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Oral Answers to Questions
(12 years, 6 months ago)
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George Hollingbery (Meon Valley) (Con)
1. When he plans to bring forward his proposals for a single-tier state pension.
The Minister of State, Department for Work and Pensions (Steve Webb)
With permission, Mr Speaker, I will answer this question together with Questions 6 and 20.
I can confirm that, as was announced by the Chancellor in his Budget, we will present further details about the single-tier state pension in a White Paper later in the spring. Final decisions on the detailed implementation of the policy will be made in the next spending review.
George Hollingbery
A number of my constituents have contacted me expressing concern about the transition between the old and new systems—in particular, a Mr Theo Stellakis, whose questions the Minister has answered on a number of occasions. Can the Minister tell us how the transition will affect two people, one reaching the age of 65—or reaching pensionable age—on the day before the changes are implemented, and the other doing so the day after?
Steve Webb
I recall corresponding with Mr Stellakis on a number of occasions. What concerns him is the idea of a cliff edge before and after 2016. Let me clarify the position. When people receive state pensions of less than the full amount because they were contracted out, as I believe the hon. Gentleman’s constituent was, we will continue to take account of that after 2016, so there will not be the cliff edge that he envisages. We will have to phase out the arrangement over time, but in 2016 we will continue to take account of past contracting out.
Mr Speaker
Mr Simon Hughes? Not here. Jo Swinson? Not here.
The Department kindly informed me of the intended grouping at approximately 9.10 this morning. I hope, and say with some confidence that I trust, that it also informed the hon. Members in question. Neither of them is present, however, so I call Mr Julian Brazier.
Mr Julian Brazier (Canterbury) (Con)
Does my hon. Friend agree that the great advantage of his proposal is that it will help to restore incentives to save? Many people feel today that there are few such incentives in the benefits system.
Steve Webb
My hon. Friend is right. At present, the level of the basic state pension is so far below that of the means test that the first slice of savings is largely offset by means-tested benefits. My right hon. Friend the Chancellor has confirmed that whatever detailed proposition we present, the level of the single-tier pension will be clear of basic means-testing, and will therefore reward those who have saved rather than penalising them.
Mr Frank Field (Birkenhead) (Lab)
How long does the Minister think he will get away with these proposals? If a private company decided to do what he proposes to do—take contributions away from people who have paid over the years and give additional pensions to people who have not paid anything—the House would be jumping around with anger. Why does he think he can do that to people who have paid for a second state pension?
Steve Webb
If we were doing what the right hon. Gentleman says we are doing, I should be as outraged as he is. However, we are not doing that. Part of our proposition is that all contributions paid to date will be recognised in the new system. At the point of transition, if someone was heading for a pension of £150, £160 or £170 a week, that is what we would pay that person. [Interruption.] The right hon. Gentleman asks, from a sedentary position, where the money is coming from. We will present our costings in the White Paper, and he will see then that we will find it through less means-testing, among other things.
As for bringing people into the system, successive Governments have, for example, credited women who have spent a period at home with children. Although they have not paid cash, they have contributed, and that should be recognised. I think that that is right, and we are doing the same.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
In his Budget statement, the Chancellor told the House that moving to a single state pension would not cost more in any year than the current pension system. Further to the question from my right hon. Friend the Member for Birkenhead (Mr Field), may I ask whether the costs of the move will be borne partly by the more than 7 million workers in the private and public sectors who contribute to defined-benefit schemes and are currently contracted out?
Steve Webb
As the hon. Gentleman knows, when we introduce a single state pension there will be no more contracting out, so clearly those who were in contracted-out schemes will be contracted back in. However, the annually managed expenditure costs of the scheme are being met by the reduction in means-testing and paying of savings credit to new claimants only, and by an increase in de minimis provision, so that people who have spent only a few years in the country do not build up a state pension as they would currently do. Those are the two main ways of meeting the costs, but they will also be met through the non-accrual of additional second state pensions after 2016.
Julie Elliott (Sunderland Central) (Lab)
2. What assessment he has made of the effect of changes in funding for childcare support on unemployment among women.
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
I refer the hon. Lady so the answer that I gave the right hon. Member for East Ham (Stephen Timms) last Thursday. In case she was not able to read Hansard, however, I can tell her that the Government fully recognise the importance of child care in helping parents—not just mothers—to move into or stay in work. Through universal credit, we will for the first time extend help with child care costs to those who work for less than 16 hours a week, which will benefit 80,000 families who formerly had no entitlement to such support.
Julie Elliott
Is the Minister aware that since the cut in the child care element of benefit in October 2011, 44,000 people have stopped claiming? How many of those people does she think have simply left work because it does not pay to work any more?
Maria Miller
I think the hon. Lady is referring to some statistics about the reason why individuals are not in work, but I do not think she can quite draw the conclusion she has drawn that those particular individuals are out of work. As she will know, the Government are absolutely committed to making sure more women are able to move into work, which is perhaps why there are some 61,000 more women in work now than when Labour left office.
Mrs Helen Grant (Maidstone and The Weald) (Con)
Does the Minister agree that flexible working and shared parental leave will be very helpful in keeping women in work and child care costs down?
Maria Miller
My hon. Friend is right. We have put in place a package of measures, including flexible working, that will make all the difference. I should also remind her that we have doubled the number of two-year-olds getting free nursery care, and some 80,000 more families will be able to get child care support under universal credit.
Mel Stride (Central Devon) (Con)
3. What progress he has made on support packages for Remploy workers in stage one factories.
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
We will have a full and intensive package of support available for any employee affected by the Government’s announcement to accept the Sayce review recommendations. Remploy is currently within its 90-day consultation period, and once that has ended we will provide final and detailed information about the support disabled people will be given to move into mainstream employment.
Mel Stride
Like my hon. Friend, I believe it is far better for disabled people to have the opportunity to work in mainstream employment than in segregated factories. However, will she outline the reforms she is making to the access to work programme to make sure that, in this case, some of the most vulnerable people in our society are able to get back into work quickly?
Maria Miller
My hon. Friend is right to suggest that we feel that access to work is the measure that will, when expanded, do most to help disabled people into work, and we will be working with disabled people to ensure we get the measures right. We have already been able to announce an extra £15 million to support access to work over the spending period, thereby helping some 8,000 more disabled people into work.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
I have spoken to every single worker in the Wishaw Remploy factory, and all of them are in despair at the thought of losing their jobs. How many notes of interest have there been from potential bidders for the Wishaw factory?
Maria Miller
I thank the hon. Gentleman for that question. I am not privy to those sorts of commercial details, but I will be working as hard as I can—as, I am sure, will he—to ensure that there are more credible bids so that, if possible, factories such as the one in Wishaw, which supports some 20 disabled people, can continue. However, I also remind him that there are more than 11,000 disabled people in his constituency, and we are trying to ensure that the available money is helping all of them.
Mr Lee Scott (Ilford North) (Con)
Does my hon. Friend agree that it is very important to get young people with special needs into work, and does she welcome the scheme to be piloted in the borough of Redbridge in my constituency to get young people into work, and congratulate Interface and local businesses on playing their role in that?
Maria Miller
I commend the work my hon. Friend has been doing. He has done so much to support disabled people in his constituency get into work, and I look forward to continuing to follow the work he is doing.
Mrs Anne McGuire (Stirling) (Lab)
Remploy Ltd provides a defined benefit occupational pension scheme for its employees, but it is not eligible for pension protection funding by virtue of regulation 2(1)(d) of the Pension Protection Fund (Entry Rules) Regulations 2005. In the case of Remploy, the Secretary of State for Work and Pensions guarantees that the company’s assets are sufficient to meet its liabilities in the event of its winding-up. Under the Minister’s current proposals, will the Secretary of State continue to honour that commitment to current and retired Remploy employees?
Maria Miller
I am sure the right hon. Lady is aware of the fact that when this Government took office we inherited an enormous deficit in the Remploy pension fund. We are trying to sort that out. I can absolutely give her the undertaking that pensions that are in place will be fully protected, as she would expect.
Karl MᶜCartney (Lincoln) (Con)
4. What progress he has made on the youth contract; and if he will make a statement.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
18. What progress he has made on the youth contract; and if he will make a statement.
The Minister of State, Department for Work and Pensions (Chris Grayling)
The youth contract was successfully launched on 2 April 2012. It builds on existing support available through Jobcentre Plus and the Work programme, enabling young people who are unemployed to look for work, gain work experience and skills, and find real, lasting jobs.
Karl MᶜCartney
I thank the Minister for that illuminating answer. What assessment has been made of the impact of the work experience programme, which is being expanded under the youth contract?
Chris Grayling
We published the latest assessment of the effectiveness of the work experience scheme last week. It showed that the people who participated were 16% more likely to be off benefits 21 weeks after starting than a similar group who did not. It is worth stating that that is similar to the success rate of the future jobs fund, at a 20th of the cost.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Can my right hon. Friend tell the House how the youth contract is being received by employers across the country?
Chris Grayling
We have had enormously gratifying levels of support from employers for the youth contract, in terms of their willingness both to hire and to give apprenticeships to young people. In particular, I wish to pay tribute to all the companies, large and small, around this country, including in your constituency, Mr Speaker, and that of my hon. Friend, which are providing work experience opportunities for young people. We know that such opportunities give them a much better start in life than those who do not have that experience.
Sheila Gilmore (Edinburgh East) (Lab)
Press reports have suggested that the amount of extra support being given to young people might be as little as a text message. Will the Minister be specific about how much face-to-face advice and support young people are getting under this programme?
Chris Grayling
Much more than was the case under the previous Government. We do not apply a one-size-fits-all approach; we do not drag somebody in from a work experience placement or from a sector-based work academy to do an interview with them. However, we keep in contact with everyone every week, and when people are not working—when they are not in a work experience placement—we are now providing weekly contact with young people, as opposed to the fortnightly contact that was the case under the previous Government.
Karen Bradley (Staffordshire Moorlands) (Con)
One message coming from Staffordshire Moorlands Community and Voluntary Services, which runs the job club in Leek and Biddulph, in my constituency, is that it would like more employers to offer the youth contract. What can the Minister do to encourage more employers to get involved?
Chris Grayling
First, I pay tribute to the work being done in the Moorlands by the job clubs there, which is making a real difference to the prospects of the unemployed. What I say to my hon. Friend and to every hon. Member is that there is a real opportunity for each of us, individually, to approach local employers and encourage them to provide work experience opportunities. Tremendous work is already being done by colleagues in organising job fairs and organising different opportunities for young people who are looking for work. We can all play a part in this; it is a way in which this House can be a real activist centre in trying to help unemployed young people.
Stephen Timms (East Ham) (Lab)
It is a good thing that the youth contract has finally started. The Deputy Prime Minister says that he told the Cabinet in January last year that something needed to be done on youth unemployment. Why has it taken the Department for Work and Pensions 15 months to make something happen?
Chris Grayling
I have great respect for the right hon. Gentleman, but on this occasion he has plain got it wrong. Over the past 12 months, we have put in place support through the work experience scheme, and we have put in place the Work programme and sector-based work academies. We have also given greater flexibility to job centres to use funding that is available to them to provide tailored support for people in their community. We have been working hard to tackle a problem of youth unemployment that built up and was left behind as a dreadful legacy by the previous Government.
Stephen Timms
In the youth contract, the wage subsidies are in a national pot to be handed out on a first-come, first-served basis, so providers will be competing to hand them out as fast as possible, whether or not they are actually needed. Surely it would have been far better to target subsidies where they are needed. Why has the youth contract been so badly designed?
Chris Grayling
Once again, the right hon. Gentleman has just got it plain wrong. We are targeting this support at young people who are struggling to get into work—the long-term unemployed. I am talking mostly about those who have been out of work for more than nine months, but sometimes this will go to those who have come from the most difficult backgrounds and who have been out of work for three months. This money is targeted absolutely at where it is needed, and I believe that it will make a difference.
Elizabeth Truss (South West Norfolk) (Con)
5. What assessment he has made of the means by which universal credit will deliver funding for childcare.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
We have committed to invest some £2.3 billion in child care support in universal credit—that is £2 billion spent on the current system and an extra £300 million we secured in order to extend support to parents working less than 16 hours. That should give them what is really important—support in work across the hours—and it means that some 80,000 more families will get child care under universal credit.
Elizabeth Truss
In the Netherlands there is a system of agencies that train and regulate childminders. That country has twice the number of childminders per head than we do in the UK and its child care is also more affordable. Will the Secretary of State look into what happens in the Netherlands, with a view to getting better value for the universal credit money and getting more people into work as childminders?
Mr Duncan Smith
I take this opportunity to congratulate my hon. Friend on the work that she has been doing on this. She is quite right that it is an important area and it is one that I have asked my Department and the Department for Education to consider together. Under the previous Government, the number of childminders fell quite dramatically. In 1996, there were about 100,000 and in 2011 that number had fallen below 60,000. That is a huge issue. When we took over, we found that the costs of child care in the UK are about the fourth highest in the world. My hon. Friend is absolutely right that there are big issues that we need to deal with and try to resolve so that we can get more people back to work with the support that they need.
Andrew Bridgen (North West Leicestershire) (Con)
7. What progress he has made on implementing the recommendations of the Löfstedt report on health and safety regulation.
Mr David Ruffley (Bury St Edmunds) (Con)
8. What progress he has made on implementing the recommendations of the Löfstedt report on health and safety regulation.
The Minister of State, Department for Work and Pensions (Chris Grayling)
As my hon. Friends will recall, the Löfstedt review was published last November. We have already made good progress on implementing the report’s key recommendations. Consultation on the repeal or revocation of 21 legislative measures is already under way by the Health and Safety Executive and the Government intend to scrap, consolidate or improve 84% of health and safety regulations, greatly reducing the burdens on business and creating a clearer regulatory framework. In addition, two independent challenge panels have been established, the first to consider complaints from businesses about decisions made by HSE or local authority inspectors. The second will consider problems arising from non-regulators, such as insurance companies, health and safety consultants and employers, and to assess whether those decisions are proportionate and appropriate or whether they are wrong.
Mr Speaker
There is scope for a written ministerial statement, I would have thought.
Andrew Bridgen
It was one, Mr Speaker.
I welcome the launch of the mythbusters challenge panel, designed to give quick advice to people affected by ridiculous or disproportionate health and safety decisions. Will my right hon. Friend explain how that panel will work?
Chris Grayling
What we are trying to do is to give people who believe that a decision that has been taken is wrong—such as a decision to cancel an event or to take some other step that will impact on their lives—a chance to go quickly to the HSE and ask whether it is based on a true interpretation. We will seek to give them a clear view within two days of whether the decision is appropriate, so that they can challenge it locally.
Mr Ruffley
EU directives accounted for 94% of the cost of health and safety rules between 1998 and 2009. What discussions has the Minister had in Brussels about this completely unacceptable state of affairs and will he make it clear to Brussels officials that British businesses want less, not more, Brussels interference in the British workplace?
Chris Grayling
I wholeheartedly agree with my hon. Friend. The tide of bureaucracy we have seen in recent years has hindered business and affected employment. My view is that the EU should focus on measures that create jobs, rather than hindering the creation of jobs. That is of fundamental importance and I can assure him that I will fight that battle extremely vigorously in Brussels.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
The Health and Safety Executive has recently concluded its consultation on charging business for some of its services. Will it be able to keep the income brought in through that process or will it go straight into the Treasury?
Chris Grayling
The actual process is that all moneys raised in such a way go to the Treasury first, but financial agreement has been reached between the Treasury and the HSE, so that appropriate amounts of money are passed on to the HSE so that it can carry out that regime as intended.
Stuart Andrew (Pudsey) (Con)
9. What steps his Department is taking to support families and individuals facing multiple disadvantages.
Paul Maynard (Blackpool North and Cleveleys) (Con)
10. What steps his Department is taking to support families and individuals facing multiple disadvantages.
Jake Berry (Rossendale and Darwen) (Con)
13. What steps his Department is taking to support families and individuals facing multiple disadvantages.
Chris Skidmore (Kingswood) (Con)
21. What steps his Department is taking to support families and individuals facing multiple disadvantages.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
My Department’s reforms of the welfare system are to support people with difficulties entering the world of work. We have considered this matter extensively and are introducing support that is tailored to the needs of individuals to get them closer to employment and to tackle the entrenched worklessness at the heart of that. That includes £200 million of European social fund support for families with multiple problems. Local authorities play a critical role in the delivery of that support and we urge them to consider it to be as important as we do.
Stuart Andrew
I welcome the fact that about half the organisations involved in the delivery of this scheme are voluntary. Does my right hon. Friend agree that local charities are often best placed to provide the tailored and personalised support that such families need?
Mr Duncan Smith
It is true that voluntary sector organisations tend to deal with the whole person, rather than, like Government Departments and even sometimes local authorities, considering specific issues while forgetting that many of them knock on to each other. Such organisations have an important role to play. We should not ignore the fact that local authorities and Government Departments have to get their act together and make sure that when dealing with families with multiple problems, they talk to each other—always, there is a tendency for them not to do so. The good authorities hub up all the services around the family, which is at the centre, so Health, Work and Pensions, Education and all the Departments involved start to co-ordinate their activity, rather than spend all that money and get nowhere.
Paul Maynard
One of my wards, Claremont, is, according to the latest DCLG statistics, the fifth most deprived ward in the country, and I see daily the hurdles that families have to overcome to deal with some of the entrenched problems they face. I realise that no single agency can solve them, nor indeed can any single Government Department. Will the Secretary of State explain what he is doing with other Departments to ensure that all troubled families get a whole-of-Government approach, rather than a series of unconnected initiative-itises?
Mr Duncan Smith
My hon. Friend raises a good point. That is why the Prime Minister asked specifically that Louise Casey operate and head up a unit, reporting to my right hon. Friend the Secretary of State for Communities and Local Government, which is looking at the 120,000 worst affected, most difficult families. The idea, as I said earlier, is that, working with her, local authorities nominate the families. She wants them to hub up services to make sure that the pooled amount of money they get is spent on life-changing actions, not the tokenistic box-ticking that too often takes place.
Jake Berry
Does my right hon. Friend agree that the best way to escape the silo mentality in Government Departments and local authorities is to champion the voluntary sector in helping to support families in areas of multiple deprivation, such as those in my constituency? Home-Start is a fantastic charity that does such work in my area. Will he support it?
Mr Duncan Smith
Indeed I do. Home-Start is a remarkable charity and I am sure that right hon. and hon. Members on both sides of the House will give it their full support. It is worth bearing in mind that the families it deals with are very much in that category of worst and most troubled, with children growing up with parents who often have multiple issues themselves—sometimes serious drug addictions—and sometimes the money given to the families does not get down to where it benefits the children. It is worth reminding the House that 1.8 million children live in workless households, which gives them a difficult start in life.
Chris Skidmore
Some of the families and individuals facing multiple disadvantages are also family carers and young carers. What reassurance can the Secretary of State give the House that the Government will recognise those who have a caring role when introducing this fantastic support package?
Mr Duncan Smith
That is very much part of what we are trying to do and we will certainly recognise such roles. After all, we recognise fully that the effort given beyond the state multiplies many times the amount given by the state. Without that support—that voluntary and family work with people with difficulties—it would be almost impossible for the state to operate.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
Will the right hon. Gentleman join me in paying tribute to Lord Ashley, who was passionately committed to people with disabilities and pursued that work both in this House and in the other place? As a further tribute, will he ensure that, in his Department, the needs of people with hearing impairments are met as they should be able to expect?
Mr Duncan Smith
Indeed I will. The right hon. Gentleman reminds us that we should all pay tribute to a brilliant campaigner, if I dare say, and supporter of people with disabilities. All of us in this House and the other place know the effectiveness of his campaigns and stand in awe of someone who dedicated his life as he did to supporting vulnerable people.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
Yesterday, I was contacted by my constituent Edward Connolly. Edward and his wife have four children under 10, and Edward is recovering from prostate cancer. He works 16 hours a week and his employer cannot give him any more hours. He cannot access the Work programme, and he is losing £250 a month in tax credits. Can the Secretary of State tell me how he proposes to protect the Connolly family from the multiple disadvantages that have been introduced by this Government?
Mr Duncan Smith
If the hon. Gentleman wants to write to me directly about that, I am very happy to speak to the individual concerned and his family. Clearly, we want to do the best by them. That is the whole point of universal credit, which will benefit him enormously at 16 hours, and other hours too, whereas the present system, as the hon. Gentleman knows, targets only specific hours, rather than all the hours that people work. I am happy to deal with that case directly.
Mr Gerry Sutcliffe (Bradford South) (Lab)
May I add my condolences to the family of Lord Ashley, who was a tremendous worker in both Houses? The Minister is right: it is difficult to deal with families with multiple disadvantages. The difficulty is that that group is growing wider now because of people losing disability or other benefits. How will the Minister make sure that we maintain an up-to-date list of the families who have problems—a list that is going to grow?
Mr Duncan Smith
The hon. Gentleman is absolutely right. This is one of the big issues that we have to deal with. The reason why Louise Casey was asked to do this work was so that she, working with the local authorities, could start to map out where the most difficult families are in their areas. The key thing—I come back to this—is that it is ultimately local authorities that will and should know where these families are. There are some good examples. In Westminster the council has already hubbed up the issue and got organisations working with it; other local authorities are not so good. I am not here to name and blame, but I want local authorities to act with Louise Casey and the team to make sure we map those families, as the hon. Gentleman so rightly asks us to do.
Grahame M. Morris (Easington) (Lab)
The Secretary of State refers to Louise Casey, but my understanding is that Emma Harrison was paid £8.6 million in dividends last year from her company, A4e, which was appointed by the Prime Minister to head up that programme, but she has now resigned. Can the Secretary of State list her main achievements?
Mr Duncan Smith
Nice try, but the hon. Gentleman has got it wrong. Emma Harrison had nothing to do with the programme. Louise Casey has always been heading it up. I understand why he wants to elide the issues, but it is not true. Emma Harrison heads an organisation and was asked to give some advice, I understand, to 10 Downing street on other issues to do with families, but she has not controlled this issue at all. I hope the hon. Gentleman will try again some other time.
Katy Clark (North Ayrshire and Arran) (Lab)
11. How many blind people had their contributory employment and support allowance withdrawn in the last month for which figures are available.
The Minister of State, Department for Work and Pensions (Chris Grayling)
May I associate myself also with the remarks about Lord Ashley? He was one of my constituents. He and I worked together closely on the future of Epsom hospital. He was a great campaigner, as well as being a lovely man, and he will be much missed.
Assuming that the hon. Lady is talking about the changes in the Welfare Reform Act, the answer is that the change has not yet come into force so no one has had their benefit withdrawn yet.
Katy Clark
I thank the Minister for his answer and associate myself with the comments about Lord Ashley. A 56-year-old blind constituent came to my surgery a fortnight ago. He currently receives incapacity benefit but is very concerned about the Government’s proposals in relation to employment and support allowance. What can the Minister say to him and to the many other blind people who are worried that they will no longer be eligible for benefits under the Government’s proposals?
Chris Grayling
It is obviously difficult to be exact in an individual circumstance without knowing about the case, but my message to all those in receipt of benefits is that this change affects only those in the work-related activity group who have the potential to return to work and who have another means of income or who have savings in their household. It does not affect those who cannot work in the support group. It does not affect those who need the financial support through an income-based benefit. It affects only a minority of claimants who have the potential to return to work and have other means.
Duncan Hames (Chippenham) (LD)
I understand why the Minister would want assessments to consider people individually. However, the frameworks for those assessments need to be got right. Take, for example, how a blind person may fare in applying for the new personal independence payment. Will the Minister and his colleague look again at the weightings that will apply to the activities supported by this payment, since if someone with full sight loss is unlikely to qualify for the enhanced level of support, surely there would be a case for changing the weightings?
Chris Grayling
We are trying to get this right. We want a reform that produces a system that reflects genuine disability and does not provide support to those who do not need it. We are in the middle of a consultation about this. I ask my hon. Friend to take part in that consultation and to encourage his constituents who may be concerned about the reform to do so. We want to get it right.
Ian Paisley (North Antrim) (DUP)
What message has the Minister for my constituent, Annie McAlonan, who was on income support and incapacity benefit and has now been transferred to ESA but has failed the medical examination? This woman has breast cancer and ongoing medical difficulties associated with that condition, yet she is told that she is now fit for employment and has to seek employment. Is this not a classic case of welfare reform failing the most vulnerable?
Chris Grayling
It is under different leadership in Northern Ireland, but let us be absolutely clear that someone who is undergoing treatment for cancer and is having chemotherapy and radiotherapy would, in almost all cases, be in a support group and be receiving long-term care. I do not know enough about the circumstances of the hon. Gentleman’s constituent to be exactly certain where she is in the course of her treatment, but one of the changes that we made on coming to office was to improve support for cancer patients, not to reduce it.
Richard Fuller (Bedford) (Con)
A constituent visited me during the weekend to express her concerns about her husband who is blind and who has been informed that he will lose ESA in five months. He is taking a course to enable himself to get back into work, but it will take longer than five months to complete. What additional support may be provided to people in his situation to enable them to get back into work?
Chris Grayling
It very much depends on the circumstances of those concerned. The only people in danger of losing ESA as a result of those changes are those with other financial means in the household. It may be that they gain an additional entitlement to housing benefit and tax credits as a result of the changes, but we do not want to apply a one size fits all through the system to those who are blind or partially sighted. Some will need long-term support as a result of their conditions, and we will want to help others with long records in employment back into employment as quickly as possible.
Alex Cunningham (Stockton North) (Lab)
12. What support he plans to provide to young people who leave the Work programme without a job.
The Minister of State, Department for Work and Pensions (Chris Grayling)
The Work programme will help and is helping a significant number of people into lasting work. We are trialling two approaches to supporting the very long-term unemployed. Those trials will inform the development of a national programme of support from the summer of 2013 for those leaving the Work programme who still need to find employment and need further help.
Alex Cunningham
Young people deserve the offer of a real job if they are out of work long term. Why does not the Minister put in place Labour’s real jobs guarantee to ensure that young people have the opportunity of real jobs with training and time to search for a job, instead of dropping them like a stone?
Chris Grayling
We have to remember that the funding that underlies Labour party policy has already been announced for, I believe, nine different purposes of late. The programmes that we have put in place to help young people are much more cost-effective than the previous Government’s programmes, and much more affordable at a time when, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) reminded us, there is no money left, and they are making a real difference today.
Robert Halfon (Harlow) (Con)
Is not the best way to help these young people the investment in the hundreds of thousands of apprenticeships that give young people the skills they need?
Chris Grayling
I completely agree. My hon. Friend has done a first-rate job in promoting apprenticeships in his constituency and in Parliament. The apprenticeship dimension to the youth contract will be an important part of getting young people into work. This is a much better way forward to create long-term career opportunities for young people than the short-term placements out of the private sector that were the hallmark of the previous Government.
Mr David Lammy (Tottenham) (Lab)
Will the Minister share his concerns with the House about the rising level of long-term unemployment among London’s black youth, now three times the level of their white peers? Why is it that in Tottenham, 87% of Haringey’s young residents are not entitled to the wage incentive scheme under the youth contract? This is a real concern.
Chris Grayling
The only young unemployed people in Haringey not entitled to access funding under the youth contract are those who have not been out of work for very long. I genuinely share the hon. Gentleman’s concerns about young black unemployment, and that is one reason why we have created for Jobcentre Plus the flexible support fund, which enables our local offices to target support, as it is indeed doing in Haringey, at organisations such as the Tottenham Hotspur Foundation, which is working with young black people. The figures that the Labour party keeps putting forward about long-term youth unemployment are completely distorted by the fact that it used to hide people in the training allowance, which did not show up in the figures, and we no longer do that.
Guy Opperman (Hexham) (Con)
14. What steps Jobcentre Plus is taking to use the flexible support fund to support claimants into work.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
Referencing that last answer, we are all rather proud of the flexible support fund. It is a bold scheme that changes the direction of travel for jobcentres, which until 2011 worked in a static and rigid way. We are getting more flexibility, and the flexible support fund allows advisers to target money at individuals who may need support in getting to job interviews or buying the right kind of clothing, which is a big and bold change.
Guy Opperman
How has the flexible support fund actually provided funding to local partnerships to address those barriers to work, and will the Secretary of State write to me with specific evidence relating to the north-east?
Mr Duncan Smith
Indeed I will write to my hon. Friend. We have looked again at the flexible support fund and increased its flexibility and what advisers can do. Let me give some examples. General advisers in jobcentres can give up to £300—raised by over £100—to whatever specific area they think needs it. Senior operational managers can give up to £500, district managers can give up to £50,000, and work service directors can give up to £100,000, so the scope is there for them to do that flexibly. Many awards have been made, for example £985 for a class 1 HGV driver’s licence, so there is scope. I advise right hon. and hon. Members on both sides of the House to remind their young unemployed and other unemployed constituents that there is scope for them to be supported if they have difficulties.
Dr Julian Huppert (Cambridge) (LD)
15. What steps he is taking to ensure that pension funds adopt ethical and infrastructure investments.
The Minister of State, Department for Work and Pensions (Steve Webb)
If I may refer briefly to the grouping of earlier questions, Mr Speaker, I understand that we failed to notify my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) and my hon. Friend the Member for East Dunbartonshire (Jo Swinson) of the grouping and so apologise to them and to you.
Pension scheme trustees can consider companies’ environmental, social and governance practices. I am clear that trustees’ duties do not require them simply to maximise short-term investment returns. On infrastructure, the autumn statement set out details of a memorandum of understanding signed by the Government with two groups of UK pension funds to support additional investment in UK infrastructure.
Dr Huppert
I thank the Minister for his comments. He will be aware of the whole range of investments that give more than just short-term financial returns. For example, the Cambridge Retrofit programme, which was launched last week, will try to retrofit every building in Cambridge by 2050. However, how will he communicate with trustees and ensure that they are aware that their fiduciary duties do not prevent them from doing this, because many of them seem to be unaware of it?
Steve Webb
The Pensions Regulator communicates regularly with trustees and provides a trustee toolkit on its website that sets out their duties, but I think that auto-enrolment provides an opportunity for ethical investment. For example, the National Employment Savings Trust will specifically have an ethical fund for those who wish to invest in that way, and I hope that the schemes my hon. Friend refers to will seek to find investment through that sort of route.
Kerry McCarthy (Bristol East) (Lab)
16. What recent estimate he has made of the level of unemployment in Bristol.
The Minister of State, Department for Work and Pensions (Chris Grayling)
The latest estimate for the level of International Labour Organisation unemployment in Bristol, produced by the Office for National Statistics, is 21,400.
Kerry McCarthy
Does the Minister know whether the Prime Minister, on his visit to Bristol today, will take the time to meet some of those affected by long-term unemployment, which is up by 72% in the past year and a staggering 15,000% among young people, or was the hon. Member for Mid Bedfordshire (Nadine Dorries) correct when she described the Prime Minister and the Chancellor on the “Daily Politics” show today as
“two arrogant posh boys who show no remorse, no contrition, and no passion to want to understand the lives of others”?
Chris Grayling
I cannot speak for the Prime Minister, but I can say that I have been to Bristol recently and spoken with unemployed people there. I can also tell the hon. Lady that the figures she quotes are nonsense. She and her Labour colleagues keep forgetting the fact that they used to hide large numbers of unemployed people on a training allowance, which masked the true picture of long-term unemployment. I can absolutely assure her that genuine long-term unemployment in her constituency is not up by 72%.
Julian Smith (Skipton and Ripon) (Con)
17. What assessment he has made of the effectiveness of the new enterprise allowance.
The Minister of State, Department for Work and Pensions (Chris Grayling)
We have not yet made a formal assessment of the effectiveness of the NEA because it is too early to draw robust conclusions. We will of course carry out a proper impact analysis in due course. Participation in the scheme has so far proved popular; at the end of November last year, when the most recent figures were published, nearly 2,000 new businesses had been created, and many more have been created since then.
Julian Smith
I thank the Minister for that answer. Is it not correct that Yorkshire and the Humber has one of the highest take-ups of the scheme anywhere in the country? Has he thought about how we could increase the number of places on the scheme in order to allow people who want to set up a business to start much earlier?
Chris Grayling
Yorkshire and the Humber has indeed proved to be a pathfinder for the scheme. I am aware of how popular it is and am now looking at ways in which we could modify it in order to provide a greater focus on those areas where demand is high and see whether it makes sense to allow people to access it earlier.
Yvonne Fovargue (Makerfield) (Lab)
19. What assessment he has made of homeless people’s experiences of the work capability assessment.
The Minister of State, Department for Work and Pensions (Chris Grayling)
In recognition of the specific issues that homeless people encounter, information and advice related to the work capability assessment is provided through their Jobcentre Plus adviser when they collect their benefit payment via the personal issue payment process.
We have also been in touch with the Department for Communities and Local Government about homeless people. Through this, a meeting has been arranged between Professor Harrington, the work capability assessment independent reviewer, and several charities representing homeless people. We will consider fully any recommendations he makes.
Yvonne Fovargue
Upcoming research from Crisis shows that almost half the homeless people questioned felt that the health care professionals at their assessment had a bad or very bad understanding of homelessness and how it impacts on their lives. What steps are being taken to raise awareness among the health care professionals conducting that research and carrying out the work capability assessment?
Chris Grayling
I have invited all the charitable groups that have an interest in WCA matters to feel free to offer guidance and training sessions to our decision makers, and to share their views so that any appropriate elements can be included in our training programmes, but of course the best way of helping the homeless is to help them into employment—to use the income to find a home and to sort their lives out properly.
Damian Hinds (East Hampshire) (Con)
Given the prevalence of mental health issues among homeless people, is not Professor Harrington’s focus on such issues in his second report particularly important for them? Does the Minister also welcome the view of charities such as Homeless Link that Professor Harrington’s work is making a material difference to the operation of the work capability assessment?
Chris Grayling
It might be appropriate at this point to pay tribute to Professor Harrington for the work that he has carried out. Of all the things that I have heard over the past 18 months about the work capability assessment, one thing I have not heard is anyone criticise Professor Harrington, who has done his job excellently and independently.
Jo Swinson (East Dunbartonshire) (LD)
20. When he plans to bring forward his proposals for a single-tier state pension.
The Minister of State, Department for Work and Pensions (Steve Webb)
I apologise to my hon. Friend for not giving her a chance to ask her question earlier on.
We will shortly bring forward a White Paper on the single-tier pension, as my right hon. Friend the Chancellor of the Exchequer announced.
Jo Swinson
I thank my hon. Friend for that reply. He and I have long campaigned for a citizen’s pension, to be paid at a decent level to all pensioners, without the need for bureaucratic means-testing and, of course, the problems that that creates, with many pensioners losing out. I welcome the plans for a single-tier pension from 2016. Will my hon. Friend confirm that, although the current proposals apply only to new pensions, there is nothing to stop a future extension to all pensioners if the money can be found?
Steve Webb
Obviously, we will not write the law in a way that prevents all pensioners from being brought within its scope, and I am sure my hon. Friend will press for that. We are aware that, under our proposals, getting on for more than 80%, and eventually 90%, of pensioners will qualify for the pension, so it will have many of the features of a citizen’s pension but be based on 30 years of contributions or credits.
Mr Speaker
Well, that exchange was worth waiting for, I am sure the House will agree. I thank both Members.
Topical Questions
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
In recent weeks we have published new figures on the incapacity benefit reassessment programme, so I thought it would be helpful to the House if I just reminded Members of the figures. Throughout Great Britain as a whole, some 37% of people have been found fit for work, with another 34% expected to be able to work in the future, with the right support. These figures show that the programme is working.
Tom Greatrex
Does any Minister think it appropriate that, while undertaking a contract on behalf of the Secretary of State’s Department, Atos Healthcare, first, published misleading information on its website; secondly, refused to comply with the Advertising Standards Authority inquiry into that information; and, thirdly, failed to correct it until alerted to do so by the media last week—several weeks after the compliance notice was issued? Do they think that that is acceptable for an agency working on behalf of the Government?
The Minister of State, Department for Work and Pensions (Chris Grayling)
We always discuss issues such as that one very carefully with our subcontractors, but I do not believe that it affects the professionalism of the health care professionals who are carrying out the work on our behalf. Many are doing a very difficult job in challenging circumstances—but doing the best for people who claim incapacity benefit and who could have a better future.
Simon Hughes (Bermondsey and Old Southwark) (LD)
Following earlier questions on pensions, will the Minister put on record the fact that the Budget and the Government’s decisions are the best news ever for pensioners now, as well as for pensioners in the future? The press and the Opposition appear to have somewhat missed the point.
The Minister of State, Department for Work and Pensions (Steve Webb)
My right hon. Friend is aware that, as Pensions Minister, I am responsible for people who are currently pensioners and for everyone who will be a pensioner, which is everybody, and we have good news for today’s pensioners: not only the highest-ever cash increase but, more than that, year-on-year above-inflation increases whenever earnings grow more rapidly—and, incidentally, an increase in the age-related personal allowance this April of more than £500.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
May I associate myself with the words of tribute to Lord Ashley, who was a formidable champion of the people whom we came into politics to serve? He will be sorely missed in both Houses, but his inspiration will live on.
Two years before the election, the Prime Minister gave the pensioners’ pledge:
“The Government I lead will make sure that older and retired people are treated with dignity and given the quality of life they deserve.”
Will the Secretary of State therefore confirm, as the Institute for Fiscal Studies has said, that pensioners will be £315 a year worse off, thanks to the granny tax?
Steve Webb
The changes announced by the Chancellor in the Budget will increase the age-related personal allowance this April by more than £500 and leave it at £10,500 for 65 to 74-year-olds while the allowance for those of working age is levelled up to that figure, at which point all people will have a substantial tax-free allowance that will be increased thereafter.
Mr Byrne
This is why pensioners on the doorstep are so cross—they know that they have been hoodwinked by the Government. This measure was dressed up in the Budget as a simplification. I think the Secretary of State detains his barbers for about as long as I do. Does he go along and ask for his hair to be “simplified”? I do not think so. A cut is a cut. On top of granny tax 1, we now learn of granny tax 2. Will the Minister admit that from 2014 pensioners will face a further cut of £900, and apologise for trying to keep it secret?
Steve Webb
I do not recognise the figures that the right hon. Gentleman quotes, but I assure him that what matters most to the pensioners to whom I speak is a decent state pension. After 30 years of the pension declining in value relative to earnings, from now on it will rise every year by whatever is the highest of earnings, prices or 2.5%. There will be a guaranteed increase every year that matches inflation or is above inflation. That is something that pensioners value.
Mr Mark Spencer (Sherwood) (Con)
T4. Does the Minister recognise that traditionally the Child Support Agency has targeted fathers who contribute willingly, rather than chase the more challenging maintenance evaders?
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
I understand that the current system feels unfair to many people. However, I reassure my hon. Friend that we do not target people in that way. We want to ensure that more people receive positive financial support. The tragic fact is that only half of children living in separated families currently have a positive financial arrangement in place.
Ann McKechin (Glasgow North) (Lab)
T2. The Scottish Trades Union Congress reported today that the number of young Scots who are in receipt of unemployment benefit for more than 12 months has increased by 1,100% since 2007. Will the Minister confirm that those 5,000-plus young people will not be abandoned? What guarantee will he give about how many of them will be in work by this time next year?
Chris Grayling
Once again, it is the same story from the Labour party and its supporters. Let us be clear that what has changed in long-term unemployment since we took office is that we no longer hide young unemployed people—or, indeed, older unemployed people—on a training allowance, which distorted the figures by as much as 30,000 each month. That is why long-term youth unemployment and unemployment appear to be rising. It has nothing to do with economic change and everything to do with how disingenuous the previous Government were.
Amber Rudd (Hastings and Rye) (Con)
T5. The Child Support Agency’s office for London and the south-east is in Hastings. It employs nearly 1,000 to do an often difficult and challenging job. When the Minister brings forward her reform plans, I ask her to ensure that this important service is not relocated, because a great deal of local expertise has been built up.
Maria Miller
I thank my hon. Friend for giving me the opportunity to pay tribute to the excellent work of the Child Support Agency staff in Hastings. I reassure her that the changes that we are planning will have a negligible effect on delivery staff.
Julie Hilling (Bolton West) (Lab)
T3. After the hard-fought and successful campaign to get the higher rate of the mobility component for blind and partially sighted people under disability living allowance, will the Minister reassure me that no blind people will be disadvantaged by the transition to the personal independence payment and that such people will continue to receive the higher rate of the mobility component?
Maria Miller
The hon. Lady will know that we are in the process of finalising the assessment criteria for the new personal independence payment. I am sure that she will be reassured to know that I have met a number of organisations that represent blind people. I remind her that with the personal independence payment, we are trying to recognise the barriers that people face to living an independent life, and not simply to categorise them based on their impairment.
Laura Sandys (South Thanet) (Con)
T9. I thank the Minister for agreeing to come to a jobs fair in Thanet in June. I am sure that he shares everybody else’s pleasure at seeing that there has been a small drop in youth unemployment. What more can I tell the young people of Thanet that we are doing to help them get the jobs that will be advertised at the jobs fair?
Chris Grayling
I am sure we were all pleased to see the small fall in youth unemployment announced last week, but there is a long way to go in tackling what is a big challenge for this country. I hope that the employers of Thanet will respond to the wage subsidies in the youth contract by giving young unemployed British people their first step on to the ladder of employment. That is what we all want to happen.
Grahame M. Morris (Easington) (Lab)
T6. We have heard a lot of talk from the Government about creating an information revolution in Whitehall, but with the Secretary of State’s Department leading a charge by outsourcing many of its responsibilities, will the same measures of transparency apply to private sector companies such as A4e and Atos as currently apply to public sector bodies?
Mr Duncan Smith
First, with respect to the hon. Gentleman, I do not think that this Government, or this Department under its current management, need to take any lessons from one of the most secret Governments in history. If he would like to look on our website, he will see that we publish a huge amount of data on all the contracts that we let, down to a very low level. He can find out more information now, as a direct result of what we do. Obviously, private contracts are for private people.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Would the Minister like to clarify his earlier remarks about partially sighted people not being means-tested and judged on their savings but being awarded benefit on the basis of their need?
Chris Grayling
That is of course our approach right across ESA. We do not apply a one-size-fits-all approach. Those with the potential to return to work will receive help to do so, those who will be able to return to work in due course will get support and guidance along that journey, and those who cannot be expected to work will receive long-term unconditional support in the support group. That is absolutely how the Government should seek to work.
John McDonnell (Hayes and Harlington) (Lab)
T7. Members throughout the House, including Ministers, have emphasised the importance of the care that must be taken in dealing with people with mental health problems as they approach their medical and capability assessments, particularly if they lose benefits. Some anecdotal evidence is emerging of suicides taking place among people who have lost benefits. Have the Government explored any of the coroners’ reports of cases in which there has been a reference to the loss of benefits as a contributory factor, and what lessons have been learned?
Chris Grayling
We will always examine something like that very carefully indeed when it happens. So far, my experience is that the stories are usually much more complicated, but that does not mean we are not doing the right thing. I passionately believe that we should help such people, particularly those with mental health problems. I have met people who have been out of work for years and years with chronic depression, but whom we are now beginning to help back into work. We have to be careful, and we examine such situations carefully when they arise.
Jessica Lee (Erewash) (Con)
Will my hon. Friend join me in congratulating Erewash credit union on its participation in the back to work scheme? A young person I met on Friday who is participating in the scheme is extremely enthusiastic about their prospects and future and now feels ready for the next step back to work.
Steve Webb
I pay tribute to the credit union in my hon. Friend’s constituency. As she knows, the Department has given credit unions significant financial support. We have recently received a report on their future development and expansion, and we hope to bring forward proposals shortly to give them a greater role and an extended way of helping people on low incomes, through both finance and initiatives such as she describes.
Heidi Alexander (Lewisham East) (Lab)
Last Friday I attended Lewisham jobcentre and was told that between 1,800 and 2,000 people visit it every day. What extra resources are being provided to jobcentres in areas of acute unemployment to help people access work?
Chris Grayling
Most recently, we have increased the number of youth advisers so that we have additional support in places such as Lewisham to enhance our work to help unemployed young people get into work. I hope that those advisers will make a difference to young people’s prospects.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Is the number of people in receipt of out-of-work benefit higher or lower now than it was in May 2010?
Chris Grayling
I am very pleased to tell the House that since May 2010, the total number of people in this country on out-of-work benefits has fallen by 45,000.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Is the Minister familiar with the recent freedom of information request that revealed that 1,100 employment support allowance claimants died between January and August last year after being assessed as fit for work? What steps is he taking to investigate this rather large number of deaths, and how come so many of those people were assessed as fit for work?
Chris Grayling
I am afraid that we cannot simply extrapolate one of those facts from the other. Sadly, we are all mortal, and circumstances arise that we do not expect. As I said to the hon. Member for Hayes and Harlington (John McDonnell), we always look very carefully at individual cases, but the Government are doing the right thing in trying to provide support to help people to get back into work. The worst thing for their health and well-being is for them to be on benefits for the rest of their lives if they do not need to be.
Mrs Helen Grant (Maidstone and The Weald) (Con)
What discussions has the Minister had with the Department for Communities and Local Government on council tenants starting a business in their homes?
Mr Duncan Smith
We discuss such matters at all times with the Department for Communities and Local Government. I promise my hon. Friend I will ensure that I raise that one.
May I take this opportunity to say to my opposite number, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), that I wish him the very best of luck if he heads off to be mayor? I have thought of a great slogan: “Byrne for Birmingham: not just 9 to 5, but also a ‘night mayor’.”
Petition
Valerie Vaz (Walsall South) (Lab)
I rise to present a petition from the residents of Walsall South.
The petition states:
The Petition of users of Darlaston Road zebra crossing, near Hough Road in Pleck, Walsall,
Declares that the Petitioners are concerned that there have been a number of accidents and near misses on the Darlaston Road zebra crossing near Hough Road in Pleck, Walsall.
The Petitioners therefore request that the House of Commons urges the Government to call on Walsall Borough Council to immediately install a signal-controlled crossing in place of the existing zebra crossing on Darlaston Road, near Hough Road in Pleck, Walsall, before any further serious incidents occur.
And the Petitioners remain, etc.
[P001020]
IMF
(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr George Osborne)
Let me update the House on this weekend’s G20 and International Monetary Fund spring meetings and the Government’s decision to make a loan of just under £10 billion, or $15 billion, to boost the IMF’s reserves.
As I have said to the House on many occasions, Britain has always been one of the IMF’s largest shareholders and biggest supporters. We helped to create the institution over 60 years ago, and our predecessors determined that countries would never again turn their backs on the world’s problems, but instead come together to solve them. In every single decade since the 1940s, the UK has been part of global agreements to increase the IMF’s resources. Why has every single post-war British Government done that? It is because they recognised what we again recognise today: that Britain, as a proud, open, trading nation, has a huge national interest in a strong IMF as a force for stability and free markets; and that Britain exerts its influence in the world partly through the institutions it helped to create, such as the IMF, where we remain one of the few countries to have our own seat on the board.
That was the case 60 years ago when the world recovered from the ravages of a global conflict borne out of depression and disastrous economic nationalism. It was the case when Latin America struggled in the ’80s and the Asian economies collapsed in the ’90s. It was the case at the London G20 summit, when Britain’s economy was at the centre of the storm. It remains the case today, as we cope with the biggest debt crisis of any of our lifetimes, and when the epicentre of the problem now lies on our doorstep in Europe and with some of our largest trading partners, including Ireland, the home of banks deeply connected to our own banking system.
We will not turn our back on the IMF, or turn our back on the world. That would be a betrayal of our country’s interest and our country’s identity, and incidentally, it would at the same time be a betrayal of my party’s history.
It is because of the decisive action this Government have taken to deal with our own debts that we can now be part of the solution and no longer part of the problem. Let us not forget that in 1976 under a Labour Government this country itself needed an IMF bail-out. If we had a Labour Government today, their Chancellor could very well be explaining to the House the heavy terms of a loan from the IMF, not a loan to it. Instead, we have taken action that means Britain is a safe haven in the storm—action that means interest payments are lower for families, businesses and the taxpayers who are funding the huge national debt that has been racked up in recent years.
However, in the modern, global economy, we simply cannot act alone. At the annual IMF meetings last autumn, there was a real sense that the world economy was staring over another precipice. The feeling at these spring meetings was that we had stepped back from the brink but that the risks remained. Markets are calmer, banks are finding funding and signs of confidence are emerging—figures last week in Britain showed unemployment falling and retail sales up, and last week the IMF revised up a little its global and UK growth forecasts—but, as the IMF rightly warns us all, the global economy remains very fragile. We see that in the Spanish bond spreads and the disappointment over the latest American jobs data.
In such uncertain times, we want the IMF to be able to cope with whatever is thrown at it—the worst-case scenario—instead of hoping for the best, which is why, for almost a year now, I have said that we would be willing to consider the case for additional resources for the IMF. I set out in January four conditions for British support. The first was that the IMF should only support countries, not currencies, and that is now clearly expressed in the communiqué issued this weekend. The second condition was that full IMF rigour and conditionality would apply to any future programmes. That too was agreed explicitly in Washington this weekend. Britain led the way in making it clear that that conditionality would not be restricted to a country’s fiscal policies but would also include structural reforms to increase growth.
The third condition was that we needed to see more resources from the eurozone for its own firewall—we had to see the colour of its money first. The IMF cannot be a substitute for action by the eurozone to stand behind its own currency. In December, the European Central Bank began its massive long-term liquidity operation, which we publicly called for and privately urged. Last month, the eurozone member states added €200 billion to their firewall, bringing the total to more than €700 billion. May I add that the Government have not added a single pound of British taxpayers’ money to those eurozone funds, having got us out of the commitments the last Labour Government sucked us into. Now, €700 billion is not as much as some wanted or what the IMF itself asked for, so, as I will explain, the size of additional IMF resources from non-eurozone countries is proportionate to the eurozone’s action.
The last condition I set was that other G20 countries had to make contributions—that Britain would not act alone. This weekend, we were very far from being alone. The eurozone provided an extra $200 billion to the IMF. France, which has the same shareholding as Britain, contributed $40 billion, and Germany, $55 billion. If it had just been the eurozone, Britain would not have contributed, but it was not: Japan contributed $60 billion; South Korea, $15 billion; Mexico and Singapore took part; and Australia, with a population one third our size and 10,000 miles from Europe, contributed $7 billion, with the support of all the main parties there.
European countries not in the eurozone have also committed loans—from Sweden and Denmark, to Switzerland and Norway, which are not even in the EU. Some have suggested that the BRIC counties did not contribute. That is not the case. India, Russia, and—yes—China have all made firm commitments to contribute resources and will set out the exact sums in the coming weeks. [Hon. Members: “How much?”] We will see in the next few weeks. The total of the expected commitments is set to be more than $430 billion.
It is true that America has not offered a loan, and mainly for that reason nor has Canada, but then America did not offer a bilateral loan at the London G20 summit. The reason the US Treasury Secretary gives is clear. The US, because it is the global reserve currency, has in the last few months offered dollar swap lines to the eurozone with outstanding balances peaking at more than $85 billion, which far exceeds any contribution anyone else has made. Its exposure is direct to the eurozone. What we and others have offered is something very different: a commitment to lend to the IMF should it need the resources.
In Britain’s case, that commitment is denominated in the IMF currency of special drawing rights and equates to just under £10 billion—about $15 billion. That is within the mandate authorised by the House of Commons and voted on twice in the past 18 months. As I set out to the Select Committee on the Treasury earlier this year, if I had felt that Britain should have contributed more, I would have asked Parliament for the authority to make a larger loan. However, $15 billion is in line with Britain’s quota share at the IMF—it is the same as previous loans we have made—and our loan is available only once the quota reform deal put together in 2010 is ratified by the required majorities of the countries that signed up to it. Our £10 billion is therefore proportionate to our shareholding and similar to our previous contributions.
Let me end by saying this. No one believes that a well-funded IMF on its own is the solution to the problems of the eurozone. Eurozone countries need to make painful adjustments to their public finances and external deficits. It is a difficult path that they have to walk, although the new Governments in the likes of Ireland, Portugal, Spain and Italy are walking it. However, that is the logic of the single currency that they are all committed to. That is why I am opposed to British membership of the euro, why I shut down the euro preparations unit in the Treasury and why under this Government Britain will never relinquish the pound.
However, opposition to our membership of the euro and the problems in the eurozone should not be a reason to turn our back on the IMF; if anything, they make the case for a stronger IMF. I know that when we offer our loan to the IMF, it is presented by some as British taxpayers simply handing over money to the euro—supposedly, money that we will never get back and which could have been used on public spending here at home—but just because it makes for an easy newspaper headline does not make it true. Lending to the IMF is a loan to the most credit-worthy institution in the world. It is a loan that comes with interest. The IMF has preferred creditor status: it gets paid back even when other creditors are not. It is true that, very occasionally, countries have defaulted on their obligations; but if eventually they want to regain access to international funding, they have to pay back debts to the fund, and in the end they all do. The IMF is designed to manage this. It lays down tough conditions, has large precautionary balances and sits on large gold reserves. That is why no country has ever lost money lending to the IMF in its 67-year history.
Let me be clear also that not a penny less will be spent on public services; nor will a penny more be levied in tax to fund our commitment to the IMF. Were the IMF to call for financing from the UK, we would exchange some of our foreign currency reserve for a claim on the IMF—in other words, we exchange a claim on one safe asset for another. That is why no one includes IMF loans in their calculations of Britain’s net debt or deficit, and nor do our sterling financing plans for the official reserves need to be changed. When it comes to lending to the IMF, therefore, I know of no other mechanism that is so clearly in the British and global interest, no other form of insurance against the world’s risks that has such potential benefits, and no other loan that can be provided with such low risks and which comes with interest.
At home, this Government have confronted head-on the debt problem that we inherited from the last Government; abroad, we support the international effort for global stability. We are guided by Britain’s national interest. Britain does not walk away from its problems; it confronts them. It does not turn its back on the world; it helps to lead the world. We will do everything abroad to support the IMF and everything at home to avoid a bail-out from the IMF. Keeping the UK safe is the overriding mission of this Government.
Ed Balls (Morley and Outwood) (Lab/Co-op)
In thanking the Chancellor for advance sight of his statement today, let me begin by setting out three propositions on which I believe all parts of the House can agree. First, the ongoing crisis in the euro area is a major threat to the stability of the European and global economies, including Britain’s. Secondly, the International Monetary Fund is a hugely respected organisation that must be properly funded if it is to play its proper role. Thirdly, solving the euro crisis and ensuring that the IMF is properly resourced are both firmly in the British national interest.
However, the agreement that the Chancellor signed up to at the weekend fails on all three counts. It will not speed up, but further delay the decisive action we need from European leaders to kick-start growth and empower the European Central Bank to act. If those extra resources were to result in the IMF stepping in to act when the European Central Bank would not, that would risk weakening the IMF as an institution. Furthermore, in those circumstances, allowing eurozone leaders further room for delay and exposing the IMF and British taxpayers’ money when rich eurozone countries will not act would categorically not be in the British national interest.
Members across the House will find it baffling that that is precisely the view that the Chancellor took, just a few weeks and months ago. Following the G20 summit in October, when euro area leaders tried and failed to get international agreement on IMF resources to bail out the euro, he told the House:
“But the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]
He went further in February when he told Sky:
“We are prepared to consider IMF resources but only once we see the colour of the eurozone money and we have not seen the colour of the eurozone money”.
Will the Chancellor tell us what has actually changed since then, because we have categorically not seen the colour of the eurozone’s money? The eurozone agreement that was reached last month was widely dismissed as a “sticking plaster” that merged two funds with no new money. As Wolfgang Münchau of the Financial Times stated:
“Ignore the headlines. This is not an increase in the eurozone’s rescue fund”.
In recent weeks, as market doubts have grown about Spain and Italy, market analysts have been clear that the eurozone bail-out fund has nowhere near the resources that it would need to stop a renewed crisis. There is still no firewall, and the only institution that comfortably has the resources to act—the European Central Bank—is prevented from doing so because rich euro area countries refuse to put sufficient money at risk. So, let me ask the Chancellor this: does he really think that the eurozone’s firewall is sufficient? Is this really the “big bazooka” that the Prime Minister talked about last summer? Does the Chancellor really think that the ECB now has the political backing to act as lender of last resort, and so stop contagion spreading? No, of course he does not. So why is he now signing up to an agreement that will mean that the IMF will be pressured into supporting Italy and Spain because the ECB will not, exposing as meaningless his nonsensical “countries not currencies” slogan?
Is it not the truth that the Chancellor is now conspiring in allowing the IMF to become the de facto central bank of the euro area, putting the resources of UK taxpayers and some of the world’s poorer countries at risk because rich euro area countries will not act? This deal might, for a short period, take the pressure off euro area leaders, but it will be at the cost of delaying a proper solution to the euro crisis, and it will undermine the IMF in the process.
The Chancellor says that his UK critics, on both sides of the House, are “isolated” in the global community in opposing this weekend’s agreement, but the United States has not signed up to give more money either. The US Treasury Secretary said, just this month:
“Europe is a very rich continent and they have the means to solve this on their own…I don’t think it is appropriate for the IMF to take on a larger role. The world needs to see that Europe is working on helping itself first. We are not going to shift our help for them so that the burden is on the American taxpayer”.
Canada is not contributing more money either. This is what the Canadian Finance Minister said about euro area leaders this weekend:
“They need to step up to the plate and overwhelm this issue with their own resources.”
The Chancellor says that we are “out on a limb” on this issue, but with America and Canada there too, that is some limb.
Will the Chancellor tell the House why he chose to tell us on Friday that he was contributing “just under” £10 billion more? With the US not contributing, that is clearly less than the UK’s quota share. Could it be that if he had contributed a fraction more, he would have had to come to the House and ask for parliamentary approval? After the Budget shambles—should I say the “omnishambles”?—of the last few weeks, is not the Chancellor running scared of those on both sides of the House of Commons?
Could the Chancellor also explain what has happened to the UK’s contribution to the IMF through the new agreement to borrow? When an IMF quota was first increased in 2009, it was understood that it would be offset by a reduction in UK exposure to the NAB—the new arrangements to borrow. Let me remind the Chancellor what the Financial Secretary told the House last summer:
“The G20 summit in London agreed on the importance of preserving the IMF status as a quota-based institution…so at the G20 meetings last November, agreement was reached to review the NAB and to reduce it in size once the quota increase was implemented.”—[Official Report, Second Delegated Legislation Committee, 5 July 2011; c. 3.]
So let me ask the Chancellor this: can he update the House? Has the UK contribution to the IMF been reduced through the NAB as the quota increases, as the Financial Secretary said, or has the Chancellor found a back-door route to increase the net UK contribution by more than £10 billion, without the permission of Parliament?
Mr Speaker
I am sure the shadow Chancellor is bringing himself to his last sentence.
Ed Balls
Finally, Mr Speaker, as for the Chancellor’s claim that the UK has sorted out our problems, unlike the US, the UK is mired with the rest of the euro area in no growth, high unemployment and much more borrowing than was planned, so how out of touch can this deluded Chancellor get? He should have stuck to his guns this weekend. He capitulated. This agreement was bad for the euro area, bad for the IMF, bad for the British taxpayer and bad for the British national interest.
Mr Osborne
First, I congratulate the shadow Chancellor on running the London marathon yesterday and raising money for good causes, but his arguments are a bit like his marathon legs—wobbly and about to collapse. His response started so well. In the first 30 seconds, he said he supported increased resources for the IMF and supported Britain’s contribution to it, but spent the next 10 minutes telling us why he was against those things. He was in favour of the loan before he was against it. I have to say it smacks of the political opportunism and empty opposition that have been the hallmark of his shadow chancellorship.
People in Washington this weekend who know the shadow Chancellor, because he used to help represent Britain at the IMF, were completely astonished by his opposition to the IMF deal. They wondered whether he was the same person who was in the Treasury for all those years and who wrote all those speeches for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about the importance of the IMF and of the international architecture being part of global solutions. Is it the same shadow Chancellor who said in November that
“the Labour party supports an increase in the UK’s International Monetary Fund subscription”?
He was asked in an interview why he opposed the Government’s decision and he said:
“I support an increase in resources to the IMF”.
Then, the interviewer said:
“Sorry? I thought you didn’t.”
He said:
“No…I support an increase in resources for the IMF”.
One is led to the conclusion that only political opportunism is driving the shadow Chancellor to the position he takes.
The right hon. Gentleman asked just a couple of specific questions. I think I answered all of them in the statement, which he should have listened to before he asked his questions. The US Treasury Secretary went out of his way to welcome the deal, but pointed out that the US had not made a loan at the London G20 summit and did not do so again because of the swap lines. Since we talked about this in the autumn, the European Central Bank has provided $1 trillion of liquidity support and €200 billion extra to the firewall, but I completely agree that euro countries need to do more to ensure reforms in their own economies.
Is the right hon. Gentleman really saying that, when a request is made for the countries of the world to come together at the IMF to provide increased contributions, Britain should stand apart from it? He represents a Labour party that stands, or used to stand, for internationalism and for the institutions of the world coming together. Now he has led the party down a complete blind alleyway. He even voted against the highlight of the Labour Government—the deal done at the London G20 summit. This is what the shadow Chancellor has done to his party—left it in no man’s land, not taken seriously at home and not taken seriously abroad. If he were ever in charge, we would be getting a bail-out from the IMF, not giving it a loan.
Sir Peter Tapsell (Louth and Horncastle) (Con)
I had rather changed my mind about asking a question because of the extremely unappealing way in which the shadow Chancellor put his case; but in order to be consistent with everything that I said in October and November, I am bound to say now that I regard it as the prime duty of Germany to solve the European problem, and that I hope that this further support from the IMF will not weaken the pressure on the German Government to do exactly that.
Mr Osborne
Germany made a $55 billion dollar contribution to the IMF this weekend, which is a much greater contribution than the $15 billion that we are putting in, and it is the principal contributor to the various eurozone bail-out funds of which we are no longer part. However, I agree with the spirit of what my right hon. Friend is saying, which is that Germany needs to stand behind its currency. That is indeed a very important part of solving this problem.
Mr Alistair Darling (Edinburgh South West) (Lab)
I think it right for us to support the IMF, but is not something very wrong when it is having to pass the hat around because it is becoming increasingly concerned that the policies being pursued by the eurozone—and, within it, some of the most developed and well-off countries in the world—are making it more likely that those countries will have to draw on international help to sort themselves out? Would it not be far better if the eurozone countries accepted that until they clean up their banking system once and for all, and until they recognise that the austerity policies that they are imposing on the peripheral countries simply will not work—and there are very few people around now who think that they will work—there remains a greater risk that these funds will have to be called upon? It seems to me that, while it is all very well to have a rescue fund, it would be far better to deal with the root causes of the problem.
Mr Osborne
I welcome the right hon. Gentleman’s support for the decision to provide extra resources for the IMF. He was Chancellor of the Exchequer in 2009, when we last made a contribution to it, and, as I said a moment ago, I think that that was one of the highlights—if not the highlight—of the last Labour Government.
The eurozone countries on the periphery are being asked to walk an incredibly difficult path. That is the consequence of being in a monetary union in which it is impossible to devalue. However, it is clear that Ireland, which has had to make some incredibly difficult decisions and take some very tough fiscal measures, is becoming dramatically more competitive—its current account is back in surplus, and its exports are increasing—so it is possible to walk that path.
I certainly agree with the right hon. Gentleman that further action is required on the banking systems in Europe. A European directive which is currently being debated transponds the Basel agreement into European law, and we are keen for it not to be watered down so that it is not used to disguise problems in the European banking system.
Mr Andrew Tyrie (Chichester) (Con)
Is not the lesson of the 1930s that the leading economic powers must stick together and support the global financial and trading system, and is that not exactly what the IMF decision is doing now? What we need is a strong and independent IMF. With that in mind, will the Chancellor tell us what discussions he has had with non-eurozone IMF members to ensure that the IMF sees off any special pleading from the eurozone?
Mr Osborne
I welcome the support of my hon. Friend, who chairs the Treasury Committee, for our decision to make a loan to the IMF, along with many other countries.
This weekend, plenty of countries, including the UK, made very clear that a contribution to additional IMF resources must come with strict IMF conditionality. They made clear that there could be no special favours for eurozone countries that needed support, and that there was no question of creating some special eurozone fund for IMF resources. Any contribution from the IMF’s shareholders must go into general resources which could be used for eurozone countries or, indeed, for any other country that needed help.
It is worth remembering that there are 53 IMF programmes, three for eurozone countries and 50 for other countries in the world, and that two of the largest programmes are for Poland and Mexico, which are not members of the IMF.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Does the Chancellor not accept that the credibility of the IMF itself is put in question if it continues to provide support for eurozone countries that are, and remain, insolvent?
Mr Osborne
No, I do not accept that. For the IMF to walk away from the enormous problems that we all know exist in the eurozone would be a betrayal of why we and other countries created the IMF: to be there to help countries, including groups of countries, that get themselves into trouble. The IMF also provides advice and conditionality along with its loans. Having set up an institution to deal with global economic problems, it would be bizarre if, when some of the largest economic problems the world has ever known arise, we were to say that the IMF is not going to help.
Stephen Williams (Bristol West) (LD)
The central unifying purpose of this coalition Government is to bring stability and credibility to the management of the United Kingdom’s economy and public finances. That, in turn, enables us to play a constructive role on the world stage. Does my right hon. Friend agree that, just as it is in the Swedish, Swiss, Australian, South Korean and Japanese national interest to give extra contributions to the IMF, it is in the British interest not just to help the eurozone, but to lend assistance wherever the IMF team’s assistance is required?
Mr Osborne
I agree with my hon. Friend. The coalition Government have taken very difficult decisions in order to make sure that our public finances are back under control, and we are seen by the world to be dealing with our debt crisis. After spring meetings in Washington at which countries not in the EU, including Australia, Japan, South Korea, Norway and Switzerland, all agreed to contribute to increased IMF resources, it would be truly bizarre if a British Chancellor were to come to the House today and announce that Britain is not contributing. [Interruption.] What did the shadow Chancellor say? [Interruption.] What? [Interruption.] What? The truth is that a Chancellor who came here and said he was not taking part when all those other countries, some of them on the other side of the world, were taking part, would have absolutely no credibility abroad.
Derek Twigg (Halton) (Lab)
Does the Chancellor believe that the eurozone is doing enough to help itself and its own countries? If he does not believe that, under what conditions would he support an IMF loan to any eurozone country?
Mr Osborne
I do not want to speculate about any future programmes that might, or might not, be required. What I want to do is make sure that the IMF is able to deal with whatever is thrown at it. That is massively in Britain’s national interest. We are talking about the source of 40% of the exports made by the businesses and factories of the constituencies we represent. For us to walk away from that at the moment would be bizarre. Does the eurozone need to do more? Yes, it does need to do more. For instance, as the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said, it needs to sort out the problems in its banking system, and it needs to make sure that the programmes that countries have been asked to embark upon are deliverable, but that is not an excuse for Britain not to take part in a global effort to support the IMF.
Sir Malcolm Rifkind (Kensington) (Con)
I suspect that on this occasion Members on both sides of the House will have found the shadow Chancellor’s remarks to have been profoundly unconvincing. Does the Chancellor agree that the purpose of these funds is to assist in the restoration of the eurozone economy, the recovery of which is profoundly in our own interests? Does he also agree that the IMF must use all the powers at its disposal to ensure a rigorous application of its rules to those eurozone countries that are in trouble, in order to ensure that the mistakes that were made when the single currency was first formed are not repeated?
Mr Osborne
I completely agree with the former Foreign Secretary. The agreement at the weekend is about ensuring that the IMF is fully resourced to deal with whatever is thrown at it. Of course, if problems were to emerge and future programmes were to be required, there would be an enormous amount of scrutiny of what those programmes would consist of, what the conditions would be, and the like, but what we would not want at such a time, when the markets would no doubt be incredibly febrile and when confidence in Britain and other countries would be evaporating, is a question mark hanging over whether the IMF has got the money to solve the problem. That is why countries from around the world have decided to make this contribution.
Mr Dennis Skinner (Bolsover) (Lab)
Does not the Chancellor realise that he would have a much stronger case on loans to the IMF if he was not practising austerity here in Britain and calling on all families to pay for the bankers? Does not he recall that when the IMF was set up we had a Labour Government who introduced a national health service, built a welfare state, built education for all and left us with fewer than 500,000 people unemployed? That Government went for growth, and that is the kind of policy he should be going for here, instead of calling for austerity for everybody else.
Mr Osborne
What I say is that the hon. Gentleman is betraying the spirit of Ernest Bevin, Hugh Dalton, Clement Attlee and the members of that Government, who came together after the second world war to build new international institutions to make sure that, in future, the world would come together to sort out its economic problems, instead of walking away from other countries, which is what we would be doing if we followed the hon. Gentleman’s advice.
Mr Douglas Carswell (Clacton) (Con)
Last October, the Chancellor told this House that Britain would not be putting money into the bail-out fund, either directly or through the IMF. He said:
“the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]
Has he changed his mind or was he playing with words?
Mr Osborne
I have not changed my mind at all. That is exactly what I said today; we are not contributing to the eurozone bail-out funds, including the European financial stabilisation mechanism, which was the thing that the previous Labour Government signed us up to. We are not part of those eurozone bail-out funds. We are not contributing money to the IMF that can be put into those bail-out funds—that is something we have also insisted on. And in the communiqué it is absolutely clear that the IMF is not allowed to create some special bail-out fund uniquely for the euro. This money goes into the general resources of the IMF to be used for countries, not for currencies.
Alison Seabeck (Plymouth, Moor View) (Lab)
Could the Chancellor please explain to the House and to his largely absent Lib Dem coalition partners—I say that for the record—why the amount chosen for the IMF is, by some extraordinary coincidence, just below the level required for a parliamentary vote? He has bandied around the words “political opportunism”, but is he not himself being a political opportunist?
Mr Osborne
I do not think that there is much political opportunism in having to take the difficult decision that Britain should contribute to IMF resources. I have taken that difficult decision, and I am happy to explain it to Parliament and to the public.
Mr John Redwood (Wokingham) (Con)
Given that I agree with the Chancellor that IMF money should not be used to bail out a currency, will he urge the IMF to make sure that loans are made available to European countries only when they are in a position to devalue or when they are withdrawing from the single currency? Otherwise, as with the sterling area, surely the responsibility rests with the governing authorities and the central bank of the euro to make the money, the loans, the subsidies available.
Mr Osborne
I do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.
Kelvin Hopkins (Luton North) (Lab)
The IMF was designed for a world of separate national currencies with exchange controls and properly managed national economies. Is it not time to look again at re-creating that sensible world, because it actually worked, starting with the re-creation of national currencies in Europe?
Mr Osborne
The hon. Gentleman has, for all the time I have been in the House, consistently argued against British membership of the euro and consistently raised questions about the viability of the euro. I completely respect him for that, but to say that the IMF cannot get involved in the eurozone’s problems would be just a remarkable abnegation of the IMF’s commitment to deal with the world’s economic problems. The eurozone is at the centre of the world’s current economic problems because those involved have not been able to convince the markets that they can deal with their debts in the way that we have been able to. So I do not think it would be sensible for the IMF to just say, “There is a very important part of the world, which is at the epicentre of the world’s economic problems, but we are not going to get involved there.”
Mark Field (Cities of London and Westminster) (Con)
I entirely support the Chancellor’s contention that the interests of the City of London and the UK’s financial services industry are best served by unequivocal backing for the IMF at this time. Will he now pledge that by the time of the Whitsun recess he will have come to this House to make a statement on the Government’s strategic policy towards our relationship with the eurozone?
Mr Osborne
I thank my hon. Friend for his support, which is very welcome. As the representative in this Parliament of Europe’s largest financial centre, he completely understands our huge national interest in a stable world economy and in institutions that can try to bring stability to that world. I will give thought to his suggestion of a statement on the broader eurozone problems and will come back to him.
Stewart Hosie (Dundee East) (SNP)
I thank the Chancellor for his statement and for allowing me early sight of it, and I agree with his welcome for the European Central Bank’s commencement of the long-term liquidity operation. There are concerns about the size of the firewall and, still, about the scale of support being offered by the ECB, but notwithstanding that and irrespective of the final balance of support to the euro from the ECB and to individual countries from the IMF, will he continue to agree that the best hope we all have for an export-led recovery is a strong, stable and growing eurozone economy with no threat to that currency?
Mr Osborne
I find myself in agreement with the hon. Gentleman who speaks for the Scottish National party. One of the consequences of what has happened over the past year or two in the eurozone is that countries that want to join the eurozone now need to ante-up a huge sum of money into the bail-out fund. No doubt that is something he will be explaining to Scottish voters as we discuss whether Scotland should ditch the pound and join the euro.
Angie Bray (Ealing Central and Acton) (Con)
I support the Chancellor’s decision to make this additional loan to the IMF because of the important work that the IMF does in stabilising the economy across the world, not just in the EU. Can he reassure my constituents in Ealing and Acton that the loan will be repaid with interest?
Mr Osborne
Yes, I can. IMF loans are repaid and they always have been in the past. No country has lost money giving resources to the IMF and such loans are repaid with interest. Indeed, if I can find the quotation—[Interruption.] It is worth waiting for, because it is from the shadow Chancellor. When the shadow Chancellor was in the Treasury, he said that IMF lending to
“countries is invariably repaid with interest.”
That is what he said in 2003. I can give my hon. Friend the assurance that loans to the IMF are made to the most creditworthy institution in the world and are repaid.
Mr Geoffrey Robinson (Coventry North West) (Lab)
Last summer, the Financial Secretary, I think, said that alongside a quota increase, contributions under the new agreement to borrow would be reduced. Can the Chancellor tell the House whether they have been?
Mr Osborne
The 2010 quota agreement has not come into effect because it has not been ratified by all the countries. Our bilateral loan will be made only once that quota deal has been ratified. I have listened to the hon. Gentleman for the 11 years for which I have been a Member of Parliament and I cannot believe that he really supports the decision being pursued by the shadow Chancellor. The hon. Gentleman knows from his time at the Treasury and from his broader experience that Britain has a vital interest in economic multilateralism and the institutions that support a more stable economy.
John Hemming (Birmingham, Yardley) (LD)
Does the Chancellor find it odd, as I do, that the Opposition were happy to commit the British taxpayer to the eurozone bail-out but will betray British workers who depend on exports for their jobs by not supporting the IMF?
Mr Osborne
To be fair, probably most Labour MPs, in their quieter moments, support the IMF and think it is perfectly sensible that, when other countries add their resources, Britain should do so. The most remarkable thing is that the shadow Chancellor led the Labour party into voting against the implementation of the London G20 deal. Because of the change of Government, we introduced the statutory instrument that gave effect to the London G20 deal, yet the shadow Chancellor led the Opposition against it.
Chris Bryant (Rhondda) (Lab)
Notwithstanding the mandate the Chancellor already has, would not our voters expect a separate vote on this loan in this House, so that all Members can take a view? The Leader of the House, who is sitting next to the Chancellor, is shaking his head; he knows perfectly well that he is going to prorogue Parliament a full week early. Members have plenty of time to stay here and vote on the matter. Is it not more important that we vote?
Mr Osborne
There have been two votes in this Parliament, in the past 18 months, on precisely the question of how much headroom the House of Commons gives the Chancellor of the day to make loans to the IMF. There have already been two votes.
Mr David Ruffley (Bury St Edmunds) (Con)
The Economist has rightly observed that the eurozone’s big problem is not a dearth of resources to the IMF, but the institutionalised paralysis of eurozone countries. Can the Chancellor tell the House what discussions he had at the spring meetings about the need for practical steps to break that paralysis?
Mr Osborne
My hon. Friend is completely right that providing additional resources to the IMF will not solve the eurozone’s problems, I said that in my statement. It is about making sure that the IMF is prepared for whatever is coming down the track—prepared for the worst, rather than just hoping for the best, and of course we do all hope that things improve. My hon. Friend is also right that the eurozone countries need to work more closely together in terms of the fiscal integration of their policies. That is one of the reasons why I did not want Britain to join the euro and would never want Britain to join the euro. The logic of a single currency is that devaluation is not possible and different inflation rates cannot be manufactured in different countries. The end result is the transfer of large sums of money from German taxpayers to Spanish taxpayers. That is their decision by being part of the currency; our decision is to make sure that the world is ready in case that does not come about.
Keith Vaz (Leicester East) (Lab)
One of the communiqués following the summit referred to the need to pursue solutions for malnutrition and food insecurity, as well as fragile states. I support the loan for those purposes, but how can we be sure that the money will end up supporting countries such as Yemen, which has just been through a presidential election and desperately needs support from the IMF and the World Bank?
Mr Osborne
The right hon. Gentleman is quite right to draw attention to the fact that, although we have been talking a lot about the eurozone, the IMF does a great deal of important work in low-income countries. As I said, there are 53 programmes, of which only three—albeit they are very large ones—are in the eurozone. At the IMF I specifically intervened to ask that the IMF’s windfall profits from recent gold sales be used to reduce the interest costs for low-income countries that undertake IMF programmes, to make sure that they have access to the increase in resources we are talking about today.
Mr Peter Bone (Wellingborough) (Con)
The only way for Spain, Italy, Portugal and Greece to become competitive and get their economies growing again is through a return to national currencies. Does not the Chancellor agree that it is a bonkers policy to pour billions and billions of UK taxpayers’ money into supporting the failed euro?
Mr Osborne
We are not pouring money into some eurozone bail-out fund. We are providing a loan to the International Monetary Fund. I hear what my hon. Friend says about the decision, but every single previous Government have been part of increases in IMF resources—in 1983 and in 1990, under Lady Thatcher’s Government, we contributed to increases in IMF resources. He says that these countries are lost causes, but in Portugal, where very difficult decisions have been taken, exports are up by 7% and the current account deficit has been reduced; Ireland has gone into a current account surplus and Spanish exports are up. Of course they are having to make the adjustments in a brutal way, by real cuts in wages rather than a currency devaluation, but that is the consequence of being in a single currency. The Governments in those countries, with, in most cases, the support of the public now, are taking those difficult decisions. It is interesting that even in Greece, which is probably the most traumatically affected of those countries, there is a clear and overwhelming public majority for Greece staying in the euro.
Mike Gapes (Ilford South) (Lab/Co-op)
The Chancellor claimed that the additional contribution that this country is making is proportionate to our shareholding. Can he explain why we are paying $15 billion, whereas France is paying $40 billion, Germany $55 billion and Japan $60 billion, and South Korea, with a smaller population and a smaller economy than ours, is paying the same as we are?
Mr Osborne
I am not sure if that is a request for more money to the IMF. As I made clear in the statement, the non-euro countries felt it was appropriate that the euro countries made a proportionately bigger contribution. That is why France, for example, has given $40 billion. In the past, because Britain has exactly the same quota shareholding as France, we would have given the same. We have not. Our $15 billion is almost exactly the same as the $15 billion loan made at the London G20 summit. I think it is proportionate to the eurozone effort. I cannot believe that the hon. Gentleman, as a former Chair of the Foreign Affairs Committee, really supports the shadow Chancellor’s position of opposing Britain being part of a global deal to increase IMF resources.
Mr John Baron (Basildon and Billericay) (Con)
I am sure the Chancellor will agree that until the core cause of the crisis is solved or at least approached—that being a lack of competitiveness—additional borrowing in a crisis caused by excessive borrowing already is simply reinforcing failure. Is the Chancellor at all concerned that for the 50 nations that he mentioned, devaluation was always an option—an option that has always been available to IMF rescue packages, but is not available to countries inside the eurozone?
Mr Osborne
My hon. Friend is right that countries in the eurozone do not have the option of devaluation if they want to remain in the eurozone. That is the logic of the single currency. That is why the Foreign Secretary, when he was leader of our party, said that it was
“a burning building with no exits”.
In that situation the question for Britain, rather than for members of the eurozone, is what do we do? What we can do is make sure that the global institutions that try to protect the world from instability, that try to provide shock absorbers for what happens in different countries, including in the eurozone, are well resourced to deal with whatever is thrown at them. I say to my hon. Friend and to Members across the House that it is possible to be very, very Eurosceptic and at the same time to be a believer in the international institutions that Britain helped to create 60 years ago.
Mr Kevin Barron (Rother Valley) (Lab)
Given the answer that the Chancellor gave to the right hon. Member for Wokingham (Mr Redwood), could he tell us exactly what was agreed this weekend that says that the IMF should give loans only to countries and not currencies?
Mr Osborne
The communiqué that was issued by the Finance Ministers and the European Central Bank governors said explicitly, with reference to the $430 billion that was provided by the countries at the meeting:
“These resources will be available for the whole membership of the IMF, and not earmarked for any particular region.”
Mark Pritchard (The Wrekin) (Con)
But is not the IMF in danger of sleight of hand? On the one hand the IMF claims not to bail out currencies, yet on the other hand it offers bilateral loans to countries in the eurozone that are failing because of the eurozone currency. Is that not an indirect loan from the IMF?
Mr Osborne
I would say, first, that the reason why these countries have the problems that they do is often because of their domestic difficulties. Portugal has been fundamentally uncompetitive for a decade. Ireland had a massive banking system that collapsed. Italy and Spain have not done enough to keep up with the competitiveness of Germany. They are addressing domestic problems. That is made more difficult because they cannot devalue their currency, but that is not the origin of their problems.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
What happened to the reforms that were supposed to be linked to any extra funding for the IMF?
Mr Osborne
In 2010, there was an agreement to change the quota of the IMF to give the new emerging economies of the world, such as China, India and the like, a greater say at the IMF. The quota was reallocated to reflect the new economic weights in the world. That deal has not yet been ratified, but we as a country have ratified that deal. We are one of the countries that have ratified it. There remain some countries that have not. Our loan is available only when the quota deal has been ratified by the required majority of those countries.
Mr Speaker
Order. There is still extensive interest in the subject, which I am keen to accommodate, but if I am to do so, brevity is of the essence.
Dr Julian Lewis (New Forest East) (Con)
When one’s friends are trapped in a burning building, is not the kindest thing to do to lead them in the direction of the exits in an orderly way, rather than give them billions to stay exactly where they are?
Mr Osborne
I would say that it is to make sure that the fire brigade has enough water to deal with the problem.
Barry Gardiner (Brent North) (Lab)
The IMF should be plan B; plan A should be the European Central Bank. Does the Chancellor not accept that until the ECB properly backs the euro, the only people who will welcome more money coming in through the IMF are the traders who are making much money by picking off the peripheral countries around Europe as they go from one to the other?
Mr Osborne
Since December, the ECB has provided €1 trillion in its long-term repo operation, so it has provided a lot of support, most of which has been used by some of the eurozone banks to stop them falling over. The ECB has taken action, but the Prime Minister, myself and other members of the Government have in public, as well as in private—but in public—over the last six months, urged the ECB to do more; urged that greater fiscal transfers take place. On many of those things the ECB has made a lot of progress since the autumn. There is a much bigger eurozone firewall. As I say, the ECB, which was not in the game at all last autumn, has now provided €1 trillion of liquidity, so it has made those contributions, and therefore the rest of the world, as well as the UK, thought it appropriate that we should make sure that the IMF is well resourced.
Joseph Johnson (Orpington) (Con)
My right hon. Friend rightly says that a well funded IMF and a bigger eurozone bail-out fund cannot be the whole solution to the eurozone crisis. Does he believe now that the overriding priority must be steps towards debt mutualisation and the structural reforms to address the underlying competitiveness issues that are at the heart of the crisis?
Mr Osborne
I absolutely believe that eurozone countries need structural reforms. This country needs structural reforms. The things that we have proposed to Parliament on welfare, education, planning and the like, are all part of reforms to make our country more competitive. We have not been talking about our economy here, but we came into government with the highest budget deficit of the lot and some real competitiveness problems. On mutualised debt, over a year ago, I said that I thought that the logic led the eurozone towards euro bonds. I have put that on the record, but ultimately that is a decision for the eurozone.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
The Chancellor is now in a position to tell us whether he intends to honour his commitment of 0.7% gross national income for overseas aid by 2013. When can we expect the legislation, which I understand is now sitting on the desk of the Secretary of State for International Development?
Mr Speaker
Order. I am sure that the Chancellor will relate the answer to the IMF, to which I feel sure the right hon. Gentleman was seeking indirectly, and without saying so, to relate the matter.
Mr Osborne
We are going to honour that 0.7%. That is in the aid budget. It is in the budget of the Department for International Development. We can talk about the merits of legislation, but we do not need a piece of legislation. The proof is whether the money is being provided, and this Government are providing the money. I for one am proud that we will be the first Government in British history to hit the 0.7% of international aid.
David Mowat (Warrington South) (Con)
The Chancellor has confirmed to the House that interest on this loan is payable in full. For the avoidance of doubt, will he confirm that the rate of interest that is payable is higher than the rate at which we will have to borrow?
Mr Osborne
The rate of interest would be set at the time the IMF called upon the loan, if it were to do so. It is only a contingent loan that will be available if the IMF needs it. The mechanism for setting the rate of interest for the IMF is well known. As I have said, countries do not lose money when they lend to the IMF—that is certainly Britain’s experience and that of other countries. Thanks to the actions the Government have taken, we are borrowing money at what is pretty much the lowest rate that anyone doing my job has ever borrowed money.
Steve McCabe (Birmingham, Selly Oak) (Lab)
If the rich EU countries that created the euro will not accept the risks associated with it, what is the moral case for saying that Britain and a host of other poorer countries should bail it out?
Mr Osborne
As I have explained, we are providing resources to the IMF. It was the previous Government, of whom the hon. Gentleman was a member, who committed the British taxpayer to the eurozone bail-out funds, which we had to get this country out of. I will take comments from my colleagues on the problems with the euro, but it is a bit rich coming from loyal Labour Members who supported Labour’s official policy of taking Britain into the euro.
Mr Julian Brazier (Canterbury) (Con)
I support my right hon. Friend’s commitment to that great institution, the IMF, and share his concern about what is happening to our largest export partner, but may I urge him to use the powerful position we have in the IMF, which is underpinned by this latest money, to ensure that there is a realistic examination of whether it is possible to save the southern European members without devaluation?
Mr Osborne
I welcome my hon. Friend’s support for this decision. IMF programmes should be very rigorous and there should be plenty of conditionality. As I have said, it is possible to undertake very difficult internal devaluations, as opposed to external devaluations—that is a consequence of remaining in a currency zone—and the IMF will help those countries through that.
Robert Flello (Stoke-on-Trent South) (Lab)
If in the weeks ahead the IMF announces, to everyone’s utter astonishment, that it wants to use some of that general fund for the eurozone bail-out pot, will the Chancellor bring the matter back to the House and allow us to vote on it?
Mr Osborne
I can be very clear that the British Government would not allow the loan we are talking about—the loan from Britain—to be used for the eurozone bail-out fund. It is for specific countries, not currencies, as set out in the communiqué.
Penny Mordaunt (Portsmouth North) (Con)
What my constituents want to know is whether their money will be safe. Is the Chancellor aware of any instance of a country that has lent money to the IMF not being repaid in full?
Mr Osborne
No, there are no such instances. Every single country that has lent money to the IMF has got its money back.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
First, will the Chancellor withdraw the outrageous slur that all Labour Back Benchers were in favour of Britain joining the euro? Secondly, surely his distinction between currencies and countries is mere sophistry. The reality is that this is about bailing out countries whose difficulties have been caused, or at least exacerbated, by being in the euro. When does he expect to have to bail out the eurozone again? When will the eurozone’s next request for money come?
Mr Osborne
I talked about loyal Labour Back Benchers and would never apply such an outrageous slur to the hon. Gentleman, whereas it is certainly applicable to the hon. Member for Birmingham, Selly Oak (Steve McCabe). The distinction is not sophistry, because an IMF contribution, were there ever to be one, to a eurozone bail-out fund, would basically put that money into a eurozone pot and then the eurozone would decide how it was spent. If there is a country programme for a specific country in the eurozone, the IMF team would turn up, wherever it happens to be, impose its own conditions and do its own analysis, and that is fundamentally different. The logic of the hon. Gentleman’s question is that the IMF would never help a eurozone country, which would lead to the eurozone countries leaving the IMF, and we would then be fundamentally undermining one of the most important institutions the world has seen in the past 60 years.
Mr David Nuttall (Bury North) (Con)
Is it not the case that every time the IMF provides any assistance to a eurozone country, it simply demonstrates the complete failure of the European Central Bank to do its job properly?
Mr Osborne
The European Central Bank is of course a very important part of the equation, but one of the problems facing Ireland, Portugal and, indeed, Greece was that they were also shut out of international debt markets, and when countries are shut out of international debt markets they usually—almost always—turn to the IMF for assistance, so it would be very odd if the IMF were not there to help them.
Mr Jim Cunningham (Coventry South) (Lab)
I am glad that the Chancellor has realised—it has taken him four years to do so—that there was a world economic crisis which started outside this country. Yes, Labour in government in the past has supported the IMF, and we still do, as we know that we have to do something to help Europe, but, following what my hon. Friend the Member for Bolsover (Mr Skinner) said, I must ask why are the British people paying for it through one of the most punitive Budgets ever levied? On the one hand they understand that we have to help Europe, but on the other we have one of the most punitive Budgets that has ever been levied on the British people.
Mr Osborne
I have never denied that there was an international economic crisis; what I said was that those problems were not visited upon Britain from abroad. Britain was at the epicentre of the crisis, with the biggest bank bail-outs, the most indebted households, the most over-leveraged banks and one of the largest deficits going into the crisis. That is what I complain about, and I complain in particular about the man who was responsible for most of those economic policies giving us lectures on them afterwards. I welcome the fact that the hon. Member for Coventry South (Mr Cunningham) supports the IMF and an increase in its resources, but the money does not come out of the public spending cuts that we have had to make in order to deal with that mess; it comes out of our foreign exchange reserves. We are exchanging one asset for another, and as I have said, every country that has lent money to the IMF has got its money back.
Jason McCartney (Colne Valley) (Con)
Happy St George’s day, Mr Speaker.
I very much welcome the fact that the loan will be returned with interest, but does my right hon. Friend hope, as I do, that those interest payments are not returned at the expense of countries such as Greece racking up yet more debt?
Mr Osborne
IMF loans are made with conditions, and one condition is interest, although there is a specific programme to help very low-income countries to cope with the interest costs. It is very important, as part of any IMF analysis, that we undertake proper debt analysis, and the IMF has been pretty instrumental in driving through the private sector creditor write-offs that have happened in Greece in order to improve debt sustainability, something which—I do not think it is any secret—many eurozone countries were not particularly in favour of. The IMF can therefore take action to improve debt sustainability.
Fiona O’Donnell (East Lothian) (Lab)
The Chancellor has told the House that this is not about a eurozone bail-out, but back in September he also told us that we would not contribute again to the IMF bailing out the eurozone. If that is the case, why are eurozone countries contributing proportionately more?
Mr Osborne
I said very clearly in my statement that the principal reason the world economy is unstable is the problems in the eurozone, and, as all the questions have demonstrated, there is of course a connection between those problems and the need to have a well resourced IMF, but, as I said last autumn, we are not prepared to see IMF resource going into eurozone bail-out funds. It needs to be for individual countries and for individual country programmes, and that is a view which not just I or Britain happens to have, but which Japan, South Korea, Australia and European countries that are not in the European Union, such as Norway and Switzerland, share. Ask yourself the question, Mr Speaker, and the House can ask itself, too: why have all those other countries thought it is in their interests to help to deal with a problem that is actually on Britain’s doorstep as well?
Matthew Hancock (West Suffolk) (Con)
What would the Chancellor say to the exporters of west Suffolk about the purpose of the loan, when they need expanding markets in Europe and across the world?
Mr Osborne
The exporters of west Suffolk, like people in every other part of the country, have an enormous interest in there being greater stability in the eurozone and in the world economy. What has been so damaging in the past six months has been the flight of confidence from those countries, and its impact on exporters in Britain and elsewhere in the world. We want confidence to return. As I said in the statement, there was a sense in the spring meetings that things were a little better than before Christmas. However, the risks are real and they remain.
Grahame M. Morris (Easington) (Lab)
In his statement, the Chancellor told the House that the £10 billion contribution to the IMF would not affect spending by UK Departments. Why, therefore, is the Chief Secretary reported to be asking Departments to identify £16 billion more in savings to pay for “unforeseen” events? Is that for a eurozone bail-out contingency fund?
Mr Osborne
No it is not, and there is no connection between the two matters. An IMF loan comes out of our foreign exchange reserves. That has been the case under Labour Governments, Conservative Governments and this coalition Government. It is a contingent loan that will be drawn upon if the IMF needs resources. We swap our foreign exchange asset for the IMF loan. The Chief Secretary said what he did today because we are trying to get a grip on the public finances. To do that, we have to ensure that Departments can deal with their own contingencies, as and when they arrive.
Mr Stewart Jackson (Peterborough) (Con)
We all know that what we are discussing is state-sponsored money laundering to prop up the failed and doomed European project called the euro. The deal does not come without a heavy human cost. In southern Europe, it means the imposition of a net tightening of 3% per year, yet there is no monetary stimulus to offset that, no demand for growth in the rest of Europe and no demand for structural reforms. Why is the Chancellor throwing the good money of UK taxpayers after bad for this economic madness?
Mr Osborne
This money comes out of Britain’s foreign exchange reserves and is swapped for an IMF loan. It is therefore not money that we would otherwise spend on public services or use to cut taxes. My hon. Friend is being a little unfair to the countries that are having to undertake difficult structural reforms. For example, Spain has recently passed significant reforms to its labour laws to make its employment market more flexible and Italy has made difficult pension reforms. People will remember the scenes in Italy when those reforms were announced a few months ago. Britain is also having to make difficult reforms and take difficult decisions to make our economy more competitive and to deal with the problems in our public finances.
Nadhim Zahawi (Stratford-on-Avon) (Con)
The Australian Government made their decision with the backing of the Opposition. Will the Chancellor confirm that his decision will not be affected by the shadow Chancellor’s flip-flopping?
Mr Osborne
There is not much danger of my being influenced by the shadow Chancellor’s flip-flopping. My hon. Friend draws to our attention the interesting point that the Australian Liberal party, which is hardly the most Europhile party in the world, understands that Australia has obligations to the international community and to the IMF. Given that Australia is prepared to make a contribution, it would be quite odd if Britain was not.
Chris Heaton-Harris (Daventry) (Con)
May I congratulate the shadow Chancellor on his epic exploits yesterday? I note that he kept on message by going neither too far, nor too fast.
I voted for the loan and believe that it would have been bizarre had the Chancellor not offered a loan of the level agreed to by Parliament. Will my right hon. Friend guarantee that he will come back to this place and ask for Parliament’s assent should more funds be asked for?
Mr Osborne
I can do that on the simple grounds that I would not be able to make a loan beyond the agreed headroom without a vote in Parliament. Perhaps by then the shadow Chancellor will have flip-flopped again and will support it. [Interruption.] I shall be very generous and congratulate the shadow Chancellor on completing the marathon and raising all that money. I advise him not to wear flip-flops when he runs.
Mrs Anne Main (St Albans) (Con)
May I ask for clarification of the terms of the loan? The Chancellor referred in his statement to $15 billion and under £10 million, but the currency being utilised is special drawing rights at £1 to the special drawing right. Should the currency fluctuate and push the loan over £10 billion, will the Chancellor come back to Parliament and give us a vote on it?
Mr Osborne
The parliamentary authorisation is expressed in special drawing rights, and on the exchange rate at the moment the loan is just less than £9 billion.
Richard Harrington (Watford) (Con)
I realise that mind reading is not among my right hon. Friend the Chancellor’s talents, but does he think that as the shadow Chancellor did his gallant marathon yesterday, he suddenly had a Saul-on-the-road-to-Damascus moment and thought, “Ah, the organisation that I have supported for so long, the IMF, now has enough money, so I don’t agree with increasing its resources”, or does my right hon. Friend think, as I do, that the shadow Chancellor’s act is one of blatant, naked political opportunism that should be condemned?
Mr Osborne
I do think it is an act of political opportunism. As I have said, there was complete astonishment at the IMF when I said that the Opposition would probably oppose what I was doing. The people there all know the shadow Chancellor, because he negotiated on behalf of the Treasury as Britain’s representative at the IMF, so they find his decision very difficult to understand.
Mr Mark Spencer (Sherwood) (Con)
Although I support the funding of the IMF, will the Chancellor confirm that it simply emphasises the importance of maintaining UK financial credibility for UK interest rates and jobs in small businesses?
Mr Osborne
I thank my hon. Friend for his support. He is absolutely right, and while I was sitting in the IMF meeting on Friday and on Saturday morning, my mind wandered to thinking about what would have happened if I had turned up and said that we were abandoning our fiscal consolidation plan. I came to the conclusion that we would have been the subject of the meeting’s discussion rather than the problems in the eurozone.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Will my right hon. Friend confirm that not a single penny is being added to either our national debt or our deficit as a result of this action?
Mr Osborne
Yes, I can confirm for my hon. Friend’s constituents in Suffolk and for people around the country that an IMF loan does not add to the debt or the deficit. We have to ask ourselves why, when people analyse the British economy, they do not add an IMF loan to the debt or deficit. It is because they understand that it is a loan that is paid back with interest and an asset that is exchanged for some of our foreign exchange reserves, not a call on public spending.
George Eustice (Camborne and Redruth) (Con)
I support the Chancellor’s decision, because Britain should play its part in supporting the IMF and helping to stabilise the world economy. I particularly welcome what he said about supporting countries rather than currencies, but what advice should the IMF give to a country that applies for support but whose problems are largely caused by an unsustainably high exchange rate?
Mr Osborne
I thank my hon. Friend for his support, which is very welcome. The problems of the countries that we are talking about lie in their lack of competitiveness, or in the case of Ireland in its banking system. The problems that they are trying to deal with have been exacerbated by the fact that they are part of a currency union and cannot devalue, although without getting into a lengthy debate I have to say that exit from the single currency would also bring them a whole set of problems. We are very clear that an IMF programme would come with robust conditions, real analysis of debt sustainability and real recommendations on structural reforms to make those economies more competitive.
Conor Burns (Bournemouth West) (Con)
Does my hon. Friend remember the warnings that many gave prior to the creation of the euro that without large regional subventions, the project would fail? Although he is correct in asserting that “I told you so” is not a policy, it is, sadly, increasingly a fact. He has acknowledged that Germany is doing more, but does he agree that it needs to do still more before eurozone countries have recourse to the IMF?
Mr Osborne
I certainly agree that Germany and other countries need to live with the consequences of the euro, and the German taxpayer is now having to provide many hundreds of billions of euros to various funds.
My hon. Friend is right that many Conservative Members warned of the consequences of Britain joining the euro. I remember helping the then Leader of the Opposition write a speech that he delivered at Fontainebleau, which was immediately parodied by the then Government, led by Tony Blair, and the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as deeply irresponsible. The then Conservative leader spelled out in that speech a lot of the consequences that have come to pass.
Christopher Pincher (Tamworth) (Con)
Harold Wilson famously said that a week is a long time in politics, so does my right hon. Friend agree, having seen the shadow Chancellor’s performance—he first supported decent funding for the IMF and then quickly appeared to criticise it—that it now appears that Labour’s Treasury team’s dictum is that a minute is a long time in politics?
Mr George Osborne
Unfortunately, the shadow Chancellor has not, in the 18 months that he has been doing that job, set out any kind of consistent and principle-based opposition to the Government. It is all over the place, and has ended up with the Labour party voting against an increase in IMF resources. If we asked people for one of the achievements of the three-year Brown Government, they would probably say, “The London G20 summit was about the only one,” and that was all about increasing IMF resources. The position that the shadow Chancellor has led the Labour into is a remarkable one.
James Morris (Halesowen and Rowley Regis) (Con)
My constituents have legitimate concerns whenever large amounts of money are placed in international institutions. Will the Chancellor therefore confirm that the money Britain has loaned to the IMF can be used globally and not necessarily in the eurozone, and that the IMF will use its normal, stringent mechanisms for ensuring that the money is spent wisely?
Mr Osborne
I can tell my hon. Friend that his west midlands constituents will not have to pay any more taxes for the loan and will see no cuts in public services as a result of it. The money comes out of the foreign exchange reserves—the foreign currencies that Britain holds and always has held. I would also say to the people of the west midlands and elsewhere that the money is available for all countries in the world that get themselves into difficulties. They have to meet certain conditions—very tough conditions—before they get access to the money, but if the world did not have a global institution such as the IMF, we would be in a much worse place. All the manufacturers and exporters in the west midlands understand that problems in the world economy and our export markets come back to bite us very quickly indeed.
Guy Opperman (Hexham) (Con)
Businesses in the north-east want a secure, worldwide support system for the global economy and welcome this decision on the IMF, but the man in the street in Newcastle and Hexham wants to know whether we have ever failed to get our money back from the IMF.
Mr Osborne
No we have not failed to get our money back from the IMF. Britain was one of the creators of the IMF, because we understood after the 1930s that if countries just walk away from problems in the world economy, the problem is very much worse. In the north-east, we have manufacturers such as Nissan in Sunderland. Nissan is making a big new investment in the UK. It is doing so, in the end, because it has faith that the world economy will be a more stable place, one of the reasons being that we have strong institutions such as the IMF.
Charlie Elphicke (Dover) (Con)
Had other IMF quota members followed the advice of the shadow Chancellor and effectively walked on by, leaving European countries to fend for themselves, what would have been the effect on the UK economy in terms of jobs and money, and what would have been the effect on the economies of developing countries?
Mr Osborne
If the world were unable to provide the IMF with the resources it needed, people would see that the world was not able to act as a whole to deal with world problems. By the way, I happen to believe that there is no prospect that the shadow Chancellor would have taken a different decision from the one I have taken if he were doing my job. He takes the position he does simply because he is sitting on the Opposition Benches.
Bob Stewart (Beckenham) (Con)
I will repeat almost exactly what my right hon. Friend just said. Can he envisage any Chancellor of any party not making a decision such as the one he made this weekend for contingency funding to help out the IMF?
Mr Osborne
I do not think that any Chancellor since the creation of the IMF would have taken a different decision. In the end, all parties—at least, until today—have recognised that the IMF is an incredibly important institution for the stability of the global economy. If was created under a Labour Government, and it would be pretty remarkable if a Labour Chancellor were to try to pull the plug on Britain’s participation in it.
Robert Halfon (Harlow) (Con)
Will my right hon. Friend assure my constituents that there will be no impact on the increased spending on our schools and hospitals that the coalition Government are providing, and no impact on cutting taxes for more than 40,000 Harlow residents through raising the income tax threshold?
Mr Osborne
I can absolutely assure the people of Harlow that we will deliver a big increase in their personal tax-free allowance, continue with real increases in the health service, support their schools and, above all, get their economy moving after the disastrous mess that the previous Labour Government put us in.
Madam Deputy Speaker (Dawn Primarolo)
I thank the Chancellor and the 58 Members who were able to participate in this important statement.
Points of Order
Kerry McCarthy (Bristol East) (Lab)
On a point of order, Madam Deputy Speaker. Last week I tabled a question to the Minister for Women and Equalities asking what representations she had made to the Chancellor of the Exchequer about an equality impact assessment for the Budget. That question appeared fleetingly at No. 2 on the Order Paper for Thursday’s oral questions and then disappeared. Although I had asked her what she had said to him, she obviously thought it more in keeping with the ethos of her Department that she let him answer on her behalf. May we have some guidance on which questions are likely to be transferred so that we do not waste our opportunity at oral questions by asking things that the Minister does not feel capable of responding to?
Madam Deputy Speaker (Dawn Primarolo)
As the hon. Lady will know, the transfer of questions is dealt with by the Departments and is not a matter for the Chair. I would suggest, however, that she has a conversation with the Table Office to ensure that, next time she tables a question, it is to be answered by the Department she intended.
Clive Efford (Eltham) (Lab)
On a point of order, Madam Deputy Speaker. At the beginning of last month, new evidence came forward calling into question the conclusion of the Macpherson inquiry about whether police corruption interfered with the investigation into the murder of Stephen Lawrence. I tabled questions on that basis to the Home Office, and on 19 March I received a holding answer saying that it would answer as soon as possible. I subsequently retabled those questions asking when they would be answered and today received another holding answer saying that the Department would answer as soon as possible. This morning, in The Guardian and The Daily Telegraph, there is front-page speculation about the Home Office’s position on an inquiry into these matters. I have not received any decent response to questions I have tabled in the House. Is it not an affront to the House that speculation clearly fostered by the Home Office should appear in the media after a Member has raised the issue in the House? Furthermore, Madam Deputy Speaker, have you had any indication from Home Office Ministers that they are likely to come here and explain this completely unsatisfactory situation?
Madam Deputy Speaker
The hon. Gentleman has closely followed these important issues for some time because of their relevance to his constituency. He asked two specific questions. The first question was about adequate answers from Departments to Members. If he is dissatisfied, it is open to him to pursue it through the Procedure Committee; it is not a matter for the Chair. His second question was about notification of a statement from the Home Office on this important issue. I have received no notification and have no knowledge of such a statement, but the Deputy Leader of the House is in his place and knows that this is an important issue, and I am sure that he is prepared to assist the hon. Gentleman in any way he can to ensure that this matter is dealt with properly and urgently.
I understand that owing to an error in the notice given on the Order Paper, Mr Graham Jones will not be presenting his Bill today.
Financial Services Bill (Programme) (No. 3)
(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
17:05 - The House divided: - Ayes: 277 / Noes: 183 - Question accordingly agreed to.
TABLE | |
|---|---|
Proceedings | Time for conclusion of proceedings |
First day | |
New Clauses and New Schedules; amendments to Clauses 1 to 3; amendments to Schedule 1; amendments to Clause 4; amendments to Schedule 2; amendments to Clause 5; amendments to Schedule 3 | 10.00 pm |
Second day | |
Remaining proceedings on Consideration | Three hours after commencement of proceedings on Consideration on the second day. |
Chris Leslie (Nottingham East) (Lab/Co-op)
I am surprised that the Minister has moved the programme motion formally, given that today—day one of what is supposedly two days for Report and the remaining stages of this Bill—we have five hours of debate in which to cover 59 amendments. Even if there are no Divisions in the House, that leaves barely five minutes for each item.
This Bill is an extremely important piece of legislation. It reforms some of the most important financial institutions in this country, including the Bank of England, creating new financial regulators and dealing with consumer finance, business finance and all those key issues. It has 103 clauses and 21 schedules, yet this programme motion gives us a derisory amount of time. We supposedly have two days, but we will in fact have one and a half days on Report. The second day is not a full day, but a half day, with three hours for the remaining proceedings. Do not let us forget that today we have five clauses to cover in the space of five hours, and we will have 97 clauses to consider in three hours on day two, whenever that is scheduled. That is barely even paying lip service to proper scrutiny. When the Bill gets to the other place, their noble Lordships will have to look seriously at whether there has been proper accountability for the provisions that are before us.
We also had insufficient time upstairs in Committee, where 20 clauses went undebated. That is because the Government have consistently allocated insufficient time for this legislation. When the previous Administration took the Financial Services and Markets Act 2000 through the House in 1999-2000, 35 sittings were given in Committee. However, less than half that number were given to scrutinise this Bill in Committee upstairs—we had only 16 sittings in total—so it is no wonder that clauses went undebated.
This is a parody of a programme motion. It leaves massively insufficient time. I do not wish to waste any more of it, but this motion has to be opposed. I hope that my hon. Friends will join me in protesting against this lack of accountability, call on their noble Lords to spend more time scrutinising the Bill properly and vote against this programme motion.
The Financial Secretary to the Treasury (Mr Mark Hoban)
The hon. Member for Nottingham East (Chris Leslie) protests too much about this matter. Those of us who are veterans of the Bill and those who occasionally came to watch our proceedings will know why 20 clauses went undebated, as is clear from the Committee Hansard. The Opposition agreed on the programme motion and the number of sittings—there was no Division on the programme motion after Second Reading—and ample time was given. However, on one occasion the hon. Gentleman spent an hour debating a set of minor and technical amendments, during which he discussed the correct terminology for people from Gibraltar and whether any Committee members had ever had the pleasure of visiting Gibraltar, questioned the drafting conventions relating to the insertion of amendments into a lettered list, and speculated as to the bedtime of my officials. He did not strike me as a man who was keen to press forward with scrutiny of the Bill.
This Bill has received proper scrutiny. It has been discussed by the Treasury Committee—we have a number of its reports before us today, which will enable us to discuss the issue—and has received pre-legislative scrutiny by a Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). We listened carefully to the arguments made by both Committees, which have been reflected in the Bill that we have debated. I believe that there was adequate time in Committee to deal with the matter. The fact that we ran out of time was not down to the way in which the Bill was debated by the Government; it was down to the way in which the Opposition handled it.
It is also the case, as my hon. Friend the Deputy Leader of the House has said, that in the last Session of the previous Government, no Bill was given more than one day on Report. Having a two-day Report Stage is important, as this Bill requires scrutiny, and I believe that a great deal of scrutiny is taking place. It is now time for us to get on with the debate, and I am sorry that the hon. Gentleman is seeking to divide the House on the motion, because the time spent on the Division could be spent discussing the Bill and getting our points across.
Question put.
Financial Services Bill
(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
21:59 - The House divided: - Ayes: 215 / Noes: 290 - Question accordingly negatived.
22:12 - The House divided: - Ayes: 216 / Noes: 290 - Question accordingly negatived.
22:25 - The House divided: - Ayes: 205 / Noes: 301 - Question accordingly negatived.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following:
New clause 5—Amendments to Tribunals, Courts and Enforcement Act 2007
‘(1) Section 124 of the Tribunals, Courts and Enforcement Act 2007 (charges by operator of approved scheme) is amended as follows.
(2) In subsection (1) for “costs’ substitute “charges”.
(3) In subsection (2)—
(a) for “costs”, in the first instance, substitute “charges”,
(b) after “scheme”, insert “along with any charges made by the operator”, and
(c) after “those costs” insert “and charges”.’.
New clause 9—Debt management plan regulation
‘The FCA shall bring forward recommendations within a year of the commencement of this Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.’.
New clause 10—Mortgage rate forewarning
‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.
New clause 12—Prepayment schemes
‘(1) The FPC must carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.
(2) The FPC must make recommendations under subsection (1) within one year of this section coming into force;
(3) Any report produced by the FPC under subsection (1) shall include an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets of the company operating such schemes in the event of insolvency.’.
Government amendments 2 and 3.
Amendment 37, page 37, line 42, in clause 5, at end insert ‘and targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.’.
Amendment 55, page 38, line 6, at end add—
‘(h) supporting the provision of legal advice on all areas of law related to personal debt, including but not limited to—
(i) issues covered under Schedule 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012,
(ii) remedies under the Insolvency Act 1986 and Tribunals, Courts and Enforcement Act 2007,
(iii) protections under the Consumer Credit Act 1974 and Consumer Credit Act 2006,
(iv) consumer redress schemes under the Financial Services and Markets Act 2000,
(v) debt limitation under the Limitation Act 1980, and
(vi) enforcement action for specified debts pursuant to a county court judgement, a High Court writ or warrant issued by a Magistrates’ Court.
(4A) For the purposes of subparagraphs (h)(i) to (vi) above the consumer financial education body may enter into arrangements with the Ministry of Justice to direct appropriate levels of funding for these purposes.’.
Government amendment 4.
Amendment 40, page 80, line 2, in clause 22, at end insert—
‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.
Government amendments 11 and 18 to 21.
Mr Hoban
New clause 4, which is the most significant of the Government new clauses and amendments in the group, provides a framework for implementation of the Government’s proposal to retain the important rights and protections of the Consumer Credit Act 1974 to ensure that consumers do not lose out as a result of the transfer. For example, we are likely to retain section 75 of the Act, which provides for the joint liability of creditors for misrepresentation or breaches by suppliers.
The Government’s preferred approach to the implementation of the transfer of responsibility for consumer credit from the Office of Fair Trading to the Financial Conduct Authority is to ensure that the Consumer Credit Act protections are replicated in the FCA’s consumer credit rule book, and that the relevant sections of the Act are repealed. That approach is in line with the intention to move to a more responsive, rules-based regime than the current statutory framework.
However, there are limitations to the type of rules that the FCA can make, which means that it will not be able to replicate in its rules all the CCA protections that we want to retain, including protections that impose rights directly on consumers and those that affect unauthorised third parties. That means that some CCA protections will need to be kept in the CCA itself, and that certain provisions of the CCA will therefore need to remain in force following the transfer. As a result, a number of changes will need to be made to both the CCA and the FSMA as part of the transition, to reflect the fact that the FCA will be responsible for regulating consumer credit and to ensure that the FCA, as well as local trading standards, can effectively enforce the retained CCA provisions. For example, it will be necessary to replace references in the Consumer Credit Act to the Office of Fair Trading with references to the FCA. We will also need to apply certain features of the FSMA, such as references to the FCA’s objectives, statutory immunity and fee-raising powers, to the FCA’s new functions under the Consumer Credit Act, and enable the FCA to use FSMA supervision and enforcement powers that would normally be used in relation to breaches of FCA rules for breaches of CCA requirements. New clause 4 enables the Treasury to make those changes and other necessary amendments to the CCA and the FSMA by order.
I should also draw attention to the addendum to the delegated powers memorandum, which the Department has prepared and provided to the delegated powers Committee. The memorandum sets out in more detail how this power is intended to operate and why it is necessary. Copies are available in both the Printed Paper Office and the Vote Office. The order to be made under this provision will be subject to further consultation following Royal Assent to the Bill. Government amendment 11 provides that any order under new clause 4 will be subject to the affirmative procedure and so can be made only with prior approval of both this House and the other place.
Government amendment 2 supports effective collaboration between the FCA and local trading standards following the transfer, enabling the FCA to contract trading standards for the provision of services in the same way that the OFT does now—for example, to undertake local inspections and follow up on enforcement action, including by local illegal money-lending teams. Government amendment 21, and related amendments 18, 19 and 20, insert into the Bill provision for the transfer of the OFT property, rights and liabilities, including staff, to the FCA.
I hope Members will agree that the Government amendments in relation to consumer credit are sensible and practical provisions to support an effective transfer of regulation to the FCA. The new clause and related amendments sit within a process of regulatory reform that seeks to tackle some of the issues raised by Members on both sides of the House about the functioning of the credit market. We believe the FCA will have much stronger powers and greater resources than the OFT has had in order to tackle detrimental practices in the consumer credit market. Unlike the OFT, the FCA will be able to make binding rules on firms to ban specific products or product features that cause harm, to issue unlimited fines, and to require firms to pay redress when things go wrong. It will also be able to apply greater scrutiny to applications for credit licences and make it more difficult for rogue firms to enter the market.
As a consequence of the transfer we have introduced into the Bill, there will be a fundamental change in the regulation of firms such as payday lenders and debt management companies. I am pleased that the provisions enabling that transfer were welcomed in Committee.
There are a number of Opposition amendments relating to consumer credit and debt management plans, and I want to say a few words about them now. On new clauses 5 and 9, I made it clear in Committee that I sympathise with concerns about some of the practices in the fee-charging debt management sector. That is why clause 6 enables the regulation of debt management companies to be transferred to the FCA. That is also why we have chosen to leave on the statute book the enabling powers of the Tribunals, Courts and Enforcement Act 2007.
More immediately, we are working with the industry to develop a protocol of best practice for debt management plans, which should cover, among other things, the nature and timing of fees. Indeed, on 14 June the Minister with responsibility for consumer affairs, my hon. Friend the Member for North Norfolk (Norman Lamb), will chair the first industry-wide meeting to discuss and take forward the protocol. That will follow several months of meetings with a smaller, representative group of stakeholders, which has talked through processes, commercial terms and advice, to reach an agreed position.
I also wish to refer the House to new guidance for the debt management sector recently published by the Office of Fair Trading, which sets out in substantial detail the standards expected of firms. I believe that it is appropriate that we give time and focus to current efforts to improve standards in the debt management sector, and take account of the significant changes to the wider regulatory regime enabled by the Bill, before we start talking about changes to a potential statutory scheme under new clause 5.
As I said in Committee, I do not think that we should throw the baby out with the bath water and shut down the market for fee-charging debt management services, as proposed by new clause 9, before fully exploring better regulation. Where suppliers of credit are aware of people who are suffering financial distress in repaying their debt, I encourage them to signpost their customers to fee-free debt advice services so that they can get the best possible advice to meet their needs.
On amendment 40 and new clause 10, I wish to reassure hon. Members that the Bill already enables the FCA to make the kind of rules proposed in those two provisions. Indeed, in relation to new clause 10, the Financial Services Authority already places a number of requirements on firms to ensure that borrowers are informed if their mortgage repayments are subject to change. I know that some hon. Members may wish to challenge the approach, saying, “But if the FCA can already make the proposed rules, what is the harm in accepting these proposals?” The point is that there are significant risks to specifying in great detail in the Bill the precise type of rules that the FCA may make. First, in doing so, we risk distracting the regulator from using its expertise and judgment to identify and address the risks that it considers pose the greatest risks to its objectives. As parliamentarians, we should be creating a framework within which technical experts can exercise their discretion, in a suitably constrained way. We should leave them to get on with the job, not provide a long laundry list of everything that we want them to do.
By specifying in detail what rules should or should not cover, we also risk creating the opportunity for challenge to the regulator’s ability to make rules that are not specified in the Bill. The lack of specific provision in the Bill does not, in any way, reflect on how seriously the Government take these issues. For example, in relation to high-cost credit, a number of initiatives are under way to improve standards in the sector. Those include work to improve industry codes on payday lending; research commissioned by the Department for Business, Innovation and Skills into the impact of a cap on total cost of credit; and a review by the OFT of payday lenders’ compliance with its irresponsible lending guidance. As well as raising standards now, the findings of those pieces of work will feed into the FCA’s approach to regulating the sector following the transfer, including on the type of rules it may make regarding these charges.
Alun Cairns (Vale of Glamorgan) (Con)
I appreciate the comments that have been made about the Bill and, specifically, about amendment 40. Does my hon. Friend agree that there is a risk of amendment 40 moving into price regulation, which is very different from product intervention? Price regulation would be a very dangerous line to follow.
Mr Hoban
I ask the hon. Lady just to hold her horses for a moment. This is about the third time we have discussed this matter and she may want to engage in the debate later, but we need to understand the function of the market. The previous Government—[Interruption.] The hon. Member for Nottingham East (Chris Leslie) says that we are still making the wrong decisions, but our predecessors in government examined this issue of the cost of credit and concluded that price caps worked against the interests of consumers. This Government have, following the parliamentary debates on the matter, commissioned research to examine the impact of a cap on the total cost of credit. We should look at the research, understand what remedies are being proposed and follow that through. One of the advantages of moving the cost of the regulation of consumer credit away from the OFT to the FCA is that the FCA has a greater range of tools and can make a wider range of interventions than the more narrowly focused solutions of the OFT.
Nick de Bois (Enfield North) (Con)
Does the Minister understand that the sense of concern is heightened by the fact that although the research is welcome, as yet there is no sense of urgency or indication of when it might become available? I would be grateful if he could suggest when we might see the fruits of that research.
Mr Hoban
I do not have that information on me, but I will endeavour to have it by the time I wind up the debate. It is important that there is evidence, that we do not respond on a knee-jerk basis and that we ensure that we protect vulnerable consumers. That includes ensuring that the right protection is in place for those who wish to borrow money to meet their needs and we should also ensure that we do not push them into the arms of illegal money lenders. One change we are making in this group of amendments includes ensuring that the work of the illegal money lending teams out in the regions can continue when we shift the regulation of consumer credit to the FCA.
I am aware of these issues and it is important to the constituents of my hon. Friend the Member for Enfield North (Nick de Bois) and to mine that we get the right answer. A lot of work has gone on in the past to consider the cost of credit, and we need to proceed on the basis of evidence rather than closing our minds to what solutions there might be. Let us have some evidence to inform the debates so that we can give our constituents the right answer, rather than something that happens to be convenient to some political whim or desire. I believe that we should have evidence-based policy making and that that is the right approach. All the stakeholders would also agree that we need to support this work with some evidence, rather than proceeding without a firm evidential base.
New clause 12 concerns the important issue of how consumers who take part in prepayment schemes are protected and how they are treated if the provider of such a scheme becomes insolvent. I suspect that many members of the House will have dealt with this matter over recent years, given how many people were affected by the collapse of Farepak just before Christmas 2006. The Government have great sympathy for those who have lost money in such schemes and are aware of the frustration they feel. One problem with the Farepak insolvency has been the fact that it has taken so long for the customers to get their money back. Work with the liquidators is continuing.
The challenge is whether the Bill is the appropriate place for regulating such a function. Prepayment schemes are advance payments by a consumer for goods and services that are not supplied immediately; they are not financial services. It is not clear whether they are an issue for any of the bodies provided for in the Bill to consider and I do not think they will be a matter for the Financial Policy Committee, with its remit of considering threats to financial stability.
Since the collapse of Farepak, a considerable amount of work has been done to consider how best to protect consumers who enter into prepayment schemes and how best to deal with situations where companies collapse. Following the collapse of Farepak, the then Department of Trade and Industry worked with the remaining hamper companies to put in place effective protection for customers’ prepayments, including oversight by a new body, the Christmas Prepayment Association. The Government also supported the OFT to deliver a consumer awareness and education campaign to empower consumers to make decisions that are right for their circumstances. The Money Advice Service also provides advice on its website about what protection is offered for various ways of saving money, including prepayment schemes. I would encourage hon. Members who are aware of constituents who continue to engage with such schemes to point them in the direction of the Money Advice Service.
Katy Clark (North Ayrshire and Arran) (Lab)
If the Minister does not feel that this Bill is the appropriate vehicle for dealing with that matter through regulation, when he sums up could he outline where it should be dealt with? There is a strong view that the current legislative framework is not sufficient.
Mr Hoban
Part of the challenge is that such schemes are part of a subset of advance payment schemes that are not necessarily covered by the Bill. These issues are consumer issues and I shall certainly raise with my hon. Friend the Minister with responsibility for consumer affairs where he feels that the best opportunity might be to do that and whether there are some non-statutory alternatives to regulation that will help protect the customers of such schemes.
Before I speak to Government amendment 3, I can let my hon. Friend the Member for Enfield North know when the research will be published. The research project will conclude this summer, and given that the transfer of consumer credit to the FCA will not take place until 2014, that gives us time to act. That is not to say that nothing is happening in the meantime in the regulation of consumer credit: the OFT is doing a great deal of work in that area. I am as keen as he and others are to ensure that the matter is brought to a head as soon as possible, so that the right protections are put in place for our constituents.
Government amendment 3 aims to improve the drafting, following the close and valuable scrutiny in the Public Bill Committee. In Committee, questions were raised about the appropriateness of “supply”, and the amendment clarifies the Money Advice Service financial education function so that it should include the promotion of awareness of the financial advantages and disadvantages relating to issues that may arise over the lifetime of the product, not just to the initial purchase or supply of a particular good and service. The function might include, for example, promoting awareness of the financial advantages and disadvantages of a person exercising the right to receive part of their pension savings as a lump sum, or the financial advantages or disadvantages of the various options open to a person who is having difficulty paying their mortgage.
I am confident that the Bill as it stands already provides for such matters to be covered by the Money Advice Service financial education function, but the amendment helpfully clarifies the scope of the MAS’s specific duty to promote awareness of the advantages and disadvantages of particular goods and services. I am grateful to the Members who raised the matter in the Committee, and I hope that the amendment addresses their concerns.
Amendments 37 and 55 would affect the functions of the MAS. Amendment 55 would require the MAS to support the provision of legal advice in relation to personal debt, with funding received from the Ministry of Justice to support that work. The amendment would reinstate changes to legal aid in the Legal Aid, Sentencing and Punishment of Offenders Bill. For the reasons clearly set out by my right hon. and learned Friend the Justice Secretary, we cannot use the Financial Services Bill to compensate for reforms to legal aid in the other Bill as a roundabout way of maintaining funding for not-for-profit bodies; moreover, effectively reinstating those categories in the scope of legal aid means reinstating legal aid for all legal advice, not just for those in not-for-profit organisations.
Amendment 55 is not required because the Money Advice Service already has sufficient responsibility and funding to assist members of the public with debt management. The MAS and other organisations provide debt advice directly, including by advising people who are facing difficulties with debt on the options available to them and the possible legal ramifications. For example, they provide advice to people who are at risk of losing their home and advice on options to resolve their financial difficulties. Any debt adviser trained to intermediate level can give advice on such matters as a matter of course. In contentious areas of law, such as the impact of insolvency or immigration status, an adviser could seek external advice. Similarly, if a non-debt issue arose, or substantive legal advice was required, an adviser could refer the client to a specialist solicitor. I therefore do not think the amendment is necessary, as the MAS and other organisations, through their debt advice services, already advise people facing difficulties with debt on the impact of the law on their situation.
Amendment 37 would require the MAS to provide
“targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
I am sympathetic to the intention behind the amendment: clearly, the service provided by the MAS should encompass such groups of people. However, as I said in Committee, one of the key features of the Money Advice Service is the breadth of consumers it is there to serve. Millions of people can be vulnerable to poor money management at any point in their lives, especially as they experience key life events. Similarly, many people, regardless of their financial circumstances, may not know where to turn for impartial financial advice, or may not know that they need information and advice in the first place. I therefore do not think it appropriate for the legislation to prescribe which groups are in most need of the service. By focusing the Money Advice Service on particular groups, we risk neglecting others who may be equally in need.
It is clear to me, from discussions I have had with the management of the Money Advice Service, that they recognise the need to provide support across a wide range of people. They also recognise the importance of face-to-face debt and money advice and the importance of ensuring the right channels of support are there to help those in need of financial advice—for example, those who need guidance on how to get out of debt or how to protect their families in the long term. I believe the MAS is acutely aware of its broader social obligation.
The group of amendments before us raises important issues that impact on many in our constituencies. The action that we have taken to tighten the consumer credit regime by moving consumer credit from the OFT to the FCA is the right way to proceed. This is a dynamic and changing market, and one of the great advantages that the FCA brings is the opportunity to keep issues such as the cost of credit under review and to make sure that it responds in a timely manner to help protect our constituents in these difficult areas.
Chris Leslie (Nottingham East) (Lab/Co-op)
I suppose the Minister is right in one respect. This long group of amendments under the catch-all heading “Consumer protection” raises many issues about which our constituents care deeply. It is just a shame that the Minister is resisting and rebutting almost all of them, except the Government amendments. But I do not want to sound too churlish. He has conceded—we have managed to extract—one minor concession from the Government in Government amendment 3. I therefore feel that all those hours and weeks in Committee were productively spent, and for that small measure I am grateful to the hon. Gentleman.
Time is short so I will comment on the series of amendments tabled by the Minister, and then on those in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). Government new clause 4 sets out a series of order-making powers for the Treasury in respect of the transfer of regulation of consumer credit matters from the Office of Fair Trading to the Financial Conduct Authority. I am grateful for the clarification of the Government’s intentions. My comments on this and the consequential amendments in the group relate to the time scale for these arrangements. The new clause sets out the paving changes rather than the regulations, saying that the Treasury may well make these orders in due course. It gives a sense of the architecture of those and the fact that most of the powers available to the OFT under the Financial Services and Markets Act 2000 will be available to the FCA and so on, but we do not yet have the time scale for those orders to be made and to take effect.
Many loose ends remain, even after the amendments. How will the local weights and measures authorities dovetail with the new arrangements, the FCA and so forth? What is holding the Government up in making those changes, publishing the new arrangements and making it clear to those who may be slightly concerned that the transition period could create a sense of limbo in which a number of issues fall between the gaps? We do not want consumer credit arrangements to be put on the back burner during the transfer—quite the opposite. We need this time more than ever to help consumers who are under strain on various fronts, as is pointed out in the amendments tabled by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), the hon. Member for Eastbourne (Stephen Lloyd) and others.
New clause 9 in my name seeks, as the Minister mentioned, to require the Financial Conduct Authority to produce recommendations within a year of the commencement of the Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.
Lorely Burt (Solihull) (LD)
I have a huge amount of sympathy with the hon. Gentleman’s points about some companies that prey on some of the most vulnerable in our society who are in fear of the debt collector knocking on the door. However, would he tar every debt management company with the same brush? I have experience of companies that behave responsibly and extend a great deal of help to people to manage their financial affairs.
Chris Leslie
That is a fair intervention. No, I would not say that they are all the same. There are companies, even those that may for some reason be using this fee charging process, that want to do the right thing, but my point is that that business model has had its time and needs to go. There is a better way, whether it is a for-profit or a non-profit avenue, for debt management consolidation to take place, and that is to tell the creditor that this is a way for them to get some money back, albeit not necessarily the full amount, from those heavily indebted customers who may owe them something, and in exchange for getting something back they have a duty as a creditor to stump up some of the cost for the administration of that consolidation. It is time to end the business model that has a propensity to cause hardship, not in every single case, but in too many cases, and that is why the Opposition believe that this is a perfectly reasonable new clause to bring forward.
New clause 10 concerns mortgages. People may well ask where the problem is at the time being when mortgage rates are at a low level, partly because the Bank of England is printing so much money that we end up with a low base rate. But the Governor of the Bank of England has been warning in a number of reports that this is an unsustainable situation and that over the medium term he expects interest rates to normalise. From the Bank of England’s point of view, whether the normalised interest rate is 4% or 5% is moot, but it is certainly much higher than the current rate.
My anxiety is that many consumers up and down the country might be under the false impression that this is a normal period, but it is not. If the mark-ups that the retail banks charge on the wholesale cost of borrowing are maintained as base rates or LIBOR rise to a more normal level, the mortgage rates that our constituents pay could end up being significantly higher, at 6%, 7% or 8%. I suspect that the difference between the price the banks pay wholesale for their money and the amount they charge customers upfront has been growing and is too wide. As soon as LIBOR creeps up, if that mark-up is maintained, we could be in serious difficulties, which is why the new clause is essential at this time.
This is a stitch-in-time new clause. We have tabled the proposal because we believe that now is a good time to require all the banks to forewarn their customers about a number of possible scenarios so that home owners with mortgages have the information necessary to prepare for them. Often when those of us with mortgages get information from lenders it is a set of retrospective information, for example on how much we have paid to defray the cost of our mortgage. We believe that it is now essential to forewarn customers about what could come in future, because we have to find a way of ending shocks to consumers, especially when changes to standard variable rates can sometimes be made with as little as two weeks’ notice.
Alun Cairns
I am trying to follow the hon. Gentleman’s argument, but how on earth could any individual or organisation predict with certainty what will happen in future?
Chris Leslie
The hon. Gentleman is right that it is impossible to predict with certainty, but this is about scenario planning and preparedness. He will know that the Governor of the Bank of England has been saying what he regards normalised base rates to be, broadly speaking. Does the hon. Gentleman not think that our constituents, especially those on variable interest rates—this might not apply to all customers with mortgages, some of whom might have fixed rates—ought to be able to see when their rates fluctuate because of the fortunes of the base rate or, as is often the case, the standard variable rate determined by their bank, and does he not think that those banks ought to help their customers plan for the future? If we end up yet again with a cycle in which people find that they cannot make their payments and their homes are repossessed, we will all have those constituents in our surgeries.
Let me give the hon. Gentleman an example. A couple of weeks ago Halifax announced that it would increase its standard variable rate by 0.5% from 1 May. RBS NatWest has done similarly, as have Clydesdale bank, Yorkshire bank and Bank of Ireland. In my view, all those increases are the result not of base rate changes, but of the fact that those banks are looking to repair their balance sheets not by squeezing remuneration and bearing down on the senior executive management costs that we all know they have, but by trying gradually to take a little more money from consumers. That is why we need a warning for customers in these circumstances.
Alun Cairns
I fail to understand the logic of the hon. Gentleman’s argument. If someone’s financial position at the time they take out a mortgage is relatively precarious, they probably should not have the mortgage. Furthermore, to take the logic to the next step, surely a fixed rate product would be better for those people and they should not have been on the variable rate product in the first place, so why on earth are we asking banks through additional regulation to make such predictions when it is meaningless in the reality of life?
Chris Leslie
We are doing this because the hon. Gentleman and I are here to represent our constituents, some of whom will be on variable rate mortgages in these circumstances. All we are saying is that we want all the banks to warn of the potential impact of rate changes across a range of scenarios. It is about helping customers anticipate what might be around the corner. It is as simple as that. The banks will give all sorts of reasons for increasing their standard variable rates. For example, they claim that costs make it difficult and often cite the special liquidity scheme, which is now beginning to taper off so the taxpayer safety net is beginning to come away, but taking more and more from consumers is in many ways unfair. I think that Lloyds bank recently borrowed many billions from the European Central Bank as part of its long-term refinancing option, so there is cheap money available wholesale for the banks. We have to keep an eye out for the way they sometimes seek to make an excessive profit off the backs of ordinary mortgage customers.
David Rutley (Macclesfield) (Con)
I appreciate the rationale that the hon. Gentleman is putting forward and that he is trying to protect customers, but I have to agree with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on the impracticality of the proposal. There now seems to be a tendency to make proposals on single products, but the Bill is about financial stability in the round, which we are trying to achieve, so is he seeking to introduce a similar forewarning system for savers on fixed incomes, who find interest rate changes equally worrying?
Chris Leslie
There might well be a case for that, but we are talking about people’s homes and the roofs over their heads. Repossessions can seriously hurt people, especially if they were unable to anticipate the situation because of a shock or unpredicted changes to their interest rates. As I have said, this point in the cycle is the right time to make this sort of change. It is about preparedness and information for home owners, and I feel strongly that we ought to have that in statute. If the Minister does not agree, this is certainly one of the issues on which we want to test the will of the House.
Chris Leslie
I will give way, but there are a number of other amendments I have to talk about.
Mark Garnier
I am incredibly grateful to the hon. Gentleman. He talks about an incredibly significant problem in this country: the £1.2 trillion-worth of mortgage debt for all the people of this land. What he is describing is a steepening in the yield curve, but that could also be the result of an increase in deposit rates, so what could be taken away with one hand could be a result of giving with the other hand. What I am really struggling with in the new clause is how he envisages mortgage lenders being able to deliver the warning, given the fact that he defines a shock in interest rates as something that cannot be predicted. Moreover, how does he envisage this working in practice?
Chris Leslie
The hon. Gentleman might know that in annual pension statements, for example, in the key facts documents a number of scenarios are put forward for what the pension might be worth under a range of growth options, such as annual growth of 3%, 5% or 9%. All I am seeking to do is ask the Financial Conduct Authority to consider a way of giving a range of scenarios and helping to provide information for customers, which would not be impossible. That is why I think that that is necessary for mortgages. I hope that hon. Members on both sides of the House will support what is a pretty modest change. It is something that I know we are all concerned about. The Government definitely need to go away and look at the issue again.
Amendment 37, which also stands in my name, relates to the Consumer Financial Education Body, which we now call the Money Advice Service. We are seeking to amend the Bill so that it specifically targets
“proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
In our view, it is vital that the Money Advice Service focuses as much effort as possible on the vulnerable and those susceptible to problems, whether as a result of misinformation or choices made in financial investments. We know already, from examples in our surgeries, that those on the lowest incomes—the most vulnerable in society—need to be better protected in legislation, and that is why the new clause has been tabled.
Justin Tomlinson (North Swindon) (Con)
I shall speak briefly to a number of amendments that are inter-linked, because the protection of vulnerable consumers cannot be taken in isolation. A series of measures needs to be taken to protect those who need the most help.
Members on both sides of the House will support the principle of amendment 40, on the total cost of loans, but it is important that through the review we find a way of making it work. We do not want to push people into the hands of illegal loan sharks, and the review, which has been going on for 18 months now, needs to conclude so that we can start to make progress, but we need to look at all the variables, including the need to limit the amount of roll-overs.
The shadow Minister described how people might use such loans in exceptional circumstances, but there are two aspects to that. First, there are some people who, through consumer choice, might wish to take out such loans, so to my mind we should have compulsory credit checks. If people who can afford to service such debts make a consumer decision to be relatively inefficient with their money, that is up to them, as long as they can afford to do so, but if vulnerable consumers get trapped in a cycle of debt and need protection, a limit on the amount of roll-overs will be absolutely essential.
I talk to a number of high-street lenders—including The Money Shop—which look at people’s bank statements, but it is not unusual for people to have more than one bank account, and the reason I am so keen on credit checks is that although people often look after one bank account in an orderly manner, that is the one they present when applying for a loan, not the one that is in financial chaos.
Nick de Bois
My hon. Friend refers to the review, but alongside other points he has made, would it be worth considering lending techniques such as doorstep lending and similar?
Justin Tomlinson
My hon. Friend makes an important point. In previous debates, I focused my anger on the techniques of doorstep lenders, who build up a relationship with the consumer, pop by once a month and, over a cup of tea, suggest items for which they might want to borrow money, trapping them in a lifetime of expensive, high-cost debt. For example, they might pop round at Christmas to ask, “Have you organised your Christmas presents for your children?” The householder says, “No, I’m not sure I can afford it,” to which the lender replies, “No problem. We’re here. We can lend you that. It’s only £3 a week. I’m sure you’re going to be having relatives to visit, so why don’t you get your carpet sorted at the same time.” Those nudge-nudge techniques, which encourage people to take on high-cost debt, need to be looked at.
Amendments 37 and 55 seek to empower consumers, and there are important factors, such as the need to access impartial advice, that need to be looked at. I found through my work as chair of the all-party group on financial education that 91% of people who got into financial difficulty would have made a different decision had they known otherwise. Hindsight is a wonderful thing, but through our casework as MPs we see that some people make the wrong decisions and get themselves into difficulty. Of the three ways I would like to see that tackled, one is by the provision of easy access to advice through organisations such as the Consumer Credit Counselling Service, Citizens Advice and the Money Advice Service. To my mind, if a debt management service offers a high-cost loan, it should provide links to those organisations, just as when somebody buys a packet of cigarettes, there is a health warning on it. There is then no excuse. It relies on consumer choice, but if somebody chooses to, they can take up the advice.
It will also help if all consumers have financial education in the first place so that they understand the advice. In the case of the Money Advice Service, one needs to know something about the products in the first place. Obviously, face-to-face advice would be ideal. I would also like all loans to be displayed in pure and simple cash terms, so that every consumer can make an informed decision. I am sure that even Treasury Ministers would struggle to work out what is meant by an APR. I will not embarrass individual MPs by carrying out a test, as I have in previous debates.
Finally, I deal with clause 10. I was interested in the Minister’s comments about advice being given to consumers six months in advance. As we all recognise, that presents a challenge, because if somebody could predict what will happen in six months’ time, they would be very wealthy. The principle is right: we need to protect consumers from sudden changes. The evidence shows that the majority of people who fall into financial difficulties do so because of a change of circumstances such as the loss of a job, a family bereavement or a divorce. One could extend that to a sudden change in the cost of a loan because of the interest rates.
Although this is often derided, I think that we need to encourage a savings culture. If one has money in reserve, one is better equipped to deal with a sudden shock to one’s circumstances. I welcome the moves of the Nationwide building society for first-time buyers, because they are among those most at risk from a change in circumstances owing to a change in their job or in their interest rates, because they extend their borrowing to the absolute limit to get themselves on the housing ladder. Nationwide has introduced a linked savings account into which people have to put regular savings for the six months to a year that they are trying to get their first mortgage. It encourages them to carry on doing so, so that if interest rates and the cost of their loan go up suddenly, they have a financial buffer. More could be done to encourage the industry to promote such products.
Katy Clark
It is a pleasure to speak to new clause 12, which I tabled along with many other hon. Members. It would require the Financial Policy Committee to
“carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.”
It would require the report to include
“an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets…in the event of insolvency.”
I come to this issue as a result of the experiences of my constituents when the Farepak Christmas savings club collapsed on 13 October 2006. Many hon. Members will be well aware of the background to the Farepak issue, which has been raised in this Chamber on a number of occasions. More than five years after the collapse of the company, almost none of the 120,000 people who lost out have received a penny of their money back. Those 120,000 savers lost about £38 million. Some money was distributed as a result of a response fund, which was set up in the lead-up to Christmas 2006, but the people who lost out have not received any money from those who are dealing with Farepak’s assets.
In my constituency, hundreds of families were affected. I pay tribute to my constituents Louise McDaid and Jean McLardy, who, along with many others, set up the Farepak victims committee, which continues to campaign for justice for those who lost out as a result of Farepak’s collapse.
Jessica Morden (Newport East) (Lab)
Will my hon. Friend add to that list my constituent Deborah Harvey, who was a Farepak agent and who has campaigned tirelessly with the Farepak victims committee? The committee recently contacted a raft of companies that run prepayment schemes to seek assurances about the future protection of people’s money, but it has not had a welcoming response. Does my hon. Friend agree that we owe it to Farepak’s victims to ensure that this sort of thing never happens again and that such people are protected in legislation?
Katy Clark
I congratulate my hon. Friend on her work on this issue. She led an Adjournment debate about it shortly before Christmas to commemorate the fifth anniversary of Farepak’s collapse.
I, too, pay tribute to Deborah Harvey, who is the current secretary of the Farepak victims committee and who has done a tremendous amount of work on this issue. The Farepak victims committee is unusual in that it has continued, in an organised way, to bring people together on this issue over a long period. One problem is that the type of people who tend to be affected when such things happen are not organised. The work done by Louise McDaid, Jean McLardy, Deborah Harvey and many others has helped to keep the issue in the spotlight. It is important to look at the situation again today, because it is a disgrace that, five years on, it has not been brought to a conclusion and people still do not know for sure how much money they will get back.
One reason for the huge problems was that the Farepak victims were unsecured creditors. That meant that when the company went bust, the money that they had paid in was not protected, as it is secured creditors who get preference. We need to look at the model whereby people pay money in and effectively save up for goods that they have not received.
Mr Robert Buckland (South Swindon) (Con)
The hon. Lady is outlining the gap between the perceptions of those who were saving with Farepak, which was based in my constituency, and the reality of the regulatory framework. The gap was between people’s belief that they were saving into a pot that they would be able to reclaim from and the reality, which was that they were unsecured creditors. That must never be allowed to happen again. This is a chance for change so that we do not again see the abuse that we saw with Farepak .
Katy Clark
I am grateful to the hon. Gentleman for his intervention. He has shown that he has a full grasp of the issues. Many of those who saved through Farepak for Christmas 2006 believed that there was some form of protection for the money that they put in. They were of the opinion that they were being responsible by saving in that way. My view is that they were being responsible. We have a duty, as legislators, to put protections in statute to enable people to continue to save using such models. I think that those people had a reasonable expectation that there was regulation in place to protect the money that they put in. Many of them presumed that there was such regulation.
Five years ago, a voluntary body called the Christmas Prepayment Association was set up. However, many prepayment companies are not members of that organisation and there is no requirement for them to belong to it. Some of the biggest players in the market, such as Tesco and Asda, are not members. The association covers only Christmas schemes and not the wider prepayment sector.
I believe that the prepayment sector has not been regulated because, over time, different forms of prepayment have developed. Mechanisms have been put in place to provide protection for the earliest types of prepayment, such as those used in the travel industry. The Farepak case highlights important failings in the regulation of the prepayment industry. It has become clear that that lack of regulation extends not just to the Christmas hamper sector, but to a wide range of prepayment situations in which consumers pay in advance of receiving goods. I have already mentioned the holiday sector, in which the Association of British Travel Agents operates, and there are many other situations in which a customer pays for something by way of instalments.
That practice is usually undertaken by those of limited means, who are at risk of losing both their money and the product if the fund goes bust before they take delivery. Such a form of payment is used by such large organisations as Tesco and Asda, but also by small organisations in all our communities. Some people pay over a period for goods for a celebration, for example, perhaps paying a butcher instalments of £10 a week. We should provide a statutory framework so that such people get some type of preference if the organisation in question no longer exists.
One reason why it is important to have regulation is that it tends to be people from poorer communities who pay in advance by instalment. They are exactly the people who can least afford to lose out, and I do not believe that they should carry the risk when they choose that model of payment for goods. Many of them honestly assume that their money will be ring-fenced in some way.
We need to move to a model whereby moneys that are prepaid are effectively held in trust, and any organisation that can no longer deliver the goods because of a collapse gives those moneys priority. I therefore believe that it is appropriate that an organisation such as the Financial Policy Committee examines the issue. Prepayment exists in a wide range of scenarios, with people paying over a period in advance of receiving the goods. I therefore ask the Government to look sympathetically on new clause 12 and consider pursuing the course of action that it suggests.
Lorely Burt
I begin by warmly welcoming the Government amendments that provide further clarity on the intention to transfer the regulation of all consumer credit businesses currently regulated by the Office of Fair Trading to the Financial Conduct Authority, while retaining all the protections that consumers currently enjoy under the Consumer Credit Act 1974.
New clause 9 would commit the Government to phasing out charges for debt management plans. Whatever the hon. Member for Nottingham East (Chris Leslie) thinks, businesses providing those plans are in the main legitimate. He talked about the scandalous behaviour in which certain debt management companies have indulged, but a number of companies look after their customers effectively and caringly.
Katy Clark
Does the hon. Lady agree that one cause for concern must be the fact that organisations profit from debt management? The charging of fees by profit-making organisations seems inappropriate. Does she agree that we should encourage voluntary and non-profit making organisations in the sector?
Lorely Burt
Of course I would encourage such organisations, and as my hon. Friend the Member for North Swindon (Justin Tomlinson) said, we need to give people financial education. There is an image of companies profiting from others’ misery, but there are companies that act responsibly and ethically, so I do not support new clause 9. It is a shame that all companies have to be tarred with the same brush, and the new clause would remove an element of choice from the consumer. Of course, many consumers would not choose a debt management company over a free service given the choice.
Yvonne Fovargue (Makerfield) (Lab)
Does the hon. Lady agree that one problem is that consumers making a distress purchase do not know which companies are reputable? Unfortunately, the ones at the top of the Google list tend to be the least reputable.
Lorely Burt
I agree that the companies that spend money on unsolicited calls to people who may have a financial problem are the ones that need to make the most profit, to cover the cost of doing so. However, responsibility for debt management is moving to the new FCA, and new guidelines are being issued. As long as those guidelines are strong and properly enforced, part of the market may still be able to benefit from providing debt management advice.
Sheila Gilmore (Edinburgh East) (Lab)
Will the hon. Lady consider the fact that it is not necessarily about whether there are charges so much as it is about who pays them? The intention behind the new clause is to protect consumers from being the ones who pay. Is it not possible that debt management companies can find another way of funding their work rather than having consumers pay the price?
Lorely Burt
That should ideally be the situation, and when the new regulations are produced there should be a careful consideration of whether any up-front fees should be paid to debt management companies.
New clause 10 would require mortgage lenders to inform existing customers about potential interest rate changes. I have to declare an interest: I was a mortgage adviser in one of my past lives, so I know a little bit about the matter, and I suggest that any reputable mortgage company should do that anyway. It is not in their interests to encourage people to take on mortgages that they will not be able to repay should financial circumstances worsen. The new clause may therefore be superfluous. I completely understand and appreciate the sentiment behind it, but the matter will probably fall within the FCA rules and within the ethical behaviour that one should expect from any mortgage lender.
Chris Leslie
I appreciate the hon. Lady’s comments, but if she cannot support the new clause, will she at least join me in encouraging the regulator to ensure that all banks think about informing customers of potential interest rate changes as a matter of course? One bank doing it would not be enough; we need them all to engage in that forward planning.
Lorely Burt
I agree entirely, and we already have a provision to enable that to happen.
My hon. Friend said that one building society requires customers to save with it before getting a mortgage there. When I had my first mortgage, more years ago than I care to admit to, that was the norm. People were expected to be a customer of a building society before getting a mortgage from it, which encouraged a way of saving that we seem to have lost in many areas of our society. I support the sentiment behind the new clause, but I do not believe we need it.
New clause 12 calls for a review of prepayment schemes, including an analysis of whether customers should be preferential creditors in the event of insolvency. The Farepak issue, and the tragedy of its customers, is emblazoned on our minds. Victims of other financial schemes such as Equitable Life still write to me virtually every week, but the new clause relates particularly to prepayment. Many structural issues contributed to Farepak’s demise and they need to be addressed. Many unsecured creditors suffer when such a company collapses. I am attracted to the idea of giving prepayment scheme customers a form of secured creditor status, as the hon. Member for North Ayrshire and Arran (Katy Clark) suggests. The Minister has advised that such a measure is not appropriate within the remit of the Bill, because a prepayment company is not a financial services company, but perhaps he could advise us on an appropriate route for looking at the proposal in a little more depth.
Stella Creasy
Borrowing has always been a part of the British way of life and part of our debates in the House as long as I have been an MP, but as we argue how best to tackle the nation’s debt, we forget at our peril the need to help our constituents to manage their debts. As the Minister pointed out, amendment 40 is our third attempt to help our constituents to manage their debts and to give them the kind of protections from such toxic credit that others around the world take for granted.
I hope I can convince the Minister that this is not a political whim, but a matter of deep importance to many who are struggling with such companies, not just in my constituency, but in constituencies across the country. If he is not convinced, I urge him to come to one of my surgeries, or to come with me down my high street, which now has 16 such companies, to see the problem and understand the urgency of action. I am sure the hon. Members for Enfield North (Nick de Bois), for North Swindon (Justin Tomlinson) and for South Swindon (Mr Buckland) have the same problems in their constituencies. The amendment is about urgent action. Too many in our communities cannot afford to wait for the outcome of research in the summer, let alone for future legislation at some unknown point.
Let me start by finding common ground. I welcome the development of the Financial Conduct Authority and its role in managing consumer credit, and the statement that it will be more willing to intervene to address problems with financial products. The question we must address today—it is what the amendment speaks to—is whether the new authority will have the teeth to deal with the problems our constituents face and act in their interests. The amendment is designed to end any uncertainty on that by giving explicit authority to the FCA to act on one aspect of our consumer market that many hon. Members are concerned about. I want to put on record my thanks to those on both sides of the House who have co-signed the amendment. That speaks to the disquiet that many have that no alternatives have been put forward.
We know why there are problems, but it is worth repeating the reasons. As the costs of food, energy and transport soar and as unemployment continues to bite family households, and as wages freeze, British families are struggling and borrowing to manage their daily needs. Aviva’s work shows that UK families owe on average £10,500, which represents nearly half the average annual household income of £23,000. That level of debt will only increase, because there is no end in sight to the financial pressures people face. One in six of our nation is now a “zombie debtor”, which means a person who is able only to service the interest on their debt and not reduce it, and a third of us have no savings at all.
Since the start of the recession, mainstream lenders such as high street banks have been much less willing to lend money, but the truth is that for many, banks are making things worse, not better. Average overdraft fees in this country have simply been reduced from £25 to £12 a day, which is still a huge sum for people who have no money. Credit card rates have soared by 2% recently, taking the average interest rate to its highest level in 13 years, despite the Bank of England base rate remaining at 0.5% for 25 months. It is little wonder that many people are turning to the high-cost credit market to make ends meet.
Last year, the payday loan sector in this country was worth £1.7 billion, a fivefold increase in a year. Research by R3 tells us that nearly 4 million people will take out a payday loan in the coming months alone. The annual percentage rate—it is a misleading term, but it is still worth looking at—can begin at 444% and escalate to 16,500% or more. Home credit lenders, about which the hon. Member for North Swindon has warned us, can charge £82 in interest and collection charges for every £100 loaned.
It is little wonder that Payplan, a debt charity, is seeing a deluge of people in financial difficulty as a result of the payday loan market. It says that nearly half its clients had six or more payday loans in the last year alone. More than half owe more than £500 to those companies and, crucially, 61% had more than one loan at a time. Eighty-six per cent. of Payplan’s clients used their loans for basics such as food, transport and the everyday costs of living, not luxuries.
Such lenders are exploding across our towns and cities. Dollar Financial underpins Money Shop. Money Shop had just one store in 1992; it now has 450 shops across the UK. There are two in my high street in Walthamstow. Meanwhile, our friends at Wonga have secured £73 million from the Wellcome Trust to expand their operations; the Provident Financial share price has risen by 16% since the comprehensive spending review; and BrightHouse, which provides hire purchase agreements at hugely extortionate rates, has announced plans to nearly treble the number of stores it operates in our country.
The FCA has many toxic practices in the market to address. As the high-cost credit industry admits, a quarter of home credit users and a quarter of payday users have no other form of credit. As consumers, therefore, they do not have the power to shop around for more affordable forms of credit. That many of those firms do not do credit checks means that customers who borrow regularly from them cannot build up a track record to show to other lenders to prove that they are credit worthy so that they can borrow at more acceptable prices.
High-cost credit companies have high fixed costs, so they make their money by repeat lending, meaning that their entire business strategy is geared towards repeat borrowing and the “rolling over” of loans, about which many hon. Members are concerned. Thirty-two per cent. of payday loans are refinanced—the average is twice—and 15% of doorstep loans are refinanced before the end of their term. All hon. Members know what “rolling over” means: it means that interest can be charged on interest accrued as well as the initial amount loaned.
Such companies also engage in aggressive marketing campaigns to encourage that repeat borrowing, persistently offering customers the opportunity to extend their loans and take out new ones. There is strong anecdotal evidence that many of those companies lend consumers more money than they can afford to pay back in a month to ensure that they have to roll over their loan.
Above all, the rates charged by high-cost credit companies often do not reflect any economic rate, meaning one that reflects competition in the market or the cost of lending. That is why rates vary so substantially, from 4,500% with Wonga to a mere 2,500% with Uncle Buck, 1,700% with Kwik Cash or 1,200% with PaydayUK. There is simply a lack of competition in the market to drive the price down in the way Ministers expect.
Justin Tomlinson
There is a lot of competition, but because people cannot understand APRs, it is irrelevant. If repayments were displayed in cash terms, competition would kick in and help consumers.
Stella Creasy
The hon. Gentleman slightly pre-empts me. I was about to say that the doorstep market, 67% of which is owned by Provident Financial, is not competitive. Nevertheless, his point about APRs being difficult to understand is well understood.
The amendment is not a panacea. We need total cost caps on credit charges so that consumers have an explicit amount beyond which the cost of any loan will never go—interest rates, administration charges and late repayment fees included. I also agree strongly with the hon. Member for North Swindon about financial education and investment in debt advocacy services to give consumers help to negotiate with creditors and the support needed to make good decisions.
We also need an expansion in alternative sources of affordable credit through credit unions and social finance. The idea that the market will somehow reduce prices where there is disparity between the consumer and supplier belongs in the textbooks, not real life. We also need a proactive regulator to ensure effective competition and protection against consumer detriments. The amendment would address those problems and provide the opportunity, presented by the FCA, to take action as quickly as possible and to prevent the problems in our communities created by these loans from becoming worse.
I agree with the Chair of the Treasury Committee, who said about replacing the FSA:
“The creation of the FCA is an opportunity to create something much better. If we are not careful, the FCA will become the poor relation among the new institutions. But it is the one that will matter most to millions of consumers.”
However, for the FCA to be that better institution, its power to act on toxic financial products needs to be made clear. The financial services practitioner panel stated:
“We acknowledge that it will be useful for the FCA to have tighter powers to control any product that can and does do harm.”
The amendment is in that spirit. It would give explicit powers to the FCA to cap, where it sees appropriate, the charges firms can apply.
I understand that the Government have been briefing people that those powers are not needed because the FCA already has product intervention powers. The Minister seems to think that that could happen, but he must address two questions: first, can it intervene; and, secondly, are its powers of deterrence or sanction appropriate to the toxicity we all want to prevent? Clearly, there are good grounds to fear that the first is not the case. In his speech today and in the document setting out the FCA’s powers, there are somersaults and loops worthy of the Olympics gymnastics team. The document states:
“The government has said that the FCA will not be an economic regulator in the sense of prescribing returns for financial products or services. The FCA will, however, be interested in prices because prices and margins can be key indicators of whether a market is competitive. Where its powers allow, the FCA will take into consideration more positively the cost of products or services in making judgements about whether consumers are being fairly treated. Where competition is impaired, price intervention by the FCA may be one of a number of tools necessary to protect consumers.”
I am sorry to disappoint the hon. Member for Vale of Glamorgan (Alun Cairns), who is not in his place, but that is part of the Government’s thinking.
The problem, however, is that the Government’s thinking is fuzzy. Lawyers in this area have highlighted the lack of clarity about whether the FCA is intended to be a price regulator and about whether the legislation proposes such a thing. John Odgers, the lawyer for Which?, highlighted that point in his written evidence to the Treasury Committee:
“It seems to me to be desirable that a power of price intervention should be spelled out, if it is intended. Financial services regulators have not in this jurisdiction previously exercised that type of power, and might in future be loth to do so without a specific statutory authority, as the use of such a power would be particularly likely to attract a challenge.”
The Minister should talk to the OFT. It is particularly well placed to tell the FCA about the problems that the fear of legal scrutiny places on consumer credit regulation. As it admitted, that fear has defined its work in this field and its lack of action against these firms. It has feared the cost to the public purse of unsuccessful legal actions. In his evidence to the Public Accounts Committee on 5 September last year, the chair of the OFT stated that
“there are companies now pursuing particular practices that 10 or 15 years ago perhaps would not have employed the most expensive lawyers and taken every point under the sun. Now, however, that is happening with an increasing number of cases where you might have otherwise expected the party to throw in the towel after the first round. They do not do that, and therefore we have to take very careful assessments. We have a particular case at the moment that I have in mind where, much to my surprise, the parties have involved the most expensive City lawyers, and we know perfectly well that we are at substantial risks on costs if we lose.”
It is little wonder that Google has a stronger track record on taking action against such adverts and firms than the OFT, which, in the past eight years, has managed to take action against one brokerage firm only.
Susan Elan Jones (Clwyd South) (Lab)
Are the Government extremely weak on this issue compared with other Governments around the world?
Stella Creasy
We should listen to the companies themselves. They state explicitly that they are coming to the UK and expanding their operations here at an alarming rate precisely because of the lack of regulation of our payday industry in comparison with other countries. They are clear that, because we do not have that regulation, we are fertile territory for their practices.
Yvonne Fovargue
I rise to support several of the amendments. I will speak first to new clause 9 on the phasing out of debt management companies. I accept that some of them might act ethically, but a great number do not, and the voluntary code of practice has simply not worked. We are talking about a distress purchase. People who buy a debt management plan will often have been worrying about it for months and months. They are looking on the internet at 3 o’clock in the morning and going to the first name they see. They do not know whether it is a member of a reputable trade body. They simply see, with relief, that someone can help them with their debts. It is no wonder that the number of complaints to the Financial Ombudsman Service about these companies’ practices has rocketed in recent years. The cost of policing and dealing with these organisations is disproportionate. It would be much easier to phase them out and put that money into the free sector so that it can ensure that creditors, via the fair share scheme or the financial inclusion fund, pay for such advice.
I would also like to speak to new clause 12 and the prepayment issue, which was so eloquently outlined by my hon. Friend the Member for Walthamstow (Stella Creasy). The people who invested in Farepak honestly thought that it was a savings scheme, which should be regulated. My experience of working for a citizens advice bureau is that one of the most difficult things to explain to people is the difference between a deposit and a prepayment. People do not understand the difference; they believe that they are equally protected whether a payment to a scheme is classed as a deposit or a prepayment. Indeed, I have seen people in my constituency surgery who have had problems with funeral prepayment schemes, most of which are covered, but some of which are not. I have had grieving relatives come to me and even people who have paid for their funeral, thinking that their family were covered and would not have to worry anymore, who have lost their money.
The voluntary Christmas prepayment scheme is simply not sufficient. As my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) said, the big supermarkets are not taking part. I wrote to every supermarket, and they said, “There’s no need for us to take part.” However, if they will not take a lead, how can we expect the smaller companies to follow? The scheme needs to be expanded. We need to ensure that people do not fall through the gaps, such as when the Government say, “It’s not this regulation; it’s that regulation,” or, “It’s not in this area; it’s a consumer matter.” The people who suffered because of Farepak do not care where it is regulated; what they need is some regulation.
Amendment 55, which deals with the money for specialist debt advice, is extremely important. We have heard on a number of occasions that the Money Advice Service does not provide debt advice, and nor should it. It should not be providing people with advice on debt, but putting the matter to the agencies that specialise in it. It is quite understandable, with face-to-face money advice and the financial inclusion fund, that the Money Advice Service should want more cases dealt with. However, there is a perverse incentive, because in being able to deal with one-off cases, the agencies are seeing more people, but giving less advice. The intractable cases, where people really need advice—those involving people who cannot deal with their debts, but need to keep coming back because their creditors keep asking them to—are not being seen. One-off advice is fine for those who can help themselves; indeed, there are a number of people who can be directed to the internet or telephone. My concern is that the removal of legal aid for debt and the Money Advice Service’s inclusion of one-off cases in the financial inclusion fund mean that the people who need ongoing support for long, complex cases are not being seen by the agencies. If amendment 55 is not accepted, therefore, I would urge that those people be considered when debt advice is reviewed.
Let me turn to amendment 40, which was so eloquently spoken to by my hon. Friend the Member for Walthamstow. I agree that capping the total cost of credit is simply one measure. However, we face an urgent situation. There are many other measures to consider, and I agree with the hon. Member for North Swindon (Justin Tomlinson): roll-overs indeed cause detriment. I have one constituent who has taken out 17 payday loans in one day alone—that is the highest so far; I am still waiting for an improvement on that. As companies have no way of checking in real time whether somebody has taken out any more payday loans, we need a database, run by the regulator so whether somebody has taken out any further loans can be checked, and a limit, whether monetary or numerical. We need to consider that, so I welcome the fact that the Office of Fair Trading is conducting a review. I hope that it will widen that review to include doorstep lenders, such as Provident, which have for so long caused detriment to consumers.
I would like to mention a case that would be solved by capping the total cost of credit. I had a constituent come to me because she had borrowed £300 from Toothfairy. She was a hairdresser. Unfortunately her washer had broken down and she had borrowed that £300 so as not to have to go to BrightHouse and pay its extortionate costs. Unfortunately, however, the hairdressers closed before her next payday—no notice; she lost her job. Over 12 months she had offered instalments to Toothfairy, but the company would not listen to her or accept any instalments. Twelve months on, she went to the citizens advice bureau. She owed £2,570 at that stage, from a debt of £300. She had also received threats from the debt collection agency, which purported to be a bailiff. The company refused to negotiate with the citizens advice bureau, and although the OFT is investigating, there is no action yet. The OFT does not have the power to suspend the company. It is investigating the case, but if it finds that there was consumer detriment, it cannot suspend the company’s licence, and it knows very well that the company will appeal. I cannot believe that there is no consumer detriment in that case, or in the number of similar cases. The OFT or the new regulator must look at the power to suspend. However, capping the total cost of credit would also be a way of doing something urgently to prevent people such as my constituent from getting into such situations.
Lorely Burt
The hon. Lady talks about the OFT not having the power to suspend, but does she agree that the new powers, which the FCA will have, will make it possible to address that?
Yvonne Fovargue
I do not believe that it has yet been confirmed that they will include the power to suspend a company. I would like the Minister to address that. If the FCA has that power and has the resources to act, that would help in cases where the company is breaking all the voluntary codes—it has been proved again that a voluntary code is not working. Again, however, consumers do not look to see whether such companies are regulated; they just need the money. They simply go to the nearest company—possibly the one at the top of the internet or possibly the person or company that sends them an unsolicited text. Consumers do not shop around for such loans.
Consumers need a robust regulator, and although I welcome the move from the OFT to the FCA in new clause 4, the Government need to clarify what that means for consumer protection. There needs to be a robust deterrent for firms entering the market. The bar needs to be set much higher. There also needs to be a real deterrent. I was therefore pleased to hear the Minister say that the £50,000 limit did not apply and that there could be an unlimited fine, because I believe that £50,000 will quite often be written into the business plan as a write-off. There needs to be the power and, as importantly, the resources to supervise and to stop bad practice at an early stage. Two years down the line is too late for the innocent people who have walked into the trap. We need a real consumer champion. As Which? has often said, what we want is a watchdog, not a lapdog.
Neil Parish (Tiverton and Honiton) (Con)
I apologise to the House for not being here at the start of the debate.
I congratulate the hon. Member for Walthamstow (Stella Creasy) on her amendment 40, because payday loans and doorstep lending are a huge problem. There are many loan sharks out there and they need to be put back in their boxes. We need serious financial health warnings about their conduct, so that our constituents have some idea of how much they are borrowing and how much they will have to repay. For instance, anyone borrowing £100 at 2000% will have to pay back up to £2,000. That needs to be clearly laid out when people are taking out such loans. As has been pointed out, APRs—annual percentage rates—are not always understood by our constituents. Therefore, if they could see exactly what they had to repay, they would be much less likely to take out such loans.
Lorely Burt
The point of payday lending is that it should be for a very short period. Such issues arise when there are innumerable roll-overs, as outlined by the hon. Member for Walthamstow (Stella Creasy). What we hope the industry will do and the review will achieve is either to confine roll-overs to a small number or to abolish them altogether, which would address the problem of the £2,000, which no one in this Chamber wants to see.
Neil Parish
The hon. Lady is absolutely right. It needs to be clearly set out when people take out a loan that such sums could be the result if they are unable to repay it. Let us consider the analogy of tobacco. We no longer allow tobacco advertising, and shops cannot even display packets of cigarettes any more, yet people can ring up Wonga on their mobile phone and take out a loan for which they will be charged 4,214% interest.
Stella Creasy
Does the hon. Gentleman agree that, although limiting the number of roll-overs is certainly a step in the right direction, there is a risk that it could result in what has happened in America, where such a limit has led to firms paying off someone’s loan and starting a new one in order to circumvent the regulation? We need a regulation with clear, explicit powers to act in relation to these companies in a way that they cannot shrink away from.
Neil Parish
That is absolutely right. Many of the people taking out these loans earn less than £15,500 a year and therefore cannot afford the loan in the first place. I have sympathy for their position, but are we really helping them by allowing them to get into the hands of loan sharks, which results in their having to pay back huge amounts of money that they simply do not have?
I have made the point before that if financial companies and loan sharks are arguing that they need to charge huge amounts of interest because people are such a high security risk, they should not be lending them the money in the first place. Let us remember the old adage about finance: these companies will lend us an umbrella when the sun is shining, but they will take it away again as soon as it starts to rain. In the circumstances that we are describing, they should never have made the loans in the first place. Citizens Advice and financial advisers often tell us about people who have got themselves into huge amounts of debt, perhaps through no fault of their own.
It needs to be made absolutely clear to people what to expect. I am not a great believer in huge amounts of regulation, but I do believe that the consumer should be able to see exactly what they are signing up to at the outset, and be made fully aware of the consequences of their actions. They often do not understand the terms if they are hidden in the small print or expressed as complicated percentages, but if they were told, “You can borrow £100, but if you don’t pay it back on time, you could end up paying £2,000 back”, it might make them sit up and think about exactly what they were borrowing. They might then choose not to do it, or to go to someone who could lend them the money at a better rate.
The Government are doing a great deal to increase the use of credit unions, and we need to do much more work on that. Perhaps we should look into ways of financing them. I have a very successful one in my constituency, and we need to build on that. Only a small percentage of people here borrow money from credit unions, unlike in Ireland, where almost 50% of people have access to such loans.
David Mowat (Warrington South) (Con)
My hon. Friend mentioned Wonga, and he was right to suggest that 4,000% is an absurd rate of interest. Does he have a view on the rate at which interest should be capped for a fortnight’s payday loan?
Neil Parish
Yes, I do. Many people in the banking sector would probably disagree, but I believe that anything over 50% is far too high. It is obscene and immoral to allow companies to go on charging vast amounts of interest—I do not care who they are—and that is why we have to take action. I am looking to the Government to do so, not only through legislation but through stating that such companies should clearly set out their rates of interest and the consequences of non-repayment, so that our constituents can take advantage of credit that is competitive and that will not ruin them.
Sheila Gilmore
In speaking to the new clauses and amendments in this group, the Minister appeared to say that many of them were unnecessary because the issues would be dealt with through the setting up of the Financial Conduct Authority. However, it is our role as parliamentarians to take up these issues, to state explicitly that we need to give political guidance on the matters that our constituents find important, and to discuss the work that needs to be done by the FCA. There is no reason why these measures should not be incorporated into the Bill. That is surely better than waiting for four or five years, only to discover that the problems have not been addressed because the means of doing so had not been set out as clearly as they might have been. I hope that the Government will therefore reconsider their position on this.
I am surprised at the way in which the Minister dealt with amendment 55. His objection to its proposals on legal aid and legal advice seemed to be that they would undermine the provisions of the Legal Aid, Sentencing and Punishment of Offenders Bill. Perhaps I have got this wrong, but I had understood that the justification for restricting legal aid was a financial one. We have been given the usual argument that the country is in a financial mess, we have a deficit and we have to save money on the legal aid bill, among many other things. It is therefore disappointing, when someone comes up with another way of financing legal advice for complicated cases, that that is not acceptable either. The Government therefore seem to be suggesting that granting legal aid in such cases is, in itself, a bad thing.
After all, we are not stopping litigation, and we are not preventing people with plenty of money from litigating on any issues. The ending of legal aid will simply result in considerable detriment for people who do not have the money to pay for their legal advice. It is regrettable to say that the proposals would somehow undermine the Government’s intentions. When we were debating the Legal Aid, Sentencing and Punishment of Offenders Bill, various speakers on the Government Benches said, “We would like to do these things, if we had a way of funding them.” They were not saying, “We really do not want to do these things at all.” They seemed to be saying that the measures were being brought in with some sadness, so when someone comes up with a partial solution, it is a shame that we cannot investigate it further.
Amendment 37 seeks to make it explicit that the work of the Money Advice Service should be to help those with the greatest problems who are suffering particular difficulties as a result of financial exclusion. The previous Government tried to address those problems through various formats. The present Government are suggesting that this will be done anyway, and that the service will be the same for everybody. However, that assumes that everyone is starting off on the same footing, which is not the case. Many people have limited choices and are therefore more likely to get into financial difficulties. The Money Advice Service should be giving those people a specific amount of its attention, and to spell that out in the Bill would not be unreasonable.
I listened to what the hon. Member for Solihull (Lorely Burt) said about the phasing out of debt management companies. We are not saying that such companies that operate on a commercial basis should disappear. The amendment suggests that it should not be the individual consumer who pays the up-front price for those services. There are alternatives, and some commercial companies could continue to operate if the financial organisations were to foot the bill. We shall be seeking to achieve that.
Finally, I want to say how important it has been that people have campaigned on these issues; for example, my hon. Friend the Member for Makerfield (Yvonne Fovargue) has campaigned hard on debt management companies, while my hon. Friend the Member for Walthamstow (Stella Creasy) has campaigned on high-cost credit. We are now some considerable time on from when we had a big debate in this place, with many Members attending and speaking on these issues, yet we are so little further forward.
If we look at the wording of amendment 40, it makes no specific pitch for a particular cap or how exactly to achieve the aim; it simply asks the FCA to make the rule. Further discussion and consultation will be necessary about what those rules should be, but the amendment asks the FCA to make this an important and early part of the work it does. I do not view that as at all unreasonable.
The alternatives proposed are not good enough. Financial education is fine, but when facing a difficult situation, no amount of financial education is good enough when there is so little choice. Sometimes regulation and financial education are proposed as alternatives, but I do not think they are. It would be great if people were better financially educated, but in a tight spot, that is not enough.
Steve Rotheram (Liverpool, Walton) (Lab)
One of my constituents wrote to me to say that he thought he had had a particularly good deal because the APR was at 5,200%. He thought that that was better than what the banks were offering, which was obviously just a two-digit figure. Does that not show that financial education is something that this Government need to take on board, because it shows how people get into debt when they do not understand the ramifications of those high interest rates?
Sheila Gilmore
I think financial education is extremely important, but on its own, it will not necessarily equip people to avoid the enticements of the lenders.
Justin Tomlinson
I cannot resist intervening on this specific point. With financial education, consumers can make informed decisions. If people are financially savvy and well financially educated, they can carry out the actions that they would otherwise have to pay a debt management company to do.
Sheila Gilmore
That is indeed the case. I am not suggesting that we should not have financial education. What I am suggesting is that we also need regulation. My hon. Friend the Member for Walthamstow eloquently outlined the various forms that high-cost credit takes, so control over it is also important.
Stella Creasy
I thank my hon. Friend for giving way. Much as I support a good deal of what the hon. Member for North Swindon (Justin Tomlinson) said, I think he misunderstands the situation. Many of my constituents have tried to negotiate, but these companies will not respond to constituents individually as they do not recognise individuals in the negotiation of credit plans, so it is often organisations that have a status—a citizens advice bureau or Christians Against Poverty, for example—who are able to make the breakthrough. That is why these debt management companies are so invidious. They claim the same status as Christians Against Poverty and the citizens advice bureaux, so it is not just a case of being financially savvy; it is also about the having the muscle of a respected organisation behind people. That can cause some of the problems.
Sheila Gilmore
I thank my hon. Friend for that important point of view.
If we do not take steps to deal with high-cost credit, we will do many people a disservice. I urge the Minister, even at this stage, to support amendment 40. It does not lay down a set of rules, but merely asks the FCA to make the rules an important priority. In order to protect people who will often feel that they have little choice but to use this sort of lending, we need to have controls in place.
Alun Cairns
I am grateful for the opportunity to contribute to the debate and to speak to the amendments. I welcome the Financial Secretary’s opening statement on the establishment of the Financial Conduct Authority, and the development away from the Financial Services Authority and the tick-box approach it adopted under the structure set up by the former Administration, which contributed to failures and had a harmful impact on many families and individuals. That is relevant to the responsibilities that the FCA will inherit. We shall now be able to secure an appropriate degree of protection; to promote choice and competition, which are regulatory concerns within the industry; and to protect and enhance the integrity of the UK financial system.
David Rutley
My hon. Friend is making a characteristically powerful speech about his concerns about various products and what the FCA should do to move things forward. I am concerned about some of the speeches and interventions from the Opposition, who are trying to be too prescriptive about what the FCA should do with particular products. Clearly, there is a range of issues and concerns, but ultimately we should surely allow the new chief executive of the FCA to take the decision based on what he or she feels should be the priority. Does my hon. Friend agree that we should not be too prescriptive?
Alun Cairns
I entirely agree. That is one of my reasons for opposing amendment 40. In my view, it will not achieve what it sets out to achieve, but will have far-reaching consequences for not only the FCA but consumers and providers.
Alun Cairns
I will give way to the hon. Lady, and I trust that I shall then have a chance to respond to her question.
Stella Creasy
Will the hon. Gentleman enlighten the House on his concern about the expertise of the FCA and its ability to exercise the powers granted by the amendment? The amendment simply gives the FCA those powers; it does not direct it to use them automatically. I should also like to know why he was concerned by what the Minister said earlier about his support for the use of price regulation.
Alun Cairns
There are clauses that allow for product intervention and refer to terms and conditions, but that only underlines the fact that amendment 40 is not necessary. I do not understand the inconsistency. I am also worried about the reference to maximum pricing in the amendment. If it were passed, price regulation would be introduced to the financial services sector for the first time, because banking services are currently based on variable cost. Many products are intended to remove the risk from the consumer, and the risk is priced accordingly. Price controls could not accommodate changes and fluctuations in the marketplace. The amendment poses a major threat to the supply of valuable products to many consumers, to the free market, and to competition principles.
Direct pricing also poses the threat of practical consequences. How would the FCA determine the price of a product? One of my hon. Friends said that he considered 50% to be appropriate, but some Members are now shaking their heads, suggesting that that might be too high. How would the FCA decide whether the basis of pricing should be fixed or variable? What about the cross-subsidies that are arranged within financial institutions with the aim of securing the financial certainty that many consumers demand? What about the long-run incremental costs? It would be impossible to price products accordingly; but even if that were a solution, it would require a large-scale, sophisticated infrastructure body to provide continual oversight of the hundreds of products provided by hundreds of organisations.
For those reasons, I oppose amendment 40. In the same breath, however, I pay tribute to the campaigning that has highlighted the scandal of payday loans, and to the Treasury, which has responded accordingly. We have already heard that there will be a report by the end of the summer, and that it will be acted on. I hope that those who share the concern expressed by the hon. Member for Walthamstow about payday loans will be reassured by what has been said not only by Ministers but by Back Benchers, who will maintain the pressure for action.
Mr Hoban
This has been a thoughtful and helpful debate, which has raised a number of issues.
The hon. Member for Nottingham East (Chris Leslie), who is not in the Chamber now, asked what would happen next. The powers to transfer consumer credit regulation can be used only when the Bill has received Royal Assent and the new regulator is up and running. A good deal of work is being done. We are examining the perimeter and nature of regulation, and are working closely with the industry and consumer stakeholders who are advising us. We expect to consult formally on the secondary legislation effecting the transfer, and on an impact assessment of our proposals, early in 2013. The transfer will then be subject to the affirmative procedure and the approval of both Houses of Parliament. That does not, of course, mean that the OFT is now a lame duck regulator. It is looking hard at various aspects of various aspects of detriment to consumer credit, and is trying to do the best possible job to protect the interests of consumers.
The hon. Gentleman—who has now returned to the Chamber—asked what role would be played by trading standards authorities. One of the Government amendments deals with that. Trading standards authorities, known more colloquially as weights and measures bodies, play a role in the enforcement of the current consumer credit regime, and I expect that to continue. The precise nature of their role will be governed by the consultation to which I referred earlier.
A number of Members asked what the OFT was doing now to regulate the high-cost credit sector. I was asked about affordability checks, about rolling over, and about unfair treatment of borrowers who find themselves in financial difficulty. The OFT is focusing on all those issues. It intends to engage in on-site inspections of about 60 major payday lenders, and in compliance work alongside trade associations and others. It is also paying close attention to the advertising of high-cost credit, and is examining a number of the websites operated by providers. It has highlighted a number of areas in which advertising practices need to be improved, and its final report will be published later this year.
Members have bandied around a figure of 18 months in connection with the research that is taking place. In fact it was commissioned last July, and the process has yet to reach its first anniversary. Members may be confusing that research with the broader review following consultation on consumer credit, or with the personal insolvency review that we launched in October 2010. Voluntary action is already being taken to tackle some of the incentives offered by the store card sector. I think that we should await the publication of the report.
As the Bill will give the FCA powers to intervene in relation to interest rates, I think that the aim of amendment 40 has already been achieved. The FCA’s new product intervention power will enable it to act more quickly and decisively when it considers that a product, or product feature, has the potential to cause significant detriment. It is a broad power, which I think is helpful. As has been established, a range of interventions can be made. The FCA can impose requirements on products as well as banning them outright, and can make rules on charges and on specific product features, including the duration of a contract.
Stella Creasy
There is genuine concern about the view of lawyers that unless the power is explicit, it will be open to challenge. Will the Minister publish the legal advice that he has had to the contrary, supporting his assessment that the power in amendment 40 could enable prices to be capped as part of action on consumer detriment?
Mr Hoban
I am certain that the FCA’s broad range of powers will enable it to do that. It can use its powers in pursuit of its consumer protection objectives. However, those are not the only powers that are available.
The hon. Member for Makerfield (Yvonne Fovargue) asked whether the FCA would be able to suspend permission with immediate effect. Under new section 55Y, it will be able to vary the permission of a firm, or to impose a requirement on a firm with immediate effect if it considers that to be necessary. We will consider whether the OFT should be given the same powers in the interim.
A helpful question was asked about the asymmetry between the information given to lenders and that given to borrowers, and about whether a cash illustration could be provided alongside information about the annual percentage rate. The consumer credit directive requires the costs of credit to be specified in terms of the APR. The Commission will review the directive in 2013. We have ensured that there is a new “with regard to” provision for the FCA—something else that it must consider when it seeks to secure an appropriate degree of protection for consumers. Consumers must have timely provision of information, and that advice must be accurate and be fit for purpose in the eyes of the consumer, not those of the provider of the service. We will consider whether a provider of consumer credit should quote an indicative cash cost alongside the APR.
Chris Leslie
I welcome the Minister’s comments. Setting aside whether he thinks the new clause should be added to the Bill, he seems to be saying that he agrees it would be a good idea in principle to encourage all banks and other lenders to engage in some sort of forewarning of customers. Does he agree that if he says that is a good idea and the Opposition think it is a good idea, that sends a signal to the new regulator to make that a priority?
Mr Hoban
I do not think this needs regulatory action. I think it is in the interests of lenders to provide the right information to their borrowers to enable them to plan ahead, however, because it is not in the interests of lenders for borrowers to fall into arrears as a consequence of increases in interest rates. That is why it is important that potential changes in interest rates are considered in lending decisions and that information is available to help borrowers to think about the impact on their circumstances of changes in interest rates. I do not believe that is necessarily a regulatory matter; rather, I think it is in the interests of firms and their borrowers that such information be available.
On the issue of consumer credit, I do not think amendment 40 is necessary. The Treasury is confident that a range of powers is in place to help people in respect of payday lenders and high-cost lenders. I do not believe new clause 10 is necessary either, but I think it is in the interests of lenders to ensure that the information in question is available.
On new clause 12, the hon. Member for North Ayrshire and Arran (Katy Clark) spoke very powerfully about the Farepak issue and how to protect such consumers in future. We must recognise, however, that there is a cost attached to any additional protections for consumers, and that it will, to some degree at least, be borne by consumers.
The question of the regulation of prepayments is complex, as was evident from the work done by the previous Government after the publication of the “Pay now, pay later” report by Consumer Focus. There are no simple solutions, particularly when we want to ensure that vulnerable consumers or those on low incomes can still access the goods and services they want. Introducing some form of set-aside or ring-fencing of funds or some form of insurance in order to be able to compensate consumers in the event of an insolvency can impose significant additional costs on businesses and therefore potentially on consumers. Several industry sectors have concluded that the gains from increased consumer confidence outweigh the costs, however, and have gone ahead with sector schemes. We will continue to monitor this topic. My hon. Friend the Member for Solihull (Lorely Burt) asked who was the right Minister to pursue in this regard: I suggest it is the Minister responsible for consumer affairs, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb).
The hon. Member for North Ayrshire and Arran also asked about credit hierarchy. That is an important subject, and I am very conscious of delays in making payments to the Farepak creditors. We must, however, bear in mind the fact that one of the aims of insolvency law is, as far as possible, to achieve an equitable distribution among the unsecured creditors. Those unsecured creditors could, of course, include small suppliers for whom the debt from a prepayment scheme could result in the failure of their business. There is therefore a difficult balance to strike.
Katy Clark
What is different about this situation, however, is that often the reason for prepayment is that the person buying the product wants to purchase in that way because of their financial situation, and the person selling the product gets the financial advantage of holding that money for a period of time. I therefore cannot understand the Minister’s point, in that at present the advantage is with the organisation selling the product. Does the Minister agree that we should be considering how to move towards a situation in which the consumer is able to pay in this way and get protection for the funds they have paid out?
Mr Hoban
The hon. Lady makes an important point. It is my understanding that some of these prepayment schemes get their income from being able to negotiate a discount with the supplier of the goods, as well as, perhaps, from the interest they earn on the prepayments. The question then arises whether the revenue the prepayment scheme gets is sufficient to outweigh the cost of enhancing customer protection. Some of these schemes are administratively expensive, and the cost of protection may exceed the income generated, which would lead to that service being withdrawn from the consumer.
As this exchange demonstrates, some complex issues are involved. The hon. Lady is right to raise them, and it is right that the Government should continue to address them. Many people rely on these schemes and it is important that they are well protected. We should make sure that there are alternative sources of information for them, in order to enable them to judge where they might get best protection and, perhaps, earn some interest themselves on the prepayment they are making, rather than the supplier making that money.
John McDonnell (Hayes and Harlington) (Lab)
Both of the issues under discussion have cross-party support. There is a consumer affairs element in them, and this kind of legislation comes around very rarely. Indeed, I doubt whether we will see such an all-encompassing Bill for another decade. There does not appear to be any consumer legislation in the planned Queen’s Speech, other than the proposed groceries adjudicator Bill. Will the Minister therefore reconsider these two matters, and meet the relevant Members to see whether there is any way they could be better addressed in this Bill before it goes to the other place or before the final vote on it?
Mr Hoban
I think that there is adequate provision in the Bill on consumer credit; the FCA has the powers to tackle that issue and I am confident that it will be able to make appropriate use of the remedies available to it. A different issue about pre-payment schemes has been raised, but that does not fall within the scope of the Bill. Of course there is a mechanism in the Bill to move the regulatory perimeter if appropriate, but I think that it is the Minister with responsibility for consumer affairs who needs to respond on that point.
I know that we want to move on to deal with the next group of amendments, but before concluding I just wish to say that there is support across the House for new clause 4, which enables us to complete the transfer of regulation from the OFT to the FCA. That does yield important benefits for our constituents. We need to get that regime right if we are to ensure that there is a reasonable supply of affordable credit to our constituents and that they are well protected—that is the goal we are all aiming at. The Bill contains the powers to do that, and I commend new clause 4 to the House.
Question put and agreed to.
New clause 4 accordingly read a Second time, and added to the Bill.
New Clause 1
Retrospective reviews of Bank performance by court of directors and publication of court minutes
‘(1) Section 2 of the Bank of England Act 1998 (Functions of court of directors) is amended as follows.
(2) After subsection (5) add—
“(6) The court shall conduct retrospective reviews of the performance of the Bank with respect to its functions and objectives.
(7) The court shall determine the particular matters to be reviewed under subsection (6).
(8) The court must publish a report on each review carried out under subsections (6) and (7) unless the court decides that all or part of such a report should not be published for reasons of confidentiality or because it would endanger financial stability.
(9) When all or part of a report of a review is not published under the provisions of subsection (8), the court must—
(a) publish as much as possible of the report,
(b) send a copy of the full report to the Chairman of the Treasury Committee of the House of Commons or, in exceptional circumstances, inform the Chairman of the Treasury Committee of the reasons for not sending it, and
(c) publish the report or part of the report as soon as possible after the court decides that the considerations in subsection (8) no longer apply.
(10) After each meeting of the court, the Bank shall publish minutes of the meeting before the end of the period of two weeks beginning with the day of the meeting.
(11) Subsection (10) shall not apply to minutes of any proceedings where the court has decided that publication should be delayed for reasons of confidentiality or because publication would endanger financial stability.
(12) Where any part of the court’s minutes is not published under the provisions of subsection (11), the Chairman of the court shall inform the Chairman of the Treasury Committee of the House of Commons of the reasons.
(13) Any part of the minutes of a meeting of the court must be published as soon as the court has decided that the considerations in subsection (11) no longer apply.”.’.—(Mr Tyrie.)
Brought up, and read the First time.
Mr Andrew Tyrie (Chichester) (Con)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss the following:
New clause 2—Reports by skilled persons—
‘The Financial Services and Markets Act 2000 is amended as follows—
“(1) In section 166, subsection (1), leave out “require him” and insert “inform that person that it has appointed a person”.
(2) In section 166, subsection (1), at end insert “The Authority may require the person to whom subsection (2) applies to pay for the costs of the report in the event that it has resulted in enforcement action being taking against that person.”.
(3) In section 228, subsection (5), at end insert “except that this is without prejudice to the right of the complainant to sue for any amounts in excess of the maximum award limit in the event that the Ombudsman has made a recommendation pursuant to section 229(5) of this Act. The Complainant’s acceptance is also not binding on the Authority which remains entitled to take such action as it would have been had the award limit not existed.”.’.
New clause 3—Enforcement of money awards—
‘Schedule 17 of the Financial Services and Markets Act 2000 is amended as follows—
“(1) In paragraph 16, leave out “which has been registered in accordance with scheme rules”.’.
New clause 13—Meaning of qualifying parent undertaking: assessment and review—
‘(1) The Treasury shall within twelve months of Royal Assent to this Act consult the FCA and the PRA on the possible need to exercise the powers provided for by section 192B(6)(a) of the Financial Services and Markets Act 2000 and shall lay before the House of Commons a report containing an assessment of the need to exercise these powers.
(2) In subsequent years, the FCA and the PRA shall provide an annual assessment of the possible need to exercise the powers provided for by subsection (6)(a), to be reviewed by the Treasury. Any such review must be laid before the House of Commons.’.
Amendment 46, in clause 1, page 1, line 12, at end add—
“(2A) The appointment of the Governor and Deputy Governors shall be made only after the Treasury Committee of the House of Commons has been consulted and has reported on the suitability of the candidates nominated by the Chancellor of the Exchequer for the posts.’.
Amendment 47, page 1, line 12, at end add—
“(2A) Any member appointed under subsection (2) shall be appointed with the consent of the Treasury Committee of the House of Commons.’.
Amendment 29, in clause 2, page 2, line 11, after ‘Authority)’, insert
‘and shall have regard to minimising, as far as possible, the use of public funds to support or rescue parts of the UK financial services industry.’.
Amendment 22, in clause 3, page 3, line 37, after ‘functions’, insert
‘having regard to the economic policy of Her Majesty’s Government, including its objectives for growth and employment’.
Amendment 23, page 8, line 32, at end insert—
(a) If the Treasury considers it appropriate to proceed with the making of an order under section 9K, the Treasury may lay before Parliament—
(i) a draft order, and
(ii) an explanatory document.
(b) The explanatory document must—
(i) introduce and give reasons for the order,
(ii) explain why the Treasury considers that the order serves the purpose in section 9K, and
(iii) be accompanied by a copy of any representations received from the FPC or the Governor.
(c) The Treasury may not act under paragraph (a) before the end of the period of 12 weeks beginning with the day on which the consultation began, unless the order is made in accordance with paragraph (b).
(d) Subject as follows, if after the expiry of the 40-day period the draft order laid under paragraph (a) is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
(e) The procedure in paragraphs (f) to (i) shall apply to the draft order instead of the procedure in paragraph (d) if—
(i) either House of Parliament so resolves within the 30-day period, or
(ii) a committee of either House charged with reporting on the draft order so recommends within the 30-day period and the House to which the recommendation is made does not by resolution reject the recommendation within that period.
(f) The Minister must have regard to—
(i) any representations,
(ii) any resolution of either House of Parliament, and
(iii) any recommendations of a committee of either House of Parliament charged with reporting on the draft order, made during the 60-day period with regard to the draft order.
(g) If after the expiry of the 60-day period the draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
(h) If after the expiry of the 60-day period the Minister wishes to proceed with the draft order but with the material changes, the Minister may lay before Parliament—
(i) a revised draft order, and
(ii) a statement giving a summary of the changes proposed.
(i) If the revised draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the revised draft order.
(j) For the purposes of this section an order is made in the terms of a draft order or revised draft order if it contains no material changes to its provisions.
(k) In this section, references to the “30-day”, “40-day” and “60-day” periods in relation to any draft order are to the periods of 30, 40 and 60 days beginning with the day on which the draft order was laid before Parliament.
(l) For the purposes of paragraph (k) no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.’.
Amendment 24, page 12, line 2, at end insert—
‘(f) an assessment of the impact of each macro prudential measure on employment and economic growth.’.
Government amendment 12.
Amendment 39, in clause 4, page 14, line 36, at end add—
‘Within a year of commencement of this Act the Bank of England shall publish a review of the effectiveness of co-ordination by the regulators of the exercise of their functions relating to membership of, and their relations with, the European Supervisory Authorities (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority), and their relations with other regulatory bodies outside the United Kingdom.’.
Amendment 28, page 15, line 4, leave out clause 5.
Amendment 35, in clause 5, page 16, line 15, at end insert—
‘(c) the ease with which consumers, particularly those on lower incomes, can have access to financial services and products which are affordable and appropriate to their needs.’.
Amendment 67, page 16, line 41, after ‘is’, insert
‘intelligible to them, appropriately presented’.
Amendment 41, page 17, line 1, after ‘transaction’, insert
‘, any common law fiduciary duties owed by the provider in question’.
Amendment 68, page 17, line 35, at end insert—
‘(e) the ease with which consumers throughout the UK can identify and obtain services which are appropriate to their needs and represent good value for money.’.
Amendment 69, page 27, line 19, at end insert ‘and by the Consumer Panel’.
Amendment 70, page 27, line 19, at end insert—
‘(1A) Unless the PRA has established a panel as provided for in section 2K(2) to reflect consumer interests, it must consider representations from the Consumer Panel established under section 1Q where such representations relate to the PRA’s general policies and practices, the co-ordination of the exercise of PRA and FCA functions as provided for in section 3D(1), or the exercise of the PRA power in section 3I.’.
Amendment 34, page 28, line 38, at end insert
‘to minimise unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.’.
Amendment 36, page 29, line 15, at end insert—
‘(g) the principle that, where appropriate, authorised persons should have a fiduciary duty towards the consumers who are their clients.’.
Amendment 71, page 29, line 42, at end insert—
‘(d) that each regulator engages with the other where they identify any gaps in or between their regulatory remits, or the exercise of these, that may become apparent in relation to any product, provider, institution, market practice, responsible shareholder interest or consumer concern;
(e) that as appropriate both regulators can identify areas where they can share services and information, acting to minimise burdens on firms supervised by both regulators and/or to maximise the understanding of consumers and facilitate the exercise of their responsible interests.’.
Amendment 33, page 31, line 24, at end insert—
‘(8A) The memorandum shall contain an estimate of the additional annual costs involved in the administration of the FCA and PRA when compared with the estimated costs of the administration of the Financial Services Authority.’.
Government amendment 1.
Amendment 42, in clause 25, page 108, leave out lines 29 and 30.
Amendment 43, page 108, leave out lines 34 to 39.
Amendment 49, in schedule 3, page 174, line 1, at end insert
‘with the consent of the Treasury Committee of the House of Commons.’.
Amendment 50, page 174, line 2, at end insert
‘with the consent of the Treasury Committee of the House of Commons.’.
Amendment 27, page 176, line 9, at end insert—
‘Publication of minutes and agendas
10 The FCA shall make arrangements to publish the agendas and minutes of its meetings, unless publication would be inappropriate.’.
Mr Tyrie
As a number of colleagues across the House will have noticed, the Treasury Committee took the highly unusual step of tabling a new clause, which is signed by all but one member of that Committee. As hon. Members will be aware, the Committee feels strongly that this Bill is defective in a number of respects, and needs a good deal of attention and improvement. That is because the Bill will hand the Governor of the Bank of England
“unprecedented new powers to shape the British economy. While continuing to set interest rates, the Bank will take over the supervision of commercial banks and insurers, be responsible for…tackling threats to financial stability…and have the power to restrict lending on mortgages, or order banks to increase their capital…one…man or woman will wield all these powers. This individual will arguably be as powerful as the chancellor”.
As drafted, the Bill seems to fly
“in the face of all ideas of modern governance, let alone parliamentary accountability.”
Those are not just my personal views; they summarise reasonably well the views of the whole Treasury Committee. As it happens, I have not said anything off my own bat yet; everything that I have said so far is a verbatim quotation from an article by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling).
Mark Field (Cities of London and Westminster) (Con)
I entirely endorse what my hon. Friend has said. May I also say, in my role as the Member for the City of London, that although I am not suggesting for one minute that the views he has just espoused are universally held within the square mile, many practitioners have deep concerns about elements of the Bill, particularly the aspects to which he has referred?
Mr Tyrie
I have heard a good number of those concerns from the practitioners to whom my hon. Friend refers. What they say, what he has just said and the fact that I was quoting a former Chancellor all illustrate an important point: new clause 1 is not just supported by the Treasury Committee and by many independent experts who have taken a look at it. My impression, which has been gained from talking to fellow MPs and many others, is that the purpose behind the new clause is supported right across the House of Commons.
New clause 1 would bolster parliamentary accountability in two ways. First, it would place a duty on the court of directors to conduct retrospective reviews of the Bank’s performance and publish the results for Parliament to examine. Secondly, it would require the court to publish its full minutes. Those two suggestions sound, to me at least, pretty reasonable, but they encountered a wave of objections from the Bank. The Bank’s frequent refrain to us has been that the current accountability arrangements are pretty much okay just as they are. We need to be clear that the current arrangements for the court simply will not do. The board of the Bank—the court—is currently prohibited from examining the Bank’s performance and it cannot make recommendations about what it may discover if it does ask any questions. The court’s role is strictly confined to process—mainly to auditing the budget. Any well-governed institution must have a board capable of examining its performance and permitted to comment on how to learn lessons from mistakes or from successes. That is why we propose that the court be required to conduct and publish reviews of the Bank’s policy. Of course that would also give Parliament an opportunity to make recommendations on what it should look at.
Mark Field
Given that, as my hon. Friend puts it, we are dealing with an unprecedentedly powerful institution, would he care to speculate as to why there has been this reluctance, in the face of repeated requests from the Treasury Committee, on the part of the Bank of England to do as he has asked?
Mr Tyrie
My hon. Friend tempts me towards a place I would very much enjoy going, but—in the interests of I cannot think what; let me suggest brevity, or something like that—I will not go there.
There has also been a concession on the minutes, but it goes somewhat short of what is appropriate. The concession is that a record of court meetings will be published—I am citing the phraseology used—but it seems to me that that will not do either. The court should publish full minutes, not doctored minutes. I do not want to sound too pejorative, but the minutes should not be written especially for the purposes of a certain type of scrutiny by Parliament. The full minutes should be published, as is the case with the Monetary Policy Committee, subject to the confidentiality provisions to which I alluded earlier.
New clause 1 addresses only a small part of what is needed to knock this Bill into shape. Much more time should have been devoted to it. The need for all this to be on the statute book by the end of this year is yet to be explained to us. It would be far better to let the timetable slip for a few months and to get the Bill right. The crisis has afforded us a once-in-a-generation opportunity to overhaul the legislation and the Bank and it seems to me that we are not fully taking it up.
It is also regrettable that all this work is being done in the form of amendments to the Financial Services and Markets Act 2000, which is itself an immensely complex piece of legislation. As the Governor of the Bank argued before the Committee and elsewhere, we would have done better to write a new Bill from scratch, but we were told that that would take too long. Again, there is a rather curious interaction between trying to get something right and the arbitrary timetable that is imposed.
I very much hope that the other place will get to grips with some of the other shortcomings of the legislation, many of which are relevant to amendments in this group. Let me list a few. The first is the effect on the accountability and governance of the complex web of interacting committees that are in place or being created—the FPC, the MPC, the Prudential Regulation Authority, and the sub-committee, NedCo, in particular. The second is the need for stronger accountability to Parliament as regards macro-prudential tools, and I note that amendment 23, tabled by the hon. Member for Nottingham East (Chris Leslie), addresses that issue—intelligently, if I may say so. The third is the heavy circumscription of the powers of the Chancellor to intervene in a crisis, which will, I understand, be addressed on day two on Report. More work is certainly needed to get this legislation right. The fourth is the need for Parliament and the Treasury Committee to engage in the process of the appointment of a new Governor, which has been in the papers over the past few days and is dealt with by amendments 46 and 47, tabled by the hon. Member for Hayes and Harlington (John McDonnell). The fifth concerns the FCA, which seems to be the poor relation in all this legislation, and a similar duty to publish minutes and conduct reviews of its work. That is touched on in amendment 27, tabled again by the hon. Member for Nottingham East.
Andrea Leadsom (South Northamptonshire) (Con)
Does my hon. Friend agree that it is also regrettable that the FCA, despite another request from the Treasury Committee, does not have a statutory primary objective to promote competition in the banking sector? The Committee has been calling for that ever since this inquiry started.
Mr Tyrie
I am grateful for that support from my Committee colleague. Competition is now one of the operational objectives, but the punch of the FCA’s three operational objectives has been diluted by the fact that an overarching strategic objective has been placed above them, and it could be used to trump the operational objectives and enable the FCA to avoid a primary duty to take account of competition. I completely agree with my hon. Friend.
The PRA veto on the FCA’s work as a whole is another issue that the Committee has raised from time to time, but I must admit that it is not covered by this group of amendments. I shall therefore move on swiftly before I am ruled out of order.
It is now common ground that the proposed governance and accountability of the Bank and the FCA are defective and need to be strengthened. The Committee is determined that they should be strengthened. We regret that they are not already in much better shape, and there is a great deal of work for the other place to do to the legislation. As a Committee, however, we showed by our decision on the need to obtain a full explanation for RBS’s failure that we would not hesitate to take new steps in order to get information that we think should be in the public domain. We took the unprecedented step in that case of sending specialist advisers into the FSA to conduct a full investigation. It should be made clear now that we will not hesitate to do the same with respect to the Bank of England if this legislation remains defective. Sending in specialist advisers was a somewhat cumbersome route to getting to the facts of the RBS issue, and it would be far preferable to improve the Bill so that such action by the Committee would no longer be necessary.
The bottom line for improving Bank accountability, to its own board and to Parliament, should be judged by two criteria. First, does the proposal hold out the prospect of improving the performance of the institution—that is, the quality of public policy? Secondly, does it help secure public consent for the decisions that that body takes? The latter is particularly important for an institution as powerful and as remote, in many respects, as the Bank of England. The Committee believes that new clause 1 would meet both those criteria and I commend it to the House.
Chris Leslie
I thank the hon. Member for Chichester (Mr Tyrie)—or is he right honourable? If he is not, he should be. I thank him for his eloquent and powerful advocacy of new clause 1. The Treasury Committee has done sterling work in trying to cajole and persuade the very reluctant Bank of England to move from the 18th century to the 19th century. If we could speed things up a little through his new clause, that would certainly be welcome. The hon. Gentleman is not exactly asking for the moon on a stick; he is simply asking for the publication to a reasonable degree of the minutes of the court of the Bank of England—shock, horror—and for proper internal scrutiny in the Bank and a review of how it has performed. The hon. Gentleman is entirely correct that it is appalling that the Bank of England has never conducted a review of its role in the 2008-09 crisis. Every other branch of government, including the FSA, has done similarly and I would have thought that such a review would be a pretty basic prerequisite for moving on, especially if we are moving to a new era when the Bank of England will be incredibly powerful thanks to the great news powers that the Government wish to bestow on it.
The Bank of England is an old institution. It started life in 1694 with just 17 clerks and a couple of gatekeepers, and it has subsequently been modernised by a number of Acts of Parliament. It is time, however, for it to become less of an honorific institution. The court should be made up of individuals who really take seriously the responsibility to scrutinise the performance of the executive of the bank, and the hon. Member for Chichester made his points perfectly well. As he says, it is like getting blood out of a stone. Some sort of oversight committee might, as the Minister said in Committee, be able to conduct retrospective reviews. The hon. Member for Chichester is entirely correct that it is ridiculous for only a record of the minutes to be published.
I will support the hon. Gentleman’s new clause, if it comes to it, but I suppose we should wait to hear what the Minister has to say. I shall not dwell on the new clause, though, as the group includes many other amendments which address a range of issues on the governance of the Bank of England and the new regulatory structures, and we have a very short space of time in which to debate it. I have, I think, 11 amendments in the group. I will not dwell on them all; I will focus on the key ones.
David Rutley
There is a sense of déjà vu, as the Bill Committee spent a lot of time debating this measure. The hon. Gentleman talks about what he perceives is the present Government’s blind spot, but the previous Government’s was clearly a regulatory system that was woefully inadequate to cope with the challenges that came its way and was found wanting. What the Bill aims to address is financial stability and to make it a core focus. Why does he want to diffuse the focus at a time when the key element we have to tackle is financial stability? Government policy more generally tackles what he wants.
Chris Leslie
This goes back to the odd statement from the Minister in Committee, when he said it would be wrong for the Bank of England and the FPC to be asked to have regard to the impact of its decision on economic growth and employment. I ask the hon. Gentleman to pause and reflect on what he is saying, which is that it is not the Bank’s and the FPC’s job to think about jobs and growth. If he goes to his electorate and says that that is what he is legislating for, I doubt he will get much of a response, but it is important. The FPC will be a vital player in our economy. The Monetary Policy Committee has this objective in its remit; it seems only reasonable to have it mirrored in the Financial Policy Committee’s remit.
This attitude, which we called the Fareham doctrine of compartmentalism, that it is for the Treasury alone to think about jobs and growth—that it would be wrong and somehow dangerous for the Bank of England to think about such issues too—is an extremely dangerous way to think about this vital and extremely powerful institution. The Chair of the Treasury Committee said that, in certain ways, the Governor of the Bank of England could become even more powerful than the Chancellor of the Exchequer. I want all the players in our economy to be thinking about the impact of their decisions on our constituents, their employment prospects, their business prospects and the prospects of growth.
I think the amendment should be made. It is exceptionally important, and I feel strongly that we should press the matter. In a sense, it is similar to amendment 24. In the Bill, we enter new verbal territory with descriptions of how policy will be made. I know that many Members are intimately familiar with macro-prudential regulation, but essentially, it is that suite of rules and powers that the Bank of England and the FPC will be able to use to intervene in their systemic oversight of the economy as a whole. We suggest simply that every time the Bank of England produces a financial stability report it should give an assessment of the impact that each of the new macro-prudential measures will have on employment and growth—a simple assessment of their impact on the real economy. As the Bill stands, there is no requirement on the Bank of England, when exercising those massive powers, to provide that assessment. As the House knows, in many policy areas, we require frequent regulatory impact assessments to be made; this is a parallel requirement. We want the Bank of England properly to analyse the impact of the measures.
Let me give hon. Members some examples, so that they understand what macro-prudential regulation is. It is about setting maximum leverage ratios; sectoral capital requirements; rules on the terms of or the conditions on a loan, either to businesses or to consumers; loan-to-value ratios and loan-to-income ratios in mortgages; haircuts on secured finances or derivative transactions; disclosure requirements; and minimum credit card repayment levels. All those things are of real and great concern to our constituents. If the FPC and the Bank are able to assess the impact of their policies on credit availability, they should also be able to assess and analyse their impact on jobs and growth. Amendment 24 would achieve that.
David Mowat
I thank the shadow Minister for his lecture on macro-prudential tools. I was on the Joint Committee and I certainly did not recommend the inclusion of a growth objective, because I believe that stability and growth are potentially competing objectives. We are passing the Bill because of what happened in October 2008. I was concerned that anything that diluted the absolute requirement for stability might give an excuse for failure, which I did not want to arise.
Chris Leslie
It was the Chancellor of the Exchequer himself who warned against the stability of the graveyard. We have to have joined-up Government and co-ordinated economic policy—I hope hon. Members accept at least that much. It should not be impossible to ask the Bank of England simply to have regard to Her Majesty’s Government’s strategy—not the Opposition’s; obviously, ours would be different—and objectives on growth and jobs. That is all we are saying. We are not saying that that should overrule the broader stability objective of the FPC. It is a simple bit of wiring to make sure that we have joined-up Government and that all the branches of Government talk to one another.
Stewart Hosie (Dundee East) (SNP)
I support the amendment in principle, but surely it should have referred to a range of impacts, in the sense of a fan chart? It is not just macro-prudential tools, of course, but the impact of those with monetary policy, which may change —it may tighten or loosen—and fiscal policy, which may also have the impact of tightening or loosening monetary policy.
Chris Leslie
I accept that. It gets to the nub of the issue. There is no single variable that has an impact like pulling a lever and an economic outcome comes along down the track. A number of factors combine to create an economic outcome. That is why people say it is sometimes more of an art than a science, but in so far as there is an ability to make projections or to measure, that assessment is needed. I hope it could be as sophisticated an assessment as the hon. Gentleman suggests.
Guy Opperman (Hexham) (Con)
I endorse the points made by the Chair of the Treasury Committee. Is it the accepted view on the shadow Front Bench that the promotion of competition is the key objective?
Chris Leslie
We want to see more competition in the financial services sector. That is an important aspect of improving choice and reducing costs for consumers, but essentially the amendments that I have been discussing relate to prudential regulation. I do not think the competition argument necessarily supersedes that.
I agree, and there is cross-party support for this, that we need to improve prudential regulation within our financial regulatory system. There is a degree of consensus in that area, which is why we did not vote against the Bill on Second Reading, for example. The question is how that pans out. The Chair of the Select Committee began his comments by saying that the Bill is defective in a number of regards and needs significant improvement. Amen to that. I agree. That is the problem and that is why I have so many concerns about aspects of the Bill, particularly in clause 5, in respect of the way the Government are choosing to divide up the regulators.
I must move on. Another area about which I have concerns is the Government’s refusal to accept that the Bank of England should be under a duty to minimise the use of public funds—to minimise the recourse to taxpayers’ money—in order to support or rescue parts of the UK financial industry. If we were all to go back to our constituencies and explain what we were doing on Monday, we would say that we had been talking about the Financial Services Bill. Most of our constituents would say, “Good. Does that mean that the taxpayer is not going to be on the line to bail out all those banks again in the future?” and of course we would all want to say yes. That is the whole purpose of what we are supposed to be doing here.
One of the most important things we need in the Bill is a provision to ensure that the system is designed such that any changes or rescue arrangements will not burden the taxpayer in the future. It is important to specify that the Bank of England should take responsibility for minimising that likelihood. It is a pretty straightforward amendment. These should not be partisan issues. That aim should be at the heart of the Bank’s financial stability objective. We know about the costs of bailing out the banks and how those have hit public finances.
Having heard the Minister’s entreaties in Committee, the hon. Members for Wyre Forest (Mark Garnier) and for West Suffolk (Matthew Hancock) and others said that the our earlier amendment was deficient because it would have placed a duty on the Bank of England to minimise the use of public funds. I have thought about that carefully and come back with an amendment that simply requires the Bank to have regard to the need to minimise that. I hope that removes any worry about justiciability, which was one of the arguments upon which the Minister relied to rebut the suggestion in Committee. I do not think it is reasonable to say that it will blur or confuse the issue if we ask the Bank of England to keep in its mind’s eye the impact that any of its decisions will have on public funds. Ultimately, most of our constituents would expect us to legislate today to minimise the recourse to public funds. I hope the Minister will accept the amendment. If not, the other place will return to the issue.
The hon. Member for Chichester pointed to amendment 53 in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) about parliamentary scrutiny. For this House, it is an incredibly important issue and I know that Members on the Government Benches feel strongly about it too. We are giving the Bank of England extensive new powers that will affect businesses, consumers and our constituents. We still do not know what these macro-prudential tools will be. We had a report from the Bank of England last December intimating that they may touch on certain aspects of loan-to-value ratios, although Paul Tucker, the deputy governor at the Bank of England, said the other day, “This looks like hot stuff. Maybe it’s too hot for us to handle at the Bank of England.” Maybe that is for the Treasury to decide. I think the Bank of England recognises that there is an accountability deficiency. That golden threat of accountability does not lead back to Parliament, as it should.
Mr Hoban
We have spent a lot of time discussing the issue. Does the hon. Gentleman not remember that the power to grant macro-prudential tools is subject to the affirmative procedure? There is a role for Parliament to play. My right hon. Friend the Chancellor said on Second Reading that he hoped that that debate would take place on the Floor of the House.
Chris Leslie
That was a minor concession but, as we can see, we have possibly an hour and a half to debate a major macro-prudential tool—and only the Treasury’s order to enact the power in principle for the Bank, not the actual use of that power by the Bank. That would be delegated to the Bank.
Chris Leslie
I will give way to the hon. Lady as I know she has thought about the matter in great depth.
It is important that we look at the work of the European Scrutiny Committee, for example. As hon. Members know, there is a steady stream of regulations coming from Brussels. Members of the Committee try their best to grapple with those, pick the most important ones and have a debate, albeit upstairs in Committee. When there are important issues, the measure is brought back to the Floor of the House for a vote. Ideally, I would like the Treasury Committee to deal in the same way with the sets of regulations that come on the conveyor belt from the Bank of England, but it has enough on its plate as it is. Perhaps we need a sub-committee of the Select Committee. Some sort of financial services scrutiny committee is required, with the time and space to go through the ramifications properly and thoroughly. Yes, then let the measure come back down under the affirmative procedure, but it is super-affirmative procedure that is necessary. That is essentially what we are doing.
We cannot amend the Bill to affect the Standing Orders of the House. That must be decided as a separate arrangement. What I am doing in amendment 23 is suggesting that there should be a longer period of time to allow the House to conduct its own inquiries into these issues. Essentially, I have cut and pasted the procedure under the Public Bodies Act which was recently passed by the Government, whereby if they wanted to abolish any quangos, the relevant Select Committee should have time and space to conduct its inquiries. That is, I hope, an appropriate way of allowing space for better parliamentary scrutiny.
I apologise to the hon. Lady; I know she wanted to come in.
Andrea Leadsom
I am grateful to the hon. Gentleman. He has probably given me the reassurance that I was seeking. It is not that we do not want the Bank of England to have those powers. In the past a lack of accountability and of central management has led to some of the problems that we saw during the financial crisis. It is not a question of focusing the authority and the powers within the Bank. It is a question of the accountability of the Bank in implementing those powers. Does he agree?
Chris Leslie
Absolutely. That is right. We are not saying that these powers might not be necessary. However, let us say, for example, the Government and the Bank consider it necessary to lean against a consumer credit bubble. They want to change the minimum repayments that our constituents make on their credit cards from 2% a month to 5% or 10%. That will have a big effect on our constituents. Imagine us going back to those constituents when they complain to their Member of Parliament, as they undoubtedly would, and ask, “Whose decision was that?” We would say, “It was the Bank of England’s decision. We voted on this in theory a couple of years ago, but now the Bank has pulled the lever and pressed the button, and this has happened.” There would be great anger. The public would expect us, at the very least, to have had the opportunity to debate and discuss that in more thorough and substantive detail, albeit in a Committee. That is all we are suggesting in the amendment.
Stewart Hosie
The hon. Gentleman is absolutely right that there would be anger, but there would also be economic consequences. If one of the macro-prudential tools invoked was a change in sectoral capital ratios, which impacted to ration mortgages, and there was a 60-day consultation period, the impact in the market, either with deals being rushed through or deals being abandoned, might be as bad. Has he considered the downside of putting such information into the public domain for such a prolonged period?
Chris Leslie
I did indeed consider the downside of having parliamentary scrutiny that might in some way impact adversely in an emergency scenario. We have not sought to amend the provision that would allow the Treasury to bring forward those orders in an emergency situation. It could do that. We could have retrospective scrutiny of that order once it had come into place. These are for ordinary, normal times scenarios. The amendment may be imperfect. I would have liked a proper way to deal with the issues, but there has been significant resistance along the way for such measures.
Chris Leslie
I totally agree with the hon. Gentleman. That is the very least that we should have. I simply counsel the House that many hon. Members are already under significant pressure because of the European rules and regulations that seem to come from an unaccountable place. It is not entirely unaccountable, but it can sometimes feel that way to our constituents. If we end up with a situation where we do not put in place at this stage the right parliamentary scrutiny arrangements, we are potentially opening up another front where a powerful institution, unelected and seemingly very distant from our constituents concerns, could have a major impact on their day to day lives, and we would be sitting here twiddling our thumbs unable to do anything about it, never mind even to debate it. We have had debates in the past on the retail distribution review and other examples where there has been massive frustration in the House about the lack of an accountability thread between parliamentarians and regulators. That would be magnified many times over if we did not put in place the right arrangements.
Chris Leslie
In certain circumstances, Parliament should be sovereign. That is an important principle in our constitution. I do not think that regulators should be able to override Parliament, if that is the Minister’s suggestion. I am pretty sure it is not. Ultimately, in certain circumstances, Parliament should be able to make the final decision. That is an important cornerstone of our constitution.
Alun Cairns
It would helpful if the hon. Gentleman could outline some of the circumstances in which Parliament should overrule the regulators.
Chris Leslie
It is entirely hypothetical. Of course we cannot do that at this stage, but there might be circumstances. I will remember the hon. Gentleman’s intervention for the many years that he will be in Parliament for when the time comes, if it comes, that he disagrees with a particular outcome of a regulation as it affects his constituents.
Amendment 35 talks about the impact of many of the changes within the regulatory system on consumers, particularly those on lower incomes. We believe that the FCA should have enshrined in its objectives a commitment to consider how easily consumers are able to find products that are appropriate to their income, and more broadly, products that provide value for money. In difficult times as incomes are squeezed it is right that consumers feel that they have a regulator that is on their side. If we are creating a genuine consumer champion in the FCA, it is important that it has a set of objectives and values that reflect that, particularly for those on the lowest income. It is a similar argument to that made in the previous group of amendments in respect of the Money Advice Service. We have seen excessive overdraft charges, high interest rates, and charges for hidden services. Those require a genuine consumer champion and this amendment would help to create that.
Amendment 36 would also shift the balance in favour of the consumer. It would introduce what is known as a fiduciary duty of care by authorised persons, by financial services providers, towards the consumers who are their clients. “Fiduciary” means holding in trust, holding in good faith, a concept that would help to rebuild confidence among the public in financial services. There is a serious lack of trust at present that is bad for consumers, providers and society at large. The Bill contains no explicit obligation on firms to avoid conflicts of interest, nor to profit at consumers’ expense without their knowledge and consent, nor to have undivided loyalties and duties of confidentiality to the customer. The pre-legislative scrutiny Committee commented on many of these aspects and recommended that some action be taken. Although the FSA has recently had its treating customers fairly initiative, we do not think that that is enough. We believe that a fiduciary duty of care is necessary, especially in the light of some of the major concerns of mis-selling scandals and the need to learn lessons from those.
Amendments 33 and 34 relate to the costs and expense of establishing the FCA and PRA, splitting the FSA into those component parts. I apologise for rattling through these. We have to minimise unnecessary additional expenses incurred, because ultimately the consumers will pay. The FSA’s budget for 2013-14 has gone up by 15.6%. I accept that the new regulatory system will have some costs involved in that, but the majority of those costs are operational and not necessarily related to the principles of regulation involved. It was a bit of a joke to see in the White Paper the Government say that the running costs under the new arrangements should not be “materially different” in real terms and aggregate from the current FSA. That will not happen. We are talking about extremely significant extra costs.
We suggest that the memorandum between these organisations should contain an estimate of the annual costs involved in administering the FCA and PRA, and compare those to the estimated costs of the administration of the FSA. That is a bit of a crude way of getting a cost comparator, but I would be interested in seeing it. Similarly, amendment 34 talks about minimising the
“unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.”
The PRA is moving to plush offices in Moorgate, leaving vacant space at Canary Wharf, a lease that expires way down the line in 2018. There is a sense in which there is a bit of empire building going on at the Bank of England, which will be responsible for the PRA. The Threadneedle street empire is growing strongly.
Sheila Gilmore
Will my hon. Friend also give some thought to those organisations that will be dual regulated and the additional costs that might be incurred?
Chris Leslie
That is why it is important that at the very least they have information, and some level of accountability, about the likely costs of this tangle of regulatory structures for them. The Association of British Insurers has voiced its concerns about the costs of the new regulatory system and it is important that we at least know from the Minister exactly what those costs will be. He skirted around the issue in Committee. Even when I asked the cost of the new building for the PRA next to Threadneedle street he said that that might be commercial in confidence. If he can help us with that I will be grateful.
The hon. Member for Chichester also spoke about publication of the minutes of the Bank of England’s court of directors. Amendment 27 seeks to introduce exactly the same for the FCA. If the FCA is to be a consumer champion, at the very least consumers should be able to see what is being discussed, who—potentially—is discussing it and, most importantly, what the nature is of the dialectic and discussions going on in its board. The Financial Secretary said in Committee that that will be a matter for the FCA, even though he could not really argue against the transparency principle, but he did promise that he would think about it. I saw a chink of light at the time and thought that publication of the FCA’s minutes was a simple concession that we might get in the Bill. I hope that he has had a chance to reflect on that.
Amendment 39 relates to the relationship between the new regulators and the European supervisory arrangements. We might think that all these decisions on regulating credit, businesses and financial services are for us to take domestically in the UK, but I am afraid that 80% of the regulatory decisions are in fact taken in Brussels by the European Commission. Commissioner Barnier has his pipeline of proposals, which is very much the driving force behind the regulatory arrangements. Some of those are good changes, but nevertheless many people feel that the UK’s domestic regulators are there merely to transpose what is decided further up the chain, and that is of concern. Therefore, we want the regulators to be fit for purpose and able properly to influence and steer some of the policy decisions that are taken in Brussels.
Chris Leslie
I was just coming to my conclusion and am conscious that other Members wish to speak, so I will not give way. I simply urge the House to vote for the amendment in the hope that the House of Lords will improve clause 5.
Mr David Ruffley (Bury St Edmunds) (Con)
I rise to support new clause 1 briefly. I had the privilege of sitting on the Joint Committee on the draft Bill and of being a member of the Treasury Committee, which is chaired by my hon. Friend the Member for Chichester (Mr Tyrie)—colleagues have noted that he is not a Privy Counsellor, but as far as many of us are concerned he is right honourable in spirit.
The main purport of new clause 1 is to establish a duty on the court of directors to conduct retrospective reviews of the Bank’s performance. The Governor of the Bank of England, in giving evidence to the Joint Committee and the Treasury Committee, has argued that it would be a bad idea to have a review into anything other than the processes by which certain policy decisions are reached. In other words, he does not want there to be a duty on the Bank to scrutinise retrospectively how good its decisions—meaning the decisions of the Financial Policy Committee or the Monetary Policy Committee—turned out to be. One of the reasons he gave was that there are lots of external commentators, such as outside economists in the City and the commentariat in the fourth estate, but it is fairly obvious that those entities are under no statutory duty to crawl through every decision of the FPC or the MPC and decide with hindsight whether they were good or bad.
The second reason the Governor gave is that the Treasury Committee holds the Bank to account, a point alluded to by the hon. Member for Nottingham East (Chris Leslie). The Treasury Committee, packed with talent though it is on a yearly basis, still has a huge amount of work to do and, not for the want of trying, does not have the amount of technical expertise or the number of macro- and micro-economists needed to conduct work month after month, tracking back and looking at how good or bad the judgment calls of the FPC, as constituted by the Bill, and the extant MPC turned out to be. My word, don’t we need such backward-looking analysis? If it had been present in 2007 and 2008, we might have avoided the difficulties of which we are all too well aware.
The Bill gives the Bank of England unprecedented powers. As a result of it, we will have a Governor of the Bank of England, whomever he or she is in the future, who will be chair of the Monetary Policy Committee, have a place on the court of directors of the Bank of England, chair the Financial Policy Committee and chair the Prudential Regulation Authority. With the creation of the FPC, alongside all the work that the Bank does on monetary policy, a lot of decisions are going to be made.
Not since the creation of the Bank of England in the late 17th century has its senior management and Governor had so much power, and, from even a cursory glance, the Joint Committee’s evidence and the evidence taken by the Treasury Committee in recent months all leads to one thing: one cannot have enough scrutiny of this big beast that the Bank will become as a result of the Bill coming into force.
The Treasury Committee argued forcefully for a severe new set of accountability and scrutiny powers. We advocated the creation of a new supervisory body inside the Bank of England in order to replace the court of directors, because the court, as everybody knows, is packed full of amateurs—well-meaning amateurs, but people who simply are not, by any stretch of the imagination, able to hold the Bank of England’s senior executive members, who are on the MPC and will soon be on the FPC, to account.
The court includes has-beens in the City, or “never-was’s”, and people with indifferent reputations in the trade union movement, in manufacturing and in all aspects of public policy. But the evidence shows that remarkably few of them have any expertise in central banking matters, in fiscal policy, in macro-prudential policy or in monetary policy. The court is desperately under-geared, and its intellectual horsepower is not what it should be.
A supervisory body, with a majority of external members, overseeing the FPC’s and MPC’s judgments and undertaking retrospective reviews is the best-case scenario; it is what the Treasury Committee thought would be the best solution for scrutinising this very powerful—all-powerful, I might add—Bank.
I understand why Ministers have concluded that they do not want to go into battle with the Governor and the senior executives about a supervisory body, because it is way too radical, but it is absolutely incumbent on this House to look at the purport of new clause 1 to see that it actually imposes more scrutiny than the Bill currently provides on the policy decisions of not just the MPC, but the FPC. Let us not forget that the MPC has recently acquired, or arrogated to itself, certain very significant discretionary powers over monetary policy—not in setting the bank rate, but in quantitative easing.
How many debates have we had in this Chamber about QE and its merits or relative de-merits? The answer is relatively few. The Monetary Policy Committee is held to account only by the Treasury Committee. It is my suggestion that the Treasury Committee, marvellous and wonderful though it is—I am a member of it, so I would say that—will need the assistance of ex-post reviews to look retrospectively at the quality of the decisions that the Bank, with its new powers, makes. I therefore urge colleagues to support new clause 1.
Mr George Mudie (Leeds East) (Lab)
I congratulate the Chairman of the Treasury Committee on new clause 1. I disagree with what was said about him becoming a right hon. Member. In my experience of this place, somebody as independent and straightforward has little chance of becoming right honourable.
On a more serious note, I follow my colleague on the Treasury Committee, the hon. Member for Bury St Edmunds (Mr Ruffley), in saying that the Minister would be well advised to accept the amendment or to indicate that further thought will be given to it. I agree with my colleague that the amendment could and should have been much harder. The problem is with the behaviour of the court of the Bank of England. It is not that it has not been given power; it is that it has accepted the boundaries and the servile role imposed on it by the Governor and the executives of the Bank of England. As I have said in this Chamber and as has been said to the Treasury Committee in all but terms, the court is allowed to count the paperclips, but that is about it. Anything serious or to do with policy is nothing to do with it. If its members had any dignity or self-regard, they would not be part of it, because apart from receiving a nice little stipend for going, one wonders what on earth they do.
The discussion in the Treasury Committee, and even in the Joint Committee on the draft Financial Services Bill, has been about bringing the corporate governance of the Bank of England into the 21st century with a proper board, and about stopping it being the fiefdom of one person. If I were the Minister, I would accept the new clause in spirit and say that I would speak quietly to people about it to strengthen the proposals and move on. He could well find himself having a much stronger position forced upon him, which would be good for the Bank of England in the long run.
I congratulate my hon. Friend the Member for Nottingham East (Chris Leslie) on amendments 22 and 23. I will deal with them briefly because many Members want to speak. This is not a political point, but the response to those amendments from Government Members is interesting, because my hon. Friend has raised a matter that deserves discussion and thought. The powers being given to the Financial Policy Committee will affect people, industries and firms, and there must be accountability. The problem arises from the fact that there is no consensus on the definition of financial stability, but the House is setting up a Financial Policy Committee, the objective of which is financial stability. The Chancellor of the Exchequer raised the most pertinent point before the Joint Committee, which was that although we do not want it to, the FPC could define financial stability as the “stability of the graveyard” and reach it. My hon. Friend the Member for Nottingham East raised that point today.
If the FPC had the responsibility for making the definition and wanted to do it without much fuss, it could set the required level of economic activity so that it neither pressed the ceiling nor went through the floor, but would that give us the growth and employment that the Government might want? Should not the FPC be asked to work towards the Government’s policy, whichever party is in government?
David Rutley
I know that the hon. Gentleman is very knowledgeable about these matters and was on the pre-legislative scrutiny Committee, but has he not seen that proposed new section 9C(4) in clause 3 contains some clear wording about what the FPC should do? It states that subsections (1) and (2) of that proposed section do not
“authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy”.
The matter is addressed, so what does he want in addition to that, and why does he feel the need for more?
Mr Mudie
I accept that point, which has been made clear all the way through, but that is negative language rather than positive. Instead of telling the FPC, “In carrying out your duties, you mustn’t adversely affect growth”, I would rather put it to work with the MPC on ensuring that we have a buoyant economy with steady, acceptable growth and employment levels. At the moment, apart from the negative words that the hon. Gentleman quotes, all we have is the requirement of financial stability.
The hon. Gentleman was with a number of colleagues here on the Treasury Committee. We go through accountability with the MPC. It is bad enough trying to get the Governor of the Bank of England to be accountable even when he has a named target; what would he be like, or what would a future Governor be like, when he came before the Committee to which he was accountable and only had to defend his actions on the grounds of financial stability, which cannot be defined? It is a case of the emperor’s new clothes. There really should be a joint mandate, with a definition of financial stability and an acceptance of the Government’s picture of growth and employment.
Kelvin Hopkins (Luton North) (Lab)
I agree with very much of what my hon. Friend says. When the Bank of England was given its independence—so-called—I thought that if it started to fly in the face of what was obviously sensible for the economy, a Government might choose to take that independence back to the Treasury and into the hands of the Chancellor. If the Bank is not sensible in respect of managing the economy as a whole, is it not possible that a Government might choose to take back that independence and operate policy from the Treasury?
Mr Mudie
One can see many scenarios. I have seen many political philanthropists since I have been a Member of Parliament. I worry because they come to the House as politicians, but seem not to want to do anything or take any responsibility. They have offloaded power to quangos and agencies, and gave independence to the Bank. The real question is why are the Chancellor and the Treasury sitting back and watching their ground—sensitive economic ground—being given away to a quango, an unelected bunch of people? Under the Bill, those people can take the remit and the guidance on it, which the Treasury sets, and say to the Treasury, “We don’t agree with you,” and that is that. That is the situation we are reaching on accountability and responsibility despite the worry about giving away powers.
On amendment 23, some hon. Members were hard on my hon. Friend the Member for Nottingham East, although it is not as if he cannot defend himself. The Government’s original proposition, which was put out for consultation, included macro-prudential tools, which, as hon. Members have said, are highly sensitive and powerful. One aspect of the proposal they have given up because of its sensitivity—I am going by what has been in the papers in the past few days—is the ability to interfere in the mortgage market on loan-to-value and similar matters. What happens if the unelected Financial Policy Committee starts leaning against the wind in a way that affects large numbers of people, and there is no way of talking to it or affecting its position?
The Government’s original proposal was that decisions on macro-prudential tools would go upstairs to the Committee Corridor as statutory instruments—secondary legislation—for a 90-minute debate on a measure that would not be amendable. All hon. Members know what happens upstairs. The Minister talks for an hour, the shadow Minister talks for 25 minutes and we all go home, with the measure voted through by the Government majority. That happens with Governments of all parties. The way secondary legislation is dealt with in Parliament is an absolute disgrace. We can excuse a lot of it, but matters as important as the ones we are discussing, it is scandalous.
To be fair to the Chancellor, I raised the proposal with him when he first introduced it and asked him to look at it again because of its undemocratic nature. I am pleased that the line has softened, but there is more talking and work to be done. If hon. Members are asked to give away powers that affect our constituents so directly, it is important for us to be absolutely sure that we have had the opportunity to at least have our say in the strongest possible terms and ones that might allow the regulator to think about what has been said, although it is not for us to take its take its job.
A Government Member attacked my hon. Friend the Member for Nottingham East and asked him whether he would interfere with a regulator. We had that situation when the Treasury Committee discussed the retail distribution review with the chief executive of the FSA. We said to him, “This Committee feels strongly about this matter. We’ve had a lot of press about it and a lot of pressure, and we’d like you to think again.” He replied, “No, we won’t think again, unless you give me evidence.” The Treasury Select Committee giving evidence to the chief executive of the FSA—what arrogance! My hon. Friend the Member for Nottingham East is doing the Government a favour. They might not agree with the detail of the amendment, but the spirit is that we give the House every opportunity to comment on, think about and be aware of the powers we give to individuals that might affect our constituents.
Mark Garnier
It is a great pleasure to follow the hon. Member for Leeds East (Mr Mudie), with whom I serve on the Treasury Committee. It is interesting that I am the fourth consecutive Committee member to speak.
The House will not be surprised to hear that I rise to speak to new clause 1, tabled in the name of my hon. Friend the Committee Chairman, under whom it has been a great pleasure to serve. He is a very forensic Chairman of a Committee doing some extraordinarily good work at a time when it could not be more important—when we are facing some of the most fundamental problems in the economic world and when it is incredibly important that we do something significant about financial regulation. There is no doubt that something needs to be done. We have had a problem with a system of financial regulation that failed to address the problems with the banks, and the Bill travels a huge distance in trying to resolve those problems and come up with a robust new regulatory framework.
Having been a compliance officer under not one but three regulatory regimes—the Securities and Futures Authority, the Financial Services Authority and the Securities and Investment Board—and, prior to that, a regulated dealer on the floor of the stock exchange under the old stock exchange rules, I have had a fair degree of practical experience of financial regulation. Furthermore, in the past 18 months or so, I have, with the rest of the Committee, spent a huge amount of time scrutinising and studying the draft recommendations for the Bill. I also spent some 50 hours, in the Bill Committee, with the hon. Member for Nottingham East (Chris Leslie), who waxed lyrical and at great length—and with great intelligence, I might add; and here we are on the Floor of the House talking about the matter yet again.
A number of things in the Bill are not ideal, but the one surgical cut that would have the most effect would be new clause 1. The Bill contains perhaps the single most fundamental change that we will see in financial regulation—the creation of the Financial Policy Committee. We have heard a lot about the FPC. One of the criticisms is that it could make profound changes to our financial system in trying to deal with financial instabilities, with bubbles that seem to be growing and all the rest of it. We can speculate ad nauseam about the type of interventions that could be made, but the one that people talk about a great deal is where the FPC may, with one of its tools of direction or recommendation, direct banks to change the loan-to-value ratios on mortgages. That could have far-reaching effects for our constituents.
Mark Garnier
I am grateful to my hon. Friend for that clarification. Interestingly enough, though, it is perhaps one of the powers that the FPC should have kept. Although it could have profound effects for people moving and so on, it is incredibly important not to lose sight of what others issues the FPC is there to address. In the past, as bubbles have grown, Members have sometimes been reluctant to take away the punch bowl before the party is over. Sometimes, when we allow bubbles to get bigger than they should be, the result is a financial crisis of the kind that we have seen. There are many things, on an analysis of the financial crisis, that could have happened, but one of them was allowing a colossal asset bubble to grow against uncontrolled lending. If a Member of Parliament or the Chancellor of the Exchequer had turned around in 2007 and said, “We’re going to stop that,” there would have been an absolute outcry. However, if the FPC had done that, it would have been acting without the worry about what would happen at the next general election, and perhaps we would have avoided the problem. It is for that sort of intervention that the FPC is being created.
Bob Stewart (Beckenham) (Con)
What happens when the FPC gets things wrong? How will it be held responsible for the decisions it makes?
Mark Garnier
I am grateful for my hon. Friend’s intervention, because that is exactly the point I am coming to. What is the accountability of the FPC? Ultimately, it has to come down, in some way, to the court of the Bank of England making an intervention to assess what is going on.
As we have discussed, the FPC will have far-reaching powers to intervene, some of which we may never know about. Some might be restricted to a 30-year rule, so we might hear about them in the future, although an awful lot may well be published. However, it is incredibly important that we look at what the Bank of England does to supervise. Currently, the court of the Bank of England is responsible for administrative matters, as we have heard—it is responsible for pay and rations. What we on the Treasury Committee want is the Bank to have a proper board—probably with a new name that reflects its updated role, although I do not think that will happen. We recommended that it should have a majority of external members who must have the relevant skills and experience, and the Treasury Committee wants the court of the Bank to be able to conduct—this is an important point—retrospective internal reviews of policy decisions of the Bank. The Bank’s response envisages limiting that to commissioning external reviews or conducting internal reviews only of the decision-making process of the Bank.
The creation of the FPC—on which my hon. Friend the Member for Beckenham (Bob Stewart) intervened on me—makes this governance issue incredibly important. As we have heard, the Monetary Policy Committee has just two tools: quantitative easing and interest rates, which it uses openly and publicly. We see detailed minutes of the meetings, followed up by evidence sessions by the Treasury Committee, which is also part of an incredibly important scrutiny process, which is fully transparent and very simple. However, as we have heard, the FPC has a large range of tools at its disposal, which means that it might not be able to give a full and open account to the Treasury Committee or publish entirely transparent minutes. Moreover, as I have said, it might be years before we know what intervention has been made. That is why we need an organisation that can intervene to look at what the FPC is doing and take on a strong governance responsibility.
That is why the court of the Bank of England needs to be able to look at the merits of the FPC’s policies and not just the method. The Bank’s board must not be restricted to finding out whether the wrong decisions were made but in the right way. That is why I would be incredibly grateful if the Minister gave serious consideration to new clause 1.
John McDonnell
I am not part of the charmed circle of the Treasury Committee, but I wish to add my congratulations to the hon. Member for Chichester (Mr Tyrie) and the members of the Committee on the work they have undertaken in examining the Bill as it has gone through the House.
I have tabled amendments 46, 47, 49 and 50, which seek to enhance the Treasury Committee’s role in the appointments of the Governor and deputy Governors of the Bank of England, and the chair and chief executive of the Financial Conduct Authority. I have done so because the background to this legislation is perhaps the most catastrophic failure of the Bank of England and the financial regulatory authorities that we have seen in 70 years. Their failure to predict or intervene effectively to ensure that the financial crisis was averted or dealt with adequately, speedily and effectively is there for all to behold. It has brought this country to its financial knees and into a recession that is turning into a depression, which is something we have not seen since the 1930s. The reasons for that have been evidenced today. New clause 1 would address part of the issue—namely, the lack of transparency of the old regime—but another element was the lack of accountability.
This legislation will create, in the Governor of the Bank of England, one of the most important roles in the country. The Financial Times editorial of Thursday 19 April stated:
“The central bank governor is not just some technocrat, but the most powerful unelected official in the country. His role has become more political since the crisis, not less, and will be even more sensitive when the BoE acquires new powers to avert financial crises. The next governor must win public acceptance and possess sharply honed political antennas. This might be harder for a foreigner.”
That last comment refers to the speculation about some of the candidates that the Government are considering.
In today’s Financial Times, the shadow Chancellor sets out his concerns about the range of powers and responsibilities that the new Governor will have, stating that only a superman or superwoman need apply, because the job will be so influential and will have such a wide range of roles and responsibilities. The Treasury Committee appreciated that fact very early on in the game, in its consideration of the new legislation. That is why, way back in November, it recommended that it should have a role in the appointment of this significant post. The Chancellor of the Exchequer argued against that proposition. I find it extraordinary that the Treasury Committee won the right to have a veto over the appointment of the chair of the Office for Budget Responsibility, yet failed to win a role in the appointment of the much more significant post of the Governor of the Bank of England. Indeed, it has no role in the appointment of the deputy governors, and no effective role in the appointment of the Financial Conduct Authority proposed in the Bill.
I genuinely thought that the Government were about to shift their stance on this matter, because, back in November 2011, the Treasury Committee stated strongly that it was not persuaded by the Chancellor’s refusal to grant it a role in the appointment. It went on:
“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR. We therefore recommend that, in order to safeguard his or her independence, the Treasury Committee is given a statutory power of veto over the appointment and dismissal of the Governor of the Bank of England.”
I wholeheartedly supported that view. The Chancellor’s argument was that the Treasury Committee could not have such a role because the Governor was exercising an Executive function and should therefore be a Government appointee. That is an absolutely specious argument.
The legislation to give independence to the Bank of England went through the House, although I never supported it. That means that the Governor has more than an Executive function. The Bank is not an Executive arm of the Government. The Chancellor of the Exchequer and the Government cannot have it both ways. If they support the independence of the Bank of England from the Government, they must establish some other form of accountability to Parliament. If they do not believe that it is independent, and that it is simply an Executive arm of the Government, the Governor will be appointed directly by the Chancellor of the Exchequer. Even if that is the Government’s argument, the Chancellor of the Exchequer is still accountable to the House, so there must be some role that the House can play in advising him on the appointment of this important post.
My amendments would simply reassert the role of the Treasury Committee and thus Parliament itself in this vital range of decisions about appointments to key elements of the new structure proposed by the Government. Let me be frank. I agree with everything said about the role of the Treasury Committee Chairman and I agree that he needs to be called “right honourable” and the all the rest of it, but sometimes people are born great and sometimes people avoid greatness being thrust upon them. I do not know what negotiations went on, and it might well be that the negotiations were along the lines of, “We will not push for a veto on appointment as long as we can get some transparency and thus at least some element of accountability for that post to the Committee itself.” If that was the tenor of the negotiations with the Government—I happily allow the Treasury Committee Chairman to intervene to clarify it—I am afraid that the deal is not good enough.
What needs to be said very clearly by this House is that these are such significant appointments—particularly the Governor of the Bank of England but also the head of the Financial Services Authority in view of its key role in seeking to avoid further crises and in regulating this country’s financial services—that this House must have at least some say over the calibre of these persons.
Mr Tyrie
I can reassure the hon. Gentleman that the report does not reflect any back-room deals, but I would like to ask him a question. I am strongly sympathetic to the approach set out in his amendments. He needs to know that the Treasury Committee intends to hold pre-appointment hearings for these jobs in any case, including for the very senior jobs like that of the Governor, when he is identified. In the unlikely event that a nomination were challenged by the Committee, many would argue that the position of the person, even at nomination stage before he or she took up the appointment, would be untenable. In that case, does the hon. Gentleman not agree that the sensible thing for the Government to do is to engage with Parliament and with the Treasury Committee a little earlier in the appointments process?
John McDonnell
I wholeheartedly agree, but sometimes in relationships with the Government a line is drawn in the sand, which makes the right of veto sometimes crucial, particularly if there is a bloody-mindedness in the direction of policy making by the Chancellor when it comes to appointments to key posts. Although I take the gist of the hon. Gentleman’s argument and can see how the Treasury Committee could create a climate of opinion or produce a report that influences the appointment in a way that makes it impossible for a person to take it up because of the lack of credibility, I think there needs to be an even stronger role for the Treasury Committee and therefore Parliament in all these matters.
This is a crucial opportunity missed in respect of the Treasury Committee’s ability to influence the Government; in respect of the Government’s ability to demonstrate to this House a greater openness when it comes to the transparency of the operation of the Bank of England and of the new regulatory authorities; and in respect of the Government themselves in how they make appointments to these crucial positions.
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
Does my hon. Friend agree that this is not just a matter of the relationship between the Government and this House, as it also relates to the relationship between the Government and the public? As we move into a period of austerity, if there is not sufficient accountability for the sorts of measures the Government view as necessary, it creates political instability. People do not see where the accountability lies for some of the austerity measures that are coming—not just in this country, but across Europe.
John McDonnell
That is exactly the point I am seeking to make. This post will have wide responsibilities and the decisions taken will have immense ramifications for the country as a whole and for all our constituents. Because of the unique role of the Governor of the Bank of England, the individual will be subject to public scrutiny in a way that a Bank of England Governor has never been under scrutiny before. I think he will become an individual in whom people must have confidence. I have to say that I have some anxieties about some of the names being bandied about at the moment, such as the appointment of a former member of Goldman Sachs, a company that does not have a particularly distinguished record in relation to the operation of economies throughout the world before and after the financial crisis.
Mark Field
It is a pleasure to be part and parcel of such an interesting debate. I especially commend the speech of my hon. Friend the Member for Chichester (Mr Tyrie). The hon. Member for Nottingham East (Chris Leslie) also made a thoughtful contribution, which covered a range of issues. As he said, it is regrettable that much of the real scrutiny of the Bill will be carried out in the other place, partly because of the guillotine but also because of the way in which votes on amendments are driven through here. I do not think that that reflects at all well on the House of Commons, which should be a place for genuine scrutiny rather than one that railroads Bills through their stages.
I do not go quite as far as the hon. Member for Nottingham East does in amendment 28. I do not think that we should get rid of clause 5 altogether. However, there is little doubt that the regulatory changes proposed in the clause, and the creation of the new supervisory architecture, will do little to address some of the significant risks that currently exist in the market. I say that as someone who speaks to practitioners every day in my role as Member of Parliament for the City of London.
A central issue is the ability of the FCA to carry out prudential regulation of firms that have sizeable assets and, often, complex structures. The recent failure of firms such as MF Global, Arch Cru and Keydata—all of which would have been prudentially regulated by the FCA—demonstrates the need for firms that have sizeable assets and are engaged in complex activities to be properly managed. One outcome of the failure of those firms has been that the liabilities of other UK businesses to the financial services compensation scheme are increasing in line with larger payouts to UK consumers. A wider effect has been that smaller and more innovative companies which, by their very nature, have less capital available to pay compensation on behalf of other firms face increased risk and rising costs. That will ultimately erode the attractiveness of London and, indeed, the UK as a venue for financial services businesses.
The FCA will not be a specialist prudential regulator. The experts will be located in the Prudential Regulation Authority, and it will be important for the FCA to work closely with the PRA to ensure that complex firms within its scope receive an adequate quality of prudential regulation. It is therefore crucial for the Bill to contain adequate safeguards and assurances that robust information-sharing agreements will exist between the two regulators. That important detail is lacking in both the Bill and the draft memorandum of understanding.
The Government should provide greater protections in clause 5, specifically in regard to the relationship between the FCA and the PRA. That would enable the two regulators to share information on systematically important companies to ensure that the PRA could make a judgment on whether they needed macro-prudential regulation. A key question is whether the FSA has learned from the problems of Lehman Brothers and the events of the past three and a half years or so. Despite the financial crisis, the FSA has failed to adjust the manner in which it supervises firms. The Turner review, published in 2009, provides a detailed analysis of the causes of the economic crisis and the areas of the financial and economic system in which the FSA and other, global regulators failed to identify growing problems.
The review promised a new philosophy of regulation that it describes as “intensive supervision”. That amounts to a huge number of new initiatives and commitments: a significant increase in the resources to be devoted to the supervision of high-impact firms; an increase in the resources devoted to sectoral and firm comparator analysis; investments in specialist skills, with supervisory teams able to draw on enhanced central expert resources; a much more intensive analysis of information relating to key risks; and an investment in specialist prudential skills.
Three years on from the publication of the Turner review, the FSA has increased the number of conduct interventions, a proportion of which have not involved consumer detriment—for example, in client asset and financial crime cases—but it has not been able to prevent the failure of a number of non-systemic companies.
The most worrying feature of what is going on at present, with the collapse of MF Global, Arch Cru and Keydata, is that under the new regulatory system they will all be prudentially managed by the FCA. It is set to be a competent financial conduct regulator, but it is no secret that it is not an expert prudential regulator. The prudential experts will all be located in the PRA. That is fine when the firms that are prudentially regulated by the FCA are small and relatively straightforward with few systemic risks, but none of the three firms to which I have referred can be regarded as small or straightforward businesses.
We are going to hear a lot more about MF Global in this House in months and years to come. It was involved in complex transactions as an intermediary on a range of financial products. The estimated gap owed by MF Global to futures customers is as large as $1.6 billion following bankruptcy. The total cost for MF Global UK has been estimated in the region of £600 million, and about $1 billion of client money remains locked in other financial institutions according to its administrators, KPMG. The total liability to consumers when Arch Cru collapsed was some £100 million, and a £54 million financial redress scheme was agreed between the FSA and the other professional organisations, Capita, HSBC and BNY Mellon.
David Mowat
I completely agree with my hon. Friend’s comments about MF Global and the fact that we did not learn quickly enough the lessons of that or of Lehman. Is there not one major aspect, however, that the Bill does not address particularly well, perhaps because it cannot: the fact that the regulation of such firms must mirror their organisational structure, which is international? Neither the FCA nor the PRA, nor any other regulatory body, can do that without much more effort being made.
Mark Field
I do not disagree with what my hon. Friend says. However, the special administration in respect of MF Global—which, as I have said, will be high profile in years to come—seems to be considerably better organised in every other jurisdiction than it is in the UK. That is doing great damage to the reputation of the UK as a destination for financial services.
Following the failure of the firms to which I have referred, the Financial Services Compensation Scheme has announced it will need to raise an additional £60 million in the investment intermediation sub-class, resulting in rising costs for firms in that category, and in the coming year both MF Global and Arch Cru will, I fear, generate further liabilities of some £600 million or more.
Alun Cairns
My hon. Friend is making very forceful points, especially on the FSCS. As that is currently funded by the industry itself, and given that the FCA cannot have detailed knowledge of the workings of every product, does my hon. Friend agree that in order to ensure that there is adequate protection, the FCA must work with the industry and accept the intelligence that comes from it?
Mark Field
My hon. Friend is absolutely right about that.
I want to touch on the impacts, however. Smaller firms dominate the advisory and investment sector, and they clearly do not have the capital available to make the sizeable pay-outs that are an integral part of the scheme on behalf of other companies. The larger banks are present in most major financial centres, but it is the success of innovative smaller companies that marks out Britain’s financial services industry, or at least has done hitherto.
I am aware, as I have spoken to this company in recent days, of a FTSE 250 firm whose costs have risen by 270% under the compensation scheme, year on year, from 2009 to 2010. That includes some £4.7 million of interim levy costs for Keydata, a current cost of £470,000 for MF Global—again, I fear that that is an interim cost—and some £700,000 for Arch Cru. The company had predicted that its total cost for MF Global could end up being as high as £9.5 million.
This situation is an enormous concern. Firms are facing increased liabilities through the compensation scheme and the future structure of the supervisory regime does not suggest that prudential regulation of these firms is likely to be improved. This matter should be addressed in this Bill, as the FCA will not be a specialist prudential regulator. As I say, the experts are located elsewhere, so it is crucial that the Bill contains adequate safeguards and assurances that robust information-sharing schemes are to be put in place between the two regulators.
I briefly wish to discuss my new clauses 2 and 3, which seek to amend section 166 of the Financial Services and Markets Act 2000. Section 166 sets out arrangements for a report by a skilled person, and the whole section urgently requires changing. The FSA has the power to insist on an investigation without determining who does it and without paying for it. The result has been that too many recent section 166 reports have cost the players in the financial services market huge sums, without producing anything of great value. Under the current regime, firms are guilty until proven innocent, and they have to pay for their own prosecution, regardless of whether guilt is proved or not.
The number of section 166 reports has, perhaps understandably, risen dramatically since the 2008 financial crisis. Nevertheless, such reports are increasingly used as a standard regulatory method, rather than being reserved, as they should be, for the most serious cases. They are becoming a phenomenally big burden on hard-pressed small firms. The costs can run into hundreds of thousands of pounds in each and every case, and companies often cannot recoup the costs, even if there is no evidence of wrongdoing.
I know that others wish to speak, but I just wish to put on the record the breakdown of the cost of section 166 reports. As I say, this is now an issue of major concern. In 2006-07, there were just 18 such cases, at a cost of £3.8 million. That number increased to 29, 56, 88 and 95 cases respectively for each of the four succeeding years, with the costs increasing from £3.8 million to £32.2 million for the year 2010-11. It is essential now that the FSA, which has not previously selected skilled persons to have a direct line of accountability, changes its whole approach on this matter. There is much more that I would like to say and I am sorry that time is so limited this evening. I hope that this matter will come back for further scrutiny, although I am afraid that that will be in another place.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Quite a few more hon. Members wish to speak and the Minister wants to come in at 9.40 pm, so if we could help each other, I would be grateful.
Mark Durkan (Foyle) (SDLP)
I wish to join others in acknowledging the strong case that members of the Treasury Committee have made on the issues addressed in new clause 1. Like others, I do not think that new clause 1, in itself, goes far enough in resolving some of the Bill’s deficiencies, but it is a commendable effort.
As we are dealing with a number of proposals that appear on the amendment paper under the heading “Governance of the Bank of England and the new regulatory structure”, there is a danger that we might make the mistake of thinking that all the provisions are about issues inside the beltway; we may think that they are all about parliamentary influence, scrutiny and the relationships between the Financial Policy Committee, the Bank of England and the Treasury and so on. Of course, as we heard in the remarks made by the hon. Member for Nottingham East (Chris Leslie), many of these provisions touch directly on issues that we thought we were discussing in the previous grouping in relation to consumer protection and the consumer interest.
I wish to discuss a number of the amendments in this group that I have tabled, particularly new clause 13. It is aimed at dealing with what seems to be a fairly gaping loophole in the Bill and relates to provisions in clause 25, on page 108, and the regime for consolidated supervision of the parent undertakings of financial institutions. The provisions in the Bill as they stand would mean that the only parent undertakings that will be regulated under consolidated supervision are those that were deemed to be financial institutions, whereas those that were not deemed to be financial institutions would be immune.
Guy Opperman
It is a pleasure to speak in this debate, albeit briefly. Like Mark Antony in “Julius Caesar”, I come to praise the Bill, not to criticise it. I accept that the Government are all honourable men and women, but so, it might be reasoned, are the members of the Treasury Committee, who are also honourable men and women, advancing a slightly contrary view.
I support the fundamental ethos of clause 1 and welcome the review of the performance of the Bank of England. I certainly do not support Opposition amendment 28, which would remove clause 5; that would be entirely wrong in the present circumstances. I speak as a critical friend of the present system and as the secretary of the all-party group on the Arch Cru Investment Scheme, which is seeking to recover compensation for the thousands of men and women in this country who have lost their lifetime savings. What happened to them is manifestly wrong, and anything that this House can do to strengthen the regulatory system to prevent such disasters, I welcome wholeheartedly.
I speak also as an MP who, almost every week, has a constituent come to me saying that they are unable to obtain bank lending and finance. That is because of the lack of competition in the present banking structure—an issue that is raised regularly. I urge the House to embrace greater competition and to open up the market to competitors to the existing large banks, which will be in a position to provide the bank finance sought by businesses up and down the country.
The other end of the telescope must also be addressed. At present, we have the large banks, but there are no small banks. Germany and America have local banking structures that work tremendously positively: individuals can set up local banks, which provide for a community purpose above all else, which is manifestly a good thing. That is why I support wholeheartedly the competition objectives set out in new section 1E of the Financial Services and Markets Act 2000, inserted by clause 5, which states that there should be an emphasis on
“the ease with which new entrants can enter the market, and…how far competition is encouraging innovation.”
I have met the chairman of Metro bank, which is that remarkable thing: a bank set up to exist at the weekend. It opens on weekends and at 8 o’clock in the morning. Imagine what could be done if we had that at the local level.
I am grateful for what Hector Sants, the present chief executive of the FSA, told me in a letter dated 12 March:
“We are conscious of the balance to be struck between ensuring high standards at the gateway, and the importance of allowing innovation and appropriate levels of access for new firms.”
The letter continues:
“there has been public debate about the potential advantages of new entrants in the area of small, regional banks focused on servicing the SME sector. In such cases we will be proportionate in our approach and would invite all firms with a viable business model and appropriate levels of resources to a pre-application meeting to help guide them through the application process”.
The Bill will, I suggest and sincerely hope, make it easer to establish local banks, which can only be a good thing.
Kelvin Hopkins
I rise to express my strong support for the amendments in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell).
There are two components of the argument: the first is the relationship between the Governor of the Bank of England and the Government, but the second is the relationship between this House of Parliament and the Government. On both, I strongly believe my hon. Friend has a point. Like him, I was unhappy about the decision to hand power over monetary policy to the Bank of England and give it independence. All aspects of macro-economic management ought to be matters for Ministers accountable to Parliament. I maintain that view and, in a sense, recent events have proved that my hon. Friend and I were right. I thought at the time that if the Governor of the Bank of England or the Monetary Policy Committee chose to be hawkish on interest rates when we had a recession on our hands, there could be a serious conflict between the Bank and Government. Fortunately, the Bank has been sensible in managing monetary policy and that clash did not occur, but it could have happened in 2008. Had the Bank been governed by a hawkish Governor, we could have seen a serious clash and those powers no doubt taken away. I was comforted by the thought that if the Bank of England got out of control, we could easily take back powers. It is not the same with the European Central Bank, where powers have been given away and cannot be taken back.
In relations between Parliament and Government, pre-appointment hearings have been shown to be a success. I have been involved in not just the two most recent pre-appointment hearings, but in developing the arguments in favour of pre-appointment hearings as a member of the Public Administration Committee for the past 10 years. Brilliant work was done by Tony Wright, who made a real impact on our constitution. Pre-appointment hearings are first class. They are not just an experiment; they are here to stay. I would like the Governor of the Bank of England to be subject to a rigorous pre-appointment hearing so that we know that they will serve the economy and relate to the House, and not just be a law unto themselves. I have probably run out of time. I know the Minister needs to speak, but I have made my point.
Mr Hoban
This has been a thoughtful and constructive debate covering the wide range of issues in this group of amendments. I shall organise my remarks in two parts. I shall deal first with issues relating to the Bank of England and the Financial Policy Committee, and secondly with the Prudential Regulation Authority and the Financial Conduct Authority.
I begin by speaking to Government amendment 12. This change was prompted by an amendment proposed in Committee by the hon. Member for Nottingham East (Chris Leslie), on the wording used to ensure that the view of the Treasury member of the FPC cannot be taken into account in determining whether the FPC has reached a decision by consensus. Although the substance of the provision, which is consistent with the general principle that the Treasury member of the FPC should not have a vote, was endorsed by the Committee, some members of the Committee thought that the wording was ambiguous. Some, including the hon. Member for Foyle (Mark Durkan), felt that the current wording could imply that the Treasury is not even allowed to exercise influence through debate or discussion.
I therefore committed to look again at the wording to see whether it could be made clearer. Amendment 12 amends the provision to make it clear that in determining whether the FPC has reached consensus, the chair should disregard “any view expressed” by the Treasury member. This does not mean that the Treasury member cannot influence the discussion and debate, but in determining consensus, that voice should not be taken into account.
The main focus of the debate has been accountability and transparency. That is absolutely right. Hon. Members are right to highlight the fact that as a consequence of the Bill, the Bank of England takes on more power and responsibility, partly because the PRA becomes part of the Bank family, and through the creation of the FPC. It is right that we strengthen the transparency and accountability of the Bank as a consequence of the reforms before us. The debate about macro-prudential tools was a helpful way of characterising that debate and talking about some of the proposals that we have made. We are committed to ensuring the ex ante approval of those macro-prudential tools by this place and the other place. Hon. Members are right to call for a review of the use of those tools and a retrospective review of the Bank’s performance. That is important too.
Let me deal first with the ex ante side of the equation. Amendment 22 talks about economic growth being part of the FPC’s objective. The Government are clear that the FPC’s principal aim should be to make the financial system safer and more stable. We do not seek the stability of the graveyard. The FPC should not be able to pursue stability to the point where the financial sector can no longer support the real economy. This means that the FPC should not be able to take action that would seriously damage the ability of the financial sector to contribute to growth in the medium to long term and the FPC should consider whether the costs of the action that it proposes would be disproportionate to its benefits. The Bill as drafted already ensures this.
Mr Tyrie
I realise that the Minister will not want to commit himself to change anything now, but would he be prepared to say now that he would consider looking at the possibility of going a little step further than the affirmative procedure in some measure towards something that we would recognise as a super-affirmative procedure for these measures?
Mr Hoban
My hon. Friend makes an important point. We need to ensure that the right scrutiny arrangements are in place, but we also need to recognise that the super-affirmative procedure can create delays, because there are times when if the House is in recess the clock stops, so there is a challenge there. In addition, a blanket adoption of a super-affirmative procedure may mean that even minor technical changes are subject to quite a lengthy process. The point that I would take from this debate is that we need to ensure that proper parliamentary scrutiny of these measures is in place, and that there is proper consultation with the public and a proper assessment of the economic impact of these macro-prudential tools on the wider economy. I hope that the Government’s position is clear. I am not ruling out the proposal. There are some issues with it, but we are committed to ensuring that the right procedures are in place to ensure proper parliamentary scrutiny.
I come now to the matters at the heart of new clause 1 tabled by my hon. Friend the Member for Chichester (Mr Tyrie) and his colleagues from the Treasury Committee. I agree entirely that the robustness of the Bank of England’s governance arrangements is vital. Hon. Members on both sides of the House have been absolutely right to point out that it is even more important given the expanded responsibilities provided to the Bank of England under the legislation. There is a consensus that the governance of the Bank needs to be strengthened in order better to equip it for these new roles. The court will need to adapt and evolve in order to operate as an effective governing body, able to oversee the Bank in transition and in steady state, ensuring that the Bank is adequately resourced to meet its new responsibilities, offering challenge to the Bank’s executive and supporting accountability to Parliament. With that in mind, a set of proposals has already been put forward by the Bank of England to help address these concerns.
Last year the Treasury Committee published an in-depth and thoughtful report into the accountability of the Bank. In response to that, the court of the Bank of England set out some positive and constructive proposals to strengthen its oversight of the Bank’s financial stability activities and to enhance accountability. Central to the court’s proposals is the creation of a new oversight committee for financial stability, a sub-committee of the court that will be responsible for overseeing the entirety of the Bank’s financial stability activities. This wholly non-executive committee will have access to the meetings and papers of the Bank’s policy-making committees, including the FPC, and will be able both to review the internal decision-making processes leading to policy outcomes and to commission periodic reviews of policy-making performance from expert external authorities. These reports will be published, unless publication would be contrary to the public interest. We welcome the court’s proposals.
My hon. Friend the Member for Chichester, in his remarks welcoming the court’s response to the Treasury Committee’s recommendations, recognised that there has been change, but he also outlined a number of areas in a report published on 23 January and argued that the court’s proposals did not go far enough, particularly with regard to the policy reviews. Recognising this, the Chancellor agreed with the Governor and the chair of the court that the new oversight body will be expected to commission retrospective internal reviews from the Bank’s policy makers of their own policy making and implementation performance. I think that the Bank has made some progress, but my hon. Friend raised the important question of whether the oversight arrangements should be set out in primary legislation in the Bill.
My hon. Friend the Member for Chichester also mentioned publication of the court’s minutes. The Bank has committed to publishing what it terms a record of future court meetings. It is worth pointing out that the FPC also produces what it calls a record of its meetings, which is a very full account of the debates that go on in the FPC, and we will expect a similar process to be undertaken for the court’s meetings. Let me be clear: I believe that there is a clear need for the Bank’s accountability arrangements to be strengthened through the publication of the court’s minutes and the enhanced scrutiny of the court’s work, although I believe that the changes announced by the Bank help address the concerns raised by my hon. Friend and the Treasury Committee. He made some powerful arguments that have been echoed by other members of the Committee, and we will consider further whether these arrangements should be put in the Bill. We will reflect on these matters and reconsider them when the Bill goes to the other place. I hope that that helps to reassure the House on how seriously we take these matters and our willingness to listen and respond to the concerns raised by Members during the debate, particularly the contributions made by my hon. Friend and others.
Chris Leslie
I just want to be clear about what the Minister is saying. Is he saying that when the Bill comes before the other place for consideration he will accept retrospective reviews and publication of minutes or that he will simply consider it?
Mr Hoban
We are clear that we want to see the court’s minutes published, which I think is absolutely vital, and that we want to see those retrospective reviews in place. The questions my hon. Friend the Member for Chichester has asked are whether we have gone far enough, whether the proposals should be in the Bill or whether we should just accept the proposal put forward by the court. Tonight I have committed to listening to those arguments—he made a powerful speech—and returning to the issue when the Bill goes to the other place.
Mr Tyrie
Will the Minister clarify a couple more points? First, when he says that he is committed to the publication of the court’s minutes, does he mean the publication of the full minutes or only a summary record of them, which it appears is what was proposed before. Secondly, he thoughtfully suggested that the non-executives of the Bank should commission internal reviews. Will they also be permitted to look at, assess and comment on the merits of the material they receive?
Mr Hoban
I think that it is important that the court’s non-executives perform a full role in scrutinising the Bank’s activities. They need to be able to look at the output of those reviews, consider them and express their views on them. On the issue of minutes, I will not say that we are getting into a semantic debate, because that would be unfair. What we want to do is ensure that a proper record of the court’s meetings is published.
I am not sure that the minutes should necessarily be verbatim, reporting every word that everyone has said, but they should certainly be a very good summary, catching the thought processes that took place in the court and the issues that were debated and discussed, so that Parliament and stakeholders can hold the Bank to account for the way in which it has used its powers not just when it comes to the Financial Policy Committee, but in other areas. I hope that that gives my hon. Friend the reassurance he looks for on our commitment to transparency and on ensuring that we do all we can to strengthen the transparency arrangements of the Bank of England.
I am very conscious that a number of other points were made, and I want to discuss them. The hon. Member for Hayes and Harlington (John McDonnell) tabled two amendments on the appointment of the Governor of the Bank of England and Parliament’s role in it. We do not have time tonight to go into the detail of that procedure, but the Chancellor has said that there will be an open process, and having heard the debate in the House he will reflect on it when thinking about how the process should develop.
I turn to Government amendment 1. In Committee, the hon. Member for Nottingham East argued for a check on the PRA’s ability to decide not to disclose the use of its veto over the FCA. The Government accept that the PRA will always be the best placed organisation to determine whether or when to disclose the use of its veto, but there is room for an element of independent consideration when it decides against such disclosure. The Government have therefore decided to place a duty on the PRA, through amendment 1, to consult the Treasury on a decision not to disclose, and this will ensure that proper disclosures do take place.
I will respond in writing to the remarks that my hon. Friend the Member for Cities of London and Westminster (Mark Field) made on the use of skilled persons. He raised some important issues.
Alun Cairns
Does my hon. Friend recognise the strength of a practitioners panel in relation to the PRA, given that he has already accepted the merits of a practitioner panel in relation to the FCA?
Mr Hoban
What is important is that the PRA establishes its process for consultation with regulated firms. It is required to set out in its annual report its process of consultation.
In conclusion, this is an important part of the legislation, and I am very disappointed that the hon. Member for Nottingham East has tabled a wrecking amendment that would take the guts out of the Bill. I thought that the Opposition supported the reform of financial regulation, but they clearly do not, so I hope that if the hon. Gentleman puts his wrecking amendment to the vote the House will oppose it.
Mr Tyrie
I am grateful to the Minister for what I have heard this evening. He has shown enough flexibility for me to feel able to withdraw new clause 1, but before I do so it is just worth my spelling out what I think I have heard.
I think I have heard that we are going to have the publication of the full minutes of the court of directors, and that we are going to permit and, indeed, encourage the court—the non-executives of the Bank of England—to commission internal reviews, to assess them and to give us their assessments, made available to Parliament.
I heard also about some flexibility on whether we will go beyond the affirmative procedure when looking at macro-prudential tools. Their proper scrutiny is extremely important for millions of people in this country. Whether we will go as far as a super-affirmative procedure I do not know, but an element of flexibility has also been provided for there.
With that in mind, my intention is not to push new clause 1 to a vote. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 10
Mortgage rate forewarning
‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.—(Chris Leslie.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
John McDonnell
On a point of order, Mr Speaker. The main purpose of the Financial Services Bill—
Mr Speaker
Order. May I appeal to Members who are planning to leave the Chamber to do so quickly and quietly, so that the House can do the hon. Member for Hayes and Harlington (John McDonnell) the courtesy of listening to his point of order?
John McDonnell
Thank you, Mr Speaker.
The main purpose of the Financial Services Bill was to secure corporate responsibility in the financial sector, and the batch of amendments that were not reached dealt specifically with corporate responsibility. May I, through you, Mr Speaker, convey a message to the Leader of the House, who is present? There will be a second day of debate on the Bill, and he may well wish to look at the programme motion again to establish whether we can debate the important elements of those amendments on that second day.
Mr Speaker
I am grateful to the hon. Gentleman for his point of order. Let me say two things to him in response to it. First, as he can see with his own eyes, the Leader of the House is present, and will have heard what he has said. Secondly, business questions on Thursday will provide a good opportunity for him to pursue the matter further—and, knowing his indefatigability, I expect to see him in his place on that occasion.
Business Without Debate
Delegated legislation
Darlaston Road Crossing (Walsall South)
Valerie Vaz (Walsall South) (Lab)
I rise to present a petition from the residents of Walsall South.
The petition states:
The Petition of users of Darlaston Road zebra crossing, near Hough Road in Pleck, Walsall,
Declares that the Petitioners are concerned that there have been a number of accidents and near misses on the Darlaston Road zebra crossing near Hough Road in Pleck, Walsall.
The Petitioners therefore request that the House of Commons urges the Government to call on Walsall Borough Council to immediately install a signal-controlled crossing in place of the existing zebra crossing on Darlaston Road, near Hough Road in Pleck, Walsall, before any further serious incidents occur.
And the Petitioners remain, etc.
[P001020]
Smart Meters
John Healey (Wentworth and Dearne) (Lab)
I am grateful to have secured this Adjournment debate. I am both a supporter and a sceptic of smart meters. I strongly back the benefits that could come from universal smart meters with the right specifications for all consumers, but I am concerned that the Government need to get a grip on some of the essential elements of the national programme. I am also concerned that consumers will end up footing the big national bill without knowing it. There are, too, already consumer complaints over early installation of smart meters, which could irrevocably damage confidence and the reputation of the programme if they are allowed to escalate.
This is a hugely ambitious prospectus for us all. It was kicked off by Labour when in government, and is now being continued by the coalition. The aim is to install 55 million high-tech gas and electricity meters in all UK households and businesses by 2020. I am told that those involved in the project have as their mantra, “Starting well and finishing early.” If the Government get this wrong, it could end up starting badly, failing to finish and costing the consumer dearly.
Let me start by being upbeat. Our UK smart metering plan has a number of world-first features. It involves both gas and electricity meters; it builds in a requirement for an in-home display for all consumers; it sees installation as being led by energy suppliers rather than the energy distribution and network firms; it has functionality for the consumer, the energy supply companies and the network operators that is far ahead of smart meters in other countries; and it places a single central data communications provider at the nerve centre of the system.
That is why consumer groups, including Which?, as well as energy companies and industry experts, all accept the potential benefits. Those benefits include: an end to estimated energy bills; detailed real-time information on energy use, with options to reduce consumption and bills; new tariffs based on time of use, consumption, carbon emissions and a range of other factors; pay-as-you-go options so we can put an end to the penalty premium that hits the poorest, who use prepayment meters at present; better control of distributed energy generation and microgeneration; easier switching; and, of course, remote connection, disconnection and meter reading without the need for a field work force.
However, the installation of smart meters is showing early signs of problems for consumers. Which?, Consumer Focus and the Office of Fair Trading are all picking up complaints, often about mis-selling, in an industry where consumer protection is still too weak and consumer trust in energy companies is at an all-time low. For instance, we are picking up reports of energy reps cold calling, with the customer believing that the purpose of the visit is to install a smart meter whereas the real purpose is to switch supplier; reports of customers being told that they qualify for a smart meter, as long as they switch supplier; and reports of reps offering free smart meters if people sign up to their energy supplier. The clear rules against any sales on installation visits, which the Minister published earlier this month as part of his update on the smart meter programme, should help, but they will help only if they are fully and toughly enforced.
Like all other hon. Members, I received the Minister’s update letter, coincidentally dated today, on the smart meter programme. I thank him for it, but it has little or nothing to say about the areas of greatest concern. Let us call them the four Cs: cost; consumer confidence; controlled testing in trials and proper pilots; and the contract for the data and communications nerve centre.
Jim Dowd (Lewisham West and Penge) (Lab)
I congratulate my right hon. Friend on raising such a significant issue. May I add a fifth C—competition—to the four that he has outlined? If the smart metering programme is implemented optimally, it stands a chance of bringing greater competition into an area beset by the big six cartel. Although there are huge dangers, as there have been with many public sector IT projects over the years, we should not lose sight of the fact that this is an opportunity to regain public confidence in the energy sector, which that cartel has seriously undermined in recent years.
John Healey
My hon. Friend is absolutely right: a perceived lack of proper competition is responsible for a large part of the loss of confidence among consumers. It is also responsible, in large part, for the frustration of many smaller suppliers, who feel closed out of what should be an open and competitive market. As he will see as I proceed, I pinpoint those doubts about proper competition in this sector as underpinning some of the difficulties that I anticipate this programme may have if the Government do not adjust their approach.
Let me deal with my first C—cost—which is central to this matter. People have seen their energy bills go through the roof recently. Many people are struggling to pay, more report falling behind with their payments and some report being forced to choose between the very basics of eating and heating. They see energy companies making huge profits, little real competition to keep down prices, no help from the Government and no action from the regulator. The cost of the meters in total will be about £12 billion—at least on current estimates. That is more than £100 per smart electricity meter and more than £130 per smart gas meter. All costs are going directly on to the bills of consumers, yet there is no requirement to report these costs or show these costs in consumer bills; there is no guarantee that companies will pass the considerable savings on to the consumers in their bills; and, above all, there is no control over costs of installation, other than the Government’s assertion that market competition will do the job.
The Minister will be well aware that the Public Accounts Committee shared some of those concerns in a report last year. The first conclusion of its report, “Preparations for the roll-out of smart meters,” is:
“Consumers will have to pay energy suppliers for the costs of installing smart meters through their energy bills, but many of the benefits will pass in the first instance to the energy suppliers.”
That paragraph concludes:
“The Department is relying on competition to drive down prices, but Ofgem have clearly found that the energy market is not functioning effectively as a competitive market.”
That was the point that my hon. Friend the Member for Lewisham West and Penge (Jim Dowd) made so clearly.
At present, the Government are writing a blank cheque for the industry. The Government and Ofgem have some powers under the Energy Act 2011 to obtain information from suppliers on cost and performance, and as a start they should use them directly. The Minister also needs to rethink the membership of the panel he proposes to oversee the implementation of the smart meter programme. It is set out in one of the update papers he published earlier this month, the “Smart Energy Code”, which shows on page 73 that the governance panel to oversee the implementation consists of 13 full members with only up to two consumer representatives, no representatives from companies that specialise in metering and—potentially, as it says “possibly” in brackets—only one Government appointee, who will not have voting rights. The Minister should accept that if the programme is to be perceived as one that is directly tailored to maximise the benefits to consumers, the way he manages it and such arrangements must reflect that intent.
Secondly, on consumer confidence, the net benefits of the programme are said to be on average about £25 a year for a household with both electricity and gas meters. The benefits, both environmental and financial, can only be fully realised if there is widespread take-up and if consumers use the information to reduce their consumption, to change tariffs and to switch suppliers if needed to get the best deal. Confidence, knowledge and trust in the smart meters are therefore essential, but they are also fragile. Fewer than one in four consumers—only 23%—consider energy suppliers to be trustworthy. Allowing them to run the roll-out without clear Government leadership risks damaging confidence in the overall purpose and benefits of smart meters. The Government’s hands-off policy therefore risks the very future of smart meters, and I think the collapse of consumer confidence and the failure of smart meters in other countries, such as Australia and the Netherlands, and in the state of California, are cautionary tales for us in the UK.
My third C is controlled testing and pilots. As the Government are letting energy companies lead the installation of smart meters, activity is patchy. Some suppliers are holding back and one or two others, such as British Gas, are taking a market decision to move fast. British Gas has already installed 400,000 smart meters and tells me that only a quarter will need replacing in the light of the Government’s latest technical specifications and that its trials are producing valuable data and intelligence for the future. A more common view among consumer groups, energy supply companies and industry experts is that a greater grip is required from Government and that prior to the start of the planned roll-out from 2014, all aspects of the programme and its participants should be thoroughly tested. They believe that much greater direction and co-ordination is required by Government of the big energy companies to test different communications links, different ways of getting consumer confidence and the interoperability between suppliers and devices.
In particular, I am concerned that the poorest will be put last. Smart meters should do away for good with higher charges for people who prepay for their energy, but none of British Gas’s 400,000 smart meters replaced prepayment meters and Government work on how prepayment will be built into the smart meter specs is being pushed back further into the future. It simply will not happen if each supplier is left to do its own thing, or to do nothing. It must be a higher priority for Ministers to sort out specifying what will be required for prepayment in all smart meters; trialling the installation and use of such meters; and establishing what help is needed for the most vulnerable. The digital switchover is a good example of both what can be done and the scale of what might be needed. I am told that in the Granada region, a team of 7,000 volunteers stood ready to step in to help consumers who were struggling to deal with switchover to make that change.
The fourth C is the contract for the central data communications and data services company. This is required, of course, to link smart meters to suppliers. The PAC, again rightly, warns in the fifth conclusion of its report:
“We expect the Department to take on board the lessons learned from other large Government IT programmes and to ensure that the contracts they place are sufficiently flexible to cater for smart grids and avoid additional costs falling to consumers.”
In my view, the Government have the right approach: as long as levels of security and reliability are sensibly specified, as long as the system is kept as simple as possible, and as long as this is done and tested in good time for the national roll-out, so that the extra costs of modifying or upgrading meters are avoided, the single competitively appointed supplier for data and communications could make the market and the service more efficient. It is certainly better than allowing the 23 active energy suppliers simply to do their own thing.
If that approach is right in principle and in practice for data communications, it is, however, reasonable to ask why a similar, tighter, Government-led approach is not right for meter installation as well. Which? is so concerned that it wants Ministers to call a halt to the current roll-out strategy, which is led by suppliers, to get proper trials under way, and then to restart the roll-out in 2014, so that it works for consumers, who in the end will pay for it.
In conclusion, there are serious questions about how the Government are handling this huge national programme. I hope that Ministers will heed the warnings and adjust the Government’s approach, because this is an area where I and millions of hard-pressed consumers paying high electricity bills all want the Government to succeed.
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
As the right hon. Member for Wentworth and Dearne (John Healey) said, less than three weeks have elapsed since we published a number of smart metering consultations and decisions. The debate is therefore timely and I congratulate him on securing it and commend him for the measured way in which he introduced it, supporting the ambition but raising realistic, sensible and constructive questions about how it is being taken forward. I assure him that the Government are alive to the issues and that, for us, the interests of the consumer are at the heart of the programme. It is the consumer experience that will determine its success, and if consumers do not have the experience we want, it will not deliver and satisfy the ambition we all share.
I agree with the right hon. Gentleman that the roll-out of smart meters will unlock huge benefits for consumers. We have brought forward the timetable because we think those benefits are so substantial. We want every home in Great Britain to have a smart meter and an in-home display by the end of 2019, enabling people to manage their energy consumption and reduce their carbon emissions.
The roll-out will play an important role in Great Britain’s transition to a low-carbon economy and will help us to meet some of the long-term challenges that we face in ensuring an affordable, secure and sustainable energy supply. This is a huge and challenging project. It is one of the largest and most comprehensive smart metering projects in the world, and it is the largest change-over programme in the energy industry since the introduction of North sea gas about 40 years ago.
The smart meter implementation programme must ensure that the roll-out is achieved in a cost-effective way, and the benefits to consumers and to industry need to be maximised. We have completed the first year of the foundation stage, which is critical preparation for the mass roll-out that will start in 2014. The publications on 5 April represent a key milestone in the implementation programme. They provide further detail on the technological and regulatory framework, and they set out substantial new proposals for engaging and protecting consumers throughout that period.
Of course, there would be little point in such an undertaking without its bringing real and substantial benefits. Alongside our recent consultations, we have published updated economic impact assessments. These show a slight increase in the net benefits over the previous assessments, resulting in total net benefits of £7.2 billion over the next 20 years. For me, the consumer benefits will always be at the heart of the smart meter programme, so in my comments I shall focus on how we are working with industry and consumer groups to make sure that smart meter installation delivers all it promises for consumers.
Most importantly, smart meters will give consumers near real-time information on their energy consumption to help them control their energy use, save money and reduce emissions, but as the right hon. Gentleman says, for smart meters to work effectively, the consumer needs to know how to work with them. Smart meters will bring an end to estimated billing, so no more surprises for consumers, and switching between suppliers will be smoother and faster. When consumers want to switch because they feel that the companies are not passing on the benefits that they expect from the smart meter programme, they will be in a stronger position to do so. We expect that new products will be supported by a more vibrant, more competitive and more efficient market in energy and energy management.
We know that for consumers to realise all the benefits, an effective consumer engagement strategy will be needed—one that can ensure that consumers have confidence in the benefits and are reassured when they have concerns, and one that helps them to understand how to use their smart meters and better manage their consumption. More importantly, we need to recognise that some vulnerable consumers may struggle to access all the benefits of smart meters without additional help. In short, we need to place consumers’ interests at the heart of the roll-out, and on 5 April we announced a package of measures designed precisely to do that.
Fundamental to consumers’ experience of smart metering will be the installation visit. That is why we are setting rules through a licence-backed code of practice to make sure that consumers have a good experience throughout the installation process, and that they are given the information they need to understand how to use their new meter and display, and how both can help them to use their energy more efficiently. We consulted last year on rules governing installation, and our recently published documents included our response to the consultation. They will place licence obligations on installing suppliers to offer customers an in-home display, allowing them to see what energy is being used and how much it is costing, as well as requiring suppliers to provide efficiency advice as part of the installation visit. Suppliers must also identify and meet the needs of vulnerable consumers, whether by arranging for a relative or carer to be present at the installation or by providing additional help in understanding and using the in-home display.
We have also been clear that householders should not be subject to unwelcome sales or marketing in their own home, an experience that would be a huge turn-off for many and would risk putting vulnerable consumers under unacceptable pressure. The licence conditions for the code will therefore ban any sales during the installation visit, and they will require that suppliers must obtain consumers’ permission in advance of the installation visit if they are to talk to them about their own products. In all those areas we have been strongly guided by the interests and views of consumer groups.
The code of practice will be developed by suppliers and approved by the regulator. It is right that suppliers should develop the code of practice because they know their customers, and they will be at the front end of installation, but if suppliers fail to submit an acceptable code, Ofgem will be able to direct changes or designate another code in its place. Ofgem will be able to take enforcement action if any supplier breaches the code.
Efficient and customer-focused installations will be essential if we are to engage customers and help them to understand smart meters and the opportunities they bring. However, the Government, industry and others recognise that the action of individual suppliers on its own will not be enough. Building the confidence and trust of all consumers—an issue to which the right hon. Gentleman understandably referred—and reaching out to vulnerable or hard-to-reach consumers, needs consistent and co-ordinated communications. We know from research that third parties such as voluntary organisations, local authorities, and housing associations, as well as friends and family, can provide an effective and more credible source of information than either suppliers or central Government. We are therefore consulting on a consumer engagement strategy that would include a central delivery system delivered by suppliers, but with independent direction and external advisory input.
Giving suppliers the responsibility to establish and fund a central body is right in the context of a supplier-led roll-out. It means they can establish arrangements that support their own engagement activities. It also means that efforts designed to raise awareness of and support for smart metering will sit alongside those tasks designed to encourage behaviour change. Of course, it will be important for a central body to reflect wider public policy and consumer interests. The consultation also therefore seeks views on the governance arrangements needed to ensure that a central body delivers the consumer engagement objectives, for example, by proposing an independent board and an advisory board with consumer expertise, and we will take into account the concerns that the right hon. Gentleman expressed on that board set-up.
Consumer engagement also offers the possibility of synergies with other energy policies. Smart metering will support the green deal by encouraging choices that increase energy efficiency, and we are encouraging suppliers to bring together smart meter roll-out with the delivery of obligations such as the affordable warmth element of the energy company obligation. Bringing those together will provide not only efficiency savings but a more comprehensive package for vulnerable and low-income consumers. An essential part of the strategy will be continual monitoring of the delivery of smart meter consumer benefits from the foundation stage onwards. Ahead of the roll-out we will be looking at the results of suppliers' trials and of community-level engagement. Where benefits are not being delivered we will take further action.
As the right hon. Gentleman has said, there is one group of customers who typically already engage with their energy consumption in a different way from most consumers, and those are the prepayment meter customers. As prepayment customers are often already more aware of their energy use and costs, our impact assessment forecasts a lower level of gas savings in particular from that sector. However, we believe that smart metering still has the potential to bring significant benefits to prepayment customers. Every smart meter will have the functionality to operate in either prepayment or credit mode, so the meters enable easy switching between the two payment methods as customers' circumstances change. Smart meters will allow more convenient ways of topping up payments, such as by phone, cash points or online, which should make prepayment appeal to a much wider group of customers. They will also enable periods to be set when disconnection will be prevented, for instance to stop customers losing supply overnight or when shops are shut.
Another important area of consumer protection addressed in our recent consultations is the need to protect the privacy of individuals and make sure they have control over the data recorded by the smart meter. The principle that has been absolutely critical to our thinking in this area from the start is that consumers must have a choice over who has access to their smart meter data, except where the data are needed to fulfil regulated duties. Suppliers need access to a certain amount of data for billing and to fulfil statutory requirements or licence obligations. For these purposes, we are proposing in our consultation that suppliers can have access to monthly data without consumer consent. If suppliers wish to access daily data, we propose that they may do so but that they will have to provide a clear opportunity for the consumer to opt out and that the data cannot be used for marketing without the customer's explicit consent. Beyond that, if suppliers wish to access half-hourly data—for instance, to develop more sophisticated services for consumers, such as the time-of-use tariffs to which the right hon. Gentleman referred—they must obtain explicit consent from the consumer to do so.
It will not just be suppliers who will wish to access data from smart meters; a range of other parties, including individual consumers, network operators, energy service companies and online switching sites, might all have reasons for using data. Our principle—that consumers should have a choice about how their data are used and by whom—will also apply in this regard. Steps are being taken to ensure that consumers are able easily to access their own consumption data and share them with third parties, such as switching sites, should they wish to do so.
We are also requiring that 13 months of data can be stored in the meter itself and that it is accessible to the consumer. That will ensure that the consumer has control over and can access their own data even if they have no wish to share it with other parties. Meanwhile, we have embedded security in the technical design of the meters to ensure that personal data are properly stored.
I hope that I have been able to reassure the right hon. Gentleman about this massive and challenging project. We have come a long way and the publication of key consultations and conclusions earlier this month marked another milestone on the way to mass roll-out. I am grateful to him for securing the debate and hope that what I have been able to say shows that we are absolutely putting consumers’ interests at the heart of the roll-out, because for us that is integral to its success.
Question put and agreed to.
Written Ministerial Statements
(12 years, 6 months ago)
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Improving Spending Control
(12 years, 6 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
Today I am publishing new rules and incentives to strengthen the control of public spending.
The Government have set out their plan to significantly reduce the structural current budget deficit over the course of this Parliament. While good progress has been made, the scale of the challenge calls for a more robust and consistent approach to managing public spending.
The “Improving Spending Control” document has been worked up with finance directors across Whitehall. It sets out a new framework for improving financial management across the public sector, and how that framework will be supported by incentives and penalties.
All organisations spending public money will be required to collect and share better information on public spending, improve the skills needed to deliver their spending plans, and identify areas of their budget that can be reprioritised in case unforeseen spending pressures emerge.
The new framework provides the necessary incentives and penalties to reform financial management. Departments who can demonstrate a good track record of spending control will be rewarded with greater freedom within their budgets. Others will be subject to greater central Treasury control.
This document sits alongside, and is consistent with, “Managing Public Money” and the “Consolidated Budgeting Guidance”. Copies of the document have been deposited in the Libraries of both Houses.
Infrastructure Cost Review
(12 years, 6 months ago)
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The Chief Secretary to the Treasury (Danny Alexander)
The Government have today published the first annual progress report on the three-year infrastructure cost review programme launched in March 2011.
Over the past 12 months, the Government have worked with industry to put in place the mechanisms through which real reductions in the costs of constructing economic infrastructure can be achieved and sustained—to enable taxpayers and utility bill payers to get more for less. The programme is on track and the report gives examples of good practice, consistent with the recommendations of the cost review, where individual savings of over £2 billion have been identified.
A key measure of success is the application of cost review principles to reduce delivery costs on the UK’s priority infrastructure projects and programmes identified in the “National Infrastructure Plan 2011”.
Copies of the document have been deposited in the Libraries of both Houses and are available on the Treasury website at: www.hm-treasury.gov.uk.
Queen Elizabeth II Conference Centre
(12 years, 6 months ago)
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The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
My hon. Friend the Parliamentary Under-Secretary of State, Department for Communities and Local Government, Baroness Hanham, has made the following written ministerial statement:
The Government have reviewed the decision to market and dispose of the Queen Elizabeth II Conference Centre taken by the previous Government in April 2009. It has concluded that the Department for Communities and Local Government should retain its freehold interest in the building in line with current Government Property Unit policy to retain freeholds in the Whitehall area as they offer maximum flexibility.
A business case developed last year considered alternative delivery options for the conference business. To inform their view of the options, the Government will be undertaking pre-market engagement to test the market appetite and their viability, beginning in May 2012. Subject to the outcome of that engagement, the Government will then decide whether the Queen Elizabeth II Conference Centre conference business, currently operating as a Government Trading Fund, should continue under the existing arrangements or be marketed to external providers. However, any disposal or privatisation should maximise value for money for taxpayers.
Chemical Weapons Convention - Declaration of Protective Programmes
(12 years, 6 months ago)
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The Minister for the Armed Forces (Nick Harvey)
The UK’s chemical protection programme is designed to protect against the use of chemical weapons. Such a programme is permitted by the chemical weapons convention, with which the United Kingdom is fully compliant. Under the terms of the convention, we are required to provide information annually to the Organisation for the Prohibition of Chemical Weapons (OPCW). In accordance with the Government’s commitment to openness, I am placing in the Library of the House a copy of the summary that has been provided to the organisation outlining the UK’s chemical protection programme in 2011.
Tackling Irresponsible Dog Ownership
(12 years, 6 months ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)
I am pleased to announce a package of measures to tackle irresponsible dog ownership. I apologise to the House that this announcement is four weeks later than intended.
In the past few years there has been a sharp rise in the problems associated with irresponsible dog ownership. The number of adults sentenced for offences relating to dangerous dogs has increased by 39% from 855 in 2009 to 1,192 in 2010. The number of dog-related admissions to hospital has also risen significantly, from 2,915 in 1997 to 6,118 in 2010. In 2009 alone, dog attacks cost the NHS £3.3 million in treating the most serious cases where victims had to be admitted for treatment. Every year there are numerous reported attacks on Royal Mail, Parcelforce and British Telecom staff. Most of these attacks take place on private property. Between 2007 and 2010, five people were killed following a dog attack in the home; four of the victims were children under the age of four years. Concerns have also been raised with DEFRA about dog attacks on health visitors and social workers during home visits.
Irresponsible dog ownership is a complex problem and there is no single solution. The primary responsibility for ensuring that dogs are kept under proper control must rest with individual owners who should only acquire a dog if they are prepared to look after it properly and make sure that it does not become a nuisance or a danger to others.
Given growing concern about the number of dog attacks, the previous Government consulted the public in 2010 to find out whether the law needed to be changed and, if so, what changes might help. The consultation found that most people thought that powers contained in the existing dangerous dogs legislation were inadequate. The police and the dog welfare charities said that the criminal law in relation to dogs being dangerously out of control should be extended to cover private property (the Dangerous Dogs Act 1991 only applies on public land or private land where the dog is trespassing) and there was also widespread support for compulsory microchipping.
The responses showed that there was no support for adding other breeds or types to the list of prohibited dogs. However, the police specifically made the point that removing the ban on the four specific prohibited types, pit bull terrier, Japanese Tosa, dogo Argentino and fila Brasileiro, would significantly increase the risk of dog attacks because these four prohibited types were originally specifically bred for fighting, are renowned for their aggressive behaviour and are known to be disproportionately dangerous when in the hands of an irresponsible individual or when dangerously out of control.
Having considered the replies to the consultation and further consulted the police, local authorities and other organisations who are in the front line in dealing with irresponsible dog ownership, Government have decided that it would be appropriate to extend existing dangerous dogs law in England to cover all private property. Extending the current law would make it enforceable in homes, private gardens and private land where people and dogs are entitled to be, better protecting the thousands of service workers such as medical staff and postmen whose jobs take them onto private property. However, the proposed extension to the criminal law will not extend to protect trespassers who have entered the private property with unlawful intentions.
In addition, to ensure the welfare of dogs that have become the subject of court proceedings and to ease the costs to the police service. Government have also decided that it should no longer be necessary for the police to seize and kennel dogs pending the outcome of court proceedings where the police do not consider the dog presents a risk to the public. The requirement to seize the dog will not be waived unless the police are satisfied that it is in the care of a responsible owner. In addition interim conditions can be placed on the owner, that is; requiring the dog to be muzzled and on lead when in public (this would apply in England).
We consider that allowing dogs to be exempted from seizure in these circumstances strikes the right balance between protecting the public from dangerous dogs and ensuring that safe and properly looked after dogs are not unnecessarily removed from their homes. We propose to raise the fee of £24 (first set in 1991) payable by the owner for placing prohibited dogs on the index of exempted dogs to better reflect the costs involved in administering these dogs for their lifetime and thereby reduce the burden on the taxpayer (this would apply throughout Great Britain). Further funding is also being given to the Association of Chief Police Officers to support the training that they provide for dog legislation officers in order to ensure that there is a hub of dog law expertise in every police force.
It is also our intention to introduce regulations under the Animal Welfare Act 2006 on microchipping to promote animal welfare by making it easier for local authorities and rescue centres to quickly reunite stray dogs with their owners. It would also help the police and local authorities to enforce dog and animal welfare legislation. Our preferred approach is to make breeders responsible for microchipping the puppy before sale.
Therefore a further consultation is being held to give the public an opportunity to give their views on these proposed legislative changes. In relation to microchipping the options are: (i) requiring all dogs to be microchipped on transfer of ownership, (ii) requiring all dogs to be microchipped from a certain date, (iii) implementing a phased-in process, such as starting with compulsory microchipping on transfer of ownership and after five years moving to mandatory microchipping of all dogs, or (iv) making breeders responsible for microchipping newly born dogs before (first) sale. This is the responsibility of the breeder or seller and not the purchaser. The preferred option is the fourth one.
We consider that education also has a significant role to play in reducing the problems associated with irresponsible dog ownership. Government are providing funding of £50,000 to be shared between the RSPCA, Battersea Cats and Dogs Home and the Dogs Trust to foster innovative local community projects to encourage responsible dog ownership in areas where there are high instances of dog-related problems. The funding is being provided on the basis that the interventions will be carefully evaluated and the learning disseminated to help others engaged in working with local communities.
In drawing up these measures, DEFRA has worked with the Home Office to ensure the new antisocial behaviour measures they are preparing reflect the needs of enforcement agencies and enhance their ability to prevent irresponsible dog owners presenting a risk to the general public.
Local authorities already have powers to designate areas of public space as “dog free zones” while social landlords are able to lay down rules for their tenants regarding the keeping of dogs or other animals. Many local initiatives build on these powers and today’s announcement compliments them to address the small minority of dog owners who cause such distress to these whom they attack or intimidate.
Reform of the European Court of Human Rights
(12 years, 6 months ago)
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The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
My right hon. Friend the Foreign Secretary and I wish to update the House on the Government’s efforts to reform the European Court of Human Rights as part of the UK’s chairmanship of the Committee of Ministers of the Council of Europe.
The Brighton declaration, the package of reforms to the Court which has been the priority for the UK’s chairmanship, was formally adopted on Friday. This was the culmination of the Brighton conference, where Justice Ministers, Foreign Ministers and senior officials from across the 47 Council of Europe member states met to discuss the UK chairmanship’s package of reforms.
The declaration itself is the result of a process which the UK took over when it assumed the chairmanship in November. The Prime Minister outlined his ambitions for reform of the Court in a speech to the Council of Europe’s Parliamentary Assembly in January. Through the Brighton declaration, we have succeeded in agreeing substantial reforms in each of the areas he set out.
First, we have strengthened subsidiarity and the margin of appreciation by securing agreement to insert these key principles into the convention itself. The member states will amend the admissibility criteria of the convention. And we have sent an unequivocal message from all 47 states to the Court that it should from now on use the existing criteria to ensure that it consistently does not reconsider cases that have already been properly handled by national courts, unless they raise a serious question of interpretation or application of the convention.
Secondly, we have agreed measures to improve the efficiency and effectiveness of the Court by cutting the time limit for making applications to the Court from six months to four; giving the Court tools to improve the efficiency with which it processes cases; and amending the convention so that the Court can routinely get rid of trivial cases.
Thirdly, we have secured measures which will ensure that the Court and its judgments are of the highest possible quality by making sure that the main development of case law is only by the Grand Chamber, comprising the Court’s most senior judges; improving procedures to ensure that the judges of the Court are experienced and well-qualified for the job; and making sure that the rules of office allow every judge to serve a full nine-year term on the Court.
Member states also agreed a further process for longer-term reform of the Court.
These represent significant changes to the convention system, which now need to be implemented fully, and the necessary convention amendments drafted and agreed. Gaining the unanimous agreement of 47 countries is no easy task and we are grateful for the constructive negotiations we have held with our European partners.
We expect the effect of the measures in the declaration to be that fewer cases are considered by the Court. Where cases do go to Strasbourg, the Court should be able to focus more on the important cases and do so more quickly. The result is a strengthening of the human rights protection for the 800 million citizens across the Council of Europe.
A copy of the declaration will be placed in the Libraries of both Houses.
Official Histories: Special Operations Executive in Italy
(12 years, 6 months ago)
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The Prime Minister (Mr David Cameron)
I have appointed Dr Roderick Bailey, Research Associate at the Imperial War Museum, to complete the writing of Special Operations Executive (SOE) in Italy 1940-43.
Public Bodies (Child Maintenance and Enforcement Commission: Transfer of Functions) Order 2012
(12 years, 6 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
Following the Government’s review of non-departmental public bodies and the passage of the Public Bodies Act 2011, and using powers contained within this Act, I will be laying an order later today to abolish the Child Maintenance and Enforcement Commission (CMEC) and transfer its functions to the Secretary of State for Work and Pensions.
The public consultation on the transfer of CMEC was held 10 October 2011 to 3 January 2012, and the Governments response was published 8 March 2012. I will place copies of both the consultation document and Government response in the House Library later today.
CMEC has responsibilities relating to child maintenance, an issue which affects many families, and the Government feel it is right that Ministers should be directly responsible and accountable for this important work.
This order is subject to affirmative debate in both Houses of Parliament. These debates will be timetabled in due course.
Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)
My Lords, Members will wish to be made aware—if they are not already—that the noble Baroness, Lady Thomas of Winchester, is not able to attend today and has withdrawn her Question for Short Debate, which would have been the third item of business today. Members may also wish to be made aware that the wording of the Question for Short Debate tabled by the noble Baroness, Lady Gardner of Parkes, was changed after House of Lords business was last printed but appears correctly on today's Order Paper. Finally, I remind the Committee that in the quite likely event of there being Divisions in the Chamber, the Committee will adjourn for 10 minutes from the sounding of the Division Bell.
Health: Pancreatic Cancer
(12 years, 6 months ago)
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Lord Aberdare
To ask Her Majesty’s Government what steps they will take to improve both the quality of care and the overall survival rates for pancreatic cancer in the United Kingdom.
Lord Aberdare
My Lords, pancreatic cancer is in some respects the poor relation of major cancers. It is the fifth most deadly cancer in the UK after breast, lung, bowel and prostate cancer. However, its survival rate, unlike those of the other cancers, has hardly improved in the past 40 years. In addition, there is evidence that pancreatic cancer patients often do not receive an adequate standard of care. Pancreatic cancer is all too often seen as a death sentence, leaving little or nothing to hope for. I sought this debate to try to focus on ways in which the Government, working with others concerned, might help to bring some hope—something more to live for—to sufferers from pancreatic cancer and their friends and families.
My concern about the issue is purely that of a layman without medical or specialist expertise. Two friends of mine died from pancreatic cancer in recent years. One was a business acquaintance who battled with it for several years, the other a friend who died within weeks of diagnosis. At least three others lost parents at a relatively early age, while another currently has the disease and is doing his utmost to beat the odds. He has been lucky enough to be treated privately at the Royal Marsden Hospital. Through the efforts of his medical team he was given a drug called Folfirinox, which is not approved for this purpose by NICE but which shrank his tumour to the point where it could be operated on. He is convinced that without that operation he would have died.
As I prepared for this debate, I was struck by the number of people who have had direct experience of friends or relatives falling victim to pancreatic cancer. When I looked at the statistics relating to it, I found them shocking. There are more than 8,000 diagnoses of pancreatic cancer in the UK each year, which represents less than 3 per cent of total cancer diagnoses. However, it accounts for nearly 5 per cent of deaths, and the length of time between diagnosis and death is typically less than six months. More than 80 per cent of patients will die within a year of diagnosis. Three-year survival rates in the UK range from 3.6 per cent to 11.9 per cent, and five-year rates from 0 per cent to 10.4 per cent. Only 3 per cent of patients survive for five years. The figures have hardly improved since the 1970s, yet countries such as the USA, Canada and Australia achieve five-year survival rates that are twice as high, and a number of European countries also do better than the UK. Furthermore, there are significant variations in outcomes between different UK regions. London and the south-east have better results than the north of England, Scotland, Wales and Northern Ireland.
Of equal concern is that the 2010 NHS National Cancer Patient Experience Survey showed that pancreatic cancer patients had a poorer NHS experience than most other cancer sufferers, for example in the information they received, in the management of their pain, and in the confidence they had in their medical teams. One aspect of this is the support available from clinical nurse specialists. Although most pancreatic cancer patients surveyed said that they had access to a clinical nurse specialist, research by Pancreatic Cancer UK found that those specialist nurses were concerned that they were not receiving the support and resources they needed to do their job well. Moreover, although it is estimated that some 20 per cent of pancreatic cancer patients may be suitable candidates for surgery, which is recognised as the only effective way of tackling the disease, only about 10 per cent receive it. Noble Lords may share my view that these figures are deeply disappointing and raise serious questions about whether we in the UK cannot and should not do considerably better for those unlucky enough to contract this dreadful disease.
There are three issues I should like to highlight as needing to be tackled. The first is to increase research into the many aspects of the disease which are not yet adequately understood. Despite accounting for 5 per cent of cancer deaths, pancreatic cancer attracts only 1 per cent of cancer research funding. Any prospect of improving survival rates must start from better data about what causes or contributes to the disease and what sorts of treatment are effective in tackling it. Experience, for example with breast cancer, has clearly shown that research does lead to improved survival rates.
The second issue is to find ways of diagnosing pancreatic cancer earlier. There are no straightforward ways of recognising the disease, and many weeks or months often pass before a firm diagnosis is reached, with almost 30 per cent of patients visiting their GPs five times or more. However, the prospects for successful treatment—or even for high-quality palliative care—depend largely on how soon the disease is identified. In addition, many patients do not have the chance to participate in clinical trials for new treatments because their condition is already too far advanced by the time they are diagnosed.
The third issue I want to raise is the quality of care for all pancreatic cancer patients, which needs to be improved, for example through better information for patients and their carers, better co-ordination between those involved in treatment, better support from clinical nurse specialists and a more consistent service across the UK.
I know that the Government share my concern about the need to improve the experience of pancreatic cancer sufferers. Paul Burstow, a Minister in the Department of Health, has met Pancreatic Cancer UK and indicated his support for its Campaign for Hope, and I welcome the fact that two pancreatic cancer-related research studies are to be conducted under the aegis of the National Cancer Intelligence Network.
I very much look forward to the Minister's response to this debate, as well as to the contributions and suggestions of other noble Lords who have much greater experience and knowledge of this issue than I do, but who none the less get three minutes as opposed to my 10. I am sure they will do much better with it. Government, of course, cannot provide all the answers; but in partnership with other organisations and interested parties—the medical profession, research bodies, funders, charities, carers, and of course patients themselves and their families and friends—they can offer encouragement, support and resources.
In particular, I ask the Minister to answer four questions. First, will he look into conducting a full audit of current pancreatic cancer services, to assess why different regions currently achieve different results, and what structures and systems work best to provide pancreatic cancer patients with an optimum quality of care?
Secondly, will he ensure that pancreatic cancer is firmly included in the national awareness and early diagnosis initiative to assess what can be done to shorten the time to diagnosis?
Thirdly, what steps will he take to increase the amount of funding going to pancreatic cancer, both for research and care, in line with its significance among major cancers in the UK? Finally, how will he seek to improve the experience of care for pancreatic cancer patients?
Progress on other major cancers has shown how much improvement can be achieved through focused efforts to raise awareness and improve diagnosis and treatment. Surely we can also improve the outlook for pancreatic cancer sufferers and give them some real hope for longer lives, better care and greater fulfilment in the time that remains to them.
The Earl of Selborne
My Lords, every Member of the Committee will be enormously grateful to the noble Lord, Lord Aberdare, for making this debate possible. I am sure we all congratulate him on his speech. Pancreatic cancer is indeed the poor relation. It is disheartening to find what little progress has been made over 40 years compared to the great successes in most other cancers.
I shall confine my remarks to the need for earlier diagnosis and try to explore some of the reasons why it is difficult to achieve at the moment. Pancreatic cancer is usually diagnosed late in its progress, making surgery very much harder to accomplish. With earlier diagnosis, there is a small chance that the progress of the disease can be slowed down, thereby prolonging life and there is a possibility that the patient may be fit enough to take part in clinical trials. Again, with later diagnosis sometimes clinical trials simply are not an option.
The difficulties of early diagnosis cannot be denied, though. Like the noble Lord, Lord Aberdare, I stress that I am a complete layman, but I recognise that there are no simple tests and indeed that many patients do not experience symptoms until the cancer has spread from the pancreas. Sometimes, however, families are able to recognise with hindsight that a range of symptoms had manifested themselves which, had they led to a diagnosis some time earlier than was eventually the case, might have given some more hope for treatment and trials. Often this manifested itself in more frequent visits to GPs and to hospital before potentially triggering an emergency presentation like jaundice.
The barriers to early detection have been well set out by Pancreatic Cancer UK’s Study for Survival. Its informative summary notes that GPs themselves record that there is a lack of sufficient information and knowledge about pancreatic cancer’s signs and symptoms, a lack of sufficient formal evidence relating to them to support the development of effective referral guidelines, and a lack of access to risk assessment tools to support GPs to identify patients with a pancreatic cancer concern.
We need to develop tools, such as a risk assessment tool, and to improve access to diagnostics. Doctors should always include the possibility of pancreatic cancer in their index of suspicion when presented with a patient with symptoms that do not seem to add up, and should always be ready to refer the patient to a consultant for investigation in such circumstances and without delay.
Baroness Warwick of Undercliffe
My Lords, I, too, thank the noble Lord, Lord Aberdare, for securing this debate and for his thoughtful and compassionate speech. It is clear that I am not the only speaker today who has had the harrowing experience of seeing a beloved family member or friend suffer from this lethal disease. My sister-in-law died of pancreatic cancer, and her story mirrors much that has been said today. She was prescribed pills for depression and had a late diagnosis, first of pancreatitis, which was not considered serious, and only much later one of pancreatic cancer. There was little understanding from her GP—not indifference, but perplexity over the symptoms of a disease that we know GPs will see as a new case perhaps only once every five years.
The statistics speak for themselves and I will not repeat them, except to remind the Committee that this is the fifth most common cause of cancer death in the UK, yet it receives less than 1 per cent of overall cancer research funding. For the 8,000 people a year in the UK who are diagnosed with the disease—that is 22 people for every day of the year—the outlook is grim indeed. Figures from the excellent body Pancreatic Cancer UK suggest that these patients have the least satisfactory health service experience of all patients diagnosed with major cancers. Its Campaign for Hope has two ambitious goals: to double survival rates within the next five years and to move the experience of pancreatic cancer patients from being one of the worst to one of the best.
How can we do that? We need, as others have said, to increase early diagnosis; we need greater investment in research and effective treatments; and we must improve the quality of patient experience for those with pancreatic cancer. A first step would be, as the noble Lord, Lord Aberdare, said, to place it firmly on the national awareness and early diagnosis initiative agenda, and I would like the Minister’s response on that. A review would look at, for example, how we can develop and provide risk assessment tools for GPs.
Then we need to be sure that any new commissioning arrangements and guidelines provide GPs with sufficient information about pancreatic cancer and referral criteria. Will the Minister confirm that this cancer will receive the attention that it deserves within the Government’s Improving Outcomes strategy for cancer?
We need a significant increase in research investment, and we need to increase clinical trials. What steps are the Government taking to ensure that clinicians and patients are fully informed about all available pancreatic cancer clinical trials?
Finally, we need to improve the experience of patients. I know that specialist nursing support—clinical nurse specialists—can make a huge difference to the experience of pancreatic cancer patients, but access to these amazing individuals is limited. Does the Minister recognise the vital role these CNS staff play in helping to improve the experience of patients, and can he offer any assurance about future provision?
There is no excuse for patients in the UK faring so much worse than those in other countries. We must improve survival rates and the quality of care—and of life—for those with this terrible form of cancer.
Baroness Jolly
My Lords, I join with others in extending thanks to the noble Lord, Lord Aberdare, for securing this debate, and to Cancer Research UK and Pancreatic Cancer UK for such excellent briefings.
One in three of us will get cancer in our lifetime, and that diagnosis, for the most part, is quite straightforward. The past decade has seen phenomenal increases in survival rates, such that fairly soon 2 million people will be living with and beyond cancer. That number is growing. This is real cause for celebration, but sadly not yet for those with pancreatic cancer. It has one of the highest incident-to-mortality ratios for any disease. The problems of difficult and late diagnosis, leading to late treatment—often too late for surgery—have been well outlined by noble Lords.
The coalition Government’s document, Improving Outcomes: A Strategy for Cancer, was published on 12 January this year. It set out a range of actions to improve cancer outcomes. Care Minister Paul Burstow said that the strategy,
“sets out our ambition to bring England's cancer survival rates in line with the European average by 2014-15”.
He added that this,
“shows that if England’s survival rates were as good as the best in Europe we would save 10,000 additional lives per year”.—[Official Report, Commons, 7/11/11; col. 139W.]
He said that the Government estimated that of those additional lives saved, 75 would be those with pancreatic cancer. That is all to be welcomed, but 2014-15 is only three years away and we therefore need to understand what actions are being taken.
It is tragic that at the moment in England there is little hope for most patients with pancreatic cancer. The Government have acknowledged difficulties in late diagnosis, the need to consider biomarkers for pancreatic cancer because there are often no symptoms until late stages, the 2005 NICE guidelines for urgent referral of patients, the high incidence of late decisions around surgery—often too late—and some suggestion of reluctance on behalf of clinicians to recommend surgery.
In his summing up, I should be grateful if my noble friend the Minister could address three issues. What mechanisms and levers are there within the Health and Social Care Act that will be able to reassure carers and those who have pancreatic cancer that these aspirations can be met? What role does value-based pricing have in the long term? What engagement is there between the department and royal colleges to address the deficits in doctor training and continuing professional development in this area that is so particularly fraught?
Long-term research needs to be supported and accelerated and, on a brighter note, a few weeks ago, Kirtana Vallabhaneni, aged 17, from West Kirby, beat 360 other entrants to be awarded Young Scientist of the Year for 2012 for her work as part of the University of Liverpool’s research projects. She—at 17—was working on identifying the harmful cells that cause pancreatic cancer. We need many more like Kirtana to increase the level of care and survival rates that are so deserved by those with pancreatic cancer and their carers.
Baroness Morgan of Drefelin
My Lords, I congratulate my noble friend on securing this important debate and I declare my interest as CEO of a cancer research charity. I am also proud to be a patron of Pancreatic Cancer UK, and I am particularly proud of its work in its Campaign for Hope, which is a very important initiative. As a vice-chair of the All-Party Parliamentary Group on Cancer, I wanted to try to put together some of those interests and to talk about the work that the all-party group is doing that is important to patients with pancreatic cancer.
As we have heard, people with rare cancers are often diagnosed later and suffer poorer outcomes than those with more common cancers. I should like to thank the Government for listening to the all-party group and others for including one-year cancer survival rates alongside five-year rates for breast, lung and colorectal cancer in the NHS outcomes framework.
We believe this focus on the NHS implementing interventions that improve early diagnosis—which is key to better survival—is important. However, we must not forget that 53 per cent of people who die from cancer in the UK have a less common cancer such as pancreatic cancer. We have to ensure that improvements are made across the board and that the gap in survival between patients with less and more common cancers does not widen but starts to narrow. This is why the All-Party Parliamentary Group on Cancer has called for the one-year and five-year indicators in the NHS outcomes framework to be expanded to cover all types of cancer. I would be grateful if the Minister could provide an update on what consideration his department has given to broadening out these indicators to include less common cancers and pancreatic cancer in particular.
I would like to make a couple of points on patient experience. We know that the experience of cancer patients must improve, particularly for those with pancreatic cancer. The 2010 National Cancer Patient Experience Survey revealed that patients with rarer cancers had less positive views of their treatment than those with more common cancers. Pancreatic Cancer UK has today illustrated this further through its briefing for this debate. If we are to encourage commissioners to take action to improve this situation, the National Cancer Patient Experience Survey must be conducted annually and be included as an indicator in both the NHS outcomes framework and the commissioning outcomes framework. It would be helpful to know what progress has been made towards this.
As we all know, cancer networks have been extremely important in driving up standards in the last few years. Once the reforms are implemented, CCGs will be responsible for non-specialised cancer services while the NHS Commissioning Board will undertake specialised commissioning. For patients with rarer conditions, such as pancreatic cancer, this means that some parts of their care pathway will be commissioned locally while others will be commissioned nationally. Cancer networks play an important role in overseeing commissioning plans and ensuring that seamless care pathways for patients are delivered. Could the Minister update us on the Government’s plans for cancer networks?
I thank my noble friend Lord Aberdare once again for securing this important debate and Pancreatic Cancer UK for its vital work.
Lord St John of Bletso
My Lords, I am grateful to my noble friend Lord Aberdare for giving us the opportunity for this important and very topical debate. At a time when there have been so many dramatic improvements in the cure and treatment of cancer, it is sad and very alarming that there have been little to no such improvements as regards pancreatic cancer. As my noble friend mentioned in his alarming statistics, the situation has not improved for almost 40 years.
It is also very concerning that the National Cancer Patient Experience Survey in 2010 showed that pancreatic cancer patients have some of the worst overall experiences of all cancer patients. In my allotted few minutes today, I want to touch on just two issues: diagnostics and research. There is currently no screening test for pancreatic cancer and, given that we now know that the disease takes 10 to 15 years to progress and that there is significantly more understanding of the biological and genetic makeup of the disease, what assurance can the Government give that more funding will be made available to provide this effective test?
Secondly, I understand that most drug trials for pancreatic cancer in the UK are currently focused on testing combinations of existing drugs. Given that there have been significant developments in the understanding of the biology of pancreatic cancer in recent years, what actions can the Government take to ensure that more trials are conducted on new drugs which build on the existing research? Essentially, we need a far more radical and creative approach to pancreatic cancer. Time restricts me from speaking on the scope for more surgery, but I cannot understand why, when 20 per cent of patients are eligible for surgery, only 10 per cent have the opportunity of having it.
In conclusion, I applaud the tremendous work of the charity Pancreatic Cancer UK and its Campaign for Hope. I sincerely hope that today the Minister can give us all some encouragement that more financial research and support can be given to address this important campaign so that the UK can achieve its potential for doubling survival rates.
Lord Ribeiro
My Lords, I declare an interest as a retired general surgeon who previously operated on patients with pancreatic cancer but was wise enough to give way to more specialised surgeons of this condition.
I support the development of pancreatic cancer centres, as suggested by the noble Baroness, Lady Morgan of Drefelin, because these 28 specialist centres in the British Isles are endeavouring to improve the standard of care for patients with pancreatic cancer. However, there are marked variations between the centres, and their outcomes should be the subject of a national audit.
I join others in thanking the noble Lord, Lord Aberdare, for bringing this debate, in this short time, to highlight some of the problems that exist. The cardiothoracic surgeons have shown the way by their national survey, over many years, of cardiac surgery outcomes. For the second year they have published the National Thoracic Surgery Activity and Outcomes report. It is important that all specialist associations take part in an audit so that it is possible to compare the outcomes between different centres and, frankly, highlight the ones that are good enough and those that are not good enough, so that at least those who know that they fall outside a 95 per cent confidence limit will improve their practice, find out how to do it better, or perhaps desist, as I did.
The argument for centres undertaking large-volume surgery is now accepted, but this needs to be underpinned by proven expertise, and I would say it takes years to actually develop that, within teams, to come up to the standards. It also needs to be underpinned by good research. Resection rates as high as 20 per cent, with 2 per cent mortality, are achievable in some centres, while others report mortality of 14 per cent.
A German study found that cancer cells in the liver and bone marrow appear in some 36 per cent to 76 per cent of patients. Undetected, these patients may well be subject to surgery, only to develop recurrent disease later. Does my noble friend the Minister acknowledge that we need greater investment in research beyond the current 1 per cent of overall cancer research funding, as suggested by the noble Lord, Lord Aberdare?
Exciting new modalities involving genomics, gene therapy and immunotherapy to complement neoadjuvant therapy are in development and need support. Let us be clear: pancreatic cancer is a difficult and complex cancer. Unlike the one-stop-shop diagnosis that can be achieved for breast cancer—which, by the way, is a very visible and obvious cancer—it can take up to six weeks to investigate and diagnose pancreatic cancer in patients prior to surgery.
Commissioners of health need to understand that this is not a cheap cancer, and they need to negotiate with the providers of healthcare and make sure that the complexity and cost are taken into account when managing pancreatic cancer.
I hope that my noble friend the Minister will use the current anti-smoking campaign to draw attention to the 70 per cent increased risk of developing pancreatic cancer among smokers as compared to non-smokers.
Lord Sharkey
My Lords, in preparing for this debate, three things struck me with a special force; the first was that 25 per cent of pancreatic cancer patients experience symptoms up to 12 months prior to diagnosis; the second was that nearly 30 per cent of pancreatic cancer patients visited their GP five or more times before diagnosis; the third was the alarming fact that the disease attracts less than 1 per cent of overall cancer research funding. With regard to the first and second areas, this seems to me to suggest very strongly indeed the need for better information to be made available both to the doctor and to the patient. Will the Minister give urgent consideration to putting in place quickly a pilot campaign whose objectives are to increase awareness among both patients and doctors of the possible symptoms of this disease? I know that the Government have done that very successfully for bowel cancer.
The third area is the question of the very low level of research funding for the disease. I realise that it is not a simple matter to increase the funding for one particular disease, no matter how pressing the case may be. In many ways this is because there is an analogue of the market mechanism in operation when it comes to the allocation of research funds. That is not a criticism of what happens in a general sense; I point out only that relying on the normal processes of allocating research funding is unlikely to result in much of an increase for the rarer types of cancer, such as pancreatic cancer, in any reasonable timeframe.
That is why I ask the Minister to see if there is any way of bypassing or supplementing the normal process of funding allocation and to see if there is any way of directly intervening to generate a substantial and urgent increase in funding. I realise that this is not easy, and it is consistent with the Government’s commitment to improve the treatment of cancer in the UK and bringing our survival rates up to those enjoyed by many advanced countries.
I, too, thank the noble Lord, Lord Aberdare, for giving us the opportunity to debate this vital issue. I hope that the Minister may be able to give sympathetic consideration to the proposals that I have put forward.
Lord Kakkar
My Lords, I join other noble Lords in congratulating my noble friend Lord Aberdare on having secured this important debate. In so doing, I declare my own interest as a practising surgeon and professor of surgery at University College London, where we have an important interest in the management of pancreatic cancer.
I shall focus on four issues in the time available. The first is to explore the problem of the diagnosis of pancreatic cancer in primary care. As we have heard from noble Lords, nearly 30 per cent of patients have three or more consultations with their primary care practitioner before a putative diagnosis of pancreatic cancer is made, along with referral to a specialist for further investigation. Are there any opportunities, or have arrangements been made or strategies considered, for trying to improve the ability of those practitioners in primary care to be sensitive to the rather non-specific symptoms attending the early presentation of pancreatic cancer, so that they might improve diagnostic strategies?
The second issue relates to specialist treatment. Improving the outcomes guidance, which has driven the cancer strategy over the past 10 years, has provided an emphasis on a focus on the management of patients with pancreatic cancer in specialist centres. What proportion of patients with pancreatic cancer is being managed in specialist centres with specialist multidisciplinary teams, comprising hepatobiliary surgeons with expertise in pancreatic cancer, specialist radiologists and specialist medical oncologists, who could well be in a position to provide the best care for patients once diagnosed, in terms of both understanding how later-presenting disease might be downstaged and of course providing the best curative surgical or palliative radiological procedures for these patients?
The third area is innovation. Your Lordships’ Science and Technology Select Committee, chaired by my noble friend Lord Patel, presented an interesting report in 2008 on genomic medicine, which was widely appreciated. What arrangements have been made about the application of genomic and personalised medicine in the area of pancreatic cancer, particularly with reference to the chief executive of the NHS’s recently published review on innovation and the putative development of academic health science networks? Will these networks provide an opportunity for the early adoption of innovation that might improve both the diagnosis of pancreatic cancer and, potentially, the development of biomarkers or other personalised medicine screening tools to improve therapeutic options tailor-made for individual patients to improve their outcomes with pancreatic cancer?
How many trials are open in the National Cancer Research Institute’s portfolio of clinical trials specifically dealing with novel therapies in phase 2 or phase 3 for pancreatic cancer? What impact has the European Clinical Trials Directive, adopted some years ago, had on participation with regard to trials in pancreatic cancer? We know generally that, in our country, participation in clinical trials has fallen from 6 per cent prior to adoption of the European Clinical Trials Directive—that is 6 per cent of all patients in the world participating in clinical trials coming from our country prior to adoption of the directive—to only 1.4 per cent last year. Has the Clinical Trials Directive impacted on clinical research in pancreatic cancer?
Lord Patel
My Lords, I want to report that the All-Party Parliamentary Group on Pancreatic Cancer is in the process of being set up, supported by Pancreatic Cancer UK. It now has the necessary qualifying members and will hold its first meeting soon. I hope that noble Lords present here will join it.
I had a speech prepared, but I have changed my mind because I can tell your Lordships the story of my noble friend Lord Turnberg, who is sitting on my left. He is reported to be a survivor of pancreatic cancer but he is not. His pancreatic cancer was diagnosed in 1997 and he was operated on. I have his permission to tell you this story, so I am not breaching any patient confidentiality. It subsequently turned out that it was acute pancreatitis, which his colleagues had diagnosed as pancreatic cancer. Although that was 1997, it highlights how difficult this disease is to diagnose. Nothing has changed and many noble Lords have commented on this. We need to improve our ability to diagnose pancreatic cancer. I also have personal stories of my own family: my mother and mother-in-law died of pancreatic cancer. Both faced their disease with courage. My mother was operated on and died a few days later. The surgeon was well meaning but did not have the competence to do the complicated surgery. I once watched my professorial colleague operate with a laparoscope for 18 hours. As the noble Lord, Lord Ribeiro, and the noble Lord, Lord Kakkar, have pointed out, it requires a great deal of stamina, courage and tenacity to do surgery for 18 hours through a laparoscope.
I was impressed by some aspects of Pancreatic Cancer UK’s survey. I would like to highlight three issues. Nearly 25 per cent of pancreatic patients experience symptoms for up to 12 months prior to diagnosis. That is a difficulty in diagnosis. Survival rates are poor but, as has been pointed out, there are, importantly, great variations in survival rates across cancer networks. This needs to be explained, because we need experienced people, particularly surgeons, to look after these patients. Comments have been made about biomarkers and it is true that biomarkers are a way of screening. However, we are a long way from achieving that. Research is being done in this country and in the United States to identify a biomarker and to identify genetic variations and genetic associations of at-risk patients. There is currently funding for research—at Cardiff University there is a programme grant for research on understanding the diagnosis and the variations in results.
The timing of the debate has gone wrong—the clock indicates that I have been speaking for only .07 minutes. That is good—I have time left. I was going to finish by pressing the Minister to look further at providing a full audit of pancreatic cancer services—along the lines of the Healthcare Quality Commission’s national bowel cancer audit—not just focusing on surgery but on all aspects of pancreatic cancers. Such an audit will also help better commissioning in the future and I hope the Minister will address it.
Baroness Finlay of Llandaff
My Lords, I am grateful to the Committee for allowing me to speak in the gap. In this important debate, there has been much focus on research. However, results will take years to come through. Work on early diagnosis and necessary training will also take time. There are patients now with an advanced form of the disease, and there are patients whose disease will recur even when they have gone through treatments that put it in abeyance. Under the new contracting process, how will we ensure that patients with pancreatic cancer have access to anaesthetic intervention services for nerve blocks such as celiac blocks? How will we ensure that clinical nurse specialists work seven rather than five days a week, and that they work as part of multi-professional teams? Without expert medical back-up, the complexity of pancreatic cancer symptoms is difficult to deal with. How will we ensure anticipatory prescribing to reduce the complications of pancreatic cancer such as thromboembolism that sometimes kill patients before the cancer itself? Patients should also have access at all times of the day and night to drugs for pain relief and to combat vomiting.
Baroness Thornton
My Lords, as ever with these debates, particularly when we are disciplined by having a short time, I find that most of the questions that the Minister needs to address have been asked—some of them more than once, and certainly much more ably than I can manage. I start by thanking Pancreatic Cancer UK for its excellent briefings, and also the Library for the excellent and detailed briefing that it produced for this debate.
I will focus on two issues. One is a catch-up on research that I know was published last December and January and was featured by the BBC and at least one national newspaper. I will then ask a question about research that will amplify things. The research linked processed meat to pancreatic cancer. It was done by researchers in Sweden. The World Cancer Research Fund joined in the discussion on that research, which focused on eating red and processed meat. We knew that this had been linked to bowel cancer, but the study published in the British Journal of Cancer analysed data from 11 trials and 6,643 patients with pancreatic cancer. It found that eating processed meat increased the risk of pancreatic cancer. The risk increased by 19 per cent for every 50 grams that someone added to their daily diet. Eating an extra 100 grams increased the risk by 38 per cent.
Professor Larsson, who conducted the research, made the obvious point that pancreatic cancer has poor survival rates, so as well as diagnosing it early it is important to understand what increases the risk of the disease. Has any further research been done on the issue of the link with diet? We know that smoking, too, is a risk factor. I am thinking of the responsibility campaign on food and diet that the Government have been running. Are they using those statistics as part of the campaign on what people should or should not eat?
My second question is about research. We know that there is a commitment to further investment in research into pancreatic cancer. However, I am aware that unless the research is properly commissioned, even if the funding is there, the money will not be spent in a timely fashion. My question echoes that of other noble Lords: are the Government increasing the spend on research in this area? How will they ensure that we develop the kind of critical mass of UK talent that will enable us to deliver world-class, groundbreaking research into pancreatic cancer, as we have done in other areas?
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, I thank the noble Lord, Lord Aberdare, for tabling today’s debate. I am aware that this is a very important issue for him and for countless other people and families across the country. The coalition Government’s cancer outcome strategy was published in January last year. It sets out how we will make sure that people with any form of cancer get care and outcomes as good as anywhere in the world, whoever they are and wherever in the country they live.
Probably the most important factor affecting the survival rates of any cancer is the speed with which it is diagnosed—I think all noble Lords mentioned that issue. We have addressed that in the cancer outcome strategy, and that is why we are supporting the strategy with more than £450 million over four years. This funding is part of more than £750 million of additional funding for cancer over the spending review period to support our ambitions for cancer care. On top of that, or course, a range of support is already available to help GPs assess when it is appropriate to refer patients for investigations for suspected cancer, such as a NICE referral guideline. However, we can do more to support them.
Cancer Research UK and the National Cancer Action Team are working together to develop a new GP engagement programme for the coming years that will allow them to increase awareness and improve training. This will all help diagnose cancer cases earlier. I can say to my noble friend Lord Selborne that Professor Willie Hamilton is currently developing a risk assessment tool to support GPs in the investigation of pancreatic cancer.
The noble Lord, Lord Aberdare, asked if the National Awareness and Early Diagnosis Initiative could do some specific work on pancreatic cancer. Our cancer outcome strategy says that we will work with a number of charities linked with rarer cancers. There have already been meetings with several, including Pancreatic Cancer UK and Pancreatic Cancer Action, to see what more might be done to diagnose these cancers earlier. The Government’s future work on pancreatic cancer will be informed by what we learn from those charities.
I am aware also that Pancreatic Cancer UK is hosting an early diagnosis workshop in June. The National Cancer Director, Professor Sir Mike Richards, my honourable friend the Minister of State for Care Services and officials from NAEDI will be attending. The workshop will be looking at practical steps that can be taken to help GPs and secondary care health professionals diagnose pancreatic cancer at the earliest stage possible. We look forward to receiving the findings of the workshop.
My noble friend Lord Sharkey and the noble Baroness, Lady Warwick, talked about the possibility of awareness campaigns. Decisions on campaign work in this financial year will be based on the evidence from the pilots that we have run regionally in 2011-12. To further address the need to improve awareness of rarer cancers such as pancreatic cancer, consideration is being given to piloting a symptom-based awareness campaign based on covering multiple cancers. We are talking with stakeholders, including rarer cancer charities, about that work.
Once pancreatic cancer is diagnosed, patients need to have access to appropriate and consistent treatment, delivered to a high standard, across the board. I am aware that there are variations in survival rates across the country and across cancer networks. Pancreatic Cancer UK’s Study for Survival 2011 confirmed that. Quite simply, it is not good enough and it must change. That is why we are providing data to help the National Health Service tackle regional variations. For example, the National Cancer Intelligence Network has made available data collections on survival rates and surgical resection rates across a range of cancers, including pancreatic cancer. These data will allow providers and commissioners to benchmark their services and outcomes against one another and to identify where improvements need to be made. They will then be able to channel resources into improving services in the areas that need to be brought up to an acceptable standard.
The noble Lord asked whether we would develop an audit of pancreatic service and care. The National Advisory Group on Clinical Audit and Enquiries recently considered a proposal for an audit of pancreatic cancer as part of the National Clinical Audit and Patient Outcomes Programme. I understand that the proposal was not recommended for inclusion in the national programme. However, the advisory group suggested that elements of the proposal could be taken forward as part of the existing bowel cancer audit when this is retendered in 2012. I will ensure that this option is considered when the department reviews the existing arrangements for the bowel cancer audit later this year.
In Improving Outcomes: A Strategy for Cancer—First Annual Report, published in December last year, we said that continuing to provide the NHS with benchmarked data,
“as a lever for improvements”,
is a priority for 2012.
Of course, a hugely important element in all this is the patient experience, to which the noble Baroness, Lady Warwick, referred. In December 2010, we published the report of the 2010 cancer patient experience survey, which recorded the views of more than 67,000 cancer patients across 158 trusts. The survey showed that 90 per cent of patients with an upper gastrointestinal cancer, which includes pancreatic cancer, reported having a clinical nurse specialist. The survey also showed that cancer patients who had support from a clinical nurse specialist had a better overall experience of care. We expect the National Health Service to consider this in developing its policies to improve patient experience. A 2011 survey is now in progress. We will be looking closely at the results of the survey to see where improvements have been made and where more needs to be done.
Research featured large in this debate, including in the speeches of the noble Lord, Lord Aberdare, my noble friends Lord St John of Bletso and Lord Sharkey, the noble Lord, Lord Kakkar, the noble Baroness, Lady Thornton, and others. The National Institute for Health Research is making a significant contribution to the search for scientific breakthroughs in pancreatic cancer. The institute’s clinical research network is currently hosting 17 studies of pancreatic cancer and is recruiting patients as we speak. In August 2011, the Government announced £6.5 million of funding for the Liverpool biomedical research unit for gastrointestinal disease. About half this investment will support pancreatic cancer research. The NIHR clinical research network, as mentioned by the noble Lord, Lord Kakkar, is currently hosting 17 trials and other well designed studies in pancreatic cancer that are recruiting patients. In 2010-11, a total of 687 patients were recruited to pancreatic cancer studies hosted by the CRN. The National Cancer Research Institute’s upper-gastrointestinal clinical studies group is dedicated to developing a portfolio of research studies in pancreatic cancer, and has a pancreatic cancer subgroup, which has developed a number of internationally run trials. That is a cause for some encouragement.
The noble Baroness, Lady Thornton, referred to the research involving processed meat. She is right; Swedish research published in the British Journal of Cancer in January 2012 said that two rashers of bacon or one sausage a day increases the risk of pancreatic cancer by 20 per cent. There is also a link with bowel cancer. The department urges everybody to have a balanced diet. As with other forms of cancer, higher consumption of fruit and vegetables seems to be protective, but I will write to the noble Baroness if I have any further information on that subject.
The noble Lord, Lord Aberdare, referred to new cancer drugs. Our priority is to ensure that cancer patients get the drugs that their doctors believe are best for them. We have delivered on our promise in the coalition agreement for a cancer drugs fund, with £650 million, all told, devoted to it. This funding has so far helped more than 12,500 cancer patients in England to access the cancer drugs that their clinicians recommend. We have listened to feedback on the first year of the fund’s operation, and today are publishing new guidance on the cancer drugs fund, which will further speed up access for patients. The new guidance makes it clear that patients will not normally need to go through the primary care trust funding processes prior to applying to the fund. In most cases, it will mean that patients are able to access drugs within a matter of days of an application being made to the fund. In the longer term, our intention is to introduce a system of value-based pricing for new drugs, with the aim of enabling patients to have greater access to effective and innovative new medicines. The whole premise of value-based pricing is to ensure that the price of a drug will be linked much more closely to its assessed value. It will bring the price that the NHS pays more into line with the value that a new medicine delivers.
My noble friend Lady Jolly asked about that. She also asked about mechanisms in the Health and Social Care Act that might assist cancer patients. The main mechanism is the outcomes framework, which will of course pervade everything that the NHS Commissioning Board does in the way of commissioning guidance, and will inform the way that the commissioning outcomes framework is developed. She also asked about engagement with the royal colleges. Ministers are currently meeting representatives from the royal colleges on education and training—I do not think on pancreatic cancer specifically but certainly on the training of doctors.
The noble Baroness, Lady Morgan, asked me a number of questions. The NHS outcomes framework— I pay tribute to the work of the All-Party Group on Cancer over a number of years—will be updated annually to ensure that the most appropriate measures are used for comprehensiveness, while recognising that we need to keep a broad continuity of indicators year on year. The refreshed NHS outcomes framework 2013-14 will be published alongside the mandate in the autumn. To support the ongoing development of the framework, we are in the process of establishing an independent technical advisory group that will provide advice to the department and the board about current indicators and proposals for new ones.
The noble Baroness asked about the national cancer patient experience survey. With the leave of the Committee, as there is a small amount of time left I propose to utilise it, unless there are any objections. In the first NHS outcomes framework we explained that the approach to Domain 4, which is patient experience, was evolutionary and the initial set of improvement areas for this domain was drawn from existing nationally co-ordinated surveys or from surveys that would be available in 2011-12. Collectively, the improvement areas aim to achieve wide coverage of the interactions that people have with the NHS and focus on different features of patient-centred care. Future work will involve refining surveys and developing new questions and measures to allow existing indicators to be replaced over time as necessary.
With regard to cancer networks, we have already made clear that there is a role for clinical networks such as cancer networks in the reformed NHS, as a place where clinicians from different sectors come together to improve the quality of care across integrated pathways, and the cancer networks are a clear example of how that way of working delivers better quality. That is why the Secretary of State announced last May that we would continue to fund cancer networks this year and that, subject to legislation, the Commissioning Board will support strengthened cancer networks.
The noble Lord, Lord St John of Bletso, asked about quality standards. There is no intention to produce a quality standard for pancreatic cancer as such, but in future there will continue to be flexibility in the library of quality standards to take account of new and emerging priorities, should such need arise.
Our ultimate goal is to improve survival rates and the quality of life for those living with all cancers, including pancreatic cancer. There are many challenges to be overcome but they are not insurmountable. Because of the Health and Social Act, clinical commissioning groups will be free to pursue innovative ways of delivering care that bring better results for all patients, including those with pancreatic cancer, and NHS provider organisations will have the operational independence to determine how best to meet the needs of commissioners.
We have set five ambitious but measureable goals: to prevent people from dying prematurely from cancer; to improve the quality of life for people with cancer; to help people recover from episodes of ill health; to improve the experience of care; and to ensure that all patients are treated and cared for in a safe environment. We will continue to deliver on those goals.
Lord Patel
I am not sure if it is in order for me to do this, but I know that whatever the Minister says is taken as gospel, and he quoted a study from Sweden about the association of eating meat with pancreatic cancer. I do not know about the quality of that study, but it sounds surprising that that amount of meat-eating increases the risk of pancreatic cancer by 20 per cent. I presume that he was talking about relative risk, not absolute risk.
The Deputy Chairman of Committees (Lord Geddes)
The Grand Committee stands adjourned until 4.30 pm, or indeed there may be a Division during that time, in which case it will be 10 minutes from the time when the Division is called.
Housing: Flats
Baroness Gardner of Parkes
To ask Her Majesty’s Government what proposals they have with regard to residential service charges and other matters affecting leasehold blocks of flats.
Baroness Gardner of Parkes
My Lords, I have declared my interest in the register as a long-standing leaseholder. Having always seen the leasehold situation from a personal point of view and how I have been affected by changes, I had not appreciated that it is a vast subject which affects over 2 million people in the UK—half a million in the capital alone pay more than half a billion pounds annually in service charges. This March, the London Assembly produced Highly Charged, an 80-page report on residential leasehold service charges in London. The foreword states,
“the complexity of the service charges regime comes as a shock”,
and looks, in particular,
“at the way the transparency of service charges can be improved and leaseholders can be given greater control over the way services to their homes are provided”.
I urge your Lordships to study this report and the Lords Library briefing pack, most capably prepared by our Library staff, in detail.
There are many different issues in leasehold. Here is a brief list of some of the key ones: simplification of the law—a consolidation Act; regulation of managing bodies; transparency—complaints processes; closing loopholes—protecting leaseholders’ rights; easier change to commonhold; right to manage—tenants’ associations; standard of services—value for money; exit or transfer fees; and financing home ownership.
Regarding simplification of the law, many people who buy leasehold property have no idea what is involved. They are looking for somewhere they can afford to live and, generally, their focus is on buying the flat. They look at the service charge for that year but many will not be looking at this going up or at large capital outlay in the future for block repairs—these are often nasty surprises. They expect to be able to rely on managing agents—normally appointed by the freeholder or some other tier of landlord—to act fairly on their behalf. The leaseholder is always at the bottom of the pile.
As Act after Act has constantly altered sections in earlier Acts, ordinary leaseholders—and even lawyers—find it difficult to navigate through the morass of legislation covering leasehold in England and Wales. There is real need for a Consolidation Act and I support the views of the Federation of Private Residents’ Associations as set out in their paper Forgotten Leaseholders.
There is a strong call for regulation of managing bodies. I am ambivalent on the point as the necessary changes in the law are far greater and a Consolidation Act which could clarify and simplify would be better. Regulation may be a helpful first step. The Government do not seem to have sufficient data on the working of leasehold law. For instance, in 2009, the British Property Federation wrote to the then Government stating that it fully supported better regulation, yet it is often quoted by Ministers as opposing regulation. Sections 152 and 154 of the 2002 Act were due to be in force by now but the Government have not implemented these protective clauses. Residential tenants’ deposits are protected by the law but the much larger amount, the leaseholders’ money held by managing agents, has no protection.
Transparency, a major news topic in recent weeks, is vital in the matter of service charges, works and repairs. Leaseholders are entitled to know how their money is spent and to be confident that they are getting what they have paid for. Shocking cases of massive overcharging have appeared in the press. In 2011, the Daily Telegraph on 3 December and the Mail on Sunday on 11 December published reports. There was a September case settled almost on the doorstep of the leasehold valuation tribunal where residents of St George Wharf, opposite Parliament, had received a refund of £1 million after a battle that went on for some years.
In the Charter Quay case against the same landlord, Mr Tchenguiz, in December, the leasehold valuation tribunal found that many interconnected companies were entering into contracts with other Tchenguiz family-owned companies and in that case received an excessive commission of 23.5 per cent for insurance. The chairman said:
“The result of entering these contracts has been extremely damaging financially, because the break clauses are so onerous”.
Peverel, the management company owned until recently by the Tchenguiz family, had a very poor record of dealings with its leaseholders.
There are too many cases where intermediate landlords or management responsible for arranging services such as insurance have agreed contracts which mean that they are pocketing money themselves to the detriment of their tenants. Transparency is necessary to reveal these situations and stop this abuse. The organisation Leasehold Knowledge Partnership is actively working to ensure good practice.
Easier change to commonhold was included in the 2002 Act and it is sad that so little commonhold has been developed since. It is so clearly in the interest of the resident. It gives people real ownership of the home in which they live. It should become government policy to facilitate commonhold. The 2002 Act allows leaseholders to convert to commonhold, but only if they are 100 per cent in agreement on the matter. That is an almost impossible percentage—just one flat can thwart it. Reduction to a simple majority would make a great difference. When residents see the benefits, as I have myself in my homeland, they would appreciate the great advantages of such a system. I support the views in favour of commonhold held by CARL, the Campaign for the Abolition of Residential Leasehold.
The right to manage and tenants’ associations can each be very beneficial. The difficulty arises in getting sufficient leaseholders in a block to agree on any option. This is particularly difficult in cosmopolitan areas where many tenants live only part time or property is in foreign ownership. At least some residents have to be willing to take on the work of handling contact with the relevant landlord or managing agent and this takes time and effort. There is no right to manage available if more than 25 per cent of the building is in commercial use. Procedures and percentages merit reconsideration.
My housing experience in GLC days showed me that the number of people willing to take on such a role on a voluntary, unpaid basis is very small and the work can be very demanding. A reputable managing agent has sent me interesting views about the need to train leaseholders to improve their knowledge of the system and obtain certification for this. He favours advisory bodies, alternative dispute resolution and mediation. He states that,
“many disputes could be avoided through early consultation”.
In an ideal world, he would be right, but many leaseholders find that whatever attempts they make fail to produce any response or necessary action from their managing agents. Agents change but are no better. Where routine inspections and long-term maintenance planning used to be the norm, little, if anything, is done now.
As regards loopholes, there is evidently a defect in the leasehold Acts. Some process exists whereby a landlord can avoid the obligation of offering their interest to the leaseholders in a block, by setting up what I think is called a sister company. In my block this has produced a very bad result for leaseholders who would, I believe, have wanted to buy in that head lease. It is wrong that we did not have the opportunity.
Exit or transfer fees have a very adverse effect on older people who wish to move to a retirement village home and when the time comes to move, perhaps to a care home. They find themselves faced with quite a high charge. This is often money that they need. If they have died, their family find that the property might be almost impossible to sell because of the high charges. This certainly needs to be looked at. It has a doubly bad effect in housing terms. Older people living in a house too large for them and who are keen to move to a sheltered housing facility are deterred from doing so because they have such a financial disincentive. This means that a large property is underoccupied and unavailable for a family in need of that size of accommodation. I support the Campaign Against Retirement Leasehold Exploitation—CARLEX.
As to financing home ownership, bridging finance—so common years ago—was short-term money advanced by a bank or building society to enable you to secure the home you wished to move to, and to give you time to sell your present home. This enabled people to move up or down in accommodation size or location, and it worked well. Today, lenders are clear that no such type of finance is available at all.
After a recent housing debate, the noble Lord, Lord Best, told me that Hanover Housing Association, of which he is the chairman, offers an older person the right to move into appropriate accommodation and gives them two years within which to decide whether they are happy and want to buy and stay, or to return to their original home. I find this a marvellous system. It should be more available.
Recently, I was involved in trying to help someone who wanted to buy a flat in a high-rise former council block—
The Deputy Chairman of Committees (Lord Geddes)
With apologies to the noble Baroness, a Division has been called in the Chamber. The Grand Committee stands adjourned until 4.51 pm.
Baroness Gardner of Parkes
I will repeat the first sentence of my paragraph: otherwise, it will not hang together. Recently, I was involved in trying to help someone who wanted to buy a flat in a former council block that had been bought under the right to buy. Application for a mortgage with a high-percentage deposit was approved in principle by the bank, and a valuation fee paid. The valuation report attached a zero value to the flat. Thinking that this must be an aberration, the prospective buyer went through the same process with another bank and got exactly the same response: the value was listed as nil. A valuer’s note said that no one was willing to lend on blocks that had a past or present connection with a local authority, particularly if they were high-rise. The two banks had been willing to offer terms, but neither would do so with a zero on the valuation report. Several other banks said that they would not offer mortgages on any high-rise blocks. The policy of Barclays is not to lend on property above four floors, with the exception of expensive new buildings such as One Hyde Park—and, I suppose, the Shard.
The implications of this are wide, particularly at a time when the Government are keen for more people to buy the flat in which they live. I sent details of the case to the Minister for Housing on 8 March, pointing out that people need to be able to move on if their circumstances change and they need larger or different accommodation, and asking who would want to buy if they were locking themselves in to a totally illiquid asset. His reply of 30 March stated that he had,
“contacted HM Treasury and they have agreed to accept responsibility for this correspondence”.
The acknowledgement card from the Treasury was dated 28 March. I await a reply. I hope that my response will be swifter than that to the consumer group Which? It has not yet had a reply from the Minister for Housing to its letter on leasehold property charges sent last October. I received the Which? article only today. I have no time to comment on it but I hope that other noble Lords may do so.
As I followed up on the high-rise case I was most impressed by how well blocks were managed by the local borough—a point made in the London Assembly report. The standard of consultation with tenants and of explanation of the work done was very clear, and far above anything that I had seen in private blocks. There are lessons to be learnt.
My brief time has run out. All I have been able to do is list some of the issues. They are complex and far-reaching, and affect many people. We all want to live in a fair and just society. We do not want to spend hours and days trying to get things done that should be done routinely and correctly. Having to complain, let alone having to do it formally through tribunal proceedings, is a slow and laborious process. Life does not need complication but simplification, and above all clarity. The issues need to be studied in detail for the benefit of all. I hope that the Government will consider the many points that I am sure your Lordships will raise today.
Baroness Maddock
My Lords, I should declare an interest: I am a vice-president of the Local Government Association. We should all be very grateful to the noble Baroness, Lady Gardner, for securing this debate on this very important subject. I am only sorry that it is such a short debate. I am sure that all of us have been paring our words, having been inundated with information.
There are 1.5 million leasehold homes in Great Britain. This means that between 2 million and 3 million people are living in long-term leasehold properties. As the noble Baroness, Lady Gardner of Parkes, showed—and as other speakers, too, will show—there are still considerable problems for those with homes in this sector. This is despite the many Acts of Parliament that have covered leasehold tenure, going back half a century. There were Acts in 1967, 1985, 1987, 1993 and, most recently, in 2002. I was involved in the 2002 Act and was surprised to realise that it was 10 years ago. There is much agreement, I think, about the need for helpful reform of leasehold across the parties. However, it is a complicated area, as we have already heard, and there is less agreement about how to make this reform a reality, and a reality that works.
The leasehold system that we are discussing today is almost a uniquely Anglo-Welsh system. The rest of the world has developed alternative approaches, to which the noble Baroness, Lady Gardner, alluded in her opening comments. The problems in the leasehold sector persist in large part because our present system is one of high legislation but low regulation. At the heart of most of the problems is the fact that the interests of the leaseholder—the one who usually has the most financial, practical and emotional investment in a property—are all too often excluded. As the noble Baroness, Lady Gardner, has pointed out, the balance of power between the freeholder and the leaseholder too often seems to be to the advantage of the freeholder. Furthermore, the root of many problems is that lessors are excluded from management decisions despite the fact that they are the people paying.
There is no independent or compulsory regulation. This situation allows unscrupulous and incompetent managers to continue operating and undermines the influence of those living in managed properties. The lowest source of redress for leaseholders is the land valuation tribunal, but it is often lengthy, expensive and bureaucratic. It is particularly detrimental for poorer households. Many living in leasehold properties are retired; in fact, more than a third of leasehold flats are occupied by economically inactive people—I believe that the noble Baroness, Lady Greengross, is going to talk about people in retirement and the problems that they have. In the short term, the existing infrastructure could be improved by focusing on levering in the interests of all leaseholders to the management process, with a compulsory ombudsman service, and improving the management of leasehold properties through licensing. This would incur some costs for leaseholders, and it would create limited hurdles for those entering as managing agents, but I feel it would improve the value and quality of the service. Greater leaseholder empowerment could be promoted by the Government taking steps to encourage the process of right to manage and the long-term expansion of commonhold.
Since 2002, complaints about managing agents have risen sharply; in fact they have more than quadrupled in the past 10 years. The number of people living in leasehold properties is growing. The Government are committed to unlocking the housing market, and leasehold properties will be an important part of this. We know that they will be particularly important in London, where the majority of new homes will be leasehold flats. In addition, the Government plan to reinvigorate the right to buy for social housing, and this is already creating more leaseholders. Surely leasehold reform should be a priority alongside increasing the housing supply. I am aware that the Housing Minister, Grant Shapps, has stated that the interests of freeholders and managing agents are balanced and that reform should be driven by a more proactive approach from the sector, not by greater regulation. However, it is clear that there are severe problems for leaseholders, and, as voluntary regulation allows companies to operate completely outside any regulatory regime, such problems will continue unless some action is taken.
The noble Baroness, Lady Hanham, who is here today, took part in debates on the 2002 Act, as perhaps did others in the Chamber. I do not know whether the noble Lord, Lord Best, was here at the time, but the noble Lord, Lord Rooker, was then the Minister. I can still hear him saying that the local valuation tribunals would improve matters for leaseholders. However, they are proving costly, lengthy and bureaucratic. What monitoring have the Government done of the operation of local valuation tribunals, and do they have any plans to improve the operation of the tribunals? What research have the Government undertaken on the take-up of commonhold? In 2002, it was supposed to take over from the old system, particularly for new build. I understand from the statistics that that just is not happening. People prefer to go to the old system. What are the Government planning to do to assist the take-up?
I conclude by saying that we have regulation across various areas where there is competition and the regulation is often there to try to look after the interests of consumers. We have not done that properly for leaseholders, and that is one of the best arguments for looking seriously at how we can regulate in the interests of leaseholders. I hope that this short debate this afternoon will assist the Minister in trying to bring home to the Housing Minister, Grant Shapps, how important this is if he really wants to ensure that we have more affordable homes for people.
Baroness Greengross
My Lords, I start by congratulating the noble Baroness, Lady Gardner, on securing this debate. It is a very important issue. I declare an interest as president of the Association of Retirement Housing Managers. I just want to make a few points about older people in retirement leasehold schemes, as the noble Baroness, Lady Maddock, suggested I might.
I start with the resolution of conflict situations, and there are quite a lot of them. As someone who for many years headed a charity which set up a mediation scheme for people in leasehold housing schemes, I was aware of the conflict. It is difficult, not least for the providers of schemes, who are dealing with people who are often prepared to spend 12 or more hours a day focusing on those issues and who can make amazing barrack-room lawyers—I do not want to be insulting—because they have so much time to concentrate on that. So it is a difficult as well as an important issue.
The industry might be better served in conflict resolution by stronger regulation through an independent regulatory body or, in the absence of that, some form of self-regulation underpinned by guidelines and codification—the sort of thing that the Association of Residential Managing Agents has proposed and supports. That is worth considering. To help residents avoid costly litigation processes, perhaps the Government could implement a dispute resolution structure based on compulsory mediation as a first step, as recommended by the London Assembly report on service charges. That might be helpful. We know that increased clarity is required on what is included in the annual service charges, what is not, and what is retained in reserve for contingency funds and what precisely those funds cover. People are often greatly lacking in knowledge about that.
On other charges, we know that the Office of Fair Trading is currently investigating transfer fees, which are payable to the landlord by the owner or their family once the property is sold. The level of fees is set out in the original lease, but the scale of the fee varies widely between property companies. Would the Government consider a scaled fixed fee of some sort, which might be helpful? There also appears to be some ambiguity on the issue of the house manager flat rental, charges for which are levied with the service charge. If people are dissatisfied with that charge, it is not entirely clear what can be done to resolve the issue. Might part of any new guidelines help to address that, and will landlords as well as management companies be expected to sign up to codes of practice which would cover allied issues such as the placement and cost of buildings insurance and any associated premium commission, which require a consistent and open approach across the industry?
Finally, older residents in retirement housing are much more likely to experience unforeseen events, such as a decline in health status or the death of a partner, than younger people and that might mean that they have to change accommodation or—more likely—have to make adaptations to their accommodation fairly rapidly. Codes of practice should include provisions to help older people and their families in those circumstances and to consider the additional provisions they may make to help older people in particular.
Housing designed for older people whose needs change as they age faces an almost built-in conflict of interest. They need more services as they age, so the costs are going to rise as more care is provided. Their income tends to be less over the years. They wish to reduce the cost but they need more services. Older and frailer residents are more costly, so when residents manage the schemes themselves they may wish to sell to active, fit and therefore younger people. There is a conflict in what extra-care housing is intended to do. It is there so that as you get older and, perhaps, more frail, the services increase to meet your growing needs but if only younger, fitter, stronger people are invited into a complex you are almost defeating the object. I do not know if this problem can be solved but it is there unless people massage the criteria for entry into this sort of housing. This is sad but it presumably happens from time to time.
These are issues which the Government and Members of your Lordships’ House who are expert in this sort of thing need to consider carefully.
Baroness Miller of Chilthorne Domer
My Lords, I, too, congratulate the noble Baroness, Lady Gardner of Parkes, because this is an enormously important issue. As she rightly said in her extremely good introduction, when people are looking at these flats they are just looking for something they can afford. They are not looking in great detail at the implications of becoming a leaseholder. I must declare an interest, having become a leaseholder in Kennington in 2002. What I say this afternoon is not because I am an expert but because our block is a microcosm of the issues raised by noble Lords in this debate. We have had the issue of residential service charges which have not gone up as much as some that I have read about but have nevertheless seen a steep increase.
In terms of capital repair charges, this year we have had a projection several years forward. As our managing agents have said, this is the first time ever for this and it is a terrific breakthrough. If there were going to be regulations, a five- or 10-year forecast should be obligatory and would help tremendously. Last year, the surcharge for external works was £2,000 on a two-bedroom flat. That is a huge amount when it has not been foreseen more than 12 months before. Not many people can just find £2,000 in a year.
If you happen to want to sublet your flat, there are charges for assignment of leases. This is an issue because if someone is marginal about subletting it might put them off. At a time when accommodation is at such a premium, we want to make sure that those charges are at least proportionate to the work done. I have come across charges for assignment of a lease where it was going to someone who was already a tenant in the block and was simply moving flats, so the taking up of references was pretty academic.
The issue of insurance was highlighted in the London Assembly report. Interestingly, it highlighted terrorism as one of the unnecessary things to insure against. Many insurance companies discount terrorism as something that you can insure against. However, in preparing for today’s debate I went back to the budgets for the block in which I live, and there was a £5,000 a year charge for insuring against terrorism. That is against the background of a number of restrictions. You cannot keep pets, you cannot keep bikes in your flat, you cannot have wooden floors and you cannot hang out washing. Perhaps all the prohibitions are reasonable. At least when we took on our leases we were aware of them.
What made the biggest difference over the decade was the revival of the residents’ association under the chairmanship of somebody who devotes a vast amount of time and energy, entirely voluntarily, to making the sorts of improvements that we should expect good regulation to make. She has made, single-handedly, a tremendous difference to the accountability of the management company. She has made it more transparent by asking lots of questions and then informing us on the structure of the freeholder and the management company, on the relationship between the two, and on the trustee whom the management company appoints. If anyone was going to speak this afternoon it should have been her, because she is a truly great expert on this. She also managed to end the perhaps unintentional divide-and-rule culture of the management company, whereby leaseholders did not come together to take on the management company over issues. Giving information about issues, and getting a consensus among leaseholders on how to resolve them, is tremendously important.
Given how difficult it is at the moment to form a residents’ management association, I hope that the Government will give at least some thought to making it easier to form one. Beyond that, I hope that they will give some thought to giving more resources to residents’ associations. I do not mean that the Government should give the resources. Perhaps the service charge could be top-sliced to give residents associations a minimal amount of funding to bring leaseholders together. That is the start point that is so difficult to achieve with no resources and few people willing to volunteer their time. If the issue is one of the David and Goliath—which is what it feels like most of the time for the management committee and the chairman of the committee—we should give a few stones for David to hurl at Goliath with his catapult. That would make an enormous difference. If we achieve anything as a result of this debate it should be in that direction.
Lord Best
My Lords, I, too, am very grateful to the noble Baroness, Lady Gardner of Parkes, for initiating this important debate on the management of leasehold flats. Since I agree with virtually everything she said, and virtually everything that everybody else said, I will not dwell on those points.
Since most leasehold property is managed by managing agents, we need to consider whether the current arrangements are satisfactory in ensuring that they do a good job. I declare my interest as chair of the property ombudsman TPO, which handles complaints by tenants and, significantly, by landlords about managing agents. I feel able to speak in this debate despite my interest because the property ombudsman TPO is principally concerned with estate agents that handle sales, where 95 per cent of agents are members, and managing and letting agents that handle rented properties, where the TPO accounts for some 60 per cent of the sector. There is another ombudsman service, quite separate from us, that handles the great majority of complaints about agents who look after leasehold property.
On ombudsman services in general, the resolution of disputes without the need to go to the courts, or in this case to take matters to tribunal hearings, has considerable advantages. Ombudsmen are not champions of consumers any more than they are on the side of providers. They must be entirely independent of both. They can in that capacity not only resolve disputes in individual cases but play a significant role in raising standards in an industry. For example, complaints against estate agents in relation to property sales have fallen, and the level of awards that agents have been required to pay has also fallen over recent years. It seems very likely that the pressure and publicity from the work of the property ombudsman in judging the behaviour of agents against a clear code of practice contributed significantly to this improvement.
Throughout their professional bodies, and in professional and trade magazines and journals, there is constant reference to the standards to be expected of agents in treating with consumers. Where the ombudsman's decision leads to an offending agent being expelled from the scheme, local publicity has a powerful impact. The ombudsman cannot deal with the more extreme cases, not least because his powers are limited to making a maximum award of £25,000 in the case of the TPO, and some matters must still go to the courts. However, the ombudsman service means that huge numbers of disputes can be resolved at low cost—indeed, at no cost to the complainant.
I recognise that there can be additional complications for leaseholders. An individual leaseholder may be insistent that the managing agent should take action, perhaps in accordance with their contractual agreement, where the cost of the agent doing so may mean that the management company, comprising the residents who will all have to pay, is not so keen for the managing agent to proceed in this way. In other words, there may be three parties engaged in a dispute: the individual leaseholder, the leasehold management company and the agent. This will require additional sorting out. One hopes that such cases are in the minority, and I would advocate much greater use of the existing ombudsman service to settle disputes and to raise standards for residential leaseholders.
We know that the Government are not keen on any new regulation in the private rented sector. The property ombudsman has argued for the same requirements on managing letting agents as exist for estate agents under the Consumers, Estate Agents and Redress Act, which would make it compulsory for all agents to belong to an ombudsman scheme. In the absence of such legislation, it seems that we must rely on voluntary action by agents to join an ombudsman scheme. The advantage to the agents will be that as consumers become aware of the difference between agents that belong to an ombudsman scheme where they can get their disputes addressed and agents that are outside such schemes, the market will ensure that few agents remain beyond the pale. In the private rented sector, a number of agents have got together with the National Approved Letting Scheme, and with the professional bodies representing agents, to launch a safe agents scheme that in particular requires all agents to have client money protection insurance. A publicity campaign by bodies representing leaseholders, such as the Federation of Private Residents’ Associations, to ensure that leaseholders choose only agents that belong to an ombudsman scheme, would certainly help to raise accountability and standards.
I will also comment on the practices surrounding payments that are required of leaseholders or their successors when they leave or die. Some contracts in retirement housing stipulate payments to the freeholder, and these exit fees have been the subject of serious complaint. Here I declare an interest as chair of the Hanover housing association, which has taken on the freeholds of several thousand leasehold retirement flats. From this I know that practices in the sector can vary from the good to the bad. At the positive end it can be beneficial to offer to occupiers the option that some part of the service charge—usually that covering the building up of a provision for major repairs, the replacement of lifts and so on—should be deferred until the occupier leaves. This will mean that every month those on tight incomes will have more spending money, and the accumulated service charge will come out of the sales proceeds when they leave or die.
At the other extreme are cases of small print where the occupier—or their heirs and successors—is required to pay 5 per cent of the sales proceeds to the freeholder in return for no discernible benefit. There have been complaints that purchasers did not understand such requirements buried in their contracts. The Office of Fair Trading looked at these questions, and it would be helpful to have an update from the Minister on the action that the OFT intends to take—not to throw the baby out with the bathwater but to clamp down on unfair and misleading contractual arrangements that are discovered. Although I recognise the Government’s aversion to statutory regulation, will the noble Baroness comment on the value of extending the role of ombudsman services?
Lord McKenzie of Luton
My Lords, like other speakers, I thank the noble Baroness, Lady Gardner of Parkes, for the opportunity to reflect on a particular aspect of housing policy and I am grateful for the briefings that we have had. I start by declaring an interest because I am, jointly with my wife, a long leaseholder of a flat in London. This debate has, if nothing else, spurred me to be more diligent in reviewing the paperwork.
As others have said, issues of residential leaseholders touch on a particularly complex area of legislation. The noble Baroness has previously sought a view from the Government about whether they will consolidate landlord and tenant legislation and was told, back in November, that there were no plans to do so. However, that exchange at Question Time brought forward suggestions that the matter might be referred to the Law Commission. Has anything been taken forward in this respect? In the same exchange, the Minister indicated that a wide range of housing regulations were being looked at as part of the red tape challenge. How is that progressing, which particular regulations are being reviewed and what areas are being looked at? In a further exchange on 17 January, the noble Baroness, Lady Hanham, reaffirmed that there were no plans for a wide ranging review of leasehold law, but indicated that the Government were keeping a watching brief and would not rule out making changes. Have any changes currently been ruled in?
Issues of leaseholders are just one part of the housing problems facing our country and, to be frank, are not the most pressing. House building has fallen by 11 per cent in the first 18 months of the coalition Government, private sector rents have risen and are unaffordable for too many and home ownership has declined as people struggle to get mortgages. We know that the Government have set their face against further regulation, scrapping Labour’s plans for a national register of landlords and regulation of letting and managing agents. This is at a time when some of the most vulnerable are having their housing benefit cut and are being directed to the cheaper and shabbier end of the private rented sector. Nevertheless, the issue raised by the noble Baroness is important and, as others have said, is likely to be of increasing significance if more blocks of flats are built, shared ownership schemes are promoted and—as the noble Baroness, Lady Maddock, mentioned—the Government attempt to reinvigorate the right-to-buy programme.
It is not just private sector freeholders and landlords who are involved with leaseholders. Some quite outdated ARMA data from 1998-99 suggests that 20 per cent of landlords are social landlords. The same survey suggested that less than half of leasehold flats were using a managing agent. Can the Minister update us on those data? I do not have time to cover it today, but there were issues about social landlords, leaseholders and the implications for decent home standards where a lot of money was being applied by local authorities to upgrade their stock and the implications of that for people who had bought a flat.
It must be acknowledged that this area is not entirely unregulated. The law requires consultation with leaseholders before works above a certain value can be carried out; demands for service charges must be in writing; there is an expectation under the law that service charges are reasonable and there is a right for landlords and leaseholders to seek a determination from a leasehold valuation tribunal. Leaseholders are entitled to a summary of service accounts and to inspect documents. Service charge funds are deemed to be held on trust but do not have to be held in separate trust accounts: thereby hangs a problem. However, as I understand it, where there is a residents’ management company or a right-to-manage company, service charge moneys are subject to a statutory trust.
Apart from the law, managing agents who are members of RICS or ARMA—the Association of Residential Managing Agents—are required to adhere to the RICS code of conduct on service charges for residential management. There is a separate code for retirement housing managers. New best practice guidance has been introduced by the RICS in co-operation with the accountancy bodies, in the face of the Government’s refusal to implement what was previously proposed. Is that considered fit for purpose, and will the Government reconsider giving it some statutory backing?
Despite the voluntary code, as we have heard and seen from our briefings, difficulties abound. Barriers to the managing agent industry are low; and not all managing agents belong to the RICS or ARMA schemes and are therefore not bound by the code. There are no ombudsman arrangements to which all managing agents are required to adhere, and the noble Lord, Lord Best, made a powerful argument to change that. It has been suggested that some of the difficulties arise from the essential imbalance of power between freeholders and landlords on the one hand and leaseholders on the other—the David and Goliath syndrome. Notwithstanding this, it would seem that some of the conflicts arise because insufficient attention is paid when a lease is entered into or required in the first place.
The London Assembly report suggests a requirement for more specific advice at the point of agreement. Estimates of service charges for the next five years, I think, were suggested in that case. It was interesting to hear the experience of the noble Baroness, Lady Miller, currently. The concerns around service charges are inflated prices, not having to achieve value for money, undisclosed commissions, awards of contracts to related companies of managing agents, and the lack of security for leaseholder moneys. The report prepared by the London Assembly also raised issues concerning the leasehold valuation tribunal, suggesting that the process was getting increasingly complex, with an impact on cost. There was difficulty in getting information from landlords, who were increasingly employing counsel, reflecting on-costs. What is the Government’s assessment of how the tribunal is currently working?
There is a case for more regulation—if not by government, by industry bodies—but this must be effective. We have a policy review under way, and in this connection the principles that we would deploy to address this issue require ensuring good practice is promoted, improving transparency, supporting a register of competitive tendering processes for services, and having systems, perhaps mandatory, for the resolution of disputes.
The Deputy Chairman (Lord Geddes)
The noble Lord times it quite beautifully. A Division has been called in the Chamber. The Grand Committee stands adjourned until 5.37 pm.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I thank noble Lords who have taken part in this debate—most especially the noble Baroness, Lady Gardner of Parkes, for introducing it. She has taken a long-term interest in housing and has great experience. It is therefore important to be able to deal with the issues that she has raised and those raised by subsequent speakers. I have a limited time, and I say at the outset that if there are areas that I miss, we will make sure that letters are written afterwards.
We believe and understand that most leaseholders are, in fact, satisfied not only with their property but with the way it is managed. However, I accept immediately that there are a number of exceptions to this rule. We also know that leasehold tenure can be complex, and problems and disputes arise, which cause concern, frustration and, in some cases, real distress to the people concerned. We have a statutory framework in place that aims to balance the different parties’ interests in the same property. The goal is to provide leaseholders with the rights and protections they need, while recognising the legitimate interests of landlords.
The current legislative framework, if properly dealt with, can deliver the right balance between the parties involved—but provided it is matched by an increasingly proactive and socially responsible approach by the professionals who are working within the sector. In taking this approach, the Government are, I recognise, presenting a real challenge to those professionals. I am therefore pleased to see this challenge being taken up by various professional bodies such as the Association of Retirement Housing Managers, to which the noble Baroness, Lady Greengross, referred. This can only help leaseholders and others concerned within residential leasehold.
The noble Baroness, Lady Gardner, referred to the London Assembly report, as did other noble Lords. We have noted that the London Assembly’s report on its investigation, Highly Charged, is a thorough and thoughtful contribution to these issues. Most of the report’s recommendations to government in fact relate to the procedures of the leasehold valuation tribunal. As such—although I will refer to the LVT later—they are issues for the Ministry of Justice, and it is up to that ministry to address these issues. It is also now for the Mayor of London and the Assembly to decide what steps they will take, but I suspect that as purdah is in place, I should not continue on that matter.
The noble Baroness, Lady Gardner, also raised the case for consolidation of legislation. This matter is unbelievably complicated. I do not know if the noble Lord, Lord McKenzie, had anything to do with consolidating legislation when he was in government, but it is not to be undertaken lightly at all. We recognise that sometimes it can be beneficial to bring together all relevant legislation, but it takes a long time. You have to bring not only the law but the regulations into one place. At the moment, it is probably not justifiable to spend time consolidating legislation in this area. The noble Lord, Lord McKenzie, referred to the Law Commission and asked whether we were planning to ask it to look at this issue. I said when we previously discussed this issue that we did not think that the Law Commission would be grateful for our recommendation, and that it was very much up to it to decide what it wanted to do. If the commission felt that there was a position or role for it, it would be in a position to take the matter up itself, but we are not at the moment planning to ask it to do so.
Service charges and the management of property were mentioned by the noble Baronesses, Lady Miller and Lady Maddock, as were the role of managing agents and their capability. Noble Lords will know that leaseholders have a range of legal rights concerning service charges and the management of property. They can hold managers and landlords to account if they believe that their service charges are unreasonable or if they are facing continuing poor management. Again, I recognise that this is not an easy area. It throws a lot of responsibility on to tenants’ associations and leaseholders’ associations. The noble Baroness, Lady Miller, referred to that.
However, I do not think that it is for government to intervene any further. People who buy leasehold properties first need to be very careful with the lease they are buying, to know what they are buying, to know what are the service charge implications and management implications. They need to know whether the managing agent has been appointed by the freeholder and what responsibility they take if that managing agent is not standing up to proper scrutiny. At the end of the day, leaseholds are the responsibility and under the ownership of the people who live in a block of flats and it is very much in their interests to have an organisation or association to use to help manage it. Although I accept that that involves a big responsibility on those who do that, there are some very determined leaseholders who manage to achieve it.
I touched briefly on the question of the leasehold valuation tribunal, which caused some ripples early on. I know that there are leaseholders who have had successes with the London valuation tribunals. Although I appreciate that there are difficulties and discrepancies between the amount of costs involved and those who pay for them, it is a fact that the leasehold valuation tribunal is there to be the arbiter in cases where otherwise landlords and tenants cannot agree.
The current maximum fee payable to a tribunal is £500. Sometimes no fee is payable at all, but of course as cases continue each party is responsible for their costs of representation. Leasehold valuation tribunals are independent and do not seek to favour one party or another. They are viewed as the most appropriate forum for dealing with a wide range of leasehold disputes. Any research on the effectiveness of leasehold valuation tribunals would, I fear, be for the Ministry of Justice. It seems ridiculous that that has got out of our hands, but that is where it is. They are given jurisdiction to determine leasehold disputes and parties can of course go to court. Again, I appreciate that that is all quite daunting for people who think that they might want to just go to live a quiet life, but that is not always possible.
Yes, managing agents are appointed by the freeholder.
Baroness Maddock
Before the Minister leaves leasehold valuation tribunals, having said that it is the responsibility of the Ministry of Justice, I would be grateful to know whether it has undertaken any review. As I said in my remarks, I can still hear the noble Lord, Lord Rooker, telling me in 2002 how wonderful it was going to be for everybody. I realise that it is not the Minister's responsibility now, but I would be grateful for that information at some stage.
Baroness Hanham
May I get back to the noble Baroness in due course? I will have to find out whether that has been undertaken.
Managing agents, as I say, are put forward by the freeholder. The leaseholders have some rights if they consider that they property is not being properly managed, and can go to the leasehold valuation tribunal about that or begin to think about taking over the right to manage the property for themselves, which would mean that they were then fully in charge.
Service charges are an issue. All sorts of issues have been raised today about the protection of money and service charges, how much they are and what is involved with them. Again, I am afraid that that is a matter for the leaseholders to watch carefully. It is important that what the managing agents do and the costs that they put forward are transparent, and that the leaseholders have a number of rights. They can and must ask for a summary of service charges, and those charges should be consulted upon. They must be able to see the supporting documentation. They have a right to see insurance documents and the right to have a management audit carried out, albeit at their own expense. So they have some control over the service charges, although I think my noble friend Lady Miller mentioned capital charges and the fact that some people had not understood that they were going to come in.
There are two codes of practice, one from the Association of Retirement Housing Managers, mentioned by the noble Baroness, Lady Greengross, and one from the Royal Institute of Chartered Surveyors, which I think the noble Lord, Lord McKenzie, mentioned. These pay particular attention to the disclosure of commissions. Although the issue has not been entirely raised today, there have been concerns about the commissions taken on insurance. There are good codes of practice that ought to be adhered to. The Association of Retirement Housing Managers code is in the process of being reviewed—we expect that to come off quite soon—and we hope that RICS will also look at that issue and revise what it says.
The noble Baroness, Lady Gardner, and other noble Lords raised two or three other points. I shall comment briefly on commonhold, something that I remember debating with the noble Baroness, Lady Maddock, in 2002 when we were, it is fair to say, vigorously opposed and saw all sorts of pitfalls coming up. Those pitfalls are still there but we could make it easier for a leasehold property to be changed to commonhold. This would now be a matter for the Lord Chancellor, which slips it away from me, and the Secretary of State for Justice. They will be required to have a look at it, and I am sure that we will refer them to this debate so that they will know what has been said about it.
The noble Lord, Lord Best, and the noble Baroness, Lady Greengross, raised the question of exit fees. We could not possibly comment on the practice of any particular company, but we are well aware that these are causing practical issues and great distress. The Office of Fair Trading, as the noble Lord, Lord Best, said, has been considering whether the exit fees might breach the unfair terms in consumer contracts, and if they do indeed constitute a breach, the OFT can take action and can take such companies to court.
I have been advised by the Whip at my right hand that I have truly run out of time. The only point that I have not covered is that on the ombudsman, which the noble Lord, Lord Best, raised. May I write to him about that, since I do not now have time? I have a note of it. I shall also write regarding the red-tape challenge.
There has been too much in this debate for me to go into as much detail in my response as I would have liked. We will scour Hansard and, if we have missed anything, I will write to noble Lords who have taken part. I thank everyone for their contribution on this extremely important subject, and I assure noble Lords that I will draw the Housing Minister’s attention to this debate and the concerns that have been raised.
The Deputy Chairman of Committees (Lord Faulkner of Worcester)
The Grand Committee will adjourn during pleasure until 6.30 pm.
Armed Forces: Personnel
(12 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Dean of Thornton-le-Fylde
To ask Her Majesty’s Government what steps they are taking to resolve the issues of operational tempo, pay, pensions and housing affecting Armed Forces personnel reported in the latest Armed Forces Pay Review Body report; and how they ensure that such steps are compatible with the Armed Forces covenant.
Baroness Dean of Thornton-le-Fylde
My Lords, the opening words of the current military covenant say that,
“the whole nation has a moral obligation”,
to all those,
“who serve or have served in the Armed Forces…and their families”.
and that they deserve our
“respect and support, and fair treatment”.
That is the basis of my Question for Short Debate this evening. I ask myself whether the Government are fulfilling their obligation on the military covenant. It is an undertaking that goes back many centuries, indeed to the first great Queen Elizabeth—Elizabeth I—when an Act was passed which compelled parishes to contribute to the care of veterans. This nation has a very long history of seeking to give good support not just to our service men and women but to their families as well, both during and after their time in the services. The Armed Forces do not have the channels to speak out for themselves. They are not permitted to join a trades union, although if you look at the blogs and the chatter on the wires, you would see that many in the Armed Forces are now agitating that they should have a trades union. I make no comment on that.
They do not have the same right to speak freely in the public arena about their position as we do. However, in January this year, Catherine Spencer, speaking on behalf of the Army Families Federation, suggested that Ministers were close to breaching the military covenant. She said:
“I have to ask if the future has ever seemed more demoralising”.
I have always believed that you should look on the upside of things and not just the negatives. I have had a pretty awful weekend doing the research for this speech because I have become increasingly concerned about the state of our Armed Forces—I am talking about the personnel side, not the equipment, obviously. I recognise the need for austerity measures but my interpretation of the wording of the 2012 AFPRB report is that it expresses deep and serious concerns on the range of those austerity measures and how they are being applied to the Armed Forces.
I declare an interest as a former chairman of the Armed Forces Pay Review Body for six years. I am currently a vice-president of the War Widows’ Association and a trustee of the Armed Forces Pension Scheme. I have been in contact with none of them for this debate; I am not speaking to any external briefing. This is based on my experience.
It is a long time since I read a report from the Armed Forces Pay Review Body which has been so direct in talking about decreasing morale in the Armed Forces. The report states that the operational tempo remains “very high”. We know that, but that is almost a blanket for a number of problem areas: people not being with their families for as long as they should, going off on operations, coming back, going on training, not having the time that we have, in the military covenant, tried to ensure for them. Indeed, chapter 2.8 states:
“The 2011 Armed Forces Continuous Attitude Survey … indicated decreasing satisfaction … and declining morale”,
in the services.
Written and oral evidence from the services family federations highlighted uncertainty from those people about, for instance, the future of the pension scheme and the related transitional arrangements; changes to the Ministry of Defence allowances package; the impact on family life of the operational tempo; and the recurring theme of poor-quality accommodation and maintenance. These are ongoing issues that have been raised not just with the present Government but with the previous Government.
Those concerns are coupled with a pay freeze for 75 per cent of Armed Forces personnel for the past two years and a pay award for the remaining 25 per cent of just £250. In my view, the decision now to extend the pay restraint for a further two years, with no exclusions and a limit of 1 per cent, is having a cumulative and potentially damaging impact on the morale of our Armed Forces personnel and their families. We should be worried about that and we should try to address the issue.
A staunch pillar of the covenant going back generations has been the provision of housing, particularly in the Army. The Navy has a high proportion of its personnel who buy their own homes. To be in a community of forces families in similar situations—young families, often with Dad, or now sometimes Mum, absent for a lot of the time on operations—provides great mutual support. In the recent, successful television programme, “The Choir”, we saw how being there supported those young women. Just 45 per cent of Army personnel are buying or renting their own homes—two-thirds as many as the rest of us in the population. So the reasons for the drop in morale are obvious.
If this situation is to change, more help is needed. The home is at the heart of the family. It is somewhere we all retreat to when we have issues. The £8,500 from the current Long Service Advance of Pay Scheme to assist in buying a home is, in my view, insufficient; it was insufficient some years ago. I am not even sure whether it is still being applied, but the conditions for it are pretty onerous. It will not bring about the change that the Government—particularly the Minister—want. The Armed Forces Home Ownership Scheme is a good and very welcome initiative, but it hardly touches the problem. Just 93 personnel benefited from April 2010 to July 2011, so it needs a lot more resourcing. I accept that in a period of austerity that is very difficult; nevertheless, it needs more resource. With the number of personnel returning from Germany, what are their hopes for decent housing either within or without the services?
I read the review body report over the weekend, and from personal experience I know how much care goes into writing this report. The authors do not want to be negative when they write the report or cause problems by overspinning it, but the report brought home to me just how serious the concerns must be. Normally the authors would put it across very calmly and without exaggeration—and I believe there is no exaggeration in this report. So I was alarmed at the overall message in sections of it. One reference on its own would not be too concerning, but reference after reference to morale must lead to concern.
The review body deals with serving personnel, not veterans; the military covenant covers those serving and those who have served, and rightly so. The plight of some veterans is concerning and has been raised in this House over a number of years. It is not getting much better. Last year the Veterans Aid charity provided 19,700 nights of accommodation for former Armed Forces personnel. A disproportionate number of people who live on the streets come from the Armed Forces; we know that from debates that we have had in the House. The link with the poverty that those people live in must be of concern to us all.
The House has a reputation for taking a keen interest in Armed Forces personnel issues. I think that we all recognise the work and dedication that the noble Lord, Lord Astor, has applied to this. Nevertheless, there are still areas of criticism. I will bring together the list of issues of concern that contribute to a lack of morale. There has been pay restraint for two years for 75 per cent of personnel, yet they see in the Budget that people with plenty of money will get tax cuts next year. Job security is disappearing and career prospects have been cut, against a background of high operational tempo and the negative impact on family life.
Sometimes when I raise issues, for example on pensions, I am told that things cannot be changed because the consequences will bounce back on the public sector. I do not accept that as a rational argument. People in the public sector do not go off and give their lives. More than 400 of our men and women have lost their lives in Afghanistan up to March this year. It cannot be said that this is the same kind of job as working in an office or in a local authority. We need to look at this.
I am not asking for special treatment. I hope that on this occasion the Minister will not trot out the usual mantra that it is all the previous Government’s fault. I am asking that we honour the military covenant. It is our moral obligation. We are in serious danger of not meeting that obligation. Perhaps in his reply the Minister will kindly consider committing to remedy what people in the Armed Forces have lost. They face four years of pay restraint—a pay cut in anyone’s language—and a lack of job security and career prospects. We need a renewal of our commitment to the Armed Forces, and we need to carry out that renewal.
Lord Palmer of Childs Hill
My Lords, I thank the noble Baroness, Lady Dean, for initiating this debate, which is very appropriate. In reaching its recommendations, the Armed Forces Pay Review Body, which the noble Baroness mentioned, must have regard to,
“the need to recruit, retain and motivate suitable, able and qualified people taking into account the particular circumstances of Service life”.
I make no excuse for raising in this debate a subject that I raised at each stage of the Armed Forces Bill: Armed Forces housing. Surely the state of availability of such housing must be a major factor in recruitment, retention and motivation. Adequate housing must be one factor to balance against the “high operational tempo” that the Armed Forces pay review report identifies. The report described the lack of choice in accommodation, the variable maintenance performance and also what constitutes family eligibility for accommodation.
In answers given by Ministers to my many previous comments on Armed Forces housing, the proposal was made that in future families will be enabled to own their homes. This was mentioned by the noble Baroness, Lady Dean. I said at the time that I agreed with this as an alternative and as an aspiration but that home ownership should not be a requirement for our forces. The report rightly says that the MoD will need to continue to make a significant provision of good-quality housing for a mobile workforce.
A significant part of the report deals with the levels of rents and the size of any subsidy. My criticism is that the financial and economic requirements laid down in the report are divorced from the state of maintenance and the modernisation of services accommodation. The report states that there are 49,000 service family units in the UK, and that the 39,600 units in England and Wales—80 per cent of the 49,000—are leased from the commercial concern to which the MoD sold the properties. Only 20 per cent are owned by the MoD or by others.
The good news is that in 2010-11, £62.5 million was spent on improvements, with 900 properties being upgraded. The bad news is that there will be a three-year pause in the improvements programme from April 2013. The report shows that the MoD’s procurement strategy was to sell off most of its English and Welsh SFA estate for £1.7 billion in 1986, whereas the rent it has paid for those often badly maintained properties has been a massive £2 billion compared to the money received by the MoD of £1.7 billion. I hope that when my noble friend replies, he will comment on that procurement policy of the Ministry of Defence. Putting my accountant’s rather than my defence hat on, given £1.7 billion with interest of, say, half a billion pounds over the six years, one could have borrowed the £1.7 billion, paid the interest of roughly half a billion, and the MoD would still own the properties having received £2 billion-worth of rent and, at that stage, the rent roughly equalling the cost of repaying the loan and the interest. The MoD, would still own the properties which it has to repair and maintain although they are owned by someone else. I ask my noble friend whether it is right to make a judgment on forces’ housing on purely financial grounds without a strong consideration of the debt we owe our service personnel as contained in the Armed Forces covenant.
I do not want to be all negative, because I take account of the fact that I am part of a Government coalition party. There are many things which we have not highlighted. For instance, there has been a rise in council tax relief to 50 per cent for service personnel overseas, a pupil premium of £250 for every child with a parent in the services and a yearly fund of £3 million to support state schools with service children. I was delighted that the operational allowance was doubled for Armed Forces personnel serving in Afghanistan. The community covenant scheme was launched to strengthen support between civilian communities and the forces with a grant of £30 million and the establishment of a veterans’ information service—they often need it.
Members of the House will know that during various debates I have made a big thing about treatment of veterans and medals. I am pleased that the Armed Forces compensation payments have been ensured as not being required as payments for social care. Improvements to the Army's education programme have also been secured. I was also delighted that during the passage of the Armed Forces Act, thanks to input from many Members of this House, there was movement, with the Minister's help, on medals which had been awarded but were not allowed to be worn. That was a move of great sensibility in which I thank the Minister for taking such a great part. I hope that the commission set up to look into medals and veterans, which seems to be clouded in a measure of obscurity, looks at the whole question of medals, the treatment of veterans and the National Defence Medal itself.
The review is important and I hope that when the Minister replies to comments made by me and the noble Baroness, Lady Dean, we can feel more comfortable on behalf of our valuable Armed Forces personnel.
Lord Ramsbotham
My Lords, like the noble Lord, Lord Palmer, I congratulate the noble Baroness, Lady Dean, on obtaining this debate. It is very important and there is no doubt that word of it will get out to the Armed Forces that we have taken an interest in what, as I know from personal experience when serving, is regarded as the highlight of the year almost on the personnel side: the annual report of the Armed Forces Pay Review Body, of which the noble Baroness was herself a most notable chairman.
I must admit that what struck me when reading the report was its similarity with what I regarded as one of the low points of my career, which was in 1977, when we had to face what became known as the Irishman’s pay rise, when the pay rise we were given was less than the increase in the accommodation and food charges. The result was that a number of commanding officers resigned because they refused to read out to their men what they were told to read—that this was a good pay settlement and that there was also to be a considerable increase in what is now called voluntary outflow. The result of that, thank goodness, was that the incoming Conservative Government had taken note of what was happening. There was an almost immediate pay rise, following the new Government taking over in 1979, which rescued a very dangerous situation. I was struck by the similarities of that situation when I read that there will be rental increases varying from 2.9 per cent for grade 1 to nothing for grade 4, and a 4.9 per cent increase in the daily food charge, when so few people are getting any increase in their pay. That strikes me as being along exactly the same lines as the previous situation. People are not silly and will see it as such.
I was for a time the Adjutant-General, the personnel director, for the Army. I was fortunate with the Armed Forces Pay Review Body of the time. It was extremely well led and it listened. It was encouraging to me that the board always came back and discussed what it had heard from us. There was therefore a partnership between the board and the military. The board recognised that the military welcomed the board, rather than not liking having it around, and particularly welcomed this partnership.
I was therefore intrigued that this AFPRB, which, as the noble Baroness said, has produced a very direct report, is clearly listening. I noted that it pointed out, among other comments, that it had heard,
“significant concerns about the wide-ranging changes in train following the Strategic Defence and Security Review”.
In other words, it was looking widely and looking for causes to report about, not just for individual things. Why is that serious? It is very serious because here we are faced with another two-year pay freeze, and we are told that the achievement of what was set out in the strategic defence review depends on a financial upturn in 2015. Frankly, looking ahead, it does not seem that that financial upturn is likely to provide what people were talking about in the SDSR. Again, soldiers, sailors and airmen are not silly, and they can see this. Coming on top of a freeze, with jam tomorrow being promised to them, and with 2015 not looking like it will provide the jam that was suggested in the SDSR, they are understandably concerned—particularly when they see that against the natural requirement for an upturn in personnel costs, which have been so adequately and fully described by the noble Baroness, the equipment programme is so vast that it is likely to swamp or dominate the personnel side, if we are not careful.
However, two sentences in the report worried me more. They were:
“We were due to undertake a number of scheduled reviews this year. For some reviews, MoD did not submit the evidence we required at the start of the round and we made clear that further evidence was needed”.
Frankly, I find that utterly disgraceful. Despite all the evidence that is there every time you talk to a serviceman, the MoD could not establish the evidence on which the Armed Forces Pay Review Body was due to do its work. No one should know this more than the current Permanent Under-Secretary, with whom I once worked when she headed the Prime Minister’s Social Exclusion Unit. She knows all about the impact on people of the things we have been talking about.
I know that we are very fortunate in having in the Minister someone who listens, cares and will take note. This is not just criticism for criticism’s sake—it is serious alarm that the MoD should be reported on by the organisation to which service men and women look up to more than any other to look after their interests. It should not be accused of not providing the evidence needed.
This leads me to the one recommendation that I would like to put to the Minister, based on the Armed Forces covenant. As the noble Baroness said, the covenant is about the services and their families, and veterans and their families. I am not talking about veterans and their families. The key part, as we discussed during the Armed Forces Bill, is when the Secretary of State reports to Parliament on the covenant. At the moment there is no set date for that, but bearing in mind the importance of the Armed Forces Pay Review Body and its report, and the fact that we in this House—and, I hope, the other House—will take a keen interest in this, I suggest that the timing of the Secretary of State’s report on the Armed Forces covenant should be related to the annual report of the AFPRB so that the Government’s comments on the AFPRB can be included in that covenant report. I believe that that is what service men and women will be concerned about more than any other issue.
Baroness Warwick of Undercliffe
My Lords, I thank my noble friend for introducing this debate and providing us with an opportunity to consider issues of such importance to our Armed Forces personnel. As she has highlighted, our Armed Forces are currently under great pressure. As the report puts it, “operational tempo remains high”. Gruelling tours in Afghanistan, and the Libya campaign, have placed a heavy burden on our services personnel and their families. This summer, there are the added operational demands of providing security for the London 2012 Olympics and the Diamond Jubilee.
These demands are being met with commitment and good will, at a time when our forces are experiencing a two-year pay freeze, cuts to MoD allowances, continuing cost-of-living increases and uncertainties over changes to come from the strategic defence and security review. While the Armed Forces Pay Review Body’s 2012 report notes carefully that recruitment and retention are,
“currently acceptable overall against a reducing manning requirement”,
it also highlights a “difficult year” for services personnel and their families. We know that to be true. While the pay freeze affects the whole of the public sector, it is not the case that all those in the public sector risk their lives when doing their jobs on our behalf.
I support my noble friend in contrasting the discomfort of pressures on the cost of living with the unrelenting day-to-day pressures on those we expect to serve us in battle. Those pressures make it vital that we get right anything that influences the retention of experienced personnel in our Armed Forces.
We have been reminded that, since November last year, the principles of the Armed Forces covenant are now enshrined in law. The covenant promises that the Armed Forces community should not face disadvantage because of its military experience. It sets out what safeguards, rewards and compensation military personnel can expect in return for military service. Fairness on pay and pensions, therefore, lies at the heart of the covenant.
The Government’s decision to implement a pay deal for our Armed Forces amounting to a real-terms cut seems to be at odds with the spirit of the covenant. At the very least, the Government should have allowed the pay review body to make its recommendations before deciding to cap pay rises at 1 per cent from next year. This decision cannot but harm the morale of serving personnel, even while they accept their share of austerity, and the PRB rightly makes the point that this will have an impact on recruitment.
However, my key point today concerns pensions, an issue that was raised by personnel of all ranks during a visit I made to HMS “Dauntless” recently under the auspices of the splendid Armed Forces Parliamentary Scheme. There is real anxiety over the proposed reforms to the Armed Forces pension scheme. The scheme is a highly valued part of the total remuneration package for the services, and a key recruitment and retention tool. Indeed, Armed Forces pensions are hugely important to satisfaction with the forces’ way of life.
Pensions can be taken at 55. Generally, people stay on longer if they believe that they have a good chance of getting promoted. Many do not, and there are several early-departure payment schemes whereby an individual can get some pension on leaving. As Major-General John Moore-Bick, general secretary of the Forces Pension Society, said, the unique nature of military service and employment patterns means that service men and women generally need to draw their Armed Forces pension for longer than they draw their pay. The average length of service is nine years; only 2 per cent of personnel serve to the age of 55; 34 per cent will earn an early-departure payment; and 64 per cent will not serve to the age of 40.
Service men and women rely on these small payments to see them into civilian life. I know this from what they told me on “Dauntless”, and from the experience of a friend whose father came out of the Army and returned to the UK aged 40, with two small children, no job and no house. The EDP housed and fed them for many months until he found work. These payments matter enormously. Therefore it is essential that the new pension scheme being designed by the MoD should protect and preserve the interests of service personnel. Confidence in their pension is crucial to morale—but it was not what I saw on HMS “Dauntless”.
If the Armed Forces fear that they are being stitched up, there is a desperate need to stem the tide of doubt. The commission on public sector pensions, chaired by the noble and learned Lord, Lord Hutton, recommended a switch to options based on average earnings over a career. The noble Lord acknowledged that in the Armed Forces the switch would take longer than the expected target date of 2015, and stressed that Armed Forces schemes should be tailored to the unique requirements and hazards of military careers. He also recommended that accrued rights for those in existing pension schemes should be protected. This was accepted by the Government, yet widespread uncertainty remains. As the review body report noted, this is not least because the Government made clear commitments to other public sector groups but so far have not offered similar clarity on how the commitments will apply to services personnel. Will the Minister tell the Committee whether the MoD and HM Treasury will undertake to resolve any outstanding issues on accrued rights as soon as possible, and end the uncertainty over the protection of earned pension provision?
Rumours spread like wildfire in the services. Good communications are essential. The PRB stresses the importance of clear, jargon-free messages. I would like reassurance from the Minister that the MoD has a communication strategy to ensure that whatever it proposes in this complex area is explained and thus understood at all levels. The PRB asks, too, that in the absence of trade union representation, the MoD will ensure that service men and women are enabled to express concerns about pension changes, and to articulate priorities for future provision.
My final point concerns the importance of the role played by the AFPRB. The review body's independence is vital. It is right that it should question plans for further pay increases and should challenge the MoD to show more flexibility on military wages. Service men and women trust the AFPRB as an independent, honest broker, and rely on it to make their case on pay and remuneration and to keep in mind its remit to take account of the particular circumstances of service life. Those circumstances, and the risks that service men and women take on our behalf, should be kept in mind by us all.
Lord Craig of Radley
My Lords, the House should be most grateful to the noble Baroness, Lady Dean, for bringing this topic to attention. Her experience of the Armed Forces’ Pay Review Body was extensive, both as a member in 1993-94 and as the chair from 1999 to 2005. The Minister and Government should pay most careful attention to her remarks and criticisms, and those of other noble Lords who spoke. I will add my slant to the thrust of their remarks.
Noble Lords will recall that the early 1970s were a time of acute national economic difficulty. A series of government steps such as the pay and prices code and the Counter-Inflation Act 1973 were applied nationwide. Looking at the Government’s strictures on public sector pay, have we not all been here before? However, for the Armed Forces of today, things are not as they were then. Experiences of dealing with the Cold War and the threat from the Soviet Union are far removed from the expensive and extended expeditionary warfare of today, in which large numbers of an ever dwindling cohort of service men and women are now involved, at greater risk of being killed or severely wounded or of being long separated from their families.
This significant change was recognised by the previous Government in their Command Paper, The Nation’s Commitment: Cross-Government Support to our Armed Forces, their Families and Veterans, and by this Government with the passage into law of the Armed Forces Covenant last autumn. That special recognition of the distinctive nature and value to the nation of the Armed Forces receives scant attention in this year’s AFPRB report. The Government’s across-the-board imposition of pay freezes in the public sector treats service personnel once more—as was the practice in the 1970s and 1980s—on a par with the rest of the public sector. However, it was the prime thrust of the Armed Forces Covenant and the previous Government’s White Paper that the services and their families were distinct from the rest of society and merited preferential treatment.
As this year’s AFPRB report makes clear, far from being independent and able to make its recommendations to the Prime Minister, the board has been directed by Ministers to observe the public sector pay restraints. This seems somewhat at odds with the response that I got to a recent Written Question about the Government’s attitude to the AFPRB. I asked the Government whether it was part of their commitment to the military covenant to implement the recommendations of the Armed Forces’ Pay Review Body in full. Their reply stated:
“The Government believe that the recommendations of an independent body such as the Armed Forces Pay Review Body (AFPRB) should constitute an integral part of the process used to determine the pay of the Armed Forces.”—[Official Report, 10/2/12; col. WA 113.]
That hardly describes the process followed this year and is some way, at least, from the assurances given by successive Governments in the past that the independent review body’s recommendations would be accepted unless there were clear and compelling reasons for not doing so. It would have been a more independent review if the body, after taking account of how comparators were faring, had been freer to reflect the increasing pressures of service life. The board stated:
“The Chancellor’s announcement in November 2011 of two further years of public sector pay restraint, with average increases (excluding increments) capped at one per cent, disappointed Service personnel who had made clear their expectation that we”—
the board—
“would return to making recommendations in the normal way following the pay freeze. We emphasised to the Secretary of State during oral evidence that this would be of great concern to our remit group and pressed him on whether there should be special consideration for the Armed Forces”.
I hope that the Minister will say something about that. The Board has perforce danced to the Government’s economic tune.
What gets overlooked in these immediate restrictions on pay and increases in charges is the longer-term impact on an individual’s financial circumstances. The baseline for calculating remuneration increases in future years has been debased and lowered while that for charges has been raised. As we heard from a number of noble Lords, at this sensitive time for morale and motivation in the services, the importance of treating service men and women—as both this Government and the previous one set out in statue and White Paper—is critical. Positive action, not vapid assurances that “we are all in this together”, is required to sustain the calibre of the forces that the nation must have to defend its interests.
Lord Lyell
My Lords, I apologise to the noble Lord, Lord Tunnicliffe, and to other noble Lords, for speaking now. I did not expect to arrive in time to ask the Minister my very brief question. The noble Baroness, Lady Dean, will know of the excellent work that our committee tried to do, I think four years ago, when we went to Colchester. I was detailed to take account of services family accommodation, and what was said to me then was quite chilling, although things seem to have improved considerably.
The Minister does not have to answer this point tonight; he can write to me. In paragraph 4.13, which begins,
“In its evidence, the Ministry told us that”
something was going on, the penultimate line on the page is:
“However, we received a rather more mixed impression on our visits”.
I will not say that that is necessarily what happened when your Lordships’ committee went down to Colchester. The report found that 42 per cent of respondents were satisfied with the quality of maintenance and repairs. I ask the Minister and indeed the rest of the Committee to glance at table A6.4 on page 76, labelled “2011 Armed Forces Continuous Attitude Survey results”. It is encouraging that 57 per cent of respondents declared that they were satisfied with the overall standard of service accommodation, and the figure for satisfaction with value for money was 65 per cent. So, in spite of the fact that a majority was not entirely happy with one aspect of value for money and service, the results were encouraging I hope that my noble friend will be able to give us further encouragement on the issue. I apologise and thank the noble Lord, Lord Tunnicliffe, for his forbearance.
Lord Rosser
I am actually Lord Rosser, not the noble Lord, Lord Tunnicliffe. Anyway, I, too, add my thanks to my noble friend Lady Dean of Thornton-le-Fylde for securing this important debate.
In a Written Ministerial Statement on 13 March this year, the Secretary of State for Defence said that he was pleased to confirm that the Armed Forces Pay Review Body recommendations would be accepted in full. But what he did not remind us of was the fact that his predecessor had previously told the PRB to confine its recommendations to a small overall pay increase to just those earning £21,000 or less, because of the two-year pay freeze imposed across the public sector.
The PRB has made it clear that, following its previous report it had heard a strong message from service personnel about the cumulative impact of the pay freeze, the Ministry of Defence allowance cuts and cost-of-living increases on their everyday lives, which implied a noticeable reduction in real income for many personnel. However, any suggestion that the PRB will soon be able to address the concerns also expressed by service personnel about perceptions of its independence appear to have been dashed.
In his Autumn Statement at the end of November last year, the Chancellor of the Exchequer made clear that the Government intended to continue to hold back pay in the public sector, including the Armed Forces, with awards at an average of 1 per cent for each of the two years following the freeze. The pay review body has told the Secretary of State for Defence that it believes that the Armed Forces would be disappointed by this, which seems a bit like the understatement of the year. It asked the Secretary of State to give it a degree of flexibility. This he has declined to do. Will the Minister confirm that this continues to be the Secretary of State’s position in relation to the next two years, despite service personnel regarding the two-year pay freeze as exceptional and making it clear to the PRB that they wanted it to resume its normal role in 2013?
The Government’s argument is that the Armed Forces’ pay has to be frozen and, after that, held back, because the United Kingdom is, to use their words,
“recovering from the deepest recession in living memory”;
that the overall value of the reward package to Armed Forces personnel remains “generous”, with pension provision being significantly better than in the private sector; and that, because of continued pressure on public finances, public sector pay awards must continue to be severely restricted following the end of the pay freeze.
However, a key reason for the continuing freeze and future heavy restraint on Armed Forces pay is the result of the Government’s economic and financial policy, which has led to the growth rate of the economy, which had been restored when the Government took office in 2010—some 1 per cent growth in GDP in the April-June quarter of that year—vanishing by the end of the year and not reappearing since. Growth provides increased tax revenues for government as well as more jobs and lower unemployment. This Government, in their enthusiasm to cut public expenditure too fast and not pay sufficient regard to the issue of growth, have killed the growth rate in the economy and thus the increased revenues that they inherited. That has made the financial situation more difficult than it could and should have been, and with it has given us at least the intended level of heavy restraint on Armed Forces’ pay over the next two years.
It is also worth mentioning that a continuation of severe pay restraint for our Armed Forces lies ahead at a time when well over 50 per cent of pay increases in the private sector are of at least 3 per cent, and the economic climate that the Government say necessitates their approach to severely restricting the pay of the Armed Forces does not also apparently prevent them from implementing next year a tax cut of 5p in the pound on incomes in excess of £150,000.
It is of course not only pay that is an issue, as my noble friend Lady Dean and others have so powerfully reminded us. The PRB itself referred to the significance of pensions as a top issue for many service personnel. As has already been said, personnel were already concerned about how pension changes might affect them, and particularly about how far a commitment to protect accrued rights would apply and how changes will affect the early-departure provisions in the current pension schemes. Pensions are important to service personnel, not least because they will be dependent on them for rather more years than people in other walks of life, and adverse changes—for example, in the basis of determining pensions and determining increases in pensions in payment—will have a much greater cumulative financial impact on service veterans and widows than on others.
On top of that, there are the uncertainties for personnel because of the redundancy programme at a time when unemployment is high in the external labour market, the continuing pressures arising from the sustained high operational tempo, issues over housing, the long hours worked by many service personnel, and the impact of separation from families. This is all having an effect on morale and motivation, as the Armed Forces Continuous Attitude Survey shows. The PRB said that, in general, levels of satisfaction fell in 2011 compared to the 2010 survey results, with significant falls observed around basic pay, allowances and pension benefits. Morale was less positive, it said, as was satisfaction with service life in general.
The question is: what does the Secretary of State for Defence—and I mean the Secretary of State, not the Minister—intend to do about this? Is he able to say anything about what will happen when the financial position improves? The holding back of pay and adverse changes in allowances and pensions will be permanent, unlike the present financial situation, unless the Minister can give an undertaking that the position will be looked at again as the financial situation improves, with a view to reversing the impact of the adverse effect of current policy on Armed Forces’ pay, allowances and pensions. Since the Government acknowledge the unique nature of military life, including the threat of loss of life or life-changing injuries, and we now have the military covenant enshrined in statute, will the Minister back up the Government’s view of service life and conditions by giving such an undertaking as I am asking about?
The Ministry of Defence is obviously determined to save money. One hopes that the Minister will now be equally enthusiastic over saving morale and motivation in our Armed Forces, to which the pay review body has drawn attention.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, I should like to start by congratulating the noble Baroness, Lady Dean, on securing this important debate. This is a subject about which she is well informed, having chaired the Armed Forces’ Pay Review Body until 2004, as other noble Lords and noble and gallant Lords said. As a result of her important work, service men and women trust the AFPRB. As the noble Baroness, Lady Warwick, said, that is very much down to the important work of the noble Baroness, Lady Dean. She has influenced Governments—not just this Government but the previous Government—and they have listened to her.
She is well aware of the independence of the pay review body. It retains a fundamental independent role in ensuring that the remuneration package of our service personnel is sufficient to recruit and retain the right people. We value its work, as do the Armed Forces, and the House can be assured that there are no plans to change this important principle.
The 41st report that noble Lords mentioned was published in March this year, and I am pleased to say that the recommendations have been agreed in full, with many of the changes taking effect from 1 April this year. However, we cannot ignore the financial crisis and the need to exercise restraint, and that is why it is necessary to freeze pay. None the less, pay for those earning less that £21,000 has increased, and it is important that we ensure that those who are experiencing the greatest challenges receive additional money. For those deployed for an average of six months, individuals will receive the tax-free operational allowance to the value of £5,280, and, as my right honourable friend the Chancellor announced in his Budget, council tax relief has doubled to some £600.
With Afghanistan in mind, the deployed welfare package has been increased. However, our forces are deployed not just to Afghanistan, and the noble Baroness mentioned in the title of this debate the operational tempo. It is true that some service personnel are now on a third or even a fourth tour, and it is testament to the work of the strategic defence and security review that we had the required capabilities to achieve what we did in support of the Libyan uprising. The increased separation from loved ones has been recognised and, as recommended by the pay review body, the qualifying period between increases in levels of the longer separation allowance has been reduced from 240 to 180 days. This means that progression through the 14 levels, ranging from £6.69 to £28.24 for each day separated, is attained more quickly.
We do understand that prolonged periods away from home impact on morale—an important point made by the noble Baroness. We do all we can to minimise this and use harmony guidelines to allow for operational rest. However, there will always be occasions where specialist skills are needed, often at short notice. This may mean that for some, harmony guidelines cannot be prescriptively followed, but we will make every effort to return the individual to their unit as soon as possible. The noble Baroness, Lady Dean, discussed morale at length. We recognise that this is a very difficult time for Armed Forces personnel and their families. Some tough policy decisions that may have had an effect on morale have had to be made as a necessary part of the department’s contribution to the overall government programme to reduce the United Kingdom’s deficit.
As my right honourable friend the Prime Minister has repeatedly set out, our combat troops will withdraw from Afghanistan by the end of 2014. Between now and then we will be able to reduce our numbers. This process has already begun. However, there cannot be some sort of cliff edge in 2014 when all remaining troops come out at once. The rate at which troops can be reduced will depend on transition to Afghan control in the different parts of Afghanistan. Although we will maintain a presence for some time after 2014, we would expect the frequency of deployment to reduce.
Armed Forces pay is frozen, as is the case for all public sector workers, with the exception of those earning £21,000 or less, to whom we have given £250 in each of the last two years of the pay freeze. Pay has also increased incrementally each year for those who are not at the top of their pay scale—some 75 per cent of personnel—a protection introduced for the Armed Forces to ensure that they were not disadvantaged by their lack of contractual entitlement. This is in accordance with the principles of the Armed Forces covenant and has meant that most service personnel will have received an increase in pay during the freeze period.
Increase in pay for the next two years will be limited to an average of 1 per cent each year. The pay review body has already begun its programme of visits to service personnel in the United Kingdom and overseas to gauge their views on pay and related issues. We always welcome the advice of the pay review body and, as we did this year, we will give due consideration to its recommendations.
The noble Baroness, Lady Warwick, mentioned pensions—in particular, the publication of the final report of the Independent Public Service Pensions Commission of the noble Lord, Lord Hutton, on 10 March last year, which resulted in a number of recommendations that were accepted as a basis for discussion on the design of new public service pension schemes to be introduced from April 2015. My department has now commenced its consultation process with service personnel and is conducting briefings throughout the service community. The consultation period ends on 20 June. However—I address the question raised by the noble Baroness, Lady Warwick—personnel have now been assured that any changes to the scheme will not affect the value of pension benefits that they earn up to 1 April 2015, and that those aged 45 or over on 1 April this year will see no change to the amount of pension that they will receive or the time at which it can be drawn.
My noble friend Lord Palmer mentioned accommodation, a subject in which I know my noble friend and all other noble Lords who have spoken take a close interest and which we discussed in the House on 1 March. We continue to examine accommodation provision but, in terms of making improvements, the Chancellor has made an additional £100 million available for service accommodation from the financial year 2013-14. It will be used by the MoD for repairing and refurbishing 650 family homes and buying a further 25.
While it is necessary to increase the daily charge in respect of accommodation, these increases range from a modest 2p per day through to 76p for accommodation in the highest standard. Increases are in line with the rental component of the retail prices index and are broadly comparable with the costs faced by civilians, but with a discount that reflects the disadvantages of living in service accommodation. This means that, for a typical three-bedroom property in the highest standard for occupation, occupants of other ranks pay some £306 per month.
The very basis of the covenant is to tackle disadvantage incurred as a result of service and to consider special treatment where appropriate. The covenant and the pay review body are not related. However, we ensure that the pay review body is kept informed of our commitments and changes.
In the two minutes left, I will very briefly address questions. The noble Baroness, Lady Dean, asked about troops coming back from Germany. The Defence Infrastructure Organisation is currently considering the likely housing requirements of those returning from overseas, including Germany.
My noble friend Lord Palmer asked about the three-year pause in the accommodation improvement programme from April 2013. As part of the MoD’s work to reduce the funding gap and balance defence priorities, from April 2013 there will be a three-year pause in the programme to upgrade lower-quality SFA homes. While this is regrettable, 96 per cent of service family accommodation properties and 42 per cent of single living accommodation bed spaces are now in the top two condition standards.
My noble friend also asked about medals. We worked constructively with the noble and gallant Lord, Lord Craig, on the issue of the PJM, and I congratulate the noble and gallant Lord on the resolute line that he took on that issue. The coalition Government have agreed to a fresh review of medals, and I hope that further details will be announced soon.
The noble Lord, Lord Ramsbotham, mentioned that my department was late in providing evidence to the pay review body. I was not aware of this, and I give him an undertaking that I shall look into it. I will write to him and copy in all other noble Lords who have spoken today.
The noble Lord also mentioned the timing of the Secretary of State’s report to Parliament. The covenant report will be produced each year and will consider the comments made by the PRB. I will pass on the noble Lord’s recommendation about the timing.
My noble friend Lord Lyell asked me to write on the issue of service families’ accommodation, particularly in Colchester. I will look into the issue and write to him and send copies to other noble Lords.
The noble Lord, Lord Rosser, asked me to give an assurance that the financial situation of Armed Forces personnel would be looked at when the financial position improves. That is, of course, the case; it will be looked at.
I hope that I have answered most questions but, if I have not, I undertake to write to all noble Lords with answers to questions that I have not answered. This has been an interesting debate and I am grateful for noble Lords’ contributions. The Committee can be assured that we will continue to listen very carefully to the pay review body, and we greatly value its work in support of service personnel and their families.
The Deputy Chairman of Committees (Baroness Fookes)
My Lords, that completes the business before the Grand Committee today. The Committee stands adjourned.
House of Lords
Deaths of Members
The Lord Speaker (Baroness D'Souza)
My Lords, I regret to inform the House of the deaths of the noble Lord, Lord Brett, on 29 March and of the noble Lord, Lord Ashley of Stoke, on 20 April. On behalf of the House, I extend our deepest condolences to the families and friends of the noble Lords.
Finance: Equity Markets
Viscount Hanworth
To ask Her Majesty’s Government what assessment they have made of the findings of the Kay review of United Kingdom equity markets and long-term decision-making; and whether they intend to take any consequential action.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Kay review’s interim report, published in February, presented a discussion on a wide range of issues highlighted by respondents to the review’s call for evidence. It did not include any firm conclusions or recommendations. We expect Professor Kay to make the recommendations in his final report in the summer and it would not be appropriate for the Government to prejudice Professor Kay’s findings ahead of the final report.
Viscount Hanworth
I am surprised by the Minister’s appraisal of the Kay report. However, will she concede that the rules of corporate government in the UK are in need of drastic revision? Does she not recognise the virtue of restricting the voting rights to shareholders who have long-term interests in companies in which they have invested, and is it not clear to her that the advisory role of shareholders on remuneration gives them insufficient powers to constrain the exorbitant executive awards that we have seen in recent times?
Baroness Wilcox
My Lords, as the noble Viscount will know, the review forms a key part of the action taken following the department’s A Long-Term Focus for Corporate Britain: A Call for Evidence, which was published in October 2010. We are exploring the issues of economic short-termism in the UK alongside executive pay and narrative reporting. Of course we are concerned. We have put forward this independent investigation by Professor Kay so that the very points that the noble Lord has mentioned will be addressed.
Lord Myners
My Lords, on 3 November in the other place, the Leader of the House, the right honourable Sir George Young, said that the Government were considering methods by which shareholders could become members of board remuneration committees. In this House on 30 January, the noble Baroness said that she would welcome employee representatives on board committees. Do those continue to be the Government’s positions and, if so, when will we see some action?
Baroness Wilcox
On the Government’s view on shareholder/worker representation on company boards and committees, we decided not to include such proposals in the packet of measures for greater transparency. However, Professor Kay’s independent report will inform all the Government’s judgments from this point.
Lord Razzall
My Lords, although I totally respect the view of the noble Baroness on premature discussion of the Kay report, does she not agree—a point with which I am sure the previous noble Lord would agree—that if markets are to take a longer-term view of investments, the fund management industry needs to change its method of remuneration so that fund managers are not rewarded by the short-term performance of the companies in which they invest?
Baroness Wilcox
My noble friend is right. We are looking at how the long-term proposals can be best served. Short-termism can be very advantageous, but it can also be dangerous in the long term, and we are only too delighted to support him in his view.
Baroness Anelay of St Johns
My Lords, the noble Lord, Lord Peston, will realise that there have already been two opening questions from the Labour Benches. It is now only fair that we go to the Conservatives.
Lord Naseby
My Lords, does my noble friend not recognise—I am sure that she does—that in times of low interest rates investors look for short-term and long-term reports, and that they therefore as a whole look forward to the report from Professor Kay and recognise that very little was done by the previous Government to address this issue?
Baroness Wilcox
My noble friend puts it extremely well. Of course short-termism and long-term planning go together. These are difficult times. We need to do the very best that we can. It is worth remembering that the United Kingdom has a world-leading corporate governance and company law regime. The World Bank rates the United Kingdom as the best place in Europe and the fifth best in the world for doing business. It is vital that the UK continues to be seen as world-leading in corporate governance.
Lord Peston
I did not give way because I was under the impression that the coalition was still part of the Government. Whatever the state of play is on that side of the House, is not the best performing economy in Europe Germany, to take an obvious example? Short-termism is frowned upon in Germany, where the shareholders are committed to the firms in which they hold shares in the longer term, as are the workers. We advised the Germans immediately after we won the Second World War. They ended up rich and we ended up a comparative economic disaster. Is it not time the Government stopped holding back from taking a view on this and actually started, as my noble friend Lord Myners said, to do something?
Baroness Wilcox
I am interested to hear the noble Lord’s question. In the more than a decade in which his party was in power, it did absolutely nothing to advance from the position after the Second World War that he quotes.
Lord Young of Norwood Green
Either I was too slow or someone else was too hasty. I am advised that the Kay report does not address the question of employee shareholders. Does that mean that the Government will reconsider their previous statements on employee shareholders?
Baroness Wilcox
As I have said and as I am happy to repeat, this is an independent report by Professor Kay. He is able to say what he likes on the whole of this subject and we look forward to what he recommends.
The Earl of Erroll
The challenge is how one incentivises people for longer-term thinking. The trouble is that if the quickest way of turning a fast profit in order to maximise one’s share options is to axe longer-term research and development, there will be no benefit to Britain in the longer term. One sees that happening too often. There are two sorts of shareholders and unfortunately the bigger lot are in there for the short term as well for investment purposes.
Baroness Wilcox
The noble Earl is quite right. We sell ourselves short if do not invest in the future and do not look at R&D. It is an important part of anyone’s balance sheets, certainly in the FTSE 100, and I am happy to agree with him.
Social Tourism
Baroness Rendell of Babergh
To ask Her Majesty’s Government whether they will incorporate social tourism policies, such as the provision of holidays by the Family Holiday Association for people living on a low income, in future tourism strategies.
Baroness Rawlings
My Lords, the Government support the work carried out by organisations such as the Family Holiday Association which provides holidays for families who would not normally be able to afford a break away from home, but we do not hold the view that holidays are a right. We do, however, keep an open mind about future tourism strategies. Our current priority is to encourage the potential that tourism gives to help the growth of our economy.
Baroness Rendell of Babergh
My Lords, I thank the Minister for her Answer. Is she aware that there are more than 2 million families in the United Kingdom—about 7 million people—who never enjoy a holiday and who will probably never have one in their whole lives? Is she also aware that while social tourism has never had official recognition or been integrated into tourism policy in this country, in the European Union, several countries integrate it—notably France and Spain, but also Portugal, Greece, Germany and Italy.
Baroness Rawlings
My Lords, the noble Baroness, Lady Rendell, asked a similar Question in February 2010. I know she is a redoubtable campaigner on social tourism and is patron of the Family Holiday Association. The Answer, which was very succinct, said that,
“the Government understand the value of access to leisure and tourism activities”—
and we are aware of the 2 million who never have holidays. It continued:
“By providing support for those who need it most, we are committed to a society where everyone can engage in leisure activities, including holidays, if they wish. A good example is our policy of free admission to many national museums and galleries”.—[Official Report, 8/2/10; col. 478.]
The noble Baroness asked about Europe. The Governments of some European countries, notably France and Belgium, take an interventionist approach to social tourism by directly funding or subsidising people to take holidays. Such countries take the view that holidays are a right.
Baroness Massey of Darwen
My Lords, would the Government consider setting up a working group to consider the social and economic benefits of social tourism?
Baroness Rawlings
I know that the noble Baroness, Lady Massey, was on the all-party group on social tourism. The Government were looking at this, but have not pursued it further. We are keeping an open mind and are aware of the European Calypso programme.
Lord Lee of Trafford
My Lords, I declare an interest as chairman of the Association of Leading Visitor Attractions and of the all-party tourism group. The proposed tax changes on air passenger duty, philanthropic giving to our great museums and galleries, restoration work for our major cathedrals, churches and historic properties and on static caravans all potentially have a negative impact on our very important tourism industry. Given that DCMS is a sponsoring ministry for tourism, could my noble friend tell the House whether it had any discussions before the implementation of the ideas of these tax changes?
Baroness Rawlings
The noble Lord asks a very relevant question. Regarding the tax changes, they are still very much in discussion. We are well aware that they have an effect on tourism and on many of the museums and galleries and all the charities that are involved with this. This is partly covered by the Treasury, but DCMS is very much aware of all this.
Lord Foulkes of Cumnock
When 2 million people do not get a holiday at all and those who are in the top tax bracket are now getting £45,000 a year extra and will be able to go on more skiing holidays and Mediterranean holidays, how can we all be in it together? Will the noble Baroness not listen for once to what is being said by knowledgeable people in this House, take it away and do something about it?
Baroness Rawlings
Social tourism is for the less well off. The Government are involved with the Family Fund, a registered charity covering the whole of the UK and mainly funded by the national Governments of England, Northern Ireland, Scotland and Wales. The funding from all four Governments amounted to £35 million, and included £27 million from England.
Baroness Jones of Whitchurch
I am sorry, we are being a bit slow on this side. Does the Minister accept the educational benefits of children and families travelling outside their own confined communities? Does she recognise the role that that might play in raising the aspirations of young people? Will she agree to talk to her ministerial colleagues in the Department for Education about the contribution that they can play in facilitating holidays for those too poor to afford a family break?
Baroness Rawlings
The noble Baroness raises a very good point. Such travel does raise the aspirations of children. Through our changes to the education and welfare system, we hope to overcome barriers to social mobility by giving families the power and resources to be able to go on holiday if they choose.
Immigration: Eurostar
(12 years, 6 months ago)
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Lord Berkeley
To ask Her Majesty’s Government what action they are taking to enable Eurostar to resume regular services between Brussels and Lille while avoiding any delays caused by immigration control being conducted at St Pancras.
The Minister of State, Home Office (Lord Henley)
My Lords, there has been no suspension of regular Eurostar services between Brussels and London which also stop at Lille. Following misuse of Brussels to Lille tickets by those seeking to avoid UK border checks, Eurostar has restricted the sale of tickets to casual travellers to three trains a day. Only these services are subject to routine immigration checks at St Pancras. We seek to keep delays to a minimum.
Lord Berkeley
I am grateful to the noble Lord for his response but is he aware that the consequence of all this is that passengers coming into the UK from Brussels, Lille, Disneyland Paris and anywhere except Paris have to queue to get through immigration for between half an hour and one hour at St Pancras? I have queued twice and I saw lots of families travelling from Disneyland Paris, of whom probably 99 per cent were British, having to queue for an hour, which is rather hard on them. Why cannot the immigration service process passports on the train after the passengers have left Lille, as it used to?
Lord Henley
My Lords, as the noble Lord knows, the ideal would be to process the passports at Brussels, which we try to do for seven of the 10 or 11 trains a day that go from there, stopping at Lille, that do not allow people to buy casual tickets. The noble Lord knows of the so-called Lille loophole, which we want to plug. As he has said, one solution would be to have staff on the train. We believe that that would be unnecessarily expensive and would not be cost-effective. We are talking about only three trains a day being affected by the Lille loophole. We think that we can continue to negotiate with the Brussels authorities to get them to allow us to do all the checks on all the trains, including the three on which casual tickets are allowed to be bought, at Brussels as would be appropriate.
Baroness Hamwee
My Lords, has the Minister been able to visit British Transport Police operations at St Pancras to look at what happens in relation to child trafficking? In a recent debate, he indicated that he would like to do so. My noble friend Lady Doocey pointed out that a number of simple steps could be taken to protect unaccompanied children coming into this country, including checks on the identity of such children and on the people collecting them, and a dedicated space on the train. Has he been able to follow any of those up?
Lord Henley
My Lords, I have not yet been able to visit St Pancras but I certainly hope to do so. My noble friend’s question is going slightly wide of the Question on the Order Paper, but it is valuable in that it points to the need not only to maintain appropriate security to provide the proper checks and safeguards for those who potentially are being child trafficked but to be able to do that in as user-friendly a manner as possible so that the complaints to which the noble Lord, Lord Berkeley, referred do not happen as well.
Baroness Goudie
Following on from my noble friend’s question, just before the Recess when we had a debate on human trafficking relating to Eurostar, I asked the Minister whether the Government would look at negotiating with the Eurostar authorities and the company which runs it to have the same arrangements as we have with airlines. Airlines are fined for bringing through children and adults who are to be human trafficked. The Minister promised to look at this and we have not yet received a reply.
Lord Henley
My Lords, I will make sure that a reply comes to the noble Baroness in due course. Obviously, we continue to negotiate on these matters with Eurostar. I should point out that Eurostar is a private company and we cannot order it to close the so-called Lille loophole with which we are trying to deal. Certainly, we will try to get to other matters and will negotiate accordingly.
Lord Bradshaw
Will the Minister turn his mind to the situation developing as regards trains from Germany which stop at several places before going into the tunnel? The same problem that applies to Lille will apply to a lot of other stations on the continent. Better arrangements need to be made.
Lord Henley
I am very grateful to my noble friend for raising that point. I understand that the German railways are already planning this and that there might be services from late 2015, so we have some time. He is right to point to the problems because of the confines of the concourse at St Pancras and other places, and the need to make sure that we can sort this matter out in the country of origin. That is relatively easy when you are talking about Brussels, Lille and London. It is considerably harder in the case of trains coming from a number of different stations in Germany. At that point different options will have to be looked at, but we have at least three years to do so.
Lord Grenfell
My Lords, I declare an interest, having been through the tunnel over 1,500 times, getting to work here and going home again, and indeed having lived to tell the tale. The Minister said that the Government would be trying to set up a system whereby the border agency’s immigration controls would be conducted in Brussels. He must be aware that this system works extremely well in Paris; it saves a lot of time and there is absolutely no delay arriving in St Pancras. I hope that he will look into this and tell us what the problem is. They are very friendly people. This morning when I came through I was asked by the immigration officer what I was planning to do with the House of Lords Reform Bill. I declined to share my views with him, in the same way that at the moment I decline to share my views with the House on that question.
Lord Henley
I commend the noble Lord on his diligence in attending this House and the frequency with which he has come through the tunnel. The system in Brussels works pretty well for most trains, in that most people go through the appropriate border security checks. The problem is that a number of people use Brussels to Lille as a commuter line rather than what it was originally designed for, a Brussels to London line. Those people are exempted from going through passport checks by the Brussels authorities and we cannot order them so to do; that is under EU rules. We therefore had to seek with Eurostar some solution to that problem, which does not arise in the case of those coming from Paris. There is similarly not a problem coming from London because, as the noble Lord knows, we do not allow people to use London to Ashford as a commuter route. It is the use of Brussels to Lille as a commuter route on that service that causes the problem.
Lord Davies of Oldham
My Lords, I am a little disturbed at the Minister’s complacency that we have got three years to sort this out. After all, the Government have had two years to sort out a range of problems, and the problems are getting worse rather than better. It is a very serious concern to all of us that a service that we are all proud of, the Channel Tunnel service, may in fact prove to be less advantageous to the travelling public in future because of these difficulties over passport checks. I hear what he says about additional expense, but if the expense is not borne by the service, it is borne by the travelling passenger having to wait for hours at the receiving station, St Pancras. Can he look at this issue with some urgency and produce a solution to it?
Lord Henley
I commend the noble Lord on the urgency with which he got to his feet, along with his colleagues on the opposition Front Bench. They have obviously been well rested by their three weeks off.
We are not complacent on this issue. All I am saying is that there is a serious problem. Part of the problem relates to the design of St Pancras and getting the passport checks done there. We would therefore like to have the checks done at the point of exit. Obviously that problem is going to be made more difficult once one has trains coming in from Germany and other places. At that point, we might have to look again at having checks done on the trains. As I said—although the noble Lord has not been that speedy—we have three years to do this because we are not likely to see trains coming in from Germany until the end of 2015.
Workers’ Memorial Day
(12 years, 6 months ago)
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Lord McKenzie of Luton
To ask Her Majesty’s Government what plans they have to mark Workers’ Memorial Day on 28 April.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, the Government extend their sympathy to all those for whom Workers’ Memorial Day is especially poignant. It is right to commemorate those killed, injured or made ill through work. The day also highlights the importance of good health and safety in the workplace. The Government continue to recognise Workers’ Memorial Day and consider that families and friends of those affected, and organisations representing workers, are best placed to decide how the day should be commemorated.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply, which I take to be personally sympathetic to Workers’ Memorial Day—which, as he said, is about remembering those who have been damaged by health and safety failures, and renewing the case for good health and safety provision. The Minister will have been availed of the report of Professor Löfstedt, which the Government commissioned. It states that,
“the vast majority of employers and employer organisations acknowledged the importance of health and safety regulation in their responses to the call for evidence and felt that, in general, the regulations were broadly fit for purpose. During the course of my review, I have neither seen nor heard any evidence to suggest that there is a case for radically altering or stripping back current health and safety regulation”.
Does the Minister agree with that? If he does, will he encourage the Prime Minister to refrain from such unhelpful utterances as “killing off the monster of health and safety”, and to act responsibly in these matters?
Lord Freud
My Lords, we are very supportive of the report by Professor Löfstedt. He made the point in the report that legislation,
“can contribute to the confusion, through its overall structure, a lack of clarity, or apparent duplication in some areas”.
That is why we are driving through reforms designed to make the system easy to understand, easy to administer and easy to enforce.
Lord Alton of Liverpool
My Lords, does the Minister agree that one of the cruellest industrial diseases is the asbestos-related lung cancer mesothelioma, which can strike up to 40 years after exposure and has thus far claimed the lives of 30,000 workers? Is not one of the best things that the Government can do to support such workers is to respond positively to the all-party calls made in both Houses for mesothelioma victims not to have to face surrendering up to 25 per cent of their much-needed compensation to pay legal costs—compensation which they need in facing the last nine months to one year of their lives?
Lord Freud
I am spending considerable time on mesothelioma currently and I hope to sort out the real problem, which is the large number of people suffering from the illness who are getting no compensation at all because they cannot trace who was insuring them. I hope to see some real progress in this area—looking at the whole area of mesothelioma, both those who have been traced and those who are untraced—and to report back on that in the not too distant future, certainly before the summer.
Lord Forsyth of Drumlean
My Lords, when I was responsible for health and safety as a Minister I asked to see all the regulations applying to small businesses. There was a three-month delay, and when I asked why, I was told that the Health and Safety Executive would have to hire a pantechnicon to send them round. Is the Prime Minister not absolutely right to emphasise the importance of the culture of health and safety in the workplace, rather than masses of regulations that people cannot possibly be expected to absorb and comprehend?
Lord Freud
Yes, my Lords, the Prime Minister is right: legislation must be comprehensible to people if it is to be useful. That process is currently under way, and we aim to reduce the legislation by up to half by 2014. We are confident that that can be done in a way that actually enhances the effectiveness of our health and safety regime.
Baroness Turner of Camden
My Lords, I thank the Minister for his sympathetic response. However, is he not aware that there is one organisation which represents organised employees in this country that has a system of training and of safety representatives that is well worth considering? I am, of course, talking about the TUC. Does he not think it a good idea to have some consultation with the TUC on these matters?
Lord Freud
My Lords, I am pleased to say that alongside my colleague Chris Grayling I wrote to the general-secretary of the TUC on the matter of Workers’ Memorial Day. We are in regular contact with him on a large number of matters, and this is one of them.
Lord Wigley
My Lords, on the question of mesothelioma, to which the Minister referred a moment ago, can he indicate whether the ideas which he will be working on over the coming period will require legislation? If so, why are the Government not taking advantage of the legislation that is currently going through this House?
Lord Freud
My Lords, it is possible, depending on the outcome, that we will need primary legislation on mesothelioma. However these things take time and we will have to structure any solution in consultation with the various stakeholders in order to get there. There is not time at the moment to attach any relevant legislation quite as rapidly as the noble Lord suggests.
Lord German
My Lords, Professor Löftstedt said in his report that there needs to be general community support as regards an understanding of risk. I therefore welcome the Government’s establishment of the independent challenge committee which allows the public to make a challenge when they see a risk that they believe is not appropriate. Can the Minister tell us how that body will be independent given that its chair is also the chair of the HSE, and whether it will not require a wider reporting mechanism than that currently envisaged?
Lord Freud
My Lords, my noble friend is absolutely right in the sense that it is often not so much what the regulation says as the way in which it is applied and used, and often those who are most shocked by how the regulations are applied are those in the HSE. This is a really valuable element of our society which has led to our having the lowest level of fatalities from workplace accidents in Europe. It is important that we concentrate this effort on where it really does save people’s lives. I think that the HSE does have an interest in making sure that that happens.
House of Lords Reform
(12 years, 6 months ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, before formally moving the Business of the House Motion on the Order Paper, I should like to make a short business Statement about forthcoming business.
The whole House is now well aware that the Joint Committee on the draft House of Lords Reform Bill published its long-awaited report this morning. The Government are not only deeply grateful to the committee but would like to single out its chairman, the noble Lord, Lord Richard, for the time, effort and expertise that have gone into the preparation of this report. I know that the Deputy Prime Minister and his ministerial colleagues will be considering the report with great care before proposing a Bill to the Cabinet.
I am equally conscious that noble Lords around the House are eager to debate the report at the earliest opportunity. I have considered this with the usual channels and, although there will be plenty of opportunities to debate the report from the Joint Committee, subject to the completion of our legislative business by the end of Thursday of this week, I propose that we should start with a debate on the Joint Committee’s report, led by the noble Lord, Lord Richard, on Monday of next week.
I should add that should the Queen’s Speech on 9 May include a Bill to reform the composition of this House, there will be a further opportunity to debate the Government’s proposals in light of the Joint Committee’s report in the course of the debate on the humble Address—that is to say, in about a fortnight’s time. These two imminent occasions for debate may well be followed by others over the course of the next Session, for which I know a few noble Lords may be limbering up. I hope that we will manage to complete our legislative business by Thursday so I look forward to next week’s debate. In the mean time, I take the opportunity of reminding the House that copies of the Joint Committee’s report are available in the Printed Paper Office and, most importantly, on the Parliament website.
Baroness Royall of Blaisdon
My Lords, I am grateful to the noble Lord the Leader for his business Statement and I welcome the fact that the Leader, with the agreement of the usual channels, is hoping to make time available for a debate on the report of the Joint Committee on the Government’s draft House of Lords Reform Bill. I am sure that the debate will also cover the alternative report, which was published today. However, I am sorry that the Leader of the House has chosen not to make a fuller Statement on the Joint Committee report today.
Before the Recess, I urged the Government both to make time for a debate on further reform of your Lordships’ House, which the noble Lord has done, and to recognise the fact that Members of your Lordships’ House would wish today, as the House returns from a prolonged Recess, to have an initial discussion on these issues. I recognise the fact that we will have many debates on this issue in the House in the weeks and months to come.
I think that this House, and indeed many beyond the House, will find it hard to understand why all sorts of people and organisations have been debating these matters today, and yet, apart from the noble Lord’s brief business Statement, this House is not afforded an opportunity today to speak further about the issue. Indeed, the Leader was on “The Daily Politics” show and in recent days we have heard many things about a revolt by Conservative MPs on the 1922 Committee. We have seen various reports of a revolt being joined first by MPs, then by parliamentary Private Secretaries—many things have been happening.
We have been told that the Deputy Prime Minister is saying that he “won’t go to war” over Lords reform and the Prime Minister spoke of the issue on the “Today” programme this morning. We have been told all this and more, but we do not have an opportunity to discuss these things today in this House. Of course, we will all need time to examine and consider the report of the Joint Committee and the alternative report of the minority group of the Joint Committee. I have read both reports and think that they are excellent and extremely important contributions to the debate on the future of your Lordships’ House. I thank the noble Lord, Lord Richard, and all those involved, for their hard work and commitment.
I urge all Members of this House and people beyond to read and study both reports closely because we need to get reform right, as the noble Baroness, Lady Shephard of Northwold, said today. We on these Benches regret that there was not a more formal Statement on these issues today, but we look forward to the debate in a week’s time.
Lord Laming
My Lords, I am sure that all members of the Cross-Bench group wish to pay tribute to the noble Lord, Lord Richard, and all the members of his team—the committee that did this study—and indeed to the work of all the members in producing the extremely helpful alternative report. One waits for one report and two come along. This is a subject of immense importance to the citizens of our society. We owe it to them to make sure that Parliament is as effective as possible in holding the Executive to account and in scrutinising future legislation.
I am sure that members of the Cross-Bench group, who I have not had the chance to consult on this, are grateful to the usual channels and to the Leader for his Statement because we think that the report should be considered very carefully. I am sure that the arrangements for a debate next Monday will be welcomed by Cross-Benchers.
Lord Tyler
My Lords, I ask my noble friend whether it is the intention of the usual channels to permit the rising time for the House on Monday to be rather later than usual so that we can demonstrate that we in your Lordships’ House are very good at scrutiny. In doing so, perhaps I may also say how much as a member of the committee I appreciated the chairmanship of the noble Lord, Lord Richard. However, it is a very big report and if all of us who have different views, even among and within the parties, have only a few seconds to make our point on Monday I feel this would not be doing due deference or paying proper regard to the comprehensive report of the noble Lord. Therefore, can my noble friend let us please go to a later time on Monday evening. I feel sure there will be great enthusiasm in your Lordship’s House to go through the night, if necessary, on this issue.
Lord Grocott
My Lords, in welcoming as I certainly do the fact that the usual channels have set aside a day for this report, I ask for one further service to the House from the Leader of the House. He has already referred to the fact that there are actually two reports. There is an alternative view in an alternative report signed by 12 of the 25 members of the committee. If my maths is correct that means that if, you exclude the chairman, that is half of the committee—in my personal opinion, the best half of the committee. Can the Leader of the House ensure that the alternative report, as well as the full report, is made available in the Printed Paper Office to all Members? I do not think that facility is available at present.
Lord Hughes of Woodside
Can the Leader of the House confirm that the House is to prorogue on Monday?
Lord Foulkes of Cumnock
My Lords, may I just ask another question? While this is a matter of great importance, there are other matters. Will the Leader of the House confirm that it will be a full day’s sitting on Monday and that the debate will be preceded by Oral Questions and that if there are any urgent matters that Members wish to raise they can raise them under the normal procedures of the House?
Lord Forsyth of Drumlean
May I ask my noble friend a question, although it may be a naive question? Given that we had a manifesto commitment to seek a consensus on House of Lords reform and given that the Joint Committee is split completely down the middle, is that not the end of the matter?
Lord West of Spithead
My Lords, on St George’s day, and falling back on the line that I am very much a simple sailor, I am confused by the fact that half the committee effectively has an alternative view. I agree with some of the statements by other noble Lords that it seems to make a nonsense of this process. I am also very concerned, as I look in a simple way at next week, that there seems to be very little time in which to have a sensible debate about this issue.
Lord Strathclyde
My Lords, I am not at all surprised by any of the interventions that have been raised today. I am sorry that the noble Baroness is disappointed that there should not be a Statement. We have had the report for only a few hours and, after all, we are House that likes to have debates when we are informed. I thought that it would be better to give all noble Lords the opportunity to read the report before debating it next week.
I am at pains to suggest that next week will not be the only opportunity to discuss this report, or indeed the whole issue of reform. I am not one of those who wish to leak the contents of the Queen’s Speech, so I will not pre-empt it, but if a Bill on this subject were to be announced there would be plenty of time during the course of the Motion for an humble Address to debate it further. That will be in two weeks’ time. Between now and the Summer Recess, I am sure that there will be other opportunities if that is required. All that is to say that Members of the House do not need to rush to put their names down next Monday. The House will not prorogue next Monday. It will sit at the normal time for the normal business to be taken in the normal way.
As for the remarks of the noble Lord, Lord Grocott, I think that there were 26 members of the Joint Committee.
Lord Strathclyde
It may be that one never turned up, but he was still a member of the committee. I am sure that the alternative report will be discussed and debated, but I am afraid that I cannot commit the Printed Paper Office to publishing it. After all, it is a privately commissioned report, not a parliamentary report. I am sure that those who commissioned and wrote it will find it very easy to disseminate it themselves. Given the authority that they possess, I would be amazed if they were not able to do so.
As for what was said by my noble friend Lord Tyler, I have not considered the rising time of the debate on the report. Of course, much will depend on how many noble Lords wish to put down their names to speak. However, I see no reason for us to rise early on that day, and perhaps we can just take a view during the course of the week depending on how many names are put down, and given the opportunity that there will be to speak later on in the month.
It is right that we should debate it. As the Convenor of the Cross Benches, the noble Lord, Lord Laming, said, this is an important matter, which people want to have debated and discussed. As for the simple sailor, and my naive friend, the noble Lord, Lord Forsyth, I understand precisely why they might think, after nine months of deliberation, that there is still division and confusion on this issue. I think the Government should be congratulated on trying to cut through this to bring forward to Parliament something with clarity and vision. Parliament will then be able to decide what it wishes to do with it.
Lord Peston
Before the noble Lord sits down, I hate to introduce a cynical comment into this very serious matter, but will it not be nothing short of a miracle if any noble Lord can think of anything original on this subject when we debate it next Monday?
Lord Wright of Richmond
For the avoidance of doubt, I am sure that the noble Lord is aware that copies of the alternative report are freely available in the Library.
Business of the House
(12 years, 6 months ago)
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Lord Strathclyde
That, in the event of the Sunday Trading (London Olympic and Paralympic Games) Bill [HL] being read a second time, Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Thursday 26 April to allow the Bill to be taken through its remaining stages that day.
Canterbury City Council Bill
City of London (Various Powers) Bill [HL]
Legal Aid, Sentencing and Punishment of Offenders Bill
(12 years, 6 months ago)
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16:41 - Division on Motion A1. - Ayes: 248 / Noes: 233 - Motion A1 agreed.
17:26 - Division on Motion B1 - Ayes: 239 / Noes: 236 - Motion B1 agreed.
18:28 - Division on Motion D1. - Ayes: 231 / Noes: 243 - Motion D1 disagreed.
19:46 - Division on Motion E1 - Ayes: 214 / Noes: 205 - Motion E1 agreed.
20:11 - Division on Motion F1. - Ayes: 174 / Noes: 220 - Motion F1 disagreed.
21:48 - Division on Motion G1 - Ayes: 159 / Noes: 197 - Motion G1 disagreed.
22:33 - Division on Motion H1. - Ayes: 125 / Noes: 168 - Motion H1 disagreed.
23:12 - Division on Motion J1. - Ayes: 100 / Noes: 154 - Motion J1 disagreed.
Lord McNally
That this House do not insist on its Amendment 1 to which the Commons have disagreed for their Reason 1A.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, today the House has the opportunity to consider the Commons reasons in response to the amendments passed by this House during its consideration of this Bill. We have engaged in complex, informed and sometimes passionate debate on a wide range of issues that are of fundamental importance. In so doing, this House has exercised its rights and responsibility as a revising and advisory Chamber. I would hope that, in turn, the Government and the House of Commons have responded attentively and constructively to the opinions of this House. In addition, my ministerial colleagues and I have had numerous meetings with individual Peers and interest groups. We have listened, and we have amended.
Before I deal with the details of Motion A, I would like to remind the House of some of the steps that we have taken to respond to its concerns and to make this a better Bill. From the start, our guiding principles have been to decide what kinds of case need public funding and what alternative routes are suitable for others. It is not all about cost savings, although they are clearly a vital factor; it is also about what kind of justice system we want for the future.
Successive Governments have concluded that the provision of legal aid in the current structure is too broadly drawn, and it encourages court-based litigation and the engagement of professional lawyers as a first, rather than a last, resort. With that in mind, the test that the Government have applied to amendments in both Houses is whether they strengthen or weaken the principles behind the Bill—what I have described many times as its central architecture. We have accepted amendments where they truly improve the Bill. The House has done much valuable work in correcting omissions and ensuring that the most serious cases continue to receive public funding, and I am grateful for the commitment that this House has put into the Bill.
As I have said, the Government have listened and have moved in important areas. We have accepted the arguments put forward by, among others, the noble and learned Baroness, Lady Scotland, and adopted the definition of domestic violence used by ACPO. We have widened the forms of evidence of domestic violence that will be acceptable to secure legal aid funding in private law cases, and doubled the time limit within which such evidence may be presented. We have removed the power to means-test suspects in police custody, and retained legal aid funding for cases involving human trafficking and domestic child abduction.
We have agreed that legal advice and assistance should be made available to welfare benefit appellants whose cases are heard by the Upper Tribunal, the Court of Appeal or the Supreme Court on points of law. We have committed to doing further work to see how we might provide funding for those appearing before the First-tier Tribunal whose case also turns on a point of law, and have retained legal aid for babies who are victims of clinical negligence. We have introduced further measures to put beyond doubt the extent of independence from Ministers enjoyed by the director of legal aid casework.
Many concerns have been listened to and many amendments made, but we have not been able to satisfy every demand. We have now reached the stage where the Government ask both Houses to disagree with amendments that, in our opinion, would undermine the rationale and principles underlying the Bill. The Government cannot accept amendments that use scarce resources on lower priority needs where other funding is available, where conflicts could be resolved by other means or where people can reasonably make provisions themselves. The Government have demonstrated their commitment to the not-for-profit sector, which does such invaluable work, by providing £20 million a year for the next two years, in addition to the £16.8 million we have allocated for this year. However, in a time of austerity, we must make responsible choices about spending public money. We must be rigorous in our decisions about allocating resources. We cannot rely on unrealistic thinking about alternative methods for achieving savings.
We have rehearsed the arguments at great length and in great depth. We are about to reflect on the House of Commons’ opinion of your Lordships’ amendments, and I will be asking the House to agree with the reasons of the House of Commons. I hope that this House will give good weight to that opinion. As I have said, we have listened and responded to the opinions of this House, which now has a responsibility to listen to the clear and settled view of the House of Commons.
Lord Higgins
If the noble Lord will allow me, he is saying that great attention has been given to the various issues that have been raised, for example by the noble Lord, Lord Alton. Is it not the case, however, that on some of these issues there was initially no debate in the Commons at all because it was programmed, and that when the matter returned from this House to the other place the Lords amendments were also programmed—that is, guillotined—and the debate was not brought to a conclusion in the usual way?
Lord McNally
My Lords, the debates came to a conclusion in the usual way. I must say that for a parliamentarian of the noble Lord’s experience, who must have carried through quite a few Bills himself on timetables and the rest—
Lord Higgins
When I was in the other place, we had a very sensible system. If the matter was being filibustered or was urgent, we had a half-day debate followed by a vote on whether there should be a guillotine. In total contrast, when I was carrying through legislation we certainly did not have the system of programming from which we are now suffering.
Lord McNally
I will leave it to the Opposition to explain fully the introductions that they made to timetabling,
Lord Cormack
I am most grateful for that flattering giving way. I point out to my noble friend that it was indeed a Labour Government who brought in automatic timetabling, but before the coalition Government were elected Sir George Young and others gave an assurance that any Conservative Government—or presumably any Government led by Conservatives—would not have timetabling. We still have it.
Lord McNally
This is an interesting side issue. Anybody who has read the debate in the other place will see that the amendments passed in this House were thoroughly discussed.
Lord McNally
The House is not doing itself much service by this, but do go on.
Lord Howarth of Newport
My Lords, on the issue of parliamentary procedure, is the noble Lord really happy that the first four amendments from this place that the Commons considered had only 26 minutes allocated to them? The House of Commons was allowed fewer than five hours to debate the 11 issues on which this House defeated the Government and offered its very earnestly considered advice.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
The Motion before the House is that we should deal with amendments that have come back from the House of Commons. If noble Lords wish to have a debate about process and procedure in the House of Commons, they can table questions and debate the issues. This is not the time for that; this is a time to deal with the amendments that we have before us.
Lord Alton of Liverpool
My Lords, before leaving that point, it was the Minister who raised the question of procedure and who said that these matters had been thoroughly dealt with in another place. The fact remains that the issue of mesothelioma, which was quite properly raised by the Minister’s noble friend Lord Higgins, was not debated on Second Reading, in Committee or on Report at all in another place. Had it not been for the amendment that your Lordships passed, it would not have been debated at all in another place. To give it only one hour at that stage and for it again to be timetabled is indicative of the need to reform not this place but, in light of what we heard earlier, the other place.
Lord McNally
The four interventions, interestingly, have all come from ex-Members of the other place.
Motion A and Amendment 1 in the name of the noble Lord, Lord Pannick, described by him on Report as a purpose clause, reflect that which features in the Access to Justice Act 1999. Amendment 1 would place a duty on the Lord Chancellor to secure within the resources made available and in accordance with Part 1 of the Bill that individuals have access to legal services that effectively meet their needs.
Despite what was said in the House of Commons by the shadow Justice Secretary, the basis for the Government’s opposition to this amendment has been clearly explained in this House. While I am grateful to the noble Lord for this new amendment, I am afraid that it has not addressed the issues with the original Amendment 1, and the Government oppose the new amendment on the same substantive grounds as we opposed the original construction. In addition to those issues which I will turn to in a moment, Amendment 1B would remove the duty in Clause 1(1) for the Lord Chancellor to secure that legal aid is made available in accordance with Part 1 of the Bill.
On Report I spoke at length about the technical issues with incorporating provisions of the Access to Justice Bill, where only excluded services are specified, to this Bill, where included services are specified. The Bill before us today, if enacted, will represent Parliament’s clear intention as to which services are to be capable of being made available to people by way of publicly funded legal aid services, and therefore to meet their needs in that regard. Any benefit of such a provision akin to that in Section 4(1) of the Access to Justice Act is simply not present in the context of this Bill. Further, both amendments conflate access to justice as a constitutional principle with the provision of legal aid. Access to justice means access to the courts, and does not mean access to a publicly funded lawyer whenever one is sought.
A further duty to provide unspecified legal services must also, in part, serve to muddy the waters and create uncertainty in respect of the services which might be funded under the Bill. It was said by the noble Lord when moving his original amendment that, as a result of the qualifications in it, the amendment,
“does not impose an independent duty which trumps the specific contents of Part 1”,
and that it,
“does not require any further expenditure by the Government”.—[Official Report, 5/3/12; col. 1559.]
I am afraid that we cannot agree with this analysis. By virtue of introducing a new duty on the Lord Chancellor, a potential cause of action must be created where such a duty is said to have not been met. Therefore, by definition, the Lord Chancellor must be at risk of being compelled to provide additional, and as yet unidentified, services to meet that duty or the duty would be a redundant one. This risk is heightened by the fact that both amendments refer to legal services, which are far broader than the legally aided services that the Bill is intended to provide. I acknowledge that this is the first time for the House to hear that observation. Such a scenario would entirely frustrate the Government’s intention of bringing certainty and clarity to the range of services that can be funded under legal aid. The amendment also has the potential to create a great deal of unhelpful and unnecessary litigation as the boundaries of that duty are tested in the administrative court.
The Bill’s purpose is clear, as are the Lord Chancellor’s duties under it. Therefore, I ask that this House does not insist on its Amendment 1. The Commons has decided against it and in my opinion the amendment in lieu from the noble Lord, Lord Pannick, will elicit the same response. Therefore, I urge the noble Lord to withdraw his Motion.
Motion A1 (as an amendment to Motion A)
Lord Pannick
At end insert “but do propose Amendment 1B as an amendment in lieu”
Lord Pannick
My Lords, as your Lordships have heard, the amendment that noble Lords approved on Report by a majority of 45 votes would state the purpose of legal aid: to promote access to legal services within the financial resources that are made available by the Lord Chancellor and subject to the other provisions in Part 1 of the Bill. The amendment had its origins in a recommendation from your Lordships’ Constitution Committee, of which I am a member, and was tabled by noble Lords from all sides of the House—the noble and learned Lord, Lord Woolf, the noble Lord, Lord Hart of Chilton, who is also a member of the Constitution Committee, the noble Lord, Lord Faulks, from the government Benches and, of course, me.
The amendment echoes the wording of Section 4 of the Access to Justice Act 1999, which is the current statutory provision. It is similar to the statutory provisions that have been found in earlier legislation from 1949 onwards. The other place disagreed with this amendment after a debate that was restricted to 27 minutes—a point made by the noble Lord, Lord Higgins, a few moments ago. Those 27 minutes to which the other place was restricted concerned not just this amendment but two others approved in this House after Divisions and to which we will come. They concern the very important subjects of the independence of the director of legal aid and the mandatory telephone gateway, which we will discuss later this afternoon. All those subjects had to be dealt with in 27 minutes—hardly the thorough consideration that the Minister suggested in his opening remarks.
The Minister in the other place, Mr Jonathan Djanogly, and the Minister today have made four main points. The first, which was emphasised in the other place but has not been mentioned today, is that financial privilege was applied to the amendment. Your Lordships will know that financial privilege in the other place does not prevent your Lordships asking the other place to think again about an amendment. Financial privilege simply requires that the amendment be varied in this House from the original amendment. That is why the amendment now before this House is not exactly the same as that which was approved on Report.
I do not want to make this a debate about financial privilege but I hope I may be excused for saying that I know that many noble Lords were as surprised as I was that financial privilege was applied to Amendment 1. The original amendment made it very clear that access to legal services would come within the resources made available by the Lord Chancellor and in accordance with the rest of Part 1, and therefore that amendment had no financial implications whatever.
Your Lordships may also be interested to note that when I made these points to the authorities in the other place and I asked for a brief explanation of the reason for financial privilege being attached to this amendment, because neither I nor the others responsible for tabling this amendment could understand the point, I was told that no reasons are given for the decision on financial privilege. Again, I doubt that I am the only noble Lord who finds it very regrettable that this House should be told that financial privilege controversially applies to an amendment but noble Lords are not told why that is so.
However, that is a side-show. In any event, the amendment now before your Lordships responds to financial privilege, and it does so by making it clear beyond any possible doubt that the question of what financial resources to make available is a matter for the discretion of the Lord Chancellor and the Lord Chancellor alone. That is what the amendment says beyond any question. It also makes it clear that its terms and effect are subject to the provisions of this part—in other words, subject to the restrictions in the Bill on what topics are within the scope of legal aid.
Lord Thomas of Gresford
Can the noble Lord explain what this amendment therefore adds to the provisions in the Bill? That is what puzzles me.
Lord Pannick
I was coming to that. If the noble Lord will have a little patience, that was the second point made in the other place. My first point, which I just want to complete, is that, with great respect, I do not accept that this amendment has any financial implications whatever.
The second point made by the Minister in the other place was that made just now by the noble Lord, Lord Thomas of Gresford. What is the point of this amendment? The view taken by noble Lords on Report was that now that legal aid is to be confined by this Bill, it is absolutely vital that we retain in the legislation a statement of principle that the purpose of legal aid is to promote access to justice within the available financial resources. That is important for this reason. The Government are proposing to limit legal aid by reason of current financial constraints and Parliament is accepting that. However, we all hope and expect that the economy will improve and, when it does, Clause 9(2) gives the Lord Chancellor a power to modify the substantive provisions of Part 1 to bring matters back within scope. When the economy improves, the case for relaxing the temporary limitations on legal aid should be considered by reference to principle, and the principle is that stated—I hope uncontroversially—in this amendment, which is to Clause 1 of the Bill. It is vital that this principle is not forgotten by reason of the temporary financial constraints under which we are all operating, and I can think of no better way of preserving the principle than setting it out at the beginning of the Bill. I happily give way to the noble Lord.
Lord Thomas of Gresford
But is not the effect of putting this at the beginning of the Bill precisely what the Minister said—that is, it leaves it open to lawyers to bring applications for judicial review and to ask judges to determine whether the financial situation has so improved that the provisions for legal aid should be extended? Is this not just making more work for lawyers?
Lord Pannick
The noble Lord, Lord Thomas of Gresford, again jumps the gun. This is the third point that was made in the other place, which I was coming to and will now address—
Lord Lester of Herne Hill
I hope I am not jumping the gun, but I do not understand from what the noble Lord has said so far why the principle of maintaining the rule of law, a duty which is imposed on the Lord Chancellor, and a duty to secure access to justice under the Human Rights Act do not themselves adequately state the general principles within which this Bill needs to be looked at.
Lord Pannick
The answer to the noble Lord, Lord Lester of Herne Hill, is that we are dealing with a Bill that specifically relates to legal aid. It is surely appropriate to include in a Bill relating to legal aid the purpose of legal aid—and to say so in uncontroversial terms. Nothing is more likely to lead to legal uncertainty—the concern that the noble Lord, Lord Thomas of Gresford, has—than that these matters should be left somehow to be implied, in the context of legal aid, by reference to the Human Rights Act. That would seem to me most unsatisfactory.
I turn to the third point: uncertainty. It was a point that the Minister emphasised this afternoon—uncertainty and, as he put it, the spectre of litigation. I find it difficult to understand this concern, given that the amendment makes it clear beyond doubt, in the plainest of language, that it is entirely a matter for the Lord Chancellor how much money to provide for legal aid purposes. The amendment makes it clear beyond doubt that this provision is subject to the detailed provisions in the Bill which specify what subjects are within scope.
In any event, this concern about litigation is a particularly unpersuasive argument in the present context. As I mentioned, the substance of this amendment has been part of legal aid legislation for many years. If lawyers were going to make mischief by reference to this type of wording, noble Lords will recognise that they would have done so by now.
Finally, the fourth point that has been mentioned by the Minister this afternoon is that the other place is, of course, the elected Chamber and that we should defer to its judgment. For my part, I recognise that there is, of course, force in this argument. Noble Lords will wish to reflect carefully on this amendment, as on all the other amendments before the House this afternoon, before asking the other place to think again.
I suggest to noble Lords, however, that this is an occasion—on this amendment certainly—when it is appropriate to ask the other place to think again. The amendment now before noble Lords addresses the concerns expressed by the Minister, Mr Djanogly, in the other place. There is simply no substance to the Government’s opposition to this amendment. It raises an issue of principle of considerable importance and it involves no financial cost whatever to the Government. I beg to move.
Lord Howarth of Newport
The noble Lord, Lord Pannick, for the avoidance of any doubt whatsoever, has made it clear beyond peradventure in the drafting of this amendment in lieu that what he and the House have sought to achieve contains no threat to the Government’s public expenditure plans. The wording makes it clear that,
“subject to the resources which the Lord Chancellor decides, in his discretion, to make available”,
the Lord Chancellor shall exercise his powers to secure that individuals have access to legal services.
For the sake of a completely illusory financial requirement, the Government propose to impair a constitutional principle of the first importance which goes back not just to 1949, as the noble Lord, Lord Pannick, reminded us, but to 1215. That is the principle of equality before the law. It should not be in doubt that it is the duty of the Lord Chancellor to secure equality before the law. We all recognise that there are constraints in the present very difficult circumstances of the economy, and that we face an imperfect situation. But it must be right to legislate in principle to ensure that, in normal times at the very least—I would contend at all times—it is a paramount duty of the Lord Chancellor to secure equality before the law for all our citizens. It is no use the law declaring high principles of which citizens cannot avail themselves in practice if financial constraints and the lack of support through legal aid mean that they are not able to substantiate their rights in the courts.
I praise the noble Lord, Lord Pannick, for persisting in this cause. I very much hope that the House will want to support him once again in inviting the other place to think again.
Lord Woolf
My Lords, I support what the noble Lord, Lord Pannick, has put before us. Doing my very best, I have found it very difficult to find any reason why this amendment should not be accepted. Attempting to rely upon what was said in the other place just does not wash. If the other place had understood the purpose of the previous amendment, I do not accept that it could have treated it in the way that it did. I do not need to go into detail about that matter because the noble Lord, Lord Pannick, has, with his usual clarity, set out the position perfectly obviously. The situation is as he indicated.
In Bills of this nature, it is frequently the practice to assist those who will subsequently have to apply the legislation—or, if I may say so with feeling, interpret the legislation—by setting out the purpose of the legislation. The Bill makes that purpose clear in so far as there was any doubt about it. There cannot be said to be any financial commitment involved. I am at a loss to understand how the Lord Chancellor, having the responsibilities that he has for the administration of justice under the Constitutional Reform Act 2005, can use that as an excuse for, without justification, trying to impede the proper consideration of this amendment. It reflects no credit to the way in which that office is now being handled for the Lord Chancellor to take that position. Every word that the noble Lord, Lord Pannick, has said with regard to the four points that were taken is of substance. I hope that, even now, the Lord Chancellor will consider whether it is consistent with his responsibilities to take the position that was adopted by the other place after very brief consideration.
I remind the Lord Chancellor of the oath that he takes when he takes office, which is laid down in the Constitutional Reform Act. I ask him to consider whether the position that he has now taken is consistent with that oath. Section 17 of the Act requires him to,
“swear that in the office of Lord High Chancellor of Great Britain I will respect the rule of law … and discharge my duty to ensure the provision of resources for the efficient and effective support of the courts for which I am responsible.”
The purpose of the amendment is to give the Lord Chancellor scope to do just that.
I would have thought that the proper course was to welcome the amendment, having regard to changes in the situation that can take place in the future. Again and again, in the course of consideration of this Bill, it has been said on behalf of the Government that they are following the course that they are taking because of the financial situation in this country. That argument demands the greatest respect, but as the noble Lord, Lord Pannick, has indicated, this amendment does not interfere with the Lord Chancellor doing precisely that. It is said that it may lead to increased litigation. If that litigation were to take place, as far as I can foresee, it would have to be by way of judicial review and it is well known that judicial review has built-in protections to avoid the litigation process being misused. The requirement of leave would mean that proceedings which are initiated without cause would have a very short life indeed. The Government of the day would be entitled to get the assistance of the courts, which they would receive, to ensure that there was no misuse of those proceedings in these circumstances. I suggest that, if full consideration had been given to this amendment, it would not originally have been objected to or objected to now.
Lord Phillips of Sudbury
Given the noble and learned Lord’s huge experience in these issues, would he kindly tell the House whether he considers that this amendment does not place any Lord Chancellor in any jeopardy in respect of judicial review? If that is the case—that is what I understood the noble Lord, Lord Pannick, to say—does that not make the provision toothless?
Lord Woolf
No one can anticipate what might happen with regard to the conduct of a particular Lord Chancellor in the future. However, in regard to the fears that have been expressed, there would be no possibility of those being treated as appropriate cases for an application for judicial review on the facts that could be reasonably expected to occur.
On the purpose of the legislation, I would adopt what was said by the shadow Minister in the other place: that the amendment states a purpose because the provision is a statement of legislative purpose. As to having a statement of legislative purpose, in legislation of this nature it is done frequently, not for the purpose of providing an enforceable duty but so that it is known what the legislation as a whole is intended to do.
Lord Lloyd of Berwick
My Lords, the noble Lord who moved the amendment as well as the noble Lord, Lord Howarth, and the noble and learned Lord, Lord Woolf, have referred to the purpose of the amendment as the avoidance of doubt. I hope that in his reply the noble Lord will explain to the House exactly what is the doubt which the amendment is designed to remove and which, presumably, the Bill will otherwise create. If he can answer that question to my satisfaction then I might vote with him. Until that question is answered, I would be inclined to vote with the Government.
Lord Thomas of Gresford
I regret that I have to disagree with the noble and learned Lord, Lord Woolf—I very rarely do. However, there is a statement of principle in Clause 1: it is that the Lord Chancellor must secure that legal aid is made available in accordance with this part. That is a very simple, short statement which would cause no judge any difficulty whatever in interpreting the provisions of the Bill. I said in Committee that the amendment then proposed was meaningless and added nothing to the Bill. I say precisely the same of the amendment as redrafted.
The amendment adds nothing, except this. I could be a very devious lawyer, and I might have a case for which I thought some funding was needed. So I might apply to the director of legal aid for special funding, knowing well that the case for which I am requesting funding is outside the legal aid scheme. The director of legal aid might say, “There is nothing special about this; I am refusing it”. I might then make an application by way of judicial review to the court, and I would get legal aid for that: judicial review carries legal aid. So I would get my money by making an application to the court for judicial review to say, “Look at this provision which the noble Lord, Lord Pannick, argues for: it is broad; it is wide; the circumstances of the country have improved; it is only reasonable that the director of legal aid should now grant me the funding that I need, or that the category of law with which I am now concerned should be brought within scope”. That is just one case. Other cases could then be brought forward in the same way.
Lord Woolf
Will the noble Lord explain how the risk to which he has just referred would be any greater than that which already exists in the words of Clause 1(1)—that the Lord Chancellor must secure that legal aid is made available in accordance with this part?
Lord Thomas of Gresford
It says in terms that it must be in accordance with this part. As the Minister has explained, the Bill as drafted says what is in scope. The Access to Justice Act 1999 set out what was not in scope.
Baroness Butler-Sloss
I am no expert in administrative law. However, my recollection is that that requires leave of the judge. If it is as spurious a case as the noble Lord has suggested, I would have thought that it would be likely to be rejected and that very little legal aid, if any, would be involved.
Lord Thomas of Gresford
Why should one run that risk? Why should one have applications for judicial review being made based on the amendment as currently drafted? This adds nothing to the Bill. All it does is open an avenue for satellite litigation which should not be permitted.
Lord Carlile of Berriew
My Lords, it would be a great disappointment to your Lordships’ House if you were to find that there was unanimity on these Benches. I am not going to disappoint your Lordships: there is not.
I agree entirely with the noble Lord, Lord Pannick—particularly in relation to the second and third parts of his speech—and also with the noble and learned Lord, Lord Woolf. In answer to my noble friend Lord Thomas of Gresford, I would say that Clause 1(1) contains absolutely no statement of principle whatever, whereas Amendment 1B does contain a statement of principle, albeit within the financial limits set by the Bill.
What I really wanted to do is say a few words about financial privilege. I suspect that there will be other noble Lords who were once Members of another place who, like me, have sat on the Reasons Committee. It is the Reasons Committee that drafts the reasons why the Commons do disagree with your Lordships' House. It sits in a room just behind the Speaker’s Chair. That room is known as the Reasons Room. Behind that Alice-in-Wonderland title lies an Alice-in-Wonderland process. In the Reasons Room, the Reasons Committee—which does not produce a Hansard record, or certainly did not do so in my time—produces reasons that, by and large, are presented on a piece of paper and nodded through. That seems to me to be what has happened here. The reason that is given is that,
“it would alter the financial arrangements made by the Commons”.
That is a statement of predictive certainty. What we have heard from my noble friend the Minister suggests that there might be a possibility at some stage in the future that some kind of judicial review action might, not would, have some effect on, not alter, the financial arrangements made by the Commons.
I echo the words of the noble and learned Baroness, Lady Butler-Sloss, about the process of judicial review. Every judicial review application goes in the first instance, on an entirely paper procedure, before a judge of the administrative court. As it happens, most applications—about 80 to 90 per cent—are refused on the papers and there is practically no expenditure upon them at all. I cannot see any circumstances in which it is more likely that judicial review proceedings would continue as a result of including this amendment in the Bill as compared with the Bill as it stands. As my noble friend Lord Thomas said, the Bill as it stands contains the potential for applications being made for judicial review against the exceptionality provisions and against a ruling that legal aid should not be given. What is proposed here hardly increases that risk.
Lord Carlile of Berriew
I will give way in a moment; I shall just finish the sentence.
If the other place has got its reasons wrong then surely we are entitled to question those reasons in this House, and if the burden of the debate justifies it, to ask the other place to reconsider, on the basis that it has got its reasons wrong. I will give way to my noble friend now—but he does not want me to. I am glad that I have answered his question. I have nothing further to add.
Lord Morris of Aberavon
My Lords, I rise in support of the noble Lord, Lord Pannick. I am concerned about the reasons given in the Marshalled List, and perhaps the Minister can help the House. What are the financial implications if this amendment were accepted? The reason given is:
“Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this reason may be deemed sufficient”.
If that is the sole basis for rejecting the amendment—or if there is any other reason, any other sinister matter, that the Minister is concerned about—perhaps he will tell us.
The noble Lord, Lord Pannick, has told the House that there are no financial implications to his amendment. The amendment states that the Lord Chancellor shall exercise his powers under this provision in order to ensure that individuals have access to legal services, and that it is entirely within his discretion,
“and subject to the provisions of this Part”.
This is a very carefully drafted amendment. It secures the Government’s financial position. The ultimate discretion is the Lord Chancellor’s, and I find it very difficult to foresee, in reality, any other financial implication.
Lord Hart of Chilton
My Lords, I have supported the noble Lord, Lord Pannick, throughout the process of this Bill. I do so again and I will not take up time to enlarge on anything that has been said thus far in support of the amendment. I simply risk causing the Minister convulsions by drawing his attention to the clock and indicating that we are well on our way to doubling the amount of time that the Commons took to dispatch four of your Lordships’ amendments. It also had the temerity to adopt a programme Motion that caused Sir Gerald Kaufman to stop in mid-track when he was saying:
“It is out of order in this House of Commons to accuse anyone of hypocrisy, so I—”.—[Official Report, Commons, 17/4/12; col. 208.]
We shall never know what he was about to say, but it shows how well we attend to amendments in this House and how poorly they do so in the Commons.
Lord Elystan-Morgan
My Lords, the whole exercise of this House examining the reasons given for rejecting an amendment from this place turns on the supposition in the first instance that the other place has in a mature, reasonable and well informed way applied itself to all the relevant issues. I therefore take very much to heart the submissions made by way of preliminary argument by the Minister. It is his case that the other place has done exactly that: namely, that it has looked in a fair, reasonable and mature way and has comprehensively dealt with those issues. I think that his argument is utterly fallacious in that respect.
Lord Thomas of Gresford
Before using a word such as that, does the noble Lord not agree that there is a constitutional convention that—
Lord Elystan-Morgan
It is exactly on the question of constitutional convention that I seek to address this House now. The Minister’s case, in so far as it refers to the Government having carefully considered the situation, is amply made out. I am sure that battalions or squadrons of legal eagles have been burning the midnight oil looking carefully at every word, comma and expression in these matters. I have no doubt that that has been done thoroughly and comprehensively.
However, has the other place thoroughly and comprehensively considered this matter? There has been a double guillotine. First, there was a guillotine in dealing with the issue because it could not be raised at Second Reading, in Committee or on Report. There was a second guillotine in the meagre ration of time—27 minutes—allowed for this amendment and two or three others. You would not hang a dog on such a procedure.
Therefore, on that basis, I make no apology for raising what I consider to be a fundamental constitutional point. We are dealing with the rejection by the House of Commons of a matter on which the time taken presupposes that its consideration could not have been mature and comprehensive. In addition, we have the reason given on financial privilege. I am as sure as I am that financial privilege cannot apply to this case because the very thing that it avoids doing is increasing the burden on the public purse. If I am right—as I understand it, that has been the rule since the end of the 17th century—it is not a financial privilege matter. Therefore, we have two constitutional issues. One is the lack of time and it being ridiculously limited in the other place. The second is the reason advanced; the very basis for refusing it cannot be sustained in argument.
Perhaps I may also challenge in a respectable, and I hope friendly, way the noble Lord’s contention that those of us who have had experience—in my case, it was a very long time ago—as Members in the other place are in some way tainted and disqualified from making contributions in this House on this matter. Is he saying that we should be silent? If this House is anything at all, it is a first-class reviewing Chamber. Is he saying that, as a reviewing Chamber, this House should not comment on such matters? If it does not comment on such matters, it does not deserve to be a reviewing Chamber or a court of Parliament at all.
Lord Faulks
My Lords, I will be very brief. I supported the predecessor of this amendment as it went through the various stages in your Lordships’ House. I did so because, for the reasons that have already been given, I thought it was an important statement of principle that ought to govern the way in which we considered the Bill and ought to be part of the Bill. I remain of that view.
It seems that the real reason for the objection to this amendment is the fear of judicial review, or the rather vaguely described “satellite litigation”. I understand why government lawyers, who are not always right about everything, may consider that there is a risk of judicial review in all sorts of situations: because of the ingenuity of lawyers and perhaps the flexibility of the Human Rights Act. However, given the way in which it is currently framed, it seems absolutely hopeless to think that there could be judicial review in these circumstances. The amendment as formulated makes it entirely clear. We are all familiar with provisions with no such discretion or reference to the Lord Chancellor or the Secretary of State, in which case courts have sometimes said that it is an absolute duty. However, with this proviso it is almost as though the Government have had the benefit of the noble Lord, Lord Pannick, advising them on how to make the matter proof from judicial review.
Lord Phillips of Sudbury
My Lords, I went to the other place to hear our amendments debated. As I am not a former Member of the other place, perhaps my noble friend will take it from me that its consideration of some of our amendments was cursory—and that is putting it quite generously. I admit to being very disappointed that, on such an important Bill as this, the other place allowed so little time for consideration of these amendments that one cannot say that they scrutinised the amendments with the seriousness with which we try to scrutinise.
Having said all that, I am still mystified by this amendment. I agree with my noble friend Lord Faulks, and consequently with my noble friend—well, he is a friend but he is not a friend—Lord Pannick. It seems clear—indeed it was part of the case made by the noble Lord, Lord Pannick—that there is no prospect of judicial review, and he has designed this amendment to cut out that prospect. However, to the extent to which he has been successful—and I think he has been—it makes the clause ineffectual. It has absolutely no practical effect. I am afraid that it is admirable in sentiment but ineffectual in purpose and therefore should not be in the Bill.
Lord Beecham
My Lords, my noble friend Lord Hart inadvertently stole my opening line about the time we have spent debating this amendment. I could also point out that we will take little less time to vote on this amendment than the other place took to discuss, and allegedly debate, all four of the amendments about which we have heard.
The noble Lord, Lord Thomas, has entertained the House by conjuring up a vision of an army of devious lawyers mining the rich seams of the potential availability of legal aid for the purpose of pursuing claims for judicial review. Others of your Lordships have rather demolished the thrust of that argument, which in any case might be thought to be somewhat fanciful, especially in the light of the quite appropriate reference made by the noble Lord, Lord Faulks, to the fact that the amendment incorporates specific reference to the discretion of the Lord Chancellor. With respect to the noble Lord, Lord Thomas, there really is no substance in his objection to the amendment as it has been moved.
In relying once again on financial privilege—when it could have been waived and substantive arguments put in the form of a Motion asking this House to reconsider the amendment—the Government seem to be succumbing once again to the temptation of relying on this way out of a difficulty. They are becoming addicted to the use of financial privilege as a reason to reject amendments from your Lordships’ House, and that cannot be a satisfactory basis for dealing with significant matters of this kind. Therein lies the strength of an argument about financial privilege when, in dealing after a fashion with the amendment in the House of Commons, the Minister, Mr Djanogly, made one of his principle objections: that the Government,
“are concerned that the amendment replicates what is already in place”.—[Official Report, Commons, 17/4/12; col. 201.]
If it replicates what is already in place, how can it conceivably add to the Government’s expenditure? It is a ludicrous proposition in an attempt to have it both ways.
For that matter, those who argue that judicial review is something to be avoided seem to have forgotten that when we were discussing the position of the director of legal aid casework—the DOLAC amendment; we will come later to a welcome acceptance of an amendment in that respect—it was argued that judicial review would be available to those who sought to make a case for legal aid in exceptional circumstances. At that point, it was to come to the rescue of people who were being denied legal aid and was something to be embraced. Today, however, for the purposes of this amendment it is an issue that could be deployed against the amendment of the noble Lord, Lord Pannick.
There is no question that the purpose of this amendment is clear. It is declaratory, but it is important to be declaratory about important principles, and for that reason the Opposition wholly support the amendment.
Lord Lester of Herne Hill
My Lords, I will explain briefly why I do not agree with the amendment. I quite agree with those who have said that it is inconceivable that it will give rise to effective judicial review because it imposes no legally enforceable duty and it is therefore inconceivable that anyone could threaten the Government by way of judicial review. However, my problem with it is that it imposes no legal duty and then does nothing else.
The amendment begins:
“The Lord Chancellor shall exercise his powers under this Part with a view to securing that individuals have access to legal services—”.
Pausing there, it is of course already the Lord Chancellor’s duty to do so under the Human Rights Act, as I pointed out in a brief question to my noble friend and colleague Lord Pannick. Under that Act, the Lord Chancellor has to act in a way that is compatible with Article 6 of the convention, which secures a right of access to justice. Existing law and Section 3 of the Human Rights Act require that all legislation, including this Bill, must be read and given effect in so far as it is possible to do so compatibly with the Human Rights Act. That first part of the amendment is already fully taken care of by that Act. In so far as the rule of law is in play, it is also taken care of by the Constitutional Reform Act.
The amendment goes on:
“that effectively meet their needs, subject to the resources which the Lord Chancellor decides, in his discretion, to make available, and subject to the provisions of this Part”.
That completely swallows up any suggestion that this is some new, important principle. I am afraid it is written in water and I do not approve of putting anything in the statute that is simply an unenforceable duty written in water.
Lord McNally
My Lords, we have had a very interesting debate on this. I hope when the noble and learned Lord, Lord Woolf, has time to read his own remarks, which contain some fairly harsh strictures about the Lord Chancellor, he will reflect that the question of financial privilege is not a matter for the Government or for the Lord Chancellor. As the Clerk of the Commons explains, an amendment that infringes privilege would be the only reason that would be given. That is because giving other reasons suggests either that the Commons has not noticed the financial implications or that it somehow attaches no importance to its financial primacy.
We had a debate very like this one when we discussed the Welfare Reform Bill. I do not have figures at my fingertips—perhaps we can give the noble Lord, Lord Hennessy, the task of looking at the record of respective Administrations in using financial privilege—but when we last discussed the matter it was made clear that this is a matter for the Commons. As the Companion states:
“Criticism of proceedings in the House of Commons or of Commons Speaker’s rulings is out of order, but criticism may be made of the institutional structure of Parliament or the role and function of the House of Commons”.
I think noble Lords have exercised that procedure today.
Lord Howarth of Newport
My Lords, the Minister said that financial privilege is not a matter for the Government but for the House of Commons. We understand—we are very familiar with the convention—that when the House of Commons rejects a Lords’ amendment it may state reasons of financial privilege and give no further explanation. However, that does not explain or justify why the Minister, Mr Djanogly, in opening the debate on the Lords’ Amendment 1 last Tuesday, began his speech by drawing to the attention of the other place that:
“Lords amendments 1 and 24 impinge on the financial privilege of this House. I ask the House to disagree to them and will ask the Reasons Committee to ascribe financial privilege as the reason for doing so”.—[Official Report, Commons, 17/4/12; col. 200.]
That was his argument, essentially because he could not think of a better one. It is very unusual for the Government to rely blatantly on financial privilege during the debate.
We have to contend with a new situation. We are not criticising the constitutional arrangements, the conventions or the manner of the relationship between the two Houses, but we are saying that the Government should not hide behind this formula, this antique convention, but should deal fairly and squarely with the merits of the argument.
Lord McNally
The noble Lord, Lord Howarth, has wandered—I shall come to some of his comments later—into interesting fields. The financial privilege of the House of Commons may be antique, but as an old House of Commons man I am rather attached to financial privilege. Kings have lost their heads and revolutions have taken place to protect financial privilege and I do not airily sweep it away as an antique remnant of a bygone age. It is an important part of the relationship between the two Houses.
Lord Howarth of Newport
Can the Minister explain how financial privilege applies in this case? Of course the Bill concerns public expenditure, and in that sense financial privilege applies, as it does to virtually every item of legislation, but how do the Government contrive to justify making it the basis of their argument to Members in another place? They asked them to reject the amendment on the grounds of financial privilege as if it were at risk of incurring unaffordable increases in public expenditure, which is simply not the case.
Lord McNally
My Lords, we can go round in circles. The qualification of financial privilege is a matter for the Clerks of the House of Commons. Former Mr Speaker Martin, when we last discussed this matter at the time of the Welfare Reform Bill, made very clear where the line is drawn.
I might not have had as long and continuous a place in the House of Commons as my noble friend but I have been around this place for the past 40 years, and one of the reasons why I teased some former Members of Parliament is that for the past 40 years, under various Administrations, I have heard these debates about the paucity of the way in which the House of Commons discussed a matter and the brutality with which the guillotine was used. That may well be one day—perhaps soon—the reason for a proper parliamentary reform Bill that takes in both Lords and Commons, but it is not an excuse for assuming that somehow, on this particular Bill and this particular issue, the Government are using chicanery or arguments that are not well understood in the relationship between these two Houses.
I also point out to the House that the one thing I have not done, and certainly did not do in my remarks at Report stage, Third Reading or today, is to hide behind financial privilege. I do not think that the Pannick amendment stands up to scrutiny and I was grateful for the contribution of a number of my noble friends in that. Part 1 of the Bill, the Lord Chancellor’s functions, states:
“The Lord Chancellor must secure that legal aid is made available in accordance with this Part”.
This seems to me a very clear statement of intent. The difference between the Act being replaced and this Bill is that the Act being replaced is an open-ended Act. It does not restrict where legal aid would apply. The whole point of the Bill—what makes it different from the previous Act—is that it limits, specifies and draws attention to where legal aid will apply and what will be out of scope. That is the danger of the Pannick amendment—that in its general good will to all men approach, it leaves the idea that things may be added. Indeed, both the noble Lord, Lord Howarth, and to a certain extent the noble Lord, Lord Pannick, said that when better days are here this whole circumstance may change. It may change, but not under a vaguely-worded Part 1 of the Bill. We have, in the course of the Bill, accepted an amendment from my noble friends that removed the ratchet and left a regulator in terms of what can be put back into the Bill, but that will be a matter for reflection and discussion in the future.
What worries me is that all the learned Lords who have spoken may be absolutely right, and if they are right we will all live happily ever after. But if they are wrong it is a future Lord Chancellor and the taxpayer who will have to pick up the consequences. Therefore, I think at this stage in the passage of the Bill, the Lord Chancellor of the day and the Government of the day see dangers in what, if it is anything, is either meaningless or has a meaning that has implications for the future; and if it does have implications for the future, in a Bill structured in this way, I think we are right to resist it.
I hope noble Lords will agree that the Lord Chancellor of the day and the Government of the day could and should have a sense of responsibility and care for the central architecture of the Bill, which we keep on talking about. The Bill is not open-ended but specific and the Pannick amendment is not something that should show on the face of the Bill. I hope that noble Lords reflecting on this, and the fact that it has been well considered and well debated and that I have not tried to hide behind financial privilege in addressing your Lordships either previously or today, will support the Government and the Commons in their amendment.
Lord Pannick
I am grateful to all noble Lords who have spoken in this full debate. I am grateful to the Minister for his consideration of the amendment and for meeting me last week to discuss the issues raised. The other place rejected the amendment and the Minister invites the House to reject the amendment because of a concern or belief that it would impose further obligations on the Government. In this House, a number of noble Lords objected to the amendment on the precisely opposite ground that it would impose no obligations on the Government. Perhaps I may briefly reply to both those concerns.
First, on the concern that the amendment would impose further obligations and would somehow undermine the architecture of the Bill, to use the Minister’s words, with great respect I have enormous difficulty in understanding those concerns. I could understand the concern if the amendment had any adverse financial consequences, but it plainly does not. It says,
“subject to the resources which the Lord Chancellor decides, in his discretion, to make available, and subject to the provisions of this Part”.
I am very grateful to the noble Lords, Lord Faulks, Lord Carlile of Berriew and Lord Phillips of Sudbury, for their views, which I share, that it is impossible to understand how in the real world this amendment could result in litigation that had any prospect of getting off the ground—certainly any more so than the original Clause 1. So the only possible objection to the amendment is that it does not impose further obligations on the Government and that it does nothing. That was the point made by the noble and learned Lord, Lord Lloyd of Berwick, and the noble Lord, Lord Lester of Herne Hill, and was a concern expressed by the noble Lord, Lord Phillips of Sudbury. I say to those noble Lords and to the House, with great respect, that that is to misunderstand the purpose of an objects clause. The purpose of the amendment is to ensure that the Bill recognises that we are cutting back on legal aid, most regrettably, because of current financial stringency, but that the principle of securing that individuals have access to legal services that effectively meet their needs, which has been part of our law since 1949, has not been forgotten. It is still the purpose of legal aid and, when the economy improves, that is the principle by which Ministers and Parliament should assess—
Lord McNally
I hate to stop the noble Lord’s flow, but he has just put his finger on it. This is not an interim, pro tem measure, waiting for a return to the 1949 Act. Although, as I mentioned in my opening remarks, financial considerations of course have played a part, the main intention of the Bill is to restructure, reshape and re-point the direction of legal aid away from the open-ended nature of the 1949 Act and successive Acts and put it into a closed system. It is that closed system that the noble Lord’s amendment, with great skill aforethought, plans to undermine. That is why we are resisting it.
Lord Pannick
I entirely accept the Minister’s point that the Bill seeks to identify those subjects for which legal aid should be made available. But the Minister will recognise that, in the anxious debates that we have had through the progress of the Bill, we have considered a number of sensitive topics in respect of which the Minister’s argument has been that we would like to provide legal aid for this subject but, regrettably, we cannot do so because we do not have the money under the current financial stringency. The House has listened to that debate and accepted, with a heavy heart, that in relation to many of the subjects in respect of which legal aid has previously been made available it will regrettably no longer be made available. Having accepted that the Government must have their way for financial reasons on many of those very difficult areas, I believe that it is absolutely vital that we retain in this Bill a statement of the principle of why legal aid is made available so that when the economy improves—
Lord Pannick
I have given way to the noble Lord before. I anticipate that the House is anxious to move on. The House has heard the debate in relation to this matter. I say to the House that that part of the 27 minutes which the other place devoted—I am not giving way—
Lord Pannick
The House wants to move on. That part of the 27 minutes which the other place devoted to consideration of this amendment shows that the purpose and effect of this amendment were not understood. I think that we should ask the other place to think again on this important matter, and I wish to test the opinion of the House.
Lord McNally
That this House do not insist on its Amendments 2, 194 and 196 to which the Commons have disagreed for their Reasons 2A, 194A and 196A, do not insist on its Amendment 192 and do agree with the Commons in their Amendments 193A, 219A and 220A.
Lord McNally
My Lords, Motion B contains amendments in relation to domestic violence. As I have previously made clear, the Government take domestic violence extremely seriously. We fund a range of programmes to help deal with and prevent this crime, many of which—I am happy to acknowledge—were put in place by the previous Administration. As the noble and learned Baroness, Lady Scotland, has previously made clear, there is nothing between the Government and the Opposition in principle here.
This was reflected in our initial proposals. First, legal aid to obtain a protective injunction against domestic violence should remain exactly as it is at present, so that those who need legal aid to protect themselves can get it regardless of their means. Secondly, while we have removed most of private family law from the scope of legal aid in favour of funding mediation and less adversarial proceedings, an important exception should be made for victims of domestic violence. This was because such victims could be intimidated during court proceedings about, for example, child contact or maintenance issues. Again, it is fair to say that these principles were welcomed.
There has been considerable debate in both this House and the House of Commons over how to decide who qualifies as a victim of domestic violence for the purpose of legal aid for private law family proceedings. Therefore, there has been much scrutiny of the definition of domestic violence used in the Bill, the types of evidence that would prove that someone was a victim and the length of time for which these should be valid. The contributions across the House have been informed, sometimes passionate and extremely helpful. The Government have listened and moved on several key points.
As set out in government Amendments 193A, 219A and 220A, we have accepted the ACPO definition of domestic violence in full. The Bill now defines domestic violence as,
“any incident of threatening behaviour, violence or abuse (whether psychological, physical, sexual, financial or emotional) between individuals who are associated with each other”.
This has been universally welcomed. We have also undertaken to widen the list of evidence, which will be reflected in regulations, to include: an undertaking given to a court by the other party in lieu of a protective order or injunction against that party for the protection of the applicant, and where there is no equivalent undertaking given by the applicant; a police caution for a domestic violence offence by the other party against the applicant; appropriate evidence of admission to a domestic violence refuge; appropriate evidence from a social services department confirming provision of services to the victim in relation to alleged domestic violence; and appropriate evidence from GPs or other medical professionals.
These are in addition to those forms of evidence already accepted by the Government, which are: that a non-molestation order, occupation order, forced marriage protection order or other protective injunction against the other party for the protection of the applicant is either in place or has been made in the past 12 months; a criminal conviction for a domestic violence offence by the other party against the applicant; ongoing criminal proceedings for a domestic violence offence by the other party against the applicant; evidence from a multi-agency risk assessment conference of the applicant having been referred as being at risk of domestic violence from the other party and action recommended; and a finding of fact by the court of domestic violence by the other party against the applicant.
On time limits, we intend to double the previously announced time limit from 12 months to two years, save in respect of a conviction for a domestic violence offence, where the only limit is that the conviction should not be a spent one. We think that some sort of time limit will still be needed—we are in the business of reducing rather than encouraging litigation—but we think that two years will make sure that those who need help get it.
I know that the noble and learned Baroness, Lady Scotland, continues to have concerns and has tabled amendments in lieu of her original amendments which ask for our list of evidence to be exactly the same as the list of evidence used by the UK Border Agency in assessing domestic violence immigration applications. I know from my conversations with her that she is worried about consistency and about genuine victims missing out. I have enormous respect for the noble and learned Baroness but I really do think that her fears are now misplaced, given how far we have moved.
On consistency with the border agency, we need to understand that the decisions being made are different, as is the context in which they are made. When the border agency takes a decision on whether domestic violence has occurred, it is a decision on the case itself. This would be analogous with a court looking at an application for a domestic violence protection order and a judge deciding whether domestic violence had occurred, not with a legal aid decision about a private family law case.
We are talking here about a secondary issue—in this case, legal aid—that arises indirectly from a person being a victim of domestic violence, not a decision that directly relates to someone’s protection, such as in an immigration context or an injunction application. What is needed for a grant of legal aid is a set of clear rules, not the kind of case-by-case nuance that is needed to decide whether someone requires immediate direct protection.
Other government departments have to grapple with similar issues when it comes to these secondary issues. They do not use the border agency list but take a judgment on what works in their particular context. One example is the rules for jobseeker’s allowance for victims of domestic violence, over which individual local authorities have discretion.
I should also point out that the noble and learned Baroness has never objected to a very important addition that we have made to the border agency list—namely, “a finding of fact” by a court that domestic violence is a relevant feature. This partly highlights the different context that we are dealing with; such a finding of fact is much less likely to arise in an immigration context, but it also provides a very important safeguard in these cases. By definition in this context, if you are seeking legal aid, it is because there is the prospect of family proceedings. If you cannot show any of the evidence of domestic violence that we have asked for but the court decides, perhaps on the basis of police call-outs or other types of testimony, that domestic violence is a feature in the case, then legal aid will be available. This is also relevant when thinking about the time limits. Where a case relates to older incidents of domestic violence but a court considers that the matter is still relevant and it makes a finding of fact, legal aid will be triggered.
When I spoke last week with the noble and learned Baroness, she suggested that we would be missing a large number of victims with our time limit because of how long victims take to come forward. She mentioned that the average time for a victim coming forward was five and a half years. However, it does not follow, as she suggested, that a two-year time limit for evidence cuts out nearly two-thirds of people as a result, because the crucial point is that the evidence will be generated when people come forward—that is, when they seek an injunction, turn to their GP or decide to go to a refuge. It is when the evidence arises, not when the abuse occurs, that indicates the start of the time limit.
I stress again how far the Government have moved on this issue. We now have a system which will genuinely and generally ensure that victims of abuse get legal aid in these private family cases. We have accepted the ACPO definition of domestic violence—indeed, we have gone beyond that. We have significantly expanded the range of acceptable evidence and doubled the time limit. There is one in-built safety mechanism in the form of “finding of fact” hearings, and of course there is a second safety mechanism in the form of exceptional funding, for the more unusual cases. So I think we have now got this right. I want to pay tribute to those across the House, not least to the noble and learned Baroness, Lady Scotland—I know her well and I know her deep concern on this issue.
For the sake of completeness, I should add that we cannot accept that the evidential requirements should be in the Bill. Legislation of course needs to be precisely drafted, and because of the level of detail required, the evidential requirements are much better left to regulations, subject to the affirmative procedure, rather than primary legislation.
Sometimes at this Dispatch Box one has to make the government case with a heavy heart. I have looked at this from where we started, where we have moved to, and what we now cover in this very important area. I am proud of what the Government have done in carrying on the broader work against this evil crime, but I am also proud of what we have now finished with in terms of a package to help in this particular case. I hope the House will give us its support. I beg to move.
Motion B1 (as an amendment to Motion B)
Baroness Scotland of Asthal
Leave out from “House” to end and insert “do not insist on its Amendments 192 and 194 and do agree with the Commons in their Amendments 193A, 219A and 220A, and do not insist on its Amendments 2 and 196 but do propose Amendments 2B and 196B as amendments in lieu”
Baroness Scotland of Asthal
My Lords, I move the amendment standing in my name not in any way to cause anxiety or concern to the Minister, or with any lack of appreciation for how far the Government have moved. I say straightaway that I welcome the moves that have been made in the right direction. However, I hope the Minister will forgive me when I say that I regret that such a move was not done immediately and that we have had to wait so long. I hope the noble Lord will not find me ungracious when I say that I would invite him to move a little further. The amendments that have been proposed by the Government widen the evidential gateway provided by the Bill as it stood before: my amendments take it just a little further.
Domestic violence applications are of great importance, not just because they relate to a large proportion of women, but also, as the noble Lord knows, because they affect men and many children. Up to 950,000 children are affected by domestic violence every year. My amendments specifically permit well founded evidence of abuse certified by a court and/or prescribed in regulations to be used in support of an application for legal aid relating to matters that touch on domestic violence. In addition, my amendments provide that no evidence shall be deemed inadmissible on the basis of the expiration while the general limitation period under the civil standard has not elapsed; in effect, moving limitation from the two years provided in the Government’s proposed regulations to six, which I think causes greater consistency.
Your Lordships will know that, in my Amendment 196B, I also seek to extend that more generous time limit to applications made in relation to children’s cases. The House has heard from me, at Second Reading, in Committee and on Report, about the importance of these issues to victims of domestic violence and their children. These amendments are, I respectfully say, vital. They are vital to all victims who may be affected by domestic violence. It is the reality of the domestic violence victim’s life that has to be properly acknowledged. Although I thank the Minister for moving both in scope on the definition and on the definition itself, it is clear from what he said in moving his Motion that the Government do not entirely understand the issues in relation to domestic violence as I had hoped that they would.
The evidential test is there to provide assurance that there is cogent information on which to base the assertions of domestic violence made by an applicant. The evidential gateway is just that: an evidential test to support the definition. The Government seek, on the basis of the amount of money that they have available, to narrow that gateway in a way that denies the reality of many victims’ lives. I would love to be able to say that my fear in relation to these amendments is misplaced. The reason I know that, tragically, it is not, is that I have had the privilege of working in this field since 1977. We know, through experience and the empirical data that we have, the consequence of a narrower gateway because there has been one in the past and we know that lives have been lost.
In many cases, women—I say “women” because 89 per cent of repeat victims are women—will not get the support they need. I will give one example, which has been given to us by St Anthony’s Centre for Church and Industry in Manchester. It relates to a case where a woman had entered into a marriage which was violent and traumatic. She wanted to start divorce and financial proceedings. She did not go to a refuge. She left her home and went to live at her parents’ house. While there, she was not able to work because she used to work for her husband in his business, so she lost her job; she was his bookkeeper. The husband remained in the joint home. He moved his mistress into that home and refused to engage in the divorce proceedings at all for a considerable amount of time. The wife could do very little about it. Eventually, because he would not negotiate and because she had no money and he had a great deal, she went and obtained legal aid to assist her to go back into the house and, if not to go back into the house, to get her just desserts in terms of financial relief. The husband had engaged some very expensive solicitors. She did not have any money to do so. That woman, today, would get legal aid. If your Lordships were to agree with the amendments and pass them in accordance with the Government’s proposal, she would not.
There are other cases. For example, a woman left her husband because of his violence and did not go back. She did not apply for any financial relief or anything at all. She simply wanted safety for herself and her children. Eight years later—way outside the two-year time limit—her husband came to apply for contact with those children. She had not gone to the police. She had not gone to her doctor. She had not gone to a refuge, because she had gone to her mother’s house. Neither had she sought to enter into litigation. But she did not have any money. At the moment, she is able to get legal aid; if these provisions are passed, she will not. I know that the noble Lord would want to provide help and assistance for those sorts of cases, but the current provisions will not do that which the Government purport to want.
Lord McNally
I have never doubted that. It is just that I keep getting nudged when I call someone learned and someone whispers in my ear that they are not.
Baroness Scotland of Asthal
Noble Lords are learned if they are in the Supreme Court or have been a Law Officer. Others, regrettably, may be learned in fact but are not learned in name.
Lord McNally
That helps me a great deal. I shall never refer to the noble Lord, Lord Bach, as learned again.
Lord McNally
My Lords, I have stated as clearly as I can why the Government and the Commons have put forward their reasons. The emotional span of this debate is sometimes extended to question whether we are in favour of victims and their children. The answer is that yes, we are in favour of them. As I said in my opening remarks, this debate is about how and whether and within which ambit we provide legal aid in private law cases. It is difficult to go beyond that into individual cases, which have been cited in debate at every stage. In many of these cases, the suspicion is that they would qualify either by application for an injunction or by a finding of fact by the court. The latter is extremely important in the additional list that we have put forward to qualify people for legal aid.
As I said in my opening remarks, when addressing an issue such as this one, and within the constraints under which the Government are operating, lines have to be drawn. It is legitimate for the Opposition to argue that that line has been drawn in the wrong place or that a time limit has been put in the wrong place. In the end, however, Governments have to make decisions—and we have made decisions. As I said, I hope that the House will look at the decisions we have made and see that we have listened and acted in a way that puts us on the side of victims and their children and that, in practice, those who face the problem of domestic violence and who want to obtain legal aid for decisions in private family law cases will find that the concessions we have made and the rules and the guidelines we have laid down will give the women and children—I accept that there may be others, but mainly women and children—who are affected by this scourge access to legal aid. I therefore ask the House to support Motion B.
Baroness Scotland of Asthal
I am disappointed that the Minister takes that view. As he will know from our previous debates, our assessment is that as a result of the changes that the Government are proposing, 54.4 per cent of victims currently obtaining legal aid and assistance for family proceedings will not be able to obtain such help and assistance in future. Although I absolutely accept that the Government intend, or wish, to be supportive, these provisions demonstrate the reverse—that they will not be supportive. I therefore wish to test the opinion of the House.
Lord McNally
That this House do not insist on its Amendments 3 and 4 and do agree with the Commons in their Amendments 4A and 4B.
Lord McNally
My Lords, we now turn to Motion C and to Amendments 3 and 4, tabled by the noble and learned Lord, Lord Pannick. The noble Lord is not learned, is he?
Lord McNally
The noble Lord’s amendments concern the independence of the director of legal aid casework. I am confident that we all share the sentiment that the Lord Chancellor should have no involvement in a decision about legal aid funding in an individual case. However, I share the view of the House of Commons that this amendment has undesirable and unforeseen consequences and that it is possible to provide the assurance and protection required without adopting the amendment.
The primary concern with these amendments is that they would have the effect of preventing the director being appointed as a civil servant. It is our strong view that the director will enjoy full independence from the Lord Chancellor yet can be appointed as a civil servant. For the avoidance of doubt, we are abolishing the Legal Services Commission and creating a new executive agency to provide Ministers with greater policy control and improved accountability for legal aid. Giving full independence to the director would run entirely contrary to this intention.
Clause 4 already provides protection in subsection (4) with a statutory bar on the Lord Chancellor’s involvement in making funding decisions in individual cases. The Bill also imposes a duty on the Lord Chancellor to publish any guidance and directions issued to the director, thereby providing transparency. Noble Lords will recall from Report stage that we amended the Bill to offer greater transparency by requiring the director to produce an annual report for the preceding financial year on the exercise of their functions during that period. This report will be laid before Parliament and published.
Lord Pannick
My Lords, together with the noble and learned Lord, Lord Woolf, and the noble Lords, Lord Hart of Chilton and Lord Faulks, I tabled the amendment on the independence of the director that was approved in this House. I thank the Minister and the Government for listening on this important subject and for including in the Bill, as the Minister explained, a reference to the independence of the director, which will give great comfort to all those who will be involved in the administration of this legislation.
Although these are matters of constitutional principle, they can be addressed by compromise, I am happy to say. I very much hope that the Government will be able to adopt a similarly conciliatory approach to the amendments that your Lordships’ House approved earlier this afternoon. I thank the Minister.
Lord Beecham
My Lords, tempting though it is to regard the notion of an entirely independent civil servant as somewhat oxymoronic, I echo the remarks of the noble Lord, Lord Pannick, and welcome the fact that the Government have moved sufficiently to meet the considerations that were advanced on Report. We are glad to be able to conclude these matters, and look forward very much to seeing precisely how the system works in practice.
Baroness Northover
That this House do not insist on its Amendment 24 to which the Commons have disagreed for their Reason 24A.
Baroness Northover
My Lords, noble Lords gave great attention to this issue in earlier stages. I hope that the discussions that have resulted, both within and outside the Chamber, have helped to reassure them.
I begin by saying that the Government have always agreed that telephone legal aid advice will not be suitable for everyone. That is why there will be exceptions to having to use the gateway to apply for legal aid—for example, for emergency cases. Those who are eligible for legal aid will be assessed on a case-by-case basis to identify whether they are suitable for telephone advice.
A key consideration in assessing suitability for receiving advice over the telephone will be whether a caller is able to give instructions and act on advice over the telephone. Trained and skilled assessors will assess this suitability, and a range of reasonable adjustments and service adaptations will also be available to assist callers in their contact with the gateway.
The gateway, based on the existing highly successful Community Legal Advice helpline, will be a two-stage process—not just, as some have called it, a “call centre” service. It may help noble Lords if I briefly set out how the process will work in practice.
Stage one: when applying for legal aid in one of the areas of law subject to the gateway, trained and skilled telephone operator service staff will engage with the caller to identify their problem and eligibility for legal aid, giving the caller the time needed to explain their problem. Organisations such as the Samaritans have contributed to training for current operator service staff. These staff will not provide legal advice, but will route clients to sources of help. If the problem is in an area of law subject to the gateway, the client will be transferred to a legally trained specialist for telephone advice.
In the second stage, as now, under the current Community Legal Advice Helpline contract, where an eligible caller is transferred to a specialist, legally trained telephone adviser, that adviser will speak to the caller to assess their needs, including their suitability for telephone advice. Where it is clear, having regard in particular to whether a caller is able to give instructions and act on advice over the telephone, that face-to-face advice is needed, the client will be referred to a face-to-face provider. I ask noble Lords to note that both the telephone operators and specialist telephone providers will have ongoing training, including awareness of different vulnerable callers, such as those with mental health issues and learning difficulties.
The Government have engaged and will continue to engage with stakeholders, including equality groups, to identify any additional reasonable adjustments for callers with specific needs. For those with little or no spoken English, a free three-way translation service in 170 languages can assist engagement with the gateway. Few face-to-face providers could offer this extensive range of languages. A third party, including a family member or advocate, can contact the gateway to speak for a person or help them explain their problem. To minimise costs, all potential callers can contact the gateway by mobile phone text or the internet to ask for a call back, and all callers can ask for a call back, too.
The use of new technologies such as Skype and webcam—wider than for just the British Sign Language service—are being investigated to enhance the service further. There will also be a service enabling an individual to contact the gateway by secure e-mail. The Government will raise awareness of the gateway to users, including the services and support it offers and we will also be monitoring its operation from day one of implementation and engaging with those using it to ensure that needs are indeed met. As we have also stressed, there will be a review of its implementation and operation, and the report of that review will be published. This will happen within two years of the implementation of the gateway and before any decision about any possible extension of the gateway to other areas of law is taken.
The Government are confident that a mandatory gateway can facilitate efficient and prompt access to legal advice, including advice for those vulnerable people in need of it. The effect of Amendment 24 and, in particular, the amendment of the noble Baroness, Lady Grey-Thompson, Amendment 24B in lieu, would be to impact severely on the provision of any legally aided advice services by telephone, including the existing Community Legal Advice helpline, the existing criminal defence service direct telephone scheme as well as the proposed mandatory gateway for certain areas of civil legal aid. These amendments are unnecessary and disproportionate to the concerns of the noble Baroness, which previously have centred on the mandatory gateway and vulnerable people.
Amendment 24B would require every eligible client to receive face-to-face advice, regardless of their particular circumstances or personal preference. This would result in a very inflexible system that would invariably introduce a delay in clients receiving advice as not only would they have to locate a suitable provider, they would also need to contact them to make an appointment to see them. No longer, for example, would a client be able to make contact with and discuss their problem at a time and place convenient to them.
Noble Lords have already acknowledged the effectiveness of telephone advice itself. On 20 December, the noble Lord, Lord Bach, described the Community Legal Advice helpline as excellent and he was sure that noble Lords would be glad to see its work continue and expand. However, such a requirement would invariably mean the end of any telephone advice as it would be highly unlikely that any individual who has explained their problem to a face-to-face advice provider would then choose to switch to a different telephone advice provider at a later stage.
Not only would this amendment have the potential to eliminate all the savings from the gateway, it could add about £4 million to the legal aid bill for criminal cases and additional cost to civil legal aid for additional face-to-face advice—advice which is currently successfully provided by telephone. The specific duties contained in Amendment 24B are also unnecessary. I can assure the noble Baroness that the Government have complied with the public sector equality duty under Section 149 of the Equality Act 2010 and we have published an equality impact assessment—at the time of the consultation on the legal aid reforms and at the time of the Government’s response—which includes consideration of the mandatory gateway policy. The public sector equality duty is a continuing one and we will continue to comply with it.
As noble Lords know, under the public sector equality duty it is necessary to have due regard to the need to eliminate discrimination, harassment, victimisation and other conduct that is prohibited by or under the Equality Act 2010, advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it, and foster good relations between persons who share a relevant protected characteristic and persons who do not share it. The relevant protected characteristics for these purposes are age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. These types of discrimination are all defined in the Equality Act 2010 and we are complying, of course, with that. For these reasons, I beg to move.
Motion D1 (as an amendment to Motion D)
Baroness Grey-Thompson
At end insert “but do propose Amendment 24B as an amendment in lieu”
Baroness Grey-Thompson
My Lords, I thank the Minister and his team for meeting with me earlier today and also for the letter I received this morning which laid out, with much greater clarity, issues previously discussed. I believe the telephone gateway will be positive for many people, and perhaps would go so far as to say that, for some, it could be better. I welcome the details of the exclusions that have been given: where there is an emergency; where the client has previously been assessed by the mandatory gateway as requiring advice face to face; where the client has accessed face-to-face advice within the past 12 months and is seeking further help to resolve linked problems from the same face-to-face provider; where the client is in detention; and where the client is a child, defined as being under 18. Some of the reassurances that have been given are positive, but these are really around those with much less complex cases.
In previous debates I have spoken much about the cost to the system and to individuals. and I initially welcomed the call-back system that has been proposed. However, on reflection, I cannot imagine an individual with a complex need or a vulnerable adult requesting this call back on the promise of a return call—there is just too much at stake.
I still have some areas of concern. The first is the continuing use of the word “mandatory”. I know that this is an operational matter; not only does it sound inflexible, it is. There are still many unanswered questions around the number of staff who will be employed, both in the first line and specialist operators, and also the cost. It is to be welcomed that they will be trained in listening, but the areas of law they will need to understand will be extensive and complicated.
The Minister has provided more information on this, and while those who work in the call centre will not be under any time constraint to get through the call, there will be a significant amount of pressure on them not only to guide the client in the right way, but to ensure that the client has understood what they are being told. How will this be measured? Will it be on customer satisfaction, or will the number of cases that progress or do not progress be used in some way?
The Minister in his letter—and I believe this is telling—twice mentions the fact that the key test will be whether the individual is able to give instructions and act on the advice given over the telephone. I am extremely concerned that vulnerable people, with complex problems, will drop out of the system, even if they make it to the first phone call. Just finding the telephone gateway may be a challenge for some. The same can be said of the online form on the DirectGov website. They may not be able to do it themselves, nor find appropriate third-party support to offer help.
I know that the Government are committed to reviewing these operations, and to make adjustments if they are not working correctly, but we could be 24 or 36 months into a new system before the figures are gathered and we understand who has been able to access the right support. It is all well and good that a client who makes it through the first call may be directly transferred to a specialist adviser, I take this to mean within the initial phone call—but I am still unclear about the route through for someone who will be advised to go to a face-to-face meeting. The current system relies on the individual being given three local centres and then making the necessary arrangements, but surely the proposed system should be better than the current one. How will this take-up rate be monitored to ensure that clients have taken the steps they are entitled to, and what are the costs attached to them?
My last amendment was rejected under financial arrangements, because there is a cost to it, but what is the cost of setting up this mandatory telephone gateway and, if vulnerable people are not able to access legal aid, what are the potential costs that could be shifted to other areas such as local authorities or the NHS? I believe a little more flexibility is required to ensure that the most vulnerable are able to access the support they are entitled to. I beg to move.
Lord Phillips of Sudbury
My Lords, I listened carefully to what the Minister said and I am afraid that I am not satisfied that the arrangements she explained are anything like adequate to deal with the more difficult cases that will be presented to those on the telephone lines. Indeed, the problem is that they will not be presented at all. As one who spent a large part of his early days in the law trying to help ordinary people with their so-called ordinary problems, I know that there is much greater difficulty in getting instructions from inarticulate, anxious or unconfident people than well intentioned, middle-class people can believe.
It is simply unrealistic to say that when vulnerable people come on the phone there will be sympathetic people to direct them here, there or somewhere else because they will never get on the phone. The reason is that today the law is so complicated that the kind of people I am thinking about will never get to the point of understanding, in articulate terms or with any clarity, what their problem is. The only chance of them getting to that point will be if they get before a sympathetic person, in a sympathetic context, who has the skill—and it takes skill—to coax out of them just what is the problem. Everyone sitting in this place may say, “Well, for Pete’s sake, they all go to school and have got technology that can do this and do that”, but at least 10 per cent of our fellow citizens are not in that category—they are the most needy people—and a system which fails the most needy 10 per cent is simply unacceptable.
I do not mind how many reviews we have about this, this system will not work for those people. I know it. I worked with the Samaritans for years, and every Samaritan knows that for every one person who comes on the telephone there are many more who never even get that far.
I am afraid to say that I shall be in opposition to the Government’s response to Amendment 24, the beauty of which was that it was the Lord Chancellor’s duty to deal with people’s needs by a range of forms. Such a system would be much more flexible. Indeed, the Minister, quite rightly, said that the need for every person to have face-to-face advice, as is required by subsection (a) of the proposed new clause in Amendment 24B, is too inflexible. However, by the same token, her argument that every case will be dealt with by telephone is too monopolistic and will not work for a very important slice of the population.
I ask all noble Lords to think of someone they know who does not have the confidence to speak up, the analytical ability to know quite what their problem is and certainly not the confidence to use this facility, well intentioned though it is. I hope the Minister will reflect on what I have said and, if she doubts me, talk to others who know more than I. Perhaps she will say in summing up what is now the position with the CABs and law centres. At least they have the facility for people to go in and meet other members of the public who work voluntarily for the CAB and have time. It can often take half an hour to find out what the problem is. Is the funding of CABs and law centres now assured so that they can do that?
Lord Clinton-Davis
My Lords, I agree with what the noble Lord has said. I can remember that many years ago, when I undertook my surgery in my constituency, people came there who were all too often inadequate, vulnerable and inarticulate. I do not know how they could have possibly represented their case on the telephone; they were afraid of the telephone. All I wish to say in my brief remarks is that I have first-hand knowledge of what the noble Lord has said and that what is now being proposed will affect such people. The majority of people who sought aid and assistance that they would otherwise not have received were incapable of representing their perfectly justified remarks.
Lord Wigley
My Lords, Amendment 24B improves on the original amendment rejected by another place in that it specifies the criteria that should be taken into account when determining the client’s needs.
The proposed telephone gateway would simply not be a suitable means for many people to access legal advice. Among the groups which the amendment seeks to protect are those whose disabilities and frailties would prevent them from being able to convey their case across the telephone; those whose first language is not English; and those whose cases are so sensitive that they would be hindered in discussing the details over the phone. That could include clients who have experienced abuse, rape and those with HIV/AIDS conditions.
The Government’s proposals have no regard to the individual circumstances of individual cases. People’s dignity should not be compromised in order to make what are likely to amount to modest savings. Cases should not be unnecessarily prolonged by operators with little or no legal training. The Government should surely listen to the many voices that oppose these proposals and reform this risky scheme.
Lord Low of Dalston
My Lords, I, too, have grave doubts as to whether a telephone helpline of the kind we are talking about can be regarded as fit for purpose if the purpose is to disentangle the client’s case with empathy and give appropriate advice on it. The matter is made worse if use of the telephone gateway is to be made mandatory. There may be a place for a telephone gateway—it can have a role in filtering cases, as the Minister said—but it is surely entirely inappropriate that it is made the sole route to discriminating and informed advice.
This is not a matter of speculation for we have been here before and we know what we are talking about. I am talking about the experience that we had with the student loans company when it took over the administration of the disabled students’ allowance. This was administered by a service staffed by the kind of people who will, presumably, be staffing the telephone gateway. They proved to have little understanding of or empathy with the kind of problems disabled students have and for which they were seeking the support provided by the disabled students’ allowance. In fact they were inclined to make light of them and even suggest that the students were somehow swinging the lead or making unmeritorious excuses for financial support from the state.
Those applying for disabled students’ allowance have much in common with the kind of vulnerable people we are talking about needing help with welfare benefits cases. I would not wish to place my confidence in a service of this kind as the mandatory gateway to legal advice and I do not think the House should either.
Lord Bach
My Lords, it is rather disappointing to have to speak on this subject again. One hoped that the other place might take note of our amendment and carry it through. However, the noble Baroness, Lady Grey-Thompson, has in her usual clear and well expressed way explained that our concern is not with telephone services per se. That is not the point at all. All of us here know the value of telephone services. I saw it at first hand as a Minister and I am delighted that the noble Baroness quoted me in her opening remarks. I hope that that excellent work continues and expands—of course I do.
However, the point is that in a limited range of cases, whether classified by the type of person, such as those with communication problems, or by the type of case, such as very complex cases or cases that require searching through reams of papers to identify the nature of the real issue—a point that was made very powerfully by the noble Lord, Lord Phillips of Sudbury—it is counterproductive to expect someone to go through a telephone gateway. In those cases there should be a provision for face-to-face advice from the outset. That is hardly an unreasonable request. Indeed, it is common sense.
I am not the first and I will not be the last to remind the House that today is St George’s day. Perhaps in rather a laboured way, I make the point that there is an English tradition of pragmatism, flexibility, seeing what actually works in the real world rather than what I fear is behind the Government’s stance: too much inflexibility, a kind of didacticism and, as I have described before using a French expression, a rather dirigiste approach towards this issue. It is an issue that cries out for flexibility and trying various ways to make sure that people who need this help can get it. The noble Baroness made her case very powerfully indeed and other speakers have supported her. I very much hope that we can ask the other House to think again on this.
I end by reminding the House of powerful words spoken by the deputy leader of the Liberal Democrat party in the other place just last Tuesday. He had listened carefully and he said this:
“I was grateful for the Minister’s reassurance, but I have to say that I am not persuaded. Like any MP with a constituency containing people from many different races and backgrounds, with many different first languages, and with all the disabilities that any mixed community has, I simply do not believe that a telephone route into deciding eligibility for legal aid is right for everybody. It may be right for many people, and I understand that it will be a good service, but if we ask constituents such as mine whether they have always been satisfied with the council response line—whether under Labour now, or with us running it, as previously—the answer is always no. That does not change, irrespective of who is running the show. I understand the Government’s position and I hear what they say about a review, although I add a request for the review to be regional as well as general, but I believe that the Lords who pressed for amendment 24 have a well-made case. I shall support the Lords in respect of amendment 24”.—[Official Report, Commons, 17/4/12; cols. 206-07.]
I do not always, or even often, agree with the right honourable Gentleman who I have just quoted at some length, but on this I do agree and I very much hope that the House will too.
Baroness Northover
My Lords, I thank noble Lords for their attention to this very important area and I especially thank the noble Baroness, Lady Grey-Thompson, for her kind words to my noble friend about his engagement with her concerns. I have a note that I need to correct the figure given for the costs of the noble Baroness’s amendment. The costs are likely to be in excess of £20 million per annum for both civil and criminal legal aid—I need to clarify that.
In reaction to what the noble Baroness, Lady Grey-Thompson, said, I point out that stage 1 is where people come in and it is decided whether they need to go through the telephone system. Stage 2 is the detailed case assessment of suitability.
To my noble friend Lord Phillips I point out that the kind of cases to which he points may well be those that are then directed towards face-to-face advice. It is extremely important to bear in mind the flexibility that is built into this system and to contrast that with the lack of flexibility of insisting that the advice is face to face. This system means that when people are taken into the telephone system their cases can be assessed to see whether they are suitable for phone advice or face-to-face advice.
Lord Phillips of Sudbury
I did not explain myself adequately. I was trying to get across the point that people will not get as far as a telephone. That is the problem. Once they are there, I absolutely think that what my noble friend has explained to the House is fine. However, I am talking about the people who, for the reasons I tried to explain, will not have the confidence or the competence to say what their problem is over the phone because it is often so damn difficult to do so.
Baroness Northover
I understand what my noble friend means about getting to that point. I ask him to ask himself how they would get to face-to-face advice. There they are with a major problem. They may very well end up in a CAB, in which case the CAB may assist them in phoning the telephone gateway and may indicate in its call that this is a suitable candidate for face-to-face advice. My noble friend needs to go back a bit and ask how the person who is in such circumstances will access any advice and then see how this may route them through to the kind of suitable, appropriate and flexible advice that I hope I have laid out.
Lord Clinton-Davis
However, where someone is incapable of expressing themselves—I remember having to listen to such a person for more than an hour—would they not be excluded from what is being proposed?
Baroness Northover
Let us assume that that person has come to you as a constituency Member of Parliament—I think that is the kind of case the noble Lord is talking about. Again, the Member of Parliament could phone the helpline and say that, for the reasons given by the noble Lord, in this case the person is likely to need face-to-face advice. If someone else, such as a family member, were to phone up, it would become apparent that the person in question could not do this. For those reasons it becomes apparent that this person is going to need face-to-face advice.
As I said in my introductory remarks, there are clearly cases where, for all sorts of reasons—and noble Lords have experience of these kinds of cases—that person will not be best helped by the telephone. In other cases that might be exactly what a person prefers: the distance of telephone rather than face-to-face advice. They might not be able to get to wherever the face-to-face advice is, or they might find that Skype is what they want to use.
The other point to bear in mind is the provision of language translation. Some 170 languages can be provided on the phone line, and very few CABs or constituency advice surgeries have that kind of provision; so there are certain advantages to that provision that might be of help to other cases. The important thing to remember in all this is the equality duty—the diversity of people and their situations and our obligation to address those needs. Those needs will need to be met in different ways, and that is built into how the system operates. The very fact that the Samaritans have been involved in training the operators is an indication of how seriously we consider the responsibility towards people with those diverse needs. Of course, the Samaritans operate a phone system for their own advice line.
I assure the noble Lord that there will be no restriction on the length of time that a person can speak to a caller. If that is the problem—that it is a matter of time—it will not kick in here.
My noble friend Lord Phillips asked about the Budget, which announced £40 million and £20 million in each of the remaining years of the spending review. I think he sought assurance of provision for the CABs.
I have emphasised how operator service staff and specialist telephone advisers will be trained to be aware of the needs of callers, especially those with mental health and learning impairment problems. There will be reasonable adjustments and adaptations available to assist callers, including provision for a third party such as a family member to call on an individual’s behalf. As long as a person authorises someone to call on their behalf, the third party could equally be a member of a CAB or other support or advice service. If the caller is assessed as unsuitable for telephone advice, they will still have access to face-to-face assistance and be referred directly to that provider. That is an improvement over the current situation, in which they might be given three phone numbers of advisers whom they then have to contact. Again, they have to use the telephone to set up these appointments, whereas with this they could be referred directly to that provider and will not have to find the face-to-face provider themselves from those phone numbers, and those providers will have to make contact back to the person.
Noble Lords might bear in mind how flexible the system is within the new arrangements. In December, the noble Lord, Lord Bach, referred to the satisfaction rates with both the existing community legal advice helpline operator service and the specialist telephone advice service; 96 per cent of respondents found the operator service helpful, and the 2010 survey of clients advised by telephone showed that 90 per cent of respondents found the advice provided helpful. That is a very encouraging response.
As I emphasised, and as we will continue to emphasise, we will keep this under review so that we can make sure that it is working as effectively as possible. As my noble friend Lord McNally assured the House, I assure noble Lords that the telephone gateway will apply initially to only a limited number of areas of law and will be monitored from day one. Noble Lords have picked up on the review, but I assure them that we will keep a watching brief over this from the very beginning to make sure that it is working well. The engagement with stakeholders that has already taken place and the need to make sure that everyone’s needs are addressed is a reflection of that. I can give that further assurance.
I hope that noble Lords will support the Government in this area.
Lord Phillips of Sudbury
I am sorry to interrupt my noble friend again, but can she tell the House that the review will be undertaken by an independent experienced reviewer?
Baroness Northover
My noble friend assures me that we will review how this is working and publish the findings. I am sure that noble Lords will scrutinise that with the greatest of care. I reiterate that the operation of the system will be monitored from the very beginning. Therefore, noble Lords do not need simply to wait for the review at the end of two years to make sure that this is working in the way that we trust will assist people, as opposed to raising the concerns that noble Lords have expressed. I hope that the noble Baroness will be able to withdraw her amendment.
Baroness Grey-Thompson
I thank noble Lords who have taken part in this afternoon’s debate, in particular the noble Lord, Lord Phillips of Sudbury. Not for the first time, I wish that I had trained in the law rather than doing a politics degree. I accept that my wording could be slightly better but, as the noble Lord, Lord Wigley, said, it has been improved since the last time I moved the amendment.
It seems that we are stuck in two slightly inflexible viewpoints. I wholeheartedly agree with the noble Lord, Lord Low, when he says that there is a place for a gateway. However, I also believe that there is a place for something else to help the most vulnerable. One idiosyncrasy of this system is that an individual could go into a citizens advice bureau and ask for help but be told to ring a phone number and be sent away. In an ideal situation, that person would be able to stay in the citizens advice bureau and make the call from there, and could even have that third-party support. If they are sent away, they may take that to mean that they are not eligible or that they do not understand some of the issues.
I thank the noble Baroness, Lady Northover, for her comments. It is probably not the right time to debate this, but now that we have a system that can be accessed on the internet through www.directgov.com or by Skype and through phone calls—there is information coming back and forth—I wonder whether there are not almost too many options for people. Perhaps a gateway and the potential for a face-to-face interview might be the simplest way to do it.
I go back to the point made by the noble Lord, Lord Phillips of Sudbury. I am sure that everyone in your Lordships’ House knows one, two, or maybe more people who would struggle to make that first contact and might drop out of the system, finding it too much to cope with, and would therefore not be able to access the help that they need. So as much as there has been some positive movement today and some very positive comments, I am not reassured that the most vulnerable would be supported through this system. Very reluctantly, I wish to test the opinion of the House.
Lord McNally
That this House do not insist on its Amendment 31 to which the Commons have disagreed for their Reason 31A.
Lord McNally
My Lords, when we were opening this debate the noble Lord, Lord Alton, intervened to make the very valid point that it was only by him raising the issue of mesothelioma in debate in this House that this important issue has received the attention that it deserved. I pay tribute to him, having known him for a long time as an adept campaigner. Whatever happens, he can take great credit for the way that he has focused attention on this terrible disease. As with some of our other debates, however, this is not about whether you are in favour of or against mesothelioma victims. This is a debate about how our legal system is being reformed.
We are implementing fundamental reforms of conditional fee agreements, or CFAs, following the recommendations in Lord Justice Jackson’s review of civil litigation costs. The current regime allows for risk-free litigation for claimants and substantial additional costs for defendants. We want to restore a fair balance to the system, with meritorious cases being brought at proportionate cost. We are therefore abolishing recoverability of success fees and “after the event”, or ATE, insurance premiums. These reforms are intended to apply across the board and will cause a real shift in our society’s approach to litigation.
That is the general case, and it is important not to lose sight of it in considering respiratory disease claims, mesothelioma claims or others, but I want to repeat some specific points about mesothelioma. No one is suggesting that these tragic cases are contributing in any way to what has been described as a compensation culture—this is a horrible disease which acts very fast, and that suggestion has never been any part of my case in putting forward the Government’s position, as noble Lords know. It is a horrific disease and we have nothing but sympathy and compassion for its victims. Recent Governments of all colours have taken measures to help claimants in these cases, and this Government are continuing that work with due urgency.
Lord Alton of Liverpool
Leave out from “House” to end and insert “do insist on its Amendment 31”.
Lord Alton of Liverpool
My Lords, before the vote on 15 March on Report, a cross-party group of 18 Members of your Lordships’ House signed a letter urging us to defend the rights of mesothelioma victims. The House subsequently voted by a majority of 31 in favour of that amendment, which enables victims of asbestos to keep 100 per cent of their much-needed compensation. The amendment adds nothing to the public purse—that is why there is no financial privilege claim against it—but it seeks to support terminally ill victims of mesothelioma and their families.
All sides of your Lordships’ House have agreed that such cases are, as the Minister has just reiterated, not part of a compensation culture. No one has been able to give any examples of fraudulent or frivolous claims, and nothing that the noble Lord has said today would dispute that. Indeed, at no stage during our proceedings has he ever either asserted or implied that. However, I was concerned to see that the Minister in another place, Mr Jonathan Djanogly, in disputing this amendment, said that the current regime,
“was meant to promote access to justice but has frequently ended up as something of a racket allowing risk-free litigation for claimants, inflated profits for legal firms, and punitive additional costs for defendants”.—[Official Report, Commons, 17/4/12; col. 265.]
I wonder what the noble Lord has to say in contradicting that assertion made in another place. The Minister there was challenged to name one case where a mesothelioma victim had taken an unreasonable or vexatious case to court. He chose not to do so. On reflection, I am sure that he would want to reconsider linking bogus claims to the issue of mesothelioma.
The Minister then said two other things which I ask the noble Lord, Lord McNally, to ask his right honourable friend the Justice Secretary, Mr Kenneth Clarke, to ponder. One was the suggestion that people dying of mesothelioma should be “watching the clock”, which is a phrase that was used in the other place—in other words, policing what lawyers are charging. He said that,
“it is quite right that someone who employs a lawyer has some idea of what is on that lawyer’s clock and what they are charging. That is very important. If someone is sick, they will have family who can help them through their sickness”.—[Official Report, Commons, 17/4/12; col. 268.]
I suspect that when you are dying, especially from a debilitating and excruciatingly painful disease, you may have other things on your mind than watching the lawyer’s clock. As one widow put it:
“Mesothelioma sufferers are in constant pain and always fighting to breathe, they suffer horrendously and they and their families are traumatised at what the future holds”.
She also said:
“Whilst you are trying to cope with the physical and emotional trauma that comes with the words, terminal illness you cannot contemplate the extra worry and anxiety that claiming compensation would bring”.
It is also erroneous to suggest that everyone has relatives to fight their corner for them. Even if they do, should that be their primary concern when a loved one is in the last few months of their life? It is not the job of someone dying of mesothelioma to become the Government’s regulator or watchdog, watching the clock or challenging exorbitant legal fees. That is the job of regulators, not victims of a lethal industrial injury.
The Member for Wythenshawe and Sale East, Mr Paul Goggins, who kindly shepherded this amendment in the Commons, asked with great clarity:
“How can the Minister expect such victims and their families—people who have received the diagnosis and know that they are going to die—to shop around for the cheapest possible lawyer when they need every ounce of their energy to fight their disease?”.—[Official Report, Commons, 17/4/12; col. 278.]
Although our amendment was rejected in the Commons, it once again enjoyed all-party support and the government majority was one of the smallest since coming to office. That underlines the crucial role of your Lordships’ House in scrutinising legislation, especially on a day when the House is once again being told that it must be reformed. It is worth noting, as I did earlier in an intervention following the remarks of the noble Lord, Lord Higgins, that this issue was not even debated in earlier Commons stages. Our Lords amendment gave the Commons its first opportunity to consider an exception for those who had no chance of surviving their illness and little hope of seeing justice done in their lifetime. It is not a bad illustration of what one national newspaper described as “the conscience role” frequently played by this House and how it scrutinises and examines details of legislation and its effects. When an issue of this importance, affecting thousands of terminally ill people can be overlooked at Second Reading and then caught by a guillotine at Committee and Report stages, leaving it completely undebated, that raises some serious questions about which House is most in need of reform.
By sending this amendment back to the Commons, it finally allowed a one-hour debate to occur last Tuesday, although the Member for Scunthorpe, Mr Dakin, was at the very beginning of his remarks when the guillotine fell and we never got to hear what he wanted to say on behalf of his constituents. Other honourable Members of the House of Commons also hoped to speak but were unable to do so.
In the Division which followed, Conservative and Liberal Democrat Members of Parliament were among those who voted for the amendment. The speech by Tracey Crouch, the Member of Parliament for Chatham and Aylesford, who previously worked in the insurance industry, is especially noteworthy. She said:
“It is not my insurance background that drives my real interest in this issue; it is on a constituency basis that I care most. Medway has been highlighted as a hot spot for mesothelioma, which is unsurprising given that the towns have historically provided the industrial hub for Kent, and that the Chatham dockyard was one of the biggest employers for many decades”.
Supporting her, Andrew Bingham, Conservative Member of Parliament for High Peak commented on the all-pervasive nature of this pernicious disease. He said:
“My constituency, like that of my hon. Friend, has a higher than average incidence of mesothelioma. We have no shipbuilding, but there has been significant employment in other asbestos-related industries across the High Peak.—[Official Report, Commons, 17/4/12; col. 271.]
Unsurprisingly, with 30,000 deaths thus far, and many thousands more to come, many honourable Members talked about their own experiences in dealing with asbestos-related cases, and there was a series of very well made speeches. Mr Andy Slaughter, the Member of Parliament for Hammersmith, reminded the House of Commons that it is misleading to suggest that victims would be better off as a consequence of a 10 per cent uplift if some victims were to lose up to 25 per cent of their damages. He said:
“The Government have refused to reduce base costs for lawyers, which would be the obvious way to stop inflated costs. Instead, they are going after victims’ damages. The beneficiaries of all this will be the defendants and their insurers. They will have significantly reduced liabilities if they lose”.—[Official Report, Commons, 17/4/12; cols. 269-70.]
Tracey Crouch said:
“I note the Association of British Insurers is warning that mesothelioma sufferers might not benefit from those reforms if the amendment goes through. I do not believe that, and I want to issue the counter-warning that, on fatal industrial diseases such as mesothelioma, the Government will be judged on what they do to help victims, whether through financial or other types of support.—[Official Report, Commons, 17/4/12; col. 272.]
I spoke to Tracey Crouch earlier today and she told me that if we send this amendment back to the House of Commons she will persist in championing it. The reason why Members feel so strongly was summed up very well by Mr Ian Lucas, the Member of Parliament for Wrexham. He is a lawyer and said:
“I am a solicitor, and I did not go into the law to take damages away from a dying person, pending the outcome of a claim”.—[Official Report, Commons, 17/4/12; col. 275.]
Finally, in resisting the amendment in the Commons, Mr Djanogly said that if it were passed,
“claimants in mesothelioma cases would have an advantage over others”.—[Official Report, Commons, 17/4/12; col. 268.]
An advantage over others? It is hard to think of many advantages enjoyed by victims of mesothelioma. That was an ill-judged and insensitive remark.
The Minister argued that it would be unjust to single out one class of claimants for exemption. Of course it is never possible to do what we would like for everyone—I fully accept that—but does that mean that we can never see the difference between one category of victims and another? Is there not a difference between someone lodging a claim for whiplash and someone who has contracted a terminal illness? Are we really incapable of prioritising or seeing grounds for exceptions, as we have now, for instance, in medical negligence cases—and rightly so?
Noble Lords should recall that mesothelioma has attracted more legal challenges to limit liability for compensation than any other disease. Exceptionally, mesothelioma has a latency period of up to 60 years. It is a fatal disease; there is no cure. No industrial disease places claimants in such difficult circumstances when facing the stress of taking legal action.
It is moving to reflect on the comments of the late Lord Newton of Braintree, who was one of the key supporters of this amendment. Lord Newton, a former Secretary of State, Minister for disabled people and Leader of the House of Commons, referring to victims of asbestos exposure, said:
“I have some experience of claims relating to that disease—or rather to mesothelioma … I think there is a real case for wondering whether we should not maintain assistance to that group of people … this condition is what you might call very slow burn. Exposure to asbestos that occurred very many years ago may give rise much later to mesothelioma, one of the nastiest forms of cancer”.
He concluded by saying:
“I hope my noble friends on the Front Bench will not consider that this amendment would have a scattergun effect but that it is well targeted and deserves careful consideration”.—[Official Report, 30/1/12; col. 1359.]
In a letter to the Times from my noble and learned friend Lady Butler-Sloss, the noble Baroness, Lady Finlay, the noble Lords, Lord Beecham and Lord Avebury, and myself and others, we remarked on the creation of an exceptional injustice if this amendment is not supported. We said:
“Asbestos victims should not, and financially cannot, subsidise other claimants’ access to justice, nor can they afford to defend test cases run by rich insurers”.
The letter urged Parliament,
“to protect asbestos victims from a gross injustice”.
Following the Commons debate, I am glad to say that the noble Lords, Lord McNally and Lord Freud, held talks last week with the right honourable Member for Wythenshawe and Sale East, Mr Goggins, and me. They are actively trying to find ways forward and I welcome that. As one can imagine, we were treated with characteristic respect and understanding. The movers of the amendment made it clear to Ministers that we are looking for a constructive outcome. If it comes to a Division, I hope that the House will continue to support the amendment while we continue to seek an agreed way forward. Society owes a huge debt to those who are now losing their lives to this terrible disease. Thousands of people will lose their lives in decades to come as a result of criminally negligent exposure to asbestos long after the dangers were known to government, industry and health and safety enforcement agencies. I hope that noble Lords will join me in keeping this issue in contention until a just solution is achieved. I beg to move.
Lord Avebury
My Lords, I join my noble friend Lord McNally in paying tribute to the noble Lord, Lord Alton, who has fought so tenaciously for the rights of mesothelioma victims and their bereaved families over many months and previously, before we got to these debates. I know that he has always espoused their rights and tried to do the best that he could for them. I also thank my noble friend Lord McNally for what he said about the Government’s intentions, the programme for settling cases without the necessity to go to court and the development of a scheme analogous to that which operates in the case of motor accidents where it is impossible to find the insurer. I welcome those moves but they are not in any way in conflict with what the noble Lord, Lord Alton, proposes in his amendment.
The arguments in favour of the amendment have been covered exhaustively in both Houses and I do not propose to repeat any of them now. I will say only that it is incomprehensible that, in the face of near unanimity on all sides among those who have spoken in those debates, the Government are still unwilling to give way. The argument that the amendment undermines the principle that in CFA cases the success fee and the ATE are to be paid by the winning claimant is destroyed by the concession that has been made on clinical negligence cases.
In moving to reject the amendment in another place, Mr Djanogly said that it was unnecessary because there was nothing in the Government’s proposals to prevent cases being taken or those affected receiving appropriate damages. If he had read the evidence that was provided by the Asbestos Victims Support Groups Forum UK, he would know that that was not true because many victims have said that they would not have brought cases if they had known that the success fees and ATE insurance would be deducted from the damages awarded. The Minister did not reply when asked directly by Kate Green whether he accepted that some cases would go unrepresented and unpursued.
Secondly, he trotted out the argument of inconsistency. Throughout these debates we have been perfectly clear in saying that we wanted to make an exception for the victims of what is universally acknowledged to be a particularly horrible disease that is invariably fatal, and the majority who voted for it were fully aware they were making an exception to the general pattern of CFA cases. The Minister then insinuated that the claims dealt with in the amendment were part of the compensation culture—an infamous suggestion when we are talking about people who are terminally ill. He went on to say that the Government were not persuaded that these cases were substantially different from other personal injury cases. I question whether he bothered to read our debates or has any knowledge of the ordeal that is experienced by mesothelioma sufferers in the final months of their lives. This is graphically described in the evidence submitted by the victims and relatives’ organisations, and known about directly by many past and present honourable Members from testimony that they received at their advice bureaux.
Finally, the Minister said that the Government were determined to bring down the cost of litigation. Let us be clear that, as my noble friend Lord McNally acknowledged, in this amendment we are talking about whether the claimant or the defendant pays the success fee. No cost to the taxpayer arises.
In another place, five Conservative honourable Members defied the Whip by voting for the mesothelioma amendment and several others abstained. It can be assumed that if it had been a free vote, the other place would have upheld the amendment and we would not be debating it today. It is only right that we should give them another opportunity to set aside the callous treatment that the Government have insisted on all along, and to substitute what we all know is the fair and compassionate answer.
Lord Morris of Aberavon
My Lords, I add my support to the noble Lord, Lord Alton. As constituency MPs, many of us saw cases to do with this very issue and the difficulties that some of our constituents had in establishing liability after years of contact. I added my name to the noble Lord’s original amendment and heard his speech then, which set out the case admirably. I congratulate him on continuing to expose such an injustice. At this late hour, all I wish to say is that my support continues and I hope that the noble Lord will succeed.
Lord Thomas of Gresford
My Lords, why success fees should be claimed at all by lawyers in this type of case just defeats me. The problem is in identifying the insurers of a particular firm that may have exposed the sufferer to asbestos many years before. I am delighted to hear that discussions are afoot on setting up a scheme akin to the Motor Insurers’ Bureau, whereby insurers come together to meet the damages and costs of a sufferer who cannot identify a particular insurance company behind his former employer. I hope that comes to pass. If it does, it will cure a lot of problems. It is obvious when a person suffers from mesothelioma; you do not have to prove that someone is suffering from this condition.
As a result of the Supreme Court’s decision last year, it has to be shown only that an employer has exposed an individual to asbestos in the past for that individual’s claim to succeed. The statistics show that these cases settle. What does that mean? It means that the fees of the lawyer are not at risk; he will have his ordinary fees paid by the insurer. Therefore, why should he get a success fee over and above that? On Report, I proposed that there should certainly be no success fee payable if a case settles before steps are taken to bring it to trial. I ask the Minister to take this into account when regulations are drawn up under what will be Section 46. The lawyer is not at risk. He has done nothing to earn more than the fees that he can properly charge. We did not have success fees in the past. We acted for people and, if we lost, we did not charge them. When we won, we got our costs and the expenses that we had paid from the other side, properly taxed. That was how the system worked.
I hope that the Government can bring in a combination of the Motor Insurers’ Bureau scheme for this type of case and couple it with regulations that say that no success fee should be charged when a case settles. That would do a great deal to alleviate the problems of which the noble Lord, Lord Alton, speaks. He is right. I stand along with Ian Lucas, my Member of Parliament in Wrexham, who as a lawyer says, “We didn’t come into this profession in order to take money from injured people”. I think that only a heartless claimant’s solicitor would charge a success fee in cases of this nature.
Lord Howarth of Newport
My Lords, I have no doubt at all about the sincerity of the noble Lord, Lord McNally, and the compassion for victims of mesothelioma that he expressed at the outset of his speech. None the less, he felt that he must advise the House to reject the amendment so powerfully moved by the noble Lord, Lord Alton of Liverpool.
I say to the Minister that there is no virtue for the Government in dogmatic consistency. I believe that they would do themselves good and, much more importantly, they would do a great deal of good for those diagnosed with mesothelioma, as well as their families and dependents, if they would agree to make an exception in this instance. If they were to do so, it would not create a permanent anomaly, and in the short term I do not believe that it would undermine the central principles of the Government’s reforms because they are absolutely secured in the legislation that Parliament will pass. In any case, the Minister need not fear because this is a category of cases that is going to reduce in number over time. Mesothelioma is, I understand, exclusively associated with exposure to asbestos. All too belatedly the terrible damage that asbestos can do to human health was recognised, and for some time due to regulations and industrial practice there has been no further exposure of people to this hazard. We can foretell with confidence that this category of cases will dwindle and, I think, disappear. Therefore, the Minister need not worry that there will be a permanent anomaly. I say to him that he does not need to persist in a doctrinaire position which runs counter to his own very real human sympathies.
Lord Faulks
My Lords, what was said in the other place about there being some advantage, as the noble Lord, Lord Alton, said, in any case of mesothelioma was most unfortunate and was, I hope, a simple slip of the tongue. Using this appalling disease to give an example of the compensation culture was equally ill advised. It plainly is not.
There is no dispute about the diagnosis of mesothelioma on any occasion. However, this is part of Part 2 of the Bill, and Amendments 31 and 32 have the effect of undermining the structure of the Bill. Part 2 was the result of Lord Justice Jackson’s report and represents an attempt to remove some of the more unattractive and, frankly, almost iniquitous aspects of the system that had grown up as a result of the changes unleashed by the previous Government’s legislation. The fact that this amendment would create an exception to this new, much fairer and proportionate system is not of course itself a reason for objecting to the amendment if it would be a denial of justice to these very deserving cases. There is no doubt that they are highly deserving cases and that they need compensation quickly. The Government have announced that there will be an increase in general damages by 10 per cent. I have to admit that I remain somewhat queasy, in common with other noble Lords, about the 25 per cent success fee that will be paid to successful lawyers in these cases, but the Government have said—and I think they are right—that the competition for these cases is such that they cannot imagine that those lawyers will insist on their success fee. A number of experienced lawyers are well geared up to taking these cases, as they have done over the years, and I very much doubt that they will want a success fee. They are, after all, as the noble Lord, Lord Thomas, said, lawyers who will recover the costs to which they are entitled. If those costs are not agreed, they will be entitled to have them assessed by a costs judge, and in due course qualified one-way costs shifting should assist.
Lord Carlile of Berriew
My Lords, the noble Lord, Lord Alton of Liverpool, has made a very persuasive case for those who suffer from mesothelioma. Part of that case is that he believes—and he has much support for this—that there will be sufferers from mesothelioma who will not be able to recover damages unless the amendment that was previously passed remains in the Bill. We have just heard from an expert on personal injury cases—my noble friend Lord Faulks—who has expressed the contrary view. He said that lawyers will be prepared to take these cases because they are not very difficult to prove and that there will be no deficit for potential claimants if the amendment is not restored to the Bill. That leaves those of us who are genuinely interested in knowing the truth about these claims on the horns of a dilemma. Given that there is no claim of financial privilege in relation to this amendment, the answer to that dilemma is extremely important.
Therefore, I, for one—and I am sure that other noble Lords around the House share this view—would be grateful if in replying to this debate or at some point during the debate the Minister could tell us whether the department has made an assessment of this problem. What is the department’s view? Does it accept that cases will not be brought if the amendment is not restored to the Bill? If so, there is a very powerful case for an exception, as otherwise people will be denied justice for an extremely serious illness by reason of what I think the noble Lord, Lord Howarth, called dogmatic consistency. I share his view that dogmatic consistency is not a necessity for any Act of Parliament. Indeed, one has only to examine half a dozen at random to see how little dogmatic consistency there is in Acts of Parliament. Therefore, I hope that the Minister will give us that information during this debate so that we can make an informed judgment in deciding whether to vote and, if so, how.
Lord Wills
My Lords, the case for this amendment was powerfully made in this House last month and in the other place last week, and I rise now briefly to add another voice in urging Ministers to think again, even at this late stage, and to try to find a constructive solution to this issue.
Before coming to your Lordships’ House, I was an MP in Swindon. Because of that town’s industrial history and particularly because of the large railway works, which employed many thousands of people over many years, this illness was known locally as the Swindon cancer. I, too, thank the noble Lord, Lord Alton, for his sterling efforts on behalf of all my former constituents who have suffered from this terrible disease and, I am afraid, will suffer from it in years ahead.
Ministers have claimed that it would be wrong for various reasons—I understand and completely accept what the noble Lord, Lord McNally, has said about this—to make a special case for this one disease. The fact, however, of this disease’s particular virulence, that it is inevitably fatal, that it progresses with terrifying speed, that it is hard even to find palliative care for it once it has taken hold, all argue powerfully for it being just such a special case.
It is unconscionable to force sufferers from this terrible disease, and their families, at a time when every hour is precious to them, to go through the processes required by this Bill to secure the compensation to which they are entitled. Those are fundamental points for me—whether they can secure lawyers and whether success fees are to be secured for the lawyers. Every hour is precious. The people who are diagnosed with this illness have months and sometimes only weeks to live. We should not force them to go through the processes required by this Bill.
As my noble friend Lord Howarth has already said, accepting this amendment would do no damage to the fundamental principles behind the Government’s reforms of the legal aid system. It is the only decent thing to do.
Lord Bach
My Lords, it is the Opposition’s view that there should be no moneys taken from victims’ damages in these cases. That is the basis of our view. So we speak in favour of the amendment that has been so well moved.
There is a great feeling across this House that we have to protect victims of industrial disease and ensure that they and their families are not victims once again of reforms that are there to deal with dodgy whiplash claims and motor insurance premiums. In another place, as we heard this evening, there was a very powerful and intelligent debate on this subject. Those who often express the view that debates in this Chamber are always of a superior nature to those of another place should read Hansard carefully and look at what took place in that very short hour towards the end of Tuesday last week. It was a very good debate.
Honourable Members on all sides of the Chamber spoke with passion, knowledge and experience about this subject. Not least was Ms Crouch, a former insurance executive, who criticised both her Minister and the Association of British Insurers for their stance on these amendments. Indeed, as I understand it, she has spoken to the noble Lord, Lord Alton, today and has also put out a press release. I am delighted that a number of Members of Parliament on all sides who spoke in that debate are listening to our debate this evening.
I could also mention Mr Andrew Percy who represents Brigg and Goole, which noble Lords will know is famous for its historic shipbuilding past, and Mr Andrew Bingham, the MP for High Peak, an area that also has a high incidence of asbestosis. They spoke against the Minister’s proposals and, to their credit, voted in the Opposition’s Lobby. Their concern was perfectly understandable. Why on earth, with absolutely no savings to the state, are we reducing the amount of money that victims get from those who harm them, while handing that money to lawyers or insurers instead? Those Members on all sides who voted were not persuaded by the stupid assertions—if I may call them that—of the Minister in the other place that industrial disease sufferers should be treated in the same way as an organised gang faking whiplash injuries for payouts or someone lying about a slip or a trip on a pavement crack. Again and again, the other place heard stories of horrific suffering of victims—and the fact that you simply cannot fake cancer of the pleural linings, peritoneum or cardiac sheath.
The history of asbestos-induced diseases—and, indeed, general industrial diseases—is not a proud one for the insurance industry. It knew for decades that asbestos killed before it acted and only then at Parliament’s promptings. Insurers have fought cases—to the death—trying to get out of paying just awards to genuine victims. There is a long history of insurers fighting claims until after the death of the claimant. It is in part thanks to their tireless lobbying that compensation levels in England and Wales are not by any standard generous in cases of this kind. They are forensically calculated to reflect pain, suffering and loss of amenity and costs of past and future losses. They are far less than victims receive in comparable jurisdictions. For example, Mealey’s Litigation Report in 2007 maintained that the average jury award in the United States for mesothelioma was $7.5 million—the average award here is £65,000. Of course, the differences between jury and judge-calculated awards and our judicial systems apply, but there is a huge difference.
No one could argue that the damages victims of this disease receive are very great; they should certainly not be eaten into in the way that this Bill, if allowed, would permit. We start from a low baseline before we even consider docking damages to prevent these claimants coming forwards.
Lord Thomas of Gresford
Does the Minister not support my argument that it is better that there should be no success fees at all, rather than that success fees should be claimed against the insurers, which is what this amendment amounts to—in other words, a continuation of the current system? Does the Minister not agree that in these cases, which are easy to prove once you establish the insurer, success fees are really irrelevant?
Lord Bach
I am grateful to the noble Lord again for calling me the Minister—it is a couple of years, I think, since that was the case. I take his point though; it is a serious point. I am not convinced that lawyers who take up these cases, if this Bill in its present form becomes law, will not take success fees. In fact, I am pretty certain that they will. I cannot see why they would not. It may be a shame, but in the reality of the legal world, if they are entitled to take success fees, they will do so.
Lord Faulks
Does the noble Lord have any basis for saying that other than simply speculating?
Lord Bach
I certainly do not have the experience of the noble Lord in this area of the law, but with the greatest respect I ask whether his view is not as speculative as mine. We just do not know, but I would have thought that the history of legal proceedings of this kind is that where success fees are available they will be sought. Maybe not always up to 25 per cent, but they will be sought.
Lord Thomas of Gresford
Surely it would be for the Lord Chancellor to amend the regulations that he has to make to prevent success fees being charged in these circumstances.
Lord Bach
That may be what the noble Lord, Lord Thomas of Gresford, would suggest to the Lord Chancellor that he should do, but is there any indication that that is what will be done? Will regulations be put before Parliament that say it is forbidden to take a success fee in a case of this kind? If so, will not the Lord Chancellor run into exactly the same sort of problems that critics of this amendment raise here against the noble Lord, Lord Alton, and me? Will that not be the position?
Lord Thomas of Gresford
Not if there is an abuse, as the noble Lord suggests. If claimants’ solicitors in cases which are not difficult to prove start charging success fees, which the Lord Chancellor or public opinion decide is simply not acceptable, then the Lord Chancellor will have the power to stop it.
Lord Bach
It may not be difficult to prove, and I understand what noble Lords say about that. But there is a history, I have to say, of insurance companies taking an extremely long time to agree to settle cases of this kind. For whatever reasons—and I do not want to go though them tonight in this House—it may be that a case will take quite a considerable period of time, even if, at the end, liability is not denied. I want to stop soon and allow the Minister to respond.
Lord Higgins
Does the noble Lord agree that the crucial thing we have to decide this evening is whether we should send the amendment back to the Commons? I find that I now understand the issues put forward by the noble Lord, Lord Alton, much better than I did at earlier stages of our parliamentary proceedings. Given all the representations that we have received, that is probably true at the other end of the building as well. Therefore, there may be a strong case on those grounds for their reconsidering it. The argument is otherwise very simple, which is that they did not conclude the debate on this amendment in the previous exchanges in the House of Commons. Therefore, if we send it back, it will give them an opportunity to do that. Indeed, if the Minister sought the leave of the House at the end of the debate in the other place, he could actually reply to the debate, which he was prevented from doing by his own guillotine.
Lord Bach
I am very grateful to the noble Lord—I think the whole House will be grateful to him—for shutting me up. That is the first thing that he succeeded in doing, but he also made the point that this is about whether this House believes that the other place should have a closer look at this. What worries me slightly is that, as I understand the programme Motion in the other place, there may be only one hour in the programme for all the matters that they have to consider; but I am not sure that I understand the procedures of this House, let alone those of the other place.
The noble Lord has persuaded me to sit down now. I think that was his intention. I look forward to hearing what the Minister has to say in response to the points that have been made. Surely the other place should take up this matter again—it is of such huge importance.
Lord McNally
I think it was the line, “I want to stop soon” that provoked my noble friend Lord Higgins to get to his feet.
Again, this has been a very useful debate, with two parallel arguments. I go back to my opening remarks: nobody underestimates the horror of mesothelioma and the importance of getting speedy redress for sufferers. Parallel to that, however, are the attempts that we are trying to bring forward to bring some order to the costs of litigation. It simply is not true that the Jackson reforms are intended just to catch dodgy whiplash claims. There was a general feeling that the amendments to CFAs which the previous Administration introduced brought in an overall inflation of costs in our legal system. We all pay for that inflation.
I hear what the noble Lord, Lord Wills, said, but the truth is that the present system which the sufferers have to use is slow and expensive. I repeat that the intention of this Government is to move as speedily as possible to get to where we can through agreement with the industry, to get litigation out of the way. It is true, as has been said by a number of noble Lords, that there was callous treatment of sufferers. There was slow movement in addressing the issue, but that accusation does not lie at this Government’s door. We have moved very quickly in our attempts to get agreement with the industry.
Lord Bach
As far as that is concerned, the setting up of a body in order to get a move on with this was mentioned in a White Paper from the previous Government two years ago. We have seen absolutely nothing after two years to suggest that that body will be set up soon. Indeed, every comment made by the insurance industry as a whole has been opposed to any organisation that would stand in, as it were, when they cannot find who is responsible for these diseases being caused.
Lord McNally
As I made clear in my opening remarks, my noble friend Lord Freud hopes to be able to make a Statement on this by the summer. The House, the insurance industry and sufferers from this disease should understand that we mean business on this. We are addressing this with a real sense of urgency. Whatever happens regarding this amendment, given the plight of sufferers from this disease, they deserve fairness and speed in settlement for the many reasons that have been put forward.
The noble Lord, Lord Howarth, said that there is no virtue in dogmatic consistency and he even had the strong support of my noble friend Lord Carlile in that. Certainly, there is no virtue in dogmatic consistency, but we need to consider the integrity of the legal system as a whole and fairness between different claimants. There are two parallel debates. There are the necessary Jackson reforms of legal costs, which will apply across the board, and the need to move with speed to get a system that deals with the problems of mesothelioma victims as quickly as possible. We can only make our impact assessments.
My noble friend Lord Carlile asked whether we thought that the Jackson reforms will prevent sufferers’ access to justice. We do not believe that. We would not have brought this forward if we had thought it. The point was made about success fees. I repeat that they are not compulsory. As my noble friend Lord Faulks has pointed out, there may be some proper, healthy competition among lawyers that will address the question of success fees.
It is not the responsibility of somebody suffering from a terminal illness to watch the clock as far as costs are concerned. It is the responsibility of government. The Jackson reforms take that responsibility away from claimants. Not just in this particular case but in the broad there was no responsibility on litigants or their lawyers to watch costs. That was the weakness of the whole system. The Jackson reforms put some emphasis back on to the responsibility to watch costs—not on somebody suffering from a terminal illness but through the reforms that we are putting through across the board in this area. For a claimant who does not have to pay a success fee, the 10 per cent uplift could mean more compensation than he or she would otherwise have got. I make no firm claim on that. It is not a question of being callous towards the sufferers. On the contrary, the Government are taking very speedy action to try to get in place an agreement which I am sure we all agree should have been in place many years before.
Sadly, this is not a problem that will go away. That is one of the reasons why I believe that we need a sense of urgency in our approach to this. Although we are now fully aware of the dangers of asbestos, this insidious disease can strike 20, 30 or 40 years after exposure. Therefore, there is a need not for a complicated, expensive, lawyer-based system of compensation, but for a system that will address the needs of sufferers. I am sorry that I cannot help more in relation to making it an exception. Horrific as the disease is, it is not an exception to the way in which the justice system should work. We should have a system in which lawyers get a proper return for the job that they do and in which those deserving compensation receive proper compensation. It is not a case of grabbing 25 per cent of that compensation. Competition and even some morality might drive that out of the system. Even bigger than that is the prize that the Government are seeking: a system that is not lawyer-based but one that is based on need, clearly agreed with the industry. As I have assured the House, we hope to make a Statement by the summer and we hope to have a system in place that brings speed and fairness to the sufferers of this disease. I ask the House to reject the amendment and to support the House of Commons resolution.
Lord Alton of Liverpool
My Lords, I am grateful to all noble Lords who have participated in this debate and in the earlier debates. The Minister has, with his usual courtesy, dealt with the arguments that have been put forward today. I reiterate my thanks to him for the time that he has spent with me, with Mr Paul Goggins last week and with the noble Lord, Lord Freud. He has said a number of things this evening on which the House should reflect, one of which was about the new scheme that it is hoped will be brought in in future and which will be a lot less reliant on lawyers. If we can achieve that, I think that there will be consensus in your Lordships’ House that it will be a very significant and purposeful step forward and it is certainly one that I will wholeheartedly support. The noble Lord, Lord McNally, has told us that that announcement will be made in the summer. However, it will require primary legislation, which is not before us, so there will be at least another 18 months from the time of the announcement before anything is on the statute book.
In the course of this evening’s proceedings, there has been dispute between different lawyers and different Members of your Lordships’ House about the practical effects of the law as now drafted on victims of mesothelioma. Pending the announcement in the summer and the new legislation that might come, I beg your Lordships not to play Russian roulette with the lives of people who have a terminal illness. I beg you not to be drawn into either side’s arguments about how this might work out and not to take chances but to preserve, as the noble Lord, Lord McNally, said the amendment would do, the status quo and keep things as they are at the moment until such time as we have something better to put in its place.
Success fees have been mentioned a great deal during the proceedings. The noble Lord, Lord Faulks, said that many lawyers would not want them, the noble Lord, Lord Thomas, said that they should not take them, and the Minister said that they would not be compulsory. However, the Bill provides for lawyers to take, if they wish, up to 25 per cent in compensation. They can take that as their payment, not for the base fee—they will get that anyway—but in addition to the base fee if they are successful in pursuing a case.
I agree with what the noble Lord, Lord Thomas, said earlier that it would be better if such a system were entirely swept away, but it has not been. If we are to wait for regulation, how do we know whether those regulations will be put forward by the Government or whether they will be successful? I do not think that we should do this on a wing and a prayer.
The noble Lord, Lord Avebury, thanked me for my persistence but, 40 years ago, in 1972, the noble Lord issued a pamphlet championing people who were suffering from mesothelioma. Thirty thousand people have died from the disease over the years. As the noble Lord, Lord McNally, has just intimated, probably the same sort of number will die before this is all over.
We are often accused of being preoccupied with fringe issues, but in a week or so, we shall have Workers’ Memorial Day. Surely, this evening, it would be fitting for us to recognise the sacrifice that workers have made in the service of their companies and this country in many heavy industries. This does not affect just those who have worked in heavy industries as even those who washed the clothes of people working in those industries have contracted this awful disease. Surely this is something on which we can raise our voices tonight, knowing that there are Members in another place who wish to pursue this further in the House of Commons and who were denied the opportunity to do so at earlier stages. Many of the issues that we have been debating this evening, which are new, should have been debated in Committee in another place much earlier on. We have been reassured that there are no financial questions. This is not about austerity; it is not about fraud; it is not about ambulance chasing; and it is not about a compensation culture. However, it is about elementary justice. I hope that your Lordships will agree with my Motion. I wish to test the opinion of the House.
Lord McNally
That this House do not insist on its Amendment 32 to which the Commons have disagreed for their Reason 32A.
Lord McNally
My Lords, Motion F contains Amendment 32, which seeks an exemption from Clauses 43, 45 and 46 for industrial disease claims. The Government cannot accept this very broad exemption to the provisions in Part 2, and the House of Commons has agreed with our position.
The suggested exemption is very wide and would cover all manner of conditions, including relatively minor problems that may be better resolved outside the courtroom. I take the point that there are all types of industrial disease claims with special factors. Where these exist, we can take specific actions, as I outlined earlier when speaking about mesothelioma, but industrial disease is potentially a very wide category, and I am not persuaded that it would be fair to treat the class of industrial disease claims differently from other types of personal injury claim. This may be of little comfort to individual victims of industrial disease, but we need to consider the integrity of the legal system as a whole and fairness between different claimants.
For all the sympathy that we have for sufferers of any industrial disease and the desire of all of us to make the legal process easier, particularly for those facing terminal illness, I cannot see that a system based on exceptions would be fair to other claimants. I fear that we would be failing in the wider duty of fairness in legal proceedings, which, as I mentioned in the earlier debate, is the key element behind the Jackson reforms. I urge the noble Lord not to insist on his amendment. I beg to move.
Motion F1 (as an amendment to Motion F)
Lord Wigley
Leave out from “House” to end and insert “do insist on its Amendment 32”.
Lord Wigley
My Lords, the House of Commons has rejected this amendment on the spurious grounds that it is inappropriate. That is a matter of opinion and judgment, no more and no less. Amendment 32 would exempt industrial disease claims from these changes. I supported the amendment that has just been passed by the House that relates specifically to exempting cases of respiratory disease from these changes. Amendment 32 goes wider to cover all diseases, conditions and illnesses that arise from a breach of duty owed by an employer to an employee, some of which may be much more complex than cases of mesothelioma, as we heard a moment ago. In the debate in the House of Commons, the argument was put that there should have been no specific amendment for one condition, such as mesothelioma, but a general approach. By passing this amendment, we give the House of Commons an opportunity to consider having that general approach.
I wish to draw to your Lordships’ attention to the meagre hour allowed in the Commons for debating Amendments 31 and 32. The Minister, Mr Djanogly, concentrated overwhelmingly, almost exclusively in fact, on Amendment 31. He said:
“the amendments are unnecessary. The legal climate in which mesothelioma cases can be brought has wholly changed in recent years”.—[Official Report, Commons, 17/4/12; col. 264.]
The whole tenor of the debate was in the context of mesothelioma, which we dealt with in our debate on the previous amendment. Of the 20 MPs who spoke, 15 spoke specifically about mesothelioma and 15 supported Amendment 32 when it came to a vote. The case against Amendment 32 was just not made in the Commons. We are supposed to respond to what the Commons has told us. It had not debated it at earlier stages, and it did not debate Amendment 32 in the hour that it had on 17 April.
At earlier stages during the passage of the Bill, the case has been made on the basis of road traffic claims and the savings that could be made in that context. Industrial disease cases are wholly different from road traffic accident claims; and, as many organisations, including the Association of Personal Injury Lawyers, have advised me, in road traffic accident claims liability is far simpler to prove than in industrial disease cases. That is why we need to have support for those cases, whatever the condition arising from industrial disease, not just mesothelioma. There is a range of other diseases. In the earlier debate, the Minister referred to further thought being given to mesothelioma by the Government and the DWP later this year. Presumably, on the basis of the argument that he put a moment ago, that further thought will also be given to the more complex cases that arise from other backgrounds in the industrial context. It is important to have the Minister’s response on the record on that.
We have been through these arguments many times, and I am not going to take up the time of the House in reiterating them. I beg to move.
Lord Bach
My Lords, I can be very brief on behalf of the Official Opposition. The Motion that was passed last time in this House was in my name, and it follows that we support the Motion in the name of the noble Lord, Lord Wigley, today. He has summed up the case extremely well, and in our view this amendment should be supported. It is quite wrong that any part of the damages awarded in industrial diseases should be taken from the successful claimant. In principle, it is wrong. Therefore we support the amendment.
Lord Phillips of Sudbury
My Lords, I can be very brief. There is a belief on this side that Amendment 32 would drive a coach and horses through the Jackson amendments, and we are broadly in support of the need to amend and reform conditional fee agreements and the like. I also draw the House’s attention to the fact that the wording of this amendment is extraordinarily wide. It will not apply just to cases of damages for industrial disease, as the heading would indicate; it will relate to any proceedings that include a claim for damages for a disease, condition or illness. That could be a minority part of the claim, and the rest, piggybacking on it, would also be outside the broad changes to these conditional fee agreements that have, in my view and in the view of the Government, had extremely unpropitious consequences for litigation generally, some of which we heard in discussion on the previous amendment. I am afraid that I oppose this amendment.
Lord McNally
My Lords, I am grateful for my noble friend’s support. We should move quickly to a decision on the matter. This is a very wide amendment. It ducks the issue that the Government have made central to this Bill and which I made in our debate on mesothelioma. Singling out a sector for special treatment is unfair across the board. We are looking in that case for non-legal solutions to the problems of the victims. The Government have taken action on a number of areas of specific industrial diseases and will continue to do so.
As I said at the beginning of my remarks, we will not undermine what most people saw in the system that is now in place: a very inflationary form of financing litigation where neither the claimant nor the lawyer has any need to concern themselves about cost. That is why Jackson was set up and why he came up with the solution that he has. As in previous cases, the idea that the 25 per cent is compulsory is not necessary. I should like to see much more competition and willingness to take these cases. Noble Lords have seen that it is easy to take very hard cases and then to say, “Well, we can’t go along with this”. If you do that, you dismantle the Jackson reforms. I believe that the debates in both Houses over the full period of this Bill have been mainly supportive of the central architecture of the Jackson reforms. I hope that when they vote on this amendment, noble Lords will see its flaws and will support what the Commons has proposed.
Lord Wigley
My Lords, I have listened carefully to what the Minister has said in this short debate, but the fact remains that if one considers the debates that took place at Second Reading, in Committee and on Report in the House of Commons, these issues have not been handled in depth and in detail. We have not seen the figures on how financial savings will arise in detail from the changes that are being made. If there are complexities in law with regard to many of the cases for compensation for injury or disease in a place of work, surely without financial support people will not be able to get the compensation to which they are entitled. If they are entitled to compensation, it is downright unacceptable that up to 25 per cent can be skimmed off.
Time after time the Minister has said that there is no compulsion to take up to 25 per cent. There may not be compulsion but it is available, and the Government have chosen to make it available. To my mind, and I believe to the minds of many noble Lords, that is unacceptable. The House of Commons needs to get its act in order and to apply itself in detail to these questions in a way that did not happen on 17 April when about one-third, at most, of an hour was allotted to the content of this amendment. For those reasons, I wish to test the will of the House.
Lord McNally
That this House do not insist on its Amendment 168 to which the Commons have disagreed for their Reason 168A, do not insist on its Amendments 169 and 240 and do agree with the Commons in their Amendments 240A and 240B.
Lord McNally
My Lords, the amendments in Motion G would bring the majority of welfare benefit matters back into scope. Before I get into the detail of this Motion, I want to remind the House that these amendments have been considered by the House of Commons. That House has disagreed with Amendment 168, ascribing financial privilege as the reason for doing so, and in place of Amendments 169 and 240 has accepted the Government’s amendments in lieu. Despite this, the noble Lord, Lord Bach, has tabled an amendment to Amendment 168 that would bring into scope advice and assistance for all welfare benefit appeals in the First-tier Tribunal. It is my opinion that this amendment will elicit the same response from the House of Commons.
As in our earlier debate, the fact that the amendment infringes privilege is the only reason that is given. I do not object to the amendment; as the Clerk of the House of Commons recently put it after a privilege reason, “That does not exclude a second try by the Lords”. However, as was said by the Joint Committee on Conventions, of which I was a member:
“If the Commons have disagreed to Lords Amendments on grounds of financial privilege, it is contrary to convention for the Lords to send back Amendments in lieu which clearly invite the same response”.
I put it to the House that the amendments tabled by the noble Lord, Lord Bach, will invite the same response—in fact more enthusiastically, in that they are wider.
As I have said many times, the Government consider that, in most cases, appellants can and do present their welfare benefit appeals in the First-tier Tribunal in plain language and without legal assistance. The tribunals system has been designed precisely so that they can do this. Indeed, a report by the president of the Social Entitlement Chamber of the First-tier Tribunal has pointed out that Department for Work and Pensions decisions are most commonly overturned because the tribunal elicits additional factual information from the appellant, usually in the form of oral evidence provided by the appellant. This suggests that legal arguments are not the most common reason for a welfare benefit decision being overturned in the tribunal. Furthermore, in his 2008-09 report, the president stated:
“The availability of this additional information suggests that there should be more direct engagement with the appellant”.
We have committed to ensuring that not-for-profit advice remains widely available and we have supported this view, as I reported earlier, with further funding, making available £16.8 million for advice service funding, which is already helping 300 front-line advice organisations. In addition, £20 million of funding will be made available in each of the financial years 2013-14 and 2014-15.
Perhaps I could draw the attention of the House to the government amendments, which, as I have said, I think are a genuine response by the Government to points that were made, not least from my own Benches. We have listened very carefully to the arguments raised here and in the House of Commons about retaining legal advice and some representation for onward appeals on a point of law in relation to a welfare benefit matter. At this point, I pay particular tribute to the noble Baroness, Lady Hollis, who has engaged in a constructive discussion on this topic with my noble friend Lord Freud. Her contribution has undoubtedly helped us to produce a sensible and workable solution.
We accept that legal aid may be justified in these cases and we offered government amendments in lieu in the House of Commons. These government amendments will make legal advice and assistance available for welfare benefit appeals on a point of law in the Upper Tribunal, including applications to the Upper Tribunal for permission to appeal. In addition, the amendments would bring into scope advice, assistance and representation for welfare benefit appeals in the Court of Appeal and the Supreme Court, including applications to these courts for permission to appeal. It is worth noting that the right to appeal to the Upper Tribunal in relation to a welfare benefit matter is a right to appeal on a point of law arising from a decision made by the First-tier Tribunal.
The House of Commons also recognises that there may be cases—although the Government think that there will be very few—where appeals relating to welfare benefits in the First-tier Tribunal will be on points of law. The Government have listened to arguments on this and have undertaken to look into this issue and investigate whether we can devise a workable system whereby advice and assistance can be made available for certain welfare benefit cases in the First-tier Tribunal.
We believe that the government amendments in lieu address the specific concerns in this House and seek to prioritise funding on cases where legal advice and assistance is most needed. I beg to move.
Lord Bach
My Lords, this House dislikes the Bill. I am referring not only to the 11 defeats and two draws that the Government sustained on Report or the defeats today but to a wider feeling that Part 1 in particular is mean-minded, picks on the poor, disabled and vulnerable and is not worthy of this country’s traditions and its legal system. This view is held virtually throughout the House. There were more than 50 speakers on Second Reading, but it is difficult to recall anyone who spoke up for Part 1.
I believe that many Conservatives are offended by the way in which the Government have picked on the poor and the vulnerable. It is against their traditions and they are unconvinced that there are any savings to be made by decimating social welfare law, particularly as the Government have consistently refused to give figures, in spite of committees asking them to do so.
I also believe that the Liberal Democrat Benches are offended by the taking out of scope debt, employment, immigration and, if the Government have their way, welfare benefit cases. If they had been in opposition now, I venture to suggest that they would have opposed Part 1 of the Bill with all their might, yet somehow, with some brave exceptions, which I will not name, they have been cajoled into voting for exactly the things with which they disagree most. The Minister is a liberal and humane man and I occasionally feel sorry for him, too. He has been obliged to put forward, particularly in relation to Part 1, nonsense after nonsense in support of his arguments.
Of course we welcome the Government’s amendment concerning upper court appeals. It was always ridiculous that claimants at an Upper-tier Tribunal—the Court of Appeal or the Supreme Court—should not automatically get legal aid to argue their case, which, as the Minister has just reminded us, can be only on a point of law. The Government knew all along that it was ridiculous and the Minister, to his great credit, never tried to argue seriously against it. We were always going to get this concession at some stage. I do not want to be difficult about the concession; we are grateful for it and for any part that the Minister may have had in getting it.
However, the position is still deeply unsatisfactory with regard to First-tier Tribunal appeals. Last Tuesday, in the other place, an extraordinarily unconvincing pantomime took place between the right honourable and learned gentleman the Lord Chancellor and the honourable Member Mr Tom Brake. I should explain to any noble Lords who do not know who Tom Brake is that he is the Commons equivalent of the noble Lord, Lord Thomas of Gresford. That is meant as a compliment to him.
The Lord Chancellor hinted tantalisingly—using expressions such as “if we can solve the problems”, “if we can find” and so on—that an arrangement might be reached whereby a lower-tier judge could certify a point of law and give legal aid to a claimant. I do not think it unfair to describe that arrangement as vague, unthought-out, superficial, strictly back-of-an-envelope stuff and, as we know, arranged very much at the last minute. Amazingly, however, it resulted in the said honourable Mr Brake immediately withdrawing an amendment that he and others had moved—not unlike my amendment today, as it happens. I am afraid that no one was fooled by this last-minute arranged minuet of an agreement. In a boxing match, it was a clear fixed fight, with Mr Brake going down to a knockout by arrangement in the second round.
Lord Thomas of Gresford
That is absolute rubbish. I say now—I would say it in a speech later—that it is not worthy of the noble Lord, Lord Bach, to attack Tom Brake in that way when he is not here to answer for himself. I am proud to be an associate of Tom Brake, who leads on legal matters in the House of Commons from the Back Benches, as I do here. He very bravely put forward that amendment and achieved a great success in getting the concession that he did, which I will develop at a later stage.
Lord Bach
If that was the concession that was sought, it was very poor fare indeed. The reasons why the deal is so unsatisfactory are numerous. Let me be brief about them. First, it is utterly impractical. What happens in real life is that, following an adverse review by the DWP, a claimant will decide whether to appeal to the lower tribunal. At present the claimant will be able to see a specialist adviser who will tell him whether there is a case or not. This prevents hopeless cases from clogging up the First-tier Tribunal but ensures that good cases go ahead to the First-tier Tribunal, which is a tribunal of fact and law.
None of this will happen under the proposed arrangement. How can a judge decide whether a case has a real point of law until it comes before him or her? Without sensible legal advice, it may never come before the First-tier Tribunal. This will mean that in practice many good cases, when mistakes have been made, are never taken up and may well mean that rubbish, hopeless cases clog up our already overburdened tribunals.
Secondly, this distinction between pure law and pure fact is a chimera. It is a nonsense at this stage. The First-tier Tribunal is not just a tribunal of law in the way that the second-tier tribunal is. It deals with the whole position and makes decisions on fact and law as they apply. Indeed, no one made that clearer than the Conservative Member of Parliament Mr Robert Buckland, who said in an intervention:
“I am listening to my right hon. and learned Friend’s arguments with great care, but I am still puzzled about the unavoidable problem of the ability to work out what is a legal issue as opposed to a merely factual one. Fact management and legal issues often come hand in hand, and they are often best handled by a lawyer. I worry that we are making an artificial distinction”.—[Official Report, Commons, 17/04/12; col. 227.]
Later, in his speech, he said:
“A person does not come through the door of the citizens advice bureau, the law centre or the local practitioner saying, ‘I am a problem of fact’ or, ‘I am a problem of law.’ They come as individuals with a particular issue that needs untangling by somebody with expertise. That somebody will, I am afraid to say, often be a lawyer. That is a fact and we should not shy away from it. Often a lawyer can quickly, in the provision of advice—I am not talking about representation in the tribunal at this stage—”
I should say that nor are we, in the course of this amendment—
“sort out the problem effectively”.—[Official Report, Commons 17/4/12; col. 248.]
He could not have put the case better for the amendment and against the very vague arrangement that was mentioned in the other place last Tuesday.
Let us look at a real-life impact of the measure that the Government propose. According to official figures last year, 173,880 people appealed a benefits decision in the First-tier Tribunals. Of those, 161,400 related to disability benefits—that is, 80 per cent—including incapacity benefit, employment support allowance, and DLA or industrial injuries disablement benefit. About 60 per cent of all appellants who received advice from a front-line agency won their case but only 39 per cent of those who did not receive advice won their case. That is clear evidence of what can be called the advice premium.
In short, meritorious claimants are more likely to win their case if they have been advised in advance. Overall, 45 per cent of those before the tribunals won their case. I hope that that puts paid to any notion that the majority of appeals lack merit or involve chancers having a go. Clearly there is a substantial need for a mechanism to correct errors. We all know that the department makes errors all the time—and that will happen as long as life goes on.
I regret that I must note that 45 per cent represents a marked increase over the previous year, in which 38 per cent won their cases, itself the culmination of years of improvement. So last year represents a sudden and significant degradation in the quality of decision-making in state agencies, which is quite the opposite to the claims made by the Government that the DWP is working to make the system more effective. The worst degradation in decision-making was for employment support allowance, on which overall half the appellants won their case. To put that in numbers terms, more than 40,000 disabled people a year have their employment support allowance reinstated after a First-tier Tribunal ruling that overturns erroneous decisions from the DWP. Again, there are marked disparities in the percentage of appellants who succeed, based on whether they receive advice or not, with some 70 per cent of advised ESA appellants winning and only 43 per cent of unadvised appellants winning. We are talking about advice, not representation. The conclusion is that advice really matters.
We argue—and I hope that the House is with us—that the present system works all right. It is true that tribunals are already overburdened, but we are now in an age of austerity and we have coming up the road radical welfare benefit reform about to commence. There will be mistake after mistake made by the authorities, so how can this be the right time to take away or remove our fellow citizens’ rights to have wrong decisions corrected—decisions that for some actually make the difference between a decent life and one wrecked by poverty and insecurity?
If our amendment were passed, it would cost the Government at most £15 million. All commentators agree that the Government’s proposals will cost the state much more in the end because, if people do not get that expert early advice, their lives go wrong. The problems that they have can be dealt with, and have been dealt with for years, by not-for-profit organisations such as law centres and CABs, in which advice on social welfare law and the law for everyday life is given for free under legal aid. If that advice is no longer available, those problems get worse and multiply and in the end the state has to pay out much more in picking up the pieces.
We do not believe that, for £15 million, which is what the Government claim would be saved by changing this system—that is, by not allowing advice at the early stage—that can possibly be sensible. This Government have, for example, found £250 million in order that we might all have weekly bin collections, but they cannot afford £15 million per year in order that people can get advice. A system that was set up by a Conservative Government, under the noble and learned Lord, Lord Mackay of Clashfern, and supported by previous Conservative Governments, as well as by the Liberal Democrats over the years, and by us, is to be completely overthrown in order, in fact, not to save any money at all.
Our amendment would allow early advice to see whether a case was one that was suitable for First-tier Tribunal or not. That is all that we are asking the House to agree to tonight. This is basically the same amendment that the noble Baroness, Lady Doocey, moved on Report, but because there is financial privilege we have lessened it. It is not for the review period—the review to the DWP. It comes into play only when there is consideration of whether to go to the First-tier Tribunal. I beg to move.
Lord Thomas of Gresford
My Lords, I am very pleased to welcome the government amendment in lieu, which follows very closely the amendments that the Liberal Democrats put down, both in Committee and on Report, for ensuring that there is proper legal support for appeals on a point of law to the Upper Tribunal, the Court of Appeal or the Supreme Court. The Government are to be congratulated on taking that step.
The lacuna in the amendment that I moved in Committee and on Report was that legal points might arise at First-tier Tribunal hearings. It was to that end that my colleague Mr Tom Brake put down an amendment in order to clarify that, or to try to obtain a concession from the Government in relation to that, when the matter came before the Commons. A number of points have been made about it. About 80 per cent of cases, maybe more, before the First-tier Tribunal are decided on the facts: whether a person has sustained a particular injury, whether that injury disables him from doing a particular job or whatever. It covers a wide range of possibilities, but it is usually a factual issue.
However, from time to time a point of law arises. Now, there is no difficulty whatever in identifying what a point of law is. The best illustration that I can make is the famous case of Donoghue and Stevenson—the snail in the ginger beer bottle. For the purposes of coming to a conclusion on the law of negligence and how it should develop, the House of Lords, in considering that case from Scotland in the 1930s, assumed that the claimant’s facts were true; namely, that there was a snail in the ginger beer bottle that the claimant drank. Accordingly, all the argument was based upon that assumed fact. As a result, the law was clarified and developed, and is the foundation of the law of negligence to this day. When the case was remitted to the Scottish court to determine the facts, it was discovered that it was impossible to prove that there was a snail in the ginger beer bottle at all. Consequently the claim was, I think, settled, or it may have failed, but that is the distinction. A point of law is when you have a difficulty in coming to a conclusion, even if the claimant’s facts are true.
The First-tier Tribunal will frequently be faced with mixed facts and law. That is to say, it will have to determine what the facts are and, in that light, consider whether there is any legal problem in the statutory provisions—any point of law—which has to be decided as well before the claimant gets his compensation, allowance or benefit, or whatever it may happen to be. So there is no problem. Every day, in every court and tribunal, points of law are being disclosed, discovered, analysed and dealt with. Indeed, you cannot appeal from the First-tier Tribunal to the Upper Tribunal unless there is a point of law that the First-tier Tribunal identifies. Similarly, in going from the Upper Tribunal to the Court of Appeal or the Supreme Court, there has to be a point of law, so there is no problem—as there appeared to be among certain minds in the other place—as to what a point of law is.
The problem that one has to face is: can an unrepresented applicant determine himself whether there is a point of law? There are two answers to that. First, any tribunal with a legally qualified chairman will perceive that there is a point of law involved in coming to a conclusion on the case, so it is in the hands of the chairman of the tribunal to determine whether a point of law arises. If it is unexpected, he can stop the case there, adjourn it and give legal aid for the case to be argued properly by a lawyer who is familiar with the statutory provisions. There is then equality on both sides. However, there is another approach. In the criminal context, if I am prosecuting and the defendant is representing himself when appearing in court, and if I as the prosecutor—the qualified lawyer—realise that a point of law arises which the unrepresented defendant has not realised, it is my professional duty to tell that defendant in a criminal case, “Look, there is a point of law in your case, which you should mention to the judge. Let’s have a discussion about it”. It is my job to bring it out.
I suggest to the Government that when it comes to tribunals, anybody representing the state—the Government or a government department—in a tribunal should be under a duty, which regulation should point out, to inform an unrepresented applicant if that state representative appreciates that a point of law arises. This is so that before they even get before the tribunal, the state representative will have told the litigant or applicant in person, “Look, my friend, you have a point of law in this case, which you must mention to the tribunal judge. If you don’t do it, I will”. That is the tradition of the legal system, and it must apply even when the state is represented not by lawyers but by representatives of the department in question. I urge upon my noble friend that he takes that on board and ensures that there is such a duty, as there is elsewhere, for lawyers to point out to the unrepresented applicant that there is a point that he should take.
I am very pleased that points of law will be properly dealt with under the government amendment. I hope that the moves that the Lord Chancellor makes to ensure that, where a point of law arises in a First-tier Tribunal, a case is either by agreement put forward for legal aid or the tribunal chairman will stop the proceedings and adjourn them until the point can be properly argued. In my view, that is the way in which all the fears that have been expressed on the position of the unrepresented applicant will be dealt with.
Lord Low of Dalston
My Lords, I supported the amendment tabled by the noble Baroness, Lady Doocey, on Report, so I have no hesitation in supporting the more limited amendment moved so fully by the noble Lord, Lord Bach, this evening. I hope that the House will ask the Commons to think further on this matter. I will say something about the substance in a minute, but I am glad that the noble Lord, Lord McNally, has emphasised the question of financial privilege because I want to say another word about that, if the House can bear it.
I come at this from a slightly different angle. There has been a change in the composition of the House of Lords in the past 10 years. I am not referring to the reduction in the number of hereditaries but to one that has been rather less remarked; namely, the appointment of so-called people’s Peers by the Appointments Commission. I am not greatly enamoured of the term “people’s Peers” but, for once, it may perhaps point to a reality that is worth observing—the links that those Peers, not being just the great and the good and the beneficiaries of political patronage, have with the diversity of civil society, which is something that the Appointments Commission has been keen to foster. They have been appointed for the distinctive contribution that they make and their ability to devote sufficient time to the work of the House. That last is an expressed criterion of appointment. I would not want to make too much of this, and I certainly do not wish to disparage other Peers, but the so-called people’s Peers have been specifically appointed on merit for the time, perspective and expertise that they can bring to the work of the House, including that of scrutinising legislation, and for their ability to reach and give a voice to parts of society that are not always reached.
That is part of what makes the Lords more accessible in some ways than the Commons. It is this House and not the other place that has been widely seen as speaking for the vulnerable and dispossessed in our consideration of the Welfare Reform Bill and this Bill. The House has done itself a deal of good. This may not be election but it adds a measure of legitimacy, or at least detracts somewhat from the air of illegitimacy, which is said to attend this House. We all know that the Commons has primacy in matters of supply, but I am sure that I speak for my colleagues when I say that this blanket resort to the claim of financial privilege as a ground for the summary negation of weeks of the very work we were appointed to this House to perform sits very ill indeed with the job description on which we were appointed to this place. It seems to me that it is the Commons’ heavy-handed use of the claim of financial privilege and not the existence of the House of Lords that deserves to be likened to what is going on in Syria or an affront to democracy.
The noble Lord, Lord Martin, whom we all greatly respect, and the noble Lord, Lord McNally, whom we also respect, say that the assertion of privilege is a completely objective matter decided on impartially by the Speaker and his advisers and has nothing to do with the Government. The Speaker may be the conduit through which these claims are asserted but, with the greatest respect, as the noble Lord, Lord Howarth, has indicated, if you believe that the Government have nothing to do with it, you will believe anything.
Scholars differ about the extent of financial privilege but Dr Jeff King, a senior lecturer in law at University College London, said:
“The Lords has the clear right not to accept the Commons assertion of privilege without a protest”.
Lord Martin of Springburn
May I interrupt the noble Lord? It is very kind of him to mention me. I support everything that he says. However, on privilege, all the Speaker does is to remind the House that it is dealing with amendments that have come from the other place that involve privilege. If the other place wishes to accept those amendments, that is recorded in the Journal of the House. That is all the Speaker does. I make the point because when this last came up, there was an implication that the Speaker was perhaps pushed by the government Whips. I just make the point that the Speaker does not often listen to the Whips. In fact, the Speaker meeting the Whips is usually like a penance during Lent. I agree with everything that the noble Lord, Lord Low, has said. The reasons given are not a matter for the Speaker. They are agreed in the reasons room after decisions have been made. The reason can be to do with finance, but on other occasions other reasons are given. I hope I have not been too long-winded in interrupting the noble Lord’s flow.
Lord Low of Dalston
I am very grateful to the noble Lord. We are in a happy state of accord. He agrees with everything that I say and I agree with everything that he has said. I do not wish to suggest that the Speaker in the other place acts in any way other than objectively. I do not think that the Speaker brings any kind of subjective judgment to bear on these matters; he just rules on these cases. However, it stretches credulity to suggest that forces other than the Speaker—to whit, the Government—may not have a role in raising the matters about which the Speaker has to remind the House. That is all that I meant to say.
I am nearly at the end of this point but I shall go back to the beginning of the quote from Jeff King of University College London. He said:
“The Lords has the clear right not to accept the Commons assertion of privilege without a protest. At risk is the Lords’ future scrutiny of legislation on … the whole of social policy. At the least one hopes the Lords will respond that they do not consent to the Commons’ use of financial privilege on this bill constituting a precedent”.
He was referring to the Welfare Reform Bill on that occasion. As a non-party-political Peer, appointed by the Appointments Commission—if not with a particular mandate, at least on a particular set of understandings—I protest at the blanket use of financial privilege by the Commons to summarily defeat amendments passed in your Lordships’ House. We should not consent to its constituting a precedent, either.
In coming to the substance, I can be fairly brief. The noble Lord, Lord Bach, has set out the case very fully and I do not want to reiterate unduly what he said. However, I underline that this amendment is of enormous significance. The Government’s proposed exclusion from legal aid of the area of welfare benefits is colossal. According to their own impact assessment, removing welfare benefit cases from the scope of legal aid will deny at least 78,000 disabled people specialist legal advice on complex welfare benefit problems. Citizens Advice has estimated that it will amount to 49 per cent of its current legal aid caseload.
Disabled people are particularly disproportionately affected by the removal of welfare benefits from the scope of legal aid. As the noble Lord, Lord Bach, said, 81 per cent of benefits cases heard in the First-tier Tribunal relate to disability benefits. As we know, the Government are undertaking a dramatic overhaul of the welfare benefits system. This will see millions of claimants reassessed and moved on to different benefits. For example, plans to replace disability living allowance with the personal independence payment will affect more than 2 million people. At a time of such unprecedented upheaval in the welfare system, access to legal advice is going to be essential, as inaccurate decisions will be inevitable. Indeed, even after three years of discredited Atos Healthcare assessments of people seeking to transfer from incapacity benefit to employment and support allowance, the success rate of appeals is actually going up. As we have heard, it was 45 per cent at the last count. As the noble Lord, Lord Bach, said, legal advice makes all the difference; it is not just marginal. According to the MoJ’s own figures, you are 78 per cent more likely to win your case if you have had legal advice. Of those appealing against their assessment for ESA, 70 per cent of those who are advised win compared with only 43 per cent of those who are not advised.
The Government are in danger of getting themselves into the position where they are criticised for kicking a man down and then depriving him of the means of getting up again. I think we should give the Commons another chance to avoid that charge.
Baroness Doocey
My Lords, I speak in support of Amendment 168B. I share the view of the noble Lord, Lord Bach, that the Government’s concessions are not an adequate substitute for the loss of legal aid.
The Government have acknowledged the fundamental principle that civil liberties are nothing if you cannot enforce them. If you do not have the money or the knowledge to defend your rights then, sadly, these rights become meaningless. That is where the legal aid system is so important, particularly for the many disabled people who depend on welfare benefits in order to survive.
The Government seem to support this principle in theory but not in practice. The Secretary of State’s statement that such legal aid should be available only on a “point of law” offers little in the way of practical help for disabled people appealing against incorrect welfare benefit decisions, the majority of which are then overturned on appeal. The difficulty is that it is completely unrealistic to assume that people with no legal knowledge whatever will be able to understand what a point of law is. I believe that many people will not even bring an appeal because they will not have the knowledge or the confidence to do so without legal advice.
The Government’s belief that their advice services fund is an adequate substitute for legal aid is groundless because it will not mitigate the cuts in legal aid. The fund was hugely oversubscribed, and in this financial year less than a third of the money has been allocated to organisations delivering advice on welfare benefits.
The Government have announced a further £20 million of funding for the next two years, and that is of course most welcome. However, this is likely to be spent plugging the gaps in generalist advice services caused by cuts to other funding sources, leaving specialist welfare benefits advice unfunded. Once legal aid cuts are introduced, the advice sector will lose at least £100 million a year, so the £20 million fund will make only a very small dent in this shortfall.
The inadequacy of the funding is exacerbated by the rising demand for services that most charities are facing. A recent survey carried out by Justice for All found that nearly 90 per cent of advice charities had more people coming to them for help in the last year, yet over 80 per cent of the same charities also predicted that, despite this increase in demand, they will be able to help many fewer people next year.
Discretionary funding is no alternative to retaining legal aid because it imposes no duty on the Government to fund specialist services and will guarantee nothing for advice agencies. Unless welfare benefit advice is retained within the scope of legal aid, it will limit access to justice and the right of people to enforce their freedoms.
The Department for Work and Pensions already reimburses the Ministry of Justice for the cost of running the tribunals, which was necessary after the huge increase in appeals caused by the introduction of employment and support allowance. It is unclear to me why this approach cannot be extended to cover the cost of independent advice to improve the effectiveness of these same tribunals.
We must do everything possible to protect the most vulnerable people in our society. I therefore urge the House to continue to press the Government to give more concrete assurances that disabled people will be able to access legal aid advice when appealing welfare benefit decisions.
Lord Howarth of Newport
On 17 April, the Lord Chancellor said to the House of Commons:
“There is no doubt that the present level of legal aid provision is on any measure unaffordably expensive ... Even after our reforms have been carried … we will still have by far the most costly legal aid system in the world. It is almost twice as expensive as that in any other country per head of population”.—[Official Report, Commons, 17/4/12; col. 217.]
The amendments that the other place addressed on 17 April concerned civil legal aid, and I would be grateful if the Minister would advise us as to which common law jurisdictions in other countries actually spend twice per head of population on civil legal aid that we do. I recognise that our expenditure on criminal legal aid is very high by international standards, but the Government have not chosen to reform criminal legal aid. We are dealing here with the reform of civil legal aid. I wonder whether what we are being asked to accept is based on a false premise. I very much doubt that it is correct that our expenditure on civil legal aid is so enormously out of line as the Lord Chancellor suggested. I am very willing to be corrected.
At all events, my noble friend Lord Bach ventured an estimate that the cost of the amendment that we are debating now might be some £15 million. Again, I ask the Minister whether he believes that, in the context of public expenditure of the order of £100 billion per year, the expenditure of £15 million to provide legal aid to support welfare benefit claimants in cases where there is real reason to doubt whether the assessment or the adjudication that has been made of their case is appropriate is unaffordable or disproportionate.
The Lord Chancellor last week in the House of Commons put the figure at £25 million, so £15 million or £25 million in relation to social security expenditure of £100 billion does not seem inordinately expensive. Yet, he said:
“we cannot afford provision in an area of relatively low priority”.—[Official Report, Commons, 17/4/12; col. 224.]
Is it appropriate to describe such an area of expenditure as a relatively low priority? We are dealing with cases of people in poverty. There would be no question of their being eligible for welfare benefits unless they were on low incomes. The risk for them, if they are not awarded benefit, is that they will be cast into abject poverty. For them, this is not a matter of relatively low priority, and nor should it be for us.
The ration that the Legal Services Commission offers of £160 in legal aid to support advice and assistance in welfare benefits cases at an early stage is by no means extravagant—indeed, it represents very good value for money—and may make all the difference to people who may be awarded legal aid or benefits from organisations funded by legal aid as to whether they can lead decent and proper lives, reconstruct their situations, support their families and live other than in poverty.
Lord Wigley
My Lords, I am glad to have the opportunity to support the amendment of the noble Lord, Lord Bach, and the comments of the noble Baroness, Lady Doocey, and the noble Lord, Lord Low, particularly in the context of disability. I speak having sat through the Welfare Reform Bill, as a number of us did for many months during the winter, and having seen the complexity that was just referred to a minute ago by the noble Lord, Lord Howarth. When the regulations under this legislation come forward and people’s well-being—the basics of their lives—may be at stake, they may need the ability to follow appeals to wherever they go.
I want to ask the Minister about the new provisions set out by the Government in Amendments 240A and 240B. They are welcome in that they preserve legal aid for welfare benefits advice for onward appeals to the Upper Tribunal, the Court of Appeal and the Supreme Court. As mentioned earlier, such appeals rest on points of law that are highly complex and which lay people can hardly be expected to cope with alone. Now that the Government have started to recognise the problems inherent in points of law in appeals, why do they not see fit to roll out the same provisions for other areas of law where points of law would arise? Surely such provisions should not be limited just to welfare benefits appeals. Now that the Government have the power to change this Bill by order, especially in respect of the scope of legal aid, I would welcome the Minister’s assurance that they will look again at retaining legal aid for advice on points of law in other complex areas of law, for example immigration appeals. Important principles arise from the changes being made and I would be very glad to have some indication from the Minister about where this might be taking us.
Lord Martin of Springburn
My Lords, the noble Lord has made many very interesting points but, at the end, he said that it would be good if the House of Commons had another chance to look at this matter. If the amendment were carried, the other place would have a chance to look at this. I heard the Minister’s comments about financial privilege, but I do not share his point of view that if we put back the amendment we are being unfair to the House of Commons or to the traditions of this House.
I think of the situations that I had to face in my former constituency where there was a great deal of poverty. I heard many academics say that it was terrible that in the east end of Glasgow and in parts of the north end of Glasgow the life expectancy of people was such that you had a better chance of survival if you lived in Calcutta. It is all very well for an academic to say that, but people in areas of great poverty in my former constituency did not always get the benefits to which they were entitled. But if they go to the first line of appeal, it will be most unfair if they do not get legal aid. In the city of Glasgow, many lawyers recognise that people who have little or no income need the help of lawyers to articulate their cases.
We should not forget that when an appeal is made, often a recipient cannot speak up for themselves—perhaps because they are stroke victims—and cannot communicate, and therefore the carer has to worry about the benefits that they are losing. The carer has a 24-hour job. When someone says they are a carer it rolls off the tongue, but that carer can be up at three in the morning or may be denied the opportunity of a social life. They have to worry about going along to a tribunal on behalf of someone whom they love dearly and whom they are caring for seven days a week and it is a great relief to many of those people if they can get legal aid which will help them so much.
It used to be the case—I know it was a while ago—that if a working man or woman had to get the help of a solicitor, they had to go into the city centre but then lawyers realised that help was needed in the peripheral areas. Many legal companies operate in what used to be shops. They rent shops and now they are in the heart of very poor communities. It would be most unfortunate if people who need help, particularly carers, do not get assistance from those who are legally qualified and able to articulate a case for them.
Lord McNally
My Lords, when the Government launched their consultative Green Paper on this legislation nearly two years ago and I made one of my first ministerial responses from this Dispatch Box, I made it clear that I was aware that we were making some tough and difficult decisions about legal aid. We have heard many times in many debates over the past 18 months that X, Y, or Z is attacking, undermining, or damaging the most vulnerable in our society. I have listened to those debates, but I remain convinced that what would have damaged the most vulnerable in our society more would have been if we had not taken the tough economic decisions necessary to put our economy right. It is no use noble Lords opposite shaking their heads. We were a lot poorer than we thought we were and every government department has had to make tough decisions. My own has had to take cuts of 23 per cent across the board over this spending review. That has meant tough decisions not only in terms of legal aid, but in staff numbers and in other aspects of the Ministry of Justice’s work.
We have never ducked the fact that we have made some hard decisions in this matter. Neither have we ducked the fact that our approach to cutting the legal aid budget meant taking the bulk of social welfare law out of scope. We had taken the decision to focus on civil legal aid. The term “relatively low priority” refers to our view that in terms of criminal legal aid we are talking about people’s liberty and reputation. It is an important part of our system that people should have legal aid in this area.
Lord Howarth of Newport
Is the Minister therefore confident that there is no waste in the criminal legal aid budget and that there are no rackets there? Is he confident that this is an area that did not need the Government’s attention and that since the Treasury obliged his department to find savings of 23 per cent it really needed to focus its effort on the civil legal aid budget?
Lord McNally
On the contrary. I am sure that the noble Lord, Lord Bach, is ready to leap to his feet to draw attention to the fact that we have carried through the savings in criminal legal aid that the previous Administration put in train.
Lord Bach
Yes, I am pleased that the Government have done that, but that figure is included in the 8 per cent that they have taken off criminal legal aid. They have taken 29 per cent off family legal aid, as well as 53 per cent off social welfare law. Why that distinction? Why take 8 per cent from a large amount on criminal legal aid, 29 per cent on family law but 53 per cent of a pretty small budget on social welfare law? That is deliberate, is it not?
Lord McNally
Of course it is deliberate. One of the things about that rather long opening speech is that it is the same speech that the noble Lord has been making for 18 months. I appreciate that he disagrees with our judgment on social welfare law, but we have never made any bones about the fact that that is where we took a tough decision. On criminal legal aid, I am quite sure that we will return to it, but the judgment we made was that since the previous Administration had made a series of quite significant cuts in criminal legal aid, we would allow them to bed in before returning to that matter. The fact is that the decisions have been tough, and we stand by the fact that tough decisions were required in the economic circumstances that we found ourselves in and also because successive Administrations have said that the legal aid system was in need of reform.
I do not know whether we have got the specific answers to the question asked by the noble Lord, Lord Howarth, about the balance in other common law countries. I have never used comparisons with continental legal things; I have always made the point that as far as Britain is concerned the comparison is with common law countries. Many months ago, on my return from the Commonwealth Law Conference in Sydney, I mentioned that the one message I brought back from Commonwealth countries with legal aid systems was their amazement at the generosity of the British system.
We are in a process in which we have had to take tough decisions. Some of the contributions today by the noble Lords, Lord Low and Lord Martin, and the noble Baroness, Lady Doocey, almost made the case that the only practical help is legal advice. That is not something we accept. We think that in these cases there are other forms of advice that are just as valuable.
On the point made by the noble Lord, Lord Martin, that I had said that we cannot give offence to the House of Commons, I think that if he checks Hansard he will find that I have never been against this House giving offence to the House of Commons. Indeed, I quoted the Companion earlier:
“Criticism of proceedings in the House of Commons or of Commons Speaker’s rulings is out of order”.
However, the Companion goes on to state that,
“criticism may be made of the institutional structure of Parliament or the role and function of the House of Commons”.
Lord Martin of Springburn
I think that the Minister suggested that for this House to send the amendment back again was against the conventions of this House.
Lord McNally
It is not. I quoted from the Cunningham committee which held that opinion. There was a point when it was against the conventions of the House.
Lord Martin of Springburn
That is an opinion of a committee; it is not a convention of this House. The opinion of a committee is just that: an opinion.
Lord McNally
Nobody is suggesting that if this House wants to send the amendment back, it is not entitled to do so. I heard what the noble Lord, Lord Low, said about the importance of people’s Peers. He may know that it is my long-standing opinion that having a party-political label does not somehow lower one’s capacity to take views on legislation. Indeed, for many hours in this House the only people taking a detailed view of legislation are those on the party political Benches. I admit and acknowledge that recent appointments have brought valuable experience to this House.
Although my membership of the other place was brief, I remain at heart a House of Commons man in terms of where—
Lord Low of Dalston
With respect, in my remarks I said that I had no intention of disparaging other Peers. More than once I have gone on record as saying that the contribution of Peers appointed from political parties is indispensable to the effective working of this House. I am certainly not one of those who would like to see the House of Lords a politician-free zone.
Lord McNally
The point is that it is still an appointed House and is an advisory and revisory Chamber. As such, where this House decides to draw stumps on a particular issue is a matter for its judgment. Although financial primacy may occasionally irritate this House, again, as a House of Commons man and as I said earlier, this is not something recently drawn up by the coalition agreement or even by the 1911 Act. It is 300 years of our much-valued history during which kings have lost their heads and their throne in the primacy of the House of Commons on financial matters. Much as I should like to flatter the House on this matter, I still believe that it is important.
I understand the desire to see more legal advice in these cases. As I said in my opening remarks, we believe that in most cases individuals will be able to appeal to the First-tier Tribunal without formal legal assistance. I quoted the president of the tribunal in highlighting that in many cases eliciting additional information from the appellant was the most useful exercise that the tribunal carried out.
I also think that we are not being idle while welfare benefit reforms are being brought forward. A number of proposals currently are being considered across government that should make it easier for people to receive the right provision of entitlement in areas such as welfare, benefits and education. The most notable of these is the universal credit which will help to reduce the scope of error significantly as it makes the whole benefit system simpler and easier to understand. We are working closely with DWP as part of its wider welfare reform programme to improve the quality and effectiveness of its initial decision-making.
As I have said, we have gone into this matter fully and it is not something that we have ducked. From the very beginning, from the first consultation paper, we took a decision that social welfare would be taken out of scope. I know how passionately the noble Lord, Lord Bach, feels about this matter. If he was in my position, it is not the road he would have taken to fulfil his party’s commitment to cut legal aid. That is the nature of things. This is the judgment of the Government.
We are not looking at complex points of law in other areas at the moment. As the noble Lord, Lord Wigley, said, the problem is that if you make a concession somebody immediately stands up and says, “Why not look at it in other areas?”. We can build on what the Lord Chancellor promised about talks with the DWP. The noble Lord, Lord Thomas, in explaining what he was proposing, illustrated why we have been careful in putting this matter forward. We will look at it carefully and I will draw to the attention of my right honourable friend the Lord Chancellor the specific proposals he made in his speech.
As I have said before, we have had a very thorough debate on this. It has certainly been very thoroughly debated in this place over the past year. I believe that it would be better now if the House were to accept the Commons amendments and the noble Lord were to withdraw his.
Lord Bach
I am very grateful to all noble Lords who have spoken in this debate. We have had the expertise of the noble Baroness, Lady Doocey, and the noble Lord, Lord Low, both of whom are experts on the disabled and the problems that they face. I am also very grateful to my noble friend Lord Howarth and the noble Lord, Lord Martin of Springburn, for their very knowledgeable contributions on this matter, and not least to the Minister for what he has had to say.
This is one of the central and most important debates of this whole Bill. It goes to the very heart of what the Government are seeking to do, which is effectively to ask whether social welfare law will survive in our jurisdiction. We currently have a system of social welfare law that we can be proud of. It is not perfect; it makes mistakes and it probably does not have enough money spent on it but it is not a bad system, where not-for-profit organisations around the country—CABs, law centres, other advice centres and some Law Society solicitors—do wonderful work at very low rates, giving advice to the most vulnerable, the disabled and the poorest in our country.
The issue is whether claimants will continue to get the advice that they have been entitled to in the past—because there has been a consensus of the political classes of all the parties that that is the proper way for a mature legal system to behave—which helps them decide whether or not they have a case when they are dealing with the state. Without that advice, how will these people get to the tribunal in the first place? The Minister quoted the president of the Social Entitlement Chamber of the First-tier Tribunal. Is that the same president who has publicly said that he is appalled at the prospect of more and more claimants coming before his tribunals who have not had the benefit of any legal advice?
Lord McNally
That this House do not insist on its Amendments 170 and 172 to which the Commons have disagreed for their Reasons 170A and 172A.
Lord McNally
My Lords, the Motion contains amendments dealing with clinical negligence. We have debated the issue of clinical negligence at length, and I am grateful for the intensity and conviction of those who have spoken in support and those who have challenged the Government during the passage of this Bill. Before I go into the detail of this Motion, I remind noble Lords that we listened to their concerns and brought forward an amendment at Third Reading in this House which specifically addresses their concerns. This amendment puts beyond doubt that legal aid will remain available for babies who suffer brain injury at birth leading to a lifetime of care needs. This was in recognition that there are often difficulties in obtaining funding for these cases through conditional fee agreements due to the extent and expense of the investigations required.
Our amendment brings into scope claims where medical negligence causes a brain injury as a result of which the child is severely disabled. It is intended that this will cover cases of medical negligence where the child is at its most vulnerable, during its time in the womb, during the delivery, and immediately afterwards. The House of Commons raised concern that there might be arguments about whether a particular child falls within the scope of this amendment. We believe that the amendment is clear in this regard. It provides for funding where the negligence occurs in the period of time beginning with the point of the mother’s pregnancy until eight weeks after birth. In recognition of the fact that premature babies are particularly vulnerable, the government amendment also provides that where a baby is born prematurely, the eight-week period will be taken to start from the point at which the mother would otherwise have begun her 37th week of pregnancy.
We have also provided that where the negligence occurs beyond the eight-week point, a safety net will remain in the form of the exceptional funding scheme, in those cases where the failure to fund would amount to a breach of the individual’s rights under the ECHR. Contrary to the concern expressed in the other House it is right that all other cases should first seek a conditional fee agreement, and where one is not available—for example, due to high disbursement costs—then exceptional funding may be available, taking into account factors such as the complexity of the case and the capacity of the litigant or litigation friend to present their case. The Government’s amendment covers the vast majority of clinical negligence children’s cases currently funded through legal aid.
My noble friend Lord Cormack has tabled an amendment in lieu of his Lords Amendment 172, which seeks to bring into scope other children’s cases involving clinical negligence that occurred when the child was below the age of 16, rather than 18. We believe that this amendment would still bring into scope a whole range of less serious cases which do not involve lengthy and detailed investigations or multiple expert reports, which are caught by government Amendment 216, and which are more suited for funding through a CFA in exactly the same way as for adults. We believe this to be the case whether the child is 18 or 16. The Commons has decided against Lords Amendment 172, and it is my opinion that my noble friend’s amendment in lieu will elicit the same response. I urge my noble friend to withdraw his Motion.
On Amendment 170, the Government have already made special provision for expert reports in clinical negligence reports to the Jackson provisions in Part 2. This will mean that no one is required to pay up front for expert reports in clinical negligence cases. Providing for all expert reports would be more costly than the current legal aid arrangements. As I have said previously, at present solicitors have to choose whether to use legal aid or a CFA to fund the case. Only 18 per cent of cases where the funding method is known use legal aid. The amendment would open up legal aid for all of those cases which are currently funded by way of CFA. Lawyers would be able to claim their success fee while using legal aid to fund expert fees, and the legal aid fund would carry all of the solicitor’s or insurer’s risk. This could result in a significant expansion of the legal aid scheme and significant costs. We do not consider this a fair outcome for the taxpayer, who should not be required to pay where cases are already taken forward and paid for by alternative means. I beg to move.
Motion H1 (as an amendment to Motion H)
Lord Cormack
At end insert “but do propose Amendment 172B as an amendment in lieu”.
Lord Cormack
My Lords, I will not detain your Lordships long. This is a simple, precise amendment. It does not cover the ground of Amendment 170, but it does repeat, almost exactly, the amendment which your Lordships’ House approved just before we rose for the Easter Recess. When I moved the amendment at that stage, I made it quite plain that I felt that it was very wrong to single out a specific group of children who had suffered as a result of clinical negligence, and to leave the others. I have heard, of course, what my noble friend has said, and I do not for a moment question his personal commitment to these issues. But we have not had any adequate response in the very brief debate in the House of Commons, and my noble friend merely repeated this evening the amendment that the Government introduced at an earlier stage, which of course we welcome, but which creates an anomaly and an unfairness.
When we debated this last time, my noble friend Lady Eaton—who signed the earlier amendment along with the late Lord Newton of Braintree—made a very moving speech in which she talked about a child who had not suffered from brain damage, but who had been paralysed. She talked about the needs of a child who would grow up to be able to walk, in spite of the brain damage, and a child that would remain paralysed for the rest of his life. It was a movingly made speech, which illustrated what this amendment is all about.
I have heard what my noble friend has said about other means of getting support. I would just repeat a point that I made in my last speech: the National Health Service—of which we are all proud, and which we have spent many months discussing in your Lordships’ House during the course of this parliamentary Session—is an agency of the state. If anyone suffers as a result of the negligence of an agency of the state, then the state should, automatically and properly, provide a means of redress. This amendment does not go so far as that, because it concerns itself wholly and exclusively with children. I believe that, in all fairness, it is an amendment that even at this late hour should commend itself once again to your Lordships’ House. I believe that it would be appropriate for us to ask the other place to think again. It did not think very much about this one, and it really should. In his brief intervention this afternoon, my noble friend Lord Higgins referred to the inadequacy of time given in another place to your Lordships’ considered amendments. As we look to the future of your Lordships’ House, we ought to consider, in the imbalance between the two Houses, whether it might not be appropriate to do a little more insisting, if what we have deliberated on is so summarily dismissed.
Given the present conventions, and the relationship between the two Houses as they exist, I do not believe that one should go on and on playing a game of ping-pong. However, in this instance we have every right to say to another place, “Please think about this. Think about the children who suffer as a result of clinical negligence. This is your opportunity to redress an imbalance”, because welcome as it is, and I repeat that it is welcome, what the Government have done does not go far enough. Let us send this back. Let the other place think, and because there are no large sums of public money involved in this—indeed it could be argued that we are probably in the long term saving public money—let them in their charity look to those who are most deserving of that charity. I beg to move.
Baroness Finlay of Llandaff
My Lords, I very strongly support the amendment. There is a very strong reason for looking at children separately from adults. Indeed the age of 16, as outlined in this amendment, makes sense because in the General Medical Council guidance 16 is the age at which a child can be assumed to have capacity to consent. When treating a child who is actively withholding consent to treatment and who is aged between 16 and 18, the doctor should and must think again. Those under 16, however, go into treatment at the consent of their parent or guardian, not of themselves. If they are then subject to error, whether that is unfortunate or negligent or almost wilfully neglectful, they have done so not with their own informed consent but with that of others.
The amendment that the Government have brought forward, which relates to neonates and birth-related trauma, is, I suggest, fraught with difficulties over the problem of premature babies and accurate estimation of the date on which they would had been born. Even in the very best of hands, estimates of their expected date of delivery have to have a plus or minus of four days around them. That would impose an eight-day error. I fear that there will be endless arguments. Should there be a small, very premature baby in a neonatal unit, and should somebody inadvertently inject the wrong drug or should their ventilator inadvertently be set incorrectly—switched off from oxygen levels, or whatever—I fear that there will be arguments around whether the expected date of delivery was really the one that had been written on the notes. Was it actually two days forward from that or two days back, depending on the date of the error?
This amendment avoids that kind of deeply traumatic argument and recognises the fact that a child undergoing treatment has not given their informed consent to it. That treatment has been at the consent of others acting on that child’s behalf. They must therefore be treated differently from adults because they are vulnerable on two counts: first, their age, and, secondly, because there was of course something wrong in the first place for them to be entrusted to the care of the service which then failed them.
Lord Higgins
My Lords, perhaps I may intervene for a moment to ask my noble friend a rather simple-minded question. The Reason given by the Commons set out in 170A states:
“Because it would alter the financial arrangements made by the Commons”.
Can my noble friend briefly tell us exactly what these financial arrangements are, to the extent that they affect the state of the economy in terms of public expenditure and so on?
Lord Thomas of Gresford
My Lords, there is something ironic in the desire of the noble Lord, Lord Cormack, to maintain legal aid for children as a child might be very much better off pursuing a claim by means of a conditional fee agreement as things stand at the moment. I shall explain.
My noble friend Lord McNally has on two separate occasions during the Bill’s passage outlined fully the Government’s intention to introduce a supplementary legal aid scheme, which was part of the Access to Justice Act 1999, passed by the party opposite, whereby there would be an automatic 25 per cent deduction from the damages recovered by a claimant who is legally aided. As things stand, if a child succeeds under legal aid in obtaining damages, 25 per cent of those damages will be taken by the state under the proposed supplementary legal aid scheme, which will be used to fund other applicants for legal aid automatically. Under a conditional fee agreement, the solicitor who acts on behalf of the child claimant will be entitled to recover his fees, if he can establish the case, from the other side. But when it comes to the success fee, under these proposals, it will be recoverable from the damages of the child and limited to 25 per cent of those damages.
A success fee cannot exceed 100 per cent of the lawyer’s normal fees that he recovers from the other side, so it may never come anywhere near the 25 per cent of the damages that the child recovers. Under a conditional fee agreement, the success fee is related to the amount of the fees, not the amount of the damages. There is not a 25 per cent deduction from the child’s damages automatically. That is just a cap to prevent a success fee from going to an extreme amount. Consequently, it may be that the legally aided child, who will have an automatic 25 per cent reduction of his damages, will be in a worse position than one under a conditional fee agreement. I do not think that that point has properly sunk in. It is for that reason that I look to the Government, perhaps not tonight but at some time if regulations come forward for the supplementary legal aid scheme, to exempt children from the 25 per cent reduction proposed under that scheme. As things stand, 25 per cent will be taken off. For those reasons, I do not think that the amendment proposed by the noble Lord, Lord Cormack, assists the children that he wishes to help.
Lord Beecham
If I understand the noble Lord, Lord Thomas, correctly—he is obviously more conversant with the Access to Justice Act 1999 than I am—provision is contained within that Act for regulations to be made—
Lord Beecham
I was about to say precisely that. It was never implemented so it is open to the Government to lay regulations that would require that 25 per cent deduction. It is equally open to them to do what their predecessors did and not lay such regulations or make that deduction. I am entirely at one with the noble Lord in saying that that deduction should not be made, but that is the situation at the moment.
With respect to the noble Lord, I do not think that his argument takes us very far at all. The Opposition support the amendment proposed by the noble Lord, Lord Cormack, despite the fact that it appears to contain a grammatical error. It refers to,
“clinical services which took place at a time when the individual was child”.
There is an indefinite article missing somewhere. However, that is a trivial point. The substantive point is one that was made effectively by the noble Baroness, Lady Eaton, when we debated this on Report. In the debate on the amendment that was discussed on that occasion, she talked of the figures involved in legal aid expenditure for children. She pointed out that legal aid for clinical negligence claims involving children cost the Legal Aid Fund some £4.6 million, of which £3 million was spent on precisely the cases of neonatal injury to which the Minister referred and to which the Government have responded by restoring them within scope. Therefore, as the noble Baroness pointed out, the net saving would amount to £1.6 million for the Legal Aid Fund.
It is time to dispose of some of the shibboleths about tough decisions and the like. Apparently it is not a particularly tough decision for the Department for Communities and Local Government to spend £250 million on weekly bin collections. It seems to me and to the noble Baroness, Lady Eaton, and presumably the noble Lord, Lord Cormack, a very tough decision to deny legal aid at a cost of £1.6 million to children under the age of 16 who suffer clinical negligence other than through the limited but welcome concession that the Government have made in respect of the injuries to which we have referred.
I also remind your Lordships of the view of the National Health Service Litigation Authority, which I quoted last time and will quote again. It stated:
“We have serious concerns over the proposal to withdraw legal aid from clinical negligence claims. Whilst we have seen an upsurge of claims brought under Conditional Fee Agreements … in recent years, we question whether CFAs are likely to be readily available to fund many of the more serious claims currently brought via legal aid”.
That view was about clinical negligence claims at large. Therefore, one might think that those concerns would surely apply to claims for children under the age of 16.
This does not remotely impinge on the huge problems that the Minister constantly reminds us of in relation to deficit reduction and the like. It is an almost trivial sum of money. By no conceivable stretch of the imagination could it be justified by financial privilege, which is the cover under which the Government approach this amendment. Let us be clear about financial privilege because it has been bandied around today and on previous occasions. Of course the Commons has the right to assert financial privilege, which is an objective process as far as the Clerks and the Speaker are concerned. However, it does not stop there. The Commons can waive financial privilege. If the Government wished for financial privilege to be waived, it would pass almost without opposition and frequently does. It is often waived. The Government choose not to waive it in connection with this and the other matters to which we have referred. It is a fig leaf behind which Ministers hide. I hesitate to convey an image of Ministers brandishing fig leaves; that would be an unwelcome variation on a theme. However, it is a pretty feeble and diminutive fig leaf for any Minister to hide behind. It is not an adequate defence for what they are doing.
I repeat: the figures show that the potential savings are minimal. Undoubtedly, justice will not be accessible for too many young people except in an expensive form potentially through a conditional fee agreement—even allowing for how the noble Lord, Lord Thomas, described it. I very much hope that the House will build on the Government’s welcome concession with this small additional financial burden and extend justice to those who need it.
Lord McNally
My Lords, the noble Lord, Lord Higgins, quoted the Reason, which states that the amendment,
“would alter the financial arrangements made by the Commons”,
and goes on to state that,
“the Commons do not offer any further Reason”.
As an old parliamentarian, he knows that if an amendment infringes privilege, that is the only reason that will be given. Obviously, when taken against the national economic crisis that we are dealing with, these various precise sums will always be able to be argued away as almost too trivial to worry about.
Perhaps I may relate to the House some other thoughts that have also motivated our approach in trying to reform legal aid in this area. Clinical negligence claimant lawyers’ bills, which the National Health Service Litigation Authority has to pay, have more than doubled from £83 million in 2006-07 to £195 million in 2010-11. As part of this, CFA success fees to claimant lawyers have more than doubled in the past four years from £28 million to £66 million, and the NHSLA pays out an estimated £33 million in claimant insurance premiums. However, damages paid to claimants have risen more slowly—from £579.4 million to £863.4 million over the same period—and the NHSLA has controlled its own defence legal costs much more carefully, rising only 26 per cent during the same period.
One motivation behind our approach in this whole area has been the impact that the system brought in by the previous Government in 2000 has had on the National Health Service, with an extraordinary rise in payments to lawyers. We are trying to address that. In doing so, early on we listened carefully to concerns about the specific issues faced by the most vulnerable children at the most vulnerable point in their lives, and we brought forward amendments to deal with that. Of course, in these areas there will always be disputes about where you draw the line and what happens to those on the other side of that line. However, in bringing forward our amendments our intention was to meet that initial lobbying, and we responded to it most positively. However, that was immediately followed by further lobbying that this should cover all children, but we do not believe that that is necessary.
The amendment purposely captures clinical negligence before, during and shortly after birth. We believe that that is a proportionate means of meeting the policy objective of targeting legal aid on the most serious and complex cases that would otherwise struggle to obtain a CFA. The eight-week period is an appropriate period of time at which to draw the line, because most of the serious and complex clinical negligence cases involving neurological injuries to infants are likely to arise from treatment or care administered during this period, when the infant can be considered to be most vulnerable. We have drawn the post-birth line at this point because of that. We also recognise that some children will be born prematurely and will need fairly intensive medical supervision in the first weeks of life. Any cases in which negligence occurs beyond this point will need to be considered under exceptional funding on a case-by-case basis. It is difficult—
Lord Faulks
I am very grateful to my noble friend for giving way. I wonder whether he can help the House on one point. Originally, before the welcome concession by the Government concerning babies damaged at or about the time of birth, the response was that exceptional funding might be available to meet those claims. Now that those claims are to be within the scope of legal aid, does it follow that more exceptional funding might be available to deal with the hard cases that may arise with children who are outside the scope of the eight-week period?
Lord McNally
I do not think that exceptional funding has ever been a specific amount of money and that therefore the amendment releases more of the exceptional funding pot to others. The exceptional funding is there to meet cases that fulfil the requirements for exceptional funding. I will not follow my noble friend because he leads me down a dangerous road. The exceptional funding is and will be there on the merits of the case. That is why we have confidence that the combination of the amendments that we have made, the CFAs, which, as was pointed out, some 82 per cent are already using, and a robust exceptional funding scheme will meet the needs in the cases that are covered by the amendment that we are opposing. Again, I ask the noble Lord to withdraw his amendment and to support the Commons.
Lord Cormack
My Lords, I felt very sad as I listened to a Minister, for whom I have both affection and respect, fail to answer this brief debate.
I am grateful to all those who have taken part. It has been brief, but that does not mean that the issue is unimportant. I apologise, incidentally, to the noble Lord, Lord Beecham, for the missing indefinite article, but we are talking about a definite proposition. That definite proposition is this: we often talk about rights and responsibilities, and certain people have particular rights and to them we have particular responsibilities. We are talking about children—those under the age of 16: children who are damaged as a result of clinical negligence within the National Health Service that the country provides for them and in which they and their parents place their trust. To limit the help, in a very small timeframe, to those who suffer brain damage is frankly not the hallmark of a civilised health service or a civilised society.
I know not whether the figure of £1.6 million given by the noble Lord, Lord Beecham, is right, but it is certainly around that figure. Indeed, the state would be the beneficiary in the long term. It would certainly be the beneficiary in the moral sense. We should concern ourselves about that. Of course the Government have problems. Of course they have great responsibilities for the economy. We are not, however, talking this evening about something that can in any way damage the financial strategy. What it can do is damage our reputation. I wish to test the opinion of the House.
Baroness Northover
That this House do not insist on its Amendment 171 to which the Commons have disagreed for their Reason 171A.
Baroness Northover
Motion J concerns legal aid for children. When the Government undertook their comprehensive review of legal aid, we looked at the principles of each type of case funded by the scheme and considered, first, the importance of the issue; secondly, the litigant’s ability to present their own case, including and especially any vulnerability; thirdly, the availability of alternative sources of funding; and, fourthly, the availability of other routes to resolution. We have used those principles to prioritise funding so that civil legal services will be available in the highest-priority cases—for example, as my noble friend Lord McNally said earlier, where people’s life or liberty is at stake, where they are at risk of serious physical harm or immediate loss of their home, or where children may be taken into care.
The application of these principles led us to protect the vast majority of funding in cases involving children. These include family cases where a child is at risk of abuse; child care and supervision cases; civil claims concerning the abuse of a child; special educational needs cases; clinical negligence claims concerning brain-damaged babies; cases concerning the inherent jurisdiction of the High Court in respect of children; cases concerning the unlawful removal of children from the UK; cases concerning EU and international agreements on children; and legal aid for children who are made parties to private family proceedings. That is why 96 per cent of the current spend on cases involving child claimants will continue. Because we have adopted the approach that I have outlined, we do not accept Amendment 171, which seeks to bring all cases back into the scope of legal aid where a child is a party. On current plans, the overwhelming majority of current support will continue, as I said.
The noble Baroness, Lady Grey-Thompson, has tabled Amendment 171B, which is almost identical to Amendment 171, with the exception of immigration and consumer law cases, on which the House of Commons has offered a clear view. In our opinion, Amendment 171B will elicit the same response in the House of Commons. However, I will set out again the measures that are in place that will guard against the risk of children falling through the net.
As noble Lords know, we have committed to providing additional resources for citizens advice bureaux and similar groups that provide the general practical advice that can often prove more productive than drawn-out adversarial legal action. As I mentioned earlier today, we will be making a further £20 million available to the sector in each of the next two financial years. It is therefore not the case that there will be no or substantially reduced funding for cases involving children and young people.
Some in past debates have suggested that children might be left to fend for themselves in courts of law. Let me address that very clearly. It is already a requirement of the rules of civil litigation that a child must have a litigation friend to conduct a case on their behalf, usually a parent unless the court specifically orders otherwise. It will be only in exceptional circumstances that the court will make an order permitting the child to conduct proceedings on their own behalf. Any step taken before a child has a litigation friend is of no effect unless the court makes such an order. There is no requirement that a litigation friend must act through a solicitor. It is therefore open to a child’s parent, or other person caring for the child, for example, to act as the child’s litigation friend in proceedings where the child is a party.
In other scenarios—for example, tribunals that are addressed in the amendment tabled by the noble Baroness—where a child may be bringing an action without a litigation friend, this will of course be a relevant factor in deciding whether they have the ability to present their own case and whether exceptional funding for representation is required in order to avoid a breach of Article 6 of the ECHR. This means that the existing Civil Procedure Rules, combined with our exceptional funding system, will provide crucial safeguards against children being left to navigate court and tribunal hearings on their own. We believe that these measures, taken together, are sufficient to guard against the risk of children falling through the net where they do not fall into the vast majority of cases that are still covered by legal aid. I beg to move.
Motion J1 (as an amendment to Motion J)
Baroness Grey-Thompson
At end insert “but do propose Amendment 171B as an amendment in lieu”.
Baroness Grey-Thompson
My Lords, this amendment is in my name at this stage. However, it received support from the late Lord Newton of Braintree and the noble Baronesses, Lady Eaton and Lady Benjamin, throughout the passage of the Bill.
This amendment is narrower than the one that was previously carried by your Lordships’ House. I was extremely disappointed that, due to the financial arrangements in the other place, I had to remove the areas of consumer law and immigration, as the latter alone accounts for around a third of the cases affecting children. This Motion makes legal aid available for children in cases where a boy or girl is a victim of medical negligence or malpractice, in all cases of private family law, education, housing and social welfare and for criminal injury appeals only after they are financially means-tested and found to qualify. This Motion would give legal aid to about 3,000 extra children a year who are not explicitly covered by the Bill. It would cost the Government about £3.2 million a year and could be easily affordable. When you consider that the Legal Services Commission is sitting on £500 million-worth of confiscation orders that it has not yet collected against supercriminals, there are other ways to save money rather than targeting children.
At present, legal aid helps around 40,000 children every year who have civil justice legal problems in their own right. If the Bill is left as it stands, legal aid will not be available for thousands of children under the age of 18 who would qualify if the current rules remained in place. It is estimated that between 5,000 and 6,000 children could be affected. The Government have not explained the rationale of why some children are being treated differently from other children who have problems under the same categories of law.
On our 40th day of debate in your Lordships’ House I asked why 220 of last year’s cases on education would qualify but 110 children would not receive access to legal aid. I still have not had an answer to that question. We have been told that individual children may qualify under an exceptional cases fund, and more information has been provided, but I still fear that children will fall through the net.
It is probably slightly unfair of me to quote the Minister when he was questioned about exceptional cases on the previous Motion, but he said that it is hard to quantify the amounts. For me, the merits of the case are not enough without knowing some of those figures. It could mean that more is spent than we are saving by doing this.
Why do I feel so strongly about this? It is because children are children; they are not adults. Children do not have the capacity to represent themselves or to interpret the thousands of pages of laws and regulations that affect them. The question of children’s capacity to represent themselves is explicitly recognised and provided for in international law.
I remind your Lordships’ House that the Children’s Commissioner for England, Dr Maggie Atkinson, wrote to the Lord Chancellor to warn that denying children a voice in legal proceedings would be in breach of the European Convention. She wrote:
“Children, by virtue of their age and capacity will not be able to present their case effectively in the majority of proceedings … Children’s need for legal aid in civil cases where they are a party should not be viewed as ‘exceptional’”.
In virtually all these cases a child will be taking action against the state, and we do not yet know how the state will begin to act if it cannot be challenged. It is therefore wrong that the state has discretion on whether it will grant legal aid to a child who is challenging it. Such systems are not synonymous with accountable and democratic systems. I ask noble Lords once again to support this Motion. This issue is so important that we should ask the other place to reconsider the case of these children. I beg to move.
Baroness Hamwee
I shall say a word about one of the items that has been left out of this list: immigration. I am sorry that the noble Baroness has decided, for reasons that I understand, not to include it in the list. We know that immigration matters will not be within exceptional funding, so that route will not be available. Unaccompanied children arriving here may very well initially claim asylum, but a child who makes an asylum claim that fails and fails again on appeal will fall back on an immigration claim. For instance, a child who comes here at, say, the age of 12 and does not succeed on asylum but gets leave to remain will after three years, at the age of 15, be seeking immigration status in circumstances that will have changed dramatically.
I can see that there may be different considerations for a child who comes within a family but there must be cases where the child should be represented separately. We have a spent a lot of time on this and we know that immigration is complex; that social workers are not qualified to deal with it; and that legal advisers need to be specially licensed for it. I know that we are not in a position to change this but it is right to put on record some disappointment. But there is hope that as time goes on the Government will realise that this is something on which particular help is needed.
The Earl of Listowel
My Lords, I support the noble Baroness in her amendment. I should like to talk about young people leaving care at the age of 16 or 17 and how this affects them. I was very grateful for the opportunity to meet the Minister this morning and for his reassurance in this area. Following that, I spoke to a personal adviser—when children leave care they are appointed such an adviser to support them during their transition from care—who said, “It is so helpful to be able to go on certain occasions to a professional, a solicitor, to get a letter to get access to welfare and the right housing for these children”.
About one-quarter of children leaving care do so at the age of 16. Therefore, we often have very vulnerable young people who really can benefit from expert advocacy. While I welcome what the Minister has said in terms of reassurance, this matter in particular needs to be looked at. He highlighted the use of the exceptional funding avenue. The personal adviser said that often it is not a question of going to court but of getting in early and getting a good letter to make the local authority or other agencies aware of the legal situation and then things would be done correctly. It would be helpful if the Minister in his response could give an assurance that the exceptional funding avenue is easily accessible in those circumstances. I strongly support my noble friend’s amendment.
Lord Beecham
My Lords, the noble Baroness, Lady Hamwee, referred to her regret that immigration is not included in the amendment. In fairness to the noble Baroness, Lady Grey-Thompson, this amendment is in lieu and something has to be different from the original amendment. An invidious choice had to be made and one could regret that any one of the categories was to be omitted but one had to be in order for the amendment to be in order.
I am indebted to JustRights for its briefing, which no doubt many noble Lords will have seen. JustRights is made up of some 18 voluntary sector organisations. When the Minister refers to extra support for citizens advice bureaux—which I think she identified in particular although she may have been referring to the whole sector—of £20 million a year for three years, one should know that Citizens Advice sustained a loss of £80 million. That sum is for everything and not just for children. Such investment has to be seen in that context.
However, as regards these amendments, by my calculation, taking out the immigration cases, the cost of accepting the noble Baroness’s amendment would be of the order of £2.8 million. JustRights estimated about £5 million to £6 million according to the Ministry’s estimates but that included something like £1 million for immigration. I beg the pardon of noble Lords but that figure should be more: the net saving should be about £4 million. It points out that the Local Government Association—I declare an interest as a vice-president of that organisation—estimates that the removal of legal aid for unaccompanied child asylum seekers in immigration cases, which this amendment does not seek to restore, would cost local authorities £10 million. In other words, the cost to one element of the public purse will go substantially to exceed the savings which would accrue from the Government’s package. It is estimated by Youth Access and the Legal Services Research Centre that greater costs will fall on other elements of the public sector, including the welfare system and the National Health Service.
Baroness Northover
My Lords, I thank noble Lords for their very important contributions to this debate.
At the beginning of this discussion, I set out in some detail the reasons behind the Government’s position on legal aid for children, and that legal aid should apply to the highest priority cases, which has been at the heart of our reform proposals. I produced a long list of where funding is being retained for children as a result of the application of this principle. The fact that 96 per cent of current spend on cases involving child claimants will continue reflects the importance that the Government have placed on that.
Lord Phillips of Sudbury
My Lords, I regret to interrupt my noble friend at this time of night, but she mentioned the figure of 96 per cent remaining in scope. The figure of 13 per cent taken out of scope was just mentioned. I wonder where the reconciliation is between those two figures, because it is significant.
Baroness Northover
It is very straightforward. As I have just said, 96 per cent of current spend on cases is included, and in terms of numbers of cases 13 per cent are outside. So 4 per cent of spend is outside, which represents 13 per cent of the number of cases.
The noble Baroness, Lady Grey-Thompson, flagged up great concern about children in this situation and referred to the Children’s Commissioner saying that if this happened, it would breach the ECHR. Indeed, we agree. I hope my introductory remarks reassured her that this is not in breach, because if there was a failure to provide funding in such a situation that it was a breach, that would be covered either within that 96 per cent that I have just mentioned or through the exceptional fund. Any child qualifying for that kind of protection would qualify, under the European Convention on Human Rights, for that exceptional funding. I hope that that reassures her. The Children’s Commissioner may say that it would be abuse of children’s rights if that were not to be the case but we are saying that that is covered because of that protection.
My noble friend Lady Hamwee flagged up the area of immigration, and here the child’s interests are generally represented by the parent or guardian. In most cases where a child is unaccompanied, the issue is usually an asylum claim and legal aid is of course remaining for these cases. My noble friend asked what would happen if the case was not accepted as an asylum claim. In these cases unaccompanied children would have a social worker assigned to them, whose role would include helping the child access the same advice and support as a child permanently settled in the UK. They could also, for example, offer assistance in filling in forms, explaining terms and giving them emotional support. As my noble and learned friend Lord Wallace of Tankerness outlined previously, the Home Office will be working with the Office of the Immigration Services Commissioner on how best to ensure that local authorities can assist children in their care with immigration applications if necessary. This could, for example, mean exempting local authorities from Office of the Immigration Services—
Baroness Lister of Burtersett
I am sorry to interrupt the noble Baroness but we have gone over this a number of times. I remember the late Lord Newton questioning this issue of using social workers. Social workers are not trained for this kind of work and, as I understand, it would be totally wrong for them to provide legal advice for children in their care. It could create real problems of conflicts of interest.
Baroness Northover
The noble Baroness may be right about social workers providing legal advice but I am talking about the kind of support that a social worker can give to a child in that situation. Often it is not a matter of specific legal advice but of assisting that child and steering them through the necessary procedures. There has been a running theme through a lot of this discussion that it is not necessarily legal advice that is required; it may be another form of support, which is where, for example, the CAB may be able to assist. Noble Lords have a lot of experience of organisations such as these assisting people and we should not forget that. We are looking at how best to ensure that local authorities can assist children in their care in the kind of cases that my noble friend has flagged up.
The noble Earl, Lord Listowel, asked about care leavers. I am glad that he was reassured by what my noble friend could tell him. I reiterate that the exceptional funding scheme will ensure the protection of the individual’s right to legal aid under the European Convention on Human Rights, as well as those rights to legal aid that are directly enforceable under European Union law. The scheme will of course encompass children leaving care, where they meet the relevant legal tests. In considering whether exceptional funding should be granted on this basis in an individual case engaging Article 6 of the ECHR, the director will consider the ability of the client to present their own case, the complexity of the issues, the importance of the issues at stake and all other relevant circumstances.
Local authorities also have a range of duties to care leavers which will not be affected by the provisions of the Bill. It is late at night but I also recognise the huge commitment in this area of the noble Earl. If he would like further discussions we are happy to do that. I hope that I have addressed the concerns of most noble Lords and would like to remind them that 96 per cent of the current funding remains in place and that the principles of need and vulnerability, which underpinned the reasons for covering the areas that we have, remain the most important ones.
I hope that the noble Baroness, Lady Grey-Thompson, will be reassured that children who are in need will be protected and that we will not see the concerns that she has flagged up come to fruition. On that basis, I hope the noble Baroness will withdraw her Motion.
Baroness Grey-Thompson
I thank the noble Baroness, Lady Northover, for her response and all other noble Lords who have contributed this evening.
In my opening speech I did not mention clinical negligence because the issue had been eloquently argued in the previous Motion by the noble Lord, Lord Cormack, and the noble Baroness, Lady Finlay.
The noble Earl, Lord Listowel, raised the important issue of children in care and children leaving care. However, this will raise more issues about where the costs will move to. The hope that local authorities will pick up the pieces concerning this group of children in care or leaving care is naive. Local authorities are already under huge amounts of pressure, and pushing the costs—and potentially greater costs—on them will not help the children who we want to see receive this help.
I am also deeply uncomfortable about the role of the litigation friend and the ability of children to access an appropriate person who is able to help them through very difficult times.
I am afraid that I am still not convinced by the arguments on exceptional funding. When we debated the percentages of cases, we learnt that 13 per cent of children’s cases will be out of scope. However, information provided by JustRights shows that, contrary to misleading government claims, the 5,000 to 6,000 children covered by this amendment will not be protected by the exceptional funding scheme. The Ministry of Justice has confirmed to JustRights that its figures on the number of children affected already account for those who would receive exceptional funding. If children were automatically entitled to legal aid, the Government would avoid the cost of administering children’s applications to the scheme, as well as possible delays that would be detrimental to children’s welfare.
I am conscious of the late hour. This issue has been extensively debated in many sessions, but we should ask the other place to think again about the thousands of children who will be seriously and negatively affected if the amendment does not go through. I beg to move.