It has not been necessary to extend the period of detention without charge beyond 14 days at any time in the last five years. Nevertheless, it is the view of the Home Secretary, as well as of the police and of the Director of Public Prosecutions, that it might one day become compellingly necessary to do so.

The Government took the view that, in order to buttress the principle of the 14-day limit and to make sure that the period of detention without charge could be extended only in the most exceptional circumstances and only for the most compelling reasons, there should be no standing power to extend the period by order, and that it should be extendable only by the introduction of emergency primary legislation if and when the need arises.

Draft Bills were prepared, and a Joint Committee of Members of both Houses of Parliament was set up last year to give the draft Bills pre-legislative scrutiny. That committee, which I had the privilege of chairing, concluded that the Government were right to wish to create a contingency power to extend the maximum period beyond 14 days up to not more than 28 days in truly exceptional circumstances. The committee understood and respected the reasons for proposing that this power should be provided by emergency primary legislation, to be enacted when need arises, so as to ensure that temporary extensions of the period of detention would happen only in very exceptional circumstances and be subject to parliamentary scrutiny and approval.

The committee concluded, however, that parliamentary scrutiny of such emergency legislation would in practice be very seriously circumscribed. The legislation might have to be introduced and debated in a period of high tension and against a background of intense media interest and speculation. It might be very difficult to explain to Parliament, and to Members with a direct constituency interest, the reasons for introducing the legislation without disclosing information which would endanger security or public safety or information which could prejudice the right of a suspect or suspects to a fair trial. This could make the process of justifying the legislation almost impossible for the Secretary of State, and totally unsatisfactory and frustrating for Members of both Houses of Parliament.

The committee also thought that there would be an unacceptable degree of risk that it would be almost impossible to introduce and pass the legislation within a sufficiently short time, particularly when Parliament was in recess and would have to be specially recalled. We pointed out that it would be absolutely impossible during the period between the Dissolution of one Parliament and the opening of a new Parliament, because there would be no Parliament. The Joint Committee therefore concluded that emergency primary legislation, as exemplified in the Government’s draft Bills, did not offer a satisfactory solution, and recommended a new order-making arrangement, under which the Secretary of State would be authorised to make an executive order of limited duration, if need arose, to extend the period of detention of suspects without charge to not more than 28 days, if exceptional circumstances applied, subject to strict safeguards and subject also to the agreement of the Attorney-General.

In Clause 58 of the Protection of Freedoms Bill, the Government have accepted the committee’s recommendation in part, and have made provision for temporary extensions of detention by order in the period between the Dissolution of one Parliament and the first Queen’s Speech in the next. But they are still proposing to rely exclusively on the introduction of emergency legislation at any other time when there is a Parliament in being, whether it is in session or not.

I understand and respect the Secretary of State’s wish to make it as difficult as possible to extend the period of detention beyond 14 days. But she has accepted that there will be times when it is impossible to introduce primary legislation because there is no Parliament in being, so the principle is breached. The question is whether there should be any other circumstances in which an order-making power should be available to the Secretary of State.

This amendment would define and limit other circumstances in which the Secretary of State could proceed by order, even when Parliament was in being, if there were compelling reasons why it would be impracticable or injudicious to proceed by emergency primary legislation. She would still be able to proceed by emergency primary legislation if she thought that it was consistent with security, public safety and the interests of justice to do so. But she would have an escape hatch, by means of which she could, with the agreement of the Attorney-General, and subject to strict safeguards, proceed by order if she judged that pressures of time, or the interests of security, public safety or justice, required her to do so. The safeguards would be the same as those applying to an executive order made at a time when Parliament was dissolved.

The principle that there should be an alternative to emergency primary legislation is already established by Clause 58. The amendment I am proposing is an extension of that principle, not a breach of it. It does not seek to establish a new principle. It is of course possible that there will never be any need to extend the period of detention of terrorist suspects beyond 14 days. I hope that it may be so. But the Secretary of State, the police and the Director of Public Prosecutions all think that it is advisable to provide for the possibility that one day there will be a need to do so. If there is, it may be that it will be possible to proceed by emergency primary legislation. If that is so, fine. But I believe, as did the Joint Committee, that there will be circumstances where that is not possible, but where the period of detention ought to be extended.

To take just one example, suppose that the need to extend the period of detention arose during the Parliamentary Summer Recess. Parliament can be, and of course has been, recalled during a Summer Recess during a time of grave national emergency. But in the Summer Recess, Members of both Houses are scattered to the four corners of the world, and the Palace of Westminster is usually undergoing major works of reconstruction and refurbishment. Is it realistic to suppose that Parliament could be recalled in the Summer Recess just to authorise the extended detention of a terrorist suspect?

Four years of service in the Home Office left me with the conviction that, if anything can go wrong, it usually will—at any rate, in that department of banana skins. The annals of the Home Office are littered with overlooked banana skins and Secretaries of State with red faces. In this matter there are just too many foreseeable risks, and too many reasons why it might be too difficult to introduce primary legislation, to justify a decision not to take a sensible precaution.

This amendment is permissive, not mandatory. If it is passed this evening, the Secretary of State need never take advantage of it if she prefers not to do so. But if this amendment is not accepted she will run the risk of finding herself in a situation where she would like, and she ought, to extend the period of detention of a terrorist suspect or suspects, but feels herself to be prevented from introducing emergency primary legislation to do so, by reasons of pressures of time, or by considerations of security, public safety or justice.

In that situation, if a suspect or suspects could not be further detained but had to be released, and then went on to commit some outrage as a result of which innocent people were killed and injured, and which might not have happened had the suspect or suspects been kept in detention, how would the Secretary of State feel? How would she explain to Parliament, to the country and to the relatives of the victims why she had not felt able to take the action which might have prevented the outrage? The Secretary of State may be made of sterner stuff, but if I were the Secretary of State, I do not think that I could live with that thought.

19:00

[Baroness Liddell of Coatdyke]

My Lords, I support the noble Lord, Lord Armstrong, and I have appended my name to the amendment that he has so powerfully moved. I will speak only briefly, because I am very conscious of the fact that I was not able to attend the Committee stage of this Bill. With impeccable timing, the noble Lord’s amendment, which also at that stage had my name appended, coincided with the birth of my first grandchild, which of course rather overtook my consciousness.

I was a member of the Joint Committee, and, as the noble Lord has so ably and powerfully laid out, this issue of flexibility for the Home Secretary was one that was covered in some detail and gave rise to a great deal of unanimity. As the noble Lord, Lord Armstrong, pointed out, the whole area of terrorism and counterterrorism is littered with the unexpected. This amendment is merely a common-sense move to ensure that the Home Secretary has at her disposal all of the tools to enable her to act in a situation which may be one of crisis.

There are checks and balances contained in other aspects of this legislation. The noble Lord, in his amendment, also refers to other checks and balances. There comes a point when it is essential to put some trust in those who hold the great offices of state in this country and it may be ironic that I, as an opposition Member, point out that I have faith in the Home Secretary not to act in a cavalier manner when she is dealing with matters of such importance as the detention of terrorist suspects.

The noble Lord, Lord Armstrong, referred to the problems that are created around the time of the Dissolution. Many of us who have served in the other place were always very conscious that over the door of the Chamber of the House of Commons is the name of Airey Neave—the last person to be assassinated in the Palace of Westminster. He was assassinated when the Dissolution of the House was going through. He was removing materials from his office in advance of going back to his constituency. So the matter of Dissolution was discussed in some detail in the Joint Committee. Those of us who have been in the other place and have been recalled also know how long that can take. Indeed, Mr Jack Straw made the point that on one occasion it took three weeks to get a recall of Parliament under way. That is not acceptable when you are dealing with matters of terrorism.

There are also issues of parliamentary privilege when these issues are debated. All of us, in this Chamber and elsewhere, have sought to quiz Ministers at the Dispatch Box. If a Minister cannot answer a question then probing questions will inevitably follow. The last thing that anyone would wish would be to see a situation in which a Minister was led into putting words into the mouth of a defence lawyer who could say that a fair trial was denied their client. I urge the House to take this amendment very seriously. It is in the name of common sense. With luck, it need never ever be used but it is part of the armoury of the Home Secretary and the Government to have these provisions in their bottom drawer in the event of such an incident taking place that requires such powers. I support the amendment.

[Baroness Royall of Blaisdon]

My Lords, I, too, was pleased to add my name to this important amendment moved by the noble Lord, Lord Armstrong of Ilminster, who has set out his concerns powerfully today and in Committee. I have little to add to what my noble friend has said. I would merely commend the work of the Joint Committee, which did an excellent job, and say that while the Government have rightly recognised the practical impossibility of having to push through emergency legislation in a state of national emergency while Parliament is dissolved, they still have a duty in many ways to take seriously the committee's concerns over the ability of Parliament to legislate in certain emergency situations in order to provide powers necessary to extend the detention period to 28 days.

Perhaps most importantly, I echo the committee's concerns over the serious risk of jeopardising a fair trial if Parliament is to be provided with enough information properly to scrutinise whether the extension was necessary. As my noble friend has said, the scrutiny of legislation within such a short deadline is of course extremely difficult. Indeed, it could be dangerous if Parliament came to the wrong conclusions. The amendment is a measured response to the concerns which were expressed by the Joint Committee and, as has been said, it provides the Secretary of State with an option to bring in emergency legislation by order in certain circumstances where it is deemed truly necessary and expedient.

It is not mandatory but it is enabling. The Government, if they so wish, could still rely on emergency primary legislation. However, if there were concerns about the balance between having sufficient information to inform debate and the risk of jeopardising a fair trial, they could introduce an executive order. As my noble friend has said, this amendment makes entire common sense; as she also said, we must be able to trust in the judgment of the Secretary of State during times of national emergency. I believe that she should, in these rare circumstances, have the power available to her.

[Baroness Hamwee]

My Lords, the noble Lord, Lord Armstrong, has done a sterling job in this area and I feel a little embarrassed to ask questions, but I will because that is what we are here for. First, I share his and the noble Baroness’s concerns about the danger to a fair trial in the circumstances that the amendment covers. It has always seemed to me that primary legislation in these circumstances is almost likely to be ad hominem. I do not know whether that is the right way to express it, but it could be read as being very personal to an individual.

I should like to ask the noble Lord about two phrases in his amendment. The first is “time constraints”. I am not entirely sure what that means. It could be read as simply meaning management of parliamentary business. I dare say that it is intended to indicate insufficient time for adequate scrutiny, although I am not sure that that is implicit. The second phrase is,

“unacceptable risk to public safety or to security”.

I read that as being objective rather than subjective on the part of the Secretary of State and the Attorney-General. I am not sure whether I am correct in this but neither am I sure how one gauges an unacceptable risk as distinct from an acceptable risk. Those matters have to be subjective. One may often have seen in such a provision “the Secretary of State considers that” rather than the more objective approach in this phrase.

[Lord Henley]

My Lords, as regards the three questions put by my noble friend Lady Hamwee I hope that I can deal with her first one, about the danger to a fair trial, later on. The other two, on the drafting of his amendment, obviously must be a matter for the noble Lord, Lord Armstrong when he comes to respond.

I echo the words of the noble Baroness, Lady Royall, in commending the work of the Joint Committee. We are very grateful for that and for all it does. I also echo the words of both the noble Lord, Lord Armstrong, and the noble Baroness, Lady Liddell, when they said, “Let us hope there will never be a need to extend from 14 to 28 days”—I think I have those words correctly from the noble Lord. We would all echo that; we very much hope that it will never be necessary. That is one reason why we want to make it as difficult as possible to do this, but I am grateful to the noble Lord for giving us another chance to consider this matter. Similarly, I am grateful to him for coming to see me only last week to discuss his concerns about the limited nature of our order-making power in Clause 58. Given the noble Lord’s expertise and experience, I understand that this is a matter to which we need to devote a degree of attention and we certainly listened to what he had to say.

The Government made it clear following last year’s Review of Counter-Terrorism and Security Powers that we felt it was right that the maximum period for pre-charge detention should be reduced from 28 days to 14 days. I think that the vast majority of this House agreed that that is a welcome change; I cannot speak for the party opposite. However, we all accept that there will be or could be circumstances—I would prefer to say could rather than will—in which a longer period of detention may be required and, as the noble Lord, Lord Armstrong, rightly asserts, we must be prepared. It is simply the way in which we find ourselves preparing for those circumstances that finds me disagreeing with him.

We have made it clear that emergency fast-track legislation is the most appropriate and proportionate way to respond to the very exceptional circumstances in which longer than 14 days may be required. Detention for 28 days is such a significant diversion from the normal standards of our criminal justice system that the Government are adamant that such a framework should be in place only temporarily, and with prior parliamentary approval. The noble Lord’s amendment seeks to allow an urgent order to be made by the Secretary of State at any point if she felt that the use of primary legislation would be inexpedient for reasons of time, risk of prejudicing future trials or risk to public safety or security.

In respect of the question of time, Parliament can, and has, acted quickly to address matters of great seriousness in the past. Many of us have been in one or another House for many years and can remember occasions when we have been called back at short notice. Noble Lords will remember that, following the attacks on New York and Washington in 2001, Parliament was twice recalled within three days. We saw Members of another place recalled to discuss last summer’s riots within a matter of days. Only last summer, Parliament was able to pass the Police (Detention and Bail) Bill within days of its introduction. We have worked with the Crown Prosecution Service and the police to ensure that decisions can be made early and quickly on whether there is a potential exceptional need to increase the maximum limit to 28 days.

The second issue is that the debates surrounding fast-track legislation might prejudice future trials. This danger would arise primarily if fast-track legislation needed to be passed when a number of suspects had already been arrested. In such circumstances Parliament could continue to debate the principle of an extension to 28 days and the general nature of the threat. It is right to say that Parliament could not debate allegations against specific individuals. However, it would not need to and it would not be appropriate for it to do so. The question of whether extension of detention warrants should be granted in respect of individual terrorist suspects would remain a matter for the courts and not Parliament.

The noble Lord’s final concern is that fast-track legislation could not be considered because of a risk to public safety or security. Although the Government accept that the passage of fast-track legislation might be difficult, we do not believe that the difficulties are insurmountable. The Government do not therefore accept that there would be a risk to public safety and security involved in adopting such an approach.

I appreciate the noble Lord’s assertion that his amendment is permissive rather than mandatory and that fast-track legislation could still be used rather than the order-making power. However, the existence of such a power is not compatible with the Government’s general view that 28-day detention must be exceptional and that the decision to increase the maximum period of detention is one which Parliament should in the main be asked to make. I remain of the view that, should such an order-making power exist, there would always be arguments in favour of using it rather than putting the question to Parliament, where it should rightly be addressed, and the perception of 28-day detention as an extraordinary measure would again be lost. For those reasons, I hope that the noble Lord will feel able to withdraw the amendment.

19:15

[Lord Armstrong of Ilminster]

My Lords, I would like to express my gratitude to the noble Lord for taking the time to talk about this matter at a meeting last week. That was useful—I hope to both of us.

I say to the noble Baroness, Lady Hamwee, that the time constraint I had in mind is that which would arise if the need to extend a period of detention became clear after somebody had already been in detention for 10 days and perhaps a weekend intervened and there simply would not be time to carry through emergency primary legislation, even on a fast track through both Houses of Parliament. It would be very difficult to define extensively in legislation what considerations of security and safety might apply but they are clearly considerations of prejudice to national security and public safety considerations relating to the possibility of a terrorist incident or outrage being planned which might be avoided, and information about which had better not be disclosed in a debate.

I am less confident than the noble Lord, Lord Henley, that it would always be possible to avoid the debate in either House straying from general principle into the particular circumstances of an incident if a terrorist incident had occurred, or if there were extensive media speculation about the possibility of such an incident. I believe that there could well be circumstances in which a Member of Parliament might have a constituency interest which would justify him or her raising more detail, or asking for more detail, about particular cases or particular people than would be appropriate or safe to do. Therefore, I remain of the view that the Secretary of State may live to regret not taking advantage of this amendment. However, in the circumstances of this being a straight issue of disagreement, with apprehension I beg leave to withdraw the amendment.

Amendment 49 withdrawn.

Amendment 49A (in substitution for Amendment 54)

Moved by

[Baroness Royall of Blaisdon]

49A: Before Clause 64, insert the following new Clause—
“Protection from stalking
(1) The Protection from Harassment Act 1997 is amended as follows.
(2) In section 2 (offence of harassment), for subsection (2) substitute—
“(2) A person guilty of an offence under this section is liable on summary or indictable conviction to imprisonment for a term not exceeding five years, or a fine not exceeding the statutory maximum.”
(3) For section 4 (putting people in fear of violence) substitute—
“4 Offence of stalking
(1) A person (“A”) commits an offence, to be known as the offence of stalking, where A stalks another person (“B”).
(2) For the purposes of subsection (1), A stalks B where—
(a) A engages in a course of conduct,(b) subsection (3) or (4) applies, and(c) A’s course of conduct causes B to suffer fear, alarm, distress or anxiety.(3) This subsection applies where A engages in the course of conduct with the intention of causing B to suffer fear, alarm, distress or anxiety.
(4) This subsection applies where A knows, or ought in all circumstances to have known, that engaging in the course of conduct would be likely to cause B to suffer fear, alarm, distress or anxiety.
(5) It is a defence for a person charged with an offence under this section to show that the course of conduct—
(a) was authorised by virtue of any enactment or rule of law,(b) was engaged in for the purpose of preventing or detecting crime, or(c) was, in the particular circumstances, reasonable.(6) In this section—
“conduct” means (inter alia)—(a) following B or any other person,(b) contacting, or attempting to contact, B or any other person by any means, (c) publishing any statement or other material—(i) relating or purporting to relate to B or to any other person, (ii) purporting to originate from B or from any other person,(d) monitoring the use by B or by any other person of the internet, email or any other form of electronic or other communication, or making improper use of public electronic communications networks or leaving messages of a menacing character,(e) entering any premises,(f) loitering in any place (whether public or private),(g) interfering with any property in the possession of B or of any other person,(h) giving anything to B or to any other person or leaving anything where it may be found by, given to or brought to the attention of B or any other person—(i) watching or spying on B or any other person,(ii) acting in any other way that a reasonable person would expect would cause B to suffer fear or alarm, and“course of conduct” involves conduct on at least two occasions.(7) For the purposes of this section, a person misuses an electronic communications network or electronic communications service or other social media if—
(a) the effect or likely effect of use of the network or service by A is to cause B, another person, unnecessarily to suffer annoyance, inconvenience or anxiety;(b) A uses the network or service to engage in conduct the effect or likely effect of which is to cause B, another person, unnecessarily to suffer annoyance, inconvenience or anxiety.(8) The Secretary of State may by regulation add further forms of conduct to subsection (6)(b) above.
(9) A person convicted of the offence of stalking is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding 5 years, or to a fine, or to both,(b) on summary conviction, to imprisonment for a term not exceeding 12 months, or to a fine not exceeding the statutory maximum, or to both.(10) Subsection (11) applies where, in the trial of a person (“the accused”) charged with the offence of stalking, the jury or, in summary proceedings, the court—
(a) is not satisfied that the accused committed the offence, but(b) is satisfied that the accused committed an offence under section 2.(11) The jury or, as the case may be, the court may acquit the accused of the charge and, instead, find the accused guilty of an offence under section 2.””

[Baroness Royall of Blaisdon]

My Lords, in moving Amendment 49A, I wish also to speak to Amendments 49B and 49C, and to do so with humility and determination. I speak with humility because since our useful, and in many ways moving, debate in Committee, when we heard the courageous testament of the noble Baroness, Lady Brinton, I, like other noble Lords, have had the opportunity to learn more about stalking and to meet other victims. These are extraordinary people—usually women—who live in fear for themselves and their children, and who have been completely and utterly failed by the criminal justice system at all levels. I speak with determination because with this Bill we have an opportunity both to introduce a specific offence of stalking in England and Wales and to change the culture of our criminal justice system from top to bottom by requiring, among other things, mandatory training, risk assessment for victims, psychiatric assessment and treatment for perpetrators and a victims’ advocacy scheme. Naturally, such changes would have to be accompanied by an awareness campaign to ensure that the issue was taken seriously.

In a time of unprecedented cuts, women’s safety must be a priority. Only today, the Daily Mail reported that half a million street lights are being switched off by local authorities forced to find savings, meaning that women working shifts or returning late from an evening out will be forced to walk the streets in darkness. Similarly, cuts to backroom police services will inevitably hit specialised units such as those concerned with domestic violence. This amendment is an opportunity to provide real protection for victims of stalking and serious sustained harassment, 80 per cent of whom are women.

As we heard in Committee, lives are destroyed by devious manipulators. Sometimes lives are tragically ended by this murder in slow motion. We are not talking of a small number of people; nearly one in five women over the age of 16 has been a victim of stalking. The number of lives affected is staggering, yet we know that stalking is grossly underreported. Of the estimated 120,000 cases of stalking each year, just 53,000 are recorded as crimes by the police and only one in 50 leads to an offender being jailed. The overwhelming majority of sentences are for less than 12 months and some are for a matter of days. Where restraining orders are given, they are constantly breached and the victims live in constant fear.

By recognising stalking as a specific offence in law, as it has been in Scotland, we would ensure that the courts looked at an entire course of conduct when it comes to stalking rather than just one specific incident of harassment, as currently happens in so many cases. It is estimated that victims tend not to report stalking until around the 100th incident—yes, the 100th—because it often begins with individually minor incidents, such as nuisance phone calls, and it is invariably only when the perpetrator’s actions finally escalate to serious and violent offences, sometimes after many years of sustained terror, that the police will step in.

Two weeks ago after eight years of sustained suffering, Claire Waxman’s stalker was finally jailed for 16 weeks for a second breach of his restraining order, after being given a suspended sentence and ordered to pay compensation. The introduction of a specific offence will train the police and the courts to focus on the pattern of behaviour reported and enable early intervention to protect women like Claire—and indeed men—whose lives are stolen from them by their stalkers. The change in Scottish law, which this amendment was modelled on, has led to an increase from an average of seven prosecutions for stalking a year to 140 prosecutions in the first four months in Strathclyde alone. Last year, only 565 offenders found guilty of serious harassment received a custodial sentence, the vast majority of which were for less than 12 months, and many for just days. The increase from six months to a five-year maximum custodial sentence that the amendment would make would enable these cases to be heard in a Crown Court and ensure adequate protection for victims.

Thanks to charities such as Protection against Stalking and the Network for Surviving Stalking, and the work of Laura Richards and Harry Fletcher, there is now a vast body of evidence about stalking, its impact and the gaps in data, legal provision, training, awareness, assessment and treatment for offenders. More people are beginning to understand the need for murder prevention. This week will see more evidence with the publication of the report by the independent people’s inquiry into stalking—an inquiry that has given a voice to victims who have suffered too long in silence and at the hands of the criminal justice system. I pay tribute to all members of the All-Party Parliamentary Group, and especially to Elfyn Llwyd MP, its chairman, for their tremendous work. Many of its members are from this House, from all Benches. I have not yet seen the report but I know that it will recommend a draft Bill on stalking.

From detailed conversations that I have had I am confident that the most important elements of this Bill are covered in my amendments. Amendments 49B and 49C would place a duty on the Secretary of State to introduce such a regulation as is necessary to effect the comprehensive reform to training, victim support, risk assessment and other such measures that the people’s inquiry is calling for. Some of these measures can be done through regulation and secondary legislation. Others no doubt will need primary legislation, but by tabling these amendments—one of which lists the measures to be included in any further regulation, and the other a less prescriptive duty on the Secretary of State—the opportunity is here for the Government to furnish the Bill with further measures at a later stage.

As noble Lords will know, the Government have undertaken a consultation on stalking, which ended yesterday, and I have no doubt that it will conclude that the actions that I am proposing here today are necessary. Indeed, the Prime Minister himself has said that there is a gap to be filled, and both the Home Secretary and Lynne Featherstone are understood to be sympathetic. When the Minister responded to the amendment that I moved in Committee, he suggested that while there might be a case for strengthening the law on stalking to raise its profile, he felt that the Protection from Harassment Act was adequate to cover this criminal behaviour. Indeed, speaking of the new offence, he said:

“We do not consider that to be proportionate where the conduct does not cause a person to fear that violence would be used against them on each occasion”.—[Official Report, Commons, 6/12/11; col. 661.]

I hope that as a result of the many briefings and representations that the noble Lord must have received, he will now change his mind. In our debate on 6 December, the noble Baroness, Lady Brinton, said that we should not accept any amendment on that occasion because we had to get it right but that we should do it early next year. That time has come. This Bill provides us with a huge opportunity to change the law, to change the culture of the criminal justice system, to diminish the fear of victims and provide them with support and assess, and to treat the perpetrators. If we wait for a new Bill, I fear that the best could be the enemy of the good. The victims of this insidious crime need these changes to be made now. They are suffering day after day and they do not have the luxury of time to debate.

Perhaps the noble Lord will again say that we should wait until the results of consultation have been considered before deciding whether to accept my amendments. I respectfully suggest that the Government should accept my amendments, which I believe to be comprehensive but also provide them with an opportunity to furnish the Bill with further measures that may be suggested by the results of their consultation if there continue to be gaps. I understand that Third Reading will not be until March, so there would be adequate time for further amendment if necessary. I beg to move.

[Baroness Brinton]

My Lords, I rise to speak to all three amendments in the group. Stalking is a heinous crime that currently goes much unrecognised, except for the few exceptional cases that hit the tabloid headlines. The headlines are not exceptional because of the stalking, the behaviour of the perpetrators or the suffering of victims, but usually because of the murder of the victim or, finally, the conviction of a perpetrator after many years of stalking.

I spoke in Committee about my personal experience. It was interesting that following that a number of noble Lords spoke to me privately to say that they had also experienced stalking—some from many years ago. It was evident that it was as vivid to them as my account to your Lordships’ House. My perpetrator was convicted more than three years ago. I think that many of us take many years to recover from the impact of the offence.

I thank the Minister for the discussions that I have had with him in the past few days. I hope that he will be able to reassure the House about some of the points raised by the noble Baroness, Lady Royall of Blaisdon. The harassment legislation was put in place by the previous Government, who decided that stalking could be included within the broader scope of harassment. However, the breadth of the definition means that a stalker, who may have hundreds of incidents on his record, is conflated with a neighbourhood dispute over hedges. As a result, sentencing for stalking is limited to a handful of months, whereas the whole nature of stalking is, as stated by one of the victims giving evidence to the inquiry, “a rape of the mind”. It also curtails the victim’s life as they cannot take up a normal life again while the perpetrator is able to attempt to continue to control their lives.

Amendment 49A broadly copies the Scottish legislation, and rightly proposes an offence of stalking. It outlines the increased penalty for being convicted of the offence. It does not, however, as I outlined in my speech in Committee, tackle the core and underlying problem of training for everyone involved in the criminal justice system. Stalkers are usually bright, manipulative and obsessed with their victim. Many convicted of stalking behaviour have been assessed by psychiatrists as suffering from personality disorders. They are frequently charming and able to convince professionals, neighbours and even, as in my case, random members of the public that they are hard done by and misunderstood, and it is all the victim’s fault for taking things a bit too seriously.

Amendment 49B attempts to put some flesh on the items that the Scottish legislation fails to mention, but from discussions with the noble Baroness, Lady Royall, there is some detail here. However, I fear that it is incomplete, and it would benefit from the detail of the inquiry’s report and probably from the responses to the Government’s own consultation on stalking, which has just closed. Let me give two illustrations. The first is the general principle behind both this amendment and Amendment 49C that all the other details are settled in regulation. This is very worrying. Proposed subsection (1)(a) refers to how to,

“prevent and treat stalking behaviour”.

This would involve a sea change in the approach to this type of crime, and I believe requires more than a passing reference to regulations. It has not been common in our criminal justice system to insist that perpetrators have treatment, and it is right that both this House and another place would want to have the chance to discuss this in some detail. Do not get me wrong; I believe that it is absolutely right that perpetrators have treatment. My issue is about the time left in Parliament to discuss that matter, which is an important change in the way in which our legislation operates at present.

It is important also because perpetrators must have a real chance to begin to understand and change their behaviour. This happened in my case; my perpetrator voluntarily agreed to have treatment, and it gave both me and the others affected confidence that he would finally stop. Too often, prison or restraining orders have not sufficed, and as soon as the perpetrator is back in society, or without constraint if the restraining order is lifted, the behaviour starts again. Insisting on treatment for perpetrators is a matter of freedoms and liberties. We need to have an open debate about the legislation, and I am afraid therefore that the amendment needs to be more specific.

19:30

Secondly, subsection (2)(b) of the new clause proposed in Amendment 49B states that regulations shall provide for “risk assessments for victims”. Victims have given very clear evidence to the inquiry that there must be a complex set of risk assessments for those affected by the behaviour of the perpetrator but that it should not and must not be limited to the victim. Most incidences of stalking relate to people who have been or believe that they have been in a relationship with the victim. Often, the victim’s children, among others, can be just as affected by the perpetrator. Imagine, for a moment, this running alongside a stalking case being investigated by the police, where the police have supported the victim in getting the criminal courts to issue a restraining order against a perpetrator, which is not uncommon. Now add to that a session in the Family Court, where the perpetrator has asked for extended contact with the children. At present, it is probable that the judge in the Family Court will not be aware of the criminal investigation running in parallel. I am sorry to say that, even if told, the judge may believe that the victim is being difficult about allowing the perpetrator access to his children.

This scenario is, sadly, not imaginary. Victims have talked publicly about how the family justice system seems unable to handle this, with the result that in one case the police had to intervene to tell the judge that he had to take account of restraining orders when considering access and that the victim was not just being difficult about her ex-husband. Risk assessments must include ongoing criminal cases, and must refer to the children of victims as well, not only to the victims. I am afraid that that is another reason why Amendment 49B is not sufficient.

I remind the Minister of my own example in which the police silver team investigating was exemplary but junior staff in control and receiving telephone calls were not trained using the code word. As a result, some months after the initial case started, if people rang using the code word, there was no immediate action. There were at least two occasions on which that lack of training or understanding meant that my perpetrator got away, again. I therefore ask the Minister to reassure the House that the department will look at stalking in its widest sense and assess the culture and training for everyone in the criminal justice system. Can he also provide comfort for the House on how serious the Government now consider stalking to be, and tell us what they will do to introduce legislation—preferably as soon as possible—support and training for victims, as well as the assessment and treatment of perpetrators?

I said in Committee that I support the principles and ideals behind the amendments, but I fear that they are too early and not detailed enough for the following reasons. First, copying the Scottish legislation is a start, but it does not reflect what Scotland has learnt from the law since its introduction, and there has been helpful evidence on both the success of and the omissions in the inquiry. Secondly, the Government's own important consultation on stalking closed only yesterday, and they must have time to evaluate the views of the many respondents. Thirdly, the all-party-supported people's inquiry into stalking report will be launched and published tomorrow. Here I wish to thank Napo and Protection against Stalking, and quite specifically Harry Fletcher and Laura Richards, for the detailed work they have done to help the all-party inquiry to hear so much evidence from victims, probation officers dealing with perpetrators, and many people in the criminal justice system. It is the weight of that evidence that the Government should read and address.

Sadly, therefore, I cannot support the amendments should the noble Baroness press her amendment. Given the facts outlined above, I hope that she can be persuaded not to divide the House on this occasion, but I also hope that, when he responds at the end of this debate, the Minister will be able to demonstrate how seriously the Government take stalking by providing reassurance for all of us that there will be legislation soon.

Just in case mischievous folk try to say that we in the coalition are not in favour of legislation on stalking or protecting women, let me be clear that this is simply not the case. Prime Minister David Cameron himself asked for a copy of the report on stalking when the all-party group was set up last year. He has repeated his concerns since then. Both the Deputy Prime Minister and Minister Lynne Featherstone, whose responsibilities include women, have made speeches outlining the importance of change in stalking legislation. It would therefore be utterly wrong to use this amendment to attempt to tarnish the Government, when in fact the problems lie with the amendments themselves and their timing.

Stalking is a dreadful act. As with deeply personal offences such as rape and sexual assault, it is just not possible for people not close to victims to understand what happens and how it affects them and their families for life—sometimes even for death. It requires legislation and a serious change in culture throughout the entire criminal justice system. We need to debate that change very publicly and carefully, in order to get it right, because some of the necessary changes are fundamental to making any legislation on stalking effective. However, it will impact on the freedoms of the perpetrator too. I thank and commend the noble Baroness for her amendments, but they are not the right vehicle; nor would it be right to rush something through that was inadequate. I am sorry that I cannot support them. I hope the Minister will be able to reassure us that we will very shortly see draft legislation to make stalking a crime.

[Baroness Howe of Idlicote]

My Lords, like the noble Baroness, Lady Brinton, I have also been involved with this committee, which has been looking in very great deal at this issue. As others have said, with the marvellous help of Laura Richards and Harry Fletcher, who have done a tremendous amount of work, we have listened to the most appalling stories. Again, as has been said, it is not just the individual whose life is ruined; it is often whole families who have to rush around the country trying to escape the persecution. As we also know, it is not just a question of trying to escape; there are murders and other terrible consequences. I, too, congratulate the noble Baroness, Lady Royall, on tabling the amendment. It is a good and very worth-while attempt not only to replicate the Scottish legislation—which, as we have all heard, has made good progress, and lessons are being learnt from it—but to make some additions, which we have worked on in our committee. Very sadly, it is probably not the right time to do so. We have a clash because the report that we have all been working on is published tomorrow, and it is very comprehensive. This makes, in my view, a strong case for a far more comprehensive piece of legislation.

That said, I commend the noble Baroness, Lady Royall, on later Amendments 49B and 49C in this group. They are an attempt, although I tend to agree probably not a practical one, to come to the right conclusion. We have, however, been told that Third Reading is not until March, so there might be some time to work on this report. If that is the case, we should gratefully look at that. Whether or not we will be able to accept it in its final stage, it would be an example of an updated piece of legislation that might in due course need further improvement but might be a step in the right direction.

I will mention cyberstalking briefly because it is a major and worrying area that needs dealing with. The perpetrator can not only continue to hound and haunt the victim in appalling ways but reinvent himself, pretend that he is the victim and spread all sorts of rumours. It is a very serious situation that we have ignored for far too long. One is almost surprised at how little attention has been paid to it. We should think back and not forget that domestic violence was regarded as something that was within the family and that the police should not get involved. How ridiculous that sounds in today's world.

Again, I congratulate the noble Baroness, Lady Royall, on what she is doing. I hope that we can make progress between now and Third Reading in the way I suggested, and then think again. I very much support what is being done.

[Lord Lucas]

My Lords, I very much look forward to reading the report tomorrow. I support the direction that the noble Baronesses have taken but I feel that Amendment 49A raises too many questions, particularly around the boundary of what is and is not acceptable conduct. For example, there is no requirement on A to behave reasonably, only on B. In subsection (5) of the proposed new clause we are getting close to the continental form of law where something is permitted only if it is allowed in legislation, whereas in the English form of law something is permitted if it is not forbidden in legislation. That requires careful consideration. I hope that the report of the noble Baroness will be the start of that process, and that my noble friend will be very supportive in his reply.

[Lord Henley]

My Lords, perhaps the House will welcome my intervention at this stage. I echo the words of the noble Baroness, Lady Howe, in saying that, surprisingly, I, too, commend the noble Baroness, Lady Royall, on tabling the amendments in this group. However, I have some doubts about their practicality and timing.

My first doubt is about their practicality. There are three amendments in the group. I am not sure in which order the noble Baroness would wish to see them on the statute book, or whether she wants to see them all on the statute book at the same time. Amendment 49A sets out in some detail what she proposes to do, although subsection (8) of the proposed new clause still gives the Secretary of State power by regulation to add further forms of conduct to subsection (6). The second amendment is a somewhat briefer attempt to do the same thing, which gives greater power to the Secretary of State to govern by regulation. The third, Amendment 49C, seems to imply that the Secretary of State can do what she likes, when she likes, merely by regulation. I am not sure that that is the right way to go about legislating in this field. I hope that I will cover these points in greater detail in my brief remarks.

I appreciate also the extreme importance of this matter. I make it quite clear to the noble Baroness and to the House that the Government take this very seriously indeed. We understand what my noble friend Lady Brinton called the fear and trauma that it can cause victims, many of whom are women living in fear of physical violence as well as mental anguish. We accept that more needs to be done—I make that quite clear—to protect victims of stalking and to stamp out such behaviour. That is why the Government took the initiative as long ago as last November in launching their consultation, which sought views on how we could more effectively protect victims of stalking—including, if necessary, through strengthening civil and criminal law, and police powers.

19:45

My right honourable friend the Prime Minister, as my noble friend Lady Brinton said, has already acknowledged that there is a gap in the law. The question is how we close it. The issue not just for the noble Baroness but for the whole House is whether voting on these amendments today will help afford further protection to the victims of stalking or whether, as I respectfully submit, it would be preferable to give a little more time for consideration of the views of victims, practitioners and the police before a decision is taken.

Reference was made to the consultation that I have just spoken about. As the noble Baroness, Lady Royall, reminded the House, it closed only yesterday. It will take a bit of time to study the results. There were nearly 150 responses from a diverse range of individuals and groups. Rather surprisingly for a consultation that has allegedly closed, there are one or two more views that will come in, but they are almost there. The groups include victims of stalking, women's groups, the police and others. We owe it to all of them to look very carefully at, and consider very properly, their views and the evidence before we decide on the best way forward. Again, I assure the House that we are committed to doing this as expeditiously as possible—but obviously it will take a little time to consider 150 responses.

We will also look at the views of the all-party Justice Unions Parliamentary Group, which will publish its report tomorrow. The noble Baroness confessed that she had not seen it, and nor have I. However, other noble Baronesses such as the noble Baroness, Lady Howe, and my noble friend Lady Brinton have been actively involved in it. We owe it to them and to the group to consider the report very carefully. Those who have been part of the group have the advantage of knowing what is in the report. Unless I am mistaken, the noble Baroness, Lady Royall, does not—and nor do I. We are very keen to consider the group's conclusions and recommendations alongside the other responses to our consultation.

I hope that the noble Baroness will not feel that I am seeking more time purely to delay or prevaricate. The issue is far too serious for that. However, as I said, with the best will in the world we cannot be expected to consider 150 responses in 24 hours, and we cannot yet consider the other report, which we are looking forward to seeing tomorrow—as is my right honourable friend the Prime Minister.

Reference was made by other noble Lords, in particular the noble Baroness, Lady Howe of Idlicote, to Third Reading. That will not happen until well after the half-term Recess. We could push that back well into March. Therefore, there is a reasonable amount of time, and to some extent the timetable is in our hands, subject to normal discussions with the usual channels. That will give us sufficient time to consider the responses to the consultation and the report from the all-party group, and to reach a view within government on the best way forward in advance of Third Reading.

The noble Baroness will appreciate that I cannot give her a cast-iron guarantee that we will bring forward the amendment that she wants at Third Reading. If she presses her amendment tonight, we will have the problem of having muddied the waters and made a decision in the House. We will then have constraints on what we can do at Third Reading. The noble Baroness is as familiar as I am with the guidance in the Companion to the Standing Orders on what we can and cannot do at Third Reading on an amendment on which we have come to a conclusion.

I would be very grateful if, on this occasion, the noble Baroness would listen to me rather than taking advice from her noble friend the opposition Chief Whip, although she can take advice from him in due course. I cannot guarantee an amendment at Third Reading, but I can promise to give the noble Baroness an assurance in advance of Third Reading as to whether or not we will be bringing forward an amendment at that stage. If we do not bring forward an amendment at that stage it will then be open to the noble Baroness, along with the noble Baroness, Lady Howe, and other noble Lords, to bring forward any such amendment as may be wished. The noble Baroness would be at liberty to bring those amendments back and press them to a Division at that point.

The choice is one for the noble Baroness but if she presses this to a Division, and if the House comes to a conclusion, she will have actually made it harder for both the Government and herself to achieve what she wants to do at Third Reading which is in something like six weeks’ time. It might be five weeks or four but, as we all know, it will be well into March.

I therefore urge the noble Baroness to listen to the remarks of some others in this debate and, on this occasion, to withdraw her amendment, bide her time for a few weeks longer and then let us see what might be possible at Third Reading.

[Baroness Royall of Blaisdon]

I am grateful to all noble Lords who have participated in this short debate for their very positive and supportive views. We are agreed, all around this Chamber, that this is a heinous crime and that we really must do something about it. I will not respond now to all the points that have been made because people want to know whether or not we are going to vote. Timing is clearly of the essence—the timing of my amendment is not perfect, in view of the fact that the people’s inquiry will report tomorrow and the Government’s own consultation finished yesterday. When the Minister talked about the consultation, he said that they would look at the results—it is terrific there have been 150 or more responses—and that, if necessary, the Government would bring forward amendments or further legislation. I was thinking that that was not good enough but as he went on it seemed clear that, while he cannot give me a binding commitment that he will bring an amendment back at Third Reading, he was inviting me to withdraw my amendment on the basis that, if he does not bring forward an amendment at Third Reading, he would be willing for me to do so. Is that correct?

[Lord Henley]

I was trying to give an assurance that, although I cannot speak for the House, the noble Baroness would be perfectly within order to bring forward her amendments to be discussed again at Third Reading. On that occasion it would, obviously, be a matter for the House to consider the amendments. Under the much stricter rules on what can and cannot be brought forward at Third Reading, I would certainly have no objection to her bringing forward her amendments or some variant of them.

[Baroness Royall of Blaisdon]

I am very grateful to the Minister for that assurance, in view of which it would be wrong of me to press my amendment to the vote this evening. However, if the Minister is not able to bring forward amendments at Third Reading, I will certainly do so and, at that stage, I will pursue it to a vote 150 per cent. With that, I beg leave to withdraw the amendment.

Amendment 49A withdrawn.

Amendment 49B not moved.

Amendment 49C not moved.

Consideration on Report adjourned until not before 8.54 pm.

Local Authorities (Conduct of Referendums) (England) Regulations 2012

Monday 6th February 2012 Lords Chamber

Motion to Approve

19:55

Moved By

[Baroness Hanham]

That the draft regulations laid before the House on 5 December 2011 be approved.

Relevant documents: 36th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 17 January.

Amendment to the Motion

Moved by

[Lord Beecham]

At end to insert “but that this House regrets that the Government are unnecessarily compelling eleven councils to stage such referendums in May 2012, given that any English local authority, or five per cent of its electorate, can require a referendum to be held on whether to have an elected mayor; and that such referendums and consequent mayoral elections involve substantial costs at a time of acute financial stringency in local government and in the country.”

[Lord Beecham]

My Lords, I rise to move a regret Motion in the terms set out. In doing so, I declare an interest as a member of Newcastle City Council for the past 45 years. I also have to say that I have not the slightest interest in being either an elected mayor or a police commissioner—no doubt to the great relief of many of the citizens of Newcastle.

The issue before us stems from the Government’s decision to impose referendums on 11 local authorities in May with a view to determining whether they should move from their present system, which is a leader and cabinet system, to that of an elected mayor. If the local electorate, or as many of them as decide to participate, opt to change to a mayoral system, there will, as I understand it, be elections in the dark nights of November next year, to coincide with the police commissioner elections.

The Government’s decision raises two issues which fall to be debated. The first is around the merits or otherwise of the mayoral system. That is the background to the regret Motion, although, whatever view one takes about the mayoral system, there is a separate question about whether it is justifiable to impose a referendum as opposed to relying on the system which has operated for the past 10 years of allowing a referendum if 5 per cent of the local electorate choose in a petition to demand one or, indeed, if a local authority decides to hold a referendum.

With regard to the first matter—the merits of the system—it is customary for Governments to have an evidence base for radical changes that they propose. In this case, such evidence is lacking in two key areas. The first is the claim that the elected mayor system is inherently better than the leader and cabinet model—more effective leads to better governance. I would argue that cities like Manchester, Birmingham, Leeds, Sheffield, Newcastle and many others have demonstrated an ability to innovate, to promote efficiency and to drive regeneration without an elected mayor. There has been a celebration of the renaissance of some of our great urban centres over the past few years, almost all of them in places with the long-standing—certainly over the past decade—leader and executive model.

There was a long tradition of local government leading the way in social policy before elected mayors. Distinguished local government figures such as Joseph Chamberlain and Herbert Morrison and, for all his faults, Newcastle’s own Dan Smith, created enormous change, not just in their own localities, but in the politics of local government generally. Huge advances were made over many decades in social policy, in housing, the move from gas and water municipal socialism which Joseph Chamberlain was espoused in the 20th century, to housing and social care, to transport and the arts. These were signal achievements of the old system of local government and it is yet to be demonstrated that the mayoral system, now operating in a relatively small number of places, is actually any better. I would argue that there is little evidence of that either here or indeed abroad. The noble Baroness may, as she did in Grand Committee, cite examples such as Barcelona. However, as I pointed out at the time—in fact, I think that the noble Baroness pointed it out but perhaps without quite realising what she was doing, with all due respect—Barcelona has an elected mayor who is not elected in a personal capacity but is elected, in the same way that a Prime Minister is elected, as the head of his party—the party list in the case of Barcelona. This is not quite the direct electoral system that is being advocated here. So, in my view, there is not that advantage of a mayoral system.

20:00

It is sometimes said that mayors are more visible and more accountable. Members of your Lordships’ House may not think I am all that visible at the best of times, but 17 years after I was leader of Newcastle City Council, it is, somewhat to my surprise, not infrequently that I am recognised in the streets of Newcastle as somebody who played a significant part, for a time, in the council’s affairs all those years ago, and I am sure that I am not unique in that way. There are probably many other places where those who have led councils whose physical presence was greater than mine are recognisable not just for that reason but because of what they had attempted to do on behalf of their community.

Irrespective of whether one supports the mayoral system, there is a fundamental question about whether we should be proceeding in this way. There is a real issue about the appetite for change. As the amendment indicates, a mere 5 per cent of the electorate of any council could have called a referendum in the past 10 years. Only 39 referendums have been called and in only one of those was the turnout for the referendum more than 40 per cent, apart from in a handful that coincided with the general election, where, obviously, with 60 per cent or so going to the polls, a higher turnout figure was recorded for the referendum. In fact, in many cases, even in those authorities where the mayoral system was opted for, the turnout was pretty low. It was 16 per cent in Bedford, 18 per cent in Lewisham and, just a week or so ago, in Salford, 21 per cent in Mansfield, 25 per cent in Watford and Doncaster, 26 per cent in Newham, 27 per cent in Stoke, which eventually thought better of it and decided to abandon the system in a second referendum a few years later, and there were only three authorities with turnouts of over 30 per cent. That is hardly a ringing endorsement of the notion that people are pining for a change in the system.

Nor is it right to say, as was proclaimed as the likely outcome of the change by those who espoused it—my noble friend Lord Adonis among others—that this will somehow lead to greater participation in local elections. In fact, in only one mayoral election, apart from those that occurred on general election day, has the turnout exceeded 40 per cent, and that was in Boris v Ken round 1 in 2008, when the turnout was all of 45 per cent. I vividly remember, as will, I am sure, other noble Lords, particularly the Minister, coming into London, getting out of a Tube station and seeing the placards every time, with the Evening Standard referring to this impending dramatic event. But it did not seem to excite the electorate all that much even here.

We have this position where the appetite is extremely limited, and not just among the electorate. There are very few in any political party who seem to advocate the system. The noble Baroness was a distinguished leader of an important council for many years, but that council has not chosen a mayoral system. I do not know whether she has been advocating it overtly or quietly, but if she has, she has failed to persuade it thus far. Indeed, apart from four councils in London, which had all been Labour controlled, no council in London and very few councils elsewhere, despite years of control by Conservatives, Liberal Democrats or both in coalition, have actually opted to call a referendum or encourage their electorate to do so. That remains the case today in most of the authorities that are in the Government’s list. It is possible that political groups in Birmingham may support a referendum and I gather that Liverpool is likely to opt as a council for a referendum, which is, of course, its choice.

I would like to quote a member of Bradford city council, in the absence of the noble Baroness, Lady Eaton, who is not in her place tonight, but who was in her place for many years as a very distinguished leader of Bradford Council. One of the Bradford members was quoted as saying:

“My colleagues and I are not supportive of elected mayors … We do not think that the proposals are suited to the needs of the Bradford district … We are hopeful that local people will recognise that an elected mayor would be unlikely to improve the quality of life of local residents or the quality of services provided to them and vote to reject the proposals”.

That was Councillor Anne Hawkesworth, the Conservative group leader on Bradford Council. I gather that that view is echoed by many of her colleagues elsewhere and certainly by many Lib Dem colleagues, including distinguished local government figures such as Councillor Richard Kemp and others, including the last Liberal Democrat leader of Newcastle City Council. Whether his predecessor remains of the same mind that he once had, we shall perhaps learn in the course of the debate.

In addition to the lack of general interest in the idea of elected mayors, there is a serious question about the nature of the powers to be conferred on a single individual. The concentration of power in a single pair of hands which requires a two-thirds vote on a council to overturn a decision of the elected mayor on key issues such as the budget, the children’s plan and so on is a very high ask. It can lead to the situation that we have seen in an adjoining authority to my own and that of the noble Lord, Lord Shipley—North Tyneside Council. For several years it had a Labour mayor and a very substantial Conservative majority on the council, and now it has a Conservative mayor and a very substantial Labour majority on the council. That is, to put it mildly, somewhat confusing to the electorate, and it cannot really be right that that situation can arise so easily and, moreover, that it would require a two-thirds vote to outvote an elected mayor. It seems that we are moving from local democracy to local autocracy, and that is not in the interests of representative local government.

We have this dilemma and we have the cost to bear in mind. The noble Baroness was good enough to make clear in Grand Committee that the cost for each authority of, roughly, £250,000 would be met in the first instance by the Government, but it is still money that could have come into local government and been used for better purposes, as could the equivalent amount, because it will be roughly the same, that will be spent on any more referendums should they occur in November this year at a time when budgets are under so much pressure. One would think that in these very difficult times this is an additional reason to avoid this issue leading to expenditure when there is so little public support for it.

I ask the Government why, in the face of apparent public indifference and the opposition of many of their own local councillors from both the partners in the coalition, quite apart from Labour and other councillors, they are insisting on forcing through the calling of referendums. If people want them, the option is there. Why are they forcing this procedure on an indifferent electorate? Holding them should surely be a matter for local choice, not at the behest of the Government. I would also like to ask them what their intentions are in relation to the 300 or so other authorities that have not yet held referendums. Will they too be compelled to go through this process and, if so, how will they be selected and when?

One issue that has been mentioned in the course of the debates over the mayoral referendum is whether we should be moving from individual city mayors to subregional or conurbation mayors, mayors of Greater Manchester or Merseyside, as was advocated by the noble Lord, Lord Heseltine, and Sir Terry Leahy recently in their report about Merseyside, and perhaps there are other places too. It is interesting that a Government who abolished metropolitan counties 20 or so years ago without having a referendum on that issue should now be thinking of reinventing some subregional governance arrangement, but one of this nature, with an even greater risk of the concentration of power, given that the geographic and population scope that would be involved would be greater than would arise in an ordinary mayoral referendum in an individual authority.

We are faced with the cost of following a government policy that is rooted in no evidence at all and apparently has no public support of any significance to achieve objectives that are very far from clear—unless there is a somewhat hidden political agenda. I bear in mind the words of the Member for Grantham, Nick Boles, who some years ago was advocating the system because it was the only way to provide a ladder by which the Conservative Party might climb back to power in places like Manchester or Newcastle. He is likely to be disappointed, in any event, should mayoral elections take place in May of this year, but that may be the motivation—not on the part of the Minister, I am sure, who is much too honourable for such a cynical approach, but I would not put it past some of her colleagues in the higher reaches of government and beyond.

It is therefore a matter of real regret that we should be forcing people into this process and, given the Government’s explicit inclusion of powers to inflict this whenever and on whomever they like, it is worrying that we are embarking on this process at this time. I beg to move.

[Lord Shipley]

My Lords, I declare an interest as a member of Newcastle City Council. I do not set out to make this a Newcastle debate. However, Newcastle is one of the 11 cities identified. I do not regret this Motion and I believe that the noble Lord, Lord Beecham, is mistaken in moving his amendment, for a number of reasons. Let me explain why.

I believe that the debate about elected mayors has moved on. The noble Lord, Lord Beecham, is absolutely right that a year or two ago I felt that the balance of evidence was strongly against. I no longer believe that to be true. One of the key reasons for that—there are several, which I will come on to—is the elected police commissioner, which I believe has altered the nature of representative democracy at a local level, and that as people get used to electing directly an individual to a role, it will be very odd if the leader of a council is not similarly elected. I will come back to this.

I have not fully understood the issue of cost. There clearly is a cost in running a referendum but actually the referendum will take place on a local election polling day, and the election, should it be approved, will take place on the day elected police commissioners are being voted in.

The decision to have a referendum in the cities identified was actually part of the Localism Bill. We debated it and we came to a conclusion. That Bill is now an Act. Of course, the proposal was in the coalition agreement—it featured it as one of a number of matters—and both that agreement and the decision in the Act should be honoured.

The second reality is that the campaigns have actually started because the polling day is only three months away. I just do not think that you can now seek to put the clock back. Of course, this is only a regret amendment, but we should now be willing to test the opinion of the electorate and it is right that in the 11 cities a decision should be made by those electors.

20:15

I note the criticism about the powers of the Secretary of State, but actually those powers simply require a referendum to be held and do not dictate the outcome. It is very difficult for politicians to argue with the ballot box. Electors will make a decision as to what they want. They should be informed about the reasons in favour and those against. Those cases can be made, people can campaign, but people should be allowed to come to their own conclusions.

Local authorities now have the power to decide the outcome—to hold or not to hold a referendum—unless 5 per cent of an electorate call for a referendum. The difficulty with that argument is that in a city with an electorate of 200,000, 5 per cent amounts to 10,000 people. That is a barrier. There has to be a very strong campaign for a mayor to be elected for people to gather 10,000 names out of an electorate of 200,000. That drives the status quo, unless there is a very good reason why people are prepared to campaign and spend time and money in calling for a referendum through gathering petitions. How much better it is if you simply test public opinion, as the Government wish to do.

There are advantages in a mayoral system. I welcome the referendum campaigns because they enable those advantages to be debated. There is a whole set of reasons why I think a mayoral system is right. Mention was made of the noble Lords, Lord Adonis and Lord Heseltine. I am convinced by the arguments both have made—it is partly about leadership, partly about figureheads and partly about connecting the electorate with a person who is democratically accountable for what happens in that city.

However, the argument goes further than that. It is better for a council leader—and I have been one myself, for a period of just over four years—to be elected by the electorate as a whole rather than by a party caucus meeting, which is what happens in practice. In other words, if, for the sake of argument, you have 40 councillors and you are the majority party, you can actually elect the leader of that council—who has statutory powers—on 21 votes. I do not think that that is sufficient mandate and I have come to the conclusion that it is better to have a mayoral system where there is an electoral mandate for that person.

The noble Lord, Lord Beecham, talked in terms of the evidence base, and whether it is better. I believe that collectively, the cities of England punch well below their weight. The context of this is devolution into Scotland, into Wales, and into Northern Ireland, and also into London. Tonight we see, in the Evening Standard, that the Mayor of London is urging that he be given power over the railways into London. There is a strong case for that, and indeed, as part of discussions going on with the eight English core cities on a devolution to them, issues around transport are being discussed.

With an elected mayor in each of those 11 cities, where there would also be a cabinet, and ward members, who would implement some of the powers of the Localism Act, not least around neighbourhood planning, I do not see this as simply a matter about a two-thirds vote. I see it as being about renewing democracy, and empowering ward members as part of the Localism Act. However, we will have that debate at a later stage. The question is whether we should test the public view, and in my view, we should. The noble Lord, Lord Beecham, said a moment ago that there is no apparent public support for elected mayors. I draw your Lordships’ attention to the very recent referendum in Salford which voted in favour of an elected mayor, and of course the recent decision over Leicester—

[Lord Beecham]

Would the noble Lord count a turnout of 18 per cent as a vindication of his position that there is a great public interest in this?

[Lord Shipley]

It is too low, but of course, local elections and leaders of councils are being elected in practice on similar numbers. So no, the point is not material. The fact is that the people of Salford have voted for an elected mayor. It is simply not the case that there is no apparent public support for elected mayors. I believe that we should test the public view. That was agreed as part of the Localism Act, and we should not regret that but should test the public opinion.

[Lord Grocott]

My Lords, I cannot claim any direct interest in the cities that have been selected for these various orders, though I have lived in the West Midlands for many years. I have a particular interest, almost a responsibility, to mention Birmingham. The House may know that my noble friend Lord Corbett has not been very well lately but he would undoubtedly have been here otherwise, and I know that he would have said that this is a daft idea. I know this because I checked with him when I saw him this morning. Although he takes no responsibility whatever for the arguments that I propose, perhaps this could be taken as, to a degree, a reflection of his views as someone who for many years was an outstanding Member of Parliament for the city of Birmingham.

I must take issue briefly with the comments that we have just heard, not least on the argument about direct democracy as if it is somehow more legitimate if a mayor is elected by the whole population of the area rather than being elected by some other mechanism. This is essentially an argument for a presidential system, because I very much doubt whether the noble Lord, Lord Shipley, would say that the Prime Minister has less authority because he is not directly elected by the population as a whole. I, for one, infinitely prefer our parliamentary system, which is basically how our local government system has operated, in much the same way that the Government is decided in the House of Commons. Executive heads are essentially chosen by their peers, and over a period of years their strengths and weaknesses are tested and observed. Although, regrettably, the mayoral system was introduced by a Government whom I supported on most things, it has always seemed to me an attempt to graft a different system from abroad—an alien system sounds so unpleasant—which has no roots in this country. That is the basis of my objection.

I have one or two detailed points to make. The argument that has just been advanced by the noble Lord, Lord Shipley, was that the Government are simply asking local people for their opinions. His position is that it is up to local people to make their minds up. A very skewed question is being put, in the sense that the Government are insisting that these local authorities hold referenda, which seems to be at total variance with all the impassioned speeches we have heard about localism from the Benches opposite. However, it is worse than that, because the Government are insisting that these tests of local opinion shall only be held in those local authority areas which currently do not have a mayoral system. I would have felt slightly more comfortable—but not a lot more—if they had asked one or two of those local authorities that have had experience of this mayoral system over the last 10 years whether they thought it was a good idea to continue with that method of local government. In the one test we have had—in good old Stoke, home of the mighty Potters—the people of Stoke have said, “Thank you very much. We have tried this system out for the past few years and we do not think there is very much to it”. I guess that may well be the response of a number of other local authorities should members of the public locally be asked their opinion. However, the Government say, “No, we are not going to ask questions in those areas—only in other areas—and they shall have these referenda whether they want them or not”. The only question I want to ask is: where is the demand? There is no evidence of demand that I have seen for locally elected mayors in any of the places where compulsorily they must hold a referendum.

We have already mentioned that the turnout in Salford was 18 per cent, which, as my noble friend on the Front Bench pointed out, and I agree wholeheartedly with everything he said, is hardly a resounding acclamation for the system—and that is the turnout, not the vote in favour. On the turnouts for some of the referenda we have had so far, in Sunderland it was 10 per cent, in Ealing it was 10 per cent, in Southwark it was 11 per cent—which I suppose is an improvement—and two-thirds of the areas have rejected the idea. I hope very much that the ones that are being tested in this compulsory vote will also reject the idea.

As to the cost in these straitened times—which the Government Benches constantly remind us about—it will be £2.5 million for the referendums. That is about a quarter of a million pounds for each one that is held. Is this really a priority that local people want in these difficult times? I ask, rhetorically, the two previous speakers who have both led their local authority that, if they had been given a quarter of a million pounds, at what point would they have thought the best way to spend it was to hold a referendum on changing the system of local government.

It is, of course, not only the cost of the referendum but should the vote go in favour, there will be the cost of the reorganisation. I have raised this issue already with the noble Baroness, Lady Hanham, and she said in Committee, rather optimistically, that it would depend on the kind of mayoral system that is adopted, which is true. She said:

“The mayor comes in and it might need to provide him with a room. He will probably need a couple of members of staff”.

I think that is fairly unlikely. She continued:

“I do not anticipate there being a huge extra cost to the council as a result of this”.—[Official Report, 17/1/12; col. GC 146.]

The noble Baroness is very experienced and respected in local government and we do not know whether she is right or I am right in saying that it will cost a lot more than a room and a couple of officers whatever system gets adopted. I cannot think of why on earth we should want to go down that road and spend that amount of money. Certainly, as someone who does not live in London but who watches the mayoral system as it goes on, I cannot believe that it is cheap. Perhaps it is, I do not know the figures, but I would like to ask the Minister—I gave notice to her office about this—whether she can tell us what the government of London cost in the last year under the old system for its head office administration, not for individual services, and what it costs now. I would bet a few shillings that the cost has not gone down. I hope the figures are there somewhere.

My noble friend Lord Beecham asked: what are the benefits of the system? It has been running for 10 years or so in many councils so we ought to know by now. The Government make grandiose claims about it in the supporting document. The Explanatory Memorandum states that the Government believe that,

“directly elected mayors … enhance their city’s prestige and maximise the potential for local economic growth”.

So I have to tell the two previous leaders of Newcastle council that, according to the Government, you failed. If you had been directly elected mayors, the place would be zooming.

[Lord Bradley]

On that point, the acclaimed regeneration of the City of Manchester is widely acknowledged to be on the basis of the stability of the political leadership over the past 28 years, when there have been only two leaders of the council. Businesses and civic institutions work closely with that leadership and have been able to plan, over those years, the regeneration which is a model for cities throughout the country.

[Lord Grocott]

That is a fulsome testimony which is entirely justified. I do not know of a shred of evidence to show that in the past 10 years London has been far better managed and that far more prestige has been brought to the city than that brought to Newcastle—I mention Newcastle as a name out of the hat— Birmingham or Manchester by the people who led those cities. I could list the other cities as well.

What are the costs and what are the benefits? I hope that in these referenda, which will doubtless go ahead, people will have the good sense of the two-thirds of those who have been asked so far in different parts of the country and say no. I am sorry about the money that will be wasted en route but I am sure they will save their local authorities money if they do say no. Before there is any further development of this scheme I hope that proper costings are made available and proper research is done into the alleged benefits of the system where it has occurred so far. I also hope that other cities will have the opportunity before too long, if the Minister persists with her policy and holds a referendum in a city that does not have a mayor at present, to follow the splendid example of Stoke-on-Trent and say no.

20:30

[Baroness Farrington of Ribbleton]

My Lords, I declare an interest, having been a councillor over a long period of time and, as the noble Lord, Lord Tope, knows, having served on two major European institutions and met a variety of people from a variety of backgrounds. I am proud to be able to say that Europe is diverse. Speaking personally—do not worry; I will not break into song—I do not want to be in America where there is a system that means that you can elect the dog catcher or somebody to do this, that or the other job. I quite like Europe because of its diversity. I like the fact that in Spain people can choose whether they have a Catalonian region. I like the fact that regions were developing in Greece. I am sorry for the problems that now face the people in that country.

The noble Lord, Lord Shipley, made my blood run cold when he said that we ought to get on with this because the campaigns have already started. That rings a bell with other bits of this Government’s legislation. We are told that, although we have not finished the health Bill, putting it into effect has already begun. That is not the democracy that I believe in. In the democracy that I believe in, you get the legislation in place and then you enact it. If the noble Lord, Lord Shipley, believes strongly in this, then he and my noble friend up in the north-east are perfectly free to go back and get 5 per cent of the population to agree to test the water. What is not in order is for somebody down here in the Government to decide, “You’ve got to spend that money”.

We have not yet seen the full impact of what the Government are doing in terms of local authority budgets and the effect on services. Earlier today the noble Baroness, Lady Hanham, whom I, too, respect, in answer to a question about differential funding for local authorities in the north vis-à-vis the south, said, “That is the system we use”—I hope that my paraphrase is agreed to be accurate—“and that is the way the money is allocated”. Well, speaking from the north, that way is not a fair way or a good way. People living in northern authorities that are suffering under the cuts in local government expenditure would not choose to spend this money at this time in this way. It is no good saying that it comes from a different budget, pocket or source. Money is money up north; brass is brass, and if there is brass going, they want it spent on old people. The current climate is not one that encourages people to want to spend money on this sort of thing.

I am totally in favour of choices. I actually argued in favour of choices for local people over police and crime commissioners. I asked why we could not have a referendum in each police authority area to ask people whether they wanted a police and crime commissioner or whether they wanted a few more police officers on the streets. The Government did not seem to want to ask them that question. In fact, the Government resisted it, as did one or two Liberal Democrat Members of your Lordships’ House. At this time there is an issue of accountability. It is no good Members of the coalition, be they on one side or the other, swinging backwards and forwards, saying that the people out there want choice and forcing a referendum on them. What they actually want is choice as to where their hard-earned brass is spent, and at the moment the Government are wasting it on a variety of schemes.

I think that it was the noble Lord, Lord Shipley, who spoke about the importance of individuals and I think that the Government believe in the importance of individuals. In a local authority, the one good thing about the current system, and people know it, is that if a leader is corrupt, difficult or fails to fulfil their duties, those who work with them day after day know about it and they either challenge them and hold them to account or the leader is unseated the next time round.

As for the issue of cities punching below their weight, that has to be seen against the background of the break-up of the regions. This was all too slow in development under my Government. We do not want sub-regionalism. I certainly do not want anything less than north, south, east, west and central in terms of regional strategy. What I actually want is to see people being given a choice. So let us ask the people, and let us ask them all the questions, not just the one or two that the Government favour. I am sure that I am not allowed to gamble in your Lordships’ House, but I would bet that if I went home to Ribbleton in Lancashire and asked the people whether they wanted a referendum or a home help, or whether they wanted a police and crime commissioner or more police officers at the end of the street—given the descent into rising crime figures under this Government—I know what they would say. With all her distinguished experience in local government, I believe that the Minister does, too.

[Lord Tope]

My Lords, I should probably start with the same words as the noble Baroness who has just spoken. For the past 38 years I have been—and still am—a councillor; indeed I am a member of the executive of a London borough council. I have been a member of the Committee of the Regions, mentioned by the noble Baroness, Lady Farrington, since its inception in 1994, and I agree wholly with what she said about that. One of the great joys of being on that committee—there are not that many—is learning about the diversity of what I would call “sub-state government” right across the European Union. I have also been a council leader for 13 years. Where I make a unique claim in this Chamber—well, I was going to say “unique claim”, but the noble Lord, Lord Harris of Haringey, has joined us—is that of having had the doubtful pleasure of spending eight years serving on an authority with the first elected mayor in this country, the Mayor of London.

The noble Lord, Lord Grocott, asked for comparisons between the mayoral system in London and what went before. That is an impossible comparison. I get very annoyed when I hear people say—with a lot of justification—that the 10 years with a Mayor of London have been a lot better than what went before. Of course they have. Back in the late 1990s, the Labour Government offered us in London a referendum where the choice was, “Do you want a strategic government for London or not?”. I and most of us did. Yet we were not offered the choice of having what the noble Lord, Lord Grocott, referred to, as I would, as a parliamentary system—the traditional local government system, which at that time existed everywhere in the United Kingdom—or a presidential system with a strong mayor and a very weak assembly. The Labour Government told us that if we wanted a strategic government, which many of us had campaigned for over many years, the only choice on offer was an elected mayor with a weak assembly—a system once described to me as being just like having George Bush with no Congress. Some of us who had long campaigned for a strategic authority in London found that choice difficult to make, but it was the only choice that the Government gave us. Clearly, had there been a no vote in that referendum, we would not have had another choice to come back and say, “Let us have a parliamentary system instead”. There would have been nothing. So forgive me if I am a little cynical when I hear Members on the opposition Bench now complain about the lack of choice.

The other way in which I may be unique here relates to the fact that I have noticed that the debates tonight and on previous occasions have almost always fallen into those opposing the referendums being those who oppose the directly elected mayoral system and those supporting the referendum being those who broadly favour having elected mayors. I find that very odd. I have not yet been tainted by my noble friend Lord Shipley to start changing my mind. I have always been and I remain unconvinced of the case for directly elected mayors. There have been some very good directly elected mayors, both in this country and in other parts of the world, yet we all know that there have quite a few very bad directly elected mayors, some of whom have ended up in prison. Maybe we know about them. I suspect that the vast majority that we do not know about at all have been as indifferent as any other system. We simply do not know about them because they did not make much difference.

I am here tonight to support the Government’s intention to have a referendum and to encourage those who hope that it will have a no outcome to have a little more trust and confidence both in their ability to argue that case and in the people to believe it.

[Baroness Farrington of Ribbleton]

My Lords—

[Lord Tope]

I thought that I would provoke someone sooner or later.

[Baroness Farrington of Ribbleton]

My Lords, would the noble Lord, Lord Tope, accept that those of us who oppose at this time spending this money on forcing people to have a referendum do so because it is inappropriate? The noble Lord does not know which way I would vote about a locally elected mayor. He knows that I oppose the elected police and crime commissioners.

[Lord Tope]

My Lords, the arguments about whether we spend money on this or that are always easily made in any debate. Tonight, I should be at my own local authority debating our council budget for the coming year, where the Conservative opposition will argue that we should not put £250,000 into this at the same time as we make a £300,000 cut to something else. You can always have these arguments. The costs of the referendums are very small in comparison to the total budget of any of the authorities, let alone to the national expenditure from which they come. Frankly, that is not a terribly strong argument for or against.

My point was that those of us who would argue yes if they had the chance—I would not, but the noble Lords, Lord Beecham and Lord Shipley, would—should have more faith in their ability to convince the electorate. Yes, we would all wish for a higher turnout so that the decision, whatever it is, is more representative of the people at large. Again, the more vigorous the argument and the campaign, the higher the turnout will be. What are the Opposition arguing? Are they saying that there should be a threshold? Are they saying that it should be passed only if a given proportion votes for it? We tried that once before in Scotland and it did not resound terribly well. We simply have to campaign for a high turnout for whatever it is that we believe in. I do not want to be that provocative.

20:45

[Baroness Farrington of Ribbleton]

My Lords, the local people already have the ability to make that choice without spending money. Let me say this to the noble Lord, Lord Tope. I know that one can stand in this Chamber or in a council meeting and say, “This is a relatively small amount of money”. But in an area where an old people’s home is being closed or the home helps are being reduced, the general public do not see the money that the noble Lord dismisses as trivial or small by comparison as being small when their services are being cut.

[Lord Tope]

My Lords, I entirely accept that. I am quite sure that in her distinguished career, the noble Baroness as a county councillor—indeed, chairman of the education committee—must on many occasions have had to make such unpopular arguments. I understand that and I am sure that the noble Baroness does as well.

I do not want to take too long or carry on being quite so provocative. However, we come now to the question of why we should have the referenda. First, it was stated in the Conservative Party manifesto, which was at the time of no great excitement to me, but it was then agreed in the coalition agreement—my party has agreed to the commitment that there will be referendums in the originally 12 and now 11 cities. That is an election commitment. It is a governmental commitment. We can all argue what the public do or do not expect. They may not expect political parties to carry out their commitments, but they ought to be able to expect political parties to carry out their commitments. Rightly or wrongly there was a commitment to hold these referendums. It is right that the Government should now be doing that, whatever we may individually hope will be the result of those referendums.

We had the question again about legislation. The Localism Act did not expressly state that these referendums would take place, but it certainly gave the power for them to take place. It was very well known, not least because the coalition agreement referred to it, that this was going to happen. The fact that people are only now in February preparing for a referendum that will probably take place on 3 May is hardly surprising, given all the commitments and all the legislation, including the passing of the Localism Act.

Therefore, I think that the Government are right to be holding these referendums in accordance with the commitments given. Those of us who hope for a no vote should have a lot more confidence in our ability to convince voters. Above all, we ought to trust the people to decide on this. It will decide the issue one way or the other for the foreseeable future. We can then get on with debating an issue that I think is far more important, which is the powers that our local government has—whoever is running it and whatever governance system they choose to have—to get on and revitalise not only our cities but the whole of the rest of local government in this country.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, the passion at the end was very good. It has been a low-key debate apart from that. I think the noble Baroness, Lady Farrington—if I may hesitantly say so—has quite a short memory, particularly in relation to putting legislation in place before it has been passed. I stood where the noble Lord, Lord Beecham, is on more times than I care to recall, telling the then Government that they were introducing and had almost put into effect legislation before it had been passed. Therefore, I do not accept that challenge to what we are doing here, but I do think the noble Baroness must not forget that that was a situation with practically all the legislation that the previous Government put in place. We must not forget that.

The grant to each local authority is done against a formula—as indeed the previous Government did. We have argued for years over which way the formula was going, one way or the other. People have short memories. We must just all try to remember where we came from.

The noble Lord, Lord Tope, drew attention to the fact that the coalition Government’s programme made it clear that we are committed to creating directly elected mayors. That commitment was carried out in the Localism Act and was a commitment to having a referendum in 12 cities. Those cities are now 11 because Leicester took the decision to move to a mayor under the original provisions in the Local Government Act 2000. The Government believe that there is good evidence that a powerful, dynamic and directly elected mayor can provide strong, visible leadership, increase accountability for local decisions, deliver local economic growth—that is really important—and bring greater prosperity to their city. However, we believe that it is up to the electorates in these cities to decide in a referendum whether they believe that the mayoral model is one that they would wish to embrace. Through directing that referendums take place, we are ensuring that the people have the opportunity to address the question for themselves.

The noble Lord, Lord Grocott, said that the question that was going to be asked was skewed. I remind him that it is set by the independent Electoral Commission and not by the Government.

[Lord Grocott]

My Lords, I did not express myself very well. I said it was skewed in the sense that it was being asked only in those areas that currently do not have a directly elected mayor. It would be a far fairer test if referendums were also being held in areas that already have them and may want to get rid of them, as Stoke did.

[Baroness Hanham]

I hear what the noble Lord says, but that was not a provision in the Localism Act. It provided for referendums in the 12 cities and not for referendums elsewhere or on other mayors that have already been elected under the 2000 Act, which was implemented by his Government.

The heart of the case advanced by the noble Lord, Lord Beecham, is the question of compulsion and the cost of the referendums. We are not requiring any particular outcome for these referendums; we are clear that the decisions about local government are for local people and nothing that we are doing departs from that principle. We are ensuring that people in our larger cities have the opportunity to address the question as to whether they want a mayor for their city. We have made it clear that central government will bear the cost of the referendums, estimated to be about £2.25 million, in line with the long-established new burdens doctrine. On the examples given by the noble Baroness, Lady Farrington, of what her local authority would think about and what people think about, this will come from central Government—

[Baroness Farrington of Ribbleton]

It may surprise the Minister that people whom I have represented over many years do not distinguish where the money comes from but where it goes to.

The Minister reiterated that this provision was in the manifesto agreement of the coalition, when it came together. So it was in the manifestos of both parties and in the coalition agreement that there would be no top-down major reorganisation of the health service. I find it difficult to accept why certain things in the coalition agreement are sacrosanct while others are being trodden on daily to the disgust of the medical profession.

[Baroness Hanham]

I thank the noble Baroness for her comments. The Government believe that there is good evidence that—

[Lord Bilston]

Would the Minister allow me to ask a question about costs? We are all well aware of the problems that the majority of people in this country are facing at this moment. How do the Government reconcile the spending of £2.5 million on these referendums, £85 million on the AV referendum and £25 million on the referendum for police commissioners? How can we square this vast amount of expenditure when there is so much poverty and we are taking legislation through this House which will make people more impoverished? We are voting on measures which are unnecessary, certainly in the minds of the public. As we have heard, they are not interested in these kinds of changes. They want local government as they have always understood it: councillors working together for their communities, most often across parties, to bring about the improvements that people look for. I suggest that this is a complete waste of time and money.

[Baroness Hanham]

My Lords, when we have had the referendums we will know whether or not people want to have a mayor, or whether they want changes to their local governance system. This is in 12 cities, that is all: the 12 largest cities. It is not in the rest of the country, which, as the noble Lord, Lord Beecham, said, can already have those referendums if they can get enough people to sign the bits of paper under the Act passed by the previous Government.

The value of large cities effectively led by powerful mayors is demonstrated by international and domestic experience. I am not going to quote Barcelona. There is, not least, the Mayor of London: the capital has benefitted from having a strong voice and leadership. As a result it has been possible to start devolving powers from the centre to the mayor, who is then able to work in conjunction with local government and see major infrastructure projects, such as Crossrail, implemented. It is exactly because of these and similar benefits which we believe that mayors will bring to other large cities that, in our view, those large cities should all have the opportunity to be governed by elected mayors. Evidence shows that, on average, local authority mayors are known to 57 per cent of local people—over twice the percentage for a council leader. I will not tempt the noble Lord, Lord Beecham, to tell me what percentage of people recognised him on the streets of Newcastle. I am confident that it might be a smidgen under 57 per cent, but I am not going to make a bet on it.

Noble Lords on both this and a previous occasion have argued against these orders, and against what they see as being compulsion, citing the current provisions under the Local Government Act 2000, which include the petition trigger and the ability for a council to resolve to change its governance arrangements, as being sufficient. This is consistent with the approach taken by the previous Government, who legislated to hold a referendum in 1998 on an elected mayor for London, which has also already been referred to by my noble friend Lord Tope.

However, I would like remind noble Lords that, under the Local Government Act 2000, which was enacted by the previous Government, there were two further triggers for a referendum. Section 35 of the 2000 Act provides that the Secretary of State may make provision enabling him or her, in circumstances set out in the regulations, to direct a local authority to hold a governance referendum. Section 36 of that Act provides that:

“The Secretary of State may by order make provision requiring every local authority, or every local authority falling within any description of authority specified in the order, to hold a referendum”,

on whether those authorities should operate a specific form of governance, which could include the mayoral form of governance. We are not on a unique path here. In fact, the previous Government used the power under Section 35 of the Act to compel the London Borough of Southwark, which I think the noble Lord mentioned, to hold a referendum on its governance model in January 2002. Indeed, this compulsion was in the form of a direction and was not even subject to parliamentary scrutiny, as this legislation is. The provisions in the Localism Act 2011 are therefore not new or confined to this Government, who are concentrating, as I have said, on just 12 cities—but that is now 11, following Leicester’s decision to adopt the mayoral form of government.

It has also been argued that there is no appetite for a mayor or, indeed, for a referendum but I would like to be clear that a case for a referendum under these circumstances is not about whether there is a clamour for one. It is about the governance of our big cities and their contribution to the country as a whole, and about how a mayor can help their city to perform even more strongly economically, socially and environmentally. That is why we believe, at the very least, that the people of the city should have the opportunity to address—and seriously address—the question of whether to have a mayor. The choice is theirs.

In the next few months, discussions and arguments will take place about the strengths and weaknesses of a mayoral model—I am saying “mayoral” because I am not sure that it is “mayoreal”, as I do not think there is an “e” in it. It is exactly this type of debate and discussion that points to the validity of an exercise in giving local people the opportunity to address the question of whether to move to that. Let us be clear; we see mayors as being better able to deliver growth and prosperity to our larger cities, something which I know that we all want.

During Grand Committee, and indeed today, noble Lords asked about the cost of a mayor against other governance structures, and about internal administrative costs and savings or allowances. As we made clear in the impact assessment, which I am sure noble Lords have all studied, and as I said in Committee, any costs or savings will depend on how much reorganisation a city council decides to undertake to accommodate the mayor. In order to do so, it may of course reallocate resources internally in a variety of ways. However, based on the 11 authorities which have adopted an elected mayor since 2000, there does not appear to be any substantial difference in the corporate and democratic core costs of having a mayor compared with a leader. Perhaps that underlines my reply to the noble Lord, Lord Grocott, last time. In the light of the current financial position, I am sure that any elected mayor would want to keep their costs and allowances down to ensure that they remain within budget.

I think it is correct that the version of the question which the noble Lord, Lord Grocott, was kind enough to tell the department that he would ask is not entirely the question that he asked in the Chamber. I am going to reply as on the first, if I may. He had asked what the costs were in the administration of the Greater London Council in its last year, if that is correct, and what the costs are now that we have a mayor and Assembly. The noble Lord is nodding his head, so I assume that is right. I can tell him that the GLC and GLA are not directly comparable in terms of function, particularly since information on the GLC is now historic. The combined component budget for the GLA—that is, the mayor and Assembly—for 2011-12 is £155.1 million. That is net of any specific grants of council tax and is the closest publicly available figure to an administrative budget that we can find. The noble Lord may wish to note that the current Mayor of London has in fact frozen council tax during his last four years in office, helped in part by this Government’s two-year council tax freeze. By contrast, under the previous Mayor of London the Greater London Authority's council tax levy almost trebled.

Finally, my honourable friend the Minister for Cities in the other place, Greg Clark, recently announced the Government's intention that the first election of a mayor will take place on 15 November of this year, fulfilling the Government's commitment that mayoral elections would take place shortly after any referendum which resulted in a yes vote. I am sure that there will be vigorous debate between 3 May and then if there are to be any elections.

We are clear as to why we believe that elected mayors would enhance the leadership of the 11 major cities, delivering greater growth and prosperity. We cannot compel an outcome but we can give local people the option of a change of governance. I am grateful to my noble friend Lord Shipley for his comments, and, indeed, to my noble friend Lord Tope. I hear what he says. It will be interesting to see the outcome.

In response to the amendment of the noble Lord, Lord Beecham, I simply add that these orders will give the people of the cities involved an opportunity through a referendum to consider and decide on their future governance without the cost falling on the cities themselves. I commend the orders to the House.

[Lord Beecham]

My Lords, I am grateful to noble Lords for what has been a lively debate. I am particularly grateful to my noble friends. To reassure my noble friend Lord Grocott, I think that three local authorities are seeking to undo the mischief of the mayoral system, as he and I and perhaps some of those would see it, although it remains to be seen what will happen in the referendums which will no doubt take place in those authorities.

I entirely share the view of the noble Lord, Lord Tope, about the original referendum in London. I opposed the proposition at the time, as, indeed, did Ken Livingstone, who was not at all keen on the idea until he was a candidate and was elected. However, such things happen in politics.

The Minister referred to the cost of the referendums and made the point again that that is being paid for by the Government. However, the cost of any subsequent elections will not be borne by the Government. They will be roughly the same figure and will fall on the relevant local authorities in November if the referendums lead to an affirmative vote. She also referred to Southwark, where a referendum was apparently imposed in 2002. That achieved the amazing turnout of 11 per cent and rejected the concept of having a mayor, which my noble friend Lord Grocott mentioned. That is surely evidence that there is no appetite for these elections, about which I spoke in moving the regret Motion.

However, the Minister did not respond to my question about what is to happen after this round of referendums. There are some 300 other councils. Is it the Government’s intention to roll this out across the country? What about the flagship Tory councils, such as Westminster and Wandsworth, which she apparently believes are less good performers than those with mayors? Those are Tory councils with substantial populations and responsibilities. Apparently, there is no proposal at the moment for referendums in those places. We have to learn eventually—

[Baroness Hanham]

With respect, I have answered that question. I drew noble Lords’ attention to the fact that the Localism Act allows for referendums to be held only in the 12 cities. There was no question of there being referendums elsewhere. However, as the noble Lord knows, they can be held, if that is what is required, under the Local Government Act 2000.

[Lord Beecham]

I am not sure that that is right. However, in any event, irrespective of whether or not the Government have the power to require referendums—I think that they do, but I may be wrong—what the noble Baroness has said constitutes a pretty substantial disparagement of the record of her political colleagues in significant authorities not unadjacent to where we are debating these matters, among others. I find it rather strange that apparently only mayoral authorities are capable of delivering regeneration and economic prosperity. The case that has been advanced is that you need a mayor to make that progress. Frankly, I do not accept that. However, in general there is a continuing lack of evidence in support of the mayoral system. I say with all due respect to the noble Baroness that affirmation is not evidence.

I turn to the noble Lord, Lord Shipley. He gives as a reason for supporting elected mayors that there are to be police commissioners. In November people will have the opportunity of buying one and getting one free because there will be two votes on the same day. But, of course, it will not be free; it will presumably be double the cost. If there is a mayoral referendum, that will cost roughly £250,000 and there will be separate costs for the police commissioner elections, which would also clock up to the same figure in individual authorities. If they are buying two, they will have to pay for two. They do not get one free.

Why the existence of a police commissioner should make it all the more desirable to have an elected mayor, I do not understand. But then few people understand why we should have police commissioners in the first place, including quite a lot of Members on the government Benches in this House and in the other place. Certainly it is not understood by the Prime Minister’s favourite police officer, Mr Bratton, whom he wanted to appoint as Metropolitan Police Commissioner, who could not understand why the American system should be imported into this country.

The noble Lord also welcomed the powers to be given to elected mayors but without explaining why only elected mayors should get them. In fact, it is not only elected mayors who are likely to get them because discussions are going on with other authorities. There is an interesting development around Greater Manchester with the Association of Greater Manchester Authorities, which is not predicated on the existence of a mayor either from Manchester or the area as a whole.

I must tease the noble Lord somewhat. It is only a few months since he and I were jointly discussing how we might campaign together against the idea of an elected mayor. This gives rise to the Paul Daniels question. Your Lordships will remember the magician and television personality Paul Daniels and his attractive young wife. She was asked: “What is it about balding millionaire Paul Daniels that persuaded you to marry him?”. I gently put to the noble Lord, “What is it Lord Shipley, recently appointed government adviser on cities, that has led you to change your mind about elected mayors?”.

[Lord Shipley]

I have read a lot of the research evidence in that context as a large amount of research has been done on the role of elected mayors. The noble Lord, Lord Grocott, said that a number of countries in Europe do not have our system and that you cannot build an elected mayoral system on to our democratic system of local government. I do not agree. I have read research produced by the noble Lord, Lord Adonis, and I have read the report of the noble Lord, Lord Heseltine, and Terry Leahy on Liverpool and Merseyside. There is also the Warwick commission on elected mayors. There is a body of research demonstrating that you could have stronger economic growth by having a stronger governance system. I remind the noble Lord, Lord Beecham, that he was talking to me about the importance of campaigning against elected mayors. I was not talking to him about that.

[Lord Beecham]

I do not recall the conversation being as one sided as that, but I shall allow the noble Lord to get away with his disavowal of those discussions. I was really only teasing him.

The issue is not who exercises the powers but what the powers are. They do not have to be conferred on a single individual with all the disadvantages to which I referred. Experience around the world is extremely variable. There are appointed mayors, as in Holland. The Labour Party, as I told the Grand Committee, once sent people to see the mayoral system in Holland without realising they were appointed rather than elected—not untypical. There are elected mayors. There is the Barcelona model. There are mayors in jail, as the noble Lord, Lord Tope, rightly said. There are mayors who are very successful. There are leaders of councils in both categories no doubt as well. The crucial thing about economic development is having the necessary powers and being able to co-operate with other authorities. In that context, of course, that opportunity has been rather dismantled by the abolition of regional development agencies and the lack of a proper system for ensuring co-operation.

However, we are where we are. I will certainly be campaigning against an elected mayor in my own authority. I shall be happy to quote the noble Lord, Lord Tope, in support of a bipartisan approach. I look forward to seeing the noble Baroness campaigning up and down the country in Conservative authorities—while we still have Conservative authorities—for referendums and elected mayors too. That is something she has not yet found time to do. Perhaps she has not really had the inclination, but maybe that will follow after May. I beg leave to withdraw the amendment.

Amendment withdrawn.

Motion agreed.

City of Wakefield (Mayoral Referendum) Order 2012

Monday 6th February 2012 Lords Chamber

City of Newcastle-upon-Tyne (Mayoral Referendum) Order 2012

City of Bristol (Mayoral Referendum) Order 2012

City of Bradford (Mayoral Referendum) Order 2012

City of Manchester (Mayoral Referendum) Order 2012

City of Sheffield (Mayoral Referendum) Order 2012

City of Nottingham (Mayoral Referendum) Order 2012

City of Leeds (Mayoral Referendum) Order 2012

City of Birmingham (Mayoral Referendum) Order 2012

City of Liverpool (Mayoral Referendum) Order 2012

City of Coventry (Mayoral Referendum) Order 2012

Motions to Approve

21:16

Moved By

[Baroness Hanham]

That the draft orders laid before the House on 5 December 2011 be approved.

Relevant documents: 36th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 17 January.

Motions agreed.

Protection of Freedoms Bill

Monday 6th February 2012 Lords Chamber

Report (2nd Day) (Continued)

21:16

Clause 64 : Restriction of scope of regulated activities: children

Amendment 50

Moved by

[Lord Bichard]

50: Clause 64, page 51, leave out lines 22 to 24

[Lord Bichard]

My Lords, I shall also speak to Amendments 53 and 54 in my name and in the name of the noble Baroness, Lady Royall, who has kindly allowed me to lead on this issue. Everyone in this House understands that one of the most difficult responsibilities for any Government is to manage risk, whether that risk is the security of our nation or the safety of the most vulnerable members of our society. It is one of the most difficult responsibilities because very few risks of any significance can be entirely eliminated, and decisions must therefore be made about what is an acceptable—sometimes an unavoidable—level of risk, and what action is proportionate in seeking to minimise that risk.

That is why I emphasised two things when I published my report on the deaths of Holly Wells and Jessica Chapman at the hands of Ian Huntley in Soham: first, that we cannot create a risk-free society; secondly, that the steps we take to minimise risk should be proportionate. For those reasons, I very much sympathise with and support the Government in seeking to strike the right balance in this very difficult area. Some reduction in the level of bureaucracy associated with vetting and barring is necessary and achievable, and I welcome the Government’s attempts to do so. However, I cannot agree that these clauses strike the right balance, even with the amendments tabled by the Minister or by other noble Lords in this House. That is why I am moving this amendment.

To be clear, these clauses relate to those who train, supervise, teach or instruct children outside a specified place, such as a school or a children’s home, or to those who are unpaid volunteers in whatever setting. In such circumstances, a person will not in future need to be CRB checked if they are under the supervision of another person who is engaging in a regulated activity and is therefore subject to CRB checks. We can, and probably will, debate how close or intensive that supervision should be. My contention, inconvenient though it may be for those of us who want to reduce the level of bureaucracy, is that no amount or quality of supervision can be sufficient to prevent someone developing a bond of trust with a child that he or she can then exploit at a time when they are free of that supervision. That is how grooming takes place.

The internet provides enhanced opportunities for the bond of trust, once established, to be inappropriately exploited. Therefore, the focus of our concerns should be not on the quality, intensity or nature of the supervision but on whether the person involved in training, instruction, teaching or supervision presents a risk to the child. They should therefore continue to be subject to checks that can help establish whether they are a risk to children. This will hold out some hope that we can prevent them gaining privileged access to children.

We know that checks cannot be foolproof, but surely we owe it to our children to take reasonable and quite simple steps to prevent those whom we know are a risk from gaining privileged access to children, even if they are subject to supervision. They must do that because children assume that adults who are trusted to offer guidance or instruction to them can be trusted—not just in limited circumstances such as the youth centre or playing field but wherever they are encountered. That is why supervision can never be enough, and why sometimes we have to place the safety of our children before our desire to minimise regulation and bureaucracy. I hope that that is what we will do this evening. If we do not, I fear that we will very quickly find that dangerous adults will realise that there are some settings and some ways in which it will be easier in future for them to gain access to vulnerable children. The people we are talking about are manipulative and clever. They will take advantage of those opportunities.

Finally, I hope that the Minister will at least be able to confirm this evening that the Act will do nothing to prevent organisations, with their local knowledge, making checks where they think they are required. For example, a school with its local knowledge will be able to carry on checking volunteers if it believes that that is necessary and good practice. I beg to move.

[The Lord Speaker (Baroness D'Souza)]

My Lords, I should advise the House that if Amendment 50 is agreed to, I cannot call Amendments 50A and 51 for reasons of pre-emption.

[Lord Rosser]

My Lords, the amendments in this group remove the distinction that the Bill makes between supervised and unsupervised work with children in regulated activities. The Bill would restrict the definition of roles that fall under “regulated activity” and would mean that employers would not be required to do CRB checks for many employees working with, and in close proximity to, children.

Furthermore, employers would not be able to access information on whether that individual had been barred from working with children and vulnerable adults. I note the further safeguards that the Government have introduced following Committee, which amend the definition of “supervised” as specifically that which is reasonable for the protection of the children concerned. That is a step forward and clarifies that organisations and employers in regulated activity are under a statutory duty to provide adequate supervision for the safety of those children. However, without the ability to access information as to whether an individual had been barred from working with children, it is not clear how the Government expect organisations to discharge such a responsibility adequately. They appear, in effect, to be placing the burden of responsibility wholly on to organisations for the protection of children while denying them access to key information.

Perhaps more seriously, the Government’s proposed amendment to the definition of supervision fails to recognise the serious issue of secondary access, which has been raised by numerous children’s charities and voluntary organisations. Many cases of child abuse do not occur in a place of regulated activity such as a school or sports club but in other unregulated, unsupervised places, as a result of the trust they forge with both the child and the parent through their position of authority and as a result of the assumption that that individual has been adequately vetted by the organisation. The case of Barry Bennell demonstrates just how such relationships can develop over many years, outside the supervision of a regulated activity. That individual received a long jail sentence for the serial abuse of young boys over a period of years when he was a scout for north-west and midlands junior football teams. He gained secondary access to players through his position and invited the boys to stay with him at his home or took them on tours to various places where he sexually abused them.

Revising and re-revising the definition of supervision through guidelines and amendments is not enough and will not stop men like that from gaining the trust of children and their parents by working without any checks in close and sustained contact with children. I know the Government are determined to remove what they regard as unnecessary regulation, but regulation is often about protecting and safeguarding people—often vulnerable people—from the potentially careless, irresponsible or criminal acts of others. The Government should think hard about the words of the noble Lord, Lord Bichard, and the potential consequences of the exemption of supervised workers and volunteers, which means that not all those working in regular contact with children and vulnerable adults are regulated.

[Lord Harris of Haringey]

It is unfortunate that we are debating these amendments at this time of night in a fairly sparse Chamber. I fear that in a few years time people will look back on this debate and say, “Why did Parliament not do more? Why was Parliament so happy to allow those changes to go through without further checks and cautions?”. I am therefore grateful to the noble Lord, Lord Bichard, for his amendments. He is quite right to say that a balance has to be struck and that no system will necessarily protect all children against abuse and against predators. However, the omission that is being created by this Bill is enormous. It is saying that if a volunteer, or someone working with children, is subject to supervision, they do not have to be checked at all. The reality is that parents send their child to a school or a club because they assume that it is a safe place. They assume, therefore, that the people who will be in contact with their child at that school, that club or that activity are also safe. I suspect that unless they pore over the details of our debate, which I am sure is not the case, they will assume that all those people are being checked against these registers and lists. Of course they will not be. They are volunteers or they are under the day-to-day supervision that is envisaged.

21:29

The reality is that children coming into contact with those adults will again assume that they are safe. The bond of trust, and it does not have to be a very strong bond, will be built up and created. When they see that individual elsewhere, perhaps in the town centre, loitering near their school or wherever it may be, they will assume that that person is as safe for them there as in the supervised context. That is why such an important gap is being created by this legislation. I know that the Government have moved significantly in terms of the amendment they have tabled about supervision being,

“as is reasonable in all the circumstances for the purpose of protecting any children concerned”.

I wonder whether that is really going to be sufficient. Is it really going to provide the protection that is needed? Is it, for example, going to ensure that the individuals concerned never offer their e-mail address, their Facebook page or their BlackBerry messenger identity to children? How can it do that if that offer is made not on the premises of the school or the club or outside the activity concerned? There will be no way of knowing whether that happens. However good the supervision may be inside that school, that club, or during the activities concerned, there will be no way of preventing that bond of trust being created and therefore the vulnerability of that child meeting that individual again outside that school, that club, or that activity. That is where the danger is going to be created.

As I said, most parents will assume that that school, that club or that activity is safe. They will assume that the people there, whom their child will encounter, will be safe, but the Government in this legislation are removing that security in saying, “We’re not guaranteeing that. All we’re guaranteeing is that physically while your child is in that environment, those people are supervised and therefore no abuse can take place”. The real, persistent danger of people who are extremely clever and extremely manipulative in getting access to children is not that they are going to do whatever they do in front of other adults or in the school or club or during the activity time. They will want to do it away from those settings, and they will do it because they have built up that bond of trust. I appeal to the Minister. It may be that he can give us enough reassurances about what,

“all the circumstances for the purpose of protecting any children concerned”,

will amount to, but I doubt whether those assurances can ever protect that trust. The only way that that can be achieved is by not drawing this distinction in this way but by accepting the amendment moved by the noble Lord, Lord Bichard.

[Baroness Walmsley]

My Lords, the noble Lord, Lord Harris of Haringey, has made some very good points. He asked whether in future people will ask why Parliament was happy that these measures were passed. I can say to the House that I am not happy that they go through unamended. I agree with everything that the noble Lord, Lord Bichard, said. Given that the Safeguarding Vulnerable Groups Act has not been implemented, what is the evidence that the measures in it are, in fact, disproportionate? As the noble Lord, Lord Harris, suggested, there is evidence that this is not what parents want. There is no great clamour from parents to have these measures changed.

The main point made by the noble Lord, Lord Bichard, was that the measures in the Bill take no account of secondary access. Young people develop a relationship of trust with all kinds of adults in the various settings that are covered by this Bill. Very often young people have the closest friendships not with the most senior people—the teachers, the heads—but with the technicians. In fact, in the school where I used to teach, the technician in the laboratory was the person who was most friendly with the pupils. People like this may not be covered by the Bill as it stands, and yet they have a very good opportunity to build up a relationship of trust with the children. As the noble Lord, Lord Harris of Haringey, has just quite rightly said, they are unlikely to misbehave on the premises, but rather build on that relationship of trust, on which they will rely in some other situation where the child is vulnerable. That is a risk that we cannot take.

[Baroness Howarth of Breckland]

My Lords, I support the amendment moved by the noble Lord, Lord Bichard. I want to concentrate on the people who are likely to abuse. I declare an interest as the vice-chair of the Lucy Faithfull Foundation, of which I have been a trustee for some 20 years. It is the organisation that pioneered the work in grooming and understanding the nature of abusers.

As the noble Lord, Lord Bichard, said, there is no doubt that these individuals will see this as open season on children—and I choose my words carefully. I have probably been involved with more of these men than most—some women, but mostly men—and so I know just how deceitful, clever, manipulative and strategic they are. They have a long view. These individuals do not just move in, see a child and think they are going to abuse them; they plan their moves carefully. There has been talk about building trust, but when a teacher can systematically abuse a child in a classroom, as in a recent case, noble Lords should take that as an example of what these kind of individuals can do, and then recognise that there are others right across the country who are thinking at this moment, “Will there be another opening for me to reach a child?”.

I have also worked with victims of that abuse. Imagine it was your son or daughter who had been buggered or raped by one of these people, who had gained their trust. The child or young person involved believes that they are implicated—the trust means that they carry the guilt. This is why often these youngsters will not come forward early, but if you talk to rape crisis lines or the people who deal with adult abusers, time after time they will tell you how the guilt kept them from telling. Research may show that if you talk to young people there is less of it, but many youngsters will not say that it is happening to them because they have that guilt.

As far as supervised access is concerned, anyone who has recently been to any of the youth provision that is around will know how hectic it is—properly so, for young people enjoying themselves—and that “supervision” is a strange word. In fact, you are just about maintaining the peace in some of these organisations. It is very easy for these individuals to make contact with the young people. As has already been said, modern technology makes it even easier.

I can see the Minister sitting there thinking, “We have heard all this before; we have our position”. But I would say to him that if you really care about our nation’s children and what happens to them in their adulthood after these incidents have happened, when they are unable to make relationships, when their marriages break down, when they have problems with their own children, when they end up in mental hospitals or in prison—if you look at any of those cohorts you will find that a lot of these youngsters have been abused—then you will find a way to absolutely ensure that it is not as loose as this. Anyone who is likely to abuse a child must be able to be checked so that certainty can be held by a parent and indeed by the child—and in some ways by the individual themselves because the abuser’s life is destroyed as well if they are not helped to not go through all of this. I hope the Minister will do so.

[Baroness Butler-Sloss]

My Lords, I hope that I do not sound a discordant note if I congratulate the Government on the fact that they have looked at CRB checks and come to the conclusion that they go too far and too often. It is very important to recognise that a large number of people are CRB checked again and again, far more frequently than is necessary. I must say that I am a governor of a boys’ school, which I will visit tomorrow, and I am CRB checked. I have never yet spoken to a single pupil without another adult present, and nor would I do so. It is quite unnecessary for governors to be checked, unless they have particular roles in the school.

However, there is a very difficult balance to achieve. The balance is at its critical point on the amendments now before the House. There is a special case about the situation with secondary access, with those who are not immediately in charge, but who are supervised. The noble Baroness, Lady Howarth, has perhaps unrivalled experience in this House. She manned Childline, for goodness’ sake. She has done so much to deal with victims, and through the Lucy Faithfull Foundation, she has done much to deal with perpetrators. What she has to say is of great importance.

I started listening to this debate, thinking “Well, actually, everybody’s going a bit over the top. Why shouldn’t we continue the excellent work the Government are doing, cutting through a great deal of red tape?”. Indeed, I hope that the Government will go on doing it. However, on this secondary access, as the noble Baroness, Lady Howarth, says, supervision is a loose word. The Government might think that there is some point in this amendment and in the following amendments with which we are dealing. However, for goodness’ sake do not get rid of the notion of cutting out a great deal of CRB checks that are totally unnecessary, or which if achieved, should not then be done again and again.

My main point is therefore, keep at it, Government, but just look at this amendment—there is a point to it.

[The Lord Bishop of Chichester]

My Lords, could I perhaps add to what the noble and learned Baroness has just said? Obviously, from these Benches we have a very particular concern in this matter. I agree entirely that there can be an excess of enthusiasm for CRB, and I have a number of colleagues who find themselves having three, four, five or even six CRB checks in relation to their different activities. This debases the currency, and is in danger of bringing the whole system into disrepute. However, as the noble and learned Baroness has said, supervision is a very loose expression.

In an organisation such as the Church—I nearly said “a voluntary association”, though theologically I do not believe that the Church is a voluntary association, but you understand what I mean—people may well be supervised in one area of activity, but not supervised in another. It is essential that we make sure that there is a comprehensive way of assessing the risk that particular individuals might pose to children or vulnerable adults in whatever area of their life they are engaged.

We are very well aware, and have very bitter experience to prove this, of the way in which those who are in apparently unregulated activities have the opportunity to groom people. They may have no direct contact with young people at all, but through their contact with their parents and the position they hold, they find ways of ingratiating themselves with families and with those who can give them access to young people. It therefore seems to me to be extraordinarily important that this question of supervision be tightened up, that while we avoid the danger of going over the top with CRB, we nevertheless make it absolutely clear that just because somebody is supervised in one area does not mean that they are totally safe in all other areas as well.

21:45

[The Minister of State, Home Office (Lord Henley)]

My Lords, the noble Lord, Lord Rosser, asked that I should take particular note of what the noble Lord, Lord Bichard, said in moving his amendment. I can give him, the House and the noble Lord, Lord Bichard, an assurance that I will do that. Our time goes back a long way to when I served with the noble Lord, Lord Bichard, in the former Department for Education and Employment and I hope that we both have a great deal of respect for each other.

I echo the introductory words of the noble Lord, Lord Bichard, when he said—this is important—that we cannot completely eliminate risk. We understand that. He also made the point that we must be proportionate in how we manage these matters and accept that we must try to reduce bureaucracy as and where we can. I was grateful for the wise words of the noble and learned Baroness, Lady Butler-Sloss, when she referred to the need to reduce the unnecessary CRB checks that were taking place.

It is important for us to remember that it is a question of balance. It is one that we can never get absolutely and completely right and we will probably have to go on arguing almost until the cows come home before we can resolve these matters. We should try to get it right, but the balance will be perceived differently between one individual and another.

By way of background, I reiterate that the Government believe, as do many outside bodies, that by scaling back the scope of regulated activity, and thus disclosure and the barring scheme, we can strike a better balance between the role of the state and that of employers or other organisations in protecting the vulnerable. Both have a role to play.

Clause 64 and the amendments to it provide that certain activity, which would be within the scope of regulated activity in relation to children when unsupervised, will not constitute regulated activity when it is subject to day-to-day supervision. An example was given to me—I think by my noble friend Lady Walmsley—of a technician in a school. He certainly would be covered. The amendments take us back to the wider scope of regulated activity as it existed under the previous Administration.

[Baroness Walmsley]

In a letter to the noble Baroness, Lady Randerson, of 1 February, the noble Lord suggested that an IT technician would not be regulated.

[Lord Henley]

The noble Baroness has caught me out and has got the letter that I wrote. I shall have to look again at the letter I sent to my noble friend and check that. I take back what I said but my understanding is that that is not the case. However, obviously I have got that wrong.

[Baroness Butler-Sloss]

Would the technician be covered?

[Lord Henley]

My Lords, if my letter—written with the great authority of myself—said that he would not, obviously he would not. However, my understanding—I have obviously got it wrong and I will have to look very carefully at that letter—is that he would be covered in a school. Perhaps I may look at the letter and then get back to my noble friend.

[Baroness Randerson]

To clarify the situation, my recollection of the Minister’s letter is that he would be covered in a school but not in a college.

[Lord Henley]

I am grateful to my noble friend for that correction. My noble friend Lady Stowell has just reminded me that there is a strong distinction between schools and FE colleges. For that reason I think it is very important. Oh, dear, I have to give way to the noble Lord, Lord Harris. Can he wait and let me finish my remarks? Calm down, as they say. I shall look very carefully at what I said. Obviously there is an important distinction between the two. I now give way to the noble Lord.

[Lord Harris of Haringey]

All I would ask is that when the noble Lord is looking very carefully to clarify that distinction he also looks at the situation of the large numbers of volunteer assistants in schools and volunteers used for out-of-school activities linked to the school—for example, to interest children in science, since we have been talking about technicians, but it could also be in art or other activities—to see whether they would be covered.

[Lord Henley]

Of course I will look at those matters and respond to my noble friends Lady Randerson and Lady Walmsley. I will even send a copy of that letter to the noble Lord, Lord Harris, in due course.

Let us return to the amendments because that is the important thing to do. I suspect this might now have to be the last amendment that we can deal with. In putting forward the amendment, the noble Lord has questioned whether we are confident that any supervision would be adequate to protect these children. In making the case for these amendments, reference has been made to the concept of secondary access. Some commentators imply a unique causal link between initial contact with the child and later contact elsewhere if the first is the place where most work is regulated activity. We do not accept that premise. Initial contact may happen where regulated activity takes place or it may happen in some other setting, such as a leisure centre, library, church or wherever. In our view, one type of setting does not offer significantly more help than any other for seeking contact with the same child later and elsewhere. Whatever the setting, we believe that parents have the primary responsibility for educating their child in how to react to an approach from any adult if it goes beyond that adult’s normal role. I give way to the noble Baroness.

[Baroness Howarth of Breckland]

Is the Minister seriously suggesting that, if there was a CRB check showing that an individual was dangerous to children, it would not be noted because this was supervised contact? That person could then contact a child through all the known mechanisms, which parents are totally unable to deal with, and abuse that child. Do the Government believe that it is acceptable that that should happen?

[Lord Henley]

My Lords, I accept the noble Baroness’s great experience in these matters. She is pointing to an occasion where a CRB check has been taken out on an individual and it becomes clear that they are not suitable to be employed in the school or wherever. In that case they are not going to be. So I do not quite see the point that she is making. Do I give way to the noble Baroness again? We must get this right.

[Baroness Howarth of Breckland]

I was saying that the Government do not take responsibility for secondary contact. The problem is that we are not necessarily talking about a school; we are talking about youth facilities where trust is built up between a young person and a child and where supervision may take place but not the kind of supervision that can have oversight at every moment. A CRB check might well show that one of the volunteers in that setting is dangerous. At the moment those CRB checks would be taken up. But the person concerned might make contact outside the primary setting. That at the moment is covered and children and young people are safe. Under the new situation it seems to me that they will not be safe.

[Lord Henley]

I do not accept that. Let me see if I can get this right. I think what the noble Baroness is trying to imply is that any number of checks will provide the safeguard. I do not think that safeguard would be provided by a CRB check in the particular case that she outlines because we have now moved on to some secondary setting. Does the noble Baroness follow me?

[Baroness Howarth of Breckland]

To clarify the point, if a CRB check has not been taken out because this is a supervised setting and the volunteers are supposed to be supervised, and the person is actually an abuser who could have been identified by a CRB check, under the new provisions will that person no longer be checked and therefore be able to build up a position of trust with a child which, in a secondary setting, they could abuse?

[Lord Henley]

Will the noble Baroness accept that there is also a role for the parents in terms of the guidance that they offer their children in that role as well? That was the point that I was trying to get over. I shall give way again.

[The Archbishop of York]

I go back to the Soham murders. Huntley happened to be a caretaker and these girls trusted him because he was the caretaker and they had seen him in school. On that day, there was no supervision. What happened to those girls? I would rather be on the side of stricter rules and in time try to water them down a bit than assume that, because someone is in a supervised role, they cannot do something worse when they are in an unsupervised role. The word “supervision” is very loose. Unless it is tightened up, people like me will still be left worrying about what happened to those girls. The caretaker was not in a supervised role at that particular point and that is when he did it.

[Lord Henley]

My Lords, on the contrary, it would be covered now, and following the changes that we are going to make it would still be covered. He was not covered by what was in place before and that is how he slipped through the net. That is why the noble Lord, Lord Bichard, was asked to set up his review into these matters and why the changes were made. The point that we are trying to make is that the changes have gone too far—this was the point also made by the noble and learned Baroness, Lady Butler-Sloss—in terms of the bureaucracy involved. As the noble Lord, Lord Bichard, put it, one can never totally eliminate risk and there has to be a degree of balance in how one deals with these matters. One must be proportionate. Merely to think that any number of checks imposed by the state is going to eliminate all risk is, I suspect, a wish too far. I give way to the noble Lord.

[Lord Harris of Haringey]

My Lords, I am grateful to the noble Lord. He said a few moments ago that there is a responsibility for parents in this. The difficulty is that the normal assumption of parents will be that every person whom their child comes into contact with in a club or other activity is safe. So presumably what the noble Lord is saying is that, in the guidance that will explain what all this means, parents will be provided with a list. It will say, “The following people whom your child comes into contact with have been checked and the others on the list have not been checked. Please advise your children not to have any contact outside this activity”. That is the implication of what the Minister is saying. Of course parents have a responsibility, but what the Government are doing is creating a situation in which parents will think that an environment is safe, but it is not because some individuals will not have been checked and those individuals may build up a relationship of trust with a child that they could choose to abuse at secondary contact.

[Lord Henley]

The noble Lord may say what he wishes, but he should not try to put words into my mouth, which is what he is trying to do. He is trying to suggest that we could tell all parents exactly who is safe and who is unsafe. Obviously we cannot do that. What we are trying to do is create a system that will provide the necessary safeguards but does not make parents feel that their children are automatically safe. Parents must still have the duty of looking after their children by warning them of potential dangers. They should not assume that merely because someone has been CRB-checked, merely because the process has been gone through and merely because every box has been ticked, which is what the noble Lord seems to suggest, all is safe.

[Lord Harris of Haringey]

My Lords—

[Lord Henley]

I am not going to give way to the noble Lord. I am going to get on with my speech. If the noble Lord will allow me to do so, I will continue.

These amendments seek to preserve what we believe is a disproportionate disclosure and barring scheme that covers the employees and volunteers far more than is actually necessary on this occasion for safeguarding purposes. In so doing, it subjects all the businesses, organisations and whatever to unnecessary red tape and discourages volunteering. The noble Lord, Lord Bichard, also made the important point of whether it would still be open to schools, organisations and businesses to continue to check volunteers and others. Of course they can, and we will ensure that they are still able to request the enhanced CRB certificate when necessary. We want to emphasise the importance of good sense and judgment by the managers on the ground when they look at this issue. That is at the heart of our proposal and it is why we think we have got the balance right. The noble Lord, Lord Bichard, is now looking somewhat quizzical but no doubt we can have further discussion about this between now and another stage.

The right thing is to get the correct balance in how one looks at these things. The noble Lord asked about schools and what they could do. This gives local managers the ability to determine these things flexibly and make extra checks. With the various interruptions I have had, I appreciate the slight muddle I got into earlier over the letter to my noble friend Lady Walmsley. There has been a degree of confusion here.

[Baroness Walmsley]

Will my noble friend give way?

[Lord Henley]

Can I just continue these matters? I hope that I have answered most of the points that the noble Lord put forward and that he will feel able to withdraw his amendment.

[Baroness Walmsley]

I am grateful to my noble friend. Could he just clarify one point? The volunteers we are talking about here are the volunteers who see children on a regular basis. That is correct, is it not?

[Lord Henley]

Correct.

[Baroness Walmsley]

I have one second point before my noble friend rises to answer. I accept that people who are not regulated can still be CRB-checked but the employer cannot get barring information. Unless the person has committed a crime and got on the police records in that way, the employer who voluntarily carries out a CRB check still does not know if that person has been barred. I understand that Sir Roger Singleton claims that 20 per cent of the people on the barred list have never been in contact with the police. Could my noble friend clarify that?

[Lord Henley]

May I write to my noble friend on that final point to make sure that I get it right? I will make sure that I look at my letter with the greatest care before sending it off to make sure that I have got it right. No doubt we will come back to this at a later stage. Meanwhile, I hope that I have satisfied the noble Lord, Lord Bichard, and that he is able to withdraw his amendment.

[Baroness Butler-Sloss]

Could I just put one question to the Minister? I preface it with the fact that I congratulated the Government—and still do—on the laudable effort to cut through a great deal of this red tape. I said that I share the concern right round the House about secondary access. I urge the Minister to go away and look at what we have said. It may be that some areas of secondary access could be differentiated from others—I do not know. He said that he might talk about it later. I urge him to do so.

[Lord Henley]

My Lords, if the noble and learned Baroness asks me to do that, then of course I will. It is obviously very important to get these things right—I want to get them right. Again, it is always a question of getting the balance right. That is what we are trying to do this evening. As I said, I suspect that the noble Lord may want to come back to this at a later stage. We will see. In the mean time, I hope that he is prepared to withdraw his amendment.

[Baroness Hamwee]

My Lords, at the risk of straining my noble friend’s patience—he has been very patient—he offered to come back on points that have arisen today. It is obvious that we are going to continue this subject with the next group of amendments, which we will come to next week. It would be extremely helpful if the noble Lord responded, as he has offered to do, not just before Third Reading but before we return to this next week. He may not wish to give an undertaking to that effect but I leave him with that thought. As the debate has gone on, I have made more and more notes on his Amendment 50A, which will be the first amendment next Wednesday.

[Lord Henley]

My Lords, I do not know whether it will be next Wednesday when we come back to this. I remind the House again that we are on Report not in Committee, and I think I have been interrupted and intervened upon more than one would expect. I will try to write to my noble friend before the next day on Report on this Bill. Whether it will be next week, I do not know.

[Lord Bichard]

My Lords, I very much welcome the tone of the Minister’s response. I respect his position entirely and we have known each other long enough for me to be able to say that. I particularly welcome his confirmation that schools, if I understand it right, and organisations that want to carry on with checks will be able to do so. I assume that that means that they will have access to the intelligence that those checks would normally disclose. That issue might well need to be looked at, but I very much welcome that assurance.

I welcome the sympathetic way in which the Minister has responded to the debate. However, let us be absolutely clear, this is not for me, or I think for other noble Lords who have spoken, a question of bureaucracy and whether we need less of it. We all agree that we need less of it. The report that I produced after Soham was not implemented in full. Checks, for example, are not routinely updated, which is why we have the bureaucracy that we have. I said specifically in the Soham report that I wanted a system that was proportionate, and I do not think that we have ever achieved that.

This is therefore not a question of whether we need to reduce bureaucracy or of supervision. The core of the argument and of my contention is that we should be concerned about risk and not allow people who are a risk to have privileged access to our children—and it is privileged access. As the noble Lord, Lord Harris, has said, we have to draw a distinction between access that someone has in a school or a club and a chance encounter. If people build up trust in a school, it is a much more powerful relationship than it would be through some serendipitous or irregular meeting and much more likely to lead to secondary access, and to secondary access being exploited. I do not think it fair to say that we should expect parents to be able to monitor those kinds of situations. Parents expect schools, clubs and centres to be places where they can leave their children with some confidence. That is why we need to make sure that in those places we do not have people who are a risk having access to our children.

I welcome the tone of the response, as I said, and the possibility of further discussions, but let us never underestimate the importance of this issue. I agree with the noble Lord, Lord Harris, that it is unfortunate—it is no one’s fault—that we had this debate without a larger number of noble Lords present, because this is a really important issue. Had I not heard the Minister’s assurances at the end about further discussions and about schools and other organisations being able to carry on with the checks as they do now, I would have had to withdraw the amendment—I have no alternative but to do so—with a heavy heart and a great deal of apprehension. The reassurances that we have received enable me to withdraw the amendment with more optimism, and I look forward to those further discussions. I beg leave to withdraw the amendment.

Amendment 50 withdrawn.

Consideration on Report adjourned.

House adjourned at 10.10 pm.