House of Commons
Prayers
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Oral Answers to Questions
Stuart Andrew (Pudsey) (Con)
1. What steps he is taking to promote refurbishment of empty and vacant homes.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
We have introduced a series of measures to get empty homes back into use, which are backed up by our commitment of £160 million of central Government funding. That is in contrast to the last Government’s pathfinder programme, which was more interested in bulldozing Victorian terraces than refurbishing empty homes.
Stuart Andrew
I am grateful for that answer. Constituents of mine in Pudsey are extremely concerned about the deluge of recent planning applications on greenfield and protected area of search—PAS—sites, given that as of October 2011 the number of empty properties in Leeds stood at nearly 14,000. Does my right hon. Friend agree that it would be better to bring those homes back into use than to destroy our green spaces?
Mr Pickles
I know my hon. Friend’s constituency well and am a frequent visitor there. He is right to point out the number of empty homes within the Leeds city boundaries, as it is one reason why we have been so keen to have the new homes bonus there, in order to bring long-term empty properties back into use. We would be doing well if we brought some of the fine architecture of Leeds—those wonderful terraced properties—back into use.
Mr Philip Hollobone (Kettering) (Con)
Will the Secretary of State congratulate Kettering borough council, of which I have the privilege to be a member, on its work with the Rockingham Forest Housing Association? They have recently spent about a third of a million pounds to bring three empty properties back into use, and now three families have homes that they did not have this time last year.
Mr Pickles
My hon. Friend illustrates my point. I hope those families enjoy their new property and will come to see it as something that a different Government were able to deliver in a different way.
Andrew Gwynne (Denton and Reddish) (Lab)
2. What steps he is taking to encourage use of empty shops not covered by the Portas pilot scheme or the high street innovation fund.
Bill Esterson (Sefton Central) (Lab)
11. What steps he is taking to encourage use of empty shops not covered by the Portas pilot scheme or the high street innovation fund.
The Minister for Housing and Local Government (Grant Shapps)
Addressing the issue of empty shops is one of the priorities for the industry-led taskforce set up as a response to the Portas pilots. We are also encouraging landlords to make empty shops available for meanwhile use, and have introduced the community right to bid, to help local people sustain their vital community assets.
Andrew Gwynne
The Portas pilot is a great boost for Stockport, and I have seen some of the good work done there, particularly during the recent “Love your local market” fortnight. However, there is a record number of empty shops in the town centres of this country—about 24,000. Just how many of those does the Minister expect to see filled as a result of the many initiatives that he has announced?
Grant Shapps
As the hon. Gentleman will recognise, the Portas review suggested 28 different steps. We have accepted almost all those, and one of the things we added to the list was a £10 million fund that directly helped to bring empty shops back into use. That is £5 million more than was proposed by his party.
Bill Esterson
Formby, Maghull and Crosby—three towns in my constituency—all bid unsuccessfully for the Portas cash. Sefton’s Labour council would like to help, but the scale of the cuts to local government make that almost impossible. What concrete support is the Minister going to give to revitalise our town centres, because the £10 million he mentions is not going to go far enough?
Grant Shapps
Hon. Members know that active Members of Parliament are an extremely important asset in getting those town centres working again. A second round of Portas pilot bidding is to take place, which I will announce before the end of this month. That is still open to the hon. Gentleman’s three towns. In addition, I can report to the House that going forward we intend to support all the towns—more than 370—that have applied.
Justin Tomlinson (North Swindon) (Con)
What consideration has the Minister given to incentivise the take-up of empty shops by young entrepreneurs?
Grant Shapps
I have been able to see some fantastic schemes in places such as Stockton, where the council has taken over a large double shop frontage, which entrepreneurs rent for just £10 a week. It then uses the empty properties in the town centre to get these people into rentals after a few months when they have made their businesses a success. Those are the types of schemes that I have seen and that I am encouraging, and hon. Members can do an awful lot to persuade their local authorities to play ball.
Ian Swales (Redcar) (LD)
I am sure the Minister will join me in welcoming the big reduction in the number of empty shops on Redcar high street, but what can he do about the rigidity of the business rates system? In one case, business rates are five times the rent being sought by the landlord.
Grant Shapps
Business rates are always a heavy cost and people like me who started our businesses in shops are familiar with that heavy burden. We have taken 300,000 of the smallest businesses out of paying any business rates at all and, in addition, we have spread the rise, which is only an inflation-level rise, for other businesses over up to three years. We will continue to look at ways to help businesses, and particularly the smaller shops, with their rates bills.
Roberta Blackman-Woods (City of Durham) (Lab)
What plans does the Minister have to assist areas with high shop vacancy rates, such as Grimsby, which has 28.3% vacant, West Bromwich, which also has 28.3% vacant, Stoke-on-Trent, which has 25% vacant, and Sunderland, which has 23% vacant? Those areas, so far overlooked for Government funding, have an average unemployment rate of more than 10%, which is way above average. Can we expect there to be more weighting towards disadvantaged areas in the next round of Portas pilots?
Grant Shapps
One of the useful changes we have made through the Localism Act 2011 is to allow local authorities to vary the rates downwards, which means that local authorities can look at their high streets and try to help them. I rather brushed over a point earlier. Those on the Opposition Front Bench have previously called for £5 million to be spent on bringing those empty shops back into use—I remind the hon. Lady that those calls came from her own Front Benchers—and we have doubled that and spent £10 million to assist.
Jane Ellison (Battersea) (Con)
There would be fewer empty shops if small retailers in particular could spread their costs more evenly. I know that the Portas recommendation was that wherever possible people should move to monthly rather than quarterly rent. Will the Minister take this opportunity to encourage all landlords to look kindly at such an approach when it is suggested by their tenants?
Grant Shapps
From my experience, as reflected in the 2007 leasing code, an awful lot of small things could make a big difference to smaller businesses. Finding the money to pay three months’ rent in a single go is enough to topple some businesses over, and smoother payments, fairer leases and not always having upwards-only rent reviews can all help. I am working with the industry, including the likes of the Royal Institution of Chartered Surveyors, to ensure that the leasing code is better implemented.
Charlie Elphicke (Dover) (Con)
4. What discussions he has had with local authorities on reforming the electoral rules relating to parish polls; and if he will make a statement.
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
I have regular conversations with local authorities on a wide range of issues, including electoral matters. Parish polls are the most local means of giving communities an opportunity to have their say by voting on a range of issues, from bus shelters and community centres to the installation of CCTV cameras. However, we recognise the current electoral rules are outdated and can be a barrier to local people’s participation in those polls. When an appropriate legislative opportunity arises, we will therefore reform the rules.
Charlie Elphicke
I thank the Minister for that very positive answer. Such polls are not just used for bus shelters. We had a parish—or town—poll in Dover on the future of the port of Dover and 98% voted in favour of the people’s port community ownership model, which was the right way forward. The rules are that polls are open between 4 and 9 and there are no postal votes, no proxy votes and no poll cards. That discriminates against the elderly, the disabled and those who work. Does the Minister agree that we need change quite urgently?
Robert Neill
I hope that I have shown that I am on the same side as my hon. Friend. I pay tribute to him for his work on the poll in Dover. He observes that some parish and town councils serve large populations. As the rules are set out in the schedule to primary legislation, we need a legislative means of reforming them, but we are looking for that.
Guy Opperman (Hexham) (Con)
5. What plans his Department has to offer support to communities seeking to purchase their local pubs or other assets of community value.
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
The Government recently laid before the House the assets of community value regulations, which give communities a fairer chance to bid to take over local assets, including their local and valued pubs. We will also support communities that take up these rights, and details of a support package to achieve that end will be announced very shortly.
Guy Opperman
Some of the finest pubs in the country are in Northumberland, including the one in Humshaugh in my constituency, which was saved by the local community. Does the Minister agree that it is a concern that soldiers were turned away from a pub down south last week? As Armed Forces day took place last weekend, including in my constituency of Hexham, does he also agree that pubs should be encouraged to accept soldiers at all times?
Robert Neill
I congratulate my hon. Friend and his constituents on the initiative in Humshaugh. I have had the opportunity of visiting other community initiatives in his area, including the Forum cinema, which has been very successful. On the point about the welcome to soldiers in our pubs, I, along with all other Members of this House, am horrified at such inappropriate and disgraceful treatment of men and women who, as we sadly learned again today, regularly put their lives on the line on behalf of our country. I note that the management of the premises in question have said that in the light of the public reaction, they will review their policy. I sincerely hope that they do; they ought to, and it ought to be changed. I hope that that is the message that all hon. Members present will send to them.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The continued decline of the local newspaper industry is of huge concern to Members on both sides of the House. Those publications are clearly community assets. What consideration has the Minister given to amending the Localism Act to protect those papers from the actions of predatory news groups?
Robert Neill
Under the Localism Act, assets are defined in terms of property assets. However, the hon. Gentleman will know that one of the challenges to local newspapers sometimes comes from the use of taxpayer-funded propaganda sheets by local authorities. It is for that reason that the Government have strengthened the rules on transparency. I hope that he will join me in encouraging those overwhelmingly Labour-controlled councils that do not play by the rules on fair trading and transparency to come into line, because many of us think that they are deliberately trying to squeeze an independent voice of criticism out of those Labour-controlled areas.
Greg Mulholland (Leeds North West) (LD)
I welcome the community right to bid for pubs and other community assets, but does the Minister agree that unfortunately it will not be as successful as it should be while the loophole allowing the demolition of free-standing pubs remains, and while the right to bid allows pubs to be changed into things like betting shops and solicitors’ offices, with planning permission? Would it not be simpler to introduce a separate use class, so that the community always has a say when a pub is to be closed or demolished?
Robert Neill
There are two points: first, the Government have indicated that they will look at the operation of the use classes order more generally; and secondly, the issue regarding demolition stems from a court definition of what counts as development, and that recently changed. Now a local authority has in its gift the ability to issue what is called an article 4 direction, removing deemed permissions in relation to various classes of development. That is an option that should be considered. So, too, is the option of neighbourhood plans, which could recognise the importance of local public houses and other community facilities. Indeed, the national planning policy framework strengthens the weight that can be given to such issues as material considerations.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
6. What steps he is taking to increase the availability of social housing.
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
The Government and the private sector are together investing £19.5 billion in an affordable homes programme that is set to exceed all original expectations. It will deliver up to 170,000 new homes for both rent and affordable home ownership. We are also spending £1.3 billion to get stalled developments back on track, and to build the infrastructure needed to unlock sites for housing.
Gordon Henderson
I welcome the Minister’s comments, but in many coastal communities there is a surfeit of holiday accommodation in caravan and chalet park centres. If one of those sites closes down, it has to revert to agricultural use. Does he agree that it would make sense to redesignate caravan parks as brownfield sites to make it easier to develop them for affordable housing?
Andrew Stunell
These are very much matters for the local plan, which is in the hands of my hon. Friend’s planning authority. I am sure that he will also be alert to the options in the neighbourhood planning system for local communities to seek a different designation, if that is appropriate.
Mr Clive Betts (Sheffield South East) (Lab)
I do not know whether the Minister is aware that according to figures from Shelter, in 2010-11 there were 104 new affordable home starts in Sheffield, including social rented housing starts. Assuming that he will put that down to the inadequate legacy of the previous Government, is he aware that in 2011-12, the number of new affordable starts fell to two, in a city of more than half a million people? Does he accept responsibility for that, and if so, what will he do about it?
Andrew Stunell
The Homes and Communities Agency significantly exceeded its corporate plan target for last year. It delivered 51,665 new affordable homes, of which 33,000 were for social rent, and that is in very stark contrast with the Labour Government’s performance; they reduced the number of social homes available for rent by 421,000.
Annette Brooke (Mid Dorset and North Poole) (LD)
What steps is the Minister taking to ensure that houses sold under the right-to-buy legislation are replaced on a one-to-one basis?
Andrew Stunell
My hon. Friend has been a lively campaigner for more social housing, and rightly so. It is an essential part of the coalition agreement on the right to buy that there will be a one-for-one replacement of every home sold, to provide a new social or affordable home.
Mr Nick Raynsford (Greenwich and Woolwich) (Lab)
I draw attention to my interest, as declared in the register. The House will have noticed that the Minister’s response to the question about the availability of social rented housing was to use a different term—affordable rented housing. Everyone knows that under this Government, social rented housing has virtually come to a halt. When will they recognise that affordable rented housing depends on very much higher rents, and when the Department for Work and Pensions is cutting housing benefit and the Prime Minister is encouraging even deeper cuts in housing benefit, how can they possibly hope people on low incomes will be able to afford those rents, if social housing is not being provided?
Andrew Stunell
The right hon. Gentleman once sat in my office and he will know that during his period of office he reduced the number of social homes available. In 2011-12 two thirds of homes completed—33,227—were social homes for rent. If he had paid more attention to getting a positive input of social homes during his period of office, we would not have such a deficit to fill now.
Chris Williamson (Derby North) (Lab)
This Administration are presiding over the worst housing crisis in a generation. There has been a 97% collapse in new social housing starts and a 68% fall in affordable housing in the past 12 months. We have heard the Minister tell us that everything is fine and dandy, but nobody believes him. I cannot help wondering if he is modelling himself on Voltaire’s hopelessly optimistic Dr Pangloss or on one of George Orwell’s cynical apparatchiks, or is he just plain incompetent?
Andrew Stunell
The hon. Gentleman left off the correct response, which is that unlike him, I am supervising the development of more social and affordable homes. It was the Government whom he supported who cut the number of social and affordable homes by more than a quarter of a million. If his Government had performed properly in their period of office, we would not be facing that housing crisis now.
Henry Smith (Crawley) (Con)
7. What recent steps he has taken to support former members of the armed forces in respect of housing.
Andrew Bridgen (North West Leicestershire) (Con)
9. What recent steps he has taken to support former members of the armed forces in respect of housing.
Karl MᶜCartney (Lincoln) (Con)
15. What recent steps he has taken to support former members of the armed forces in respect of housing.
Rebecca Harris (Castle Point) (Con)
19. What recent steps he has taken to support former members of the armed forces in respect of housing.
The Minister for Housing and Local Government (Grant Shapps)
I am determined to help current and former members of the armed forces gain the housing they deserve. I have given service personnel priority for the Government’s affordable home ownership schemes, including Firstbuy, and on Friday last week I issued new statutory guidance to make it easier for service personnel to get access to affordable homes for rent.
Henry Smith
I am pleased to hear that that guidance is coming forward because my local housing authority has up till now seemed to be confused about where it stands in relation to the military covenant and its obligations under it.
Grant Shapps
I am grateful to my hon. Friend for giving me the opportunity to explain to the House that that new guidance makes it clear to his and every other local authority that this nonsense of people returning, often without a base back in this country because of the amount of time they have served overseas, and then not being able to apply for housing in their area because of some trumped-up allegation that they have no locality—in other words, that they do not have a residency requirement —is to end. That is what the guidance makes absolutely clear.
Andrew Bridgen
I have a constituent in the village of Belton, Mrs Kirsty Pett, who is a mother of four and has served in the armed forces, whose husband, a former Warrant Officer, was tragically killed in a motorcycle accident last year. She is currently on the council housing list and has been given medium priority, but she will lose her privately rented home in the very near future. Will my right hon. Friend confirm that Mrs Pett’s family, and indeed widows and children of all armed forces personnel, will benefit from the new changes to enable her to remain resident in her home village?
Grant Shapps
My hon. Friend raises an important point: when Army personnel return, that is one thing, but when they do not and their spouses are left to pick up the pieces, that is when this country owes them a real debt of gratitude. In the new statutory guidance, which was issued on Friday, I have ensured that the bereaved spouses of those who are serving and of reservists get top priority.
Karl MᶜCartney
I thank my right hon. Friend for his reassuring earlier answer, which indicated that the Government are taking action to support veterans who have made sacrifices to defend our liberty. Many councils in the UK will be giving priority to former armed forces personnel who have urgent housing needs. Will he join me in calling on City of Lincoln council and North Kesteven district council in my constituency to follow suit?
Grant Shapps
Yes, absolutely. In drawing up the criteria, we have made sure that councils need to provide that additional guarantee to those service personnel for some years after they leave the armed forces, so the residency criterion, for example, will not be placed against them for up to five years.
Rebecca Harris
The whole House will welcome the new guidance to councils, particularly as it relates to social housing. The Minister alluded to support for those who wish to purchase their own home, and many people in my constituency of Castle Point would like to get on the housing ladder. Will he give me more information on what support there is for that?
Grant Shapps
My hon. Friend is absolutely right. Of course, when many people come back from military service they want to start on the housing ladder by purchasing a home. I have extended the Firstbuy scheme by ensuring that a high preference is given to those people. In addition, we have sent personnel out to bases both in the UK and abroad to ensure that Army personnel know that they can apply to the Firstbuy scheme, for example, and hundreds have done so.
Phil Wilson (Sedgefield) (Lab)
8. What estimate he has made of the level of affordable house building starts in 2011-12.
Siobhain McDonagh (Mitcham and Morden) (Lab)
18. What estimate he has made of the level of affordable house building starts in 2011-12.
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
There were 15,698 affordable housing starts on site in 2011-12 delivered in England through programmes managed by the Homes and Communities Agency.
Phil Wilson
If the Government’s record on affordable homes is so good, why has the number of households in bed and breakfast-style accommodation increased by 44%?
Andrew Stunell
Many of these problems would have been a great deal easier if we had had an extra quarter of a million social and affordable homes, which is the reduction that the hon. Gentleman’s Administration produced. We have a social and affordable housing programme that will deliver 170,000 new affordable homes by 2015, and my right hon. Friend the Housing Minister has been very diligent in pursuing the point the hon. Gentleman raises.
Siobhain McDonagh
There appears to be a discrepancy between the figures used by the Government and those used by the Homes and Communities Agency. Why does it suggest that there was a 68% drop in starts last year, and will the Minister be getting the chief executive of that august organisation in as soon as possible to clear it up?
Andrew Stunell
The hon. Lady should not believe too much of what she reads on these matters—[Interruption.]
Mr Speaker
Order. The Minister, as we always expect him to, is behaving like a gentleman, but the hon. Gentleman must be heard.
Andrew Stunell
The fact of the matter is that the social and affordable housing programme is meeting an urgent need and we are pressing ahead with it vigorously. The issue that the hon. Lady raises must be seen in the context of the financial and housing situation we inherited from the previous Government.
Robert Halfon (Harlow) (Con)
Given what my hon. Friend said about right to buy and like for like in social housing, does he agree that the more people who take up the £75,000 discount, the more chance there will be for people to have affordable housing, and will he make every effort to encourage every council to offer that discount so that we can make affordable homes for the many, not for the few?
Andrew Stunell
That is of course an important step, and the Minister for Housing and Local Government has also announced a consultation on “pay for stay” to ensure that those on very high incomes do not have the subsidised use of valuable social rented accommodation.
Hilary Benn (Leeds Central) (Lab)
I am not surprised that the Housing Minister has chosen not to answer these questions, given that the House knows he has a bit of a problem when it comes to statistics. Will the Under-Secretary explain how his right hon. Friend came to conclude that the huge decline in affordable housing starts this year—that is what the figures from his own Department show—were in his words “impressive” and “rapid and dramatic progress”?
Andrew Stunell
It is certainly rapid and dramatic progress if someone inherits a situation in which they are going backwards. We are going forwards, and the Homes and Communities Agency housing delivery programme is on track and, in fact, in completion terms, ahead of its corporate plan. There is a cyclical financial profile, but the sector has risen to the challenge to deliver, and 146 providers will deliver 80,000 new homes for affordable rent and affordable home ownership, using Government funding of just under £1.8 billion. This means that we will be able to deliver even more homes for every pound of subsidy from the taxpayer.
Hilary Benn
I am not surprised that the Minister is unable to answer the question, but the House should be keen to assist his right hon. Friend the Housing Minister in his difficulty. He has already had to be put straight by the UK Statistics Authority, and I suggest that he seeks the help of the Education Secretary and offers to take one of the new mathematics O-levels. I have a question: “If 49,363 affordable houses were started last year and only 15,698 affordable houses were started this year, should Grant describe this as: a) ‘a massive increase’; or b) ‘a 68% decline’? Please show your detailed workings.” Does the Under-Secretary not understand that every time his right hon. Friend does that, it is not just affordable house building that declines, but his credibility? When is the Secretary of State going to get a grip?
Andrew Stunell
The right hon. Gentleman prays in aid the UK Statistics Authority, so if I may I shall very briefly quote this:
“Official estimates of net change are available for social rented dwellings, but not for the wider stock of ‘affordable’ housing beyond this category. They show an overall reduction of 421,000 in the stock of homes rented from local authorities and housing associations over the period 1997 to 2010.”
That seems to me a horrific indictment of Opposition Front Benchers, and what Government Members are doing is repairing some of that damage.
George Hollingbery (Meon Valley) (Con)
10. What progress his Department has made in protecting the rights of people who live in park homes.
The Minister of State, Department for Communities and Local Government (Greg Clark)
The treatment of residents on many park homes sites is simply unacceptable, and I welcome the Select Committee on Communities and Local Government’s important report, which highlights widespread abuse. The Government will therefore offer their full support to the Mobile Homes Bill of my hon. Friend the Member for Waveney (Peter Aldous) in order to secure a better deal for residents.
George Hollingbery
I am grateful for the Minister’s reply. The inquiry took a good deal of evidence that criminal fraternities were making considerable inroads into the industry. Will he outline for the House what the proposed measures are going to do to rid that industry of such people?
Greg Clark
I know my hon. Friend is a member of that Select Committee, and one of the most shocking things I found when I read the six volumes of written evidence that had been submitted was how many submissions had to be anonymous because the people giving evidence feared reprisals. It is completely unacceptable that bullies and thugs should intimidate some of the most vulnerable people in our society. The Housing Minister has published a consultation on the measures that are needed to deal properly with the problem and to drive out these rogues from the sector, including restricting their ability to block sales. Those measures will be reflected in our hon. Friend’s Bill, to which I hope the whole House will give its full support as it makes progress.
Natascha Engel (North East Derbyshire) (Lab)
I belong to the all-party mobile homes group, and we have been campaigning for years to strengthen the hand of local authorities to enforce properly the licences that protect people who live on park home sites. Will the Minister outline the specific powers that local authorities are being given to ensure that the powers that they do have are properly enforceable?
Greg Clark
Now is not the time, because the Bill will be published, as well as the response to the consultation. However, the hon. Lady can have my reassurance that the Select Committee’s recommendations on strengthening the ability of local authorities to prevent the owners of park homes from denying the rights that every other home owner reasonably expects will be present in the Bill.
Stephen Gilbert (St Austell and Newquay) (LD)
I welcome the support that the Government will give to the private Member’s Bill promoted by my hon. Friend the Member for Waveney (Peter Aldous). However, does the Minister agree with me and the Select Committee that the Bill should include reserve powers for a fit and proper person test should the welcome steps that the Government are already going to take not deliver justice for residents?
Greg Clark
As I said, the Government will respond to the Select Committee’s report. The Select Committee, of which my hon. Friend is a member, said that the measure would be a big change in the regulation of the sector and that the best thing would be to carry out a review in a couple of years to see whether the changes had had an effect. That approach seems sensible.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
12. What steps he is taking to increase opportunities for young people between the ages of 18 and 25 to find suitable housing.
The Minister for Housing and Local Government (Grant Shapps)
The housing strategy outlines a range of initiatives designed to get the house building sector moving again and to provide opportunities for everyone. In particular, our NewBuy and Firstbuy initiatives are helping young people into home ownership and we are supporting that with institutional investment in the private rented sector.
Mr Sheerman
Is the Minister sure that that will help 18 to 25-year-olds? There is a crisis out there of young people with nowhere to live. The issue is not just about housing benefit; I believe that all benefit should be linked to education and employment. But the fact is that there is a crisis and there does not seem to be much imagination on the Minister’s part.
Grant Shapps
The hon. Gentleman is absolutely right to point out that the crisis is very real and we believe that it has been brewing over a long period. By the way, it is about a lot more than simply housing; if we look at the lives of people in chaos, we always find educational problems and family breakdown, and often financial crises are involved. A lot of work is going on across the Government, including the ministerial working group, which brings together eight different Departments. Our next report, which the hon. Gentleman can look forward to, will be published before the summer and will tackle that exact issue.
Jack Dromey (Birmingham, Erdington) (Lab)
Under Labour, homelessness fell by 70%. Under this Government, 1 million people are out of work; house building is falling; homelessness is rising rapidly; and now there is the proposal to punish young people who leave home to find a job or get an apprenticeship by making them lose their housing benefit and therefore the roof over their head. The measure was described as “absurd” by the YMCA because it will drive up homelessness and close the facilities that support those people.
The Minister for Housing and Local Government has said that homelessness is what brought him into politics. Is it not becoming increasingly clear that his legacy will be rapidly rising homelessness and should he not concentrate not on making a bad situation worse, but on building homes, creating jobs and driving down homelessness?
Grant Shapps
From the great passion with which the hon. Gentleman speaks, one would imagine that he had a long-term interest in this issue; in fact, he is the eighth Labour shadow Housing Minister whom I have faced. During the time the Opposition have been in place, guess how many Opposition day debates there have been in the Chamber about this important subject? Zero, none—there has not been a single such Opposition day debate. That is because the hon. Gentleman has a very loose relationship with statistics himself. Homelessness is lower than it was in 28 of the last 30 years—and it is less than half the level it was in the 13 years of his Government.
Graham Jones (Hyndburn) (Lab)
13. What assessment he has made of the level of negative equity in the north of England.
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
A Council of Mortgage Lenders report in 2011 suggests that, as of the first quarter of that year, 827,000 UK households were in negative equity. That includes nearly 300,000 in the north of England. The organisation also reported that there were 36,200 repossessions that year—the lowest annual total since 2007.
Graham Jones
In its report on home ownership, Standard & Poor’s says that rates of negative equity in the north-west and the north-east are four times higher than those in London. Obviously those areas were disproportionately hit by the Government’s cuts, and unemployment is rising. There are hard-pressed families in these regions struggling to pay their mortgages. What help is the Minister going to give them?
Andrew Stunell
I remind the hon. Gentleman that negative equity becomes a problem if people cannot pay their mortgage. Mortgages are affordable at the moment because of the fiscal and financial policies that this coalition Government are pursuing. Interest payments on mortgages are at the lowest level as a proportion of total income since records began. I invite him to consider how many repossessions in the north of England would result if we had the bond rates of the Italians or the Spanish, and therefore how important it is for this Government to remain steadfast on their fiscal programme.
Stephen Mosley (City of Chester) (Con)
Does the Minister agree that the way to encourage a successful housing market in the north of England is to encourage the growth of sustainable, private sector-led jobs in that region?
Mr Speaker
Lewisham, Deptford is some considerable distance from the north of England, to which nevertheless the observations of the right hon. Lady will certainly relate.
Dame Joan Ruddock
I hope to be in order, Mr Speaker, by pointing out that despite what my hon. Friend the Member for Hyndburn (Graham Jones) said about the north of England, Lewisham has the fourth highest rate of repossessions in England. There are 17,000 homeless people on our housing waiting list. What advice would the Minister give to those of my constituents given the misery that they are facing through losing their homes—their most precious possession?
Mr Speaker
I am a tolerant and obliging fellow and I wanted to hear the evidence, but there is nothing to which the Minister should respond on the Floor of the House, because the question relates to the north of England and he did not expand it. However, the right hon. Lady’s observations are on the record.
Mr Speaker
The hon. Gentleman says that she is a dame, but even dames must play by the rules, and that is not disputed.
Fiona Mactaggart (Slough) (Lab)
14. What his most recent estimate is of the number of homes to be built in the south-east in the next five years and of the proportion of such homes that will be let at affordable rents.
The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)
We do not forecast levels of future house building. However, taking into account delivery in the first term of this Government, up until March 2015 we expect to deliver 107,000 affordable homes in London and east and south-east England through the Homes and Communities Agency programme and the Greater London authority. Of those, over 37,000 are expected to be for affordable rents.
Fiona Mactaggart
I am rather confused by that answer, because the Minister has just said that he does not forecast numbers of new homes but in an earlier answer he forecast 170,000 new homes. I do not know when a forecast is not a forecast. May I tell him what the housing situation is like on the ground, because his responses so far have not revealed it properly? In Slough, 43 affordable new homes have been started, down from 103. I have had more inquiries about housing this year than in any year since I was elected in 1997. We have nearly 300 people whose homes have been repossessed. [Interruption.] If I could come to the question—
Mr Speaker
Order. I think that the hon. Lady wants to know what the Minister is going to do about the situation.
Fiona Mactaggart
May I specifically ask the Minister what he can offer to people in a situation where there are more people on the housing waiting list in Slough than there are affordable homes?
Andrew Stunell
The hon. Lady made up in volume what she lacked in common sense.
Mr Speaker
Order. There is no breach of order. [Interruption.] Order. I must say to the hon. Lady that the Minister is not out of order. I do not think she should take offence, as the Minister did not mean to be offensive in any way; he was being light-hearted and jocular, as we all seek to be.
Andrew Stunell
If it assists in our proceedings, I am happy to withdraw the comment.
I fully acknowledge that we need more social and affordable homes. That is why we have a programme that is adding to the stock of social and affordable homes. I say to the hon. Lady that Slough will end up with more social and affordable homes in 2015 than there were in 2010, unlike the period in which Labour ran this country and its housing policy.
Mr Adam Holloway (Gravesham) (Con)
16. What the percentage change was to average band D council tax bills in real terms in (a) England and (b) Gravesham constituency over financial years 2010-11 and 2011-12.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
Thanks to the council tax freeze, over the last two years, council tax bills have fallen by 1.4% in Gravesham and 4.4% across England in real terms. That is real help for families and pensioners with the cost of living.
Mr Holloway
I thank the Secretary of State for his answer. I will ask my question in a very calm manner. The majority of councils in Kent have frozen their council tax. Is he disappointed that in Gravesham it has risen by 3.48%, which is just below the 3.5% threshold for a referendum?
Mr Pickles
Gravesham has joined the small, select list of council tax dodgers. If it was felt that the council tax should go up, it would have been sensible to put it to the people of Gravesham, who no doubt would have given it their consideration.
George Freeman (Mid Norfolk) (Con)
17. What steps his Department is taking to promote small wind turbines within the planning framework.
The Minister of State, Department for Communities and Local Government (Greg Clark)
Following the requirements of a private Member’s Bill in the last Parliament, the Government have introduced permitted development rights for domestic installations of small-scale renewable energy projects.
George Freeman
Does the Minister agree that although not all communities are keen for large-scale wind generation in their area, many small businesses, families, households and neighbourhoods are keen on small wind-powered generating turbines, such as those supplied by the excellent Windcrop in my constituency, as part of the micro- generation revolution that the Government are promoting? What assurance will he give the House that the Government will continue to promote that popular brand of microgeneration from small, local wind projects?
Greg Clark
I am aware that the firm to which my hon. Friend refers creates valuable jobs in his constituency. He will also know that Norfolk, like other places in the country, attracts tourists, so it is right to maintain the quality and character of the landscape. The new permitted development regulations give some latitude to householders, but not in a way that will destroy landscapes.
Teresa Pearce (Erith and Thamesmead) (Lab)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
On Thursday, I spoke to the Local Government Association annual conference. I announced our intention to make it easier for councils to abolish chief executive posts without having to hand out massive payouts, welcomed the £430 million in bids for the new weekly collection schemes, and noted the next stage of town hall transparency in which new rules will require councils to declare their trade union funding and their interests. In the interests of bipartisanship, I pay tribute to the hon. Member for Warrington North (Helen Jones), who courageously put down questions on council tax collection and exposed the inability of Labour councils to collect council tax.
Teresa Pearce
Shelter has advised me that my borough of Bexley has one of the highest proportions of home owners at risk of repossession in England. What funding and advice does the Secretary of State intend to give Bexley so that it can cope with that risk?
Mr Pickles
I am sure that the hon. Lady will recognise that repossessions are at their lowest since 2007. The most important thing that we can do to help people is to ensure that interest rates are kept at a reasonable level. That is what the Government have done. An increase of 1 percentage point would add £1,000 to the costs faced by her constituents and put more people at risk.
Priti Patel (Witham) (Con)
T2. The Minister will be aware of the excellent representations by the Witham town centre team to bring a Portas pilot to Witham. Will he congratulate that team on their vision and, importantly, support them in bringing that vision to Witham town centre?
The Minister for Housing and Local Government (Grant Shapps)
I am aware of the excellent Portas pilot bid by my hon. Friend’s town team. I wish it well, along with the other 350 or so bids that are still in the competition. As I mentioned, an announcement will be made before the end of this month.
Helen Jones (Warrington North) (Lab)
Properly targeted and funded family intervention works, so why have the Government introduced a half-baked scheme based on research that fails to distinguish between poor families and those involved in antisocial behaviour? Why do they refuse to give details of their cost estimates on the spurious grounds that the spending of public money is commercially sensitive? Is it not because they want to disguise the fact that they have slashed services such as Sure Start and youth intervention programmes, which really make a difference, and the fact that councils will get back only a tiny fraction of the millions that they have already lost?
Mr Pickles
I would have thought the hon. Lady would have been a little bit more jolly, considering that I congratulated her on the great work that she has been doing on behalf of the Government.
I am very surprised at the hon. Lady, because we would not have been able to help troubled families without the intensive help of Labour councils. The big difference between what we are doing now and what she suggests is that we are allowing councils to come up with their own schemes and methodologies. All that we are interested in is the outputs. Frankly, she should congratulate all those who have worked hard, because we can now identify the correct families, three months ahead of when people expected us to be able to do so.
Andrew Bridgen (North West Leicestershire) (Con)
T6. Has the Minister had a response from the UK Statistics Authority to the letter from the shadow Housing Minister, the hon. Member for Birmingham, Erdington (Jack Dromey), about net losses in social housing?
Grant Shapps
Yes, I can report to my hon. Friend and the House that I have had a response from the UKSA. The hon. Member for Birmingham, Erdington (Jack Dromey) pleaded in his letter for an answer on whether I was right to say that the reduction in affordable homes for rent under Labour was 45,000 or 200,000. I am pleased to say that the UKSA wrote back to both him and me and confirmed that the figures showed an overall reduction of 421,000 homes for social rent during Labour’s time in office—a disgrace, and in stark contrast to the 170,000 that we will be building over the next three years alone.
Kate Green (Stretford and Urmston) (Lab)
T5. There has been a 40% reduction in homelessness services for women between 2011 and 2012. As the number of homeless people increases and the services available to support homeless women reduces, what will the Minister do about it?
Grant Shapps
As the hon. Lady will know, I bring together eight Departments in a working group on homelessness and its causes. Our next report is very likely to be on the precise issue of the women who make up a subsection of people who are homeless. It is worth bearing in mind that one of the first things the Government did was to change the disgraceful rules that prevented the number of homeless people from being properly registered under the previous system. It is also worth knowing that the level of homelessness is less than half the average under the previous Administration.
Sir Tony Baldry (Banbury) (Con)
T7. Will my right hon. Friend consider working with Cherwell district council, myself and others to make Bicester a garden city?
The Minister of State, Department for Communities and Local Government (Greg Clark)
First, I congratulate my hon. Friend on his knighthood, which is thoroughly deserved. We have heard that being a dame accords a Member no special privilege, but my hon. Friend commands the respect of the House uniformly.
I am very happy to work with my hon. Friend. The difference between this Government and the previous Government is that such things are entirely up to the local authority, but we will do everything that we can to help that fragrant corner of Oxfordshire become a garden city.
Simon Danczuk (Rochdale) (Lab)
Rochdale is a hot spot for home repossessions and homelessness. Does the Minister accept that there is a link between the bankers’ LIBOR scandal and such problems?
Grant Shapps
All the research into homelessness proves that there are a lot of different causes, and LIBOR may be a contributory factor if it transpires that mortgage rates have been adjusted as a result. The hon. Gentleman takes a considerable interest in the matter, and I am sure he will be pleased to note, as we are, that repossessions last year fell to their lowest level since 2007. Low interest rates have been a very important reason for that falling number.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
T8. One of my constituents recently asked our local planning department whether he needed planning permission to erect a shed for his mobility scooter. The planning officers refused to answer his question and insisted that he had to submit a form and pay a £75 fee to determine whether the shed was covered by permitted development rights, which it was. Does my right hon. Friend agree that it is wrong for local authorities to charge for simply clarifying planning rules?
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
The Minister will know that more rain fell on Newcastle upon Tyne and the surrounding areas in a few hours last Friday than would normally fall in the whole month of July. The resulting floods damaged businesses, people’s private homes and the transport infrastructure. Ministers will want to join me in thanking the local authority employees, who responded magnificently, and the emergency services more generally for their response. Will the Secretary of State look again at the Bellwin formula to see whether it works reasonably? It is an old formula, and possibly ripe for revision to deal with exceptional circumstances of that kind.
Mr Pickles
The right hon. Gentleman will be very familiar with Bellwin and the formula and he is right to praise the emergency services and local people. I have spoken to friends in the area, and I know the events were traumatic. I recall the enormous damage and wreckage—both physical and psychological—caused by a flash flood in my constituency a few years ago. The Government have not yet received an application under the Bellwin rules, but I can assure him that when it comes, we will look at it most sympathetically in terms of the formula.
Amber Rudd (Hastings and Rye) (Con)
T10. A woefully inadequate number of new houses were built in Labour’s 13 years in government. What progress is being made on new houses in areas such as Hastings and Rye, so that young people have a chance of getting on the property ladder?
Grant Shapps
The good news is that programmes such as NewBuy, which allows people to get a 95% mortgage once again, will help people in Hastings and across the country, as will programmes such as Firstbuy, which is on track to deliver more than 10,500 homes. The record low interest rates will also help people, as long as they continue and as long as we ensure that the deficit is not allowed to balloon.
Mr George Howarth (Knowsley) (Lab)
On social housing, does the Minister agree that it would make a lot of sense if priority were given to the building of bungalows for rent, which would assist the elderly or those who have mobility problems and free up two and three-bedroom family social rented houses for those on the waiting lists?
Grant Shapps
I absolutely agree with the right hon. Gentleman—that is a very sensible approach, as is ensuring that the right to buy is available. Right to buy frees up the home lived in by the occupant who has had the opportunity to reach the aspiration of purchasing their own home. The cash is then used to build another home to take somebody off the record waiting lists we were left by Labour.
Duncan Hames (Chippenham) (LD)
Cherish Chippenham’s bid for a Portas pilot will be even more competitive in the second round, which I am delighted the Minister will announce later this month. We have heard that some places consider their high streets to be in a more dire situation, but does he agree that there is far more to the important criterion of potential for improvement than simply a statistical vacancy rate?
Grant Shapps
My hon. Friend is absolutely right. A vibrant town centre requires all sorts of things to bring people in to shop there. He will be interested to know that not only will the second round be announced before the end of the month, but so will a £1 million prize for the most improved town centre. That does not have to be one of the Portas pilot—it can be any town centre. Every single one of the towns that apply will enjoy the support of the Government.
Mr Andy Slaughter (Hammersmith) (Lab)
Hammersmith and Fulham’s housing strategy involves plans for 22,000 new homes in three opportunity areas. That should be good news for the 10,000 local families waiting for social housing, but not one of those 22,000 homes will be a social home for rent. Is it the Government’s housing policy that my constituents have to move out of London if they want an affordable home?
Grant Shapps
I know the hon. Gentleman has never quite got over his days as Hammersmith and Fulham housing lead, even though Hammersmith and Fulham is now doing a phenomenal job, delivering far more homes than were available under the Labour administration. I am sure those of the 170,000 homes for affordable rent that are in Hammersmith and Fulham will be enjoyed by the constituents there.
Mr Aidan Burley (Cannock Chase) (Con)
I welcome my right hon. Friend’s announcement last Thursday that he will change the law in order to require councillors to declare union support and donations as pecuniary and therefore prejudicial interests. Did he receive representations from the Labour Front-Bench team against these proposals when the statutory instrument came in this month? If not, would their union paymasters be justified in thinking them asleep on the job?
Mr Pickles
This matter—not whether Labour has been asleep on the job but the amount of union involvement with councillors—is of enormous concern. We are taking the moderate and reasonable approach of saying, “We support unions and it is wonderful that they support the Labour party, but we would like to know and it should be a matter for public disclosure.” Given that it is so uncontroversial, I am sure it will receive support throughout the House.
Jeremy Corbyn (Islington North) (Lab)
Is the Minister aware of the housing crisis throughout central London in the private rented sector, with rents rising well above inflation, housing benefit being capped or cut, and many families being evicted and communities broken up? Is it not time that we lifted the housing benefit level and introduced strict regulation of the private rented sector to preserve families and communities in the inner-city parts of the country?
Grant Shapps
It is absolutely the case that rents are not well served by caps at all, and when in place they enhanced neither rental levels nor the quality of properties. For example, the housing market shrank to 8% with rent caps. There is no advantage to introducing rent caps. Without them, the market has expanded again to 16%, serving people in London and elsewhere far better.
Mrs Helen Grant (Maidstone and The Weald) (Con)
Are the Government’s excellent proposals for troubled families being embraced by local authorities throughout the country?
Mr Pickles
I am delighted to report that all 152 principal local authorities signed up last month. I am also delighted at the amount of progress being made and delighted that at least some Opposition Members have been more than helpful. It is our first big chance to do something about this serious situation.
EU Council
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Prime Minister (Mr David Cameron)
I am sure that, like me, the whole House will be deeply saddened by the deaths of three British servicemen in Afghanistan yesterday. These brave soldiers were demonstrating great courage to prevent Afghanistan from once again becoming a haven for international terrorists and therefore to help keep us safe here in the UK. The suspected perpetrator is in custody, and we will do everything in our power, with the Afghan national security forces, to ensure that justice is done. This tragic incident again demonstrates the very real risks that our soldiers face every day, and we will learn all the lessons that arise from it. I know that everyone in the House will want to send their support to our brave troops and their families at this difficult time.
Britain had three objectives at last week’s European Council: first, for eurozone members to take the urgent action needed to deal with the immediate crisis; secondly, to secure a comprehensive growth package firmly focused on Britain’s priorities; and thirdly to send a clear message to the rest of Europe about what we expect from the budget negotiations to come. I shall deal with each before turning to future policy and the Government’s response to the banking scandal.
First, on the eurozone, Britain has been clear that in the short term we want urgent action by eurozone countries and authorities to defend their currency and deal with the instability. In the longer term, we recognise that the remorseless logic of a single currency means that the eurozone may need closer economic and fiscal integration. Britain is not in the euro, and we are not going to join the euro, so we should neither pay for short-term measures nor take part in longer-term integration. The summit made some progress. On shorter-term measures, eurozone members agreed to use the bail-out funds to support intervention in bond markets; to put eurozone money directly into struggling banks; and to ensure that official loans to Spanish banks would not be given preferential treatment over private sector loans. Under the last Government, we could have been liable for financial support for these measures, as members of the EU bail-out fund, but this Government have repatriated that power so that the British taxpayer is not involved.
On longer-term issues, eurozone members agreed important steps towards closer integration following a discussion of a report by the President of the European Council and others. It is vital for Britain—and, we would argue, for the strength and prosperity of the whole European Union—that they do this in the right way. We therefore secured agreement that as this work goes ahead, the “unity and integrity of the single market” will be fully respected.
On the specific proposal of a banking union, we ensured that Britain will not be part of any common deposit guarantees or under the jurisdiction of any single European financial supervisor. I am very clear that British taxpayers will not be guaranteeing any eurozone banks, and I am equally clear that, while we need proper supervision of our banks, British banks should be supervised by the Bank of England, not by the European Central Bank. The original draft of the growth compact included a whole section on economic and monetary union which implied that a banking union might apply to all 27 countries. A number of countries worked together to ensure that that whole section of the growth compact was removed.
Our second objective involved growth. The growth programme includes commitments to deal with weak lending, including through an increase in funds for the European Investment Bank. Alongside this are clear commitments to complete the single market in areas such as services, energy and digital, in which Britain will be one of the prime beneficiaries. The agreed plan included dates and times by which those steps should be concluded.
We also agreed to go ahead with the European patent court. Businesses have complained for decades that they needed 27 patents to protect their intellectual property. That problem will now be solved. In finalising the agreement, Britain had two objectives: that the new patent should be redrafted so that it did not get snarled up in the processes of the European Court of Justice, and that a significant part of the court, covering pharmaceutical and life science industries, would be based in London. I am pleased to say that we secured both those outcomes. That will mean millions of pounds and hundreds of jobs for Britain.
Our third objective involved the EU budget for the next seven years. We want a budget that is focused on growth, not a focus on growth in the budget. EU members as a whole are €3.5 trillion more in debt now than when the last EU budget was negotiated. We have to face up to that tough reality. I made it clear that without the British rebate, we would have the largest net contribution in the EU as a share of our national income. Without our rebate, our net contribution would be double that of France and almost one and a half times bigger than that of Germany. So the British rebate is not up for renegotiation. It is fully justified.
On foreign policy, the Council welcomed the EU oil embargo against Iran, which came into force yesterday. On Syria, we called for united action by the United Nations Security Council to place more robust and effective pressure on Assad’s regime, including the adoption of comprehensive sanctions.
Europe is changing rapidly and fundamentally, and that presents real challenges for all countries. Those inside the eurozone have to face fundamental choices about whether to limit their national democracy and provide financial support to the weaker members. And like others outside the Eurozone, we in Britain also face big choices. As Europe changes to meet the challenges of the eurozone, so our relationship with Europe will change, too.
There are those who argue for an in/out referendum now. I do not agree with that—[Interruption.] I do not agree with that because I do not believe that leaving the EU would be best for Britain. Nor, however, do I believe that voting to preserve the exact status quo would be right. As I wrote yesterday, I do not believe that the status quo is acceptable, but just as I believe it would be wrong to have an immediate in/out referendum, so it would also be wrong to rule out any type of referendum for the future. The right path for Britain is this. First—[Interruption.]
Mr Speaker
Order. Members are a little over-excitable. They must calm themselves, and the Prime Minister’s statement must be heard.
The Prime Minister
First, we must recognise that, in the short term, the priority for Europe is to deal with the instability and chaos. Secondly, over time, we must take the opportunities for Britain to shape its relationship with Europe in ways that advance our national interest in free trade, open markets and co-operation. As I argued yesterday, that should mean less Europe not more Europe, less cost, less bureaucracy, and less meddling in the issues that belong to nation states. Thirdly, all party leaders will have to address the question. It follows from my argument that, far from ruling out a referendum for the future, as a fresh deal in Europe becomes clear, we should consider how best to get the fresh consent of the British people.
Finally, as I have said, as the eurozone moves towards a banking union, we must ensure that Britain takes responsibility for sorting out its own banking sector. On the unfolding banking scandal here in the UK, we need to take action right across the board, including introducing the toughest and most transparent rules on pay and bonuses of any major financial centre in the world, increasing the taxes that banks must pay, ensuring tough civil and criminal penalties for those who break the law and, above all, clearing up the regulatory failure left by the last Labour Government.
The British people want to see two things: they want to see bankers who acted improperly punished; and they want to know we will learn the broader lessons of what happened in this particular scandal. On the first, the Serious Fraud Office is looking at whether any criminal prosecutions can be brought, and at whether the full force of the law is being used in dealing with this. On the second, I want us to establish a full parliamentary committee of inquiry involving both Houses, chaired by the Chairman of the House of Commons Treasury Select Committee. This committee will be able to take evidence under oath; it will have full access to papers, officials and Ministers, including Ministers and special advisers from the last Government; and it will be given by the Government all the resources it needs to do its job properly.
The Chancellor will be making a full statement, but this is the right approach, because it will be able to start immediately, it will be accountable to this House and it will get to the truth quickly, so we can make sure this never happens again. I commend this statement to the House.
Edward Miliband (Doncaster North) (Lab)
I am grateful to the Prime Minister for his statement. On the tragic news from Afghanistan, all our thoughts are with the family and friends of the soldiers concerned. The news reminds us once again of the risks our troops face—day in, day out—and of our duty to do everything we can to protect them.
Let me start with the Prime Minister’s announcement on the banking inquiry. It is right for him to reconsider the position of last week on the need for a full inquiry. I welcome that recognition. I have to say, however, that I am not convinced by his way forward because I do not believe it measures up to the scale of what is required. However able or distinguished they are, politicians investigating bankers will not command the consent of the British people. People are understandably angry about the way their banks let them down, and I do not believe that the proposed way forward is the way we can build the consensus required for real change. After all, there have already been a number of Select Committee reports into the banking crisis.
I appreciate that the Leveson inquiry has been uncomfortable for politicians on all sides, but that is the way it should be. We will continue to argue for a full and open inquiry, independent of bankers and independent of politicians. That is the only way, in my view, that we can rebuild trust in the City of London and financial services.
Turning to the European Council itself, let me associate myself with what the Prime Minister said on Syria. Agreement—but, in truth, little progress—was reached at Geneva on Saturday, and the divisions within the international community on this issue mean that too little is being done to bring the escalating violence to an end. In that context, will the Prime Minister update the House on the position of Russia, which is clearly imperative in this regard, on a future for Syria without President Assad?
Turning to the main issues of the summit, it took place against a backdrop of the continuing crisis in the eurozone, a faltering global recovery and a double-dip recession here in the UK. The central challenge, then, was how we can have a Europe not of austerity and unemployment, but of jobs and growth. I am afraid to say that on that central issue, the Prime Minister cannot be part of the solution because he is part of the problem.
On growth, the Prime Minister used an instructive phrase in his post-summit press conference, when he said:
“Just as we have to tackle the euro crisis, so we have to tackle the growth crisis”.
Having at last admitted that there is a growth crisis, he added:
“Britain has been driving this debate.”—[Laughter.]
I do not think it was meant as a joke, but it suggests someone quite out of touch with reality. As he was speaking, the figures were coming in, showing the double-dip recession, created by him in Downing street, was worse and deeper than we thought. The UK is one of only two countries in the G20 in double-dip recession. There can be no solution to the growth crisis unless we tackle the crisis of demand in the European economies and globally? Will he tell us whether he advocated at this summit any measures to tackle the crisis of demand in the European economy, as well as the long-term measures he mentioned?
The Prime Minister talked about the banking regulator. How will he use his popularity and influence in Europe to secure specific legal safeguards between now and December’s final proposals to protect the very important British interest in the single market? He then talked about the patent court, and said, with his customary humility, that the outcome showed that he was succeeding. Only this Prime Minister could pretend, having argued that the court’s headquarters should be in London, that it was a diplomatic triumph that it had ended up being based in Paris.
As for the eurozone and bank recapitalisations, it is welcome that direct help can be provided for eurozone banks, but does the Prime Minister really believe that the funds that eurozone countries are making available are adequate? There are many reasons to believe that that is not the case.
Finally, there is Europe and the Prime Minister’s position—or should I call it his weekend hokey-cokey? On Friday, he ruled out a referendum. He said:
“‘I completely understand why some people want an in/out referendum… I do not think that is the right thing to do”.
Hours later—what a coincidence—100 Back Benchers and the former Defence Secretary called for an in/out referendum. Then, hey presto, on Sunday—[Interruption] —the Prime Minister hinted that he might rule one in. Then the Foreign Secretary—[Interruption.]
Mr Speaker
Order. I said that Labour Back Benchers should not be yelling when the Prime Minister was speaking, and the same applies to Government Back Benchers. I do not care what they are exhorted or encouraged to do from any quarter; it is not proper behaviour, and however long we have to continue, it is not going to happen. That is the beginning and the end of the matter.
Edward Miliband
Then the Foreign Secretary was sent out to say on television:
“The Prime Minister… is not changing our position.”
Three days, three positions. First it was no, then it was yes, and then it was maybe.
Can Members on both sides of the House have some clarity about the Prime Minister’s position? First, has there been a change in the Government’s position, yes or no? Secondly, the Prime Minister talked of a referendum being connected to the renegotiation of powers. To be fair to him, his position on renegotiation is longstanding, not least because he has got nowhere in negotiating it, but is he now saying that he may be in favour of withdrawal from the European Union if he does not get these powers? That would be a new position. It would be helpful—and I am sure that his Back Benchers would like it too—if we could have a “yes” or “no” answer to that question as well.
Thirdly, can the Prime Minister explain this? Last October, he said in the House:
“there is a danger that by raising the prospect of a referendum… we will miss the real opportunity to further our national interest.”—[Official Report, 24 October 2011; Vol. 534, c. 27.]
So why is he doing it now? We all know the answer to that question. It is not to sort out the crisis of growth, it is not to tackle youth unemployment, and it has nothing to do with the national interest. It is all about managing the divisions in the Prime Minister’s own party. But a nudge-nudge, wink-wink European policy is not good for the country, nor will it keep his party quiet.
Five years ago, the Prime Minister said that his party should stop banging on about Europe, but now he is the man getting out the drum. As John Major could have told him, it is not going to work. We have a veto that never was, a referendum that the Prime Minister cannot explain, a party talking to itself, a Prime Minister who is managing his party rather than leading the country, and a Government who are letting Britain down.
The Prime Minister
Let me start with the right hon. Gentleman’s questions about the inquiry into the banking scandal. I think that what he said was rather demeaning to Parliament, the House of Commons and the House of Lords. I see no reason why Parliament cannot get to the bottom of this if we take the best and brightest from both Houses and all parties, and there are few better people to do that than my hon. Friend the Member for Chichester (Mr Tyrie), who has considerable expertise. The key point, however, is that this needs to be done speedily. The Vickers Bill—the banking Bill—will be introduced in the House of Commons in January, and I want an inquiry to be completed by then so that we can take the best of that inquiry and put it in the Bill. I think that that is the right thing to do.
Ed Balls (Morley and Outwood) (Lab/Co-op)
It is what you tried to do on Leveson.
The Prime Minister
The shadow Chancellor is intervening from a sedentary position. No one would like to see him in the dock of a courtroom more than me, but the job here is to get on with it, find the answers, and put them into law.
Let me now deal with the questions that the Leader of the Opposition asked about the European Union. He asked some very specific questions, including one about Russia and Syria. At the weekend, following some very hard negotiation by my right hon. Friend the Foreign Secretary, all parties agreed on transition by mutual consent. We now need to implement the policy, and all the P5 members need to do that.
The right hon. Gentleman talked about taking responsibility on the economy. When is Labour going to take responsibility for the twin crises: the crisis of the deficit and the crisis of failed banking regulation? He asked what we had done to protect the single market. If he looks at the summit conclusions, he will see that it says very specifically that the single market and its integrity must be protected. On whether the eurozone funds are sufficient, frankly, I think he is right to ask that question. We continually say it is very important that the firewall—the bazookas—are big enough.
On the right hon. Gentleman’s description of recent events, I think he probably ought to give up the hokey-cokey and stick to the Rubik’s cube. But let me tell him this: I am not going to take any lectures from a group of people who gave up the rebate and got nothing in return, who gave up our social chapter opt-out and got nothing in return, and who took us into the bail-out funds when we were not even part of the euro. Those are the people who say that the European Union has not got too much power and that they would join the euro if they were in power for long enough. The right hon. Gentleman likes to tell us endlessly about standing up to vested interests, but the fact is that he will never stand up to two big vested interests: the trade unions and Brussels.
Sir Malcolm Rifkind (Kensington) (Con)
While there is wide agreement in Britain as to the need for reforms in our relationship with the EU, does the Prime Minister agree that the worst possible moment to try to start negotiating with 26 other countries is when all the member states are, quite rightly, preoccupied with the very future of the eurozone and the potential of its collapse? Does the Prime Minister also agree that as the UK is fully protected by the statutory requirement for a referendum if there are any further proposals for the transfer of powers to Brussels, it must be the right policy to establish a link between any negotiations which we wish to begin, and the new treaty that would be required to have unanimous conset if the eurozone 17 wish to achieve a fiscal and banking union?
The Prime Minister
My right hon. and learned Friend has set out the situation very well. It is worth saying, as I said in my statement, that everyone has to recognise that the short-term firefighting is the EU’s urgent and immediate priority, but my point is that we are safeguarded through the referendum lock in respect of further powers being transferred. However, we must think about how Europe is developing, make sure we make the most of the opportunities, and then think about how to seek the consent of the British people.
Mr Alistair Darling (Edinburgh South West) (Lab)
Does the Prime Minister agree that the customary celebrations after last week’s euro summit were, yet again, premature? There is not nearly enough money in the European stability mechanism, as its £500 billion is not enough to deal with Spain, let alone other countries. Equally, the German Chancellor’s opposition to eurobonds means there must be a question mark hanging over the eurozone. On banking, if we are to have a truth and reconciliation committee—which is fine—we must just remember that some of the most strident calls for deregulation over the last 30 years came from the Government side of the House.
The Prime Minister
I have great respect for the right hon. Gentleman, and what he says about the eurozone agreements at the weekend is absolutely worth listening to and having regard to. The point I would make is that for the first time in a long time there was a series of steps that countries such as Britain had been calling for about using the facilities to buy bonds and about direct recapitalisation of banks. They are hedged around with all sorts of ifs and buts, but that was progress. On the truth and reconciliation commission issue, I note that the right hon. Gentleman said that a full independent public inquiry is not the right way ahead. I think the way ahead we have suggested will be swift enough, but also strong enough to get to the answers—and to get to them quickly.
Mr John Redwood (Wokingham) (Con)
Given that there is practically no unpledged money left in the current bail-out fund and given that the new bail-out fund does not exist, did the member states assembled discuss how they are going to get hold of the £500 billion or more that they might need, and are they proposing to borrow it on the credit rating of countries such as Spain and Italy?
The Prime Minister
As ever, my right hon. Friend is incisive at getting to some of the difficulties in what is being proposed. I think we should be pushing the eurozone members into taking the short-term steps to try to help with financial stability, which buying bonds, directly recapitalising banks and sorting out issues of seniority are all about. We have to recognise the great difficulties they are going through in trying to raise adequate amounts of finance, but none the less it is in our short-term interests that they do deal with the crisis at the heart of the eurozone, because the high interest rates in Italy and Spain are not only hurting Italy and Spain; they are hurting us, too.
Mr Jack Straw (Blackburn) (Lab)
The right hon. Gentleman failed to answer the question from my right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, just a moment ago, in which he asked the Prime Minister to recognise that the pressure for deregulation and a very light touch in the City was coming very strongly from him and—[Interruption.] Oh yes it was. So if there is to be truth and reconciliation, will there be some acceptance by the Prime Minister and the Chancellor that they got it woefully wrong in putting the pressure on us?
The Prime Minister
Everyone will have to account for what they have said and all the rest of it, but I have to ask: who was in charge for the last 13 years? Who was the City Minister who carried out this action? If the right hon. Member for Blackburn (Mr Straw) wants to go into the interstices of who said what and did what, I can tell him that the Conservative party—I do not think I was in Parliament at the time—actually voted against the tripartite arrangement that has so badly failed.
Sir Menzies Campbell (North East Fife) (LD)
May I welcome my right hon. Friend’s continuing, and occasionally warm, endorsements of Britain’s continued presence in Europe? Does he also agree that those who wish to take Britain out of Europe now have a duty to provide detail as to what the political and economic cost would be, rather than vague promises of the Elysian fields?
The Prime Minister
My right hon. and learned Friend makes an important point, which is that we need to make sure that the whole debate about our engagement in Europe is properly informed. I do support our membership; I do think that the single market is vital for us and that determining the rules of that market matters for us. However, it is important that we air these facts and figures, and the balance of competences review that will be launched shortly will help all parties, all politicians and all parts of civic society in Britain to see some of the arguments and some of the facts and the figures. I think that that will help to inform the debate.
David Miliband (South Shields) (Lab)
Further to that question, I wonder whether there are any circumstances, further to the Prime Minister’s negotiations, in which he will recommend to the British people that they should leave the European Union.
The Prime Minister
As I said, I want to stay in the European Union for the reasons I have given. But I will always stand up for the British national interest as I see it. That is the job of being Prime Minister.
Mr Peter Lilley (Hitchin and Harpenden) (Con)
My right hon. Friend will know that my opposition to excessive centralisation of power in Europe has never been in doubt. Indeed, the only doubt that my Euroscepticism has given rise to was that which John Major cast upon my paternity. Will the Prime Minister, none the less, agree that what we need is not a commitment to an in/out referendum, but a commitment to insisting that our partners give us back powers to govern ourselves if they want our agreement for them to subordinate themselves further to centralisation in Europe?
The Prime Minister
My right hon. Friend, whose parentage I have never questioned, nor would I ever do so, puts it very well. The fact is that Europe is changing very rapidly. The eurozone countries, in my view, are going to need to take some pretty bold integrationist steps. That will provide opportunities and openings for countries outside the eurozone, such as Britain, and we should maximise those opportunities to pursue our national interest. I firmly believe that that means remaining at the table for those things that really matter for us, but I think that is what we should do.
Mr Peter Hain (Neath) (Lab)
Is the Prime Minister concerned that on Europe and the referendum he sounds more like John Major by the day?
The Prime Minister
What matters is doing the right thing. I think that there are two positions that do not make sense. First, unless you actually want to leave the European Union now, and some people do, an in/out referendum now is not the right answer. But ruling out, for ever and a day, any form of getting the consent of the British people for what I would call a fresh deal and a fresh settlement in Europe also does not make sense. This is a question that all party leaders are going to have to answer. We are providing the answer—the right hon. Gentleman’s party leadership will have to do the same thing.
Andrea Leadsom (South Northamptonshire) (Con)
Will my right hon. Friend agree to consider carefully that the Fresh Start project’s options for change paper, which is being launched next week by my right hon. Friend the Foreign Secretary and is the culmination of a year’s work by parliamentarians from all parties and external experts, might possibly offer some of the solutions to the type of reform we are looking for in the EU? Will he also agree to reconsider the issues of competition in the banking sector that, in my opinion, are one of the major reasons why we are in this appalling situation?
The Prime Minister
I shall certainly consider very carefully what my hon. Friend says. As I said, the Foreign Secretary will shortly set out the balance of competences review and how the process will work. I hope that that will inform debate; clearly, the piece of work undertaken by her and her colleagues will help. She mentions the banking sector and there are clearly rules for financial services at the level of the single market that are required and it is very important that we have a say over them. The fundamental elements of banking union, however, flow from the single currency, not the single market. That is why that union should be carried out at 17, not at 27.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)
What discussions were there of the likely effects of the oil embargo on Iran and were there any discussions on the knock-on effect on prospects for a sustainable peace in the middle east?
The Prime Minister
There were brief discussions about Iran because the discussions about the single currency, the eurozone and the growth compact were so protracted. There is strong agreement in the European Union that the sanctions are right and necessary and I think that if we could get Iran to take a more sensible path on the issue of civil nuclear power, that would help unlock the problems of middle east peace rather than making them worse.
Mr William Cash (Stone) (Con)
I was heartened by my right hon. Friend’s interview on the referendum question, but given his negative answer to me on 23 May on that same question, will he take the advice of the London taxi driver to whom I have just spoken, who just said, “The British people are not stupid; they understand the position. Give them renegotiation, give them a referendum, get rid of the coalition agreement—then, he will be re-elected by a massive majority.”
The Prime Minister
I can see that it must have been a particularly satisfying and heart-warming taxi ride for my hon. Friend. As I have said, I do not think that an immediate in/out referendum is the answer, but ruling out a referendum is not the answer either. There are opportunities to build the sort of settlement we want in Europe and the Government believe that we should take advantage of them.
Helen Goodman (Bishop Auckland) (Lab)
Will the Prime Minister tell the House what indications he has had from European colleagues that they would be likely to agree the repatriation to this country of the social chapter and other powers?
The Prime Minister
We were able to renegotiate the bail-out power and get out of that part of the treaty, so we have had some small success on that agenda already. There is a big change coming in Europe. I cannot say how fast it is going to go and whether it will be a number of small treaties or a bigger treaty, but there will be opportunities. The eurozone countries will have to do more to integrate, which will give others opportunities to pursue their own agendas.
Conor Burns (Bournemouth West) (Con)
My right hon. Friend the Prime Minister will be aware that the British public are heartily sick of broken promises on European referendums, not least because of the decision of the Labour party to renege on a referendum on the Lisbon treaty. Can my right hon. Friend see the attraction of passing into law in this Parliament a binding commitment to a referendum in the following Parliament and that it might well strengthen his negotiating hand if he can look his fellow Heads of Government in the eye and know that any deal that he negotiates will have to be put to the British people, whose government, after all, we are talking about?
The Prime Minister
I take seriously my hon. Friend’s point and there is some merit in that argument. We have legislated in this Parliament for a referendum lock that we very much hope will apply to future Parliaments. The problem with the approach he suggests is that the change in the eurozone and in Europe is happening so rapidly that it is quite difficult to predict in legislation passed in this Parliament the exact nature of any referendum in a future Parliament, so I do not think that is the right way ahead. As I wrote in the article in The Sunday Telegraph, I think we need to show some tactical and strategic patience, knowing that we can safeguard our existing position with the referendum lock and make the most of the changes that are happening in Europe, as I have set out.
Mr Denis MacShane (Rotherham) (Lab)
Will the future referendum that the Prime Minister is now semi-pledging also cover treaty obligations relating to the European convention on human rights and the Council of Europe?
The Prime Minister
As the right hon. Gentleman knows, the two issues are separate, in that there is the Council of Europe, and the European Union. There is, of course, the attempt to make the European Union a signatory to the European convention on human rights, which I have considerable difficulties with, but as things stand, the two things are separate.
Sir Tony Baldry (Banbury) (Con)
Britain is a trading nation. Does my right hon. Friend agree that, as a trading nation, it needs unfettered access to Europe’s single market, and also a clear voice and say in the rules of that market?
The Prime Minister
My hon. Friend is absolutely right. That is at the heart of the case for remaining in the European Union. We export a large share of our gross domestic product; we need Europe’s markets to be open. I would not want to swap the status that we have, of having both access to the single market and a say over the rules of the single market, for the status of a country that only has access. It is very important, though, that as the eurozone develops and integrates, we make sure that there are safeguards to prevent caucusing at the eurozone level that could disadvantage us in the single market. There is a whole series of steps that we have to take, some of which are about safeguarding what we have, some of which are about making the most of the future, and all of which are achievable if we play our cards right in the years ahead.
Kate Hoey (Vauxhall) (Lab)
May I simply ask the Prime Minister to look at his terminology? In his statement, he mentioned Britain 12 times; he did not mention the United Kingdom once. Does he agree that if there is to be a referendum, which I think is inevitable, the people of Northern Ireland should have a very strong say? He must, in the European Council, refer to the United Kingdom, or the UK for short; saying “Britain” excludes Northern Ireland.
The Prime Minister
As ever, the hon. Lady is right about almost everything, and I am rightly chastised.
Mr Edward Leigh (Gainsborough) (Con)
What I suspect the majority of British people want is what they were offered in the only referendum that they have ever been allowed on Europe, namely a say on whether there should be a common market—no more, no less. Given that our partners have the overwhelming balance of trade in their favour, why should they veto our negotiation for a free market area? The door is unlocked; why does the Prime Minister not walk through it and renegotiate?
The Prime Minister
The point that I make to my hon. Friend, whom I respect hugely for his views, is that what we have in the single market is not just a free trade area, but a say in the rules about how that free trade area works. It does seem to me that absolutely central to Britain’s case for remaining in the European Union are those two key points. I think that there is a difference between a single market with rules and simply a free trade agreement. That is what I think we should continue to pursue.
Keith Vaz (Leicester East) (Lab)
May I welcome the continued support that has been given to Greece? It is not just a case of Greece repaying its debts; it is about the responsibilities that it has to the rest of the EU. Last year, as the Prime Minister knows, 100,000 people illegally entered Greece through Turkey. Will we ensure that those resources are directed towards protecting the borders of the EU?
The Prime Minister
I know that the right hon. Gentleman has great expertise in this area. It seems to me important that we support organisations such as Frontex, and the means by which those countries can protect their borders, but in all these European negotiations we always have to be careful about the language of burden sharing, because of course when we look at where people actually end up, in terms of asylum claims, it is often countries such as Britain, Sweden, and Denmark that bear a very large share of the burden, and we always have to be alert to that argument.
Philip Davies (Shipley) (Con)
Will the Prime Minister remind his coalition partners that in their 2010 manifesto, they said:
“The European Union has evolved significantly since the last public vote on membership over thirty years ago. Liberal Democrats therefore remain committed to an in/out referendum”?
Given that, and given that I know my right hon. Friend always likes me to remind him that he is in coalition with the Conservatives as well, may I remind him that an in/out referendum is now inevitable in this country at some stage, and that it would be to his advantage to be ahead of that curve, rather than being seen to be dragged into it later on?
The Prime Minister
My hon. Friend makes a good point. He often rightly criticises me for not delivering every part of Conservative policy, and now he is having a go at me for not delivering Liberal Democrat policy as well. I do occasionally make that point to our coalition partners, but as I have said, I think the sensible position to take is not having an immediate in/out referendum, but not ruling out a referendum in the future. Europe is changing; there are opportunities for Britain, and I am determined that we should take them.
Mr Dennis Skinner (Bolsover) (Lab)
With all these mixed messages, unlike the Thatcher regime, can the Prime Minister tell us whether he came to his present opinion before or after he met Andy Coulson?
The Prime Minister
Just to clear it up, I did not meet or speak with Andy Coulson at the weekend.
Mrs Anne Main (St Albans) (Con)
I completely disagree with my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind). With the chaos in Europe, there has never been a better time for other EU members to mind their business, not ours, and now is the right time to try to have a debate with them about which powers we would like to bring back, before we have any form of referendum.
The Prime Minister
My hon. Friend makes a powerful point. The argument that I would make is that although there may well be opportunities because of the needs that other EU members currently have, respecting the fact that they are fighting a fire in the eurozone, which is their urgent work that benefits us if they can deal with those bond spreads, deal with those banks, deal with those problems, the right time to consider institutional changes is as institutional reforms and treaties come through.
Sir Stuart Bell (Middlesbrough) (Lab)
The Prime Minister has referred several times to the national interest. He also referred to the brief discussion on the ban on oil imports from Iran. Is not that ban an example of how the European Union acting in concert can assist the British national interest?
The Prime Minister
Yes, I think that it is, but the argument that I would make is that that was an agreement reached through unanimity. It shows that what is required often in Europe is not institutional structures, but political will to come together and do the right thing. That is what we have done in relation to Syria, Iran and eventually Libya, so I am all for co-operating and often leading the debate with our European partners about foreign policy priorities. That is what we have done about Burma and sanctions, but I do not think that means the endless passage of powers from Britain to Brussels—in fact, quite the opposite.
Simon Hughes (Bermondsey and Old Southwark) (LD)
May I associate the Prime Minister’s Liberal Democrat colleagues with his expressions of condolence and sympathy following the deaths of our servicemen in Afghanistan? Does the Prime Minister agree that, while it is of course right that at the last election his party had a set of manifesto commitments on Europe, as did the Liberal Democrats, the coalition agreement is clear? There is provision for a referendum if there is a handover of power from the UK to Brussels. There is no provision for any other referendum, and we are agreed that the priority, as evidenced last weekend, is that 27 European countries work together to deal with the imminent, urgent economic crisis across Europe.
The Prime Minister
My right hon. Friend makes an important point. To be fair, in terms of coalition policy on Europe, we said clearly that there would be no further passage of power from Britain to Brussels. We have said that we should protect and defend the single market. Let us look at the achievements over the past couple of years. We have got out of that bail-out fund; we have promoted the single market in energy, digital and services; and we have written into conclusions after conclusions safeguards for the single market. That is all to the good, but all party leaders, whether Conservative, Liberal Democrat or Labour, must think of the future— how we evolve policy in a changing Europe, how we maximise the benefit for Britain, and how we take the British people with us. That is exactly what I am doing.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
The Prime Minister suggests the setting up of a parliamentary committee of inquiry. Whenever we have such inquiries and when they are compared with judge-led inquiries, the big difference is access to information, such as e-mail exchanges and other background material. Will he ensure that in its terms of reference such a committee will have the same powers as a judge-led inquiry?
The Prime Minister
The short answer to that is yes, I want it to have those powers. What Parliament has behind it is that, if people do not produce those policies, papers and people, they are in contempt of Parliament. We are seeing with the Culture, Media and Sport Committee inquiry that the whole concept of being in contempt of Parliament is being strengthened, and that is all to the good. The committee will have the powers that it needs and the expertise that it needs, but crucially it will be able to get on with the job straight away.
David T. C. Davies (Monmouth) (Con)
Does the Prime Minister agree that the last time we saw the current levels of interference in British domestic affairs, it led to the traumatic split with the Catholic Church? Does he agree that we would be better off having a second referendum than a second Reformation?
Mr Speaker
Order. I want to hear the Prime Minister on the subject of reformations and other matters.
The Prime Minister
As a rather wishy-washy member of the Church of England, I am finding answering this question rather difficult. The point I would make is that there are opportunities, but we should show patience because our colleagues in Europe are dealing with a fire-storm. We can pursue our interests and, I think, deliver on them over the medium term.
Barry Gardiner (Brent North) (Lab)
The EU decision on the oil embargo on Iran has caused great joy in the paint shops around the Arabian Gulf, as vessels have gone into dry dock to be repainted, renamed and reflagged. Can the Prime Minister set out for the House what practical steps are being taken to monitor Iranian vessels to ensure that there is an embargo in fact as well as in name?
The Prime Minister
The hon. Gentleman raises an important point. I believe that the embargo will be robust and we will make sure that it is policed. I do not want to set out in public what all those measures will be, but we will make sure that the points he makes are taken on board.
Mark Pritchard (The Wrekin) (Con)
Far be it from me to correct the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), but I understand that the Liberal Democrat manifesto referred to provision for a referendum if there is
“fundamental change in the relationship between the UK and the EU.”
The Prime Minister said in his statement that “Europe is changing rapidly and fundamentally.” Is it not time we had an in-or-out referendum in this Parliament, rather than relying on the outcome of the next general election, which of course nobody can predict?
The Prime Minister
I completely understand the view held by my hon. Friend and a number of other colleagues on our Back Benches either that we should want to get out straight away and so should have an in/out referendum straight away or, to be fair to him, that the change has been so fundamental that the referendum should be held sooner rather than later. I have set out my argument; I think it would be better not to do that immediately for the reasons I have given. I think that there is an opportunity for what I would call a fresh settlement and fresh consent that would be in the national interest of the whole United Kingdom.
Pete Wishart (Perth and North Perthshire) (SNP)
Well, it looks like we are going to have a referendum, maybe in two or three years’ time, and maybe there will be more than one question—a Euro-max option—and we do not know what the question will be, yet the Prime Minister has the gall and temerity to question the Scottish National Party’s referendum process. Does he believe that all this delay for two or three years will create a great deal of business uncertainty across the United Kingdom?
The Prime Minister
I have to say gently to the hon. Gentleman that there is a slight difference. As I understand it, his party has a very clear view that it wants to leave the United Kingdom, and fought an election in Scotland on having a referendum to do just that. What I am trying to do is help him to have that simple, single-question referendum so that the country can make a decision. I profoundly hope that Scotland will vote to stay in the United Kingdom, which I think would be in Scotland’s interests and in all our interests, but I have to say that we should not have to wait quite as long to get on with it as his First Minister wants.
Mr John Baron (Basildon and Billericay) (Con)
The Prime Minister has repeatedly said that now is not the time for an in/out referendum, so will he confirm that the letter I and 100 other colleagues sent to him urged him to legislate in this Parliament for a referendum in the next Parliament and so address the mass public distrust in politicians promising referendums on Europe, because they remember all too well the Labour party’s broken promises?
The Prime Minister
I absolutely hear what my hon. Friend says. I do not want to misrepresent him, and if I have done so in any way I absolutely apologise. That was never my intention. I read very carefully the letter he sent to me. He is not suggesting an immediate in/out referendum. As I said in reply to my hon. Friend the Member for Bournemouth West (Conor Burns), although it is possible to legislate in one Parliament to bind the next, as we have done with the referendum lock, I do not think that it makes as much sense to do that with a referendum for the future, because we do not know the exact pace of developments in the eurozone or the exact changes that will take place in Europe; I do not think that that is the right answer.
Chris Bryant (Rhondda) (Lab)
The coalition agreement makes another commitment in relation to treaty change: that the Government will campaign to abolish the ludicrous caravanserai between Brussels and Strasbourg, which we would all agree should be abolished. I am absolutely certain that the Prime Minister has got absolutely nowhere with that and possibly has not yet even mentioned it to the new French President, so why should people trust him when he promises more renegotiation and has not even managed to secure the one thing he is committed to?
The Prime Minister
I am still waiting for my apology, which I notice I have not yet got. Perhaps there will be a few more questions first. The hon. Gentleman will know that in order to deal with the problem of the two Parliaments we need a treaty change, so he should want to bring it on.
Nicholas Soames (Mid Sussex) (Con)
May I associate myself with the remarks of my hon. Friend the Member for Banbury (Sir Tony Baldry) about the importance of trade and the single market? Does the Prime Minister agree that if we are to see a return to prosperity in the European Union, the rules of the World Trade Organisation need to be vigorously enforced? To that end, it would be fatal were we not to be sitting at the table when those matters are discussed.
The Prime Minister
My right hon. Friend makes an important point. One of the things that we have made progress on over the past two years is the EU free trade deals with fast-growing parts of the world, including Korea, and obviously negotiations are under way with Singapore, India and others, including possibly Japan. In recent weeks, we have also made some quite exciting progress with the idea of an EU-US trade deal, so there are things that European nations can do together for our mutual benefit. Trade and the single market are clearly absolutely up there, and I very much agree with my right hon. Friend on that point.
Mr David Winnick (Walsall North) (Lab)
After what has happened today and the responses from the Prime Minister’s side of the House, does he now have some sympathy for what John Major had to endure from his party during the 1992 to 1997 Parliament?
The Prime Minister
I worked very closely with John Major and admire him very much. People now make a reassessment and see that he left this country an excellent economic record, which the Labour party completely squandered with a whole decade of debt.
Mr Stewart Jackson (Peterborough) (Con)
Irrespective of our personal views, why is it right that the people of Scotland will be given a potentially irreversible in/out referendum by 2014, yet the people of the United Kingdom will not be given a similar plebiscite on a matter of great import—this country’s relationship with the European Union?
The Prime Minister
I have great respect for my hon. Friend, who takes a very clear view about which he feels very deeply. I think that there is a significant difference, which is that in Scotland, like it or not, the Scottish National party is committed to leaving the United Kingdom and was elected with a mandate for a referendum to do just that, whereas in the case of the United Kingdom and the European Union, most people in our country want a fresh settlement with fresh consent, rather than the binary choice of leaving right now or, indeed as I said in my statement, voting to stay in right now and thereby almost confirming that status quo, which I am not satisfied with—and I do not think many people are.
Paul Flynn (Newport West) (Lab)
How many of the hundreds of new jobs that will come from setting up the patent court will be located in the city that has been the home of the brilliantly successful United Kingdom Patent Office, now the Intellectual Property Office, the city of Newport?
The Prime Minister
I do not know the answer to that question; I will have to look very carefully and, perhaps, reply to the hon. Gentleman. The parts of the court that we will have will be pharmaceuticals and life sciences, an area of great national expertise, and it is a good deal for London and a good deal for the UK.
Joseph Johnson (Orpington) (Con)
Unemployment in the eurozone today hit a fresh record high of 11.1%, with youth unemployment reaching the terrible level of 22.6%. Whatever happens to the euro, what recognition is there in Brussels of the risk of creating a lost generation unless the EU as a whole takes seriously the need to do serious labour market deregulation and to push ahead with the completion of the single market?
The Prime Minister
My hon. Friend makes a very important point. If we look at the different rates of youth unemployment throughout Europe, we find that we are certainly not one of the best, but certainly not one of the worst. We can look at countries such as Germany and Holland, which have very low rates of youth unemployment, different approaches to welfare from ours and different approaches to training, and we have a lot to learn from them, but overall what my hon. Friend says about opening up the single market—deregulating—is one of the key answers to getting young people back to work.
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
Can the Prime Minister explain to the House why existing anti-fraud legislation does not work in the case of the LIBOR rate-setting scandal?
The Prime Minister
As I have said, today we have asked the Serious Fraud Office to look specifically at the issue and to see whether there are criminal acts that it can address. It has the resources that it needs, and if it needs more resources it will be provided with them, but we have a Serious Fraud Office, which is the authority for both investigation and prosecution, to deal with just that question.
Richard Harrington (Watford) (Con)
I am sure that the Prime Minister remembers from his recent visit to Watford the several multinational companies, such as Medtronic and Hilton Worldwide, whose trade depends very much on their using the UK as a hub for their European operations. With that in mind, could he assure the thousands of my constituents who work for those companies that nothing that happened in the European Council will be detrimental to their interests—and, above all, that he will not be bounced into an in/out referendum that could put their jobs at terrible risk?
The Prime Minister
My hon. Friend is absolutely right. Britain benefits from being in the single market and having a say over the single market rules. One of the things that has happened over the last two years has been that, because of investments by companies such as Nissan, Honda and Jaguar Land Rover, we in the United Kingdom are now a net exporter of cars again, for the first time since 1976. Access to the single market and our role in the single market play a key part in that investment.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Businesses in my constituency are worried about jobs and growth. Given the size of our trade relationships with Europe, they want a Prime Minister who will show leadership in getting growth across Europe. What progress did the Prime Minister make on a growth package and how did he see that as being in the UK’s national interest?
The Prime Minister
I am grateful for the hon. Lady’s question. There was good progress on the growth compact. I think people had expected that it was all going to be an agenda, important though that is—project bonds and European Investment Bank spending is part of it. But the hon. Lady will see that in the growth compact, copies of which will be available in the Library, there are very clear commitments to the services directive, energy liberalisation and the digital single market. That is very much the British, and also Italian, agenda, which we have driven into the growth compact, which will really help our country.
Mr Speaker
Order. I am keen to accommodate more colleagues, but very large numbers of them are standing and I will not be able to accommodate them all. To maximise the number of participants, brevity will be of the essence.
Richard Drax (South Dorset) (Con)
The Prime Minister urges close integration as one solution to the problem in Europe. Closer integration, even among a smaller number of eurozone countries, is already leading to economic chaos and big civil disorder. Surely he should be advising everyone to go back to their currencies, except, perhaps, for the powerful countries in Europe, and then rebuild the economy, rebuild jobs and rebuild wealth.
The Prime Minister
We cannot make choices on behalf of other European countries. The eurozone countries say that they want a single currency and that they want that single currency to work. If that is the case, I believe that it follows that they will have to integrate more deeply. It remains to be seen whether all of them will be able to do that. What we see in Europe, week after week, are the difficulties of taking those steps. None the less, we cannot instruct those countries not to do something. That is their choice. We have made our choice, which is to stay out of the eurozone. As I said, we are not going to be involved in that integration and we will not be paying those bills. I hope that my hon. Friend can be reassured on that basis.
John Cryer (Leyton and Wanstead) (Lab)
Can the Prime Minister confirm that he is prepared to see the sacrifice of sovereignty and democracy in Greece and other eurozone countries to defend the single currency?
The Prime Minister
I would not put it like that. I cannot tell the Greek people what to do. My view is that the right answer for Britain is to be outside the single currency and not to be involved in this integration. People can go back to my election address in 1997, when I said that I opposed Britain’s joining the single currency. The reason why I opposed it was that I did not think it right to give up that sovereignty and level of democracy. That is a choice that those countries and those people must make; it is not for us to make it for them.
George Eustice (Camborne and Redruth) (Con)
I agree with the Prime Minister that the priority for this country should be to negotiate the return of powers from the EU and that any referendum should come at the end of that process, not the beginning. However, does he agree that we should reject the defeatism of the Leader of the Opposition and start to articulate the case for an alternative vision for the future of Europe?
The Prime Minister
My hon. Friend makes a very important point. There has been a defeatism from the Labour party, including when it was in government. When confronted with difficult choices about the rebate, it gave it up; and when confronted with the issue of the European constitution, it promised a referendum and did not deliver it. In the end, it always went along with absolutely everything. The Labour party has not yet told us whether it would sign the treaty that I refused to sign back in December. When it comes to this, it is the status quo party.
Mr Andrew Love (Edmonton) (Lab/Co-op)
There are significant misgivings about the impact of a banking union on the financial services sector in this country; the Prime Minister commented on some of them earlier, during his statement. What reassurance can he give the House that the strategy that he is currently following will not lead to the long-term disadvantage of finance in this country?
The Prime Minister
I do not believe that it will. We are trying to protect our interests in terms of the single market and our strong financial services industry. I believe that a banking union flows from the fact that there is a single currency rather than from the fact that there is a single market. That union should be at 17, and we will be able to protect our interests from outside it.
Steve Baker (Wycombe) (Con)
I welcome the progress that my right hon. Friend is making towards obtaining the full-hearted consent of the British people. Will he remind us, please, who denied the British people their say on the Lisbon treaty?
The Prime Minister
My hon. Friend makes a good point. The fact is that a promise was made of a referendum on the European constitution, which changed into the Lisbon treaty. The previous Government had every opportunity to deliver that referendum as country after country went through passing that treaty into law, and they completely failed and let the country down.
Nia Griffith (Llanelli) (Lab)
Will the Prime Minister give us a little more detail about the evidence that he used to convince his EU counterparts that the UK Government are serious about increasing demand, particularly in the light of the latest disastrous UK growth figures?
The Prime Minister
The point I would make to the hon. Lady is that there are parts of the growth compact that include expanding the role of the European Investment Bank, and we support that. We support the idea of project bonds—innovative finance—because part of the problem is the need for an active monetary policy required right across the European Union. However, we should not give up on the real wins for our economy of completing the single market in energy, digital and services, because real increases in both demand and supply could come about from that.
Neil Carmichael (Stroud) (Con)
No doubt there will be many more EU Councils to come, so does the Prime Minister think that he would be helped or hindered in his negotiations to protect Britain’s interests if there were an in/out referendum in the foreseeable future?
The Prime Minister
I am sure that the first half of my hon. Friend’s question is right. I have been Prime Minister for only two years, but I feel that I have spent about half my life in the Justus Lipsius building in Brussels, and I am sure that other summits will be coming along. The point about having an in/out referendum now is that if your view is that Britain should leave the European Union, then of course that is the logical thing to do, but if you want to fight from the inside for a fresh settlement and then a fresh mandate, the approach that I am setting out is the right one.
Graham Stringer (Blackley and Broughton) (Lab)
The Prime Minister has claimed success with the bail-out funds, which, of course, were not part of any treaty. Most of the powers that have been transferred from this House are in treaties. If he fails to renegotiate those powers and return them to this House, will he then agree to an in/out referendum?
The Prime Minister
On the bail-outs, I do not think that the hon. Gentleman is correct. The fact is that a treaty article was used for those bail-outs, and we have replaced what was called the EFSM, the European financial stabilisation mechanism, with the ESM, the European stability mechanism. I got it written into the preamble to the treaty that Britain would not be included in it and would not have to contribute to it. That is to our advantage, and it shows what you can achieve if you are prepared to negotiate hard and not just give in to whatever people want.
Matthew Hancock (West Suffolk) (Con)
I warmly welcome the announcement of the review into banking to replace the failed regulation drafted by Labour Members, but will the Prime Minister ensure that, as a deterrent, criminal sanctions are available in future for those bankers who are wholly irresponsible?
The Prime Minister
My hon. Friend makes an important point. The Chancellor will be going into more detail on this issue. We need to ensure that the regulators and the SFO have all the powers they need. People will not understand why crimes on the high street are punished in one way but crimes in the banks and elsewhere are punished in another way. That absolutely needs to be cleared up, and I am sure that this Government will do so.
Wayne David (Caerphilly) (Lab)
Given the Prime Minister’s support—in theory, at least—for a referendum on Europe, what is his position now with regard to a referendum on Lords reform?
The Prime Minister
We have set out in the House of Lords Reform Bill a very clear pathway for the House of Lords. House of Lords reform was in the hon. Gentleman’s party’s manifesto, it was in our manifesto, and it was in the Liberal Democrat manifesto, so I do not think a referendum is really necessary.
Mr Peter Bone (Wellingborough) (Con)
I can report that the relationship between Mrs Bone and the Prime Minister is blooming. I have just discovered that the Prime Minister has invited Mrs Bone to Downing street next week. She is very excited about the renegotiation and the Prime Minister’s words on the referendum. Could he please her even more at next week’s meeting by promising legislation in this Parliament for an EU referendum in the next Parliament?
The Prime Minister
As ever, I am looking forward to my meeting with Mrs Bone, but—how can I put this?—I do not want to get her too excited before the big day. I am afraid that I cannot satisfy my hon. Friend on that basis. We have in place the referendum lock, which I think should reassure Mrs Bone a lot.
Mark Hendrick (Preston) (Lab/Co-op)
What game is the Prime Minister playing? He is encouraging eurozone members to integrate closer and at the same time encouraging his Back Benchers by saying that we will have a referendum that could bring us out of the European Union.
The Prime Minister
I do not really understand what lies behind the hon. Gentleman’s question. It is intellectually coherent to argue that if countries want to be in the eurozone and to have a working single currency, they must take at least some of the steps that other single currencies, such as the dollar and the pound sterling, have taken. That means that they have to stand behind weaker parts of the union and that they need things such as joint debt issuance and a single banking system. That is just a fact of economic life. I see no contradiction in arguing that Britain should be outside the eurozone with a looser relationship with the European Union and that those inside the eurozone will have to take at least some of the steps that I have set out. If they do not, I think that the eurozone will have real difficulties.
Mr James Clappison (Hertsmere) (Con)
Does not the history of our membership of the European Union demonstrate that there is not just an issue with the single market, but that there is more of an issue with the ever closer union that is enshrined in EU treaties? Will my right hon. Friend assure us that to be meaningful, a referendum must encompass the question of ever closer union?
The Prime Minister
That goes back to one of the problems with the referendum in the 1970s, when people did not receive a full explanation of all that was envisaged by the original treaty of Rome. I am clear that I do not support ever closer union. I do not want to see an ever greater transfer of powers from nation states to Brussels. However, I think that Britain and the European Union can work very well together to maximise the single market and our co-operation on matters such as foreign affairs, while ensuring that it is in our national interest.
Mr David Anderson (Blaydon) (Lab)
Was the financial transactions tax spoken about at the weekend, whether formally or informally? Does the Prime Minister not realise that the people of this country would welcome that as a way of showing that bankers are being made accountable for their appalling behaviour?
The Prime Minister
The financial transactions tax was mentioned, because the growth compact says clearly that a number of eurozone members will go ahead with it. I do not support it and Britain will not take part, because unless there is agreement all over the world, the transactions will go to jurisdictions that do not have the tax. That would cut our jobs, our investment and our GDP. The people who would pay for such a tax would be not the bankers, but the pensioners, and I do not think that that is sensible.
Nigel Adams (Selby and Ainsty) (Con)
How bad does the Prime Minister think the financial damage to the UK would have been had we not got ourselves out of the euro bail-out mechanism?
The Prime Minister
I am grateful for my hon. Friend’s question. We can start to count the cost, because with things such as the Spanish bank bail-out, we can work out what percentage we would have paid. We have saved Britain considerable amounts of money by ensuring that we are not involved in the bail-outs.
Mr William Bain (Glasgow North East) (Lab)
Economic demand is continuing to fall across the eurozone, youth unemployment in Greece and Spain reached 52% today, and 5.5 million young people are unemployed across the EU. When will the Prime Minister finally acknowledge that the answer to such a chronic crisis of demand and jobs can never be harsher austerity?
The Prime Minister
The point that I would make to the hon. Gentleman is that because we are outside the euro, as well as having tough fiscal targets, which frankly anyone in my position would have to deliver to deal with the debt and the deficit that we were left, we can have a very accommodating monetary policy, with ultra-low interest rates. Our monetary policy is our own to determine because we are outside the euro. That is the difference between the situation in Britain and the situation in countries that are inside the eurozone.
Jacob Rees-Mogg (North East Somerset) (Con)
I completely support the Prime Minister in saying that the answer is less Europe, rather than more Europe. I wonder if I may bring his attention to part (j) of the communiqué, which states that the Commission will work on proposals for a
“common consolidated corporate tax base”.
Can I assume that Her Majesty’s Government will oppose those moves, as we are cutting corporation tax here, not trying to raise it to European levels?
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
It is clear that the type of referendum that the Prime Minister has in mind is one in which the choice is to vote in favour of whatever settlement we manage to extract or in favour of the status quo. Does he think such a referendum would satisfy the in/out zealots on his Back Benches?
The Prime Minister
For people who want to leave the European Union—that is a perfectly honourable, respectable political tradition and Members on both sides of the House, probably even Liberal Democrats, have held that position—campaigning for an in/out referendum is a perfectly sensible thing to do. It is just not my view or the Government’s policy, and I do not think it is the hon. Gentleman’s, either.
Mr Julian Brazier (Canterbury) (Con)
I welcome the Prime Minister’s announcement of the progress in Russia’s views on Syria. Could we do more to persuade Russia that it is not in its interests to have a nuclear-armed Iran sitting on its border?
The Prime Minister
My hon. Friend is entirely right to make that point, and the Foreign Secretary has spent a lot of time with his Russian counterpart having exactly those discussions. There are great connections between resolving the situation in Syria and trying to get a resolution to the Iranian situation. It is worth noting that the oil sanctions have come in. They are tough and represent concerted action by the European Union, and I think they can make a difference.
Huw Irranca-Davies (Ogmore) (Lab)
The Prime Minister’s position on an EU referendum seems to be summed up in that comedy catchphrase, “Yes but, no but, yes but, no but.” Is he likely to come to a decision and resolve his teenage dilemma before the next election?
The Prime Minister
I think I would let Vicky Pollard stick to her own work and think of something different.
As I have said, I think there are only two positions that do not make sense for Britain. One is an immediate in/out referendum, which I do not think would be right for us, and the other is somehow to rule out for ever and a day any way of forming a new consent with the British people. I want to see a new settlement, and I think we should then get a new consent. That seems to me an entirely sensible and logical position to take.
Mr David Nuttall (Bury North) (Con)
At a time when EU countries are more indebted than ever before, why should the UK pay more so that the European Investment Bank can make yet more loans when there is an increasing risk that some of those loans will never be repaid? How much of the €10 billion increase in funding for the EIB will this country have to pay?
The Prime Minister
We account for about 14% of new loans made by the European Investment Bank. There is clearly weak lending by banks and there are problems in monetary policy right across the European Union, so the role of the EIB is helpful. It is important, though, that it maintains its very strong triple A credit rating.
Mr Speaker
Order. I am now looking for questions consisting of a single, short sentence. I am sure the hon. Member for Eltham (Clive Efford) will lead us in that exercise.
Clive Efford (Eltham) (Lab)
With reference to the answer that the Prime Minister gave to the hon. Member for West Suffolk (Matthew Hancock), if he genuinely believes that some of the actions of Barclays bank bordered on the criminal, will he now call for the resignation of Mr Bob Diamond?
The Prime Minister
I do not think it is for Prime Ministers to hire and fire bank chiefs. Mr Diamond will have to make himself accountable to his shareholders, and to this House when he answers questions on Wednesday. As I have said, I think he has some serious questions to answer.
Dr Julian Lewis (New Forest East) (Con)
Is it my right hon. Friend’s position that in any referendum on Europe while he is Prime Minister, the option of voting to leave the EU will not appear on the ballot paper?
The Prime Minister
No, that is not what I have said. What I have said is that I do not support an immediate in/out referendum. I believe that we should show strategic and tactical patience, and then I want to see a fresh settlement for which we seek fresh consent. The right time to determine questions about referendums and the rest of it will be after we have that fresh settlement. That is what we should do.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
The Prime Minister has repeatedly endorsed the United Kingdom’s membership of the EU this afternoon. Will he say something about the circumstances in which he would endorse withdrawal from the European Union?
The Prime Minister
What I have always said is that we should act in the interests of the whole United Kingdom, and I do not think our best interests would be served by leaving the European Union. That does not mean that we meekly and lamely accept the status quo. We are not happy with the status quo, as the British public are not. I am not a defeatist who says that you have just got to take what you are given. We have already shown in a small way, by getting out of the bail-out fund, that we can do better, and I want Britain to do better.
Ian Swales (Redcar) (LD)
Is the Prime Minister aware of any significant City institutions that want this country to leave the EU?
The Prime Minister
I am not aware of any City institutions that want that. On the whole, the City institutions want to ensure that our position in the single market is safeguarded. I am not a mercantilist, but it is worth noting that the one sector in which we have a massive current account surplus with Europe is financial services. It is therefore important that we ensure we safeguard the interests of that sector.
Mr David Evennett (Bexleyheath and Crayford) (Con)
I welcome my right hon. Friend’s statement. Does he agree that we must continue to battle for radical and substantial reform of the EU and not be deflected from our national interests of trade and the single market?
The Prime Minister
My hon. Friend puts it extremely well. We should pursue the national interest. The key argument is membership of and influence over the single market. That lies at the heart of our case for being in the EU.
Mr Sam Gyimah (East Surrey) (Con)
Does my right hon. Friend agree that a referendum is only a means to an end and not the end in itself, and that it is therefore important for us to work out what Europe we want to emerge from this crisis and what it means for the UK national interest, so that we give voters a meaningful choice in the matter?
The Prime Minister
My hon. Friend is absolutely right. Before we get to the referendum question, we must ask the prior questions of what exactly Britain wants in Europe, what we have at the moment, what we would like to change and how we can best change it. All those prior questions need to be asked before we get to the vital question of how to secure the full-hearted consent of the British people.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
More Eurocrats work in education and culture than on the internal market and services. Will my right hon. Friend stand up for hard-pressed British taxpayers and ensure that our scarce resources are directed towards jobs and growth by completing the internal market?
The Prime Minister
The depressing statistic my hon. Friend gives is important as we go into the budget negotiations. We must ensure that the EU budget is focused on things that are likely to help with growth, such as the single market, rather than on regulation. She makes a very good point.
James Morris (Halesowen and Rowley Regis) (Con)
There has been a lack of growth in Europe, but does the Prime Minister agree that, despite concerns about our future relationship with the EU, we should focus on policies that target growth, particularly in important sectors for British business, such as energy and the digital market?
The Prime Minister
My hon. Friend is entirely right. That is why our approach in Europe—the positive steps we have taken—is about building an alliance with other European countries to push forward the single market and free trade agenda. It has been heartening that in recent months, people such as Prime Monti of Italy and Prime Minister Rajoy of Spain have been involved in that. There is no longer a north-south divide in Europe: many countries are pushing for the growth agenda that has been championed by both parties in the coalition.
Gavin Barwell (Croydon Central) (Con)
I welcome the Prime Minister’s stress on the importance of the single market and his statement that, in other areas, the EU status quo is not acceptable. Does he agree that this issue will be solved in the long-term only by giving the British people their say?
The Prime Minister
My hon. Friend is right that, in the end, as Europe changes and as we seek this fresh settlement, we will need to seek a fresh mandate. That is what the Conservative party at least has clearly recognised.
Henry Smith (Crawley) (Con)
At last week’s meeting, the European Council president said it could take up to a decade to implement EU treaty change. Does my right hon. Friend agree that it is therefore more important that the Government passed a referendum lock in legislation?
The Prime Minister
My hon. Friend makes a very good point. Europe is changing rapidly and, as I have argued, quite fundamentally, but some of the institutional changes will take quite a long time to come through, because it is difficult for democratic states to achieve what the eurozone countries are engaged in. It will take time, which is why, as I have said, we need the tactical and strategic patience to maximise our national interest.
Robert Halfon (Harlow) (Con)
I welcome the fact that my right hon. Friend has opened the door to a referendum on substantial renegotiation. Will he resist EU regulations on biofuels, which are pushing up prices at the pumps for hard-pressed motorists?
The Prime Minister
One question about biofuels is their sustainability—that might be what lies behind my hon. Friend’s question, but I will have a careful look at it.
Charlie Elphicke (Dover) (Con)
Although I welcome the Prime Minister’s setting up the banking review, does he agree that the real crime is that there is any doubt at all that interest rate rigging is a criminal offence? If we are to have truth and reconciliation, should we not see a bit more responsibility and a bit less of the buck-passing that we have seen from former Labour Cabinet Ministers today?
The Prime Minister
My hon. Friend makes an important point, but although there has been silence from the Labour party in this House, in the other place its Whip stood up and said, “Absolutely, this is squarely Labour’s fault.” It is a pity we do not hear a bit of that from the party here.
Andrew Bridgen (North West Leicestershire) (Con)
Given that the UK is running a large trade deficit with the rest—[Interruption.]
Andrew Bridgen
Given that the UK is running a large trade deficit with the rest of the EU, does my right hon. Friend agree that our European partners would have much to lose from erecting trade barriers with this country, if the British people decided to leave the EU?
The Prime Minister
My hon. Friend makes a good point. Britain is not only a huge market for other EU goods but a large net contributor to the EU budget. For that reason, as I often say, our membership entitles us to just as strong a view as those who have joined other parts of the EU, such as the single currency. We should never be frightened of making our voice heard.
Jason McCartney (Colne Valley) (Con)
Does the Prime Minister agree that the Leader of the Opposition is wrong to criticise those who bang on about Europe, because by doing so he is criticising my constituents who bang on about the EU directives, whether on fish discards, animal experiments on stray cats and dogs or the levying of VAT on aviation fuel for the Yorkshire air ambulance?
The Prime Minister
As ever, my hon. Friend speaks up robustly for his constituents. Some of the issues that we face in our constituencies relate to the extra regulation, extra cost and extra bureaucracy coming from the EU, so he is absolutely right to make that point.
Mr Speaker
Last but not least, we must hear the voice of Kettering, Mr Philip Hollobone.
Mr Philip Hollobone (Kettering) (Con)
Given that my right hon. Friend is now not ruling out a future referendum on our membership of the EU, is it not time for Her Majesty’s Government to commission an official, full-scale, independent, comprehensive audit of the costs and benefits of our membership in order better to inform that referendum when it comes?
The Prime Minister
When my hon. Friend sees the balance of competences review, he will find that a lot of what he seeks is in it. The idea is to look through the competences exercised by the EU and nation states, and to work out the costs and benefits, so that we have a proper and informed debate. Where he and I will differ, I suspect, is here: I think we benefit from having access to, and a say over, these markets, and that is a powerful argument for remaining in the EU. Like him, however, I am not happy with the status quo, and I want us to seek to change it and then get consent for it.
Mr Speaker
Order. I thank the Prime Minister, the Leader of the Opposition and the 74 Back Benchers who have questioned the Prime Minister in 62 minutes of exclusively Back-Bench time.
LIBOR (FSA Investigation)
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr George Osborne)
On Thursday I updated the House on the Financial Services Authority’s investigation into Barclays and the attempted manipulation of the LIBOR market in the years running up to and during the crisis. The House has just heard from the Prime Minister, and I would like to give more details of the steps we are taking.
This morning I spoke to Marcus Agius, who confirmed that he was resigning as chairman of Barclays because of the unacceptable standards of behaviour within the bank. The Treasury Select Committee has called the chief executive of Barclays to account for himself and his bank on Wednesday, and I, like many people here, look forward to hearing his answers.
As I also said last week, every avenue for the possible criminal investigation of individuals involved in the attempted manipulation of LIBOR is being explored, but in the view of its chairman, Lord Turner, the powers given to the FSA do not allow it to pursue criminal sanctions. People in the country rightly ask why it does not have the necessary powers, and those who set up the tripartite system can answer.
People also ask whether the gaping holes in the existing law mean that no action at all is possible. After all, fraud is a crime in ordinary business, so why should it not be in banking? I agree with that sentiment, and I welcome the Serious Fraud Office’s confirmation that it is actively and urgently considering the evidence to see whether criminal charges can be brought, particularly in relation to the Fraud Act 2006 and false accounting. It expects to come to a conclusion by the end of the month, and we encourage it to use every legal option available.
I should like to address three further issues today: what happens to the money we get from the fines; what urgent changes are needed in the regulation of LIBOR and other markets to prevent such abuse occurring again and to ensure that the UK authorities have the powers they need to hold those responsible to account; and the wider issue of what went so badly wrong in the culture of our banking system and the way it was regulated, allowing such fundamental failures of basic standards of conduct to go unchecked and unchallenged. Let me take each issue in turn.
Last week, I said that we wanted to ensure that all future fines paid by the financial services industry should go to the taxpayer. Today, I can confirm that we will propose amendments to the Financial Services Bill in the autumn to make that happen. The new arrangement will apply to fines received from 1 April 2012, so the measure will include the Barclays penalty. From now on, the multi-million pound fines paid by banks and others who break the rules will go to the benefit of the public and not to other banks.
That brings me to the urgent changes needed to the regulation of LIBOR to prevent this from ever happening again and to ensure that in future the authorities have the appropriate powers to prosecute those who engage in market abuse and manipulation. I have today asked Martin Wheatley, the chief executive designate of the Financial Conduct Authority, to review what reforms are required to the current framework for setting and governing LIBOR. This will include looking at whether participation in the setting of LIBOR should become a regulated activity, at the feasibility of using actual trade data to set the benchmark, and at making initial recommendations on the transparency of the processes surrounding the setting and governance of LIBOR.
The review will also look at the adequacy of the UK’s current civil and criminal sanctioning powers, with respect to financial misconduct and market abuse with regard to LIBOR. It will also assess whether those considerations apply to other price-setting mechanisms in financial markets, to ensure that these kinds of abuses cannot occur elsewhere in our financial system. We need to get on with this, and not spend years navel-gazing when we know what has gone wrong. I am therefore pleased to tell the House that Mr Wheatley has agreed to report this summer so that the Financial Services Bill currently before Parliament—or, if necessary, the future legislation on banking reform—can be amended to give our regulators the powers they clearly need.
The review is essential to ensuring that we mend the broken regulatory system—introduced by the last Government—that allowed these abuses to happen, but the manipulation of the most used benchmark interest rate reveals the broader issue of the professional standards and of the culture in some parts of the financial services industry that was allowed to grow up in the years before the crisis and which still needs to change. I do not think that a long, costly public inquiry is the right answer. It would take months to set up and years to report. We know what went wrong, and we cannot wait until 2015 or 2016 to fix it.
In just six months’ time, we will bring forward the banking reform Bill, which will implement the recommendations of Sir John Vickers’ independent commission on banking. The Bill will bring far-reaching, lasting change to the structure of British banks by ring-fencing retail banks from their investment banking arms. Let us see whether we can use that Bill to make any further changes needed to the standards of the banking industry, and to the criminal and civil powers needed to regulate it and hold people to account for their behaviour.
As the Prime Minister said, we propose that Parliament establish an enquiry into professional standards in the banking industry. The Government will in the coming days lay before both Houses a motion to establish a Joint Committee, drawn from the Commons and the Lords. It should be chaired by the Chair of the Treasury Select Committee, my hon. Friend the Member for Chichester (Mr Tyrie). He and his Committee have already been quick off the mark in investigating the issue, and we certainly want their hearings this week to proceed.
I propose that the Joint Committee’s terms of reference should be as follows. Building on the Treasury Select Committee’s work and drawing on the conclusions of UK and international regulatory and competition investigations into the LIBOR rate-setting process, we should consider what lessons are to be learned from them in relation to transparency, conflicts of interest, culture and the professional standards of the banking industry. I propose that the Committee should be able to call witnesses under oath, including current Members of Parliament and of the House of Lords. I can confirm that we will provide the Committee with the resources that it needs to do the job.
I would suggest to the House that we ask the Joint Committee to report by the end of this year. That is enough time to do the job—and do it well—but not so long that it drags on for years. It means, in very practical terms, that we can amend our banking Bill to take on board its recommendations at the beginning of next year. I hope all parties will reflect on this and support the motion we put forward.
The failure to regulate the banks in the boom years cost this country billions of pounds. The behaviour of some in the financial services industry has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to the economic prosperity of the country. We are changing the failed regulation and are reforming the banks; now it is time to deal with the culture that flourished in the age of irresponsibility and to hold those who allowed it to flourish to account. I commend this statement to the House.
Ed Balls (Morley and Outwood) (Lab/Co-op)
The systematic lying—[Interruption.]
Mr Speaker
Order. Everything will be slowed up, the more noise there is. I do not care what the exhortation is for people to create a wall of noise. That should not and must not happen in this Chamber. If we end up being much slower because people are mindlessly bawling their heads off from either side of the House, we will be slower. I do not think the public will be much impressed by that sort of behaviour from either side of the House.
Ed Balls
The systematic lying, concealment and arrogant abuse of power revealed by the FSA report into LIBOR market fixing at Barclays bank is truly shocking. As one member of the Vickers commission said this morning:
“Today’s banks represent the incarnation of profit-seeking behaviour taken to its logical limits, in which the only question asked by senior staff is not what is their duty or their responsibility, but what they can get away with.”
Set against the depths of that malpractice, which has now been revealed, and the scale of the challenge we face in reforming and rebuilding trust in British banking, I am afraid that the Government’s decision to reject Labour’s call for an independent and judge-led public inquiry into the culture and practice of banking in our country just will not do. Just as in phone hacking or the Iraq war, so in banking: only with an independent, forensic and open public inquiry—not politicians investigating bankers—can we rebuild trust for the future.
Banks play a vital role in our economy—they lend to businesses, small and large; they help people to save and borrow for mortgages; and many hundreds of thousands of jobs across the UK are dependent on our retail and our global wholesale banking industries—but banking is a profession that depends on trust, and that trust is currently in tatters. The public are rightly baffled and angry about what they learned was happening at Barclays. We have learned that senior bank executives knew about and covered up deliberate market fixing and manipulation of key interest rates. When ordinary people break the law and defraud the taxpayer or the benefit system, they face criminal penalties and jail sentences; the same should apply to bank executives. The public are now rightly asking who they can trust to clear up this mess and sort this industry out.
First, on the issue of criminal penalties, the Chancellor says he will bring forward amendments to the Bill in the House of Lords—amendments that he did not introduce in the House of Commons. Will he confirm that the powers he needs for an FSA investigation to be followed by a criminal investigation are actually on the statute book and that it is the job of the Serious Fraud Office to take forward those investigations, using the powers in the Fraud Act 2006? Will he confirm that section 2 of the 2006 Act already makes it a criminal offence to make “false representation” for personal gain and that it is an offence under section 4 to “abuse” a position of trust for financial gain? Will the Chancellor explain whether such investigations are already under way, and whether it is true that the Serious Fraud Office initially refused to act because of inadequate resources? There is now a real suspicion that the Chancellor’s new conversion to law making is just a smokescreen for the failure of prosecutors to get a grip.
Secondly, on the LIBOR market, we welcome the limited investigation that the Chancellor rather belatedly announced at the weekend. Self-regulation of this market goes back to the 1980s, but will the Chancellor explain why in March, as this scandal started to emerge, the Financial Secretary denied there was an issue and dismissed our calls for investigation and tougher regulation? When he was asked in the Committee whether he had a view on what needed to be done, he replied with one word: “No.” Given how much the Chancellor is now placing his faith in the Bank of England as the leading financial regulator in the future, will he assure us that the Bank did not turn a blind eye to the manipulation of the LIBOR survey?
However, the problems of culture and ethics that have now been uncovered are wider than the LIBOR market. The public are angry, and they rightly ask whether this generation of politicians, regulators and banks can put right the wrongs for which they are paying a heavy price. I say “this generation of politicians” because we must all admit that regulation should have been tougher, and we should all learn the lessons of an open and independent judicial inquiry. For my part—[Interruption.] For my part, I regret—[Interruption.]
Mr Speaker
Order. What we cannot have are individual Members who feel that their contributions from a sedentary position are somehow in a different category from the sedentary interventions of other Members. We do not need them. What we need is a bit of respectful listening to what is said by the Chancellor and the shadow Chancellor.
Ed Balls
For my part, I regret—as do Ministers and central bankers around the world—that we did not see the financial crisis building and take action, but let me ask the Chancellor this question: do he and the Prime Minister regret consistently attacking us in the Labour Government for being too tough in our approach to regulation, saying that it would undermine City effectiveness? That is what they said.
As for the future of regulation more widely, let me ask the Chancellor another question. Having rightly commissioned the Vickers report, does he now regret coming to the House a few weeks ago and saying that he was watering down its recommendations and weakening leverage ratios, and arguing, shockingly in the light of recent events, that complex derivatives—the very derivatives that led to the appalling mis-selling of interest rate swaps to small firms—should be inside the retail bank ring fence, contrary to the recommendation of Sir John Vickers? Surely that is one U-turn that we need from the Chancellor.
We all have a responsibility to do better in future, to reform our banking industry and to rebuild trust, but we do not believe that another parliamentary inquiry can do the job, just as we rejected that approach in relation to phone-hacking. The Chancellor said today that we did not need more “navel-gazing when we know what has gone wrong.”
How complacent is that? If the Chancellor and the Prime Minister are so confident that their approach is right, why do they not put two options to a vote, and let the House decide? Labour Members will vote for an independent and open public inquiry, not an inadequate and weak plan cobbled together over the course of this morning. The independent inquiry is what our constituents want, and it is the only way to achieve a lasting consensus on reforms for the future.
Mr Osborne
There was one question that dared not speak its name: who was the City Minister when the LIBOR scandal happened? Who? Put your hand up if you were the City Minister when the LIBOR scandal happened.
The shadow Chancellor was not here on Thursday, so he has had days to think about it, but there was not one word of apology for what happened when he was in charge of regulating the City. He blamed central bankers around the world and he blamed the Opposition of the day, but he did not take personal responsibility for the time he was regulating the City when the LIBOR scandal started, and that is why he will not be listened to seriously until he does. Indeed, we need to know whether he knew anything of what was going on. Did he express any concern about the LIBOR rate? When he was in the Cabinet and Gordon Brown, the right hon. Member for wherever it is, was Prime Minister, was he concerned about the LIBOR rate and Barclays? We shall find out in due course.
Let me now deal with the specific questions asked by the shadow Chancellor. He said that the criminal penalties exist in legislation. As I said, the Serious Fraud Office—which is totally independent of politicians, and rightly so—is looking at the law and seeing what it can do, but Lord Turner himself has said that the Financial Services Authority does not have adequate criminal powers. [Interruption.] Opposition Members are shouting, but let me read to them something a member of their own Front-Bench team has said. Lord Tunnicliffe said this:
“Criminal sanctions are extraordinarily difficult to bring about because of the burden of criminal law. It is fair to say though that you can’t find them in the current legislation. And, yes, OK, it’s our fault. I hope my leaders don’t hear me say that.”
That is a member of the Labour Front-Bench team clearly placing the blame on the late Labour Government, of which the shadow Chancellor was the principal economic adviser. That is the problem with the current law, and we are seeking an urgent review in order to amend it and make sure we can deal with the problem.
The shadow Chancellor talks about our acting belatedly in respect of regulation. He had 13 years in which to regulate properly, yet in the space of two years we are changing the entire system of regulation by getting rid of the FSA and introducing a change to the structure of banking. That is happening because of the recommendations from the committee that we set up under John Vickers, and we have still not heard from the shadow Chancellor whether he supports John Vickers’ proposals. He often gets up and says what is wrong with them—[Interruption.] Well, if he has just welcomed them for the first time, that is very welcome, but he goes out of his way not to do so on other occasions.
The shadow Chancellor then said that, somehow, a parliamentary inquiry would be wrong and that I was complacent to say we knew what had gone wrong. This is what my predecessor, the right hon. Member for Edinburgh South West (Mr Darling), said at the weekend, however:
“We know what went wrong and we don’t need a costly inquiry to tell us”,
so that is not just the view of the current Chancellor.
I hope the shadow Chancellor reconsiders his position. We will have good people from both sides of this House and the House of Lords to consider the matter. We will put the motion to the House. Let us have a serious inquiry, but let us have an inquiry that comes to a conclusion within a measurably short period so that we can amend the law that will be going before the House next year. That is the sensible step to take. In the meantime, the shadow Chancellor should reflect on his role and his responsibility, as the City Minister who let Northern Rock sell those dodgy mortgages, as the City Minister who let RBS explode, and as the City Minister who presided when the LIBOR scandal began.
Sir Peter Tapsell (Louth and Horncastle) (Con)
Unlike the shadow Chancellor, I strongly opposed the tripartite regulation of the banks when that was brought forward by the then Labour Chancellor, as I said in a speech I made in the House in 1997. May I now revert to questions that I put to both the Prime Minister and the Attorney-General—who is still with us in the Chamber—suggesting we should urgently consider introducing the concept of the directing mind as defined in the Dodd-Frank Act in the United States, which would enable English commercial law to be strengthened so that the heads of banks can be held answerable for the actions of rogue subordinates?
Mr Osborne
My right hon. Friend reminds us that he was absolutely right about the problems that would emerge with the creation of the tripartite regime, and, sadly, his predictions have been borne out by events. He also makes a specific proposal about legal changes and the introduction of the directing mind. We are aware of that idea, and we will look into it. The House can look at it, too, in the inquiry over the next few months.
Mr Alistair Darling (Edinburgh South West) (Lab)
The Chancellor referred to my quote in a newspaper yesterday. I should just tell him that I was asked specifically about the investigation of individuals, and I made the point that there are authorities, such as the Serious Fraud Office and the Financial Services Authority, who are supposed to be doing that.
On the Chancellor’s broader point, let me say that this inquiry will work only if it is a genuine examination of what went wrong. As I have said before, it went wrong under successive Governments over quite a long period, as well as in the City itself. If the inquiry looks like a partisan exercise in settling scores between the political parties, it will not work. The public may not like bankers, but they do not care much for politicians either. I therefore hope the Chancellor can give us an assurance that this inquiry will not be that sort of exercise, and that it will instead be a genuine inquiry into what went wrong and what needs to be put right.
Mr Osborne
First, the inquiry should be genuinely cross-party and it will, of course, be up to the Labour party to choose whom it would wish to be on the Committee, both in the Commons and in the Lords. So there will be a choice for the Labour leadership in that respect. Of course, I hope that they would consult my hon. Friend the Chair of the Treasury Committee, but it is ultimately their choice.
Secondly, the Treasury Committee, under its previous Chair, Lord McFall, did some very good work on investigating what went wrong. So the idea that the Select Committee or a Joint Committee is unable to do this work is nonsense. “The run on the Rock” was a very good report, as I think the right hon. Gentleman would concede, and it provided the basis for some of the changes in the Financial Services Bill. I think we can draw also on the expertise in the House of Lords in this area and have a Joint Committee. As I say, I hope that once tempers have cooled today, we will be able to reflect on that and have a joint-party consensus on it.
Mr Andrew Tyrie (Chichester) (Con)
First, may I assure the House that I will not countenance a partisan inquiry and I would not be prepared to chair one either? I do believe that Parliament—both MPs and the other place—has something to contribute to clearing this mess up; they cannot do it all on their own.
By any standards, the LIBOR scandal, for which 20 banks around the world are now being investigated, is shocking. It has corroded trust in the UK financial services industry and it is a shameful affair. I find it particularly sad that it will have unfairly damaged the reputations of hundreds of thousands of our constituents who work hard and honestly in the financial services industry. The UK’s reputation has been tarnished, but it can be restored and enhanced if we draw the right lessons. The Treasury Committee will continue with its inquiry into what exactly happened. We will be holding the inquiry on Wednesday with the chief executive of Barclays, and we will also probably call the British Bankers Association and the regulators to find out exactly how this all happened.
None the less, the immediate task to be conducted by the Financial Services Authority must be to ensure that we have appropriate sanctions for wrongdoing and a regulator strong enough to give us confidence that wrongdoers will be caught. Does the Chancellor agree that another task, on which the Joint Committee will and should concentrate, must be to learn the lessons of the LIBOR scandal for corporate governance and standards in the banking industry?
Mr Osborne
I completely agree with all the sentiments exposed by my hon. Friend. He is right to say that this is an incredibly important industry. In many constituencies represented in this House, across the United Kingdom, financial services will be the largest private sector employer. We want to ensure that this industry has a high reputation that Britain can be very proud of. Of course these activities have damaged the credibility of the industry, and that is what the work that we have begun here, and which I hope he continues, will put right.
Mr Speaker
Order. There is a lot of interest but not much time. I am keen to accommodate as many as possible, but extreme brevity is required. So questions, please, without preamble.
Frank Dobson (Holborn and St Pancras) (Lab)
Would the Chancellor of the Exchequer authorise Her Majesty’s Revenue and Customs to examine the personal taxation position of all the people involved in this scandal, because if they are willing to swindle everybody, the chances are that they are trying to swindle the Revenue?
Mr Osborne
The Chancellor of the Exchequer, hon. Members will be glad to know, under any Government, cannot direct the Revenue towards any individual. It would be a very sorry state in this country if I could direct the Revenue to the tax affairs of individuals, so I am not proposing to do that. However, as I have said at this Dispatch Box, and as others have said, this Government are introducing a general anti-avoidance rule, we are clamping down on stamp duty evasion and we have increased the resources from the budget we inherited from Labour when it comes to tackling tax evasion, and the Revenue is therefore well resourced to do its work.
Mr David Ruffley (Bury St Edmunds) (Con)
Last year, the then director of the Serious Fraud Office, Mr Richard Alderman, declined to investigate possible breaches of the Fraud Act 2006 arising from allegations of LIBOR rigging. In the light of that, does the Chancellor of the Exchequer think that the SFO is still fit for purpose?
Mr Osborne
Yes, I do. My understanding, although I have not spoken to him directly, is that the director of the Serious Fraud Office feels that he is well resourced to undertake the investigations he is undertaking.
Mr Peter Hain (Neath) (Lab)
Does the Chancellor accept that public confidence in his Government, the Crown Prosecution Service and the police will be totally destroyed if no prosecution results for the bankers who rigged the LIBOR rate? Whatever the specifics of banking legislation, an offence has been committed—conspiracy to defraud—and that is what the police should be investigating in a criminal investigation.
Mr Osborne
The Serious Fraud Office is absolutely independent of Government, but it will be in no doubt that this House and the Government want to ensure that the law is properly enforced and that if there are legal avenues that it can explore, it should use them. We must accept that the Financial Services Authority, which is also a prosecuting authority in respect of financial crime, does not feel that it was given enough powers to undertake a criminal prosecution, as Lord Turner has said very clearly. That is why I want to give the regulators the powers they need. Instead of spending two or three years getting to that point—a long public inquiry would take a year or two, after which the Government would go away, consult, publish a White Paper and introduce legislation, and it would be 2015 or 2016 before we did anything—I propose that we use the Financial Services Bill that is already before the House and next year’s banking Bill to put things right.
Stephen Williams (Bristol West) (LD)
The Chancellor mentioned new legislation on the destination of fines on the banking industry and other financial services providers. I raised the issue with our hon. Friend the Financial Secretary in January and got the answer that in the past 10 years, £377,734,373 was levied in fines across the banking sector—a staggering amount. Does the Chancellor agree that a suitable destination for future fines might be the not-for-profit sector and the debt advice agencies that do such valuable work in all our constituencies?
Mr Osborne
My hon. Friend is right to point out that under the current arrangements, these fines, including the one that Barclays is paying, will be used to reduce the levy that the rest of the banking industry pays to the Financial Services Authority, so the rest of the banking industry will be the beneficiary of the fines. I do not think that that is right and that is why we are making the changes. We are making them retrospective from the beginning of April to ensure that the fine paid by Barclays will be available to be used for the benefit for the public, and I am sure that we will have a lively debate about how that money should be spent.
Glenda Jackson (Hampstead and Kilburn) (Lab)
I welcome the Chancellor’s commitment to broad-ranging and hard regulation for the British banking system—a position eschewed like the plague by his colleagues when they were in opposition. Will he guarantee that the powers given to the FCA will ensure that it is genuinely what many of my constituents have campaigned for for some time: a banking watchdog, not a lapdog?
Mr Osborne
I can certainly tell the hon. Lady what we want the new regulators to be. We want them to be tough, independent regulators who hold the banking industry to account. However, it is frankly pretty pathetic for Labour MPs, including former Ministers in the Labour Government, to get up and blame the then Conservative Opposition for what happened when they were in office. Why do they not take some responsibility for what they did?
Mr Speaker
Order. I repeat that we need brief questions and although I know—[Interruption.] Order. Although I know that the Chancellor is seeking to assist the House, pithy replies would also help.
Penny Mordaunt (Portsmouth North) (Con)
Does the Chancellor find it odd that the Opposition are calling for Barclays to face a criminal investigation, given that when they were in office they set up a regime that did not make this abuse a criminal offence?
Mr Andrew Love (Edmonton) (Lab/Co-op)
Does the right hon. Gentleman regret diluting the Vickers proposals, under pressure from the banks? In the light of revelations in recent days, will he ensure that the ring fence is strengthened, so that this does not happen again?
Mr Osborne
We are not diluting the Vickers proposals; we are putting them into law. The House will have the opportunity next year to ring-fence retail banking and separate it from banks’ investment banking arms. When I was the shadow Chancellor, I proposed changes to the structure of banking, and they were completely rejected by the former Prime Minister at this Dispatch Box. We now have an opportunity to change the structure of banking, and I hope that I will have the hon. Gentleman’s support when the law comes before us.
Andrea Leadsom (South Northamptonshire) (Con)
In the early 1990s, we had around 45 major banks; we now have about five. One of the key reasons why there is so little new competition is the lack of ability to switch. Does my right hon. Friend agree that now is the time to look again at the proposals that the Vickers commission made on switching, and to think again about moving to account portability?
Mr Osborne
My hon. Friend will know, as we discussed this in the Treasury Committee, that the Vickers commission specifically recommended—indeed, insisted on—the ability to change bank account easily, and that from 2013, the banks should have in place a mechanism that enables people to do that within a week. As Vickers said—I agree with him—let us see that that happens; if it does not, we can take alternative measures, but we have in place plans to make it much easier to switch bank accounts from next year.
Stewart Hosie (Dundee East) (SNP)
I welcome what the Chancellor said about the Serious Fraud Office and the responsibility that he has given Martin Wheatley in relation to governance and the setting of LIBOR, and what he said about potentially putting criminal sanctions in the banking reform Bill. I am disappointed that he has not ordered a full public inquiry, but I wish the investigation that he has set up well. Will he confirm to the House that the hon. Member for Chichester (Mr Tyrie) will not be restricted in any way in calling for evidence, under oath, from witnesses from the commercial banks, the central Bank, the regulators, or Ministers at the Treasury at the time of the LIBOR rigging scandal?
Mr Osborne
I can confirm to the hon. Gentleman that the Committee will not be restricted in any way. It will call whomever it wants. I suggested—but this, of course, will be a matter for the House—that it should call people to give evidence under oath. [Interruption.] As we are getting a question from an Opposition Front Bencher, let me say that the Committee will also be able to call former Government Ministers.
Joseph Johnson (Orpington) (Con)
The shadow Chancellor seemed to suggest that the Chancellor was passing the buck to the Bank of England, and that the Bank was somehow conniving in LIBOR lying. Will the Chancellor confirm that the Financial Services Authority, in its investigation, found no evidence to suggest that the Bank of England at any point encouraged banks to low-ball their LIBOR rate?
Mr Osborne
The FSA’s report is very clear about the interaction between the Bank of England and Barclays. Paragraph 176 says:
“No instruction for Barclays to lower its LIBOR submissions was given”
during the telephone conversation that caused the press interest.
Mr George Mudie (Leeds East) (Lab)
Will the Chancellor confirm that there will be no Government majority on the Joint Committee?
Jason McCartney (Colne Valley) (Con)
Will the Chancellor once again confirm that progress is being made towards a more responsible banking system, with the separation of high street domestic banking and banks’ so-called casino operations?
Mr Osborne
My hon. Friend is right: we are proceeding with a change to the structure of British banking, in which we will ring-fence the retail banks from their investment banking arms. [Interruption.] There will be plenty of opportunity for Labour ex-Ministers such as the shadow Chancellor to appear before the Committee, if he is worried about that. We will introduce a Bill, which will go through Parliament next year. In answer to the point about a public inquiry, why spend three or four years before getting to legislation? Why do we not use the opportunity to get it right now, and amend the Bill that will be before Parliament?
Mr Dennis Skinner (Bolsover) (Lab)
With hedge funds providing up to 50% of all the money that goes into the Tory party political coffers, can we be sure that those criminal penalties that are referred to can extend to any or all of those Tory MPs mentioned in The Independent on Sunday yesterday?
Mr Osborne
I do not think that that question deserves an answer. The inquiry will do its job, and I hope it will do so on a cross-party basis.
Ian Swales (Redcar) (LD)
With Friday’s FSA report into the inappropriate selling of base rate swap products, does the Chancellor believe that the culture behind that latest scandal should also be part of the inquiry?
Mr Osborne
The Joint Committee will look more broadly at the culture in the banking industry, but the very specific point that my hon. Friend makes is about a mis-sold retail product. What I want to do, and what I am sure our constituents would want us to do, is make sure that the compensation is paid out as quickly as possible. I do not want any inquiry to delay that. We want to make sure that small businesses, in particular, which are having cash-flow problems because of the products that they were mis-sold, get the compensation they need. I do not want to impede that process.
Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)
Does the Chancellor identify shortcomings in existing anti-fraud legislation, apart from the costs of pursuing an investigation and a prosecution? Will he confirm to the House that there will be no constraints on either investigation or prosecution costs?
David Rutley (Macclesfield) (Con)
Does my right hon. Friend agree with the view expressed a few years ago that
“nothing should be done to put at risk a light-touch, risk-based regulatory regime”?
Is this not further evidence of the wishful thinking that is all too prevalent on the Opposition Benches?
Mr Osborne
My hon. Friend is right. I remember sitting at the Mansion House listening to the former Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), telling us in 2007 about the golden age of the City, just before the City imploded.
Mark Durkan (Foyle) (SDLP)
Does the Chancellor recognise that many of us observed for a number of years that the competition between the Front Benches in the House seemed to be based on saying, “Our touch is lighter than yours”? The public believe that Parliament and parties have indulged the banksterism that is now all too apparent. The failure and inadequacy of legislation were a failure by Parliament, not just of Government. Is an inquiry that will be a Whips’ stitch-up, with fairly narrow terms of reference, really an adequate response to the public concerns out there?
Mr Osborne
In the end, the conclusion of the inquiry will command the confidence of the House only if it is a unanimous report. The Labour party will be able to choose its members. If it is a divided report along partisan lines, people will see that. I hope the joint inquiry comes forward with a unanimous report. As I say, that would be the way to proceed. A public inquiry would take months to establish and a year or two years to report; in Northern Ireland we have had inquiries that have gone on even longer. There would then be a Government response, a Government White Paper and Government legislation. We would be standing here in 2016 or 2017 dealing with a scandal that had happened a decade earlier.
Conor Burns (Bournemouth West) (Con)
As my right hon. Friend sets out the task of restoring trust and integrity to the banking system in the light of the appalling revelations at Barclays, he will be aware that we all have constituents who are decent people working in those institutions, who have been badly let down by some of the leaders in the sector, not least the 4,000 people who work for JP Morgan in Bournemouth. May I invite my right hon. Friend the Chancellor to use this opportunity at the Dispatch Box today to recommit the position of this Government—that we are committed to a vibrant banking sector that contributes so much to the economy of the United Kingdom?
Mr Osborne
I can tell my hon. Friend that we are absolutely committed to a vibrant banking sector. I have gone out of my way in these exchanges to draw attention to the fact that this is an incredibly important sector to the British economy. The fact that an American bank employs 4,000 people in Bournemouth reminds us that this sector is not just in the square mile of the City of London or in Canary Wharf. This industry employs many hundreds of thousands of people around the country. It is the largest private sector employer in the country, and of course it has a huge impact on the rest of the economy, which is why it must now be properly regulated.
Caroline Lucas (Brighton, Pavilion) (Green)
The Chancellor keeps repeating his intention to follow the Vickers recommendation of ring-fencing retail and investment banking, but in the light of this scandal will he not accept that simple ring-fencing is not enough because any firewalls will soon be circumvented, which is why we need nothing less than the full legal separation of retail and investment banking?
Mr George Osborne
There are people who share the hon. Lady’s view, but we specifically asked John Vickers and his commission, whose membership was drawn from people who had expertise in the consumer industry, banking and elsewhere, to consider whether we should physically separate the banks as she suggests. They explicitly addressed that issue and came to the conclusion that ring-fencing was a better approach, and one of the reasons why they did so is that ring-fencing might provide more stability for the retail arm, as it would be able to draw on the resources of the investment bank. They specifically looked at that and came to the conclusion that having a retail ring fence was better than separating the banks.
Madam Deputy Speaker (Dawn Primarolo)
Order. I inform hon. Members that there is very important business after this statement and I will therefore be unable to fit everyone in. I plan to let the statement run for another 10 minutes or so, so short questions and short, direct answers would help enormously.
Mark Field (Cities of London and Westminster) (Con)
For the reasons the Chancellor has set out, I very much agree that the long path back to trust in banking and financial services is served by a banking Bill, but will he take on board some of the concerns expressed just now by the hon. Member for Brighton, Pavilion (Caroline Lucas)? Many feel that the LIBOR scandal might be a turning point. In addition to looking at ring-fencing, is he open-minded enough at least to consider the prospect of a fully fledged separation of casino or investment banking from retail banking?
Mr Osborne
I say to my hon. Friend, whose constituency expertise and personal expertise I have a great deal of time and respect for, that one of the purposes of asking John Vickers to do this work was to resolve the issue for our country. We brought together a commission with broad experience. It specifically looked at this issue and came to the conclusion that a ring fence was better than actual separation. I think that we should stick with its recommendations in order to give the industry some stability.
John Mann (Bassetlaw) (Lab)
If tomorrow morning the elected Treasury Committee comes up with its own terms of reference, as it is appointed by Parliament to do, will the Chancellor accept them or ride roughshod over them?
Mr Osborne
It is for the House of Commons and the House of Lords to pass a motion, so ultimately it is a matter for the House.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
At the heart of this matter is a culture that has seen bankers go from trusted advisers to salesmen and clients go from valued clients to marks. Given that culture, is it not right that the Committee be asked to interview the Vickers commission again to see whether, in its view, ring-fencing is adequate following these events?
Mr Osborne
It would be entirely up to the Committee to call whomever it would want to call, and it might well want to speak to John Vickers, who has enormous expertise in this area.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I think that the Chancellor has done his announcement a disservice by setting it up as a continuation of his obsession with placing every act of wrongdoing by every banker at the door of the previous Government. Does he not accept that what the public want is something that gets to the heart of the rotten culture exposed by the FSA report last week, rather than the partisan way in which he set out today’s announcement?
Mr Osborne
I agree with the right hon. Gentleman that we want to get to the heart of the cultural problems, but when the shadow Chancellor responds to a statement and blames it all on the party that was in opposition at the time, it is perfectly reasonable for me to point out who was in government. That is a perfectly reasonable response in the cut and thrust of this House, but I completely agree with the sentiment he expresses, which is that we should try to proceed on a cross-party basis. I hope that his Front Benchers will think about supporting the joint inquiry—they will of course be able to choose its Labour members—because I think that that it is the correct way forward to give us answers for next year.
Dr Phillip Lee (Bracknell) (Con)
Does the Chancellor agree with me, and indeed with Plato, that good people do not need laws to tell them how to act responsibly, and that bad people will find a way around such laws? We really should bear that wisdom in mind when it comes to determining the outcome of the inquiry that has been announced.
Mr Osborne
I am tempted to say that we should find an Aristotelian mean, where we do not completely destroy the industry with one inquiry after another, but instead have a sensible inquiry that gets to the right answer, amends the law appropriately and enables us to have a sensible financial services industry that avoids the scandals that we are dealing with today.
Helen Goodman (Bishop Auckland) (Lab)
One of the most controversial episodes in the recent history of the City was big bang in 1986. Notwithstanding the many good qualities and good intentions of the hon. Member for Chichester (Mr Tyrie), the fact is that in 1986 he was a special adviser to the then Chancellor of the Exchequer, who was overseeing big bang. Does the Chancellor agree that the hon. Gentleman will find it difficult to demonstrate the necessary independence?
Mr Osborne
My hon. Friend the Member for Chichester (Mr Tyrie) is more than capable of demonstrating his independence, and I remind the House that thanks to the reforms of this Government he was elected to his post by the entire House of Commons.
Dr Sarah Wollaston (Totnes) (Con)
I have just received a heartbreaking letter from a 72-year-old pensioner who is being pursued through the courts for a disputed and modest tax claim. How can it be right that those telling lies for eye-popping sums are not ending up in court?
Mr Osborne
The Serious Fraud Office is independent of the Government, but it is pursuing every avenue to see whether it can bring criminal prosecutions in this case. This is, however, a matter for the SFO, which is going to come back to us by the end of the month to tell us whether it can do so, and it will have heard what the House has said today. We also want to ensure that in future the regulators have the criminal sanctions that they need, and that is why we seek these investigations to change the law now, rather than waiting four or five years to do so.
Clive Efford (Eltham) (Lab)
How can it be right, and in line with the Government’s credibility on wanting to clean up the banking system, when those who were responsible and in management at the time of these criminal activities—both the Prime Minister and the Chancellor have today accepted that criminal activities were going on—remain in post, such as Mr Bob Diamond?
Mr Osborne
As the Prime Minister said and I repeat, Mr Diamond has to account for himself before the Treasury Committee this week, and I congratulate the Committee on doing that. The chairman of Barclays has resigned, but it is not the job of the Chancellor of the Exchequer to hire and fire the bank chiefs at this Dispatch Box. I am not sure that we want to go down that path; it is much better for the shareholders to do it, the board to do it, and they will have the appearance before the Committee of Mr Diamond to go on.
Steve Baker (Wycombe) (Con)
Further to the question from my hon. Friend the Member for Bracknell (Dr Lee), will the Chancellor look again at my Financial Institutions (Reform) Bill, which would transfer commercial risk back to the banking sector and end the incentives that have created the culture of recklessness and rule-breaking that is ruining the City?
Mr Osborne
I will certainly take a close look at my hon. Friend’s Bill and get back to him on it.
Mr Tom Watson (West Bromwich East) (Lab)
The Chancellor said in his statement that he had asked Mr Wheatley whether participation in the setting of LIBOR should become a regulated activity. Does the Chancellor accept that public confidence in the British Bankers Association has completely ruptured, and that for the public it is a question not of whether, but of when, we take that responsibility away from it?
Mr Osborne
I completely agree with the hon. Gentleman that confidence in the process of setting LIBOR has been damaged—of course—by these revelations. That is precisely why, if I may say to him, I want to get on with it: that is why I have asked Mr Wheatley to do his report in the next couple of months, not even by the end of the year—so that we have the opportunity in October of amending, just before it becomes law, the Financial Services Bill. The hon. Gentleman is an expert on public inquiries, and I am sure he will agree that a public inquiry would take years to get to that point. Let us get to that point this autumn.
Mark Pritchard (The Wrekin) (Con)
I fully support greater transparency in banking and, in particular, punishing those who have done wrong, but can the Chancellor from the Dispatch Box today reassure my constituents who, as part of their pensions, hold shares in banks that the Government, or the inquiry, will take no action that unnecessarily undermines the value of those pensions?
Mr Osborne
We would not want to take actions that unnecessarily undermined the value of anything, so my hon. Friend has that assurance.
Mr Roger Godsiff (Birmingham, Hall Green) (Lab)
After the nationwide disturbances last year, a student was given a six-month sentence for stealing a pack of water bottles. What punishment does the Chancellor believe would be appropriate for bankers who have stolen millions of pounds from investors through rigging interest rates?
Mr Osborne
I completely understand and sympathise with the sentiment that the hon. Gentleman is expressing: people suffer criminal penalties for offences involving much, much smaller sums of money—a fraction of the sums that we are talking about. The Serious Fraud Office, which is independent of the Government, is looking at the matter. Let us wait to hear what it has to say. It is looking at what laws are available to let it do that. I am sure that he would not want the Government of the day to undertake the criminal prosecutions themselves.
Stephen Mosley (City of Chester) (Con)
What powers and sanctions will the parliamentary Committee of inquiry have should witnesses refuse to attend, refuse to answer questions or mislead the Committee?
Mr Osborne
Parliamentary Committees have a whole set of powers available to them. Ultimately, as I understand it—the Parliamentary Secretary to the Treasury might correct me if I am wrong—the House itself can call witnesses to Parliament through a vote. That power is available to us—[Interruption.] That is absolutely the case. [Interruption.] What I find astonishing is Opposition Front Benchers’ lack of confidence in Parliament—in the House of Commons, in the House of Lords—to do this job. Looking at how they treated Parliament over 13 years, perhaps that is not surprising. I have confidence in Members from both sides of the House to do the job being asked of them.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Interest rate swaps have been mis-sold. They are complex derivatives. Does the Chancellor still think it right that they are inside the retail banking ring fence?
Mr Osborne
We are not proposing to put complex derivative products inside the retail ring fence; that is not part of our proposals. As I say, we are coming forward with plans to implement the Vickers reforms and I hope that the hon. Lady welcomes that.
Mr Robin Walker (Worcester) (Con)
We have had regrets but no apology from Opposition Front Benchers. What our constituents really want is action. May I commend the Chancellor for taking action to set up a swift parliamentary inquiry? Will he make sure that the proceeds from any fines go to the taxpayer, not the banks?
Mr Osborne
I thank my hon. Friend. I say again that I came to the House just last Thursday and said that I would look to see what I could do on the fines. I have now come forward, a few days later, and said that we are going to take those fines—including the fines that Barclays will pay—and make sure that they are put to the public benefit, not to the benefit of the financial services industry. We are acting extremely swiftly on this. As I said, I would have thought that it was in everyone’s interests that we get on and deal with the matter in the coming months.
Mr Michael Meacher (Oldham West and Royton) (Lab)
Since there is clear evidence of a conspiracy, going on for years, to defraud over LIBOR, will the Chancellor now transfer responsibility for the interest rate market away from the incestuous control of the British Bankers Association to the Financial Services Authority or the Bank of England, including the power to bring criminal charges on evidence of market abuse?
Mr Osborne
The right hon. Gentleman asks two very good questions, as did the hon. Member for West Bromwich East (Mr Watson), about who should oversee the setting of LIBOR and what criminal sanctions should exist for the manipulation of that market. That is precisely what we are going to investigate over the next couple of months in Mr Wheatley’s inquiry. That will enable us in September and October to change the law; the Bill has been going through Parliament and can become law this autumn. I hope that I have the right hon. Gentleman’s support for getting on with this and getting the powers on the statute book.
Mr Rob Wilson (Reading East) (Con)
If it is found, following the Joint Committee inquiry, that manipulation of interest rates damaged small businesses or mortgage holders, will my right hon. Friend consider forcing the banks to reimburse fully those individual small businesses and mortgage holders?
Mr Osborne
Of course, if harm is proved to individuals or to businesses the whole question of compensation will arise, and we have the compensation regime to address that. As I said in the House on Thursday, it is difficult to establish whether that is the case because people were trying to manipulate the rate up and down on different days to suit their derivative trading book, so there were times when the rate was too low and times when it was too high compared with the fair market rate, and so the question of how much people lost out will be difficult to establish.
Madam Deputy Speaker (Dawn Primarolo)
Order. I am sorry that I am going to have to end the statement there. We have taken questions from 39 Back Benchers in 47 minutes. I appreciate that it is a very important issue, but we have very pressing business that we need to move on to, and of course this matter will come back to the House again.
Points of Order
Jeremy Lefroy (Stafford) (Con)
On a point of order, Madam Deputy Speaker. In asking a question of the Chancellor regarding London commodity markets and their impact on smallholder farmers around the world following his statement last Thursday, I inadvertently failed to draw Members’ attention to my entry in the Register of Members’ Financial Interests. I wish to do so now and apologise for the oversight.
Madam Deputy Speaker (Dawn Primarolo)
I am grateful to the hon. Gentleman for putting that information on the record. He has been quite ingenious in using a point of order to do so. I am sure that the House is grateful for that correction.
Chris Bryant (Rhondda) (Lab)
On a point of order, Madam Deputy Speaker. You will know that when there is an equality of voices in this House, that is the only time when the Chair of a Committee or the Speaker is able to vote. In the other House, it is quite the reverse: the Speaker or the Chairperson of a Committee is able to vote twice, both in their own right and then if there is an equality of votes. If the new Committee that is to be set up is set up as a Joint Committee, traditionally that has meant that the rules of the House of Lords apply rather than those of the House of Commons. That would mean that the Chairman of the Committee, who is a Member of this House, would have two votes. Is that correct?
Madam Deputy Speaker
I am advised that the hon. Gentleman is correct in his analysis of the rules with regard to the requirements on voting and whether a situation would apply in the circumstances that he has described. I am grateful for his point of order. Perhaps I could ask him to leave it with me at this point so that I can take further advice from the Government and the Clerks as to whether that is the true intention of the Government.
Finance Bill (Ways and Means)
Resolved,
That provision (including provision having retrospective effect) may be made in the Finance Bill about face-value vouchers.—(Mr Gauke.)
Finance Bill (Ways and Means) (No. 2)
Resolved,
That provision may be made in the Finance Bill amending the descriptions of supplies which are zero-rated, exempt or subject to a reduced rate of value added tax.—(Mr Gauke.)
Finance Bill (Ways and Means) (No. 3)
Resolved,
That provision (including provision having retrospective effect) may be made in the Finance Bill about the treatment of arrangements involving settled property.—(Mr Gauke.)
Finance Bill (Programme) (No. 2)
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
TABLE | |
|---|---|
First day | |
Proceedings | Time for conclusion of proceedings |
New Clauses, Amendments to Clauses, new Schedules and Amendments to Schedules relating to fuel duties. | 7.00 pm |
Amendments to Clauses 1 to 4 and new Clauses and new Schedules relating to income tax rates, rate limits and personal allowances | 10.00 pm |
New Clauses, Amendments to Clauses, new Schedules and Amendments to Schedules relating to child benefit | 11.30 pm |
Second day | |
New Clauses, Amendments to Clauses, new Schedules and Amendments to Schedules relating to value added tax. | 7.30 pm |
New Clauses and new Schedules relating to the taxation of banks and employees of banks; remaining new Clauses and Amendments to Clauses; remaining new Schedules and Amendments to Schedules; remaining proceedings on Consideration | 10.00 pm |
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I will speak very briefly because I am conscious of the time, but it would be remiss of me not to put on record the fact that we have some concerns about the lack of time available to discuss what is a very big Finance Bill. There are a number of serious issues that many Members will want to discuss during the course of this evening. Although we will not vote against the programme motion, I want it to be on the record that we regard this as an exceptional circumstance and we do not wish it to be seen as the way in which things will be automatically dealt with in future.
The Exchequer Secretary to the Treasury (Mr David Gauke)
Let me briefly respond to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). As hon. Members know, we have already scrutinised the Budget and the Finance Bill for eight weeks, including in Committee of the Whole House and in the Public Bill Committee, where our discussions were thorough and detailed. Indeed, the hon. Lady played a very large role in those discussions. Before that, in December 2011, the Government published over 400 pages of draft legislation and received about 450 comments on it. That demonstrates our commitment to improving the way in which policy is developed. In order to make progress with Government business in good time, we have agreed through the usual channels to programme this debate on Report. I commend the motion to the House.
Question put and agreed to.
Finance Bill
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
22:00 - The House divided: - Ayes: 233 / Noes: 315 - Question accordingly negatived.
22:14 - The House divided: - Ayes: 236 / Noes: 312 - Question accordingly negatived.
23:29 - The House divided: - Ayes: 234 / Noes: 300 - Question accordingly negatived.
The Economic Secretary to the Treasury (Miss Chloe Smith)
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 8—Biodiesel—
‘(1) With effect from 1 July 2012 the fuel duty payable under the Hydrocarbon Oil Duties Act 1979 on biodiesel produced from waste cooking oil shall be 10 pence per litre less than would be payable apart from this section.
(2) The Commissioners for Her Majesty’s Revenue and Customs may by order made by Statutory Instrument repeal subsection (1) on or after 1 January 2014 or when the Renewable Transport Fuel Obligation has come into effect, whichever is the earlier.’.
New clause 9—Taxes on road fuel—
‘The Chancellor of the Exchequer shall conduct a review into the relationship between fuel duty, other taxes charged on road fuel and the cost of road fuel, and lay a copy of the report before the House of Commons before 1 August 2012.’.
New clause 11—Fuel duties: rates—
‘(1) The Hydrocarbon Oil Duties Act 1979 shall have effect as if the amendments made to it by section 20 of the Finance Act 2011 (Fuel duties: rates of duty and rebates from 1 January 2012) had not been enacted.
(2) This section will have effect from 1 August 2012.
(3) The Treasury may by order made by Statutory Instrument repeal subsection (1), and any such order shall be subject to annulment in pursuance of a resolution of the House of Commons.’.
Miss Smith
I share the concerns that many have raised about driving, the cost of living, and the challenges of running a business. Although the cost of fuelling a vehicle has recently eased as global oil prices have fallen, it is still a very important part of the overall cost of living. That is why the Government have announced that we will provide further support to motorists regarding the cost of fuel by deferring the 3p per litre duty increase that was planned for this August until January next year. That will mean that this Government will have kept fuel duty frozen for a total of 21 months since our decision in the Budget 2011 to cut fuel duty by 1p per litre.
Robert Halfon (Harlow) (Con)
I am grateful to the Government for moving on this issue, as will be many motorists across the country. Will my hon. Friend confirm that, because of what the Government have done, fuel duty will be 10p lower than it would have been if we had followed Labour’s plans?
Miss Smith
I shall certainly confirm that. It is testament to the repeated action that this Government have taken to support motorists that that is indeed the case.
Sarah Newton (Truro and Falmouth) (Con)
Does my hon. Friend agree that this reduction in fuel duty is vital not only for motorists but for small businesses such as those in Cornwall that have long distances to take their goods to market, and that it shows that this Government are listening and are on the side of hard-working families and small businesses?
Miss Smith
I am grateful to my hon. Friend. She is not only in fine fettle, as she is standing without crutches, but rightly points to the effect that we know this will have on households and businesses.
Mr Alan Reid (Argyll and Bute) (LD)
I, too, welcome the decision. This Government are certainly on the side of rural motorists. Will my hon. Friend confirm that as well as fuel duty on the mainland being 10p a litre lower than it would have been under Labour’s plans, on the islands it is 15p a litre a lower thanks to the Government’s adopting the island fuel discount—a policy that Labour refused to adopt?
Miss Smith
I am pleased to confirm that. I am glad to hear my hon. Friend’s welcome for the scheme on behalf of his constituents and others in rural areas where we are piloting it.
Julie Hilling (Bolton West) (Lab)
Like other Members, I welcome the Government’s U-turn on petrol tax—another U-turn on the omnishambles of the Budget—but does the hon. Lady recognise that the increase in VAT means that the cost of petrol has increased during the time of this Government, and not decreased as one might imagine?
Miss Smith
I shall say two things in response to that. First, as a result of all the actions that this Government have taken, including what we have had to do on VAT, the price of petrol and diesel at the pumps is still lower than it would have been under Labour—whose Members are, on the whole, absent today. Secondly, the decision that we are legislating for today combines our determination to help families with the necessity of keeping Britain safe in the global storm and with our credible plan to deal with the country’s debts.
Robert Halfon
Does my hon. Friend agree that the Opposition’s support for a cut in VAT is rather a misnomer, because not only would it cost £12 billion, but the vast majority of businesses who need to get their petrol prices down do not pay VAT?
Miss Smith
My hon. Friend is an ardent voice on behalf of small businesses in his constituency and elsewhere. He is right to point to the nuances in the costs of running a business.
Deferring the August rise will cost about £550 million this year. We will finance that through greater than expected savings in Government spending. That will avoid increasing the national debt, which is vital to our country’s well-being. That is our tough but fair plan to deal with Britain’s debts. Our actions to reduce the deficit and to rebuild the economy have secured interest rates at near record lows, benefiting businesses and families and keeping mortgage rates low.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
This morning, my hon. Friend and I were together on the train pressing the case for investment in rail. Are the Government, of whom she is a proud member, not showing the right example to the country by taking their foot off the accelerator and driving more economically? Will this measure bring the growth that the FairFuelUK campaign said it would?
Miss Smith
This morning, I was indeed speaking in my constituency capacity about my wish that our regional economy will not be left in the sidings. The same is true of our national economy. We must ensure that Britain remains competitive. Our actions, which are part of a credible national plan, have kept Britain safe from the global turmoil around us. It is within that plan that we have listened and acted.
New clause 1 will defer the fuel duty increase that was planned on 1 August this year to 1 January 2013. As the Chancellor said last week, and as my hon. Friend the Member for Harlow (Robert Halfon) has noted, this decision means that pump prices are 10p a litre cheaper than they would have been if we had not abolished the previous Government’s fuel duty escalator. It is a real help for families, businesses and motorists across the country. The AA has said that it is
“great news for all motorists”.
The RAC Foundation has said that it is
“good news for drivers and good news for the country.”
The Government have taken action upon action to support motorists and have done more than any other Government. We have avoided the two years’ worth of increases planned by the previous Government. More than that, last year we abolished Labour’s fuel duty escalator, which increased fuel duty by above inflation every year until 2013. We have successively cancelled and deferred duty to deliver the longest period of unchanged fuel duty for more than five years. As a result of that repeated action, average pump prices are now approximately 10p a litre lower than they would have been. To put that in context, a typical Ford Focus driver will be £159 better off and an average haulier £4,900 better off between 2011 and 2013 than they would have been under the plans left by the previous Government.
This support for motorists is part of our broader plan of helping with the cost of living and promoting business growth, while reducing the deficit and rebalancing the economy. That has included freezing council tax and raising the personal allowance.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I, too, congratulate the Government on this decision, not least because it saves me from making a speech on an amendment that we had planned to table on this issue. Considering the gloating of the official Opposition last week, does the Minister recall the Labour party at any stage on Second Reading or in Committee making the case for this 3p cut?
Miss Smith
The hon. Gentleman has given me the perfect opportunity to note that, regrettably, the official Opposition’s Benches are astoundingly empty. The stance that they took last week showed astounding political opportunism, given that they had 13 years to support the motorists but did not, and that they left behind a depth charge of increases. I regret that I shall not be able to hear him put the case in his own words. Perhaps I may explain to him more of the actions that we are taking to support the motorist and businesses.
Businesses are seeing successive cuts in corporation tax, coupled with an extended business rates holiday for small businesses until April 2013. In passing, I should note that the high pump prices of recent years are causing real difficulties in ensuring that motoring remains affordable. However, pump prices have fallen by nearly 11p a litre since their peak in April. That said, at a time when money is tight, deferring the fuel duty increase from August to January will provide further support to motorists.
This is a Government who not only have a credible plan to support motorists, but are dealing with the debts created by the previous Government. A responsible Government are able to listen to, consider and respond to the concerns of motorists. Compared with the plans that we inherited, we have cut fuel duty, cancelled the previous Government’s escalator and introduced a fair fuel stabiliser.
I understand that we will also be discussing what the Opposition have planned for motorists, perhaps in some detail. I also look forward to hearing from my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) on biodiesels. I look forward to responding on those matters. This Government are on the side of motorists and our measures will support them when times are tight.
Sheila Gilmore (Edinburgh East) (Lab)
On Second Reading, we were given to understand that the fuel duty rise was essential to the Government’s proposals and a key piece of the jigsaw in resolving the deficit. For many weeks, that has been the clear message from the Government. I understand that Government Back Benchers were exhorted to write to their constituents to tell them why—regrettably, no doubt—the rise would have to happen and there was no alternative. It therefore comes as rather a surprise to hear that it is not quite so essential to the Government’s plans after all, but is a dispensable piece of the jigsaw.
This is probably the most expensive of the U-turns that have been performed over the past few weeks. It dwarfs many of the others in terms of revenue forgone. It is all very well for the Minister to tell us that it has happened because we have a listening Government, but they must also listen to what they have been saying. On that basis, they must explain how they have come to this position.
Lyn Brown (West Ham) (Lab)
Does my hon. Friend have any idea how much the U-turns have cost collectively so far?
Sheila Gilmore
I understand that it is in the region of £725 million. That is quite a large hole in what was presented in March—it seems a long time ago now—as a balanced Budget. That was one of the Chancellor’s key themes in his Budget speech. We now appear to be faced with something of an unbalanced Budget.
Sheila Gilmore
It is clear from the pattern of fuel duty rises under the last Government that such things were never set in stone and were not intended to be so. One has to look at the situation with which one is faced.
Miss Chloe Smith
The hon. Lady has a touching faith in the previous Government’s ability to stick to a course. Does she support Opposition new clause 11, which has a price tag of about three times as much as the new clause that she is attacking?
Sheila Gilmore
We have very different views about how to stimulate and boost the economy. The Government have run demand into the ground, for example by raising VAT to 20%, which has had an effect on fuel. Ministers are reluctant to talk about that in any detail. It has to be remembered that prior to the election, the Conservatives were going around telling us that there would be no increase in VAT, and their coalition partners liked to stand in front of huge billboards saying that they feared there would be a VAT bombshell but were completely against it.
Mr Jim Cunningham (Coventry South) (Lab)
Has my hon. Friend noticed that oil and petrol prices have dropped by 28% over the past three months? That is not reflected at the petrol pumps, and surely the Government should do something about that.
Sheila Gilmore
My hon. Friend makes an important point. When the raw product goes up in price, the pump price goes up very quickly, but a downward turn seems to take a great deal longer to reach the consumer. We have made similar arguments about other energy price rises.
The hon. Member for Argyll and Bute (Mr Reid) suggested that it was all right for the Government to make U-turns such as this, because they had found savings elsewhere. That is nice to know, but if such savings could be found so easily, maybe the Government could have avoided some of the other things they have done. After all, we spent a lot of time in the Budget debate and before talking about the plight of couples who were losing tax credits because they were deemed not to be working enough hours. That change affects a small number of people—from memory, I believe it is about 500,000. We were told that if it were not implemented, it would cost the Treasury £500 million. We were told that it was impossible to go back on that decision, because money was so tight.
Like all Governments, the current Government are making choices. In the past two years, they have said that certain things have to be done and are not choices. They have said that they have been forced into them. However, all Governments make choices—that is part of governing.
Julie Hilling
Does my hon. Friend recognise that the Government have chosen not to do a U-turn on the granny tax, which is aimed at the people who are least able to pay, but continue to reduce the top rate of tax?
Sheila Gilmore
Indeed, and a lot of people would be glad to see the Government make U-turns in other areas, and in fact in their entire economic policy. It has been misguided, and the Opposition were clear from the start that it was the wrong way to reduce the deficit.
Sheila Gilmore
That is a very important point. We had a semi-answer from the Government saying that savings had been found, but they seem to be somewhat mysterious savings. We had not heard about them before, and we still do not really know where they have been found.
Miss Chloe Smith
Has the hon. Lady not read the Office for Budget Responsibility’s forecasts or the reports identifying about £4 billion of underspend in each of the past four years?
Sheila Gilmore
If the Economic Secretary is so clear that there is money to be used, I once again have to press her on some of the choices that the Government have chosen not to make. From what she has just said, it seems to me that there may be scope for her to reconsider some other matters.
I have a constituent whose employer, a big national department store, recently told her that she had to go completely flexible with her working hours. That meant that her shifts could vary from day to day. When she said that that could be very difficult for her, because she had child care arrangements to make and could not simply change things at short notice, she was told that she could reduce her current 18-hour week to a 12-hour week. We are told that such people should easily be able to find more hours of work to get around the problem of having their tax credits removed. If there is so much underspend, perhaps the Government should think beyond their proposals on fuel duty. It does not give us a great deal of confidence when they are adamant that they are not going to change things, but then do so before thinking about where they are going to find the money.
Mr Iain McKenzie (Inverclyde) (Lab)
My hon. Friend rightly identifies the fact that the Government have found additional money all of a sudden to fund their U-turns. Does she think that that money could have been used to create employment in areas with significant unemployment levels?
Sheila Gilmore
It could, and there could also have been significant investment in the building of affordable housing, which is dear to my heart. That would not just give people houses but create jobs and apprenticeships and boost the local economy. The Government could have done that if they had really wanted a Budget for growth. Our criticism of the Budget was that however balanced it may have seemed—it now turns out not to have been quite so carefully balanced as we were told—it was not a Budget for growth. Very little was put into building up jobs and growth. Perhaps it was only a practice Budget, although I always thought that was what the autumn statement, which used to be called the pre-Budget report, was for.
David Rutley (Macclesfield) (Con)
Fiscal responsibility is clearly an overriding priority, but does the hon. Lady agree with President Hollande, who recently said that
“national debt is the enemy of the left and the enemy of France”?
It is also the enemy of the United Kingdom.
Sheila Gilmore
National debt is sometimes essential. After all, I seem to recall that it was very much higher at the end of the second world war than it has been at any time since. There were reasons for that, and I believe we finished paying it down only a few years ago. Sometimes, we have debt because we have made essential or useful investment, and of course it is not the same as deficit.
Mr McKenzie
My hon. Friend is making a very good point. We have heard one of the comments of the new President of France, but does she think the Government will agree with his opposition to the austerity measures that have been put in place across Europe?
Sheila Gilmore
I do not dissent from my hon. Friend’s view. The new President’s general intention is indeed to break away from the fixation with austerity measures. That is not the same as saying that we do not want to deal with the deficit. The question is how to do that successfully and ultimately reduce borrowing.
The last Government have been misrepresented as having constantly increased the national debt. That is simply wrong. It was substantially reduced under the Labour Government, but what caused that process to go into reverse—I am not going to say it did not—was the recession and the economic stimulus that was put in to get us out of it. Our view remains that had the policies that were in force between 2008 and 2010 been continued, rather than going into a double-dip recession we would have begun to climb out of the recession.
Julie Hilling
Does my hon. Friend agree that we had growth in the British economy at the time of the general election, but we now have a recession made totally in Downing street? If the Government have such a big underspend, why on earth do we face a double-dip recession, and why are ordinary people suffering so much at their hands?
Madam Deputy Speaker (Dawn Primarolo)
Order. In replying to that intervention, I hope the hon. Lady returns to the subject of the debate, which is fuel duties.
Sheila Gilmore
I do not want to dissociate those things—they are linked in lots of ways. Initially, we were told that there were constraints on the Budget, including not postponing the increase in fuel duty. What happens in a few months’ time? The measure is a deferral—we are not forgetting about it for ever—but what financial complexities will that create?
It is heartening that the Government’s motivation seems to be their recognition that people are suffering from a general reduction in their standard of living. As many commentators have pointed out, many working families are experiencing real reductions in disposable incomes such that they have not experienced for many years. That is part of the serious position in which people find themselves. It is good that the Government have understood that and want to act on it, but I would like them to act on some of the other issues that Opposition Members have constantly raised. I want them to understand that people are suffering not just from fuel prices, but from a number of other measures. The Opposition’s five-point plan would have reduced VAT and enabled investment in job creation. Perhaps it is not too late even now for the Government to U-turn on that.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I am happy to speak in the debate on new clause 1, which was moved by the Economic Secretary on behalf of the Government; on new clauses 9 and 11, which are in the name of the Labour Opposition team; and on new clause 8, which is in my name.
I support new clause 1. I am not against responsive government—indeed, there is a duty to be responsive in government. I therefore welcome the fact that the Chancellor announced that the Government had heard the concerns of ordinary people, families and businesses that cost of living pressures continue to be difficult on them. The cost of fuel at the pumps affects people in rural areas, but it also affects people in suburban and urban areas, and people running both small businesses and larger firms. For some people, there is an inescapable obligation to drive—they drive for their families and businesses, and in emergencies. Therefore, the price at the pump is a hugely important part of their weekly budget.
People made the case, and the Government, including Treasury Ministers from both parties, first agreed to delay the increase scheduled for earlier in the year until August, and last week announced a further delay until the end of the year. That is welcome. It is fair to say that the announcement came slightly out of the blue and yellow last week—it took a few people by surprise—but it clearly has not been met with opposition from those on the Opposition Benches, because a grand total of six Labour Members, including the Whip, have been present in the Chamber for this debate. There is clearly no great furore at this concession to the needs of the consumers.
Simon Hughes
No, I will not give way. The hon. Lady spoke for a very long time, as she often does, and I will not concede. This is a short debate—it goes on only until 7 o’clock—and I want to allow other colleagues to speak.
I want to make a specific plea on biodiesel. I should declare my interest: as some colleagues know, I sometimes drive a London taxi, which has often been powered by biodiesel bought from Uptown Oil, a firm in my constituency that collects used cooking oil from local firms—a chain of good environmental practice ends up in my cab and other vehicles in south London.
I have had discussions with the Economic Secretary and the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), and I asked colleagues—my hon. Friends the Members for Bristol West (Stephen Williams) and for Redcar (Ian Swales)—to argue the case in Committee last week. We have so far not persuaded the Government to change policy, but I wanted to put the case as to why the industry needs continuing Government attention and to ask that they do not turn their back on the industry, even if they are not willing to concede to my requests now.
Charlie Elphicke (Dover) (Con)
I remember a case reported in the papers some while ago. A gentleman in Wales was arrested by customs officials for not paying duty on the cooking oil in his car. He was traced by the smell. Can the right hon. Gentleman confirm that cooking oil fuel no longer smells, and that customs officials should not arrest people found with it in their cars?
Simon Hughes
I confirm both.
Biofuel is produced from waste vegetable oil and collected locally. This has been going on for a century or more—the first diesel engine ran on peanut oil. Colleagues may not know this, but the idea was that biodiesel vehicles would be used by farmers, who could use their crops effectively. The Department for Environment, Food and Rural Affairs is clear that the huge numbers of blockages caused by pouring oil down drains are not a good thing—it is better to put it somewhere else, which costs money for companies and local authorities.
Biodiesel also means that such waste does not go into landfill sites, which produce 40% of our methane emissions and 3% of our country’s greenhouse gas emissions. The product therefore helps us to meet our renewable energy targets. We produced something like 35 million litres of biodiesel from used cooking oil sourced in the UK for road transport two years ago, which meant a carbon saving of 82 million kilograms of CO2.
There are about 30 to 40 producers—not just Uptown Oil in my constituency, but companies all over the UK. They are generally small firms, employing about five to 20 employees. They are confronted by a severely difficult economic situation. We could lose them, which would mean a loss of employment, a loss of revenue to the Government because they pay their taxes, and a loss of the source of the product, which would be a very bad thing.
In April 2012, following a decision by the previous Government, the differential fuel duty on biodiesel was taken away—it was put in place to support the industry—as the system of support across the EU changed to a new one. The derogation was originally meant to end in 2010, but it was extended by two years by the previous Government, because the implementation of the renewable energy directive was delayed—perfectly legally. There was therefore an attempt to ensure that the industry in the UK had continuing support on the basis that when such support ended—it was planned to end in spring 2012 —the new renewable transport fuel obligation certificate system would bring in the revenue.
Sadly, that was delayed—it was due to be implemented in December 2010, but in the end, it was implemented in December 2011. The new system has therefore had only a few months to bed in. The problem—bluntly—is that the price of the certificates is nothing like what the industry expected. Let me give a couple of quotes from people on the front line. This is from a firm in Feltham:
“I have found biodiesel road sales fall through the floor since the removal of the tax differential. 80% of my biodiesel sales now are for use as heating oil at a considerably reduced margin and overall volume of sales. I have had to lay-off my production manager and am working 7 days a week just to try to keep the business going.”
Edible Oil Direct Ltd of Rye, East Sussex says:
“We had to keep our prices at the pre budget price. Our On-Road customers who most makeup ‘saves money’ as opposed to the ‘green impact’ stated that if the price was increased in line with mineral they will switch back to mineral.”
Convert2Green of Middlewich, Cheshire says:
“"On average Convert2Green…received last year 20p tax differential and 17p Renewable Transport Fuel Certificate…revenue per certificate i.e. 37 pence per litre. With this, the company made an operating profit of £290k. Currently, the best offer we have for RTFCs up to April 2012 is 7 pence per litre and from April 2012 onwards 10 pence per certificate. At two certificates per litre”—
the new system—
“we estimate we will get 9 pence per certificate or 18 pence per litre on average. This is a reduction of 19 pence per litre. We sell approximately 3.75 million litres of road fuel per annum. Our profit reduction is £712,500 per annum or £59k per month. This takes us into significant loss. We will have to consider our future.”
Finally, the firm from which I bought my biodiesel, Uptown Oil, just over the bridge in Southwark, says:
“So far it has had a disastrous effect on our sales of Biodiesel for road use....Down 75%. Before the change we were receiving…around 17 pence…and 20p from the government. Now we receive 7p x 2 RTFC so 14 pence. So having increased our price we are worse off by 13 pence a litre. If we were to increase our price by 13 pence our fuel would be marginally more expensive than fossil fuel and sales would virtually cease.”
Those figures speak for themselves.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to speak on this important issue. Notwithstanding the fact that few Opposition Members are present, I hope that Government Members will recognise the quality of the contributions, if not their weight in numbers. Neither should anyone believe that the fact that there are relatively few Labour Members in the Chamber suggests a lack of interest or concern about this issue, which matters to every one of our constituents.
Two weeks ago, on 20 June, an article in The Daily Telegraph reported the Prime Minister as warning motorists that there was
“no bottomless pit of money”
to fund a fuel duty cut. We were led to believe that this was dampening speculation that the Treasury would be able to afford the £1.5 billion needed to cancel the extra duty for one year. On 24 June, the Transport Secretary, also in an interview in The Daily Telegraph interestingly, indicated that she was not prepared to lobby the Treasury to delay or abandon the 3p increase in fuel duty due this August. She was also reported as saying that her focus was instead on “challenging” petrol firms to cut the cost of fuel at the pumps to reflect the falling cost of oil globally.
We have no problem with that. Many people are concerned that prices at the pump do not change as the oil price drops, although we know that it is difficult for small independent petrol retailers who have to buy at a particular price and might not have the same volume going through as some of the large supermarkets. We have to understand that. However, the Transport Secretary’s comments chimed perfectly with the words of the Economic Secretary in a recent Westminster Hall debate:
“Calls for the August increase to be scrapped raise an important question, because we would need to consider how to replace the £1.5 billion it would cost. That money would need to come from higher taxes or lower spending elsewhere.”—[Official Report, 23 May 2012; Vol. 545, c. 143WH.]
Every time the issue was raised, then, Ministers made it absolutely clear that if they were to do it, they would have to come up with a way of paying for it—stating the obvious, perhaps, but I shall return to that point later, if I have the opportunity.
It might be a cliché to talk about a week being a long time in politics, but a week after the 20 June article, the shadow Chancellor, in an article for The Sun—that newspaper, like FairFuelUK, had campaigned on the issue—called for the August duty increase to be dropped, and made it clear that he wanted it to be dropped at least until next January. Government Members seemed to suggest that this was opportunistic and done on the spur of the moment or for purely political reasons. Nothing could be further from the truth. We have consistently made it clear that action needs to be taken, especially given that times are tough, with higher VAT generally and prices rising faster than wages.
Everyone knows from their constituents—I am sure that Government Members receive the same representations as Labour Members—that filling up the car is now a big drag on family budgets. Indeed, a nurse in my constituency who was not on a high salary told me that filling up her car to get to work cost her so much that it was like having another mortgage.
Charlie Elphicke
The hon. Lady is making heavy weather over who should take the credit and whose idea it was. Is it not great news, first, that prices at the pump are falling, and have been falling in recent weeks, and secondly that the Chancellor has been able to freeze fuel duty?
Cathy Jamieson
I welcome the fact that it will make a difference for constituents, but once again, unfortunately, the way it was done did not suggest a Government who were organised or knew that they were going to make the announcement at that particular time. That is important in the context of how it will be paid for, but I shall come to that.
At the time, we expressed concern that the Chancellor’s Budget plan would mean a 3p hike in fuel duty in just five weeks. Previously, we had called for the Government to cut VAT, which would have knocked 3p a litre off fuel prices, as well as helping hard-pressed household budgets in other ways. We called for the August rise to be dropped because we believed that increasing the fuel duty at this time would have sent the wrong signal to retailers, who would have had to pass every penny on to drivers and put prices up just when they should have been cutting them.
We also made the point that with Britain now in a double-dip recession, the last thing our economy needed was another tax rise adding to the squeeze on household budgets and to the difficulties faced by many small businesses. The Government’s priority should have been to boost the economy, rather than to clobber families, businesses and pensioners just when they were feeling the squeeze the most. That is why we called on the Chancellor to stop the August fuel duty rise, at least until next January. We said that we would put that issue to a vote in Parliament, and that is why we tabled new clause 11.
Mr Jim Cunningham
One question that has never been answered is why the fuel duty decision was not taken in the Budget. Does my hon. Friend agree that the Government rushed into this without thinking about the consequences?
Cathy Jamieson
Indeed; my hon. Friend makes a good point. The way in which the decision was announced, and the aftermath of that announcement, does perhaps suggest that the Government were rushed into this. Also, many Government Back Benchers agreed that the fuel duty increase should be dropped. A number of them made that clear in a good Westminster Hall debate, and others publicly signed up to support the FairFuelUK campaign.
We tried to be helpful. We suspected that Ministers might say—as, indeed, they did—that they could not afford to stop the increase, even though they had found the money to give a tax cut to millionaires. As has been suggested, if there is money available, it ought to go to those whose household budgets are being squeezed the most. It is still astonishing to me that the Government seem intent on punishing families—especially those with children—while at the same time giving a massive tax cut to millionaires. [Interruption.] Government Back Benchers can shake their heads and look at the ceiling, but real people are being affected by this Government’s Budget, and those who are benefiting are the best off.
We suggested some ways of raising the necessary funds. We said that the Government could perhaps consider closing the tax loopholes that the Prime Minister had been condemning, and stopping hundreds of millions of pounds being lost through offshore tax havens. We also suggested that they might want to reverse the pension tax relief boost that they have given to people who are already well off—namely, those earning more than £150,000—and that they might want to use the £500 million underspent in the Olympics budget.
We were not being opportunistic. We understand that difficult decisions have to be made if we are to get the deficit down, and as a responsible Opposition we looked at the figures. We also recognised that, at difficult times in the past, Labour had put up fuel duty. On many occasions, however, we also delayed or cancelled planned fuel duty rises in the light of the circumstances at the time—including at the height of the global financial crisis —because it was the right thing to do to give assistance to the people who needed it most and to ensure that we balanced and grew the economy.
We know—and more and more commentators are agreeing with us—that raising taxes and cutting spending too far and too fast have backfired. Britain has been pushed into a double-dip recession, more people are out of work, and the result is a bigger benefits bill and £150 billion of extra borrowing. That is why we need a fairer and more balanced plan for our economy that will get people back to work, and why we are calling again for the Government to change course and put their efforts into tackling youth unemployment, as well as using the skills of people who have been made redundant, and who have something to give back, to support young people into the jobs market.
We agree with the Government that stopping August’s 3p rise in fuel duty is the right thing to do for British businesses and families. I do not know whether the Prime Minister and the Chancellor have ever had to worry about the cost of filling up their cars in the way that the nurse in my constituency does. She works night shifts, and she does not know whether she will have enough money left at the end of the month to fill up her car so that she can get to work. In response to the hon. Member for Dover (Charlie Elphicke), we are glad that the Government have at last started listening to those who face those difficulties, and we will therefore be supporting the Government tonight on this issue. As I said earlier, however, the manner in which the announcement was made raises a number of questions. It looked as though the issue had brought about the quickest U-turn in politics. The new benchmark for “a long time” in politics is no longer a week but overnight, with changes being made 24 hours after the initial announcement.
Mr Graham Stuart (Beverley and Holderness) (Con)
I am delighted that the hon. Lady has given way. I wonder whether she could bring her speech to a close, so that we might hear from someone who really does have some authority on this subject and who has so ably led the campaign to bring about this change.
Cathy Jamieson
I acknowledge that the hon. Member for Harlow (Robert Halfon), to whom the hon. Gentleman is referring, did a lot of work on the campaign. However, given the earlier suggestions that there was a lack of interest in this subject on the Opposition Benches because of the lack of numbers here tonight, I felt it important to lay out our case fully. I hear what the hon. Gentleman is saying, however, and I will bring my remarks to a conclusion.
I want to ask the Minister some specific questions. Now that the Treasury has had a week or so in which to do the number crunching—if it had not already done so—what areas of departmental underspend have now been identified to ensure that the decision to delay the August 2012 increase in fuel duty will be met in a fiscally neutral way? Will the Minister also tell us which Departments have, through budget exchange, already surrendered an underspend in advance of the end of this financial year, and which Departments are expected to have greater than originally forecast savings in departmental spending in 2012-13?
I do not have time to comment on the points that have been raised about biofuels. Perhaps I shall be able to do so in another debate. In conclusion, however, I should like to refer Members to new clause 9. We shall not be pressing it to a vote this evening, but it calls for a review of the relationship between fuel duty, other taxes charged on road fuels, and the cost of road fuel. It was made clear in the recent Westminster Hall debate that such a review might reflect the views not only of the Opposition but of many Government Members —I see some of them nodding—and I hope that the Government will be good enough to listen to that proposal, and to come forward with a plan to establish such a review.
Robert Halfon
I am grateful to have the opportunity to speak, and I support the Government’s new clause. I hugely welcome the support of my colleagues, particularly that of the hon. Member for Dundee East (Stewart Hosie), who did so much work with FairFuelUK and attended the Westminster Hall debate to which the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) referred.
The case for cheaper petrol is economic, social and moral. It is economic because the AA says that keeping 3p off fuel prices will pump £1.8 million into our economy every single day. That supports high street demand at a time when it is collapsing in Europe. It is social, because fuel duty is a tax on everything, and we should be honest about who is paying it. We talk about “motorists”, but they are not a special interest lobby group. As FairFuelUK and many hon. Members have shown, motorists are everyone: mums driving to school, children on the bus, pensioners hit by inflation. That is why this is an issue of social justice. The economy is important, but it is only half the argument.
The case is moral, too, because as I have set out in other debates, fuel duty is regressive. The Office for National Statistics said last year that it hits the poorest twice as hard as the richest. Fuel prices are now, in essence, a poverty trap, adding to our dole queues. The average motorist in my Harlow constituency pays £1,700 a year to fill up the family car—that is a huge amount and clearly unsustainable.
Opposition Members have spoken of a U-turn, but I would say that it is an L-turn, showing that the Government have listened, and I believe that the Government deserve huge credit for doing so. When I spoke to my constituents at the weekend, no one said that this was a U-turn or wondered when it was first mentioned or by what Minister when and why. Rather, they said thank you to the Government for listening to motorists.
The Chancellor, the Economic Secretary and her predecessor, who is now the Transport Secretary, have done more to cut fuel taxes in two years than the Opposition did in a decade. The 2011 Budget saw Labour’s rise cancelled and fuel duty cut by 1p, while in last year’s autumn statement Labour’s January rise was scrapped after the campaign by FairFuelUK and MPs. Then, last week, the Government delayed Labour’s August rise. This is a radical tax-cutting agenda, targeted in a way that helps the poor. It shows that the Government are on the side of the little guy, supporting aspiration and hard work.
I listened to the “Today” programme interview with the shadow Chancellor, and I say to the hon. Member for Kilmarnock and Loudoun that this is not a decision made in a day. I and many others have been to see Treasury Ministers over many weeks and have led delegations to see relevant Ministers. I knew that the Government were considering this issue for a long time.
Cathy Jamieson
I thank the hon. Gentleman for making those points. If those discussions were going on for that length of time, would he not have expected the Government to say how it was going to be paid for?
Robert Halfon
In the Westminster Hall debate, which the hon. Lady mentioned, the Economic Secretary did not give a view either way on the issue and said that the Government were looking at it. Ministers then came to the House for Treasury questions. What better way of informing us that they were going to stop the August rise?
Returning to the “Today” interview with the shadow Chancellor, he said that Labour had “acted” on petrol prices, but a House of Commons Library note says:
“From 2000 the Labour Government increased road fuel duties...In its 2009 Budget the Labour Government announced that in future years fuel duties should rise by 1p a litre above inflation.”
In the next Budget, they
“proposed that the escalator should apply at least until 2014/15”,
and that
“the increase set for 2010/11 would be phased in over the coming tax year in 3 stages...fuel prices continued to rise strongly, driven by this increase in duty rates”.
That is the record we inherited, and which we are now having to unwind.
Robert Halfon
I apologise, but I cannot, as I have to allow time for the Minister to respond.
There are still problems: fuel is still at around £1.30 a litre, which is unsustainable. As the RAC has said, duty revenues are shrinking every year, as people are driven off the roads. We must stop seeing cars as a cash cow.
I accept that the Government can only do so much. We are always held hostage by the international oil price. As has been noted, however, pump prices are quick to rise, but it feels as though we need a court order to get them down. Evidence shows that from May to August last year, oil prices fell by 5.5%, but petrol and diesel stayed high, falling by just 1.5%.
The Office of Fair Trading has said it will not investigate the UK oil market. I am petitioning the Backbench Business Committee to table a motion so that Parliament can urge the OFT to investigate that market, which clearly looks uncompetitive and unfair to many people.
Finally, there is the problem of local variation in petrol prices, especially in rural areas, but also in towns like Harlow. Harlow residents often write to me, saying that fuel is 5p cheaper only a couple of miles down the road, and there is no explanation for it, other than a lack of competitiveness. Germany, Austria and America have initiated fuel price regulation to limit price rises. We should be doing the same thing.
In conclusion, the Chancellor and the Economic Secretary have given Harlow families and many millions of motorists across the country at least six months’ breathing room, and I welcome that. I urge the Government to look seriously at the long-term cost of fuel and petrol, and see what else they can do. I also urge them to put pressure on the OFT to do a market study. I will vote wholeheartedly for the Government’s new clause, and I urge the House to join me.
Miss Chloe Smith
With just a few minutes remaining, I would like to respond to a few points—in some detail, if I may, in relation to the Government new clause.
I shall take up some of the themes raised by my hon. Friend the Member for Harlow (Robert Halfon), who has indeed campaigned assiduously on this issue to the benefit of his constituents and others, but first let me first tackle some of the points—frankly, mainly about process—raised by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). After our time in Committee, when we interacted very reasonably, I regret to say that the hon. Lady focuses on points that do not matter to constituents not only in Harlow but up and down the country. I know from conversations in my constituency and elsewhere that people soundly welcome the news that fuel duty will be frozen for the 21st month in a row. It is important that the Government are able to listen and respond in that way.
Let me answer the hon. Lady’s specific question—I have done so already, but I am happy to repeat it. The funding for this measure has been found from within existing spending plans. We will set out the details in our autumn statement. I know that my constituents—and, I suspect, hers as well—welcome a Government who take every opportunity, when underspends are found, to make life easier for households and for businesses. That is what we are doing with this measure. I am glad that the hon. Lady welcomes the impact of this measure on households and businesses, and I hope she leads her colleagues, who appear rather thin on the ground, to join us in the Lobby tonight in favour of the Government new clause.
Briefly, new clause 9 calls for, if I am not mistaken, the 29th report for which the Labour party has called during the course of Finance Bill 2012. I do not think such a report is necessary; it rather misses the point, which is that we are taking action to help motorists in businesses and in households. I wonder what the hon. Lady makes of new clause 11 and the costings implicit within it, as cancelling the 3p increase would cost around £1.4 billion next year. If I am not mistaken, that is just as unfunded from Labour’s point of view as is their five-point plan. I have already explained the action this Government are taking to support motorists and how we are going to fund it.
New clause 8 was proposed by my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes). He has campaigned assiduously on this matter, and I recognise that. He and I have spoken about it in meetings in the past. He laid out what his new clause is designed to achieve—to introduce a 10p duty differential from 1 July for biodiesel derived from used cooking oil. This would carry on where the sunset relief of the previous Government left off. That was designed to end on 31 March this year.
Let me make a few brief points to my right hon. Friend. The last Government’s differential was very costly. It cost £80 million in 2010-11, and the amount subsequently rose to £160 million. Most of the supply was imported, as international producers took advantage of the UK’s unlimited relief. Analysis by the Government indicates that if a 10p-per-litre duty differential were introduced, the cost could rise to £90 million in 2013-14. Rather than subsidising importers, that money could be spent on key public services. This Government believe that the renewable transport certificates—
Cathy Jamieson
I beg to move amendment 1, page 2, line 6, leave out paragraph (c).
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following:
Amendment 2, page 2, line 7, leave out subsections (3) to (6).
Amendment 23, page 2, line 36, leave out clause 4.
Cathy Jamieson
The amendment deals with an unfair situation that I mentioned earlier. People who are already earning considerable amounts, millionaires and others receiving the highest levels of pay, will benefit from the Government’s proposal to reduce their tax rate to 45%. We had a good debate on the subject on Second Reading, but were not able to discuss it in Committee. At that time we wanted the Government to reconsider, and not just because millionaires were set to receive something equivalent to a £40,000 per annum tax cut.
Sheila Gilmore
My hon. Friend may be interested to learn something that I myself learnt from a television programme that had no direct connection with economics. It was part of a series about London streets. A banker who was talking about his home in Portland road said that prices there had risen considerably since the taxpayer had bailed out the banks, and that far from suffering from the current financial situation, people seemed to be benefiting.
Madam Deputy Speaker (Dawn Primarolo)
Order. I must inform the hon. Member for Harlow (Robert Halfon) that only one Member should be standing on the Floor of the House at any one time. Welcome to the Opposition Benches, Mr Halfon.
Cathy Jamieson
I was not sure whether the fuel duty debate or the intervention from my hon. Friend the Member for Edinburgh East (Sheila Gilmore) had exercised the power of persuasion that led the hon. Member for Harlow (Robert Halfon) to cross the Floor and spend some time on the Opposition Benches, Madam Deputy Speaker, but I shall now return to the subject of the amendments, which are fairly simple and straightforward.
Amendments 1 and 2 would remove the cut in the top tax rate for people earning more than £150,000 a year, and amendment 23 would prevent the abolition of the age-related allowance that would increase the tax on millions of older people—the so-called granny tax. As we said in the earlier debate, the amendments are based on the straightforward principle that when times are tough and there is less money around, we must ensure that the burden of deficit reduction is fairly shared. That theme of fairness will be a feature of the contributions of Labour Members this evening.
As I said at the outset, however, the Government have chosen to cut taxes for the richest 1% of the population, and that tax cut is worth £40,000 to those who earn more than £1 million a year. At the same time, they are raising the taxes of 4.4 million pensioners by, in some instances, hundreds of pounds a year. Most of those pensioners are living on less than the average taxpayer.
Cathy Jamieson
I hear what the hon. Gentleman says, but many people will be about £511 a year worse off. Many, particularly those on the lowest incomes, will not benefit from the rise in the income tax threshold, and a large proportion will be part-time workers who cannot work for the extra hours that they have been told will enable them to continue to qualify for tax credits.
Charlie Elphicke
Does the hon. Lady not welcome the fact that 2 million will be taken out of tax altogether, and that most basic rate taxpayers will be better off to the tune of, I believe, £220?
Cathy Jamieson
The problem is that the Government are giving with one hand and taking away with another. According to the Institute for Fiscal Studies, many people will be £511 a year worse off. That may not seem a lot of money to one of the millionaires who will benefit from that £40,000, but it will make a big difference to a low-paid worker who is struggling to make ends meet and is feeling the pinch because of rising prices for food and other commodities.
Julie Hilling
Not only have the Government cut the rate of tax at the top—admittedly there is a welcome relief for people near the bottom, although of course those at the very bottom will not benefit at all—but the squeezed middle are being hammered in all directions. Because the threshold at which people will start to pay the higher rate has fallen, more people will be dragged into it, and people are also being affected by the tax credit and child benefit measures.
Cathy Jamieson
That is absolutely true. As I said earlier, that is exactly what happens to those who cannot work for the extra hours that would increase their working time to the 24 hours that would entitle them to maintain their working tax credit. These are people who want to work and pay their way—they want to do the right thing—but for some reason the Government have chosen to clobber them the hardest at the same time as giving millionaires a tax break. That makes no sense to me, although Government Members may say that it is a point of principle.
A commentator—I think that it was Fraser Nelson of The Spectator—recently suggested that the best definition of “Osbornism”, if there can be such a definition, had been provided by Groucho Marx:
“These are my principles. And if you don’t like them—well, I have others.”
I hope that the Government have received the message loud and clear from the Opposition and from the British public. We do not like the principles that are at the heart of the Government’s economic policy. We do not like, or accept, the principle of asking millions to pay more so that millionaires can pay less. That is why we are giving the Government the opportunity to put their well-practised U-turning skills to good use once again.
Mr Jim Cunningham
Should they not go further than that? Should we not deal with the amendment to existing legislation allowing the use of foreign countries as tax havens to avoid paying the debts of the developing countries, which can cost £4 billion a year?
Cathy Jamieson
My hon. Friend has made a good point. We will have an opportunity to discuss that subject in more detail tomorrow.
The Government once made much of their commitment to fiscal responsibility. Deficit reduction was to be their defining mission. Today, however, that task has been made even harder by the failure of their own economic plans, which involve £150 billion of extra borrowing. Their pledge to clear the deficit by the end of this Parliament has been blown to pieces, yet they still find the money for a tax giveaway to the top 1%.
Cathy Jamieson
Perhaps the hon. Gentleman would like to comment on that in his intervention.
Nigel Mills
Am I right in thinking that the impact of amendment 1 would be to take away the 45p rate and leave the highest rate at 40p, thus in effect giving a double tax cut? Can the hon. Lady explain the technicalities of how her amendment works?
Cathy Jamieson
I am a relative newcomer to this place, and I sometimes find its procedures and conventions bemusing. I have learned from my time in the parliamentary process, however, to take advice from the Clerks and others who know about drafting legislation, and that is what we did in respect of these amendments.
The Minister will no doubt protest that the higher rate was not raising any money, but the Government’s attempts at justification have not withstood the scrutiny that has been undertaken. The Office for Budget Responsibility, for example, says that Her Majesty’s Revenue and Customs’ estimates of the reduced tax avoidance that would result from the reduced rate are “highly uncertain”. They are based only on the first year’s yield from the new top rate, which was always expected to be artificially depressed by people’s ability to bring forward their income. No real basis is therefore offered for estimating the revenue-raising potential of the 50p rate. It is for that reason that the Institute for Fiscal Studies said that it is
“too soon to form a robust judgement.”
The claims that new funds would flood into the Treasury as a result of people relaxing or reversing their efforts to avoid paying the top rate have been shown to be notoriously speculative. Again, as the IFS explained,
“you’re first giving out £3bn to well off people who are paying 50p tax...you’re banking on a very, very uncertain amount of people changing their behaviour and paying more tax as a result of the fact that you’re taxing them less...there is a lot of uncertainty, a lot of risk with this estimate.”
A written answer provided by the Exchequer Secretary to my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chief Secretary, on 19 June shows that in 2010-11 more than 73% of people earning over £250,000 were paying more than the top rate, as were more than 80% of people earning between £500,000 and £10 million, implying that many tens of thousands of people were paying the 50p tax rate of last year and are now in line for a very large tax cut if this measure comes into effect.
Cathy Jamieson
I will give way to the hon. Gentleman, if he would like to answer that point.
Charlie Elphicke
I read the impact statement and the detailed IFS discussion of the so-called ‘uncertainty’. Its premise was that the avoidance would end because people would pay themselves out, regardless of how they had parked and deferred the revenue, and would therefore pay the tax at 50p. The problem is that people who have a personal service company—as so many Labour MPs and Labour supporters, including Ken Livingstone, seem to have—can defer for a very long time. They can pay themselves a beneficial loan and almost avoid tax altogether. That has also been a scandal in recent days. It is therefore not true to say people cannot continue deferring.
Cathy Jamieson
I will answer that point in more detail later. I am a little disappointed, however, as I thought the hon. Gentleman was going to make a different point. He seems to be suggesting that only people with a connection to Labour had been avoiding or evading tax, which is, of course, absolutely not the case. I hope Members across the House will ensure that at every stage those who are due to pay their taxes should pay them and should do so willingly and properly.
Sheila Gilmore
What does my hon. Friend think about the fact that in Committee a Conservative MP, the hon. Member for North East Somerset (Jacob Rees-Mogg), said that in his opinion the actions of a certain Ken Livingstone were in fact very sensible?
Cathy Jamieson
I do not wish to return to the lengthy debate that took place in Committee, but we did at various times have discussions about people doing things that were perfectly legal—and which, if they were so advised, might make perfect sense—but the question then arises as to whether they are morally or ethically the right things to do.
Julie Hilling
Was my hon. Friend as surprised as I was when the Government refused to release the tax details of their Front-Bench Members?
Cathy Jamieson
Again, I do not want to focus on such issues at this time. I am sure that Government Front Benchers will want to take responsibility for their own actions.
I now want to address some points that Ministers may make about the Bill’s measures to reduce tax avoidance. The IFS has again been very busy and has made some extremely helpful and interesting points. It says this Budget compared poorly with Labour Budgets, which cut tax avoidance by more than £12 billion between 2002 and 2009—an average of more than £1.3 billion each year. This Budget, however, is estimated to have cut tax avoidance by just £800 million. Closing loopholes to prevent avoidance should be something that every Budget does, and we should not be required to compensate the very rich for the inconvenience.
The Government’s last line of defence will no doubt be that cutting tax for those who already have the most will unlock investment and kick-start economic growth, but that is pure ideology, with no evidence to back it up. The OBR documents accompanying the Budget show a continued pattern of the promised recovery of business investment being postponed. An 8% increase was promised for 2011, but the amount actually fell by 2%. A further 10% increase had been projected for this year, but the forecast is now less than 1%. The role of such investment in driving growth for future years has been significantly written down.
As for growth, again the OBR is clear. It states in box 3.1 on page 46 of its latest economic and fiscal outlook, which is headed “The economic effects of policy measures”, that the only policy with a measurable effect is the cut in corporation tax. It says that that will lead to an increase in GDP of
“0.1 per cent by the end of the forecast period.”
Beyond that, it says in the policy costings document:
“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”
Therefore, according to the best evidence and the advice of independent experts, this is a tax change that will have no discernible impact on our economic prospects and, at a time of tight public finances and tough decisions on deficit reduction, it could cost billions of pounds, making it harder to deal with the deficit and necessitating harsher sacrifices for others in society.
The granny tax is addressed in another of our amendments, which would reverse the Chancellor’s shameful raid on pensioners’ incomes. We must give the Government a chance to make amends for what is essentially a broken promise, and for their shabby attempts to sneak this past Parliament and the public. We call on the Government to cancel this unfair measure for a number of reasons. First, the Government made a commitment as recently as last year that the age-related allowance would be uprated each year of this Parliament in line with the retail prices index. It is there in black and white on page 35 of the 2011 Red Book. Recently it has been reported that the Prime Minister is resistant to suggestions from the Secretary of State for Work and Pensions that he break pre-election promises on benefits for older people. Yet here is a promise made only last year that the Government have consigned to the dustbin. Instead of acknowledging this most disreputable of U-turns, the Chancellor actually sought to conceal it, dressing a crude tax grab up as a “simplification”.
According to the House of Commons Library, by far the majority of those being asked to pay more live on incomes that put them in the bottom half of taxpayers. The crucial point—again, I am sure that Government Members will have heard this—is that having a small personal or occupational pension of just £67 a week, or little more than £3,000 a year, would be enough to put someone in line to lose under this measure. We are talking about the people who did not earn big salaries in their working lifetimes but managed to save so that they could provide for themselves. These are more people doing the right thing; they avoided the means-tested benefits. So yet again I say: why are the Government so keen on policies that penalise the people who are doing the right thing? Why do they penalise the people who are trying to work—the low-paid, part-time workers who lose their tax credits—and the pensioners who have tried to avoid the means-tested benefits and have saved for their retirement and done the right thing?
There is no doubt that pensioners have been hit hard by this Government’s decisions: winter fuel allowance has been cut; pensions have been indexed to a lower measure of inflation; the increase in the state pension age for women has been brought forward; last year’s VAT rise added £275 to the cost faced by an average pensioner couple; and cuts have been made to services such as the NHS, social care and local transport—all the things that matter on a day-to-day basis for pensioners. So pensioners have been hit hard by this Government’s decisions and policies, yet with this Finance Bill the Government are coming back for more. They are not content with all those things and are coming back for more. In total, this measure will raise more than £3 billion pounds over the next five years.
Ian Lavery (Wansbeck) (Lab)
Is it a coincidence that the tax cut to the rich costs £3 billion, which is exactly the same as the tax increase for elderly people in society?
Cathy Jamieson
My hon. Friend makes a very valid point. That must be purely coincidental, because surely no Government would want to take that amount of money from pensioners simply to give it to the richest. Perhaps this Government would though; perhaps we have the same old Tories with the same old policies, yet again. The pensioners who have been hit hardest by this Government’s decisions are seeing them coming back for more. That £3 billion raised over the next five years is the biggest revenue raiser in the whole Budget, and it is coming from the pockets of pensioners with modest incomes. And it is all going towards what? Is it going to paying down the deficit? No. Is it going to help young people get back to work? No. Is it going to help the poorer pensioners? No. Instead, this money is being taken from millions of older people living on modest pensions and redistributed to a few thousand individuals with incomes of more than £150,000 a year. What an absolute disgrace: taking from the pensioners to give to those already on those high earnings.
The Government were said to be surprised by the anger this tax change has aroused. If that is the case—if they were surprised—that shows just how out of touch they are with the values, principles and priorities of the British people. At the time, the response of Age UK was very clear. It said that it was disappointing that the Budget
“offered a tax break of at least £10,000 to the very wealthy while penalising many pensioners on fairly modest incomes, who are already being squeezed”.
We could not have put it better ourselves. The chief executive of Saga said:
“Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.”
The National Pensioners Convention said:
“We have been inundated by pensioners who are disgusted that those on around £11,000 a year will no longer get additional reductions in their tax—whilst those earning £150,000 or more will see their tax bills reduced.
This is seen by many as the last straw...Pensioners feel they are being asked to bail out the super rich—and it’s simply not fair.”
Pensioners are absolutely right to feel that way.
These amendments are a chance for the Government to rectify one of the most blatant injustices in this Budget. It simply cannot be right to ask millions of pensioners on modest incomes to pay more while finding a way for a few thousand millionaires to pay less. It is extremely hard to comprehend how the Government could ever have thought that this was fair, or that it would be acceptable to pensioners and to others who care about pensioners, but now they have an opportunity to put it right, and Members from all parts of the House have a chance to show where they stand. They can support these amendments and do the right thing by the people who did the right thing for themselves.
Charlie Elphicke
It is a pleasure to follow the shadow Minister, who has set out such a partial view from the Labour party’s perspective on this Budget. I think there is a better approach: the more people we take out of tax, the better, as the administration cost is less and there is less hassle for people, particularly the least well-off. I want to see the personal allowance increased to £10,000 as soon as possible. Good progress was made in the last Budget, but the sooner we take the number to £10,000, by far and away the better. Nevertheless, I welcome the fact that most basic rate taxpayers will see an annual cash gain of £220, and I welcome the fact that this Budget takes 2 million people out of tax altogether. That is important, particularly given that we all remember the fiasco over the 10p tax rate. The more we can look after the least well-off and take them out of the tax system, by far and away the better.
I was fascinated by the whole discussion about the 50p rate. We can see from Treasury figures that we are talking about £100 million. That figure is rubbished by the Labour party, which thinks the figure is completely wrong and cites an IFS report. Let me quote the relevant passage from the IFS report, which is where I think the Labour party draws its approach from. The IFS states:
“The worry for the Chancellor is that the estimate that cutting the top rate to 45% will only cost £100 million is particularly uncertain. It assumes a ‘no behaviour change’ cost of £3 billion offset by a behavioural change of £2.9 billion. The first number we know reasonably accurately; the second number is estimated with great uncertainty. Even if we knew the effect of introducing the 50p rate—which we don’t with any precision—responses may not be symmetric. Those who have got a taste for avoiding the 50p rate may continue to avoid the 45p rate (even if they wouldn’t have done so had the 50p rate never existed). The experiment with the 50p rate does not appear to have gone well.”
My first conclusion is that the IFS is saying that making the rate 50p in the first place was a complete and utter disaster. The second issue raised is the uncertainty over behavioural change. On that, I say that we have empirical evidence on what happens when the rate is reduced. I do not know whether everyone recalls this, but we used to have an income tax rate of about 80%. When that was reduced, first to 60%, there were great cries from the Labour party that it would cause a collapse in the revenues, but instead the revenues rose. Why was that? It was because fewer people avoided tax. The Government of the day then reduced the rate to 40p. Again there were great cries from the Labour party that that would let the rich off the hook, but what happened? The revenues rose. Why was that? It was because fewer people were as interested in avoiding tax and they paid up a fair share.
Sheila Gilmore
There are other explanations for the increased tax take during the period in question. One was the general growth in the economy, which generated more income, whereas another was the greater degree of inequalities, which meant that although people were paying a lower rate of tax, the cash take was higher because their income had risen so much. People on very high incomes are still paying a relatively low rate of tax, however. If tax avoidance did not take place previously, why have there been so many examples of it?
Charlie Elphicke
I absolutely agree. The 1980s were a time of great economic expansion; a great time of liberalising markets, sound money and sound economic policies that saw that massive expansion. It was also good that the ’80s saw a massive reduction in the rate of taxation, which spurred on growth.
What happened in the last decade was all built on debt. It was all a bubble and it ended in a massive shambles and a massive bust that has brought our country to its knees. We need growth. How will we get it? By reducing the rate. If we cut the rate, we will increase the take and encourage people to invest in UK plc. That is where we need to go.
Hywel Williams (Arfon) (PC)
Proponents of the Laffer curve, which is what the hon. Gentleman is talking about, often say that paying a higher rate of taxation is a matter of personal choice. Does he agree?
Charlie Elphicke
As I said, I think the Laffer curve is an interesting principle, but I prefer empirical curves and empirical results from experiments. We know from the ’80s that if the rate is cut, it increases the take. For me, the uncertainty is not about whether reducing the rate from 50p to 45p will cost the Exchequer £100 million, but about whether it will add £100 million or £200 million to the Exchequer as fewer people seek to avoid tax.
Jacob Rees-Mogg (North East Somerset) (Con)
Does my hon. Friend think that cutting the rate to 40p or even 35p might have raised even more money? Would not that be a very good thing for the Government to do?
Charlie Elphicke
My hon. Friend tempts me, as ever. He knows that my view is that one should reduce the rate and clamp down heavily on tax avoidance. I respect the fact that he does not always share my views on tackling tax avoidance—I recall that in Committee he said that I was going to paint the cliffs of Dover red, so passionate was I that people should pay their fair share—but I do think that if we have lower, simpler taxes and a simple tax system, it will incentivise investment and encourage more economic growth. The argument for reducing the higher rate of tax, which was only a temporary increase in the first place—the Labour party seems to have forgotten that—was to get more investment in our economy and to encourage the entrepreneurs and wealth creators.
Jonathan Edwards
Does the hon. Gentleman agree that the major problem we have at the moment is that it is socially acceptable to avoid paying tax and that our job as politicians is to create a social climate where it is unacceptable not to pay what you are due?
Charlie Elphicke
I agree. There has been a climate in which it is somehow acceptable to avoid taxation and I made many speeches in Committee about how that culture is unacceptable and needs to change.
It is up to us to send a clear message, as Members of all parties, that tax avoidance is wrong. That was why I intervened on the shadow Minister earlier to say that the message sent by politicians who use personal service companies is deeply corrosive. They should all pay a fair share of taxation and should not try to avoid it in that way, because it sends the wrong message. In all fairness, I say that to members of my own party as much as to Labour members. It is not acceptable in the current age.
Ian Lavery
The hon. Gentleman and I had some good discussions in Committee—I would not call them enjoyable, but they were good. Does he think it is fair to hit the grannies—to hit elderly people—with a £3 billion loss and at the same time to cut taxes for the richest people in the UK?
Charlie Elphicke
I think it is fair to say that we are not cutting taxes yet, because the change would not come through to the next financial year. Hon. Members will correct me if I am wrong, but I believe that that is the case. We must consider the Exchequer numbers, which show that the cost of the cut is very low. I think those numbers are wrong, as they have not taken into account the dynamic effects of the change, which will probably be tax accretive to the Exchequer when all is taken into account.
As for the issue of age-related allowances, the Government’s triple-lock guarantee will mean that the overwhelming majority of older people—in fact, all of them, I think—will be better off and there are no cash losers. Secondly, we are talking about the very richest of the oldest. We are not talking about the oppressed pensioner with no savings but about the richest of the oldest and, as I say, there will be no cash losers. Although it is uncomfortable for many people and has been uncomfortable for all of us, the Government have been doing the right thing by the elderly and have been looking after the least well-off elderly first of all. It is really important to protect them from the difficult economic times we have had.
Sheila Gilmore
I ask the hon. Gentleman to correct the impression he gave. The age-related tax allowance does not go to the very richest pensioners; it is the group in the middle who are being squeezed by the proposal.
Charlie Elphicke
The age-related tax allowances only kick in to benefit those pensioners who have a substantial income, or a more substantial income, in retirement. We are not talking about the very least well-off pensioners who are affected by grinding poverty, but about pensioners who are better off and who have savings and income. As I said, there are no cash losers and they have had a massive benefit from the pensions triple lock.
Ian Lavery
When the hon. Gentleman says that there are no cash losers, does that mean that pensioners will not lose out?
Charlie Elphicke
That is my understanding, yes. Pensioners will not lose out, there will be no cash losers and no pensioners will be worse off in cash terms, As the hon. Gentleman well knows, we can have the argument about future rates of inflation and future rates of RPI, but one must also take into account the other side of the equation, as pensions and benefits for elderly people will rise in the same way and at the same time. Overall, we are not talking about a great difference; we are certainly looking after the least well-off of the elderly, and we have done so very well indeed. That is an important achievement of this Government. Pensioners have been better off under the Government and have been shielded from the austerity measures.
Let us look across the piece at what the Government have done. We have done the right thing to reduce taxation at the top level, which was meant to be temporary, to encourage investment in our economy and to encourage entrepreneurs. The Government need to take further action to deal with people who abuse personal service companies and other tax wheezes and to ensure that we have stronger measures against avoidance by individuals. We have seen enough of it in the newspapers, so I shall not go into individual cases because, as we know, that ends up in a spat about whether one likes Take That or late-night comedy shows. Nevertheless, it is right that we should ensure that individuals cannot play the system and that the law should be changed. It is all very well for the Labour party to take the moral high ground on the issue of tax allowances, but Labour was asleep at the wheel for about a decade and failed to deal with tax avoidance in the individual and corporate spheres. That was completely wrong.
Kevin Brennan (Cardiff West) (Lab)
I would be more prepared to take that from the hon. Gentleman if I had not sat through Finance Bills when we were in government only to see that, time after time, his party tried to stop us closing loopholes that would stop tax avoidance.
Charlie Elphicke
I was not there at those times, I did not sit through those Bills and I cannot comment. I am only a newish Member, elected in the 2010 general election, and I have personally been pretty consistent in making the case that we should not have tax avoidance and should be far more vigorous in tackling tax avoidance by individuals and by corporates. Corporate tax avoidance is particularly important, but it is not on the subject of this debate, so I shall move on quickly before you call me to order, Mr Deputy Speaker.
There is an issue and we need to tackle it. Overall, I want the allowances for the least well-off to be higher so that we take more of them out of tax. I think the Government have taken the right Budget decision on the higher rate numbers and have taken a difficult but principled decision on age-related allowances. The Government have struck the right Budget balance.
Barry Gardiner (Brent North) (Lab)
“No cash losers”: I must say that I think that those are the most disingenuous words that I have heard in this Chamber for a great many years. I remember that in the Budget the Chancellor was not particularly keen to draw the House’s attention to this change.
In the Budget, the Chancellor glossed over the whole issue of the granny tax very quickly indeed, yet only a year before, he came to the Dispatch Box on Budget day and said that he would not hide anything—he would tell it like it was. He would tell the bad with the good. That was just a year before, but in this year’s Budget, he glossed over the granny tax altogether.
“No net losers”—how accurate is that if we look at the total picture for pensioners? For existing pensioners, the age-related allowance will be frozen. It is interesting that the year before, it was not the Chancellor, but the Prime Minister, no less, who promised that the allowance would increase in line with the retail prices index. “No net losers”—those who believed the Prime Minister’s promise to pensioners might be excused for feeling that they were losers under the change. That is what happens. People listen to what the Prime Minister says, and make their financial plans on the basis of it: “The Prime Minister promised me, so of course I can expect to have that.” Well, it did not happen, and I think that is disingenuous.
We heard in this Chamber that there are no net losers, but what about people who are about to become pensioners? Are they net losers? They certainly expected an age-related allowance, but they find that, for them, it is not frozen, but cut. We can stand here and call black white, but it is incumbent on us not to take the public for fools, and I am afraid that the speech from the hon. Member for Dover (Charlie Elphicke) did that. I regret that, because he is not a disingenuous character—he is quite a lovable character in this House—but to say what he did is to treat people with contempt. It is treating them as though they do not understand their own affairs, when it is their own affairs—their own pennies, in many cases—that we are talking about. That hits hard.
Ian Lavery
Is it not a fact that 4.4 million pensioners will lose roughly £83 a year from next year, and that people who turn 65 next year could lose up to £322 a year? That implies that it is disingenuous to suggest that people are not losing out—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. “Disingenuous” is not a word that we should use. I know that it is meant to be an appropriate term, but it is not the sort of parliamentary language that we accept. I am sure that we will not be using it again.
Barry Gardiner
I apologise to you, Mr Deputy Speaker, and to the hon. Member for Dover, if that is unparliamentary language.
Mr Deputy Speaker
Order. In fairness, Mr Gardiner, you said that you did not think that the hon. Member for Dover (Charlie Elphicke)was disingenuous. We were all right up to that point.
Barry Gardiner
Thank you, Mr Deputy Speaker. I absolutely recognise the figures that my hon. Friend the Member for Wansbeck (Ian Lavery) laid before the House, and of course I think that they are accurate. He is right to say that we are talking about a cut—a cut in what people were, with legitimacy, expecting. That is the point. It was legitimate for somebody coming up to pensionable age to expect that their retirement could be based on the figures that they were using. They had a promise from the Prime Minister that that would be the case. That promise was not honoured, and they have experienced real hardship as a result.
I want to focus on one other aspect of the debate: people’s behaviour at different rates of taxation. Let me be clear that I do not, in principle, want a 50p rate of tax to continue in place in perpetuity. Indeed, the Labour party does not want that, as was made very clear when my right hon. Friend the Member for Edinburgh South West (Mr Darling), as Chancellor, introduced the tax before the 2010 election. He made it quite clear that we felt it was necessary in the short term, but would ultimately wish to get rid of it. There is no desire on the Labour Benches to see a 50p tax rate imposed for ever more.
Barry Gardiner
From a more-than-sedentary, almost recumbent position, he says, “Hear, hear! Let’s go to 20%!” Does he really think that there is not a limiting point at which the argument tips? Does he really think that there is not a point below which, instead of more revenue coming into the Exchequer, there is a dramatic loss of revenue? Of course there is.
Jacob Rees-Mogg
I do indeed think that there is a point at which revenue would drop off, if rates got low, and the Laffer curve shows such a point. However, as a general point, I think that the lower the rates are, consistent with raising the revenue that is needed, the better, and that we have not tested the argument properly to see how low we could go.
Barry Gardiner
Well, there we are: the Great British public are being treated to an experiment. “We want to test how far the Laffer curve theory can go.” Is that really the Government’s policy? Is it really their policy to see how low they can get tax before the economy collapses?
Jacob Rees-Mogg
I am grateful to the hon. Gentleman for giving way once again. Sadly, I am not Her Majesty’s Government. He must address his comments to those on the Treasury Bench, rather than to me.
Barry Gardiner
I am sure that it is only a matter of time. In so far as the hon. Gentleman seeks to speak for his party—
Barry Gardiner
I do not want to see dissent break out on the Government Benches. No fighting amongst yourselves, please, gentlemen. These are serious matters. They cannot be treated as an experiment because people suffer.
Charlie Elphicke
I thank the hon. Gentleman for giving way. He is a courteous and jolly fellow. Let me help him by digging him out of the hole that he is rapidly getting himself into in his exchanges with my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). The point that we are making is simple: reducing the top rate will not change the income and revenue numbers significantly, but it sends a message to wealth creators that their investment is encouraged and will help to grow the economy.
Barry Gardiner
The hon. Gentleman has already said once in the debate that he does not believe the Treasury’s figures. He has now reinforced that. The Treasury has made the calculations. He can choose to say, on a personal level, “I think the Red Book is a load of tosh,” but he cannot say that that is the Government’s position. The Government’s position is that the measure will cost £3 billion a year. [Hon. Members: “No, it is not.”] The Government cannot get out of this one. They say that it will cost money. That money will be taken away from some of the poorest people in our society to pay for it.
That is what people find so distasteful about the way the Government are behaving. They are taking away from some of the poorest in our society, yet feel that it is so important to send that signal out to some of the wealthiest. The people who are being excoriated in the public conversations around the country for what they have done and what they continue to do to our economy—those are the people who will benefit, and it is the poor in our constituencies who will suffer.
Sheila Gilmore
Did my hon. Friend spot the illogicality in the position of the hon. Member for Dover (Charlie Elphicke), who made an impassioned claim to be a scourge of tax avoiders, but is in effect endorsing tax avoidance by arguing that we have to reduce the rate of tax because so many people are trying to avoid it? Would it not be better to look at ways of preventing people from avoiding tax?
Barry Gardiner
My hon. Friend, yet again, makes an excellent point. There is an implicit acceptance that people will try to avoid tax, and that therefore it is better to reduce the level of taxation so that there is not the same level of avoidance.
Most of my constituents listening to this debate and to the debate that has been going on since the Budget think the Government do not understand what people are going through, what they are feeling and just how difficult it is for some of them to make ends meet. They do not understand that precisely because of the sort of signals the hon. Member for Dover just mentioned. The Government consider it more important to make those signals to the wealthy. They think it is more important to focus on what they understand about their involvement in society, and they do not give the same attention to getting those messages to the poor in society.
What the Government have done in the Budget is to say, “If you are poor, we know that the best thing for you is to cut your benefits to make sure that you work harder, and if you are rich, we know that the best thing for you is to cut your tax so that you work harder.” People look at that and say, “This doesn’t make sense. It’s one law for the rich and another law for the poor.”
Charlie Elphicke
Yes, we do understand, and I in particular understand because my constituency is one of the most deprived in the south-east. The economic numbers are much more like those of a constituency much further to the north of England than the hon. Gentleman’s constituency. We do understand, and we also understand that wages have stagnated since about 2004, on the hon. Gentleman’s Government’s watch. This is not a new problem. We understand that, which is why we need to reduce the top rate of tax to encourage the job creators to create the jobs and the money that will give my constituents more prosperity.
Barry Gardiner
The hon. Gentleman talks about the way in which wages have broadly stagnated. We are now seeing wages going down and jobs being lost, and we are back in recession. He should look at the promises of his Government in that first Budget. The promises, commitments and assertions were that the measures in it would pull us out of the problems that we were in and get the economy back on track. They would deliver growth and prosperity, but they have not. He will remember, because he is an honest fellow, to use his word, that at the time, on the Opposition Benches, people were saying, “No, this will lead to a double-dip recession.” All those on the Government Benches told us in unison that we were wrong and that the Budget would pull us through the problems.
The electorate look at that, see the analysis, see what steps were taken and ask, “Who was right?” They know, because we are back in double-dip recession, that the Government got it wrong. We are at a point where there is £150 billion extra borrowing, the largest single increase year on year in the UK’s history.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I know the hon. Gentleman is painting the big picture, but we need to come back to the relevance of income tax. We have discussed personal allowances. I know he will come back to the point.
Barry Gardiner
I accept your ruling, of course, Mr Deputy Speaker, and you are right. We have strayed wide of the initial focus of the amendment. It was not my intention. All I can say in mitigation is that I was led down the path by the interventions that I took.
Mr Robert Syms (Poole) (Con)
I welcome this debate because the decisions that we take on tax rates are critical. We have had a slightly more general debate than I expected. Opposition Front Benchers particularly presume that the Government can somehow control events. However, there is a big wide world out there and anybody watching television or watching what had happened in the eurozone knows that there is a limit to what any Government can do in the present circumstances, when confidence is low, countries are being bailed out and businesses, even those with money, are not investing as rapidly as one would like. All the Government can do within the global context is try to make the best decisions they can on the information that they have. We have a plan, which I think is a good plan, and by and large we are sticking to it. The deficit has come down by 25%. That is a start and we need to do more.
On the subject of income tax rates, I think we tax people at far too small a salary. We do not increase incentives to work. A key point of the coalition programme is to up the basic allowances to make work pay. We all know—I am sure even the hon. Member for Brent North (Barry Gardiner) knows—that the benefits system can be a big disincentive to people taking jobs. People act rationally, and if they are not going to be much better off or if they are going to lose money, they will not take work. A reform of benefits is needed, with the universal credit coming in, and we have to up the income tax allowances for those at a lower pay level in order to increase incentives for people to take jobs. Hopefully that will get more people into work over a period of time.
All the evidence suggests that work is good for people. It is better for their health, including their mental health, and it is a better way to bring up a family, and of course those in work have a better chance of gaining skills, reskilling and getting on in life. That is the key point about what the coalition Government are trying to do. Therefore, I commend them for what they have done to take many millions of people out of income tax and hope that they continue to make progress in that area so that incentives to work increase over the next few years.
Ian Lavery
The hon. Gentleman is very kind to give way. Does he agree with hitting pensioners hard with the £3 billion tax increase?
Mr Syms
About a quarter of my constituents are pensioners, but I have received only three or four e-mails on this subject. It is not a major issue in Poole, where most of my constituents pay tax. I do not think that it is the big issue that Opposition Members claim it is. It depends on how fast the basic allowance for all taxpayers overtakes the age-related allowance, which I presume is logically what the Government want it to do. Of course, it also depends on the level of inflation. If we freeze the allowance and have higher inflation, it will be eroded more quickly than if we have lower inflation. Thankfully, one of the good points about the past few months is that inflation is starting to crash back down towards 2%, and the sooner we reach that rate, the better.
If we look at what the Government have promised in their triple lock for pensioners—the increase in the basic state pension of over 5%—along with the winter fuel allowance, which we continue to pay, and free bus travel, we will see that their priority has been to support pensioners. We have been criticised over the reduction in the winter fuel allowance, but I point out that the previous Government put it up for the election year but made no budget provision for the year after, and we are faced with some very difficult problems. Unfortunately, it is an expensive item and the Government have been unable to keep it at the level it was for one year, but on the whole we have kept it at the level it was for most years at the end of the previous Government’s time in office, and that is a boon to many pensioners. I think that what the Government are doing on the age-related allowance is probably the right thing to do.
Ian Lavery
I am surprised to hear that only three or four of the hon. Gentleman’s constituents have contacted him on that point—I wish him good luck on that. Various figures have been bandied about and I wonder whether he disputes them. It has been suggested that 4.4 million pensioners will lose up to £83 a year and those turning 65 next year could lose up to £322. Does he support that?
Mr Syms
I am not sure that that is a massive loss of income. The most recent issue we debated was the 3p cut on fuel, which will make more of a difference to pensioners in my constituency than this minor change in tax allowances. I think that the Government’s policy towards pensioners is fine.
Let me turn to the top rate of tax. We all know that there is a lot of politics in this. The rate was 40p under the previous Government, except for the last 37 days they were in office, so the 50p rate was one of the wonderful inheritances from them. Clearly, if we want to stop people looking to avoid paying tax, we have to keep a competitive rate. At 40p we have a rate that was competitive with many western European countries, but at 50p we do not. If we have a country without exchange controls, a very mobile population, as we do, and people with highly tradable skills, there is a danger that if we start to put up the rates we will lose revenue and people will go abroad. As my hon. Friend the Member for Dover (Charlie Elphicke) said, having had a 50p rate which meant people started looking at how to avoid taxation, that might stay in the system for some time. I welcome what the Government have done by reducing the higher tax rate to 45p. I think that it is a pity they delayed it, because I suspect that the impact will be to reduce income tax take for the current year, but when the rate drops to 45p for the year after, we will see an increase in the income tax yield.
It is important to give a message. I was in this House when the previous Government put up income tax. In one of his last speeches from the Government Back Benches, Stephen Byers said that he very much regretted that the Labour party had decided to do that. If all the evidence suggests that that has not raised very much this year, it seems to me that it is being done for ideological reasons, rather than practical, economic ones. If nothing else we ought to be practical in how we do things. Therefore, the Government’s reducing the top rate, as a start, is the right thing to do which will have a beneficial effect in the long term. But let us not forget that the allowances for the lower paid have gone up this year. The top rate of tax will come down next year, by which time we will have had another Budget in which I hope the Government will have made more progress on assisting some of those on lower pay and taking more people out of the tax net.
The one thing that can be said about the Government is that their thinking is joined up. We have welfare reform, we are pushing up the tax allowances to increase work incentives, and we are dealing with a whole range of tax rates, including trying to make corporation tax more competitive, and I think that that will make us a much more competitive country in the world. We look like an island of stability, certainly compared with the eurozone countries. Let us hope that they sort out their problems so that we can start selling them our excellent goods, but let us face the fact that we live in a competitive world and unless our taxes are competitive we will not be able to generate the wealth to pay for all the things we want: health, schools, foreign aid, defence and all the things we need to do. I think that the Government are on the right track. Clearly, it is a very bumpy economic environment, certainly rather bumpier than we might have thought it would be when we came into office, but provided we have leadership and vision, we will get through.
Jonathan Edwards
It is a pleasure to contribute to the debate. It has been very interesting listening to the debate on income tax for the 2013-14 financial year. Hon. Members already know the position of the Plaid-SNP-Green group; we were among the handful of Members who voted against the inclusion of the new 45% additional rate in the founding principles of the Bill at the conclusion of the Budget debate earlier this year. Indeed, the official Opposition seemed to miss that debate, with the exception of two Labour Members, the hon. Members for Newport West (Paul Flynn) and for Bolsover (Mr Skinner). I also tabled amendments in Committee, which were supported at the time by the official Opposition, including some that they have chosen to table for this evening’s debate, which naturally I will support if they decide to push them to a vote later.
Much of the debate on Second Reading and in Committee focused on differing interpretations of, and often selective quotations from, a series of reports. Hon. Members attempted to argue that their party’s interpretation of the statistics was most valid, and we heard some of that again this evening. They were essentially making economic arguments about taxation—about the Government’s claim that the loss of tax revenue from shifting the 50% additional tax rate to 45% would be compensated for by the stimulus it would provide to the wider economy, and that given the amount of forestalling and income shifting that the 50% rate has apparently generated, we would be better off in future and, ultimately, more tax would be paid. That is the thrust of the argument.
I simply do not buy the idea that a tax cut will make those avoiding the 50% rate choose to contribute to society by paying at the 45% rate. What the Treasury should be doing, rather than giving a tax cut to those earning in excess of £3,000 a week, which is almost twice the average income in two months for most of my constituents, is closing down all the clearly aggressive tax avoidance schemes, some of which have been highlighted in recent weeks, and ending the tax havens that provide a nice bolthole for those who wish to hide their income.
For my party, however, the issue of taxation is one of principle. We believe that people should be proud to pay taxes and contribute to society. It should not be a game in which those who can afford to pay an accountant pay less and then consider it a triumph or a success. As I said during a debate in Committee, the Scandinavian model of taxation and social security is in my party’s DNA. Some might say that that is the difference between ourselves and the Labour party, which announced the introduction of the additional rate as a temporary measure, bringing it in literally weeks before the party left government. Where we believe that the additional rate is part and parcel of contributions to society, Labour remains unclear how long the now official Opposition intended to continue the additional rate.
This tax cut for the mega-rich leaves a bitter taste in the mouth. Public sector workers in my constituency face pension changes, meaning that they have to pay more in, that they get less out and that they work longer—that is, those who still have their jobs after spending several years with pay freezes and the threat of regional pay dangling over them. Living standards for private sector workers in my constituency are being squeezed, and many families struggling to make ends meet are being stigmatised by the Government, while the disabled and the vulnerable face tribunals to decide whether their pain is real. It is not acceptable that we are in a society which tells those at the bottom that they have a culture of entitlement, while those at the top get huge and unnecessary tax cuts. Why do we think that we can cut the poor’s income to make them work harder, but incentivise the rich through tax cuts? That is perverse thinking.
We support the aim of amendment 3, which would give those public sector workers earning less than £21,000 who have had their pay frozen a £250 tax rebate. They deserve it, as do many private sector workers who have lost out because of the Treasury’s austerity economics.
We support also amendment 1, tabled by the official Opposition, despite its effect of wiping out the additional rate altogether for 2013-14. Given their failure to vote on the inclusion of the 2013-14 rate in the Bill at the time of the Budget, we recognise that their intent is to show their belated support for maintaining current income tax rates. If the amendment is successful, we expect the Government to reinstate the top rate at 50%.
With last week’s figures confirming that the double-dip recession is deeper than first thought, and with the cuts now beginning to feed their way through the system, giving a tax cut to the mega-rich is a funny way of showing that we are all in this together.
Nigel Mills
It is a pleasure to follow the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I shall make a few brief remarks on various subjects in the Bill, starting with the granny tax, which I also spoke about on either Second Reading or during the Budget debate—we seem to have been debating it for a long time, particularly those of us who have done a few weeks in Committee on some of these topics.
I was one of those who heard the Budget, heard the Chancellor briefly mention what became known as the granny tax and did realise what it was likely to mean. I was not one of those, like the hon. Member for Leeds West (Rachel Reeves), who claimed that the Chancellor had hidden it in his speech; it was clearly there.
Those of us who, in our short time as Members, have argued that we need to simplify our tax regime face a problem when one way suggested by the Office of Tax Simplification is this very idea. To be fair to the OTS, it did not envisage its idea being introduced quite so quickly. I suspect that generally it would be quite keen to have its ideas legislated on in a matter of weeks, but on this one it intended there to be further consultation and deliberation. It was, nevertheless, one idea that it came up with as a way of removing one of the regime’s complexities, whereby an additional allowance has to be claimed, the policy justification for which was determined a long time ago. It is perfectly reasonable for the Government to revisit it and to wonder whether, of all the groups in society who need such extra help, pensioners earning more than the state pension are one of them.
Those people who have done the right thing and saved, and who now have a little private pension on top of their state pension, are generally the ones in whom we want to encourage pension-saving behaviour, but the basic personal allowance is rapidly heading towards the £10,000 target in the coalition agreement, and the benefit of that higher personal allowance has to be clawed back. We are seeing a complexity with a reducing benefit, and we are perfectly entitled to want to understand the policy justification for it when we spend the limited amount of money that we have. It is not, therefore, an unreasonable or illogical proposal for the Government to bring forward; there was a year’s notice, and there is a chance for consultation to consider its impact.
Ian Lavery
The hon. Gentleman recognises that we cannot please everybody, but does he agree that cutting taxes for the rich pleases the rich, while the ones who will be less pleased are pensioners, having £83 a week taken off them, and people who turn 65 next year, losing £322?
Nigel Mills
I am sure that people who benefit from a tax cut will be pleased and those who lose out from a tax change will not be, so I guess I can agree with most of that, but it will be interesting to see in the Lobby later whether the hon. Gentleman votes for his party’s amendment, which would mean the House passing the Bill after abolishing the 45p rate completely and reducing it to a 40p rate.
It is all right saying, “Perhaps we can do that and perhaps the Government will do something different in future,” but we are legislating in Parliament, and if we were to vote for the amendment and remove the 45p rate, it would not actually exist, and I am not sure that those Members who would rather the provision read “50p” than “45p” could in all conscience vote for that. I clearly will not vote for the amendment, because it would be the wrong measure at this time; I will vote for there to be a 45p rate in next year’s tax regime.
When I debate these things, I could take a narrow constituency view. I suspect that very few of my constituents pay the 50p tax rate, as I have many pensioners who are not that well-off and will be adversely impacted by the granny tax, so from a political and personal view I could happily oppose the tax cut and the granny tax, too, but we have to get our economy into sensible working order.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
The hon. Gentleman talks about the over-65s, saying that this is all very fair and things will balance out over time. Does he not understand that someone over 65 is likely to be on a fixed income and £323 is therefore considerably more important, whereas if someone earns higher amounts and is taxed at 50%, 45%, 40% or anything in between, whatever it may be, they have the capacity to earn more? Once they retire, it is the fixed nature of their income that makes the Chancellor’s decision so invidious.
Nigel Mills
I am grateful for the intervention, and of course understand that pensioners living off their savings have suffered terribly during the recession, starting with the raid on private pensions when Labour first came into office, all the way through to the terrible impact of the loss of interest income on savings. I totally accept that that is clearly an issue, but to return to the 45p or 50p rates we ought to be completely accurate. With the 2p national insurance charge, which comes in when someone normally starts paying NI, and which will remain, those rates are 52p or 47p. We should be careful on a matter of principle. I am not sure how many people out there would want to work if the money for more than half an hour of every hour that they worked was not for them but for the taxman. That is what that effective 52p rate does; it means that a person is probably not working for themselves for 31 minutes of every hour.
I am not sure that that is a real incentive for those who have a lot of money. They do not need to carry on working; they could retire to their yachts and sail around the Mediterranean. We want them to come back, invest in another business, have another go and employ some more people. We want that investment to come into the country. If a person is keeping less than half the money they earn, there is a real psychological impact. That is why it is right to bring the rate down.
We are having a long political debate about what was meant to be a temporary tax. The previous Government never had it in place when they were in power; it was set up as a political stunt for the election. It was not expected to raise significant amounts of money. It was there not for an economic purpose, but a political one. It was right for us to say that at a time when we need to get activity going and to attract investment into the country, we need to encourage those who have a choice whether they carry on working and generating wealth or not, to carry on working.
It is right for us to bring the tax rate down. I would have thought that it was better just to do it rather than wait a year, but there are many good economic reasons why we had to wait for that length of time. The fact is that if tax rates are too high, people get much more keen on avoiding tax.
When I was relatively new in my accountancy career, the then Chancellor in effect reduced the capital gains tax rate to 10% tax on the sale of a business asset. The place where I worked then had made lots of money advising people on how to reduce their capital gains tax liabilities when they retired from their businesses. When the rate went down at a stroke overnight from 40% to 10%, that meant that no one was interested in that kind of tax planning; they were perfectly happy to pay what they thought was a reasonable tax bill. But the reverse effect also applies—if the rates go up to a level that people are not happy to pay, they will start to use ingenious methods to avoid the taxes.
Gloria De Piero (Ashfield) (Lab)
The hon. Gentleman is speaking as though his party had always supported the abolition of the 50p tax. However, a couple of months before the Budget, the former Energy Secretary, the right hon. Member for Eastleigh (Chris Huhne), was saying that the 50p tax was here to stay. He told the BBC:
“I think we’ve won that argument.”
What happened?
Nigel Mills
I guess it is not for me to explain the right hon. Gentleman’s comments. He was clearly misinformed.
However, we have seen that drift towards tax avoidance. I was saying that there was an easy way to avoid paying UK tax—not to be working in the UK at all. People can choose whether to come here or stay here; no complicated avoidance is necessary if they are not here at all. We want to attract the most skilled and able here to earn their money.
My hon. Friend the Member for Dover (Charlie Elphicke) was generous in not having a go at some of the high-profile individuals who have been caught avoiding their taxes. People earning very good livings in this country should pay the tax that Parliament tells them they have to pay—there is no excuse for using complicated routes through Isle of Man or Channel Islands trusts. If they are taking money from hard-working people who go to their concerts, comedy shows or football matches, it is outrageous for them to route it through the Isle of Man. I am not sure that I would choose to listen to their concerts or their jokes.
We should send a strong message that such behaviour is unacceptable. If those people are now feeling a little guilty and think that they have made a terrible error of judgment, it is quite simple—they can re-file their tax returns from recent years, declare all that income and pay tax on it. As Gary Barlow might think, “It only takes a minute” to do that—[Interruption.] We had to get some in. Then that money would be “Back for good”, wouldn’t it? It would certainly be one of our “Greatest day”s. I only “Pray” that he would do that—it would certainly be magic if he did. Those are all the Take That songs that I can remember, so I will not carry on.
The important point is that if we push tax rates up too high, revenues will start to go down and people will start engaging in the behaviour we want to crack down on. The Government are cracking down on it and doing everything they can, but there is a limit to how far ahead they can stay. New things will always come along. Fundamentally, we cannot stop people leaving the country.
Labour Members generally think that Conservative Members cite the Laffer curve; we have heard mention of calculations on fag packets and so on. The theory that revenue falls if tax rates are too high is a lot older than the Laffer curve. I had the pleasure of studying Mr Ibn Khaldun, a Muslim philosopher from the 14th century, who wrote an extensive commentary on what happens with tax rates. When they start low, they generate lots of economic activity. Gradually the Government like the idea of spending money, taxes go up and then the economy fails. If our debate was not programmed tonight, I could read out pages of those quotes, to prove that Mr Laffer’s theories are not new, but I shall resist. The theory is not new; it is an entirely understandable and accurate theory: if tax rates are too high, we end up losing revenue.
Another amendment under discussion would give a £250 tax cut to a public sector worker who had not had their £250 pay rise for the last two years. I am not convinced by that. It would be very generous; presumably, if they had had the pay rise, they would have to have paid tax on it, so they would not have had the full benefit of the £250. The idea is probably tempting, but I will not be able to vote for it.
Meg Hillier
I do not want to broaden the debate too much, but I say at the outset that we should get back to the basics. Why is it important that people pay tax? I strongly believe that it is important for people to have a stake in society and that paying tax is a big part of that. I may be out of step with a number of Members—including, possibly, my party’s Front Benchers—in believing that the rush to increase the personal allowance and take lots of people out of tax is not necessarily, on its own, a good move. Taking people out of the tax system altogether denies them responsibility for a number of issues to do with public spending and takes away the accountability that we, as elected Members, should have in helping to set those policies.
Nigel Mills
I agree with the hon. Lady, but does she note that we are not taking people out of national insurance? All those people are still paying the tax most closely associated with the main public spending items.
Meg Hillier
It is interesting that the hon. Gentleman has managed to conflate tax and national insurance; perhaps he has given away what the Government’s thinking really is.
I am a member of the Public Accounts Committee which has been looking closely at the sometimes interesting tax arrangements of some individuals. We recently went on a study visit and discussed some of the international issues to do with how tax is dealt with. The UK’s is a complicated system and we are not alone in that. This means that, in the corporate world, corporate lawyers can run rings around HMRC and that highly paid lawyers can find ways for some high-worth individuals to work in a more tax-efficient way, to put it politely, and actively to avoid tax—sometimes worse. To a degree, New Zealand has simplified its tax system, although it is difficult to know from a distance how successful that is for people.
If the increase in allowance were genuinely linked to a simplification of the system, I would be much more supportive of it, but it has the feeling of being rather piecemeal, a bit joined together. It is like a dodgy second-hand car—the front bit is welded to the back bit. The coalition feels a bit like that; sometimes I am not entirely sure whether the Deputy Prime Minister or the Prime Minister is at the front or back at any particular time. There is a danger that we are seeing the increase in the personal allowance as a sticking plaster for one element of the coalition, while the cut in the 50p tax rate, which, as my hon. Friend the Member for Ashfield (Gloria De Piero) pointed out, was opposed by the Liberal Democrat half of the coalition—she quoted the former Energy Secretary—is a sop to the other side. We almost have two unjoined-up bits of the system.The hon. Member for Amber Valley (Nigel Mills) talked about tax simplification. If that is the mission, then let us see the overall plan for it, but all we hear about is the increase in personal allowances. I do not sense that there is a big idea, and that is a real worry.
Let me turn to the 50p tax rate cut. Some 300,000 taxpayers will gain £10,000 a year as a result of that policy. These are individuals who earn more than £150,000 a year. The Treasury says that it should do this because £2.9 billion will supposedly come back from the people who are currently avoiding tax. I am not sure that that stacks up. Government Members try to suggest that these earners are all wealth creators, but we need to look a bit closer to home in the public sector. Perhaps the Government of whom I was a part, and the party that I represent, should have been a bit sharper in this regard. Public sector salaries have increased exponentially over the past decade. With the best will in the world, and much as I admire many of the people in my own constituency, and those I have met over the years, who work in the public sector because they genuinely believe in public service, they are not wealth creators, and I do not think they would consider themselves to be so. They may be safeguarding the health of my constituents or enabling the council to deliver excellent services; there are myriad ways that they can help, but wealth creation is not one of them.
Ian Lavery
I totally agree with my hon. Friend. Ten thousand pounds a year equates to £833 a month, and it is more than hundreds of thousands of people in my constituency make on an annual basis.
Meg Hillier
Absolutely. If we have a duty in this House, it is constantly to remind ourselves of what life is like for our constituents. We can get lulled into a sense of safety and snugness on these green Benches and enjoy intellectual repartee and debate, but we are here to represent the people who elected us. It is incumbent on us to remember that many people are living on £10,000 a year or less, and it is important that we reflect their concerns in this House. For me, that is a burning issue. I want my constituents to earn more than £10,000 a year, but they will not be able to do so unless we get the economy moving.
Locally, we have real poverty and high unemployment. Youth unemployment has risen to about a quarter of the total number of my constituents aged under 24, as roughly a third of them are, and we are seeing an increase in over-50s unemployment. These are the people who are not gaining but seeing those earning over £150,000 gain considerably. There is a lot that we need to do.
We must look at the unfairness of the cut overall and at the needs of the people who are earning less. I do not think that the money that is supposed to come back will be used to reverse the cuts to further education, to make the banks lend or restore the overdraft facilities of small businesses in my area, or to restore the education maintenance allowance, which had a big impact in helping those in my constituency who wanted to skill themselves up to earn more money—the end of EMA put those people on the back foot. Those matters all impact on the lives of people in Hackney South and Shoreditch today.
A year ago, the Chancellor promised that the measures in the Budget, some of which we are debating today, would boost the economy. What have we seen in the past year? The economy has not just stalled, but shrunk. Again, who suffers the most? It is not the people who have gained from the reduction in the 50p rate of tax, but ordinary men and women up and down the country who are working hard and paying tax. The Chancellor has also had to borrow £150 billion more than planned.
I have mentioned the freezing of the personal allowance overall, but the decision to take away the pensioner element has the biggest impact on those who earn between £10,000 and £29,000 a year. There are not many pensioners in my constituency who earn more than that, although it does have an interesting mix. Being on the edge of a city, there are people of greater wealth in my constituency, but they are not many in number.
Somebody who is due to retire in 2013-14 aged 65 will lose £323 a year, which other Members have talked about at length. It is worth reiterating the point that I made to the hon. Member for Amber Valley: somebody who is on a fixed income or who will be on a fixed income in a year’s time will have to adjust their affairs overall, including their savings if they are lucky enough to have any. That £323 may not seem much to us on our comfortable salaries as Members of Parliament, but for people on low-level fixed incomes of just above the amount where they would get help other than the basic state pension, that will have a real impact on their household income. I reiterate that we must think about the message that that sends out: pensioners are the victims; those earning £150,000 a year or more are the victors. That is unfair.
Graeme Morrice (Livingston) (Lab)
Thank you, Mr Deputy Speaker, for giving me the opportunity to contribute to this debate in support of the Labour Opposition amendments.
I was a member of the Finance Bill Committee and attended each of the 18 sittings over the past several weeks; obviously I must have been bad in a former life. It was clear to me that the more the Bill was scrutinised in Committee, the more it was revealed that the Bill, and the Budget that it will enshrine into statute, is the omnishambles that many commentators have described it as.
Once again, the Tories are showing their true colours. It was a classic Tory Budget, with millions paying more so that millionaires can pay less. That is evidenced by the fact that, as we have heard throughout the debate, 14,000 millionaires will receive a tax cut of more than £40,000 a year, while 4.4 million pensioners will lose an average of £83 a year. It is a classic Tory Budget, but with the difference that it was possible only thanks to the support of the Liberal Democrats—the Lib Dems who continued publicly to oppose any change to the 50p rate of income tax immediately prior to the Budget statement but then voted for it; the Lib Dems who, before the last election, repeatedly stated their opposition to immediate public spending cuts, only to support a Budget reduction of more than £6 billion within two weeks of forming the coalition; and, lest we forget, the Lib Dems who promised not to raise VAT and then raised it.
The 50p rate raised about £1 billion in its first year and could have raised £3 billion a year over the lifetime of this Parliament and beyond. Its continuation could have been used to cut fuel duty, not just freeze it, as we agreed in the previous debate. Many of my constituents have written to me about that. It could have been used to reverse the Government’s damaging cuts to tax credits or help reduce the deficit. Instead, the Chancellor chose to give the richest 1% of earners a huge payout. People on middle and low incomes are already being squeezed by rising fuel, energy and food prices. Now, their tax credits and child benefit are being cut. Yet again, the Government have made the wrong choice and proved how totally out of touch they are.
The aspect of the Budget that has undoubtedly caused the most anger among my constituents is the decision to freeze the personal allowance for pensioners, which will help subsidise the Chancellor’s bumper tax cut for the rich. That was buried in the Budget’s small print, and the Government tried to make out that it was a tidying-up exercise. However, nobody was fooled by that. It was clear that it was actually a £3 billion tax raid on pensioners. No wonder that was the only aspect of the Budget that was not leaked in advance.
How will the Chancellor’s tough talk about cracking down on tax evasion and aggressive tax avoidance, which he says is “morally repugnant”, be put into action if the resources of Her Majesty’s Revenue and Customs continue to be cut? Some 10,000 jobs will go by 2015, including 240 processing posts at Pentland House in my constituency.
Labour’s five-point plan for growth offers an alternative vision. If the Government followed our advice and implemented a £2 billion tax on bank bonuses to fund 100,000 jobs for young people, we would begin to see some progress on tackling the scourge of youth unemployment. Instead, millions are left to pay for a Budget for millionaires—a classic Tory Budget, but this time supported by the discredited Liberal Democrats.
Thomas Docherty (Dunfermline and West Fife) (Lab)
I should, in the interests of probity, place on record the fact that my wife works for Age Scotland. I declare that interest.
The contrast between the two sums of money that we are debating has been mentioned several times. There is the £3 billion of tax cuts for millionaires’ row, versus the £3 billion by which our pensioners will be worse off as a result of the punitive measures employed by Liberal Democrat and Conservative Members. Personal allowances for the over-65s, our golden generation, are to be cut in real terms in the coming year. As several hon. Members have mentioned, that will mean that a pensioner who turns 65 in the next year will be up to £323 a year worse off. In these hard-pressed times, with the rising cost of living, rising energy and water prices and the flatlining of their savings, they can ill afford to pay that tax. It is worth contrasting their situation with that of the people who will be the greatest beneficiaries of the Government’s decisions.
I know that many Members are fans of a popular US television programme called “The West Wing”. For hon. Members who do not own a television, let me explain that it is about a wonderful Democrat politician, whom Members of all parties might aspire to be, who is pitted against a mad, right-wing Republican Congress that pursues more and more absurd policies. Even “The West Wing” could not countenance the idea that in a time of austerity, when deficits have to be reduced, a right-wing party—or the two right-wing Government parties—would call for tax cuts for the very wealthiest. Even Speaker Haffley in “The West Wing” would not support such ludicrous so-called economics.
Ian Mearns (Gateshead) (Lab)
Would my hon. Friend care to speculate on how many of the 14,000 millionaires who will be super-beneficiaries of the measures will stop moving the mountains of cash that they currently move to avoid paying tax when the top rate is reduced from 50p to 45p? Surely if they move mountains of cash to avoid paying 50p, they will not move any less to avoid paying 45p.
Thomas Docherty
I suspect the best and fastest way to answer my hon. Friend’s question would be to attend the next Conservative party fundraising drinks event, where I am sure many of those millionaires will be buying the Minister a rather hearty round.
Much has been made of the quad’s all-night drinking session. I am sure they were drinking fine Scotch malts—indeed, no fine malts are made outside Scotland—but they should have spent more time looking at the detail of those two decisions. In direct contrast to the hon. Member for Dover (Charlie Elphicke), I would argue that pensioners on an income of £10,000 a year are not among the wealthiest pensioners in the country. If Conservative Members believe pensioner households struggling to get by on £10,000 are wealthy, it goes to show how staggeringly out of touch they are.
Jacob Rees-Mogg
I am extremely grateful to the hon. Gentleman for giving way and am enjoying his wanderings through the drinking habits of certain Members of the House, which I am not sure are directly relevant. Why is it fair that pensioners should have this benefit but not families who have a £10,000 allowance who are struggling with children? Why is it fair that the benefit should be age-related?
Thomas Docherty
I always give way to the hon. Gentleman, who knows more about age than anyone in the House. He needs no history lesson, but the measure goes back to the end of the second world war, and the concept of the greatest generations—those who have given a lifetime of sacrifice. It is worth noting that, just last week, we unveiled a long-overdue memorial to some of that greatest generation. I am sure he would recognise their sacrifice.
Jacob Rees-Mogg
The measure was introduced earlier, I believe by Winston Churchill; indeed, an hon. Member asked earlier how we could overturn what the great man had done. The wartime generation are having the benefit frozen; they are not losing it. The people who are not getting it were not born when the war was going on.
Thomas Docherty
I cannot believe the hon. Gentleman’s hearing is going. I began by saying that a cash freeze is a real-terms cut. I am sure he would agree with that.
Jacob Rees-Mogg
The Government’s wonderful policies are very successfully bringing down inflation; there has been a substantial fall. In addition, oil prices are coming down and there is a cut in fuel duty. That amazing combination means everything is working very well.
Thomas Docherty
With an intervention like that, it will not be long before the hon. Gentleman is sitting on the Front Bench speaking for the Government on Treasury matters. Perhaps I can help him on another matter, though, because several references were made to Take That. For his benefit, let me say that they are a popular beat combo who can often be found on the wireless. He might enjoy listening to them.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We do not need to worry about Take That and radios for today. I think that the circus has carried on long enough.
Ian Mearns
Would my hon. Friend care to reflect on the fact that we have just heard from the hon. Member for North East Somerset (Jacob Rees-Mogg) a celebration of stagflation?
Thomas Docherty
My hon. Friend is correct. This is not a time for celebration, as the cost of living continues to rise and the cost of energy and other precious commodities heads in the wrong direction. The real-terms cut faced by pensioners this year will make their lives much harder.
It is also worth reflecting on who will benefit from the proposals outlined by Ministers. We are talking about footballers, pop stars and “Big Brother” contestants. We talk about wealth generation and the value of people. With the greatest respect, I would argue that those three categories should not be given priority over our greatest generation. I know that the Minister is a courageous soul and, for his sins, an Ipswich Town supporter—such as that can be—but I wonder whether he truly believes that the value given by Ipswich Town players last year or this year was greater than the value given by the greatest generation in our nation. Surely, he must reflect on whether Middlesbrough, Ipswich Town, Sunderland, Leicester City or Crystal Palace players should really be prioritised over our pensioners.
Gloria De Piero
Did my hon. Friend notice the inconsistency of the Liberal Democrats on this matter? In January, they said it would be very wrong to reduce the 50p tax, but by March they were briefing that they were not ideologically wedded to the tax. Has this episode not demonstrated their powerlessness in government?
Thomas Docherty
I often think that the Business Secretary would make an excellent contestant on “Strictly Come Dancing”, such is his fleetness of foot. In fact, I am sure that tomorrow morning there will be leaflets out in Brent and elsewhere condemning and disowning this Government policy, as if Liberal Democrat votes had not yet again carried the argument, leaving Ipswich Town footballers and others better off and our greatest generation worse off. This is a poverty of policy. It is the worst example of what happens when the quad sits up drinking and it will leave the country with a dreadful hangover.
Sheila Gilmore
The policy on the higher tax rate is, in effect, an endorsement of tax avoidance, which worries me greatly. Some of us sat through the Finance Bill Committee and heard Government Back-Bench Members say how much they disapproved of tax avoidance, but throughout this episode we have heard people argue that because some people have taken steps to avoid tax, we should reduce it. That is highly unsatisfactory to the many people who, on pay-as-you-earn, have little ability to avoid tax. They are gobsmacked by all this.
If part of the problem was due to people forestalling, which is the technical term, in the first year of the new tax, perhaps—and this is a thought for the future too—we should have introduced it with immediate effect, as happens with some other taxes. For example, tobacco duty is generally increased on the day of a Budget, so that people do not rush out to fill their shopping bags—or whatever they do. Perhaps that would have been a way around it. I know it is not traditionally done with increases in tax rates, but if that is how people respond to these things, perhaps we should treat higher earners like we treat people we think will fill their bags with cheap booze or cigarettes, and forestall them, rather than letting them forestall the rest of us—because that is what they are doing to the communities in which they live. Unfortunately, in a year’s time, we are likely to hear Government Members saying “We told you so” even more. The reduction has been postponed for a year, but it will still happen, and a lot of people will no doubt do the same thing in reverse when it does.
It has become something of a mantra to say that no money was ever raised from the 50p rate of tax, but that is not true: £1 billion was raised, even in the year in which people were apparently forestalling. If we had let it run for somewhat longer, the situation could have been even more different. However, as the Institute for Fiscal Studies pointed out, to rush to judgment on this matter so quickly, because that suited the way in which the Government wanted to go, was not justified. We are, in effect, saying to people that it is all right to avoid tax.
I started to tell a little story earlier, and I hope that it will be seen to be relevant. I am fascinated by history, and particularly by housing, and—unusually, for me—I watched a television programme last night. It was entitled “The Secret History of Our Streets”, and last night’s episode was about Portland road, in London. It had been made long before the current debate on the Budget. A young, brash banker got up and said that the value of the property on that street had gone up even further since the taxpayers had bailed out the banks. Did we really think, he asked, that the banks were going to start lending to small businesses? No, they were going to give people like him an increase in income so that they could pay even more for those houses. He might have been one of those boastful types, but that was nevertheless an insight into the mindset of the kind of people in our community who think that tax avoidance is absolutely legitimate. There is a great deal of wealth in this country, as that example showed, and many ordinary people find this whole debate offensive and difficult to swallow.
At the other end of the tax issue, we have the question of raising the tax-free allowances. The Government keep saying how kind they are being to people on low incomes, but we should remember that once those people have had their tax allowance raised, they will get no further advantage in subsequent years because they are already out of the income tax regime. Other people, however, have gained considerable advantages from the raising of the basic tax threshold. Many people on considerably higher earnings—although not necessarily paying higher rates of tax—have gained from the measure.
It has been easy—for the Liberal Democrats in particular, as this is one of their favourite lines—to say that raising the tax threshold is all about helping the very poorest. However, the very poorest were already outside the income tax regime, and people on considerably higher earnings—particularly two-earner families without children—have benefited substantially from the raising of the threshold. We must also take into account what people on the margins who have been taken out of tax have lost. When we look at the details, we see that as a result of the measure, they could lose tax credits and, in some cases, housing benefit. Their gain is therefore very much less than has been suggested.
Mr Kevan Jones (North Durham) (Lab)
A lot of the people my hon. Friend is describing are actually in work, and the Government seem to forget that a lot of low-paid workers get housing benefit and other benefits. Does she agree that it is those individuals who will be hit the hardest?
Sheila Gilmore
Indeed, people who are working and who are, or were, paying tax stand to lose considerable amounts, particularly in the light of the way in which the tax credit system has been eroded as part of this process.
There are those who say—again, this is one of those things that keeps getting repeated as if it were true—that the Labour Government were not bothered about getting people into work or making work pay, but the whole thrust of tax credits, including child care tax credits, was indeed to make work pay. What this Government have done, by reducing the amount that can be claimed for child care, by taking away tax credits and, most inappropriately in my opinion, by taking away tax credits from some of the lowest-paid couples because they are deemed not to be working enough hours, more than detracts from the gains made by raising the tax threshold. Being realistic, these poor people whom the Liberal Democrats think they are standing up for have, particularly if they have children, lost out because of the combined effect of the Government’s measures.
Sheila Gilmore
That may well be the case.
What we need to do is to find ways to invest in our economy that will genuinely benefit not just those who are unemployed, but those who are under-employed. The Government like to suggest that the rate of growth in the private sector has increased slightly in the last few months, but most of the jobs created over the last couple of years are part-time jobs. As a result of that, these very people are simultaneously losing tax credits and have to claim other benefits. The housing benefit bill has risen substantially in the last year, despite the Government’s changes, and that is because many people in part-time jobs are having to claim. What we saw in May, for example, was that the tax take had dropped and expenditure had risen, particularly on various kinds of welfare benefits.
Taken as a whole, this policy is simply not working. I would have greater respect for the Government if they were now saying, “We must look at why it is that some people are seeking to avoid the additional rate of tax. We must find ways—perhaps it is nudge, perhaps it is enforcement—to make them pay.” As others have said in this and previous debates, we seem to say to one group of people that if we take their benefits away they will work harder, while we say to another group of people that we have to give them more money through tax breaks so that they will work harder. It does not make a great deal of sense, and it is profoundly unfair.
Some of the differentials in our society now are huge. If the proportion—not necessarily the amount—of tax being paid by the top 1% of earners has risen, it might well be because their incomes have risen so much further than those of the rest of the community. The gap between the top earners and the rest has widened hugely over the last few years, which creates a profoundly unequal society.
Stephen Williams (Bristol West) (LD)
I have listened to a good deal of what the hon. Lady has said during our debates, and I have been trying to decide whether or not she supports the raising of the tax allowance. However, I want to ask her about the specific point that she made about the gap between the rich and the poor, which she said had widened over a “few years”. Surely she meant “over the last 13 years”.
Sheila Gilmore
As I think the hon. Gentleman knows fairly well, the increase in inequality began far earlier than that. The point in the history of the post-war United Kingdom when the equality gap was narrowest was 1979, which, interestingly, marked the end of a 20-year period during which Labour Governments had predominated. After 1979, the widening of the gap began and accelerated.
I would not suggest for a moment that the party of which I am a member did as much as I should have liked it to do when it was in government, but we did a great deal for pensioners and the least well-off workers in society by, for instance, getting single parents back to work and introducing the minimum wage. It is simply not true that we were not aware of the issues, or that we did nothing to tackle them. The hon. Gentleman may want to return to the heady days of 1979, and perhaps we should all want to do that. Now, however, inequality is breeding a society that poses many dangers, and we want to reduce that inequality, but I do not believe that the Budget does anything to reduce it. We know that the Budget will increase child poverty, and I believe that in three or four years the inequality gap will have widened even more.
Jacob Rees-Mogg
It is a real pleasure to follow the hon. Member for Edinburgh East (Sheila Gilmore), who made such an enormous contribution to the Public Bill Committee. She enlivened it regularly with her thoughts, with which I have almost invariably disagreed—and today is no exception.
We are now dealing with the best part of the Budget: the heart, soul and even the guts of it. We are doing some big and bold and important things, with which I shall deal in turn. One of them is tough and brave and noble. It is the proper aim of Government to take on difficult things which, although difficult, are right. But I shall start, instead—
Ian Lavery
Is it bold and tough to rob the pensioners of £3 billion and give the millionaires a £3 billion tax cut?
Jacob Rees-Mogg
The pensioners are not being robbed. The pensioners have been extraordinarily well looked after by this Government, and rightly so. I agree in many respects with the hon. Member for Dunfermline and West Fife (Thomas Docherty), who talked earlier about how important the elderly were to our society. He called them the golden generation. I thought that, out of respect to Her Majesty, we ought to call them the diamond generation, as they are all over 60.
Of course we owe a great deal to the elderly. That is why it is right that they have kept their bus passes—which they are pleased to have, although there are not many buses in North East Somerset—and their winter fuel allowances. If they are over 75, they will also retain their free television licences so they can watch the BBC free of charge. I think that many of them prefer Sky nowadays, but that is a separate issue. The Conservative party, in alliance with our Liberal Democrat friends, has looked after the pensioners.
As for the thresholds, it is absolutely right that they should be evened out. Let us consider the people who are paying tax across the country. How is it fair for those who have retired to be given an automatic tax break, rather than those who are working hard and perhaps bringing up children? They need the income just as much as the pensioners, and in some cases more. That, I think, was bold and brave of the Government, and right.
I want to begin, however, by discussing the easiest step to defend—the one that was so startlingly obvious that it is surprising that the Government did not take it earlier and go further. I am talking about the reduction in the 50p tax rate to 45p. We know well that high taxes drive out enterprise and people, and drive down tax revenues. That is not because of evil schemes of tax avoidance; it is because people simply decide that if they are not going to get paid, they will not work. They remove their labour. Our socialist friends—
Thomas Docherty
Does the hon. Gentleman really believe our society is enhanced by these pop stars and premiership footballers?
Jacob Rees-Mogg
It has to be said that I am not the world’s greatest expert on pop stars and footballers, but none the less I think they bring a richness to our national life that enlivens many people in my constituency, and even in Scotland. They want to watch the highest quality football being played.
This is relevant, Mr Deputy Speaker, in case you think I am going off on a tangent. I have thought that it would be a good idea to remove the limit on overseas players in cricket, because that limit has been removed in association football and it has led to our having in this country the highest quality league football, and in English cricket—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We are drifting away from the topic under discussion—and as somebody who follows cricket and feels that it is to the benefit of the England team that there are not too many overseas players in the county game, I do not want to go any further into this debate.
Jacob Rees-Mogg
Thank you, Mr Deputy Speaker, but the reduction of tax is what encourages them to be here and why they do not decide to work in other countries instead.
Thomas Docherty
I am pretty sure, Mr Deputy Speaker, that the England cricket team is very good and the England football team is not very good.
Jacob Rees-Mogg
But my concern was about Somerset county cricket club. Football teams such as Manchester United do very well through having more foreign players. Somerset, however, has yet to win the county championship, but this lower level of tax and greater freedom in employing overseas players may lead to its achieving that.
Returning to the question of the 45p tax rate, we have had a discussion about avoidance in that context, and I want to defend tax avoidance. I know this is not the most popular cause to espouse, but I do so because I believe in the rule of law, and I do not believe the rule of law is best maintained by Parliament being arbitrary in its taxation.
We have the power, through our votes this evening, to set rates of tax as we choose—to set schemes that allow people to be charged tax, or not to be charged tax, as we choose. If we in this House are too incompetent to draw up the tax law properly, is it reasonable to say to the taxpayer, “You must work out what Parliament may have wanted. This is not what is said, but Parliament may have wanted you to pay this extra amount on top”? Should we then also say that to people who put money into their individual savings accounts? Should we retrospectively say that they ought to have paid more tax on their ISA sums, or on their pension funds?
Ian Lavery
Does the hon. Gentleman agree that there is a moral obligation on people to pay taxes, as well as a legal obligation?
Jacob Rees-Mogg
No, I do not. I do not believe that taxation is a matter of morality. I believe the law is a matter of morality and it is immoral to break the law, and therefore I divide very firmly between tax evasion and tax avoidance, which is the historical position of this Parliament—and, indeed, of English law. Tax evasion is criminal and should be prosecuted to the full extent of the law. I think the scheme used by a comedian, whose name momentarily escapes me but who is quite famous, was almost certainly unlawful, and that scheme should be prosecuted.
Mr Kevan Jones
I know the hon. Gentleman lives in a rarefied world, but does he not understand the anger felt not only by low-paid workers, but middle-earners, who pay their tax through pay-as-you-earn and have no opportunity to avoid tax, unlike the footballers to whom he referred? This situation cannot be fair in any society.
Jacob Rees-Mogg
It is very important, once again, to differentiate between avoidance and evasion. If we have passed laws that allow people, for example footballers, to sell the rights to their name and corporatise that, we can change the law, and the fact that this Parliament has not changed the law means that people are entitled to do it.
Mr Jones
Does the hon. Gentleman get it? Does he not understand the anger of even middle-income earners, who pay their taxes, work hard and cannot use any schemes such as those he has been suggesting which are open to those on ludicrous sums of £250,000 a week? Many people in Somerset must be in this category?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. It is worth answering that one first.
Jacob Rees-Mogg
I am getting so many interventions, and I am always happy to take them all; allcomers are welcome. I do not think that there is this anger; I think that people are very supportive of high earners who earn their money.
Chris Heaton-Harris
Does that not make the point? If there was this anger, thousands of people would not queue in lines to get their season ticket for Manchester United at the beginning of each season and millions of people would not be watching on television, because the strength of anger that Labour Members seem to want to articulate would mean that people would boycott these disgraceful sports and pursuits.
Jacob Rees-Mogg
My hon. Friend is absolutely right and he has hit the nail on the head.
Ian Mearns
The hon. Gentlemen have got it quite wrong. The tribal nature of football is that people idolise their own team’s players and despise the activities of the players from other teams. The bottom line is that the hon. Member for North East Somerset (Jacob Rees-Mogg) would prefer that there was no tax at all.
Jacob Rees-Mogg
The hon. Gentleman is wrong on that last point; I recognise that there is a need for taxation, though slightly beyond the clauses we are immediately discussing. However, I will answer the important point that he has raised on the tribal nature of football and why people are willing to see these high salaries paid. It is because they recognise that those salaries get them the best quality players and they want to see the best quality players playing for the team that they so ardently and passionately support—it is an ardent passion that I do not have, but I understand that many people do have it. That requires low taxes, because otherwise these players take their talent abroad.
I come back to Professor Laffer, because his argument is one that is so obvious as to be self-evident: if the tax rate is zero, nothing will be raised and if it is 100%, no sane person will pay it either as there is no point in working or in earning. There is some point along that curve where the least legal avoidance takes place—I emphasise that avoidance is legal—the most amount of working is done and the highest amount of revenue is received. We have seen this. I know that some Conservative Members, myself included, think that there was a golden age when Baroness Thatcher was in charge—
Ian Lavery
I intervened just too early, because he mentioned Margaret Thatcher—another issue. Is there anywhere on this curve that the hon. Gentleman continues to mention where morality comes into play?
Jacob Rees-Mogg
This argument is not a moral one. We are not the House of Bishops. I am all in favour of the Lords Spiritual having a view on this, but I am not one of them. I did not go into the Church; I went into politics. Politics is about raising the revenue that is needed for the country to carry out its business, and it is not an issue of morality in terms of how we phrase the laws. That those laws are then obeyed is a matter of morality. I can probably quote paragraphs of the Catholic catechism on this, but you are looking fretful at that thought, Mr Deputy Speaker, so I shall move back to the golden age of the noble Baroness Thatcher, Lady of the Garter, Order of Merit.
In 1979, the top tax rate was 98%—83p in the pound on income tax and a 15p surcharge. [Interruption.] I hear Labour Members saying that that was excellent and a jolly good thing. It is rather splendid to know that I am not the only one with dinosaur-style views in this House; there are even greater dinosaurs on the Labour Benches. When those tax rates were reduced they came down first to 60% and then to 40%, to fury from hon. Members. I believe that the House was suspended when the noble Lord Lawson introduced the rate of 40p in the pound; I think the Scottish nationalists got up in a passion of anger, wishing for higher taxation to spread across the realm of the United Kingdom. What did that reduction do? It raised more money for Her Majesty’s Government, which meant that the Government could spend money on their priorities and pay down their debt. We had a golden economic scenario when the noble Lord Lawson was at the helm, because we believed in low tax rates and had the courage of our convictions.
Kelvin Hopkins (Luton North) (Lab)
I remember the noble Lord Lawson’s time as Chancellor and the real reason we boomed in that time was that he depreciated our currency by 35%.
Jacob Rees-Mogg
Without going anything other than briefly through a history of sterling in the 1980s, I seem to remember that it bottomed in 1985 at $1.10 and then started rising again. So, that was not the case throughout the noble Lord’s period in office.
I shall come back to the subject of the Laffer curve, but I must first take an intervention from the hon. Member for Clwyd South (Susan Elan Jones).
Susan Elan Jones (Clwyd South) (Lab)
I must confess that I was rather enjoying the sporting analogies and wondering, if the rules were different, what rates of taxation would be required for England rugby players to be able to beat the Welsh—but let me move on. The hon. Gentleman says that there is no morality in tax, but how does he feel about indirect taxation? There were many concerns about the effect on petrol prices, for example, when VAT was raised. Does he think that that should be reduced, too?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We are in danger of moving off the topic. We are discussing personal allowances and we need to get back to them. We have had a good lesson in the Jurassic history from those on both sides of the Chamber.
Jacob Rees-Mogg
Thank you, Mr Deputy Speaker. One always feels ashamed not to answer a question directly, so I apologise to the hon. Lady for the fact that I shall have to give a later answer on that knotty point of value added tax.
I will stick with the Laffer curve and its history of increased revenue. We heard from the Opposition that when rates went down, the economy boomed and so, therefore, did the revenues raised. There are two answers to that. One reason that the economy boomed was that there was lower tax, so people had more of their own money in their pockets to spend on goods and services, leading to overall economic growth. Secondly, the amount paid by top taxpayers grew much faster than the rate of the economy overall. We are now in a situation where 27% of income tax is now paid by the top 1% of income tax payers—
Jacob Rees-Mogg
In 1979, when the hon. Gentleman had a real socialist Government, that figure was about 8%. One can see that massive expansion in the burden of tax falling on the richest in society—the ones who can bear that burden—comes when the rate is lower. That is an excellent part of this Budget; perhaps the best part.
Chris Heaton-Harris
I thank my hon. Friend for being so generous in giving way. If one could possibly take the politics out of tax, surely one would want to hit the tax rate that brings in the most revenue, in order to pay for hospitals and everything else. If that tax rate was proved to be lower than the higher tax rate, one would like to think that common sense would prevail and that Ministers would choose the tax rate that would bring in the money.
Jacob Rees-Mogg
I agree with my hon. Friend. I believe that there are studies that show that that rate would be 36p in the pound. I hope that the Minister is listening and that we can look forward in the next Budget to the rate being lower still.
We have heard discussion about the morality of tax rates, and I dispute that there is morality to tax rates, but there is a perniciousness about taxing for the sake of it and about taxing for the sake of envy, because people do not like the rich or because they wish to crush the income earners in society. That is not the type of envy that we have on these Benches. Even our Liberal Democrat friends do not suffer from that type of envy; they recovered from it after their experience in 1909.
We Conservative Members have never had that type of envy. We recognise that if the maximum amount of revenue is raised, it is better for everybody. We heard our Prime Minister giving an invitation to our friends in France, saying, “Come and join us. The weather here may be rainy, but the tax rate is only 45p in the pound, compared with the 75p that you may have to pay.”
Ian Lavery
Will the hon. Gentleman enlighten the House on what personal tax allowances he would put in place at different levels, if he were the Chancellor and had the power?
Jacob Rees-Mogg
It would be an impertinence for someone who entered the House in only the past two years to aspire, even hypothetically, to the height of Chancellor of the Exchequer. I leave that question to my hon. Friends on the Government Front Bench, who, having listened carefully to all that is said in this debate, will no doubt advise the Chancellor. They may consider the figure of 36p in the pound to be perfectly suitable—or they may go further and advocate a flat tax, which is a very attractive proposition. Perhaps people could have tabled an amendment to that effect, but sadly they did not. As I understand from my hon. Friend the Member for Amber Valley (Nigel Mills), who is no longer in his place—
Jacob Rees-Mogg
Oh, he is behind me. My hon. Friend the Member for Amber Valley said that the effect of the amendment from our Labour friends would be to bring the tax rate down to 40p. I am not sure that it was wise of him to say that, because those of us who were listening may be tempted to go into the same Lobby as the Opposition later, to help them achieve that objective.
I want to talk about the other great aspect of the Budget, and to give full credit to our Liberal Democrat friends for twisting Conservatives’ arms to get them to do something that they have always wanted to do anyway: get as many people out of taxation as possible by raising the thresholds. As the thresholds are raised, so the incentive to work becomes greater. The hon. Member for Edinburgh East (Sheila Gilmore) said that we wanted to make the out-of-work work harder by cutting their benefits, and the in-work work harder by cutting their taxes, and thought that was illogical. Of course it is not, because a person does not get unemployment benefit for working; if a person works, they lose their benefit, and if we encourage people to work, they have more money. Likewise, if we cut people’s taxes, they have more money, so they are likely to work harder.
When we raise the threshold, we find that many millions of people are able to work more easily. They will be taken out, to some degree, of the poverty trap, which is one of the most crushing and pernicious taxation and benefit traps that anyone has to face. The move, in stages, to a £10,000 threshold is a very bold thing to do in a time of economic difficulty, but it may have some of the greatest social benefits of any of the policies that the Government are following. It really is a noble approach to taxation—an objective that is fundamentally worthy.
Mr Kevan Jones
I have listened carefully to the hon. Gentleman, but I am not sure that he realises that a large number of my constituents, and possibly his, who are in low-paid jobs claim council tax benefit, housing benefit and tax credits. However, all of those have been cut by the Government, and that counters the encouragement to work, in terms of the increase in the threshold.
Jacob Rees-Mogg
I am always grateful for the hon. Gentleman’s thoughtful interventions, but one of the greatest mistakes that Governments make is to have this merry-go-round of taxation and benefits, whereby we tax people and then pay them back their own money in benefits, with a cut taken for administration in between. It is much more sensible to take people out of tax altogether. I would like the threshold to be raised considerably higher, basically towards average earnings, so that the bulk of people do not pay tax at all on what they earn, but do, of course, pay in other ways, through other taxes—through indirect taxation. That takes away the major disincentive to go into employment, and lets people benefit from the fruits of their labour. That is an important proposal that has come forward, and it is popular throughout the country, though I would not say that there was literally cheering in the streets.
Chris Heaton-Harris
My hon. Friend talked about the recycling of money through the system. In May 2010, nine out of 10 families were able to claim some sort of tax credit. Surely it is completely wrong if everybody —or 90% of people—is relying on the state to give them money back in some grandiose scheme. Surely taking people out of tax is the right way to get rid of that problem.
Jacob Rees-Mogg
I am in entire agreement with my hon. Friend. We want to get people out of the tax and benefits system as much as possible so that they can stand on their own two feet. That is what people want.
Sheila Gilmore
The problem with the hon. Gentleman’s argument is that, even if the tax threshold is raised towards the median income, as he suggested, unless the minimum wage is raised substantially, many people’s earnings will be so low that they will still live in great poverty. That was why benefits such as tax credits were created. The other route might be to raise the minimum wage.
Jacob Rees-Mogg
Mr Deputy Speaker, you will rule me out of order if I argue that raising the minimum wage would be extremely unwise, so I would not dare to say it. However, on the point of benefits for the worst off, I am all in favour of those. It is a thoroughly good thing to help people who are just in the earning bracket, but not to give benefits to people earning £70,000 a year, paid for out of their extraordinarily high taxes.
Kelvin Hopkins
Surely the biggest disincentive to less well-off people earning or trying to get work—many are trying to get work that is not available because there is mass unemployment—is the fact that all the benefits are means-tested. If we reduced the level of means-testing and had many more universal benefits paid for out of a much more progressive form of taxation, we would avoid that problem.
Jacob Rees-Mogg
There are enormously exciting benefit changes coming through and I look forward to speaking on those with enthusiasm, because I think they will make a substantial change to the welfare of the people of this country. But that is for another day. We must make sure that the tax system encourages work, gets people off benefits and helps them to be prosperous. Universal benefits have the grave disadvantage of wasting money on people who do not need it.
In the limited time that remains to me, I wish to deal with the issue that has caused most controversy: the freezing of the age-related allowance. This was a bold decision for the Government to take, but undoubtedly the right one. The ordinary threshold has been so raised that the age-related allowance, which used to be almost double the ordinary allowance, is now only marginally higher. The change is being made in the most sensible and calm way, by freezing the allowance so that nobody loses in cash terms. There will not be a cash loss to any existing pensioner. Over time the basic threshold will be raised so that everybody is better off.
It is a policy that has of course been momentarily unpopular. It has received a little publicity that is adverse, but as somebody once said, to govern is to choose. Government are at their best when they make tough choices and stick to them. We know that the economic situation of this country is deeply unsatisfactory. We know that we have a deficit that is out of control and a level of debt unseen out of wartime. In getting it right, the Government cannot throw money about like confetti. They must take the tough and bold decisions and yes, there may be consequences in the newspapers, but—
Kelvin Hopkins
The hon. Gentleman talks about the deficit. Things are getting worse, rather than better, because of the squeeze on the economy. If we made serious efforts to reduce the tax gap, which is estimated at £120 billion a year, we could solve that problem overnight. It is just a question of changing the law to make sure that people pay the taxes that they should pay.
Jacob Rees-Mogg
We have already discussed this. By and large people pay the taxes that they are supposed to pay, as Parliament has laid down. If they evade tax, the full force and might of the law can and should come down upon them.
I conclude on the crucial point of defending the Government on a decision that, though it has not been immediately well received, will be welcomed by the electorate, because the electorate admire Governments who govern effectively through the tough times. They do not admire Governments who are loose and lazy with their money. They admire ones who are willing to take the tough decisions. We should oppose all the amendments in the group and stick with the Budget as it was—a very fine and good Budget, in which the right decisions were made.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had an interesting debate that has addressed what are perhaps two of the most controversial issues in the Budget: the change to age-related allowances and the reduction in the 50p rate of income tax. The debate has lasted three hours, but at one stage I thought we might finish early, until we heard the tour de force from my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). I hope that I will have time to respond to the various comments that have been made. We heard the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) quote Groucho Marx, which I suppose is an improvement on other Marxes who might have been quoted, although I was reminded of the other Groucho Marx line:
“I’ve had a perfectly wonderful evening, but this wasn’t it”,
at least until I heard the speech from my hon. Friend.
The changes the Government have made to the rates and thresholds of income tax will provide a competitive platform for our tax system while also ensuring fairness. The measures in the Bill will reduce the additional rate of income tax in 2013-14 to 45p, increase the personal allowance to £8,105 and simplify the working of age-related allowances. I will discuss each of the amendments in turn, but it is important first to set out why the Government have taken this approach.
The fact is that the 50p rate of income tax has not raised the revenue it was intended to raise. It is currently the highest statutory income tax rate in the G20. When we came to power we inherited an economy that the previous Government had driven into a parlous state, with regard to not only the state of the public finances but our overall competitiveness. The fact is that the 50p rate came in only at the fag end of the Labour Government, who for 13 years had kept the 40p rate, and when they brought in the 50p rate they declared that it was temporary. There was a reason for that: they recognised that the 50p rate would damage our competitiveness. The hard evidence backs up that claim. The report by HMRC sets out that the 50p rate is distortive, damaging to international competitiveness and an economically inefficient way of raising revenue.
In short, the 50p rate is a failed policy. We were told that it would raise over £2 billion and, given the crippling deficit we were left, that was not something we could just wave away as if it did not matter. However, higher taxes are worth while only if they raise more revenue, and the analysis by HMRC shows that at best the yield would be £1 billion, and at worst it may raise nothing at all. That is because the behavioural response has been substantially larger than expected.
Chris Heaton-Harris
One part of HMRC’s gaming for this actually did not look at how much extra money would come in as a result of the incentive to pay the lower level of tax. Surely it would have been worth while doing that so that we could prove to some of those who do not understand simple economics that it would be worth while.
Mr Gauke
HMRC’s analysis, which is a good piece of work, showed through two different mechanisms that the reality was that the amount being raised was somewhat less than had been predicted. The fact is that the behavioural response was much greater.
Let me say a word or two about that. To start with, HMRC estimates that as much as £18 billion worth of forestalling took place in 2009-10, of which about two thirds, up to £11.3 billion, has been estimated to unwind in 2010-11, but this forestalling was not factored into the original revenue calculations. Furthermore, HMRC estimates that between one third and one half of the behavioural effect comes from genuine reductions in income. We have heard this evening that this is all about tax avoidance, that tax avoidance increases when we increase the rate and that we can be sure we will get the benefit of it as we unwind, but the reality is that between one third and one half of this was simply the result of less economic activity, because people reduced their hours and participation in the UK labour market and moved elsewhere.
Kelvin Hopkins
The Minister has said it: the amount raised from the increase in tax declined because the economy went into relative decline as a result of the Government’s policies. The fact is, however, that all this is about the feebleness of our tax-collecting system—the laws governing it and HMRC, which has been shown to be soft on big companies, in particular, and soft on the rich when it comes to tax collection. Light-touch regulation: that is the poison.
Mr Gauke
I strongly disagree, but before I turn to tax avoidance let us remember that between one third and one half of the reduction is because of less participation in the labour market. It is not because of the decline in the economy; we are talking about people moving elsewhere, people retiring earlier and people working fewer hours because it is not worth their while, in their opinion, to work as hard as they would otherwise do. Let us not forget that when someone moves from this country to Switzerland, we miss not just the difference between 45p and 50p, but everything, the whole 50p, and not just that bit above £150,000, but the first £150,000. That is the consequence of a tax rate that drives people out of the country and does not attract them here.
Thomas Docherty
Can the Minister tell me two premiership footballers who have left the country because of this tax rate?
Mr Gauke
No I cannot, but I know that, for example, the Arsenal manager remarked that the 50p rate put him at a disadvantage. Earlier, the hon. Gentleman mentioned Ipswich Town and whether its players deserved a tax cut or pensioners did, and I have to say that on last season’s performance one or two looked as if they could qualify for the age-related allowance, but that is not at the heart of my argument.
The point is that we have to be competitive, and we want to attract talent to the UK, but having a higher rate than France, Italy and Germany is not competitive.
Sheila Gilmore
Generally, when changes are made and we want to assess their impact, we carry out properly independent research. On the changes to housing benefit, for example, the university of Sheffield has been commissioned to produce reports, but what research into our short experience of the 50p tax rate was carried out that gives rise to the conclusions mentioned? Do we have some research that we can look at, or is there just speculation that people might have retired or might have gone to Switzerland?
Mr Gauke
The hon. Lady asks what research we have. I am holding it in my hand: the document produced by HMRC, which sets out a thorough analysis. I urge her to read it and to see that it is far from speculative; it is a thorough piece of work, which shows that as a result of the 50p rate total income fell by between £2.9 billion and £4.4 billion and GDP was between 0.2% and 0.3% lower. There has been not just a loss of tax revenue, but a loss to the whole economy through lower productivity and lower economic activity.
Justin Tomlinson (North Swindon) (Con)
If Labour Members felt that the 50p rate was so good, why did they introduce it as only a temporary measure?
Chris Ruane (Vale of Clwyd) (Lab)
If it is such a sensible, logical and scientifically researched conclusion that reducing the tax rate from 50% to 45% is such a good thing, why do the great British public not believe it?
Mr Gauke
I do not know whether the great British public have reached that conclusion. Perhaps some of them believe some of the arguments put by the Labour party, but if they do I have to point out some of the weaknesses. In the Committee of the whole House, the hon. Member for Pontypridd (Owen Smith), who previously spoke for the Opposition on this issue, said that he considered the taxable income elasticity calculations in the report to be “smoke and mirrors”. We would call them analysis and economics.
Ian Mearns
I am grateful to the Minister and Ipswich Town supporter for giving way. Does he agree with the general thrust of the argument put forward by his colleague, the hon. Member for North East Somerset (Jacob Rees-Mogg)? It was that tax avoidance is not at all morally repugnant and it should be encouraged as long as it is legal.
John Hemming
I am a Government Back Bencher who is not massively enthusiastic about the reduction in the top rate; I think that the Laffer curve peak would be at a higher rate than is thought. However, will the Minister comment on the fact that the Labour party seems to have forgotten that it did nothing to close the transparent fiddles, which are so resented, when people have paid 1% or 2% in tax? Those transparent fiddles have been around for years and Labour did nothing to close those gaps.
Mr Gauke
My hon. Friend makes an important point. If we are talking about unfairness in the tax system as far as rates are concerned, I should say that the much greater unfairness is when wealthy individuals are paying very low rates of income tax—lower rates than are paid by the vast majority of people working in this country.
Let me say a word or two about avoidance. In the Budget, we announced a package of measures that will yield more than £1 billion and protect more than £10 billion in revenues over the next five years. Our approach to tackling stamp duty land tax avoidance and the banking scheme closed down in February demonstrate that we are prepared to move quickly and take radical action where necessary. We are introducing strategic changes to address the underlying loopholes in the tax system, as can be seen in clause 22, which is about the treatment of manufactured overseas dividends. More generally, the Government have been active in their response to tax avoidance schemes and can and do act as soon as they become aware of abusive schemes. We have provided HMRC with additional financial support and we remain absolutely committed to tackling tax avoidance.
Amendment 1 asks us to leave out the additional rate for 2013-14. It is exactly the same amendment as was tabled in the Committee of the whole House. I will not repeat every point that I made then, but as my hon. Friend the Member for Amber Valley (Nigel Mills) said, that might well leave us with just a 40p rate rather than a 45p rate. There is an alternative interpretation, which would mean that no income tax was charged for earnings above £150,000. I say that with some nervousness. I hope that I have not overexcited my hon. Friend the Member for North East Somerset; I think that even he would accept that that was below the revenue maximising point.
When the 50p rate was introduced, the right hon. Member for Edinburgh South West (Mr Darling), the then Chancellor, explicitly stated that it was a temporary measure. We are announcing the cut to 45p now to provide stability for investment decisions and certainty for employees and the self-employed. That is why my right hon. Friend the Chancellor set out the rate for 2013-14 this year.
It is right that we take these measures to improve competitiveness, and our doing so has been widely welcomed. This matter must be viewed in the context of the personal allowance increase, which shows that we are committed to a fairer tax system that provides greater reward for work while supporting the public finances. This year there is a £630 increase in the personal allowance, as introduced by clause 3. That represents the second step in our commitment to increase the personal allowance to £10,000 on top of last year’s increase of £1,000. We have also announced a further increase of £1,100 next year—the largest ever increase in cash terms. The Government are taking 2 million people out of income tax, we are providing a tax cut to 24 million people, and we are well on course to meeting our target of a personal allowance of £10,000.
Let me turn to the second subject that we have debated—age-related allowances. Amendment 23 seeks to leave out clause 4, which introduces a phased withdrawal of age-related income tax personal allowances. Those will remain in place until the income tax personal allowance for those born after 5 April 1948 aligns with or overtakes these levels. At that point, the clause guarantees that older people will receive the higher allowance. Amendment 23, like others tabled by Opposition Front Benchers, is a repeat of an amendment tabled in the Committee of the whole House. The Government have committed to increasing the personal allowance above the rate of inflation. Next year, the personal allowance will increase by £1,100—£840 above inflation—and so from 2013-14 everyone born after 5 April 1948 will receive the same personal allowance of £9,205. This will take a further 880,000 people out of tax altogether. Similarly, everyone born after 5 April 1938 will continue to receive the age-related allowance that they currently receive instead of moving on to the higher age-related allowance, which will be maintained for those born on or before this date. There will be no new recipients of age-related allowances from next April.
One of the Government’s key objectives for the tax system is to make it simple and straightforward for people to understand. Clause 4 helps to provide for a simpler system while ensuring that nobody will lose out in cash terms as a result. It will help to make sure that people get the allowances to which they are entitled and pay the right amount of tax, and make the system simpler for Government to administer, thereby minimising costs to the taxpayer.
Ian Lavery
It has been mentioned a hundred times tonight that no one will lose out in cash terms. Will there be any losers in this?
Mr Gauke
Nobody will lose out in cash terms; that is the point.
Age-related allowances are complex and hard for older people to understand, as the Public Accounts Committee confirmed in a 2009 report. The same report also stated that too much emphasis is placed on older people having to prove their eligibility, resulting in erroneous claims and potential overpayments of tax. Furthermore, in March this year the Office of Tax Simplification published its interim report on its review of pensioner taxation in which it highlighted no fewer than nine complexities with the age-related personal allowance.
Half the people aged over 65 in 2013-14 will pay no income tax at all and are therefore unaffected by these changes. Those who will now not receive an age-related allowance will benefit from a £1,100 increase in the personal allowance, which represents the largest cash increase ever. At the same time, those who are affected by the withdrawal of age-related allowances will still see the total deductions they pay reduce significantly because we have retained the exemption from national insurance contributions for those of state pension age.
It is important to consider these changes to age-related allowances in the context of the wider support that the Government offer to pensioners. Only 40% of pensioners benefit from age-related allowances, about 50% are unaffected by the changes made by the clause because they pay no tax and will continue to pay no tax, and the remaining 10% have incomes above the taper limit for age-related allowances and are therefore unaffected by these measures.
Let us also remember that the triple lock ensures that each year, the basic state pension will be uprated by the highest of these: inflation, earnings or 2.5%. This April, the basic state pension increased by the consumer prices index inflation rate of 5.2%. That meant that there was an increase of £5.30 a week in the full basic state pension—the largest ever cash increase in the basic state pension. Under the previous Government’s plans, the basic state pension would have increased by only 2.8% from this April—an increase of only £2.85 per week. That means that the full basic state pension is £127 a year higher in 2012 than it would have been under the previous Government’s plans. Next year, a full basic state pension is forecast to be £130 a year higher than under the previous Government’s plans, and the year after that, it is forecast to be £133 higher.
Each year, more than 11 million pensioners will benefit from the introduction of the triple lock. An existing pensioner with a full basic state pension will gain more from the triple lock in each of the next three years than they will lose from the freeze in age-related allowances. The Institute for Fiscal Studies has said:
“Our analysis shows that they have lost considerably less from recent tax and benefit changes than any other demographic group. And over the past decade and more pensioner incomes have risen faster than those of the working age population.”
To conclude, the Government are making changes to ensure that there is a fair and competitive tax system. Some of them are controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate is not sustainable. The introduction of the triple lock on state pensions means pensioners continue to be better off. These changes are good for our long-term tax revenues, good for our economy and good for the UK as a whole. I ask the Opposition to seek leave to withdraw the amendment.
Rachel Reeves (Leeds West) (Lab)
It is good to have plenty of time to wind up for the Opposition. We will press for a vote on amendments 1 and 23 this evening, because as today’s debate has confirmed for anyone who was still in any doubt, this is not only an omnishambles of a Budget, as my hon. Friend the Member for Livingston (Graeme Morrice) said, but a flawed and unfair Budget.
We have heard contributions about the hardships that the Government’s economic failure and unfair austerity measures are causing for our constituents. My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) talked about the cuts beginning to bite. She rightly said that pensioners are the victims and millionaires are the victors from the Budget. My hon. Friend the Member for Wansbeck (Ian Lavery) said that the tax cut for millionaires is worth more than the money that most of our constituents take home in a year. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) spoke about a tax cut for the mega-rich that leaves a bad taste in the mouth.
Instead of taking serious steps that might repair the damage that has been done, the Chancellor and his Ministers have turned from their failed experiment in expansionary fiscal contraction and resorted to the notorious Laffer curve. As my hon. Friend the Member for Brent North (Barry Gardiner) said, they are testing that economic philosophy to its limits. It is their latest excuse for an economic policy that rewards those who are already very wealthy and is the last refuge of a Government who have lost any sense of purpose beyond the protection of privilege.
The argument that cutting tax for the very richest is the only way of improving the economic prospects for the rest of us was made by the hon. Members for Amber Valley (Nigel Mills) and for Dover (Charlie Elphicke). They were suggesting that cutting taxes for the rich is what makes them work harder, but that cutting benefits for the poor is what gets them out of bed in the morning. They were saying that although these policies will hurt their constituents, they will vote for them anyway. I am sure that their constituents will sit up and take notice.
It is the same old Tories dusting down the same old trickle-down theories. They did not work in the 1980s and they will not work today. As my hon. Friend the Member for Edinburgh East (Sheila Gilmore) said, the Government seem to think that if they cut taxes for the richest, somehow the rest of us will be the beneficiaries. Nothing could more clearly demonstrate the Government’s perverse priorities than the fact that, when ordinary families are going through the toughest times in living memory, clause 1 of chapter 1 of part 1 of this Finance Bill gives a £3 billion tax cut to the richest 1% of the population, and the rest of the Bill is peppered with dubious means of making other, far less fortunate people in society pay for it.
Among those means, the largest and most flagrant is the abolition of the age-related allowance. The Government call it a tax simplification; we call it a tax grab from pensioners with occupational pensions of little more than £5,000 a year. As my hon. Friend the Member for Wansbeck said, it will cost pensioners £83 and people coming up to retirement £323.
May I just say how disappointing it was—
Cathy Jamieson
I beg to move amendment 24, page 5, line 4, leave out clause 8.
Mr Deputy Speaker (Mr Nigel Evans)
With this it will be convenient to discuss the following:
Amendment 25, page 134, line 2, leave out schedule 1.
Amendment 21, in schedule 1, page 138, line 10, leave out
‘in relation to the payments’
and insert
‘equal to 100 per cent of any amounts in relation to which one or both of conditions A and B are met under section 681B of ITEPA 2003’.
Amendment 22, page 139, line 10, leave out
‘in relation to the payments’
and insert
‘equal to 100 per cent of any amounts in relation to which one or both of conditions A and B are met under section 681B of ITEPA 2003’.
Cathy Jamieson
It is a pleasure to open the debate on these important amendments. I intend to pursue a theme that emerged earlier this evening—that of fairness to children, families and people who are feeling the squeeze as a result of the Government’s current policies—and also to discuss feedback from people who are concerned about the practicalities of the Government’s proposals on child benefit for higher-rate taxpayers, along with points that were raised by Members during that part of the Committee stage that took place on the Floor of the House.
When I spoke about this issue in Committee, I reminded Members that child benefit involved a number of important principles, not least the principle of universality, which Labour of course supports. Because I spoke at some length on that occasion, I do not intend to rehearse all the arguments again now, but I think it worth repeating that child benefit is supposed to benefit—literally—children and families. That fact has been lost at various points, but I hope that we shall be able to keep it in our minds tonight as we consider what the Government are proposing.
As I pointed out in the earlier debate, child benefit was designed to ensure that mothers—at that time, specifically mothers—had money paid into their purses regularly, so that they had a stable income that could be used for their families.
Mr Edward Leigh (Gainsborough) (Con)
Does the hon. Lady agree that child benefit as we have traditionally understood it has had one great advantage, in that not only does it recognise the role of women in bringing up children, but its universality has ensured that there is virtually no fraud or error, and nor does it in any way add to the unemployment or poverty trap?
Cathy Jamieson
I thank the hon. Gentleman for making that point. It is important to understand that the fact that this was a universal benefit ensured that everyone who ought to have had it and who needed it was able to get it. When we debated this topic in the House previously, some Members tried to characterise our concerns about these proposals as Labour trying to protect a universal benefit paid to high earners, rather than looking at the overall principled position, and some may try to do so again this evening. I should repeat what I said both earlier this evening and in that earlier debate: that kind of argument does not wash at all in terms of fairness from a Government who have given a tax cut to millionaires while millions of ordinary families are feeling the pinch.
During the earlier debate, I also reminded Members of article 27 of the United Nations convention on the rights of the child, which the UK has signed up to. It outlines the obligations on states to assist parents to meet the needs of their children, and I pointed out that a number of organisations—as well as a number of Members—had highlighted the importance of those obligations. Sadly, that exhortation to make this debate about fairness to children and families seems to have gone largely unheeded, apart from some honourable exceptions. There have been Westminster Hall debates looking at this issue in more detail, in which a number of Members highlighted both the unfairness of the proposals and their practical difficulties.
Gordon Birtwistle (Burnley) (LD)
Does the hon. Lady agree that it is unfair to expect a family in my constituency where the parents might work in manufacturing industry for about £8 an hour to be contributing from their taxes to pay benefits to people who earn over £50,000 a year?
Cathy Jamieson
Well, there were some robust exchanges on that issue in previous debates. If the hon. Gentleman feels that is a difficult point, I cannot understand why he does not also feel that it is unfair that people on the very top earnings—those earning millions of pounds each year—are to get a tax cut of £40,000 per year, instead of focusing on the needs of children. I find that extremely odd, and I shall say a little more about the unfairness of the proposals later.
Mr Frank Field (Birkenhead) (Lab)
Does my hon. Friend agree that the hon. Member for Burnley (Gordon Birtwistle) is mistaken? We are not talking about redistribution from poorer to richer people. When child benefit was introduced, it took over the function of child tax allowances. Its purpose was to maintain tax equity. That is why there was the element of free income regardless of whether people were on £8,000 a year or £80,000 a year. It made a distinction between those who were responsible for children at any given level of income, and those who were not.
Cathy Jamieson
I thank my right hon. Friend for that intervention, which explains the history extremely well. That is why I have focused so much on reminding us that this is supposed to be about children and doing the right thing by people who have the responsibility for caring for them, whether parents, or grandparents or other family members who may be entitled to claim the benefits. I hope to have enough time to be able to say a few words about that towards the end of my contribution.
The Government did revise the original proposal, but that revision has not gone far enough to deal with the inherent unfairness. The revised proposal will affect about 1.2 million families, of whom it is estimated that some 70%—790,000 couples and 30,000 lone parents in 2013-14—will lose the full amount of their child benefit. A further 330,000 couples and 20,000 lone parents affected by the charge in 2013-14 will lose a proportion of their child benefit. The average loss for those who are going to lose out is estimated at about £1,300 a year. In a previous debate, I highlighted the difficulty for families who are going to lose about £500 a year because of other changes that have been made. That £1,300 is a very significant amount for anyone caring for children in today’s economic climate.
Andrew Gwynne (Denton and Reddish) (Lab)
Of course my hon. Friend is absolutely right about the unfairness of this proposal. We hear statements from the Government about the complexity of the tax system, so does she not find it surprising that they have come up with a proposal that increases complexity in the taxation system, as well as unfairness?
Cathy Jamieson
Again, my hon. Friend makes a valid point, and I shall deal with it in detail in a moment or two. Strangely, given everything else that the Government have supposedly wrapped up to try to make anomalies disappear, we know that sometimes even more anomalies have been created as well as unfairness. In trying to simplify things, they have actually made them more complicated.
In the Committee of the whole House, I raised issues about the principle and about the costs. It is important to have those firmly stated on the record, because the Government have estimated that the additional cost to Her Majesty’s Revenue and Customs over the first five years will between £8 million and £13 million for the computer system—the development and running costs—about £100 million for staff resources and £5 million for customer information. I asked the Minister in that debate for some further information on that. Some further parliamentary questions since then elicited more information, particularly on how much would be spent on marketing the new system. However, having looked at all this again in great detail, I must say that in my opinion and in that of Labour Members, it is not marketing that is needed at this point in time to make a bad policy and an incoherent change to the taxation system palatable to people, but a change of policy to make sure that whatever is done is fair and workable, and will not cause any further problems.
Despite exhortations from Government Members for further changes, those with incomes above £50,000 will have their child benefit withdrawn at 1% for each £100 of income from January 2013. That means that there will be no child benefit entitlement for families where any earner has an income of more than £60,000. As I said in Committee, although the changes that the Government have made are a small step forward, they do not deal with that inherent and fundamental unfairness. That is because they still leave the scenario where a couple with children where one earner is on £60,000 and the other is on £10,000 lose all their benefit, whereas a dual-earner couple on £49,000 each keeps it all. We still do not see how that is fair.
It is not just Labour Members who are saying that there is a problem. Irrespective of someone’s views on whether this is a fair system or whether they support the principle of what the Government are trying to do, which I do not, there remain a number of issues that others have raised. These points will not be new to the Minister, but I am outlining them once again because they have not been adequately addressed during the consideration of the Bill. The most recent information that has come from the Institute of Chartered Accountants in England and Wales makes things clear. It states:
“While this Bill makes some steps in the direction of tax simplification, many of the measures introduce yet more complexity and taken overall the Bill does little to simplify the UK’s complicated tax system. The child benefit reforms…create considerable cost, confusion and complexity.”
It is also concerned about the Bill in general and states that
“the valuable lessons in drafting style produced by the Tax Law Rewrite project have been lost.”
I mentioned that earlier in our consideration of the Bill. As so much of the Bill is made up of complicated schedules and guidance and as it is the longest finance Bill ever, we must question whether we have had the opportunity to carry out all of the scrutiny, even though we did our best in Committee.
People who have to operate the provisions are concerned that they might need to be amended in the light of experience to ensure that they all work properly together and do not end up having further unintended consequences. Essentially, we are using the amendments to ask for clause 8 and schedule 1 to be withdrawn because we believe that the changes are flawed and unfair. That has also been pointed out by the ICAEW, which was straightforward and blunt in its language, stating that there could be a “reputational and operational disaster” for the Government and for HMRC. Those criticisms were largely reported and we have had the opportunity to listen to them in our debates.
We share the ICAEW’s disappointment that the Government have not tabled more workable proposals in time for our final consideration of the Bill. I would hope that even at this stage the Government will at least be able to give us some answers to the criticisms that have been raised or to accept that their plan is not only unfair but risks being unworkable.
The criticisms highlight the fact that
“the phased withdrawal for those earning between £50-60,0000 will be difficult to implement, open to error and potentially costly for HMRC to administer and for taxpayers to comply with.”
As those critics have said:
“The trouble is that an income tax system based on taxation of individuals, does not work properly if it has to cope with benefits that apply to a household”
such as tax credits
“or potentially to another person”
such as child benefit. The real concern is that:
“The phased withdrawal will not work well with the PAYE system.”
A considerable amount of concern has been expressed that the
“‘sliding scale’ approach to tapering down the benefit makes the system much more complicated.”
It has been described as “perverse” that such an approach is being removed for higher personal tax allowances for those aged over 65 on the grounds that this will help to simplify the system at the same time as a form of it is being re-introduced for the withdrawal of child benefit. That does not seem to be a consistent policy approach.
A further criticism is that the implementation timing is odd, with a start date of January 2013 that does not align with the start of the income tax year on 6 April. Concern has been raised that that
“could trigger many unexpected tax bills at the end of the tax year, as many more taxpayers will be brought into self-assessment.”
I do not think that the public have yet caught up with what they will be required to do.
The system is also
“unlikely to cope efficiently if families change or break up”
and we had a considerable amount of discussion on that question during the previous debate. As we all know, family formations change over time. Couples form, the people involved might have children from previous relationships and so on. There is real concern that
“The confusion caused by the new system could hit tax compliance, and undermine confidence in the tax system at a time when the employers are also having to implement the Real Time Information scheme for PAYE.”
On top of the criticisms set out by the ICAEW, the Chartered Institute of Taxation has raised a number of concerns. I hope that the Minister will be able to give an answer to some of these points about the complexity of the scheme. The institute’s concern is that
“ a high degree of complexity—for both HMRC and taxpayers—into what has hitherto been a straightforward benefit with practically universal take-up”
is now being introduced. It also believes:
“If the legislation is to be implemented, there are many issues that need to be resolved”
and that that should happen well before the new charges go live. Given the timing of the implementation of these provisions, there is not a huge amount of time to sort out any of the anomalies. I hope that the Minister can say something on that point. [Interruption.] I heard someone say “six months”. If it is believed that all this can be sorted out in that time, I would like to hear it from the Minister, because many of us have experienced cases where, with the best of intentions, and with support on all sides, fairly complicated systems—new computer programmes and so on—let alone systems of this complexity, have not worked.
Helen Goodman (Bishop Auckland) (Lab)
Is my hon. Friend saying that if a person’s income fluctuates during the year, but they do not know that it is fluctuating, and do not know the full amount of their income until the end of the year, the child benefit will be treated by one set of rules, whereas if they know how their income is fluctuating and whether they are moving in and out of the zone in which the charge applies, they will be treated in another way?
Cathy Jamieson
Yes, my hon. Friend has got the situation exactly right; that is the problem as it has been described. As for people who may elect not to receive the benefit, the Government’s proposals make it difficult for people who do not know what their earnings will be over a particular time to make that judgment.
A number of issues have been raised to do with how one would determine the higher-income person in a relationship. The measure raises a number of complex issues to do with independent taxation and taxpayer confidentiality. I know the subject has been raised with the Minister. My understanding is that HMRC will tell the couple which person had the higher income and is therefore subject to the new charge. As I outlined previously, I can see some difficulties associated with this. Not only does an individual need to know about their partner’s income, but they would need to know whether their partner has claimed child benefit and whether the partner has elected not to receive the benefit.
This will be particularly important where a couple are not on speaking terms. That does happen. It may not seem like it when everything is cosy in the coalition, but there are relationships in which people are not on speaking terms or where they have separated. In those circumstances, we need to be clear about what HMRC intends to do to inform a partner whether the other has made an election not to receive child benefit. Will they be advised, should the partner subsequently revoke that election?
There are potentially Catch-22 situations, particularly in relation to self-assessment and submitting the returns. Far from simplifying the system, which was straightforward and understood by everyone and which made it easy for people to claim, we seem to be making it far more complicated.
I want to raise, briefly, the issue of extended families. There are concerns that there may be contentious cases where different people claim entitlement to child benefit—for example, where parents are unable to look after the children and perhaps grandparents take over that role. We know the valuable role that grandparents can play in those circumstances, often at considerable cost to themselves. There could be situations where a parent continues to receive child benefit, although the child lives with the grandparents. If one or both grandparents have adjusted net income over £50,000, under the relevant provisions of the Bill, the higher-earning one would be liable for the higher child benefit payment, even though the grandparents are not necessarily at that point receiving the child benefit and could even be in dispute with the recipients.
These are some of the practical problems that come into play when we look at how people live their lives. I have mentioned the issue of timing. Perhaps the Minister can answer that. The issue of national insurance credits was raised in the Committee of the whole House. Although the Minister went some way towards explaining the situation and giving reassurance, it would be helpful to hear that stated here this evening.
I shall spend a moment on the problem of electing not to receive child benefit and revoking the election. Where one party to a relationship has an income in excess of £60,000, it seems that HMRC would like to encourage the child benefit claimant to claim the child benefit but to elect not to receive it, because that somehow makes everything neater. HMRC would stop paying out the child benefit, which would reduce the need for the higher earner to join self-assessment and to pay their tax. Those who expect their income to be more than £60,000, apply for child benefit and elect not to receive it, yet subsequently realise that their income for the year is likely to be between £50,000 and £60,000, could lose out unless there are some changes to the legislation.
It is important to place on the record that it is not only the Labour Opposition who oppose what the Government are doing. People who understand the tax system and want to see it improved, such as the Chartered Institute of Taxation, say that ideally the clause and the schedule should be withdrawn and a fresh consultation launched, with a view to coming up with a more workable alternative to the current proposals. We have tabled a couple of amendments to test the Minister’s view on whether that is needed. It has been suggested that these are needed to assist in the situation where people elect whether or not to receive child benefit.
The amendments would put all claimants not subject to 100% high income child benefit charge on the same footing as other claimants able to make a revocation, so this might be easier, it is argued, for HMRC staff to understand and implement. There is a clear distinction between people who elect not to have payments and then find that their income is under £50,000, and those who elect not to have payments and find that their income was between £50,000 and £60,000. The Bill copes with the former, but not with the latter.
I can see people’s eyes beginning to glaze over at these technicalities. Hon. Members in all parts of the House no doubt want me to bring my remarks to a close. [Interruption.] It is good that we all agree on something. These points are very important.
To return to what I said at the outset, if we make the situation more complicated, cause more confusion and make it less likely that people will know whether they qualify for the benefit, that will not be helpful for families, it will certainly not be helpful for children and, I would argue, it will not be helpful for Ministers, because it is they who will have to come back to fix the problem later.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As hon. Members can see, a number of Members are standing and wish to contribute in what is a relatively short space of time, and the Minister still needs to respond, so please be mindful of other Members when making contributions.
Mark Field (Cities of London and Westminster) (Con)
I must confess that I support the principle behind the clause but share many of the concerns expressed by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about its practicality. However, I accept that there is an overriding need to reduce the vast fiscal deficit, and all of us who feel that way must look at the provisions, whether in the Budget or elsewhere, and support what is being done to try to get the deficit down. Apart from everything else, it is a moral case: we cannot pass these huge debts on to the next generation. Even now, in an era that the Opposition have identified as one of austerity and savage cuts, the Government are borrowing £1 in every £5 they spend.
There is an absolute crisis in the welfare state and we must wean ourselves off this huge amount of public expenditure at the earliest opportunity. One of the most important areas to look at is that of universal benefits, particularly universal middle-class benefits, which must be up for consideration. Housing benefit, which has been discussed, and child benefit are certainly important. I believe that wealthy pensioners should not get free TV licences, bus passes or winter fuel allowances, although I accept the political difficulty of that, given the promises made just before the general election.
The Minister is an intelligent man and must realise that the practicalities of the system will make it an absolute nightmare. The hon. Member for Kilmarnock and Loudoun has made quite clear how she feels about it, but let us for once in politics be wise before the event, rather than after it.
Nadine Dorries (Mid Bedfordshire) (Con)
My hon. Friend talks about the practicalities of the system, but is he aware that there is no practical mechanism by which wealthy parents can opt out of the system if they do not want to claim child benefit?
Mark Field
There will be by next January, because they will not qualify for it.
The broader issue is that there is a risk that the proposal is potentially a penalty on aspiration for those who earn roughly between £50,000 and £60,000 a year. It is a disincentive for families with one parent who stays at home to look after children. What of the broader tax incentives? One of the reasons I am so keen on reducing the higher rate of tax to 45% is that I think there is a mass incentive in having lower rates of tax, yet the concern for those earning between £50,000 and £60,000 who have three children is that they will be paying a marginal rate, often of over 60%, which does not seem to be a sensible way forward. Those are the theoretical issues.
There are a number of major practical issues that the Minister will have to look at. This system will be incredibly difficult to implement. The reality is that many people now earn consulting income and do not know nine months into a year, let alone at the beginning, whether they will earn between £50,000 and £60,000. We will see some strange disincentives that will encourage people to arrange for invoices to go out just after the financial year, so that one year they earn £49,000 and the next they earn £80,000 or £90,000. It strikes me that much of this will rely on IT systems, which have been a reputational nightmare for both HMRC and the Treasury. I think that this system will be very tough to administer. As has been mentioned, the implementation will be in January, rather than, as normal, at the beginning of the tax year, which will make for additional difficulty.
I want this to work. I think that all of us who want to see the deficit reduced want to see Budget measures working well for the Treasury and HMRC. My biggest concern is that we will end up returning to the House, perhaps in January or slightly later next year, at the beginning of the next tax year, recognising a system that is going to be discredited, not least because huge amounts of money will be uncollected and, if the schemes goes ahead, because large amounts will have to be repaid.
Helen Goodman
One reason for not taking up the proposal is that one group in society which is most likely to be in child poverty is children in families with lots of children.
Mark Field
I accept that, but we are looking for a simple system—[Interruption.] No, the issue at stake is trying to find a straightforward and simple system that bears down on the idea of universality, which we should try to do if our welfare system is to retain any credit.
I hope that even at this late stage the Minister will give some thought to the matter. I work on the basis that I want the measure to work, but nothing would undermine our tax system more than the benefit before us being undermined, as many of us fear, through the practical difficulties that are almost inevitable. Let us for once, as I say, be wise before the event.
Helen Goodman
Normally, one begins a speech by saying what a pleasure it is to speak, but it is not a pleasure to speak in this debate; it is a great disappointment. This is the third time that I have spoken about the problem with the child benefit proposals in the Budget that the Chancellor of the Exchequer announced.
The first time I spoke I thought that there were four arguments against the Government’s proposals; I now discover that there are 14. First, there is the impact on distribution and horizontal equity, the point well expressed by my right hon. Friend the Member for Birkenhead (Mr Field). The Institute for Fiscal Studies’ independent analysis of the impact of changes made by the Budget looked at households with and without children, and households with children are losing most. From all the changes in the current year, households with children will lose 1.3% of their annual net income compared with 0.5% for those without children.
On the changes implemented so far, the loss is 3.5% for households with children and 2.1% only for working-age households without children. By 2014 there will still be inequity between households with children and households without. By then, even assuming that universal credit is as good as the Government say it will be, which I doubt, households with children will have lost 3.7% of their income—£1,411 on average—whereas those without children will have lost 2%, or £646 a year. How it can be fair to take more money from families with children than from those without, I do not know.
There is clearly also unfairness among those people who are just above and just below the thresholds, and among families in which one person earns £50,000 and those in which two people earn £40,000. We have discussed all that before.
New problems have emerged since we debated the issue. There is the possibility of people planning their tax to avoid the charge; administrative problems have been referred to; and we have repeatedly asked the Minister how he will preserve independent taxation, given the implications for it. That point has been raised to a significant extent by the professions; the Chartered Institute of Taxation and the Office of Tax Simplification are very concerned about the issue.
One thing that is not at all clear is how Ministers intend to implement the measure, given that, as far as I can see—the Minister can correct me if he wants—in schedule 1 there is no obligation on people to share information about their incomes, so it will be extremely difficult for people to know what is going on. The Minister is calm about that, but given that families’ incomes and circumstances change over time, the measure is highly likely to lead to a large number of practical difficulties.
Another thing that is odd from a Government who claim to be in favour of the family is that they are introducing a charge that is, in effect, a couple penalty. At one stroke of a pen, they have achieved both a penalty for couples and the destruction of the independent taxation of women. It is a masterstroke of its kind.
Nadine Dorries
Does the hon. Lady agree that many couples with no children object hugely to their taxation going towards families who decide to have large numbers of children? The proposal made by my hon. Friend the Member for Cities of London and Westminster (Mark Field)—that the cap should be at two or three children—strikes a fair and moral balance.
Helen Goodman
As I explained to her hon. Friend, I do not think it strikes a good balance because the children who live in families with lots of siblings are the children who live in poverty. I know that Conservative Members are not as committed to addressing child poverty as were the last Labour Government, and we will see the results of that as we go through this Parliament. I regret that. I am surprised that the hon. Lady, who is in general a practical, well-rooted person, does not see the power of that point.
Another issue is the fiddly definitions of partnerships and the difficulty that Ministers will have in establishing what those are for the purposes of the measure. The measure is both administratively fiddly and extraordinarily mean. It will affect more than 1 million families; about 1 million people are going to lose £1,300 a year. That is a significant sum and I wish that the Government would take more seriously both the practical and the fairness arguments that we are making.
The Minister has still not addressed one final issue: people who at the moment get national insurance credits by claiming child benefit. They will lose their national insurance credits, which will impact on their pension entitlements for many years to come.
I hope that the Minister, even at this last stage, will have a last-minute conversion.
Mr Stewart Jackson (Peterborough) (Con)
I say gently to the hon. Member for Bishop Auckland (Helen Goodman) that it is incumbent on her party to offer suggestions for alternative sources of funding, rather than the endless criticism. I speak as someone who is generally extremely sceptical of the policy, but alternatives came there none from the Opposition. Even the alternative offered by my hon. Friend the Member for Cities of London and Westminster (Mark Field) was cursorily rejected by the hon. Lady.
I have been consistent on the issue since it first arose at the end of 2010, following the Chancellor of the Exchequer’s announcement. It would be churlish and unfair of me not to concede that he took on board the issue of the cliff-edge effect. He sought to ameliorate that perverse issue with the taper system, which was broadly supported on the Government Benches.
Apart from administrative issues, there are a number of other criticisms that were comprehensively covered by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson). For example, the Government are not abiding by their own tax consultation policy. My hon. Friend the Exchequer Secretary, who is proud to have been the tax personality of 2010, launched a document called “Tax policy making: a new approach” in June 2010. He also responded to the public consultation of December 2010, which called for thorough consultation and cost-benefit analysis and impact assessments for key stakeholders. That has not happened in the case of this change, which will affect 790,000 couples and 30,000 lone parents who will lose the entirety of their child benefit allocation, and 330,000 couples and 20,000 lone parents who will lose some of it. That is a major problem. Apart from the lack of consultation, we still have the unfair situation that a single-earner couple earning just above the threshold rate, which was then £42,475, will lose child benefit, but a two-earner couple earning just under that amount will receive it in full. That has not been properly addressed.
As my hon. Friend said, we have a moral responsibility to focus on clearing up the deficit left to us by the previous Administration, but this proposal, in particular, fails on the grounds of fairness. How can it be right? It will send the message that ambition is wrong, that the basic tenets of fairness will be disregarded, and that there will be a perverse anti-marriage and anti-home maker bias and an attack on hard work, ambition and family responsibilities.
The policy means that a two-earner couple with two children on a combined income of £100,000 will keep their child benefit while a one-earner family with two children on just over £50,000 begin to lose it and, if their income rises to £60,000, lose it completely. The former household is already far higher up the income distribution yet keeps its child benefit, while the latter household, which is lower down the income distribution, loses it. Let us remember that this proposal was predicated on clobbering the top 15% of the income distribution, but it does nothing of the sort. Only if the family has one child will they be in the eighth decile of the income distribution; if they have two, three, four or more children, they will, largely speaking, be skewed towards the middle. We are not clobbering the richest in society; we are clobbering people who want to do well and are ambitious and aspirational. Unfortunately, that will have perverse consequences that will backfire on this Government politically and in terms of what is needed to make sure that the administration of the system works properly.
This issue is inextricably linked to the popular commitment that we made in the 2010 general election to give a tax break for marriage and families, which we have not yet carried through. We need to keep faith with that, particularly as the coalition agreement guaranteed the Liberal Democrats, who had some ideological problems with it, the chance to abstain. If the Government want to keep the faith with the people who elected us as Conservative Members of Parliament, they should make sure that that is in the pipeline now, because after April 2013 administrative difficulties with IT systems might preclude its coming to fruition.
In terms of cash in the pocket and real tax bills, a one-earner, two-child family earning £60,000 currently pays £13,950 in tax per annum while a two-earner, two-child household with each person earning £30,000 pays just £8,768. That difference will increase substantially as a result of these tax changes. The first family will see their bill rise to £15,667, meaning that there will be a substantial difference of 59% between the tax paid by the two families.
Nadine Dorries
To go back to the point made by the hon. Member for Bishop Auckland (Helen Goodman), there are more financially astute means of dealing with child poverty and with large numbers of children than a universal benefit in the form of child benefit.
Mr Jackson
My hon. Friend makes an important and astute point, which is that the Rolls-Royce minds at the Treasury, of whom the hon. Member for Bishop Auckland (Helen Goodman) was one, can surely find alternative methods to collect income. We know that the deficit is a problem that the Government have to grapple with, mainly because of the splurge of public expenditure under the last Government and the debt millstone that they left. We must look at all the alternatives, including putting a cap on the number of children, such as two or three. Incidentally, that policy is hugely popular with the public, according to polls taken in the past few weeks.
The higher income child benefit charge fails on at least two bases. First, it is transparently unfair, because it treats families on lower incomes more harshly than those on higher incomes, merely because of the way in which the incomes come to them. Secondly, in the distinctions that it makes, it discriminates between different types of families in a way that is profoundly unenlightened and completely unacceptable. I urge Treasury Ministers to think carefully about the alternatives. This is a potential disaster in the making. It is unfair. I ask them to think again.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I will have to bring the Back-Bench speeches to an end at 19 minutes past, so there are three minutes left.
Kelvin Hopkins
I strongly support the brilliant speeches of my hon. Friends the Members for Kilmarnock and Loudoun (Cathy Jamieson) and for Bishop Auckland (Helen Goodman). There are clearly qualms on the Conservative Benches about this disastrous policy.
I had the privilege of being at the TUC general council 37 years ago as a staff member when the original policy was approved by the TUC general council. At that time, we had the social contract between the TUC and the Labour Government, which I think was a brilliant success. Harry Urwin, the deputy general secretary of the Transport and General Workers Union, argued the case against some trade unionists who were concerned about a tax allowance, which would tend to go to male workers, being given through a universal benefit largely to women for their children. It was a massively progressive policy and was the right thing to do. It was in line with the principles of universality established by Beveridge and many brilliant social scientists and theorists later on, such as Richard Titmuss. It was of enormous benefit to families and children.
The hon. Member for Mid Bedfordshire (Nadine Dorries), my nextdoor neighbour, talked about punishing children for the sins of their parents. If their parents, by accident or design, have large families, it is not the fault of the children. The money goes to the children, not to the parents. To punish the children for what their parents have done, by accident or design, is completely wrong.
The principle of universality is rightly carried through in the basic state pension, the winter fuel allowance and a number of other things. If we want to redistribute income, we do it through the taxation system, not with means-tested benefits. We talk about trying to get people back into work. If they receive means-tested benefits, they lose them when they get back into work. Sometimes it is cheaper to stay at home and claim benefits than to go to work. Universal benefits do not have that problem, because everything else comes as extra.
My hon. Friend the Member for Kilmarnock and Loudoun is right, our amendments are right and I hope that the House will carry them.
Mr Gauke
Clause 8 introduces a new income tax charge that will be used to withdraw child benefit from a claimant or their partner who receives income of more than £50,000. The charge will reduce the cost of child benefit to the Exchequer while protecting those on low incomes. This measure, like so many others, is a consequence of the previous Government’s profligacy. We are having to make these decisions because of the budget deficit that we inherited—the largest in peacetime history. Unfortunately, it is the British people who have to pay for the debt left by the last Administration. Without addressing the deficit we will face sterner economic conditions, so we are having to ask for more. However, we will do that in a way that is both fair and reasonable, and this measure will ensure that those on low incomes will remain unaffected and those with the broadest shoulders will bear the greatest burden.
Although reconsidering the universality of child benefit was never our first choice, it is the position we have been left. I recognise that many people are concerned about the change and believe that child benefit must somehow be sacrosanct. However, it simply is not fair that an individual who earns £15,000, £20,000 or £25,000 should pay for benefits for those earning £80,000, £90,000 or £100,000. When a Government need to raise revenue, it makes sense to turn to a measure with a broad base and significant numbers of recipients who do not rely on the additional payment that they receive. Child benefit is just such a payment. The steps that we are taking will raise £1.8 billion for the Exchequer by 2014-15.
Mr Leigh
What conceivable political point is there in a Conservative Government attacking 1 million of our own people—hard-working people on middle incomes and families in which someone, usually a woman, wants to stay at home to look after a child? What are a Conservative Government doing?
Mr Gauke
Speaking as a Conservative, I consider that all the British people are our people.
By raising £1.8 billion by 2014-15, we will ensure that those with the broadest shoulders bear the greatest burden. That was why my right hon. Friend the Chancellor announced that we would seek to withdraw child benefit from higher rate taxpayers. We always said that we would consider ways to implement the measure, but we have been clear that a complicated new means-testing system, which is what would happen if we extended the tax credits system in the way that some have proposed, would not be a sensible way forward. Instead, we should look to existing systems and processes to ensure that we can achieve our goal.
Clause 8 withdraws financial gain from child benefit from families in which one partner has an income of more than £60,000, and reduces the gain if one partner has an income of more than £50,000. It does so in the most efficient and pragmatic way possible, applying a tax charge on those high earners using existing processes. That charge will apply to an individual in receipt of child benefit, or to their partner if they are married or in a civil partnership or living as if they were married or in a civil partnership—a point that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) made. That is an existing definition of partners within social security legislation and means that other adults living in the household will not affect the liability.
The changes will not affect those receiving child benefit who have income under £50,000, or whose partner does. Some 85% of families receiving child benefit, or 7 million families, need not be troubled by the changes. If an individual or their partner has income of more than £50,000, the charge will be tapered depending on their income. The equivalent of 1% of the child benefit award will be charged for every £100 increase over £50,000 in adjusted net income. Child benefit will be withdrawn in full only at an income of £60,000. Furthermore, the thresholds between which the taper will operate will not depend on the number of children.
The changes will take effect from 7 January 2013, and the individuals affected will include information relating to the charge on their self-assessment returns for the first time for the tax year 2012-13. The first payments of the charge will be due by 31 January 2014 if a taxpayer chooses to pay in a lump sum. Those affected will be able to opt out of child benefit payments—that answers a question that my hon. Friend the Member for Mid Bedfordshire (Nadine Dorries) asked. Some may wish to do so, although Her Majesty’s Revenue and Customs will set out clearly the options and implications. For example, if an individual’s income were to fall below £60,000, they may revoke their election not to receive child benefit, and payments would be resumed.
Mr Stewart Jackson
If my hon. Friend is going to consider the efficacy of different policies, will the Treasury undertake to consider alternative sources of funding as a corollary to this change, such as a cap on the number of eligible children?
Mr Gauke
My hon. Friend and other hon. Members have made the case for a cap on the number of children receiving child benefit. I hear his point about an alternative policy, but we must ensure that the child benefit regime provides support for those who need it most. The policy for which we are legislating maintains that principle—those on the lowest income will retain support.
The Government strongly discourage anyone from not registering for child benefit on the birth of their child, even if they decide to opt out of receiving payments. The child benefit system does not process only child benefit, and failing to register can affect state pension entitlement and make it less straightforward for the child to receive a national insurance number when they turn 16. It is therefore important that children remain registered.
Amendments 21 and 22 would allow those on the taper who have opted out of child benefit retrospectively to receive the payment. I am pleased to confirm that HMRC will apply the legislation as it is to enable such a claim to be made. I can therefore reassure the hon. Member for Kilmarnock and Loudoun that the amendments are not necessary. As I have said, the legislation provides a claimant whose income, or whose partner’s income, is more than £50,000 with the opportunity to elect not to be paid child benefit, so they are not liable for the high income child benefit tax charge. A claimant who has elected not to be paid child benefit can subsequently revoke that election and ask HMRC to reinstate payment of child benefit.
The payment of child benefit would then normally be made from the first pay day after the revocation has been received by HMRC, and not from the date when child benefit was first stopped. That is because it would make no sense to pay arrears of child benefit to those whose income, or whose partner’s income, is more than £60,000. However, the legislation provides for retrospective revocation when a claimant discovers that, contrary to their original expectations, they do not have an income of £50,000 or above. That retrospection will be limited to two years after the end of the tax year to which the original election applies. That means that child benefit can be paid for up to that two-year period.
When a child benefit claimant or their partner has income of between £50,000 and £60,000, the decision whether to elect to receive child benefit is not so clear cut, because the amount of the tax charge is dependent on their income. HMRC recognises that a couple might be nervous about making an election if a later decision to revoke the election would apply only to future payments, leaving them worse off. The legislation provides HMRC with the power to issue directions as to how the election process will be administered. I hope I have cleared up that point.
Let me try to deal with the few remaining points. Draft guidance is being prepared over the summer, during which time HMRC will consult external representatives, including the Social Security Advisory Committee and the HMRC benefits and credits consultation group. The directions will confirm that an election that has been made by a claimant whose income or whose partner’s income is between £50,000 and £60,000 can be revoked retrospectively, to the point at which the child benefit ceased.
I have dealt with this point on the state pension, but it is possible to be registered even if people are not receiving cash. I have also dealt with the point on the definition of partners used in the Bill. As for the argument that the measure is complicated, we have looked at alternatives, but we think the measure is the best available to us. On the principle of individual taxation, HMRC is committed to protecting confidentiality. For taxpayers who are unable to discuss their incomes with each other, HMRC will develop a process with appropriate security checks so that they can answer yes or no to simple questions about the income of their partner.
As I have said, the Government have had to make difficult decisions. The measure means we can continue to provide child benefit, and so, in a sustainable manner, protect those who need it the most. We accept that this is not an ideal situation, but the budget deficit left by the previous Administration is the challenge we must overcome if we are to avoid a far worse predicament. I urge the Opposition to withdraw their amendment.
Cathy Jamieson
In the very short time available, I want to say that we will press amendment 24 to a Division, although I accept what the Exchequer Secretary said about amendments 21 and 22 not being necessary. The only other point I would make is that it seems odd for him to say that he did not want a more complicated means-test system and then to introduce an extremely complex taxation system. It does not make any sense, and does not pass the test of competence or the test of fairness.
Question put, That the amendment be made.
Business without Debate
delegated legislation
Delegated legislation (committees)
Beer Duty Escalator
(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Gavin Williamson (South Staffordshire) (Con)
It is a great privilege to have secured this debate this evening. It is an even greater pleasure to see so many hon. Members in their places as we start this Adjournment debate at this late hour. One could say that an Adjournment debate is akin to an after-hours lock-in, but probably without so much pleasure or enjoyment. We are all here because we care passionately about both the brewing industry and, of course, our pubs right across our constituencies and across the nation. We care about them because we know they are part of the fabric of our nation. We all have concerns about the beer duty escalator and the impact it is having on the many pubs and breweries across the land.
We have to go back to 2008 to see the introduction by the last Labour Government of the beer duty escalator, which saw beer duty rise by inflation plus 2% each year. This, sadly, has been carried on, and it is having a detrimental impact on our pubs and breweries.
James Wharton (Stockton South) (Con)
My hon. Friend makes a very good point, and I congratulate him on securing this important debate. He will be aware that it has been predicted by the British Beer and Pub Association that the escalator could cost as many as 5,000 jobs. When he talks about a detrimental impact, does he think it important for the House to recognise just how significant that detrimental impact could be on such an important industry?
Gavin Williamson
My hon. Friend makes a valid point about the impact on jobs in the industry of the beer duty escalator, which I was coming on to. In my constituency of South Staffordshire, 1,286 people are employed in breweries and pubs—whether in the fantastic brewery of Enville, the brewery of Kinver, the Morton brewery in Essington, the Marston’s brewery in neighbouring Wolverhampton, or in the 86 pubs scattered across the constituency. Unfortunately, however, these pubs have declined in the last few years, and I am afraid that the beer duty escalator has had an impact in that respect.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Does my hon. Friend agree that a sensible way of helping pubs might be to lower the duty on draught beer but raise it on canned beer?
Gavin Williamson
My hon. Friend is not known as a visionary—I believe that his new wife often refers to him thus—for nothing. I hope that the Minister is noting his ideas eagerly, and will recommend them to the Treasury as a host of examples of radical new thinking that could improve and support our breweries and pubs.
Greg Mulholland (Leeds North West) (LD)
I congratulate my hon. Friend on securing this debate, and assure him that his cause has the full support of the all-party parliamentary save the pub group.
Pubs pay even more tax per pint because of the other forms of tax to which they are subject. I fully support my hon. Friend’s proposal—indeed, I think that a separate duty should apply to real ale, which requires an increased cost of production and increased cellarmanship—but there is also a problem with European legislation. Rather than saying that we should not challenge that legislation, should not Ministers convey to Europe the message that it could do something important that would greatly help not only our brewing industry but our pubs?
Gavin Williamson
It is always welcome when a Liberal Democrat speaks so vociferously against the European Union. I thank the hon. Gentleman, who has fought so hard for pubs not just in his constituency but throughout the country.
Almost 1 million jobs in the United Kingdom are generated by the UK beer and pub industry, which affects all our constituencies, including that of the Economic Secretary to the Treasury, my hon. Friend the Member for Norwich North (Miss Smith). Some 550 people work in the industry there, and I am sure that, like the rest of us, my hon. Friend wants the number to increase.
Mr Andy Slaughter (Hammersmith) (Lab)
I am trying to extend the debate to the Opposition Benches. Although my local brewer, Fuller, Smith and Turner, is internationally famous, it is still a family firm, but last year it paid 37% of its turnover—not its profit—in tax, and beer duty will rise by 27% during the current Parliament. Should not the Government take notice of that?
Gavin Williamson
The hon. Gentleman has made an important point about how difficult it is for many pub and brewing companies to invest more money in generating new jobs and products in a sector in which we are world leaders. We in the United Kingdom are clearly paying far more duty than the European average. Although we consume only 13% of the beer consumed in the European Union, we pay 40% of the tax bill. I do not often talk about the need for European harmonisation, but I should like us to harmonise with the Germans, who only pay a tenth as much beer duty on their pints. Perhaps we should explore that idea further.
Mr Robin Walker (Worcester) (Con)
My hon. Friend mentioned new products a moment ago. The Firefly, a pub in Worcester, recently embarked on the first new brewing venture in the city for 16 years. I am sure that the pub, and Worcestershire, would support my hon. Friend’s campaign.
Gavin Williamson
My hon. Friend has made a valid point. Not only is everyone in South Staffordshire rooting for the ending of the beer duty escalator, but so are those in the great county town of Worcester. Obviously their pubs are not as fantastic as those in South Staffordshire, but we all have our crosses to bear in life.
We recognise that the Government face a great challenge. It is not easy to do what they are doing, and Treasury Ministers carry a burden on their shoulders that I am sure none of us on the Back Benches would wish to carry.
Andrew Griffiths (Burton) (Con)
As chairman of the all-party group on beer, I congratulate my hon. Friend on securing this debate. I am sure he agrees with me that the packed Benches at almost midnight show the strength of feeling in this House in support of Britain’s brewing industry. Does he share my shock that British brewers are paying half their income in tax to the Treasury, yet the future of the industry is at a critical point? Does he agree we can save jobs and pubs if we cut the duty on beer?
Gavin Williamson
As always, my hon. Friend and fellow Staffordshire Member of Parliament makes an excellent point. We want to encourage investment by our brewers into this vital industry and into our pubs.
Gavin Williamson
Over the last eight years there has been a 50% increase in beer duty but only a 10% increase in revenues from that duty. That is a great concern.
Gavin Williamson
My hon. Friend is bobbing up and down, so I had best give way to him.
Neil Carmichael
We are talking here about small and medium-sized businesses—businesses that employ some 1,600 people in my constituency. My four breweries are very successful small businesses, but they could do with some help in respect of this policy.
Gavin Williamson
All the Members who have intervened have made the most wonderful points, and my hon. Friend certainly has not disappointed in that regard. I am a little disappointed, however, that he did not mention his four breweries for a potential future press release.
Richard Fuller (Bedford) (Con)
I, too, congratulate my hon. Friend on securing this important debate. As the Member for Bedford, the home of the largest family-owned brewery, Wells and Young’s, may I ask him whether he agrees that it is also a timely debate? The Treasury recently took action to reduce the fuel duty escalator, and it would be a welcome addition if we were also to eliminate the beer duty escalator and its impact on our economy.
Gavin Williamson
I would never dream of supposing that I knew more than Treasury Ministers, but that would certainly be a good idea to bear in mind for future Budgets. We must look at the economics involved. As I mentioned, there has been a 50% increase in the rate of duty, but only a 10% increase in the amount of revenue.
I have had the great privilege over the past few months of serving on the Finance Bill Committee, where I heard many emotive and brilliant arguments from my hon. Friend the Economic Secretary about the need to get the balance right between the rate of tax and the money it brings in.
Heather Wheeler (South Derbyshire) (Con)
I must declare an interest: for 25 or 26 years, I have been married to a brewery man—and thank goodness for Bass and for Young’s. Many pubs in South Derbyshire are still under threat or are going to close, even though the Shardlow brewery, the John Thompson brewery and in particular the Burton Bridge brewery, which has just opened, are fantastic. I should also mention the Brickmakers in Newton Solney. We are trying to do our best, but the yoke of taxation is too high. Does my hon. Friend agree?
Gavin Williamson
I entirely agree. I think we have gone too far, and it is having a detrimental effect on the amount of tax revenue the Treasury can get from this important potential source. The Exchequer already brings in £8 billion in tax revenue from the beer and pub industry, but my concern is that that amount will go into slow decline. Already, the Office for Budget Responsibility and Her Majesty’s Revenue and Customs have made it clear that the money coming in from the increase in beer duty is not going to increase. It has not done so in the past year and it is not expected to do so in the next year. We therefore need to look at different ideas. One of them is not to keep taxing. We have had many debates about the Laffer curve and its benefits, but the simple reality is that beer duty is getting to the point where it is too high and it is pricing people out of the market.
Nigel Mills (Amber Valley) (Con)
Does my hon. Friend agree that one of the problems of getting the duty rate too high is that it gives a boost to the illicit trade, which now makes up about 10% of the off-sale market? The higher the duty is pushed, the higher the illicit sales go and so no duty at all is received.
Gavin Williamson
The worst thing we could possibly see is the growth of the illicit trade and the Chancellor of the Exchequer getting none of the money whatsoever. We want to make sure that people are paying their taxes and their duty, but we do not want to tax people out of the market.
Richard Drax (South Dorset) (Con)
May I add a slightly solemn note to what has been a light-hearted debate? I had a great friend, David Woodhouse, the chairman of Hall and Woodhouse in Blandford, who died aged 49 of a heart attack, running his company. He said to me on many occasions that he could not understand why Governments, and ours in particular, were proposing this tax every year, given that it is a tax on jobs at a time when we are trying to increase jobs. Surely that must be a point for the Government to take away from this debate.
Gavin Williamson
My hon. Friend touches on an important point: this is not only about jobs, but about British jobs. Some 68% of the drinks that our pubs sell are beers, so this duty is having a detrimental impact on every one of our pubs. Furthermore, 86% of all that beer that is consumed is produced in this country, which compares with a figure of 0.2% for wine.
Julian Sturdy (York Outer) (Con)
I congratulate my hon. Friend on securing this very important debate. He is absolutely right in what he says about the jobs in the pub and brewing industry, but let us also not forget the malting industry, which has a great tradition, especially in Yorkshire. I must declare an interest, because there is also an impact on the farming industry. The job creation that is affected by the beer duty escalator goes right from the grain to the glass.
Gavin Williamson
I would never expect anything other than an intervention from a great colleague of mine, who also is a farmer, to enable us to understand the whole process of the brewing industry and to put it into perspective for us.
Julie Hilling (Bolton West) (Lab)
I congratulate the hon. Gentleman on securing this debate, and he is being extremely generous with his time. Does he agree that it is also ironic that we are increasing the tax on beer, which drives people to drink much more harmful substances—drinks with a much stronger alcoholic volume—so raising the duty all the time is not good for the nation’s health either?
Gavin Williamson
The hon. Lady makes a very valid point. One of the consequences of having a Scotsman as Chancellor for quite a period of time is that the duty on Scotch whisky seemed to be frozen. Perhaps now that we have an English Chancellor what we need is to freeze the duty on English beer. There is so much that we need to be doing. We need to be reviving our pubs. We need to be seeing that vigour and sense of community returning to all our pubs across the country.
Andrew Bingham (High Peak) (Con)
I congratulate my hon. Friend on securing this debate; the number of Members here at this late hour shows its importance. Does he agree that pubs not only sell beer, but provide a great community centre in small and rural communities? So many charity collections and fundraising exercises begin in pubs, where people meet and talk.
Gavin Williamson
My hon. Friend makes a valid point. In addition, pubs are an important part of the economy and employ young people. In my constituency, 50% of those employed in the beer and pub industry are under the age of 25.
We all talk about the beer duty escalator. Just the other day, I was in a department store. I went up an escalator, and then I noticed that I went down one. So I say to the Minister that we could keep a beer duty escalator, but perhaps put it in reverse.
Andrew Jones (Harrogate and Knaresborough) (Con)
My hon. Friend is being very generous and possibly setting a world record in taking interventions. A suggestion that might meet the requirement from the Treasury Bench to raise revenue and which builds on the points made by colleagues about supporting the industry and supporting pubs is to remove the escalator just from cask ales. Those ales are available only in pubs. British pubs are of course part of our heritage and we are talking about a British product with a British supply chain, as my hon. Friend the Member for York Outer (Julian Sturdy) said. We have great pubs, particularly in the Yorkshire area.
Gavin Williamson
Unfortunately, they are not as good as those in the county of Staffordshire—although I am sure the pubs in Yorkshire are not bad.
I would love the Minister to stand at the Dispatch Box and announce to the whole Chamber that the beer duty escalator will be frozen or reversed. I know that she carries many burdens on her shoulders and may not be able to give us that promise, so I ask her to meet me and other colleagues who have such concerns in order to listen to the arguments put forward by the industry and by people who feel passionately not just about our pubs but about our beer and our great breweries—a part of our industrial heritage that is living and breathing today.
I am quite sure that if the Minister can take the arguments to the Chancellor and to all those in the Treasury and convince them that we need either to freeze beer duty or to let it rise only in line with inflation rather than at inflation plus 2%, she will be able to provide an enormous boost not just to British breweries and British beer but to the great British pub. I am quite sure that, if my hon. Friend can achieve that, when she next enters the pub every punter will be raising their glass to the Boadicea of British beer.
The Economic Secretary to the Treasury (Miss Chloe Smith)
I must take the opportunity, after that last reference, to invite hon. Members to drink at the Iceni brewery in Norfolk, at which I am sure they would be extremely welcome.
I congratulate my hon. Friend the Member for South Staffordshire (Gavin Williamson) on securing the debate. It has been interesting and I thank him and all hon. Members who have contributed tonight. It will not be a surprise, as I have the rather thankless task of being the final speaker tonight at this late hour, if I suggest that he can buy us all a drink when we have finished. I am sure he can do that.
In all seriousness, I want to compliment my very fine brewing and drinking city of Norwich. I regularly go into pubs—indeed, I drink the odd beer—I run politics in the pub surgeries and my local newspaper also runs a very fine “Love your local” campaign, so I am very much in tune with the spirit of what we are discussing tonight.
I regret to say that I must turn to the burdens about which my hon. Friend spoke and do my duty in providing some background on my hon. Friend’s proposal to end the beer duty escalator. As hon. Members will be aware, the inflation plus 2% annual increases were first announced in the 2008 Budget by the previous Government and were extended in the March 2010 Budget. Those pre-announced increases applied to all alcohol types, not only beer, and the additional revenue from the increases was included in the public finance projections at that time. Let me put some numbers on that for your edification, Mr Deputy Speaker. The value of removing the escalator would be £35 million for 2013-14 and £70 million after that.
Greg Mulholland
Does the Minister not accept that beer has been treated particularly unfairly when compared with spirits and cider? Ludicrously, the global cider producers who knock out mass-produced products, often not using British apples, pay half the duty even of the smallest micro-brewers on the lowest small breweries’ relief rate. That is simply not fair.
Miss Smith
I hear the hon. Gentleman’s argument and pay tribute to him for his work with his all-party group. Let me answer his question with the main question posed at the end of the speech made by my hon. Friend: I would of course be happy to meet hon. Members who are present tonight to discuss these matters further.
There are many points to go into—more, I regret to say, than I have time for. The key point that I must make first is that the duty increases that we are talking about—the increases through to 2014-15—form a vital part of the Government’s plan to tackle the debt left by the previous Government. It would be worse for everybody if we did not tackle that debt. When I say “everybody”, I mean beer drinkers, cider drinkers, spirit drinkers, wine drinkers, brewers, publicans and, of course, all those who never touch a drop. The high interest rates that would result if we abandoned our credible plan to tackle the deficit would not help anybody.
Dan Rogerson (North Cornwall) (LD)
The Minister will no doubt have seen in the business section of The Times today the piece on the Sharp’s brewery in Rock. Doom Bar is now a famous brand around the country, and is enjoyed, the article tells us, by the Prime Minister. The Minister has rightly set out the situation facing the country. However, the brewing industry is very keen to take on young people, train them up, and give them a career. That is what Sharp’s is doing. Does she agree that being more sympathetic on beer duty might allow companies to invest in taking on more employees?
Miss Smith
Again, a fine point is made. I am the first to support the notion of encouraging young people into work and work experience, but we have to be realistic. The Treasury and the Government face a number of proposals from different industries that say, “Ours is the industry that holds the key,” and I am sympathetic to those arguments. There is, of course, much evidence to go into for all such proposals, but it is important to proceed as a responsible Government, and to try to take into account the revenue that is required to fund vital public services and that, as I say, helps everybody.
Alec Shelbrooke
To expand on my intervention on my hon. Friend the Member for South Staffordshire (Gavin Williamson), perhaps we can look at a tax-neutral way of getting more people into pubs, which create so many jobs. As there is an onus on landlords to ensure that people drink sensibly on their premises, that, rather than minimum pricing for alcohol, may help to tackle alcohol abuse.
Miss Smith
On that note, let me come on to some of the factors affecting the state of the industry. It is important to be clear that duty is not the only thing affecting the state of the pub industry. We have all, I am sure, been in good pubs and terrible pubs, and the price of the beer is not the only factor involved. On the price of a beer, I point out that the pre-announced alcohol duty increases in question added only 3p to a pint of average-strength beer, including VAT. The total duty on a pint of beer is now 47p. I think that hon. Members will agree that, especially as alcohol consumption does, after all, carry its own costs and concerns, that addition in the Budget this year is not an overwhelming or unreasonable amount. It is something that we can consider in the context of the public finances and the challenges relating to them that have to be met.
As I say, alcohol duty is only one of a wide range of factors that determine the final price paid by the customer. Let us be clear about the position of the industry. The decline in the beer and pub industry that some talk of is influenced by a number of factors. Lifestyles are changing. People’s choices when they walk into pubs and other establishments are changing. People have more choice about whether they go to a pub or somewhere else. Removing the escalator, which is what has been asked for tonight, and the pre-announced duty increases would not solve those problems. There is very much a wider context.
My right hon. Friend the Member for Putney (Justine Greening)—my predecessor as Economic Secretary to the Treasury with responsibility for alcohol duty—and I have met a wide range of representatives from industry. As I said, I am happy to continue doing so. I recognise the important contribution that pubs and breweries make to local communities and to the wider economy. Many groups that have been prayed in aid tonight, such as the Campaign for Real Ale and the British Beer and Pub Association, have welcomed the work that we have done to date, such as the review of alcohol taxation in November 2010. We continue to keep all taxes under review.
Miss Smith
I am sorry. I must complete my remarks within a few minutes, but as I said, I am happy to continue the conversation, whether in the bar or elsewhere.
CAMRA’s figures show that the net rate of pub closures has slowed dramatically over the past two years. I believe the BBPA’s figures support this. I support pubs as places where people can drink sensibly in a supervised environment and enjoy themselves responsibly. I want to reverse the trend towards pre-loading on cheap alcohol at home. I was out with Norfolk constabulary in my neighbouring constituency, Norwich South, on Saturday night, observing some of the problems in action in places that are not as friendly as the community pubs that have been spoken about tonight.
In my view, minimum unit pricing will help to tackle the issue of excessive alcohol consumption and heavily discounted alcohol sold in supermarkets and off-licences. I strongly believe that that will benefit pubs and the responsible on-trade once we can tackle the demand for cheap alcohol in supermarkets. It is of interest to hon. Members here tonight that we have introduced a 50% reduction in alcohol duty for low-strength beers. That may be a growing sector in the industry.
In brief response to my hon. Friend the Member for Amber Valley (Nigel Mills), the Government are committed to tackling alcohol fraud and avoidance, and have been working in collaboration with the industry to address that. There are a number of measures that we wish to take to act on that.
At the Budget, this Government knew that it would be unfair to place further burdens on the alcohol industry, on pubs and on responsible drinkers. This is why we did not go further than the pre-announced duty increases. But I return to my main point. There is an important question of the public finances. The revenue from these increases was included in the public finance projections at that time. It would now require the raising of other taxes to pay for removing them. That is the question that I ask hon. Members to consider. I am sure that many pub conversations come up with the best answers to that, which hon. Members may like to go on to discuss.
This year’s duty increase and those to 2014-15 form part of our vital plan to reduce Britain’s debt, which is required to ensure low interest rates and a stable platform for growth for everybody—drinkers, businesses and households. We will continue to keep all taxes under review and monitor the impact of alcohol duty—
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Written Ministerial Statements
(11 years, 10 months ago)
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Copyright Reform
(11 years, 10 months ago)
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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)
My noble Friend the Parliamentary Under-Secretary of State for Business, Innovation and Skills, Baroness Wilcox, has today made the following statement:
Today the Government are announcing part of their response (“the Response”) to the recent Copyright Consultation (“the Consultation”). These are Government proposals to take powers to authorise orphan works and voluntary extended collective licensing schemes, and put in place statutory codes for collecting societies that do not adhere to voluntary ones.
The Government have considered the responses to the consultation carefully, and intend to legislate as soon as possible. The Enterprise and Regulatory Reform Bill currently going through Parliament provides such an opportunity and the Government plan to lay amendments to introduce these measures in the Committee Stage of the Bill.
The response document sets out the broad parameters that the Government intend to set for these measures, and further information about their intentions regarding the regulation of collecting societies. Subject to parliamentary approval once the necessary legislation is in place, there will be further consideration of the regulations for the authorisation of orphan works and extended collective licensing schemes, generally through consultation. Similarly, there will be further consultation on the regulations for statutory codes of conduct.
The response will be published on the Business, Innovation and Skills, and Intellectual Property Office websites, at: http://www.ipo.gov.uk/response-2011-copyright.pdf and a copy will be placed in the House Libraries. Responses on other issues covered by the Copyright consultation—including the Government’s plans to modernise copyright through changes to the UK’s copyright exceptions and the proposed copyright notices scheme—will be set out in a subsequent document later this year.
The Government have welcomed the views of the Business, Innovation and Skills Committee on this area of work, and is considering the recommendations, from its recent report “The Hargreaves Review of Intellectual Property: Where Next?”.
In addition, the Government will be introducing an amendment which will take the form of a power to amend the Copyright Designs and Patents Act 1988 by regulations in order to implement EU directive 2011/77/EU on the term of protection for sound recordings. This power will allow the Government to implement the EU directive while maintaining the current level and scale of criminal penalties for infringement activity applicable under UK law.
ECOFIN
(11 years, 10 months ago)
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The Chancellor of the Exchequer (Mr George Osborne)
The Economic and Financial Affairs Council was held in Luxembourg on 22 June 2012. Ministers discussed the following items:
Contributions to the European Council Meeting on 28-29 June 2012—European Semester
Following a ministerial discussion the Council approved the fiscal and economic elements of the draft country-specific recommendations under this year’s European semester for the 27 member states. The Council also approved draft recommendations on the economic policies of the member states of the euro area as a whole. Ministers also discussed the process by which the country-specific recommendations had been arrived at. The recommendations were taken forward for political endorsement at the European Council and are due to be formally adopted by the Economics and Financial Affairs Council in July.
Implementation of the Stability and Growth Pact
The Council adopted decisions closing excessive deficit procedures for Germany and Bulgaria, thus confirming that they have reduced their deficits below the EU’s 3% of GDP reference value. The Council also adopted a decision lifting the future suspension of commitments for Hungary from the EU’s cohesion fund.
Convergence Report from the Commission and the European Central Bank (ECB)
The Commission and the ECB provided an update on their assessment of the readiness for euro membership of the eight euro outs committed to joining the single currency (Bulgaria, Czech Republic, Latvia, Lithuania, Hungary, Poland, Romania and Sweden). This was followed by a brief discussion among Ministers. The assessment showed that none of these member states fulfils the convergence criteria at this stage.
Follow up to the G20 Summit (Mexico, 18-19 June 2012)
The Council was briefed by the presidency and the Commission on the outcome of the G20 summit in Los Cabos (Mexico) on 18 and 19 June. The summit focused on instability in the euro area, as well as on ways to strengthen international financial architecture and regulation; reduce food price volatility; promote “green” growth and greater investment in scientific and agricultural technology and research.
The presidency also looked ahead to the G20 Finance Minister’s meeting on 4 and 5 November in Mexico City, noting the implementation of the 2010 IMF quota and governance reforms, which will be discussed by the IMF executive board.
Financial Transactions Tax
Following a presentation by the presidency, Ministers debated the future direction of this dossier. A number of member states expressed concerns and stated their opposition to an FTT and I intervened to reiterate UK opposition to the Commission’s proposals in this area, given the negative impacts on jobs, growth and on financial activity across the EU at a time when we should be doing all we could to attract business and drive growth. I also underlined that any new proposal put forward for consideration under enhanced co-operation must provide clarity on the scope of the tax and what the revenues would be used for.
The presidency concluded that support for an FTT as proposed by the Commission was not unanimous, but that some member states wished to further consider enhanced co-operation on this dossier. The presidency noted that formal requirements for enhanced co-operation would have to be met, and that next steps will be handled by the incoming Cyprus presidency.
Energy Taxation Directive
The Council discussed progress on this directive and the presidency concluded that while there was agreement amongst member states that minimum tax levels should be laid down in the directive, member states should retain maximum flexibility to determine the structure of their national energy taxes.
Any Other Business
The presidency provided the Council with an update on progress on four financial services directives: the capital requirements directive (CRD4); the credit ratings agencies directive (CRA3); the EU mortgages directive and the directive on the harmonisation of transparency requirements for listed companies.
ECOFIN Breakfast
Over breakfast Ministers were debriefed on the previous evening’s Eurogroup
meeting. Ministers discussed the economic situation, as well as bank recapitalisation and developments in sovereign debt markets. They also discussed the possibility of a capital increase for the European Investment Bank.
ECOFIN Lunch
Over lunch Ministers discussed the multi-annual financial framework for the 2014 to 2020 period.
Equitable Life Payment Scheme
(11 years, 10 months ago)
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The Financial Secretary to the Treasury (Mr Mark Hoban)
The Treasury can confirm that the Equitable Life payment scheme has written to approximately 90% of all eligible individual policyholders to inform them of their status within the scheme, and that payments have been made to 288,823 policyholders. In addition, the scheme has today published a further progress report, which can be found at: http://equitablelifepaymentscheme. independent.gov.uk/ and I have arranged for a copy to be placed in the Libraries of both Houses.
In the coalition agreement published in May 2010, the Government pledged to
“implement the parliamentary and health ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure”.
To honour that pledge the Government announced in October 2010 as part of the spending review that £1.5 billion would be made available to the scheme for distribution to up to 1 million eligible policyholders, and passed the Equitable Life (Payments) Act to establish the scheme. The Government met their commitment to start making payments by June 2011 and high volumes of automated payments were being made by December 2011.
In order to lessen the burden on policyholders, the scheme contacts policyholders directly with payment and there is no requirement to “make a claim” to receive a payment from the scheme. Therefore, the scheme committed to contact all the individual (i.e. non group) policyholders it could by June 2012 so that they knew their status within the scheme. This letter would either:
make payment;
inform of a nil payment;
inform them that they would be paid by April 2014 and the amount of any payment due.
In the previous progress report, published in January 2012, the scheme reported that 95,000 policyholders had received payments totalling £77 million. The scheme can confirm today that 288,823 policyholders have received payments from the scheme totalling £277,727,668. This means that nearly two-thirds of all individual policyholders due a payment from the scheme have received it. Additionally, around 75% (27,671) of with-profits annuitants have now been contacted by the scheme about their first year payment, 25,215 of whom have received payment.
As of 30 June the scheme can confirm that it has written to 495,823 (circa 90%) individual policyholders to either:
make payment;
inform of nil payment;
request further address verification in advance of making payment;
inform of eligibility within the scheme.
There is a group of individual (i.e. non group) policyholders for whom the data processing work to determine the payment status of their policies is ongoing. This means that while the scheme cannot confirm the amount of any payment due at this stage, the scheme can confirm their eligibility for the scheme.
The scheme has written to these policyholders to confirm their eligibility, that the data processing work is ongoing, and that any payment due should be made no later than April 2013. These policyholders need take no further action as the scheme has all the data it requires to confirm their payment status within the scheme and will be writing to them again in due course.
Following receipt of payment, the scheme has continued to receive low levels of response from policyholders—less than 0.25% of eligible policyholders have complained to the scheme. In addition, the scheme has established an independent process to assist those policyholders who are dissatisfied with any complaint response from the scheme.
As stated in June 2011, there are additional complexities in retrieving the contact details of those policyholders who bought their policy through a group (i.e. company) scheme. The scheme can confirm that it has begun the process of contacting group scheme trustees to obtain policyholder’s address details. Payment to these policyholders will start in the coming months.
The scheme can also confirm that hundreds of payments have already been made to the estates of deceased policyholders, and the process of identifying, tracing and contacting the estates of deceased policyholders continues. As this is an understandably complex area with some cases going back many years, this verification work will continue during 2012 and throughout the duration of the scheme. Payments to the estates of deceased policyholders are being made on completion of this tracing process.
Over the coming months the scheme will continue to make payments to policyholders and to contact the trustees of group schemes so that their eligible members can be paid.
The end of the first year of the scheme marks a significant milestone in the life of the scheme, and bringing closure to the Equitable Life issue. Eligible policyholders who have not yet heard from the scheme should contact the scheme via its call centre on: 0300 0200 150. The scheme will then be able to advise of the next steps a policyholder should take to receive further details on their status within the scheme.
Education for Young People
(11 years, 10 months ago)
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The Secretary of State for Education (Michael Gove)
We are committed to raising the age of compulsory participation in education or training to 17 in 2013 and 18 in 2015. This will ensure that every young person has the opportunity to continue their studies and go on to skilled employment or higher education.
The raising the participation age (RPA) legislation makes it clear that education and training does not necessarily mean full-time study in a school or college. Employment with training is, for many young people, an excellent option, either through an apprenticeship or through full-time work with part-time training alongside. We want to do all we can to support employers who want to hire young people.
The legislation introduced by the previous Government included duties on employers to check evidence of young employees’ enrolment in education or training and, where necessary, to agree working hours to fit around those courses. It also introduced powers for local authorities to take enforcement action against young people who are not participating and their parents, which could ultimately have led to a fine.
Ministers stated during the passage of the 2011 Education Bill (now Act) that the Government’s intention was to commence all of the provisions of the RPA legislation, except the enforcement against young people and parents, to the original timetable.
However, our recent consultation suggested that the introduction of the employers’ duties, together with associated potential fines, could act as a powerful disincentive to firms hiring 16 and17-year-olds, particularly at a time when the labour market for young people is extremely difficult. This would be damaging both for the economy and for the prospects of young people.
We have decided that we must not at this point put in place barriers that may deter businesses from employing young people. We have therefore decided that we will not commence the two duties on employers within the RPA legislation (in chapter 3 of the Education and Skills Act 2008) in 2013.
As a result, we will not require employers to check that a young person is enrolled on a course before employing them, nor arrange work to fit round training as would previously have been the case. Nor will we subject employers to fines for failure to discharge one or more of these duties.
The duties on employers, together with the enforcement process against young people and parents, will remain in statute. We will review implementation regularly after 2013 and will have the option to bring these elements into force if and when they are needed.
The duties on young people, local authorities and learning providers will be brought into force as planned in 2013 (and 2015). Sixteen and 17-year-olds in work will be required to participate in education or training and local authorities will have a duty to support them to do so.
A copy of this statement and the report of the recent consultation will be placed in the House Libraries.
The Secretary of State for Education (Michael Gove)
We need to reform the education system for young people aged over 16, particularly for students who want to pursue vocational courses. Around 1.6 million 16 to 19-year-olds are in education each year, but as Professor Alison Wolf stated in her review of vocational education, as many as 350,000 are on courses which do not benefit them.
This year’s annual skills survey from the CBI found that more than two-fifths of employers were not satisfied with the basic literacy of school and college leavers, and more than a third were unhappy with levels of numeracy. Reform is vital if we are to ensure that all young people are given the best chance of getting good jobs, succeeding in life and continuing their education.
To ensure a better experience for all young people a number of changes need to take place. One of the principal barriers to improving vocational education has been the system for funding education for young people aged over 16. At present schools and colleges are funded per qualification and so the more qualifications students take and pass, the more money schools and colleges receive. This means that the most rational course of action for schools and colleges is to enter students for easier qualifications—whether vocational or academic. Furthermore, the funding system is not geared towards activity that does not lead to qualifications, such as work experience, even though evidence shows its high value in securing future employment.
We are therefore introducing reforms to programmes of study and funding so that schools and colleges are freed to improve vocational education. Rather than funding per qualification, we will fund institutions “per student” allowing sufficient income for each student to undertake a full programme of study, whether vocational or academic.
As a result of these changes, every 16 to 19-year-old will have the opportunity to undertake high quality study which will help students move on to skilled work or further or higher education. Young people will be able to take up valuable work experience opportunities. Students without a good pass at 16 in English and maths—the subjects most valued by employers—will have to continue to study those subjects to age 18. We will publish data for each institution showing whether students progressed into work and further or higher education. This will enable students and their parents to make informed choices about programmes of study and institutions. It will also encourage schools and colleges to offer the courses and qualifications employers and higher education institutions value.
Young parents in particular can face barriers to participating in post-16 education and so I am today also publishing the results of the consultation on the Care to Learn childcare support scheme. This confirms that we will continue the scheme in its current form and the support it offers to this group of young people.
We are committed to raising the age of compulsory participation in education or training to 17 in 2013 and 18 in 2015. Young people will either study full or part-time at a school or college, or be in work but released for training opportunities. The Government want to do all they can to support employers who want to hire young people. We are today making a separate statement that explains why we have decided not to commence the duties placed on employers by the raising the participation age legislation in 2013. The Government have decided that we must not at this point put in place barriers that may deter employers from employing young people.
I realise that these changes may cause concern for institutions which offer a primarily academic programme of study. I very much value the commitment of schools, colleges and students to achieving academic excellence and entry to top universities. To protect institutions while discussions about academic qualifications take place, I am guaranteeing that no institution will see its funding per student fall as a result of these changes for at least three years.
I am establishing a ministerial working group to assist us in ensuring that these reforms work in the best interests of all young people. I will be inviting representatives from further education colleges, sixth form colleges, schools (including grammar schools) and other providers of post-16 education to consider the best way to implement the reforms to the programmes of study and associated funding changes.
Taken together, the reforms I am announcing today will set us on a clear path to giving young people greater choice and higher quality provision. It will mean that, whatever their ambitions or aspirations, they will reach adulthood with the rigorous qualifications, experience and skills that higher education and employers require.
Copies of the documents we are publishing today will be placed in the House Libraries.
Victim and Witness Strategy
(11 years, 10 months ago)
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The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
The Government will, today, publish their response to the consultation “Getting it right for Victims and Witnesses” which began on 30 January and ended on 22 April 2012.
When I published the consultation document I observed that victims too often feel themselves to be an afterthought for the criminal justice system. Despite improvements over the last two decades, the system has continued to fall short—whether in relation to helping victims recover in the aftermath of a crime, supporting them through the stresses of investigation and trial, or providing the right services, funded as far as possible by offenders rather than the taxpayer.
That is why I set out a package of proposals to remedy these weaknesses, and deliver a more intelligent and coherent service for victims. My plans included increasing spending on victims’ services, with extra money coming from offenders themselves; reforming the criminal injuries compensation scheme so that it is focused on seriously injured victims of serious crime, and strengthening victims, rights so that victims feel less like accessories to the system, kept in the dark about their case, or expected to sit next to families of perpetrators in court.
The consultation elicited over 350 written responses, which we have carefully considered. They have helped us refine our proposals. We are taking forward a package of reforms that will, I believe, meet the whole range of ambitions I set out in the consultation document.
The response I am publishing today includes summaries of the comments received on our proposals and it sets out the policies we will now take forward. The reforms are wide ranging.
First, I intend to proceed with plans to make improvements to the support available for victims, raising up to an additional £50 million from the perpetrators of crime through the victim surcharge and other financial impositions. The way in which support for victims is purchased will also be subject to reform. We will move to a mixed model of national and local commissioning. The budget for the bulk of services will be devolved at local level to police and crime commissioners who will decide which services are needed in their communities. For some specialist support services, including rape support centres and support to those bereaved by homicide, my Department will continue to commission services nationally. Police and crime commissioner (PCC) elections will be taking place this November. The decision on when funding for victims services will transfer to PCCs will be made in due course but we would not envisage this happening any later than April 2015.
Secondly, our system of criminal injuries compensation will be reformed so it is properly focused on victims of the most serious crimes. The revised scheme will, for the first time, be placed on a sustainable footing. There will be an end to payments for minor injuries, and to those with serious criminal convictions.
There will be a revised victims’ code, setting out more clearly what victims can expect from the criminal justice system and ensuring that victims are treated always with dignity and respect. We will consult on a new draft code next year.
These reforms will also, among other things, aim to increase the use of restorative justice and of the victim personal statement. Both can help victims to cope and recover, both have a valuable role to play in the criminal justice process.
We will also put in place the first statutory compensation scheme for British victims of terrorist atrocities abroad. It will see Britons who are targeted in future terrorist attacks overseas compensated in the same way as domestic victims of terrorism.
In the light of the major reforms that the Government are announcing today to improve services for victims and introduce greater local accountability, the Government will consider how best to ensure that victims’ interests are well represented and review the role of the victims’ commissioner while the new framework for victims is established.
I will lay the following secondary legislation before Parliament today:
The draft Criminal Injuries Compensation Scheme 2012. This replaces the 2008 scheme. It provides compensation to victims of violent crime in Great Britain, including bereaved relatives.
The draft Victims of Overseas Terrorism Compensation Scheme 2012. This is a new scheme to compensate British, EU and EEA nationals resident in the UK who may be injured or have a relative killed in a future act of overseas terrorism designated as such by the Foreign Secretary for the purposes of the scheme.
The Criminal Justice Act 2003 (Surcharge) Order 2012. This will increase the victim surcharge payable by an adult on a fine and extend the surcharge to conditional discharges, community sentences and custodial sentences including suspended sentences. Similar provision will be made in respect of juveniles.
Copies of the draft schemes and their associated documents will be deposited in the Libraries of both Houses.
Copies are available in the vote office and the printed paper office. The response to the consultation can be found on the Ministry of Justice website at: www.justice.gov.uk.
Child Support Maintenance Calculation Regulations 2012
(11 years, 10 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
Later today I will be publishing the Government’s response to the consultation on the regulations governing the calculation methodology for the new statutory child maintenance scheme. The consultation was held between 1 December 2011 and 23 February 2012.
The Government want to encourage and support parents to make their own family-based arrangements, but are committed to also providing a statutory service for those separated parents for whom this is not possible.
As part of the Government’s child maintenance reform programme, the existing two failing Child Support Agency statutory schemes will be replaced with a new, single scheme from October 2012 using a pathfinder approach.
The aim of the new scheme is to produce a faster, more accurate and transparent process for assessing child maintenance payments. This will be achieved with a new administrative framework which will include a single set of calculation rules, a single computer system and a link to information from HM Revenue and Customs (HMRC) tax systems.
We intend to lay the Child Support Maintenance Calculation Regulations 2012 later today, they complement existing primary legislation by establishing the amended statutory framework the new scheme will operate within. They cover the calculation of maintenance, including how income is determined and the circumstances in which calculations may be varied.
There were 36 responses to the consultation, all of which have been carefully considered. I maintain that the proposals outlined in the consultation provide a stable footing on which the new scheme can operate.
The Government consulted on increasing the flat rate paid by non-resident parents on certain prescribed benefits, or whose income is £100 or less, further than the £7 proposed by the previous Government. I am announcing today that we will increase the flat rate to £10 when we open the new scheme to all new applicants, in order better to reflect the costs of bringing up a child and reduce the gap between child maintenance paid by employed and unemployed non-resident parents.
The Government also consulted on reducing the percentage reduction from the non-resident parent’s income for those children who live in their household. This is to get closer to equalising the treatment in the calculation of those children living with and those living apart from the non-resident parent. I can confirm today that we will do that by changing these reductions to 11% for one child, 14% for two children and 16% for three or more.1
I believe that these changes will help provide a fairer system for all of those parents who use the statutory child maintenance service in the future.
I will place copies of the consultation response and impact assessments in the House Library later today. The consultation response, impact assessments, regulations and explanatory memorandum will also be available on the Child Maintenance and Enforcement Commission (CMEC) and Department for Work and Pensions websites later today. See:
http://www.childmaintenance.org/en/publications/consultations.html.
1A non-resident parent usually pays less maintenance if they are supporting a child living as a member of their household. The statutory calculation does this by reducing the amount of income used to set maintenance by one of three specified percentages.
Workplace Pension Reform (Qualifying Schemes)
(11 years, 10 months ago)
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The Minister of State, Department for Work and Pensions (Steve Webb)
Later today the Government will publish the following documents:
“Automatic enrolment: Guidance for employers on certifying defined benefit and hybrid pension schemes”;
“Automatic enrolment: Guidance for actuaries on certifying defined benefit and hybrid pension schemes”;
The Hybrid Schemes Quality Requirements Rules 2012; and
The Government response to the consultation on “Automatic enrolment: career average schemes as qualifying schemes”.
We will also be publishing an updated version of:
“Automatic enrolment: Guidance on certifying money purchase pension schemes”.
The guidance and rules were the subject of consultation in 2011 and we are grateful to all of those individuals and organisations who provided responses on these as well as those who responded to the career average scheme consultation.
The guidance will help employers who are already providing good workplace pension schemes to continue to do so under the reforms.
Our response to the consultation on career average schemes confirms that we intend to lay an amended draft regulation before Parliament. The changes that this introduces will give career average schemes greater flexibility over the way in which they can provide for the revaluation of benefits that is required for them to be used as qualifying schemes.
I will place a copy of these documents in the House Library. They will also be available later today on the Department’s website at:
www.dwp.gov.uk/policy/pensions-reform/workplace-pension-reforms/guidance/ and www.dwp.gov.uk/ consultations/2012/auto-enrol-career-ave-qual-sch.shtml.
The hybrid schemes rules were signed on 29 June 2012 and took effect on 1 July 2012.
Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Geddes)
My Lords, as I am sure all noble Lords present are aware, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells ring and resume after 10 minutes.
Civil Aviation Bill
(11 years, 10 months ago)
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Lord Rosser
“( ) The CAA must, at such intervals as it considers appropriate, review market power determinations made on the basis of an earlier analysis.”
Lord Rosser
My Lords, this is a probing amendment. The Bill provides that operators of dominant areas located at dominant airports require a licence to levy charges for airport operation services, and states that an airport area is dominant if the CAA makes a determination that the market power test is met in relation to the area. Subsection (8) of Clause 7 states that the Civil Aviation Authority may make separate market power determinations in respect of different areas at the same airport with the same relevant operator and may also make a market power determination in respect of an airport area that consists of two or more areas that are not adjacent if the areas are located at the same airport. Subsection (9) then states that a market power determination ceases to have effect if the Civil Aviation Authority publishes a notice of a further market power determination in relation to the airport area or in relation to an area that includes all of the airport area.
The effect of the amendment, which would add further words to the end of Clause 7(8), would be to require the Civil Aviation Authority, at such intervals as it considers appropriate, to,
“review market power determinations made on the basis of an earlier analysis”.
It is not clear whether other wording in the clause, or elsewhere in the Bill, is intended to require the Civil Aviation Authority to review decisions that it has made on market power determination. Circumstances can change over a period of time, and factors that were important in the original decision may cease to be so, or other factors may come into play.
Other subsections in Clause 7 say that the Civil Aviation Authority may make a determination that the market power test is or is not met in relation to an airport area, and that the Civil Aviation Authority must make a market power determination if asked to do so by the operator of the airport area or any other person whose interests are likely to be materially affected by the determination, subject to certain laid-down criteria being met.
There ought to be a requirement for the Civil Aviation Authority to review market power determinations it has made, irrespective of whether it is asked to do so. Subject to what the Minister has to say in reply, that does not appear to be a requirement laid down in the Bill. Even the reference in subsection (1) to the Civil Aviation Authority making a determination whenever it considers it appropriate to do so is not clear as to whether it also means reviewing a market power determination it has made that the test has been met or whether it applies only to making determinations where it has not previously been decided that the test has been met.
If the Minister does not intend to accept the amendment, I hope that he will say why the Government do not consider it appropriate, if that be their argument, or which provisions already in the Bill cover the issue raised in the amendment. Perhaps the Minister could also say how often the Government expect the Civil Aviation Authority to be making market power determinations. Are they likely to be regular occurrences and is it anticipated that such decisions will have to be revised or amended on a regular or frequent basis or only rarely? I beg to move.
Lord Jenkin of Roding
I was surprised at the last sitting of the Committee when my noble friend made it clear that it is envisaged by the Government that there should be competition between two different terminals at the same airport. At an airport such as the JFK International in New York, where the terminals are situated widely apart and are approached in different ways, there may be some sense in that. Even in as large an airport as Heathrow, which now has five terminals, I find it difficult to conceive how there could be competition between the various terminals. It is built into this clause, on which the noble Lord, Lord Rosser, has moved his amendment, which seems to have some merit.
I would be grateful if, in responding, my noble friend could describe how he sees such competition arising. At the moment, taking Heathrow or Gatwick as an example, they are all under the same management. It may be separate between the airports; I find it difficult to conceive how it might happen between terminals. I would be grateful if my noble friend could explain how this might come about. It would obviously need to involve a change of ownership between the different terminals. Is there any prospect of that or is it somehow envisaged that there should be competition without a change of ownership? Perhaps my noble friend might explain that.
Lord Berkeley
Like the noble Lord, Lord Jenkin, I, too, was confused. I suppose there could be competition with baggage handling taxi services. The heart of an airport is, after all, the runways. Is it envisaged that there is competition between two runways? If it is, that is remarkably stupid. One never knows, and it will be interesting to hear what is subject to competition in this clause and what is definitely not, within a particular airport.
Earl Attlee
My Lords, I thank the noble Lord, Lord Rosser, for the explanation for the rationale behind this amendment. I am afraid that I must oppose it, for two reasons. The first is substantive and the second is technical.
The amendment would oblige the regulator to review its market power determinations at such intervals as it considers appropriate. Clause 7 provides that a market power determination is a determination by the CAA that an airport operator does or does not meet the market power test in relation to an airport area. Where it does, the operator is subject to economic regulation under the Bill. Where it does not, it is not subject to economic regulation.
Let me now turn to my reasons for opposing this probing amendment. The substantive reason is that the amendment is unnecessary. Clause 7(1) expressly empowers the CAA to make a market power determination,
“whenever it considers it appropriate to do so”.
I am mindful of the underlying purpose of Part 1 of the Bill which is broadly to further the interests of end users by regulating airport operators where necessary. I note also the CAA’s subordinate duty at Clause 1(4)(b) to have regard to the principle that,
“regulatory activities should be targeted only at cases in which action is needed”.
In answer to the question of the noble Lord, Lord Rosser, it is implicit that where changes in circumstances lead the CAA to believe that there are reasonable grounds to believe an operator presently subject to regulation should cease to be regulated, or vice versa, then it would investigate further. If appropriate, it would then conduct a full market power determination. I am reinforced in my view because Clause 7(2) obliges the CAA to make a market power determination in certain circumstances. Against this background, the noble Lord’s amendment adds little to the Bill
There is a further technical difficulty with the amendment, which I accept is a probing one. It is not wholly clear what is meant by a “review” of a market power determination. Presumably it is something short of conducting a full market power determination. Perhaps it may involve a consideration of whether the underlying circumstances have changed. However, no further provision is made to publish the results of the review or to take action in the light of its conclusions. In short, neither the purpose nor the effect of undertaking a review is made clear in the amendment.
My noble friend Lord Jenkin asked about competition between different facilities in an airport. The recommendation was made by the Competition Commission; we are implementing it.
Lord Jenkin of Roding
My noble friend must explain how it would work. I find it very difficult to see how it would if the facilities were under the same management.
Earl Attlee
My Lords, if they were under separate management there could be a competition situation. Under the current legislation, one simply cannot regulate because it does not provide for competition within one airport. Therefore, we are future-proofing the legislation.
The CAA’s functions under Chapter 1 comprise, broadly, deciding whether an airport operator should be subject to regulation—and if it should, regulating it accordingly. Clause 1(1) requires the CAA to carry out its functions under Chapter 1 in order to further the interests of passengers and freight owners in the provision of airport services. Under Clause 1(2) the CAA is required to promote competition when doing so, but only where it is appropriate to its carrying out its functions under Chapter 1. This is set out in Clause 1(2).
The concept of competition in provision captures competition in the provision of airport operational services between all airports, regulated and non-regulated, and competition in airport operational services within airports—for example, competition between terminals. However, the CAA must promote competition only where appropriate. It would not be appropriate to promote competition where the CAA was not carrying out its duty under Clause 1(1)—specifically, where promoting competition does not further the interests of users of air transport services in the range, availability, continuity, cost and quality of airport operational services.
Lord Berkeley
Perhaps I might seek confirmation of what the Minister said to the noble Lord, Lord Jenkin. Will he confirm that Clause 7(4) applies to airports where the number of passenger movements exceeds 5 million—I refer to a Written Answer of 20 June to the noble Lord, Lord Laird—and that therefore Heathrow, Gatwick, Stansted and Luton would all be covered by the clause?
Earl Attlee
My Lords, the large airport test certainly applies in Clause 7(2), which refers to areas located in large airports. It goes on to define a large airport. I suspect that the CAA can make a determination on any other airport at a later stage if it becomes apparent that it might be in need of regulation and meets the tests in the Bill. Therefore, I invite the noble Lord, Lord Rosser, to withdraw his amendment.
Lord Rosser
Perhaps I might ask the noble Earl one last question before I withdraw my probing amendment. The thrust of his response seemed to be that what I sought to achieve with the amendment was covered by other parts of Clause 7. Do other parts of Clause 7 allow the CAA to initiate a review of an earlier decision that it has made off its own bat, or only if it is asked to by a person listed in subsection (3)?
Earl Attlee
My Lords, my understanding is that as soon as the CAA realises that it is appropriate to initiate a review because circumstances have changed, it can do so.
Lord Rosser
That is a very clear answer. The Minister has said that the CAA can do it off its own bat. I will want to read the Minister’s response carefully but my initial reaction is that if the Minister is saying that my amendment is covered by other wording in Clause 7, the point that I seek to establish has been met. I will not go down the road of competition, which has been raised, since that will be dealt with by a subsequent amendment. I will wait for it to appear. I thank the Minister for his response and beg leave to withdraw the amendment.
Lord Davies of Oldham
My Lords, as the Committee will recognise, we are anxious about Clause 9 and the two succeeding clauses, which relate to the very issue that we discussed under the previous amendment. This gives us a chance to explore much more fully the kind of issues that were opened up by the probing amendment a few moments ago. It may be looked on as something of a blunderbuss to fire at the Minister at this stage, particularly when he was so generous in his response to a question that I asked earlier in the House today. However, the blunderbuss is there simply because, like the noble Lord, Lord Jenkin, we are not quite sure what the implications of the Bill as it is drafted are. Therefore, we want as full and wide a debate as possible about an extremely important area.
The first question that the Minister needs to answer is: where is the demand for this provision of inter-terminal competition from the industry? All submissions that noble Lords will have received on this issue are, for a very good reason, critical of and hostile to the proposal that the Government have put forward. Airports require substantial investment. They need the confidence of investors in the resources that they intend to utilise. However, here there seems to be a proposal that the authority could promote competition between terminals when the whole structure of an airport’s finances is on the basis that such competition does not exist and, for very good reasons, ought not to exist. I shall elaborate on those reasons in a moment. However, what is more, the Bill says that if a decision is taken on this, it will be done through secondary legislation. We all know the limitations of secondary legislation in debating the fundamental principles of how an airport is to operate.
The noble Lord, Lord Jenkin, referred to the one airport that most us know has inter-terminal competition at present, namely JFK International Airport. He was quite mild in his assessment of the position there. Many other people are pretty critical of just how expensive that airport is, its lack of efficiency and the competition between terminals. It has the features to which the noble Lord, Lord Jenkin referred—a wide expanse of differentiation between terminals and a large number of them. However, that still does not mean that many of us, and much of informed opinion, cannot see the advantages that have been derived there from such competition. Representations from the industry show that it is extremely critical of this proposal. The Minister used the phrase “future-proofing” as the reason for this potential development, but the trouble with that is that it might cause disruption, consternation and anxiety here and now against a most uncertain future. When airports have made their representations on this issue, they have been pretty forthright about the disadvantages.
First, they foresee the potential for a substantial increase in operating costs because the economies of scale that airports are able to realise in their present arrangements through their ability to optimise capacity across all their terminals will be lost. That would be a substantial disadvantage to passengers. Secondly, inter-terminal competition is conceivable only where there is significant spare capacity. If one target for this is London Heathrow, “spare capacity” is just about the most inapplicable concept one could think of. The Minister should tell us where he thinks there is a large airport with more than one terminal that has sufficient spare capacity to be able to adapt to this situation. Where there is any spare capacity, the airport operator has an element of freedom to deal with the exigencies of particular situations. The Minister will have to explain the rationale behind Clause 9.
Moreover, the Minister will be all too well aware that airlines have very different needs. The reason an airport has different arrangements in its terminals is because it seeks to cater for the range of different needs of the various airlines. It will want to be in a competitive position so as to attract airlines through these differences. It is clear that no-frills operators have different needs from those who operate a full service on long-haul scheduled carriers. A single operator can accommodate these differences. I shall give one example. One of the terminals at Manchester airport is set up for holiday traffic. Because of the nature of the arrivals and departures of those flights, Manchester has made specific provision in the terminal to cope with it.
It must be recognised, of course, that difficulties can arise when airlines move. They have the freedom to do so and they exploit it to move to different airports. Gatwick made representations to the Committee and the Government indicating that when Delta, a large airline, quit Gatwick, that had a significant effect on its traffic and accordingly it had to make considerable changes. To adapt terminals to accommodate all sorts of traffic would be expensive. It would run counter to the investment that has already been made in our major airports.
There are other anxieties about the Government’s proposals. Obviously, when planning is carried out for airport development, it will not be easy to put forward proposals which envisage the possibility of a substantial section of the airport—one of its terminals—being sold off and therefore being subject to a different strategy from that in which people have invested. It also affects the airport in dealing with its suppliers. Airports can strike deals with significant suppliers of the very large amount of commerce which is transacted within them. Under the proposal which is envisaged here, these arrangements could be severely disrupted. One terminal would potentially deal with one group of suppliers and another could deal with another group of suppliers.
We do not feel that the Government have taken on board the industry’s anxieties about a piece of future-proofing which appears to be of potential benefit to the Government in terms of legislative time but has very little to do with the actual operation of airports. The Government are clearly not able to identify it as a demand within the industry. It would cause severe difficulties. There have been difficulties just on the relatively minor, if still important, issues of airlines choosing under the free market, as they are entirely entitled to do, to change their requirements and move to another airport. The concept of competition between terminals takes us a massive stage further.
The Minister indicated in the debate on Amendment 17 that he thought that it was unnecessary, and that the clause provided an opportunity for action when it is needed. I am not at all clear that a case has been made for action in terms of competition between individual terminals. I cannot see just where the demand is coming from at this stage. However, I am aware of airports’ anxieties about losing a great deal from the arrangements, and the fact that that the arrangements might prove largely unworkable.
Again, I apologise to the Committee for the fact that our amendments are not more precise on these issues, but this a pretty general problem. That is why we thought that it would be advantageous for us to speak against the clause standing part in Committee, in order that voice could given to the general issues which are raised by Clause 9 and the immediately subsequent clauses.
Lord Berkeley
My Lords, I shall expand a little on the comments of my noble friend Lord Davies of Oldham. A question needs to be asked: who will benefit from these three clauses? Will the passengers benefit? In my experience, when I want to go from A to B by air, I go to a website and look at the different airlines on different routes. Let us consider Stansted, for a change; we keep on talking about Heathrow. We are told that Stansted has lots of capacity. It has one terminal and one or two satellites from where the lower-cost airlines operate, and they make you walk a hundred miles to compensate you, presumably for paying lower landing fees. I suppose that those satellites, with a little engineering work, could be converted into a separate terminal, but how will the passengers benefit? When you book with an airline, you do so by considering price, timing or convenience. If you are going to book with easyJet to go to Dublin, for example, you do not have a choice of which part of the terminal, or which terminal, the plane will arrive at after landing. You are told where it will be. The passengers do not, therefore, have any choice over which terminal they can go to. They choose the airline and the airline tells you where you are going to end up.
I still cannot see who is going to benefit from these clauses. The airlines will not benefit, I imagine. Some of them pay lower landing charges than others and, as a result, are told to use a particular terminal—either close by or far away from convenient public transport and other facilities. You do not book with an airline because there is a better class of McDonald’s or a restaurant in some terminals. Are the airport operators going to benefit? I cannot see how. It will cost more, as my noble friend said. The suppliers will not get as big a volume of trade as they would if they were supplying a whole terminal. You could argue that they or someone might benefit from competition. And the passengers? I would be pleased to hear from the Minister about how they would benefit from these clauses.
Earl Attlee
My Lords, I thank noble Lords for their contributions but I am afraid that I must oppose the amendment and support the Question that these important clauses stand part of the Bill.
Inter-terminal competition may be some time off and the Bill makes no provisions about timing. However, it is important that we future-proof the legislation. The noble Lord, Lord Davies of Oldham, talked about disruption and consternation. Clearly, this would not be in the interests of passengers, and the CAA would therefore not allow such competition because it would be in conflict with its primary duty to the passengers and owners of cargo.
The noble Lord said that different airlines have different needs. He is, of course, quite right. Some airlines want to run a premium service and others want to be no-frills. However, the CAA will have to strike the balance between those differing requirements as well as replicate the effect of competition.
The Bill does not, in general, require inter-terminal competition but does accommodate the possibility. Promoting competition between terminals under the Bill would not happen if the cost implications of doing so meant that it would not benefit the passengers, again under the CAA’s primary duty. In the circumstances postulated, there is no question that the CAA would seek to require inter-terminal competition. If, however, an airport chose, say, to lease a terminal to a third party, the Bill would remain in service, and I will come back to that in a moment.
Clause 10 empowers the CAA to determine, by applying the criteria set out in Clause 9, including in cases where one or more separate entities have some form of management control over that area. Clause 11 contains provisions for the publication of operator determinations made under Clause 10 by the CAA. Clause 12 empowers the CAA to make operator determination in advance, on the basis of circumstances that may not yet have arisen.
The amendments to Clause 12 seek to remove the CAA’s powers to carry out an advance operator determination. However, before I get on to why the amendments are not desirable, I wish to reassure your Lordships on why “standard” operator determinations under Clauses 9, 10 and 11 are a necessary part of the legislation. These clauses are important for regulatory certainty, enabling a person to know whether they are the operator of an airport area for the purposes of Part 1. Otherwise, in difficult cases it will be uncertain who the operator is and who is not, and therefore who is and who is not subject to economic regulation. This means that they cannot be clear as to their legal obligations, and neither they nor their financial backers can know with certainty whether they will be subject to economic regulation.
The clause is not focused solely on the possible future scenario where intra-airport competition can be introduced. For example, it could apply where a whole airport was leased and some management functions were split between lessor and lessee. However, noble Lords have rightly pointed out that these clauses are important for ensuring that the Bill allows for the regulatory regime to work in a scenario where there are multiple operators of different airport areas at one airport—in other words, where there is inter-terminal competition. Inter-terminal competition is more likely to lead to more complex ownership arrangements.
I have already mentioned that it was a recommendation of the Competition Commission in its BAA Airports Market Investigation report of 2008 to allow for the regulatory regime to function where inter-terminal competition is present. The present legislation, the Airports Act 1986, does not allow for this possibility. If we, the Government, had not made these provisions, no doubt noble Lords would suggest that we should have done so, praying in aid the Competition Commission’s recommendations. It is important to note that these clauses do not empower the CAA to introduce inter-terminal competition; they merely ensure that if inter-terminal competition becomes a reality, the regulatory regime can accommodate the scenario.
Clause 10 empowers the CAA to make binding operator determinations on the basis of the circumstances at the time the determination is made. However, this is considered insufficient where a person wants to know whether they will comprise the “operator” in the event that they take some control over an airport area. Against this background, to allow for greater regulatory and commercial certainty, Clause 12 empowers the CAA to make advance determinations—that is, determinations on the basis of circumstances that have not yet arisen. This would include a determination that, if a lease were executed with specified terms, the lessee would or would not comprise the operator.
The first amendment would deprive the CAA of the power to make an advance operator determination. The Government cannot agree to this because it would increase regulatory uncertainty and possibly stultify commercial transactions. I therefore urge noble Lords to withdraw their opposition to the clauses.
Lord Davies of Oldham
My Lords, the Minister made the best fist that he could of a fairly weak argument. Of course, I recognise the merits of the clauses, in that he made it clear that it is important to define the operator and to know whom we are talking about. Who could possibly gainsay that proposition?
In objecting to the clause, I am not objecting to the sense that lies behind the elements within the clause to which the Minister addressed some of his remarks. I indicated that in opposing the clause I recognised this to be a fairly blunderbuss approach and that we have not refined our opposition in amendments—something that we may do in due course, perhaps on Report. However, I say to the Minister that in this general debate anxieties have been expressed across the Committee, and he has not allayed those anxieties at all, apart from—
Lord Trefgarne
I am afraid that the noble Lord is mistaken. The Minister has very much allayed my anxieties about this matter. I see these clauses as facilitating competition between terminals at a particular airport. What is the matter with that? When the operator comes to choose the terminal from which he wishes to operate, he will select the one that offers him the best deal—maybe it has the best duty-free shops or is the cheapest—and these benefits will be passed on to the passengers. I am very much in favour of these clauses and I hope that the noble Lord will not press the question of whether they should stand part of the Bill.
Lord Davies of Oldham
I am delighted that the noble Lord had his anxieties allayed. They are obviously not as acute as those on this side of the Committee. In particular, if the noble Lord is all in favour of inter-terminal competition, perhaps he will ask the Minister to identify just where this is a raging success that we would want to encourage. The only specific example that we have so far is subject to considerable criticism. As the noble Lord indicated, airport operators are accurately defined in the legislation; I will not gainsay the necessity of that. None of them speaks well of future-proofing what they regard as a disadvantageous element of the Bill, which will introduce the possibility of inter-terminal competition. In particular, by putting it in the Bill in the way that they have, the Government limit parliamentary debate to secondary legislation. We know the limitations of that.
However, I seek to identify that this concept is a significant departure from how any British airport is run at present, and from how any successful airport is run elsewhere. Unless the Minister produces some evidence of how competition works to the benefit of the passenger—which he signally failed to do in his earlier contribution—the Committee will recognise that, far from my anxieties being allayed, they are more pronounced. Of course, I recognise that objecting to a clause standing part—or three clauses in this case, which is the first time that I have engaged in such an extensive operation—is something from which I shall have to resile fairly promptly. However, I do so to air a significant aspect of this debate. I say to the Minister that we are so dissatisfied with the response at this stage that he must assume that we will take this issue further on Report.
Earl Attlee
I am curious about the noble Lord’s attitude to the Competition Commission’s recommendation that we should provide for inter-terminal competition. Does he support that view or not?
Lord Davies of Oldham
Of course, I recognise the role of the Competition Commission and we applaud a great deal of its work. However, when it makes recommendations, one must also consider the industry’s likely response to the proposal that is being put forward. All I say is that the noble Earl has not identified any aspect of British industry that considers this to be an intelligent and sensible development. Nor is he able to identify any example from elsewhere in the world where this form of competition has redounded to the benefit of the consumer.
Lord Trefgarne
With the noble Lord’s permission, I will cite an example. Many years ago, I landed my aeroplane at Miami International Airport. I had not chosen the terminal at which to land. I negotiated with three different terminals over the radio, found the cheapest and in I went—very good, too.
Lord Davies of Oldham
My Lords, that is a very good illustration. If the noble Lord had also indicated that hurricanes were raging at the time and he was able to put down with the help of the airport, I have no doubt that we would all regard that as an extreme benefit.
However, airports always adjust to emergencies, so if the noble Lord is saying that as the pilot of a private plane he can see stupendous advantages in inter-terminal competition, how many people do I have to count in order to introduce into legislation a very significant development? Is it is the number of people who own and fly private aircraft? Our consideration of government legislation ought to be undertaken on a wider perspective than that and the Government’s defence of it ought to be a jolly sight wider too. But, of course, I shall withdraw my opposition to the clause standing part.
Earl Attlee
Earl Attlee
My Lords, in moving government Amendment 20, I shall speak also to government Amendments 21, 22, 23, 30, 32, 33, 35 to 45 and 61 to 63. These 20 amendments are being taken together because they all relate to appeals to the Competition Commission and the Competition Appeal Tribunal. Some 13 of the amendments give effect to our position that the Competition Commission and the Competition Appeal Tribunal should decide appeals on the same grounds. The other seven amendments ensure that both the Competition Commission and the Competition Appeal Tribunal have regard to the duties imposed on the CAA as set out in Clause 1 when deciding an appeal. For brevity, I will refer to the Competition Commission as the CC and to the Competition Appeal Tribunal as the CAT.
It has come to the Government’s attention that the current drafting in the Bill gives rise to inconsistency between the grounds on which the CC and the CAT may allow an appeal. In the present drafting, although the legal grounds on which an appeal may be allowed are the same, the CAT is specifically required to decide the appeal by reference to these grounds and “on the merits”. There is no equivalent provision for the CC to decide the appeal “on the merits”.
The Government are concerned that this inconsistency creates unnecessary and undesirable legal uncertainty. We wish to correct this to shut out any risk that under the current wording it could be interpreted that different powers are being conferred on the CC and the CAT. In summary, these amendments propose changes to the provisions about appeals to the CAT to align them with provisions about appeals to the CC.
Amendment 30 is to one of the grounds on which the CC may allow an appeal under Clauses 24 or 25 which relate to appeals against conditions of new licences and modifications to the licence conditions. The amendment would change the ground on which the CC may allow an appeal from,
“that the decision was based on the wrong exercise of a discretion”,
as it is currently in the Bill, to,
“that an error was made in the exercise of a discretion”,
as per the amendment. This amendment is being made to clarify the current drafting.
The remaining amendments are specific to appeals brought before the CAT. Amendments 35, 36, 37, 40, 43 and 61 delete the subsections that contain the current grounds on which the CAT may allow an appeal in Schedules 1, 3, 4, 5 and 13. Amendment 20 deletes a provision stating that an appeal may be brought on only one of the current grounds. Amendments 21, 38, 41, 44 and 62 replace these grounds with the same grounds as provided for in Clause 26 concerning appeals to the CC from,
“that the determination is based on the wrong exercise of a discretion”,
to,
“that an error was made in the exercise of a discretion”.
In particular, Amendments 21, 38, 41, 44 and 62 ensure that the CAT’s consideration of appeals is consistent with the CC’s by, first, removing the phrase “on the merits” from the grounds on which the CAT must decide an appeal, as just discussed; secondly, introducing an overall requirement that the decision appealed against was wrong on specified grounds—error of fact, wrong in law, and error in the exercise of discretion; thirdly, restricting the grounds for determining the appeal in the same way as for the CC; and, fourthly, reflecting Amendment 20 which, as I have just mentioned, clarifies the grounds of wrong exercise of discretion.
The overall result of these 13 amendments is that both the CC and the CAT may allow an appeal only to the extent that they are satisfied that the decision appealed against was wrong on one or more of the following grounds: that the decision or determination was based on an error of fact; that the decision or determination was wrong in law; and that an error was made in the exercise of a discretion.
These amendments are important to deliver the Government’s policy intention that the grounds on which the CC and the CAT decide appeals should be the same. They are also in keeping with our wish to deliver an efficient and effective appeals regime. These amendments allow the CC and the CAT to take a decision that offers something more than judicial review but does not extend to a potentially lengthy full rehearing of the case. The remaining seven amendments again ensure consistency between the two bodies. Amendments 32 and 33 to Clause 30 specify that when the Competition Commission is carrying out its functions as specified under subsection (4) of Clause 30, it must have regard to the matters,
“in respect of which duties are imposed on the CAA by section 1”.
Amendments 22, 39, 42 and 45 import an express duty on the CAT to have regard to the CAA’s duties as set out in Section 1 when deciding an appeal under Schedules 1, 3, 4 and 5. Amendment 63 imports an express duty on the CAT to have regard to the CAA’s duties as set out in Section 4 of the Civil Aviation Act 1982 when deciding an appeal under Schedule 13. My officials have engaged extensively with the CAT and the CC on this matter and they are content with the amendments. I commend them to your Lordships.
Lord Rosser
My Lords, perhaps I may take one of the amendments in the group to make my point. Government Amendment 30 deletes paragraph (c) in Clause 26, which says that the Competition Commission may allow an appeal under Section 24 or 25 only to the extent that it is satisfied that the decision appealed against was wrong on one or more of the following grounds, one of which is that the decision was based on the wrong exercise of a discretion. That wording has now been replaced in government Amendment 30 with the wording,
“that an error was made in the exercise of a discretion”.
I endeavoured to listen carefully to what the Minister had to say about this group of amendments and, if he did cover my point, I would be grateful if he could repeat his explanation. He seemed to say that this was all about clarifying the current drafting as opposed to explaining what the difference was between the wording in the Bill and what is being proposed, bearing in mind that it is not the same wording and therefore presumably does not mean exactly the same.
It would be helpful if the Minister could explain what this change in wording means. I refer to government Amendment 30 to paragraph (c) in Clause 26. Does the change from “wrong exercise” mean that although a decision was made incorrectly, the process was fine and the options to choose from were correct, the proposed wording,
“an error was made in the exercise of a discretion”,
is meant to imply that the exercise itself was flawed, had the wrong information to hand, was conducted incorrectly and options were considered that should not have been? It is important that we do not just get told, “We are seeking to clarify the current drafting”, but that we have a full explanation as to what the current wording in Clause 26 means—this relates to,
“that the decision was based on the wrong exercise of a discretion”,
and how that differs in meaning from the wording with which Amendment 21 replaces it,
“that an error was made in the exercise of a discretion”.
I hope that the Minister can clarify the position.
Lord Soley
Before the Minister replies, I was looking at this with some interest. I cannot help feeling that the issue might be one of parliamentary drafting. I would like to know whether the CAA, the airlines or the Competition Commission asked for the wording to be changed. My noble friend Lord Rosser has already pointed out that there is a change of wording, with “the wrong exercise”, but it is also odd that the original wording from Schedule 1 is in the present tense, whereas the wording in the amendment is in the past tense. I cannot help feeling that the parliamentary draftsman who did it first was found to have got something slightly wrong; I am not sure what. It is puzzling why that wording has changed from the present to the past tense, unless it is just for a legal reason. If there is another reason, I would like to see where the amendment came from and why.
Lord Jenkin of Roding
My Lords, I am full of admiration for the textual criticism of the noble Lords opposite. I have a rather simpler question for my noble friend. As I listen to him, and I try to do so carefully, the main purpose of this large group of amendments is to ensure that the same rules apply to the Competition Commission and the Competition Appeal Tribunal. How is it that anybody ever thought that the rules should be different? Why is it only at this stage that we are making them all the same? Was there some purpose to the way in which the Bill was originally drafted? I would be most grateful for an explanation. I am sure that there is a perfectly good reason, but I do not know what it is.
Lord Soley
There is a reason I am picking up on this, of course. I am a member of the Delegated Powers and Regulatory Reform Committee. We are getting increasingly worried about the quality of drafting of government Bills. It looks like a case where the drafting has changed for some reason. I do not want to be critical of the parliamentary draftsman concerned without knowing the facts but, if we flag it up as rather odd, there might be an explanation. I do not know what it is, and I would quite like to.
Earl Attlee
My Lords, the Committee will recognise that parliamentary draftsmen work in peculiar ways. It may be helpful if I read out what I said on this particular amendment again. Amendment 30 is to one of the grounds on which the CC may allow an appeal under Clause 24 or Clause 25, which relate to appeals against conditions of new licences and modifications of licence conditions. The amendment would change the grounds on which the CC may allow an appeal from,
“that the decision was based on the wrong exercise of a discretion”,
to,
“that an error was made in the exercise of a discretion”.
The view was taken that the drafting in Clause 26(c) could have been better expressed. There was no external request to change this wording, but the Committee will understand that officials go over the drafting again. It seems to me that it is better drafting. Originally, the grounds of appeal were based on statutory precedent, based on retrospective appeals to the CC and the CAT. The wording varied slightly. That is how the inconsistency first arose.
Lord Soley
Perhaps I may come back briefly. In a way the Minister has answered the question. The Delegated Powers Committee—not just the parliamentary draftsmen—worries about the quantity of legislation and the way in which it is often hastily drawn up. We end up making changes of this type which do not seem to come anywhere other than in Bills that are brought out by the Government in a state of incomplete readiness. We end up having an awful lot of amendments on the Floor of the House. This has happened under successive Governments and therefore successive parliamentary draftsmen. I suspect that the fault lies both in the way we manage government and in the expectations we place on parliamentary draftsmen. It is an indication of how things can go wrong. My guess—it is only a guess; I am not a lawyer—is that the interpretation by a court of the original wording in the Bill would have been different from the interpretation by a court of the amendment tabled by the Government. On that basis I understand it but I am glad that the Minister clarified it.
Lord Rosser
Perhaps I may ask the Minister to clarify what the wording means. When I made my contribution a few moments ago, I asked whether the current wording,
“wrong exercise of a discretion”,
meant that if a decision was made incorrectly, the process was fine and the options to choose from were still correct. I then asked if the new wording,
“error … made in the exercise of a discretion”,
was intended to imply that that the exercise itself was flawed, that it had the wrong information to hand or was conducted incorrectly, and that options had been considered that should not have been. Does the wording we now have mean one of those two options—and, if so, which one?
Earl Attlee
My Lords, it is probably best if I write to noble Lords; this is a very technical point.
Lord Jenkin of Roding
I have not heard an answer to my question. Why were there different rules for the Competition Commission and the Competition Appeal Tribunal? What was the original reason for having different rules? I entirely support the proposition that the rules should be the same; it makes a great deal of sense. However, I am puzzled by why somebody at some stage thought they should be different.
Earl Attlee
My Lords, as I said, originally the grounds of appeal were based on statutory precedent and retrospective appeals to the CC and the CAT. The wording varied slightly; that is how the inconsistency arose.
Earl Attlee
“( ) The Competition Appeal Tribunal may allow an appeal under paragraph 1 only to the extent that it is satisfied that the market power determination or operator determination appealed against was wrong on one or more of the following grounds—
(a) that the determination was based on an error of fact;(b) that the determination was wrong in law;(c) that an error was made in the exercise of a discretion.”
“( ) When deciding an appeal under paragraph 1 (including giving directions) or making a market power determination or operator determination, the Competition Appeal Tribunal must have regard to the matters in respect of which duties are imposed on the CAA by section 1.”
“( ) When deciding an appeal under paragraph 1 relating to a market power determination (including giving directions) or making such a determination, the Competition Appeal Tribunal must have regard to the notices, guidance, advice and information described in section 6(10).”
Lord Davies of Oldham
“( ) A licence must include an obligation on licence holders to procure and publish annual surveys of passenger satisfaction, including but not limited to—
(a) baggage handling services, and(b) arrangements for delays to affected air passengers.”
Lord Davies of Oldham
My Lords, I shall speak also to Amendments 25 and 26 in this group. Amendment 24 is fairly straightforward. We should remember that a principle of the Bill is ensuring customer satisfaction and the welfare of passengers. We seek through the amendments in this group to make the possibility of those satisfactions greater by ensuring that there is an annual survey of passenger satisfaction that would include baggage-handling services, which we recognise are outside the control of the airport operator because they are under private contract, and arrangements after delays to air passengers.
All forms of transport can produce their irritations and even the most trouble-free journey can attract criticism. However, dissatisfaction with air transport hits the headlines from time to time—regular travellers, given their experience, probably feel that it does not hit the headlines often enough. Amendment 24 would require the airport authorities to carry out regular surveys in order better to inform them on the nature of consumer dissatisfaction. The surveys would cover all delays and the arrangements made as a consequence, because there is no doubt that delay is an all-too-common feature of air travel and causes a great deal of disturbance to passengers.
There are commendable parts of the Bill and the Minister appreciates that we are broadly in favour of it. As we indicated on Second Reading, we accept its principles. One of the principles is the value of open data and publishing information that will advance the service provided by airports. There is no doubt that information about delays and the experience of the services offered at airports can do two things: improve the performance of the airport that is subject to criticism through these reports and inform the passenger of comparative performance. Given that airports can be competitive in terms of the services that they operate and the airlines that fly from them, this information for passengers should be welcomed.
I put forward these principles in the knowledge that other Members of the Committee are likely to be well disposed towards something more than just freedom of information requests and consider that accurate information on performance should be volunteered to the general public. We all know that when things go wrong, they often go very badly wrong indeed. In its pre-legislative scrutiny of the Bill, the Select Committee on Transport in the other place said that, where possible, airport licences should be structured to address key areas of passenger satisfaction. The surveys that are carried out demonstrate, in the main, a positive attitude to the flight experience, because people are successful in getting from one point to another. Not many people do that on a daily basis, although I have no doubt that a few benighted souls are forced to depend on air travel to that extent. However, levels of satisfaction show less than optimum agreement on baggage handling, which can often prove to be a massive irritation, and on delays at border control, which is a substantial issue.
I am conscious that in the other place it was indicated that the Bill cannot impact directly on government policy on immigration control and the Home Office’s operational control of UKBA. I respect that limitation. However, we cannot discuss issues about airport delays without making reference to the obvious fact that security considerations often prove to be the source of some of the most irksome delays. Therefore, when the Minister replies, I hope that he will not just fall back on the point that I have already conceded—that this legislation can deal with them directly—but that he will appreciate, when considering the issue of the welfare of passengers and the satisfaction that they derive from their flights, because problems occur because there has not been sufficient anticipation of the demands made of the border force, because there are insufficient officers on duty, or because a decision is taken, for security reasons, that every single passenger, whatever their category, should be subject to exactly the same controls. We are bound to acknowledge that this is of concern to us. We all have the welfare of the industry at heart, but this is a subject of very considerable anxiety among passengers.
I have discussed this issue externally in order to get a slightly more objective view, rather than just being critical of the arrangements in the United Kingdom. I have friends who regularly experience the delights of entering the United States of America—delights that often translate into great appreciation of the country once they are there but scarcely describe the experience they often encounter at US airports. British people enter as aliens, of course, and are subject to what often looks like a somewhat arbitrary operation on the part of the American authorities. Huge queues develop and it is not unusual for people disgorged from aircraft to have to wait for several hours in queues for entry into the country. I take it that we seek to make representations on behalf of British citizens when these problems arise, so we ought to pay the same due consideration with regard to flights into Britain.
Amendment 25 would require,
“the holder of a licence to develop passenger welfare plans”.
This was a recommendation made by the Transport Committee following its pre-legislative scrutiny of the Bill. We pay tribute to the fact that the Civil Aviation Authority has made some constructive moves in this direction. It has established a consumer panel to act as a critical friend. We certainly would like to buttress the position of the Transport Committee, which is that the consumer panel ought to focus on the welfare of passengers. The panel was established recently and, as I say, its purpose is to act as a critical friend. It provides a consumer perspective on all aspects of the CAA’s work, which is very welcome, and in particular it is meant to concentrate on the passenger experience and the enforcement of consumer protection legislation. The panel members are looked to to provide a source of challenge to the Civil Aviation Authority on how to identify consumer interests and to ensure that they are reflected in the authority’s work. However, in this legislation the Government have not included passenger welfare plans as part of a licence for airports. They simply claim that the CAA will draw up licences to cover such welfare.
Lord Bradshaw
I ask my noble friend to consider very carefully the arrangements now in place in the bus and rail industries for taking care of passengers. These have been built up over a long period, although they are certainly not completely fair. Statistics on performance are very regularly published but this issue goes very much wider than performance; it relates to things such as looking after people who miss their connections or trains. When I was chairman of the bus users’ council, I was concerned about people who were left in draughty old bus stations because the last bus did not run, or something of the sort. These are all people who need protection. I am slightly surprised, but I am perhaps better advised, by what the noble Lord, Lord Davies, has said: people at airports should at least be protected as well as passengers who use buses or trains.
Lord Soley
I am broadly sympathetic to this group of amendments tabled by my noble friend Lord Davies, and to the recommendations of the Transport Select Committee. It is always dangerous to put too much in a Bill, but on this we need to start with the recognition that when a person comes into an airport, particularly to a major airport such as Heathrow, it is their first impression of the United Kingdom. If they are coming here from any of the emerging countries—especially China, India or Brazil—the image for someone who is thinking of setting up a business and investing here is not good. It has got a lot better since Terminal 5 opened at Heathrow. I readily accept that there is a much greater desire to do things about this. I also accept that, as my noble friend Lord Davies has pointed out, a lot of the recent problems were not caused by things that the Bill will cover; they were caused by immigration control and so on. The image of vast queues moving very slowly—which is what were seen, even if that issue will not be covered by these amendments—is very bad for Britain. It is less true for other airports but it is still true; so we need to get our act together and do rather better on this.
I was trying to envisage someone who had just emerged from one of these long queues taking part in one of these surveys, whether for immigration purposes or anything else. They might give some short, sharp answers to the questions. We have to do better. That is the thrust of these amendments and of what the Transport Select Committee was saying. I urge the Minister to look at this matter sympathetically and see whether he can come up with some way of constantly emphasising the importance of the passenger having a good experience. It does not do our business or general tourist travel any good at all to have the images we have had.
I dread to think of what will happen if we have problems of runway availability at Heathrow during the Olympics. You can see what will happen if there is a severe weather event that causes a back-up because there is no alternative runway space. You then have the inevitable position of all the other problems at the airport, and you will have some very disappointed people coming into Britain. This is rather important and the airports and the Government need to look at this whole area.
Lord Empey
My Lords, I am sure that most of us travelling through airports have been approached at one time or another by the person with the dreaded clipboard. No doubt all noble Lords here were free and giving of their time and answers to help these people establish their true feelings.
Whether the particular methodology contained in these amendments is right, I am not sure. No one wants to add to the difficulties of getting a licence or to the bureaucracy involved. Nevertheless, underneath all that, the noble Lord, Lord Davies, is making a fundamental point that we all share. There have been a number of cases in recent years where the whole image of this country and the welfare of many thousands of passengers have undoubtedly been put to the test. Unfortunately, on some occasions, the relevant airports have failed that test. One constantly hears that there is an absence of information being fed back to the passenger.
Of course, these emergencies obviously come out of the blue in many cases. Sometimes the airports are not properly prepared, they do not have enough staff or facilities and one understands that this is not easy to cure. Nevertheless, it should be at the core of what we are trying to do. We are trying to make aviation more efficient but, in parallel with that, we have to make it a more pleasurable experience.
In so many walks of life—we are talking mostly about finance—consumer welfare and consumer benefits are put at the core of many of the things that we do in this country. That is right and there is therefore some merit in these amendments. Whether this methodology is the right one is not necessarily the issue today. The point is that there is a fundamental issue, and I hope that the Minister will refer to it in his reply. Should there be a broadly understood standard that would apply to all airport operators in the event that an emergency will arise, as it inevitably will; and how are people to be treated? Are we to continue to see our television screens covered with images of passengers complaining about their treatment, delays and lack of information?
In order to raise standards, which is our general objective, there should surely be some methodology. I have an open mind as to whether or not it should be this precise mechanism but I hope the Minister will at least acknowledge that this must be at the core of what we do.
Lord Berkeley
My Lords, following the comment of my noble friend Lord Soley about immigration, by coincidence I have in the Crime and Courts Bill an amendment about the immigration service which may be discussed later tonight. The service is woefully inadequate, as my noble friend said. The delays are reflecting very badly on the country.
Passenger satisfaction should be measured in respect of immigration delays as well as many other things, because they are quite significant. My suggestion that I shall probably put tonight is that the immigration service should be given targets. I am not sure that this Government like targets but there might be a target for people with EU passports to wait for not more than 10 minutes, and for those from third countries to wait for not more than half an hour. We can debate what the targets should be. The crucial thing is that the immigration service should be required to pay some kind of compensation to the airlines if they exceed those targets, unless there is an emergency or something like that.
As several noble Lords have said, the key is to have this information. I would much rather see it come from the licence holder than from the immigration service, which might be tempted to massage the figures slightly. My noble friend Lord Davies can think about whether it should go in as a further amendment on Report, but we ought to measure this matter along with some of these other issues to get independent information on passenger satisfaction regarding everything they see when they arrive at or leave an airport.
Earl Attlee
My Lords, I am aware that similar amendments were tabled in the Committee and Report stages in the House of Commons. These amendments provide us with a welcome opportunity to return to some important issues for passengers.
The noble Lord, Lord Bradshaw, talked about comparisons with the bus and rail industry arrangements. There is no reason, however, why the CAA cannot look at those rules and regulations when devising licence conditions and learn from what happens in another industry. The noble Lord, Lord Soley, talked about first impressions. They do matter and I have been impressed with the work going on at Gatwick to improve the appearance of the airport and the way it works.
The noble Lord, Lord Empey, touched on the issue of a market survey and said that passenger satisfaction is at the core of what we are trying to do. It is, but it is the duty of the CAA to achieve the desirable outcomes by means of the licence conditions.
The noble Lord, Lord Berkeley, talked about immigration issues, as did other noble Lords. A few years ago, I declined to visit the United States, even at public expense, because, frankly, I thought that the immigration arrangements there were so awful that I did not want to do it. I just said, “No, I will stay here and be with your Lordships”.
Earl Attlee
We will see what happens in the next reshuffle.
My honourable friend the Immigration Minister is reviewing what additional data may be published by the Home Office and shared with port operators. Meanwhile, the border force has responded to recent problems in a number of ways. It is tackling short-term peaks with a pool of trained staff, working with airports and airlines to ensure that they provide more accurate passenger manifests and flight schedules so that the border force can flexibly deploy staff at the right times and places, creating a new central control room for the border force at Heathrow that uses mobile teams for rapid deployment, and implementing new rostering and shift patterns. The border force is also working with Gatwick and Heathrow airports to improve passenger flows, using more specific measures such as e-gates and other biometric checks.
There can be no doubt that passengers want efficient baggage-handling services when they travel by air. The experience of recent years has also demonstrated how vital it is that airports prepare effectively for potential disruption. It is clear that the aviation sector as a whole needs to have effective means of dealing with passenger welfare during disruption of services. While I can therefore understand and agree with the sentiment behind these amendments and what noble Lords have said, I cannot recommend accepting them into the Bill. The text of the Bill already provides the most effective means of protecting passenger interests in relation to the matters raised.
Clause 18 and the licensing regime as a whole will give the CAA the flexibility to tailor licence conditions to the specific circumstances facing individual airports with substantial market power. This flexibility is an important means of minimising the distortions associated with regulatory intervention and ensuring that action taken by the CAA is proportionate. However, we also believe that giving the independent expert regulator flexibility and discretion in deciding the content of the licence is the most effective way to protect the interests of present and future passengers. If Parliament chooses to use this legislation to hard-code certain points in licences, it would constrain the regulator’s freedom to decide what priority should be afforded to different passenger concerns and what costs should be allowed for the delivery of competing consumer priorities. As the Minister of State said in Committee in the House of Commons, amendments such as these would make the licence system unbalanced because passengers care about a whole range of different issues. Moreover, a prescriptive approach in the Bill is likely to make it more difficult for the regulator to adapt its approach to the changing concerns of passengers. In 2005, who would have thought that volcanic ash would have been a major problem later on?
If we were to adopt these amendments, they would oblige the CAA to give greater weight to these factors than other matters that might become equally or more important to passengers in the future. This danger was recognised by the noble Lord, Lord Soley. Your Lordships can be very confident that the CAA will already use the new licensing powers proposed in the Bill to focus on, for example, operational resilience and passenger welfare in the event of extreme disruption—not least because of the CAA’s Clause 1 duties, as the noble Lord, Lord Davies, recognised. And why it would it not do so?
As we have discussed in Committee, in response to a request for advice from the Secretary of State, the CAA published an indicative licence in January to assist Parliament in its scrutiny of the Bill, and a copy has been sent to the House of Commons Library. At the request of the Department for Transport, the draft licence includes provisions on operational resilience. The proposals in condition 7 would require the licence holder to operate the airport efficiently and use its best endeavours to minimise detriment to passengers arising from disruption. The noble Lord, Lord Davies, mentioned disruption due to winter. When I visited Gatwick Airport before the most recent winter and saw all the new equipment in place, I was absolutely confident that the winter would be very mild.
It would also require the airport to draw up, consult on and gain the CAA’s approval for an annual resilience plan setting out how it would secure compliance with its obligations under the condition. The licence holder will then be obliged to comply with the commitments it has made in its resilience plan. The CAA sought initial views from industry in drafting the indicative licence. However, since Parliament has not yet concluded its consideration of the Bill, the CAA has not yet started to consult on proposed licence conditions for each airport that will be subject to regulation.
If the system proposed in the Bill is implemented, the CAA will consider the extent to which it is necessary or expedient to include conditions in a licence for operational resilience and other matters such as passenger welfare. The CAA expects that activities that might be expected to be part of the new licence regime would include taking into account other obligations on service quality standards, and the success of codes of conduct and voluntary arrangements being adopted by industry. Against this background we believe that putting specific requirements in the Bill on issues such as baggage handling and operational resilience could prove to be a disproportionate response that would place an unnecessary restriction on the CAA’s flexibility to develop proportionate and effective ways to address passenger concerns—and might even lead it to address the wrong ones.
In summary, the Bill provides the CAA—the body with the relevant operational expertise—after appropriate consultation, with the flexibility to determine appropriate and effective licence conditions. The amendments in this group could undermine our goal of giving the specialist regulator a flexible toolkit to protect the passenger. Therefore, I hope that the noble Lord will withdraw his amendment.
Lord Davies of Oldham
My Lords, I am grateful to noble Lords who introduced significant points, to which the Minister paid due regard—about as much regard as he paid to the points that I made in my opening speech. If through the amendments in this group I had sought to introduce microscopic instructions to the CAA on what it ought to do that would limit its capacity to fulfil its duties, I would quite understand the thrust of the Minister’s response. However, the first of the three amendments to which I addressed my remarks requires publication of an annual survey. This is not desperately specific but merely indicates that it would be a very good idea if the licence holder—the airport authority—gave some account to the general public of the effectiveness of its operation.
The second amendment suggests that the licence holder should develop passenger welfare plans. That is not specific; it merely indicates that it should be incumbent on the licence holder to fulfil the obligation that apparently underpins the Bill, which is to provide a better service to passengers. The third amendment merely suggests that support is necessary and should be provided for stranded passengers at airports. There is no Member of this Committee—including the Minister—who does not agree that action must be taken in this area. The Minister went so far as to indicate that strenuous efforts had been made to ensure that the numbers of such stranded passengers would decrease. I am not sure that Gatwick has the equipment to affect the climate and make our winters milder, but I know exactly what he meant. It now has the equipment to keep aircraft manoeuvring and able to fly, whereas over the winter that caused so much distress the airports did not have that.
We are merely asking for provision to be made for stranded passengers—an objective that the Minister says he shares—and I cannot think that the actions of the Civil Aviation Authority are cabined, confined or constrained by including these amendments in the provision on how the licence is granted. However, at this stage, I accept that the Minister is not as warm about these amendments as he is about the forecast for future winters, and I beg leave to withdraw the amendment.
Lord Davies of Oldham
“( ) provisions requiring the holder of a licence to prevent users of air transport services buying preferential access to check-in and security processes on an outbound journey and immigration control and baggage reclaim processes on an inbound journey.”
Lord Davies of Oldham
My Lords, it is my approach today to produce completely uncontroversial amendments, and I am sure that this will be the least controversial. I am not entirely confident that the Minister will accept it but I know that the sentiments behind it will be shared by all Members of the Committee.
The subject of concern tackled by the amendment is obvious enough, such are the difficulties at our airports at certain times. Heathrow, being the largest and dealing with the largest number of passengers, inevitably has the longest passenger queues, which are the bugbear of people entering the country. The proposal is that, if some people pay enough, they can bypass the restrictions. Surely that is so contrary to the main principle on which the coalition works—that we are all in this together—that not a single Member of the Committee will beseech the Minister to accept the proposition.
It is proposed that substantial amounts of money can be garnered by the airport by offering preferential opportunities to those who are prepared to pay. It is suggested that £1,800 will enable passengers to avoid the queues. Heathrow is thus offering a back-door service for wealthy air passengers. This does not appear in any of the normal communications to passengers but is offered discreetly to the well favoured. Wealthy air passengers can pay £1,800 to bypass the passport check queues.
I have already indicated to noble Lords that I recognise the limitations of the Bill with regard to the UK border force but this provision relates directly to the way in which passport checks are operated. Whereas some people endure queues of up to three hours because passport control desks may be understaffed, or because the pressures and anxieties surrounding the security position justifiably lead to more intensive scrutiny of passengers coming in, rich passengers can get through in minutes.
Border staff may be taken away from their regular duties to process this arrangement for the privileged, which is a VIP offering that Heathrow sought to keep secret. The airport should not pursue such strategies. It should come to an end. However, the best way of guaranteeing that neither Heathrow nor any other airport contemplates this heinous practice is to put it in legislation. I beg to move.
Lord Trefgarne
My Lords, while I am sympathetic to the noble Lord’s wish to ensure that there is no corruption through people buying their way through the airport, there are some people whom I would wish to have preferential treatment—for example, members of the Royal Family and the heads of state of other nations. How does the noble Lord think they should be accommodated if the restrictions that he proposes are put in place?
Lord Davies of Oldham
My Lords, I do not think that the issue of payment is likely to arise with members of the Royal Family or diplomatic staff because the arrangements for how they should be treated are agreed with the airport authorities. That is very different from saying that you can enhance the value of your ticket with extra money to get through the queue quickly. That is the practice to which I object. I am not saying that the Royal Family fit into that category. I imagine that it is also not the case for diplomats. We also have control over the process of entry to the country for air crews, but we do not expect them to take their turn in the queue because we recognise that special arrangements should be made for them. I do not want to exclude some special arrangements; I object to a scheme that enables those who are wealthy enough to purchase privilege.
Lord Berkeley
I suppose my noble friend is thinking in particular about those bankers who are now all over the press for possibly having committed criminal acts to fiddle the LIBOR. They are probably the only people who could afford to spend an extra £2,000 or so to save five or 10 minutes—or maybe several hours—coming into the country. There is just one thing that I would add to this. There is some benefit in having famous people who are prepared to speak out going through the same process as everyone else. Occasionally, they get so fed up that they go to the media and complain about it. I suspect that part of the reason why things are getting better at immigration in airports is that one or two people have had the guts to speak out and say, “This is iniquitous”. If these people were tempted to jump the queue by paying £1,000 or £2,000, we would lose that. My noble friend has made a very strong argument for having this in legislation on the basis that people should not pay extra for special treatment.
Lord Jenkin of Roding
I should like to be reassured that the noble Lord, Lord Davies of Oldham, does not seek to insist that everyone must stand in the same queue for check-in. If you buy a first-class ticket, many airlines have special check-in counters for such travellers. That seems entirely appropriate and entirely different from going through immigration, either outwards or inwards. The amendment specifically mentions check-in. However, it seems entirely appropriate that if you buy a first-class ticket you can go to a first-class check-in desk and not wait as long as you would if you had bought a standard fare.
Lord Trefgarne
Perhaps the noble Lord will tell us how he proposes that disabled people should be handled. They often have special provision at airports, which is necessary and very proper.
Lord Davies of Oldham
On the latter category, we are shortly to debate the arrangements for the disabled, and I hope to provide reassurance. I accept what the noble Lord is saying; of course there are special arrangements for the disabled. We all know why it is necessary for the law to be strengthened in that area, and I shall be proposing an amendment to deal with that matter.
The situation that I have identified is not concerned with people going through different routes according to their ticket, but the question of how one goes through the state’s immigration controls. The contention that you are less of a security risk because you are wealthy is dubious. After all, I seem to remember Bin Laden did not come from a totally impecunious family. It is not the case that those who have a great deal of money are better security risks. Why on earth should everyone else, for the necessary security of the nation, be obliged to suffer some of the privations that occur from time to time? I fail to understand how one can market a package that guarantees that one is whisked through security.
Lord Berkeley
Does my noble friend agree that the key to the amendment is the word, “buying”. There is nothing to stop the provision of different queues for first-class passengers or others at check-in or security. The question is: have they paid extra to go through that facility rather than for the facilities on the flight?
Earl Attlee
My Lords, I am aware that a similarly worded amendment was tabled in Committee in the House of Commons, but that related to Clause 83, on provision of:
“Information for the benefit of users of air transport services”.
The stated aim of that amendment was to close a perceived gap in the information that will be published under that clause on what passengers can expect to experience when departing or arriving at an airport, especially in relation to how long they should expect to wait to have their passport checked. The Government supported the broad intention of that amendment. Giving consumers more information on the quality of service provided by airports and airlines will help to maximise the benefits that markets deliver to passengers. However, the Minister of State ultimately resisted the amendment on the basis that the Bill already enables the CAA to require the collection and publication of information on check-in, baggage handling and security queues. He further explained that the UK border force, the authority responsible for border controls relating to arriving and departing passengers and goods, is responsible to Ministers and Parliament, and said that this is a more effective and appropriate means to hold the UK border force to account than giving the CAA power to oversee its activities.
The amendment today goes further than the previous one by seeking to prevent users from buying preferential access to check-in, security, immigration control and baggage reclaim processes. In considering the amendment, the Committee should note the distinction between check-in and baggage reclaim processes, and aviation security and border-control processes—the latter being subject to exacting standards enshrined in legislation. For example, airports are required, pursuant to international standards and EU and domestic regulatory requirements, to ensure that all passengers undergo security screening to specified levels. This is subject to monitoring and enforcement through security inspections and tests by the regulator. Legislation also requires full travel document checks to be conducted on all passengers, including all British citizens, arriving at the UK border. As the Minister of State made clear in the House of Commons, the security of our borders and the checks that need to be undertaken to protect us from those who would enter our country to do us harm are treated with paramount importance.
I am aware that the BAA runs a VIP suite scheme at Heathrow. The UK border force does not charge BAA or the VIPs any money for the provision of this service, nor does the BAA cover any border force costs. I will write to the noble Lord, Lord Davies of Oldham, with full details of the number of years that these arrangements have been in place. As long as standards of security and immigration are maintained at all times and in respect of all passengers, the Government do not wish to prevent the market offering access to these services, which are tailored to the needs of passengers. However, there is no question of reduced security, as suggested by the noble Lord, Lord Davies.
Your Lordships will no doubt be aware that a number of airlines offer faster check-in services to premium travellers who are willing to pay a premium for the service. The Government do not wish to prevent passengers benefiting from such products. If the concern is that the purchase of preferential access to check-in or baggage control processes would be an impediment to competition, the Bill already provides the CAA with the necessary powers to address that.
In summary, aviation security and immigration processes at UK airports must comply with exacting standards that are enshrined in legislation. There is no scope for passengers to pay to avoid these processes. The Government believe that the amendment goes too far in attempting to prevent the market offering access to these and other services that are tailored to the specific needs of users. I hope, therefore, that the noble Lord will consider withdrawing the amendment.
Lord Davies of Oldham
I am grateful to the Minister for his response, although I still believe that he is failing to recognise the context in which we find ourselves. That answer might have sufficed a decade ago, but as he knows only too well, we are operating a very stringent security regime at our airports. We all know the privations that occur from time to time. We know that people have to queue for hours on end because of the necessary requirements. The Government say that it is about security and the market has the right to provide preferential treatment for some. It seems to me that the concept of security is an obligation for every citizen. I do not see why there are favoured circumstances for a few, nor do I think it is conducive to the implementation of the security requirements if people believe that there is an inherent unfairness. The noble Earl made no reference whatever to that. Of course I recognise that no payment has been made by the airport to the Home Office with regard to this. However, if people are being transferred from heavily pressed desks to facilitate entry for those who have paid a premium, one should not be at all surprised that the difficulties occurring at airports are growing acutely. I beg leave to withdraw the amendment, but the Minister may come to rue the day.
Lord Jenkin of Roding
Lord Jenkin of Roding
My Lords, we can also discuss Amendments 28A, 28B and 29A. I can deal with this fairly briefly because I made a point about it at Second Reading. No doubt noble Lords will recognise that this is the amendment which raises in Committee the issue that I described to the House on 13 June at column 1379. The problem is relatively simple. Appeals can be made by anybody who considers himself disadvantaged as a result of decisions affecting the airports.
The British Airports Authority raised the question of whether it could be to their huge disadvantage if they were trying to raise the large sums of money that they invest every year. I quoted the figures at Second Reading. It is investing very large sums in our airports. That investment depends entirely on confidence and a degree of certainty, otherwise the markets will be less likely to advance money, or will charge more, which of course would immediately affect the costs of the operation and therefore the charges to passengers.
Lord Trefgarne
My Lords, I shall not detain your Lordships for more than a moment. I very much support what my noble friend Lord Jenkin of Roding has been saying on this matter. There is a serious problem here. As my noble friend explained, it is a very unlikely circumstance but, if it did happen, it could be catastrophic, and I do not think that the Bill can be allowed to proceed to the statute book with this difficulty identified.
Lord Soley
I shall be similarly brief and just wish to add to what the noble Lord, Lord Jenkin, said. The figure involved for investment at Heathrow alone is £100 million a month. Putting that into context, you raise that on the bond market and you secure it against the airport in just the same way as someone buying a house secures a mortgage against the house. If there were appeals of the type indicated by the noble Lord, Lord Jenkin, they could have a very disruptive effect on the financial markets. I think that there is a question about whether the bankers entirely agree with BAA about the risk involved but the point is that, if the risk is there and we can deal with it fairly easily, then frankly we should. If there were an appeal, it would be a severe and difficult embarrassment, particularly if the fight became bitter. The risk of a challenge to £100 million a month investment at our major airport is not funny. I suspect that the CAA would not allow an appeal but, again, this is a case of being sure that we have the safeguards in place, as the noble Lord, Lord Jenkin, indicated, and I certainly support his amendment.
Lord Berkeley
My Lords, I, too, support the noble Lord, Lord Jenkin, and others on this amendment. An appeal may be very unlikely but, as other noble Lords have said, the consequences would be bad. I cannot see how anyone appealing under Clauses 24 and 25 would find it relevant to question the financing of BAA—or any other operator, for that matter. That would seem to have nothing to do with any appeal but one occasionally gets vexatious appeals. Given the size of the sums and the disaster that would ensue if investments did not go ahead because the bankers became uncertain about an appeal, this would seem to be an extremely sensible set of amendments. I, too, shall be interested to hear what the Minister has to say in response.
Earl Attlee
My Lords, I have listened very carefully to the points that have been raised. As my noble friend Lord Jenkin pointed out, I have met BAA to discuss this issue in some detail, and since that meeting I have considered its concerns.
First, I assure the Committee that the Government remain of the opinion that there are good reasons to include derogations to financial resilience licence conditions where these would otherwise cut across existing financing arrangements. The CAA, which will be issuing the first airport licences, has also confirmed that it supports the broad principle that ring-fencing licence conditions, which does not cut across existing financial arrangements, could bring benefits to users.
The practical effect of the amendment would appear to shut out an airline’s right of appeal in respect of an entire licence condition, even if only a small part of it contained an exception relating to financial arrangements. Therefore, the scope of the amendment appears to be wider than the reason advanced for its inclusion. None the less, it is a perfectly good amendment for us to debate. The Government remain of the opinion—
Lord Soley
The point that the noble Earl makes is a fair one but it is perfectly possible, with the government draftsmen, to make a more refined and specific amendment, if necessary.
Earl Attlee
I absolutely agree with the noble Lord, Lord Soley. It is my duty to point out a drafting error in case my noble friend wants to run the amendment on Report. If I had not identified the problem in Committee and suddenly jumped up on Report and said, “Actually, the amendment is defective”, I think I would be a little unpopular.
The Government remain of the opinion that the broad rights of appeal provide an effective means of improving the accountability of key regulatory decisions. The process enables the interests of both airport operators and materially affected airlines to be taken into account. We therefore believe it is correct that this right of appeal should extend to licence conditions that relate to financial arrangements. An airline seeking to appeal a financial resilience condition, or the absence of such a condition in the first licence granted to an operator, will need to satisfy the Competition Commission that it is, in this context, a person whose interests are “materially affected” by the decision.
Any dispute over whether a derogation would cause a breach of existing financial arrangements would be most likely to arise from legal questions about the true construction of the loan agreement and/or the licence condition. These could ultimately be resolved through judicial review and, in the mean time, an airport operator could seek an injunction to preserve the status quo. Further comfort may be drawn from the fact that, subject to a government amendment that has been tabled being agreed, the Competition Commission, in deciding an appeal, will be obliged to have regard to the duties imposed on the CAA. Markets should therefore be reassured that the risk of existing creditor protection in an airport operator’s funding structure being unintentionally removed and triggering an event of default is extremely small.
We acknowledge that there is a possibility that the uncertainty created by an airline making an appeal to the Competition Commission on a licence condition relating to financial arrangements could affect an airport operator’s ability to access capital markets to raise finance while the appeal is being considered. However, as the timing of an application for leave to appeal is predictable, we consider that this is something an airport operator could successfully manage by pre-funding its financing requirements. We remain of the opinion that the right of appeal for airlines would not have significant negative consequences for an airport operator’s ability to raise debt in the capital markets.
Lord Trefgarne
Will the noble Earl say how long the appeals will take? He said that they would be of no consequence and could be temporarily ignored while the appeal process continued, but how long would that take?
Earl Attlee
My Lords, it may be helpful to the Committee if I outline the process. The initial consultation stage is a reasonable period set by the CAA. The period to bring an appeal, and the earliest date that licence modifications could come into force, is six weeks. For regulated representations the length of time is eight weeks. The appeal period is 24 weeks. Therefore it could be quite a long period. However, the appeal can be rejected because it is frivolous, vexatious or unlikely to succeed. The Competition Commission can make that determination quickly—but if it thought that there were good grounds for an appeal, the process would take longer. Frivolous or vexatious appeals, or those unlikely to succeed, could be determined quickly.
While the government position is clear and we have already communicated it to BAA, I have listened very carefully to noble Lords’ concerns and will communicate them to my right honourable friend the Minister of State for Aviation. I do not see that it would be in the airlines’ interests to attempt to overturn financial derogations determined by the CAA to be in passengers’ interests, where to do so would cause an event of default. The appeals regime has been designed to deter frivolous or vexatious appeals, as I mentioned. Furthermore, where the CAA proposes to grant a licence, including a condition furthering a financial derogation, or proposes to modify a condition containing a financial derogation, special conditions will apply.
Lord Soley
I am grateful but the Minister seems to be heading in the direction of neither moving on this nor looking at it again. He has described an appeal process that could take longer than six months. So it is a six-month possibility. He said earlier that the amendment put down by the noble Lord, Lord Jenkin, was too extensive. I understand that but I do not believe it is beyond the wit of the Government to come back with an amendment that is more specific. It should be possible and I do not see why it cannot be considered.
Earl Attlee
My Lords, noble Lords suggested that the appeal process would take six months. I am suggesting that the Competition Commission will very quickly be able to determine whether the appeal is frivolous, vexatious or unlikely to succeed. I do not believe the CAA would grant a derogation unless it was absolutely certain that it would pass scrutiny from the Competition Commission. There is also the point that the licence condition does not come into effect until the appeal is heard.
I reiterate that I am not taking this away and I am not reflecting on it. I will, however, discuss the matter in detail with my right honourable friend.
Lord Trefgarne
I am bound to tell the noble Lord that his answer has been wholly unconvincing on this matter. I hope he will undertake to reconsider and bring forward amendments if he thinks fit at the next stage.
Lord Jenkin of Roding
When my noble friend started his reply by talking about the amendment being too extensive, I thought he was going to move on to say that a redrafted one that was not quite so widely drawn might meet with his approval. As my noble friend proceeded, however, that possibility seemed to disappear over the horizon until we got to the end when he said that he will continue to discuss this with his right honourable friend the Minister of State at the Department for Transport. I hope that will be a serious reconsideration. This is not a frivolous point and it is not covered by saying that the Competition Commission could dismiss appeals as being frivolous or pointless.
Of course, the financial markets would be totally spooked by the threat of an interruption which, as the noble Lord, Lord Soley, said, might last for more than six months. They would not be prepared to go on lending and the whole investment programme would be threatened. This could not be in the interest of passengers. I understand that my noble friend has to be cautious about what he says, but when he said at the end that he would not reconsider it but would discuss it with the Minister of State, I paid more attention to the second point than the first. Perhaps we are making progress. If it is a question of drafting something that removes the risk only so far as is necessary, I am sure that the lawyers working for BAA—perhaps with the department lawyers or parliamentary counsel—would be able to find a form of words. In the mean time, Ministers must be willing to recognise that this problem has to be dealt with and cannot be put off.
Lord Soley
Another way of approaching it is to allow the CAA to take into account the risk to investment before coming forward with any appeal. That is another way of coming at the same problem.
Lord Jenkin of Roding
I am grateful to the noble Lord, Lord Soley, who has been extremely supportive throughout this, raising a number of useful points. This has been a valuable debate. The point that was raised at Second Reading has now been exposed here. My noble friend met the BAA people and it seems that we are making some progress. However, it takes two to tango. I am not sure I would want to tango with my noble friend, although it might be rather fun, but I hope that what he has said indicates that minds are not closed and that the Government will be prepared to consider this between now and Report stage.
The Government would lay themselves open to criticism if they put anything in this Bill which was liable to put at risk the huge investment programme that BAA has at its airports. That is the point. However unlikely, the damage could be immense. Having said that, I am sure the Minister has recognised the support around the Committee and I beg leave to withdraw my amendment.
Amendment 27A withdrawn.
Amendment 28
Lord Rosser
“( ) that the appeal does not demonstrably show that it is in the interests of users of air transport services”
Lord Rosser
My Lords, as we have just been discussing, Clauses 24 and 25 deal with appeals to the Competition Commission in respect of, first, the conditions of new licences and, secondly, modification of licence conditions. Under the Bill, persons who operate a dominant area at a dominant airport require a licence to levy charges. An appeal lies to the Competition Commission against a decision by the Civil Aviation Authority to include, or not to include, a condition in a licence when it is granted, and an appeal also lies to the Competition Commission against a decision by the Civil Aviation Authority to modify a licence condition.
An appeal can be brought only with the permission of the Competition Commission and the Bill states that the Competition Commission may refuse permission to appeal only on one of the following grounds: that the appeal is brought for reasons that are trivial or vexatious, or that the appeal does not have a reasonable prospect of success. Clearly, from the wording in the Bill there is a concern that trivial or vexatious appeals should be stopped. I am sure we would all agree with that objective, and my amendment seeks to add in a further ground on which permission to appeal can be refused—namely, that the appeal does not demonstrably show that it is in the interests of users of air transport services, in order to further minimise the potential for frivolous or vexatious appeals.
The primary duty of the Civil Aviation Authority, as set out in Clause 1, is that it must carry out its functions in a manner which it considers will further the interests of users of air transport services regarding the range, availability, continuity, cost and quality of airport operation services. Surely, then, there must be an argument for saying that in any appeal to the Competition Commission against a decision by the Civil Aviation Authority to include, or not to include, a condition in a licence, or in any appeal against a decision by the CAA to modify a licence condition—both instances relating to persons who operate a dominant area at a dominant airport—it should also have to be shown quite clearly that the appeal is in the interests of users of air transport services, bearing in mind that that is the primary duty and responsibility placed on the Civil Aviation Authority, whose decision is being appealed.
Clause 30, on the procedure on appeals, states that subsections (1), (2) and (5) of Clause 1 apply to the carrying out by the Competition Commission of its function of deciding an application for permission to appeal under Clauses 24 and 25. Clause 30 refers to subsections (1) (2) and (5) of Clause 1, and subsection (1) refers to the Civil Aviation Authority having, where appropriate, to carry out its functions in a manner which it considers will promote competition in the provision of airport operation services. In a debate on an amendment when we were previously discussing the Bill in Committee, the Minister said that subsection (1) of Clause 1 would take priority over subsection (2) as far as the Civil Aviation Authority was concerned if promoting competition in the provision of airport operation services conflicted with its duty under subsection (1) to carry out its functions in a manner which the Civil Aviation Authority considers will further the interests of users of air transport services regarding the range, availability, continuity, cost and quality of airport operation services.
However, it is not clear whether the giving of priority to subsection (1) over subsection (2) in Clause 1 where there is any sort of conflict applies also to the Competition Commission under Clause 30. Without it apparently being clear that it does, the Competition Commission, bearing in mind its name, might well give greater weight to promoting competition when deciding whether or not to refuse permission to appeal, rather than wanting to satisfy itself that the appeal is in the interests of users of air transport services, which is clearly stated in this amendment and is in accordance with the primary, overriding duty of the Civil Aviation Authority as laid down in Clause 1(1).
I hope that the Minister will either accept the amendment or be able to provide an assurance that giving priority to subsection (1) over subsection (2) in Clause 1 applies equally to the Competition Commission in Clause 30 as to the Civil Aviation Authority. I beg to move.
Earl Attlee
My Lords, I thank the noble Lord for explaining the concerns that his amendments seek to address. However, I believe that the Bill already takes those concerns into account. The proposed appeals process has been carefully designed to ensure that where an appeal is brought, ordinarily for it to succeed, the appeal body should consider whether it is in passengers’ interests in the provision of airport operation services. It is our aim to have in place an appeals process that facilitates transparency and a timely manner of resolution of appeals, and that permission to appeal should be granted only where appropriate. However, we do not wish to stop those whose interests are materially affected from appealing. In meetings with airlines and airport bodies, my officials have sought to assure parties of this.
Clauses 24(5)(b) and 25(5)(b) as currently drafted already ensure that permission to appeal a licence condition or licence modification would be refused if the appeal did not have a reasonable prospect of success. Where an appeal had a reasonable prospect of success, it would be unjust and wrong in principle to refuse permission. In answer to the important question put by the noble Lord, Lord Rosser, I refer the Committee to Clause 30, which contains provisions stating that the Competition Commission “must have regard” to the same duties as the CAA in the discharge of stated functions. Included in these is the determination for permission to appeal under Clauses 24 and 25.
The Bill as drafted empowers the Competition Commission to refuse to grant permission to appeal so as to avoid parties bringing an appeal as a “spoiling” tactic. Nor can appeals be used as a delaying tactic. The default position is that the CAA’s licence condition or modification comes into effect while the appeal is being heard. Therefore, I do not believe that the inclusion of a further subsection in Clauses 24 and 25, as suggested by the noble Lord, would add anything of further substance to the Bill.
In the light of those assurances, I hope that the noble Lord will be willing to withdraw his amendment.
Lord Rosser
Before I do so, while I think that the noble Earl has probably given me the assurances that I seek, perhaps I may ask him again directly whether he is saying clearly that, under the terms of Clause 30 where it states—as I indicated and the noble Earl has repeated—that subsections (1), (2) and (5) of Clause 1 apply to the carrying out by the Competition Commission of its functions, which include determining appeals brought under the two clauses that we are talking about, in carrying out those functions the Competition Commission is bound in the same way under Clause 1(1) and (2) as the Civil Aviation Authority is itself. Will it have the same general duty in respect of determining whether those appeals should be heard? In other words, it is to give priority—and see as its primary duty as the Competition Commission—to making the decision to furthering,
“the interests of the users of air transport services regarding the range, availability, continuity, cost and quality of airport operation services”,
thus ensuring that that duty overrides the duty to promote competition in the provision of airport operation services. I think that that is what the Minister said to me, but I should be grateful if he could confirm that that is the case.
Earl Attlee
My Lords, the Competition Commission must have regard to the CAA’s general duty under Clause 30, as per the set of amendments accepted earlier today. We do not believe that it would be sustainable for the Competition Commission to promote competition where to do so would be inimical to the interests of users of air transport services, as described in Clause 1(1).
Lord Rosser
I do not seek to play with words; I am just anxious to be clear. The Minister said that the Competition Commission must “have regard”. Does that mean that its general duty in hearing these appeals is the same as the CAA’s general duty under Clause 1, which states that its primary and overriding responsibility in determining whether those appeals should be heard is to,
“further the interests of users of air transport services”,
rather than, where there is a conflict, to promote competition? I do not know whether we are playing with words over “have regard to”. In the Minister’s view, does that mean that the Competition Commission is bound in the same way as the CAA is in its general duty under Clause 1(1) and (2)?
Earl Attlee
My Lords, the short answer to the noble Lord’s question is yes.
Lord Rosser
In that case, since the Minister’s very specific answer makes it clear that the Competition Commission has the duty in the same way as the CAA has the duty under Clause 1(1) and (2), I beg leave to withdraw the amendment.
Earl Attlee
“(c) that an error was made in the exercise of a discretion.”
Lord Rosser
Lord Rosser
The amendment relates to Clause 29, which deals with appeals determined by the Competition Commission under Clauses 24 and 25, which we have just discussed. Clause 29 states:
“A determination made by the Competition Commission … must be contained in an order”.
Later, it states that the Civil Aviation Authority,
“must take such steps as it considers requisite for it to comply with the order”.
It then goes on to say:
“The steps must be taken … if a time is specified in the order or is to be determined in accordance with the order, within that time, and … otherwise, within a reasonable time”.
The effect of the amendment would be to remove “within a reasonable time” and insert,
“within the period of 24 weeks beginning with the day on which the Competition Commission published the relevant order”.
This is a probing amendment, which seeks to find out what the Government mean by “within a reasonable time” and how they believe those words should be interpreted. Do they mean more or less than 24 weeks and, if it could be more than 24 weeks, will the Minister give some examples of where it might be reasonable for the Civil Aviation Authority to take longer than 24 weeks to comply with an order made by the Competition Commission when no specific timescale is laid down by it? It would also be helpful if the Minister could say who will be responsible for deciding whether the Civil Aviation Authority has taken steps to comply with an order within a reasonable time. Will it be the Civil Aviation Authority itself, the Competition Commission, the Secretary of State, the courts or some other individual or body?
As I say, this is a probing amendment. I hope I have explained the motive for tabling it and the issue that we hope the noble Earl will address. I beg to move.
Earl Attlee
My Lords, the amendment seeks to amend subsection (7)(b) of Clause 29. The clause contains provisions relating to the publication of, and other matters connected to, the determination of appeals.
The current drafting provides that the CAA must take steps to comply with the appeal determination within any time period specified in the order. When none is specified, it must do so within a reasonable time. I am unable to support the amendment for two reasons. First, we do not think that it is necessary. Under subsection (7)(a) of the clause, the Competition Commission may specify a time limit in the order. We would expect it to do so if and whenever appropriate. Why would it not do so? Secondly, in circumstances where it is not appropriate to specify a period, it will be necessary to afford the CAA a reasonable time within which to comply with the order. What will comprise a reasonable time depends upon the context. There may be cases where action should be taken in fewer than 24 weeks and others where it is not reasonable to expect the CAA to take action within that period.
The noble Lord, Lord Rosser, asked me to give examples. I do not have any to hand but there may, I suggest, be a requirement to provide IT facilities or some capability that might require the CAA to procure something. It simply would not have time to take the necessary procurement action, although it might have every intention of doing so and perhaps give assurances that it would do so.
Against this background, to set an arbitrary time limit of 24 weeks is not appropriate and may cause injustice. Therefore, it is prudent to retain the flexibility that subsection (7)(b) provides the CAA. This flexibility is consistent with our wish for the CAA to be an efficient regulator but to allow it appropriate periods of time to comply with orders. I hope that in the light of my explanation the noble Lord will be willing to withdraw the amendment.
Lord Clinton-Davis
I have a certain amount of sympathy with what has been said but the trouble with this provision is that it lacks specificity. That is desirable in legislation. I have some doubts—perhaps the Minister can remove them—as to whether these sorts of provisions are capable of determination without difficulty. Perhaps I am wrong about that. The Minister ought to take another look at this matter. We are on the same wavelength on this. There is no doubt that we are in agreement about the provision that the Minister has in mind but I am doubtful about the wording.
Earl Attlee
My Lords, I am not a lawyer but I do not have any difficulty in understanding the provisions. I do not understand why the Competition Commission or the Competition Appeal Tribunal would not set a time limit if it were appropriate to do so. If it were inappropriate—the CAA might have said that it was already complying and had no intention of stopping complying—it would be totally unnecessary to impose a time limit. However, I would expect the Competition Commission to impose a time limit if it were desirable.
Lord Rosser
I thank the Minister for his reply. I also thank my noble friend Lord Clinton-Davis for the points he made. Obviously it is my intention to withdraw the amendment since it is probing in nature, but will the Minister respond to the other point I made about who will determine whether it has been done within a reasonable time? The clause provides that it should be done “within a reasonable time” if no time limit is set. Who makes the decision as to whether it has been done within a reasonable time?
Earl Attlee
My Lords, I do not know the answer to that question, but I imagine that if it was not done within a reasonable time, there would be a mechanism for the appellant to go back to the Competition Commission or the Competition Appeal Tribunal. However, if I have got that wrong, obviously I will write to the noble Lord.
Lord Clinton-Davis
I would have expected the Minister to say that the phrase “within a reasonable time” is used repeatedly in other legislation. Will he consider that?
Earl Attlee
My Lords, the terms “a reasonable time” and “a reasonable person” are frequently found in legislation. The noble Lord is absolutely right.
Lord Rosser
I am happy to leave this in the context that if the Minister finds that the response he has given to me on who will determine whether it has been done within a reasonable time is not the position, he will write to say that. As I say, it is a probing amendment to try to find out more about the Government’s intentions so far as the definition of “within a reasonable time” is concerned, and what kind of cases might come within that category rather than in subsection (7)(a), which provides that,
“if a time is specified in the order”.
I thank the noble Earl for his response and I beg leave to withdraw the amendment.
Earl Attlee
Earl Attlee
Earl Attlee
My Lords, this is a minor and technical amendment and as such I do not expect it to be controversial. It seeks to make the drafting in sub-paragraph (2)(a) of paragraph 22 of Schedule 2 consistent with the rest of that paragraph. It corrects the omission of the words “information or evidence” from the phrase “matter, information or evidence”. This phrase can be found elsewhere in paragraph 22. So this amendment makes sub-paragraph (2)(a) consistent with the other provisions in paragraph 22 of Schedule 2, which delineates the circumstances in which the Competition Commission may allow new matters, information or evidence to be adduced in appeals brought before it. Paragraph 22 of Schedule 2 generally prohibits the Competition Commission from considering any matter, information or evidence in an appeal that was not in the appeal before the Civil Aviation Authority.
However, in common with other appellate jurisdictions, there are limited circumstances where, in the interests of justice, this general rule needs to be capable of being displaced. It is necessary for the power to displace this rule so as to be co-extensive with the scope of the general prohibition. I beg to move.
Lord Davies of Oldham
My Lords, I agree with the Minister. Try as I might, I can find nothing controversial in his amendment.
Earl Attlee
“( ) The Competition Appeal Tribunal may allow an appeal under paragraph 1, 2 or 3 only to the extent that it is satisfied that the decision appealed against was wrong on one or more of the following grounds—
(a) that the decision was based on an error of fact;(b) that the decision was wrong in law;(c) that an error was made in the exercise of a discretion.”
“( ) When deciding an appeal under paragraph 1, 2 or 3 (including giving directions), the Competition Appeal Tribunal must have regard to the matters in respect of which duties are imposed on the CAA by section 1.”
Earl Attlee
“( ) The Competition Appeal Tribunal may allow an appeal under paragraph 1 only to the extent that it is satisfied that the decision appealed against was wrong on one or more of the following grounds—
(a) that the decision was based on an error of fact;(b) that the decision was wrong in law;(c) that an error was made in the exercise of a discretion.”
“( ) When deciding an appeal under paragraph 1 (including giving directions), the Competition Appeal Tribunal must have regard to the matters in respect of which duties are imposed on the CAA by section 1.”
Earl Attlee
“( ) The Competition Appeal Tribunal may allow an appeal under paragraph 1 only to the extent that it is satisfied that the decision appealed against was wrong on one or more of the following grounds—
(a) that the decision was based on an error of fact;(b) that the decision was wrong in law;(c) that an error was made in the exercise of a discretion.”
“( ) When deciding an appeal under paragraph 1 (including giving directions), the Competition Appeal Tribunal must have regard to the matters in respect of which duties are imposed on the CAA by section 1.”
Lord Empey
“Directions to airport operators in the interests of national air infrastructure
(1) The CAA may give to any airport operator a direction requiring him (according to the circumstances of the case) to do, or not to do, a particular thing specified in the direction, if the CAA considers it necessary to give such a direction in the interests of modifying competition to ensure sufficient national air infrastructure between hub and regional airports.
(2) The Airports Act 1986 is amended as follows.
(3) In section 34 (matters to be taken into account by CAA), after subsection (3)(a) insert—
“(aa) the need to ensure adequate services between hub and regional airports;”.(4) In section 82 (general interpretation), after the definition of “functions” insert—
““hub airport” means an airport used as a transfer point for passengers from one flight to another in order to complete a route”.”
Lord Empey
My Lords, I shall speak also to Amendment 74. Members will, I am sure, recall that we had a debate in this Room in November last year on transport links between the regions and London. Subsequently, in December last year, I tabled a Private Member’s Bill, the Airports (Amendment) Bill, which was given a Second Reading in the House on 16 March.
The amendment’s fundamental aim is to deal with the situation whereby the regions of the United Kingdom do not have guaranteed air access to our principal airport at Heathrow. As your Lordships are aware, the issue of landing slots is controversial, with their ownership in some cases disputed. What is not disputed is that, particularly as far as Heathrow is concerned, airlines have the use of the slots and even put the value attached to them on their balance sheets.
There is no doubt that there has been a significant improvement in air access between the Greater London area and many of the regions, which is to be welcomed. However, the reality is that, while a number of airports have tried to expand their portfolio of destinations, Heathrow is currently the principal hub airport for the United Kingdom. As a consequence, when we consider the amount of money that the Government have put into regional policy, as well as the considerable resources which continue to be put in by the European Union—indeed, in many cases providing funds for infrastructure at airports to promote links between the regions and our national hub airport—it seems an anomaly that the Government have no powers to intervene to ensure that air access exists between the national hub airport and the regions.
That is a serious weakness. Things are changing that quickly in the airline industry. To take an example from my own city, Belfast, Members will be aware that British Airways took over British Midland Airways Ltd recently. A lot of controversy was created because people said that that could theoretically put the principal route between Belfast City Airport and Heathrow under threat. People argued that, as the slots are more valuable to airlines for international routes than domestic routes, there would be a long-term temptation to switch to those sorts of routes.
There was a second development a few weeks ago when Aer Lingus, which runs three flights per day between Belfast International Airport and Heathrow, decided to move to Belfast City Airport. That means that all the Heathrow to Belfast routes are now going from the one airport. If that was not enough, Etihad Airways put in a bid for a percentage of Aer Lingus and only two weeks ago Michael O’Leary said that he wanted to buy the whole of Aer Lingus. When we look at the profile of Etihad Airways and of Mr O’Leary, I am not confident that we could see a guarantee of our air access to Heathrow.
There is a major European Union dimension to this. As the Minister knows, I have been to Brussels twice in the past few months pursuing issues there because, by coincidence, they are looking at the same issue. In December of last year, the Commission produced draft regulations of the Parliament and the Council on common rules for the allocation of slots at European Union airports. They are looking at this and a number of issues at the same time.
If that were not sufficient, the European Parliament has produced an own-initiative report which was passed by the Parliament in May of this year, paragraph 23 of which says that it,
“considers it essential for regional airports to have access to hubs”.
That is exactly what I am trying to achieve through these amendments, because there is a serious weakness. It cannot be right that, as a nation, we invest heavily in trying to develop the commerce and tourism of our regions and at the same time leave in question one of the principal points of access, particularly for an area like mine where there is not the alternative of a train or of road. There is only travel by ferry or air. If you are trying to develop a region to be commercially attractive, it needs air access to the main hub.
Air access is entirely at the mercy of the airlines. The Minister has repeatedly said that the Government are not able to intervene. That is not satisfactory. It puts regions at risk. I have quoted one example of the significant changes in my own region in the past few weeks. That fills people with concern and creates doubt. Doubt creates a potential obstacle to investment, which we do not want to see.
I understand that the Minister has to have regard to the European dimension, which is critical. I visited the European Union two weeks ago and went to the office of Commissioner Kallas, who is responsible for transport, and discussed issues there, and on a number of occasions with Members of the European Parliament because they are engaged in a co-decision process. We happen to have a legislative vehicle passing through at the moment and they, by coincidence, are doing the same thing and looking at slots. There seems to be a unique opportunity to do something to ensure that the regions will not be left out in the cold.
I know that these are difficult issues. You are effectively interfering in the natural competition process, in so far as these slots are attributed by value and if you interfere with them you affect their value. That is why I met with people in Brussels who have specific responsibility for competition issues as well. All of these things we have to deal with. While there are perfectly good connections, and under EU Council Regulation 95/93 a public service obligation can be given to assist transport between one region and another should there be market failure, there is no provision to link a specific city to a specific airport, which is precisely what we need in our case. While there is no market failure at the moment, and I hope that no market failure will ever occur, the fact remains that a principal instrument of government policy—the promotion and economic welfare of the regions, which is also held as a common view by the European Union—is now entirely at the whim of whatever commercial operation happens to be going on within or between airlines. That is not a satisfactory situation, which is why I tabled Amendment 46.
Amendment 74 deals with the point that introducing my proposals would be against European Union regulations. Amendment 74 merely points out that the powers would reside with the Secretary of State but could not be implemented until they became compliant with European Union regulations. That, in essence, is what I am trying to achieve: that the regions are guaranteed access to the principal hub airport at Heathrow, and that we become compliant with European Union regulations, where Parliament has already expressed that it is essential for regions to have access to hubs. As for its part in the co-decision process, I hope that over the next year or so in Brussels we will be able to make the arguments that will make us compliant with European Union regulations. I beg to move.
Lord Davies of Oldham
Briefly, I have considerable sympathy with the case put forward by the noble Lord, Lord Empey. We appreciate that Belfast and Northern Ireland have a particular interest in air travel. I also draw the attention of the Committee to the fact that Scotland, and Edinburgh in particular, is also concerned about the reduction in services that may be attendant on commercial transactions on slots.
I recognise that this is a difficult issue for the Minister, particularly as we are divided on much of the guidance on what government aviation policy is in the round. This dimension of it therefore explores an area on which the Government are likely to say that we could come back next month, or perhaps the month after. Unfortunately, time and tide wait for no man and neither does legislation, because the Minister has to try to get his legislation through. Here is a clear case of where it would be helpful to have a clear view on government policy.
I am sure that the Minister will do his best on this amendment. I have no doubt that it is quite critical in the development of aviation policy. I therefore very much look forward to hearing what the Minister has to say.
Earl Attlee
My Lords, just in case the issue about the Competition Commission comes up again during our debate today, I would like to clarify what I said in response to the point made by the noble Lord, Lord Rosser, about the CC having regard to the CAA’s general duty. As an appeal body, the CC must have the flexibility to decide an appeal justly and according to law. A duty to “have regard to” is not the same as a case where the CC must apply exactly the same duty as the CAA, but the primary duty will have great weight in the CC’s decision. It seems very unlikely, having regard to the constrained grounds under which an appeal may be made—an error of law, fact and so forth—that the CC would allow an appeal that was inimical to passengers’ interests.
Flexibility arises from Clause 1(5). Where there is conflict between the interests of different classes of passengers, the CAA is generally free to choose whose interests it prefers. The CC would also have regard to this provision. I will write to noble Lords so that any interested parties can pick up this clarification.
I welcome this debate about the slots and thank the noble Lord, Lord Empey, for explaining his concerns. I also pay tribute to the work that the noble Lord has done not just in Westminster but in Brussels. It is an object lesson in how to achieve these objectives. The new clause is intended to allow the CAA to take actions to help protect the provision of regional air services to congested London airports, such as directing airports to ring-fence slots for regional services or structure their charges so as to favour regional services.
The Government take the matter of regional connectivity very seriously. The noble Lord, Lord Davies, mentioned the problems of regional airports, for example some of those in Scotland. As I said before, we recognise the vital contribution that regional airports make to local economies, and that high-quality regional connectivity is hugely important. For remoter areas of the UK, regional air services are not a luxury but a vital means of connectivity. As the Committee will be aware, and as I confirmed at the first Grand Committee sitting, European Union regulations govern the allocation, transfer and exchange of slots at Heathrow and other slot co-ordinated airports in the UK.
EU slot regulations follow the Worldwide Slot Guidelines determined by the International Air Transport Association, reflecting the fact that commercial aviation is a global business. Council Regulation (EEC) No 95/93 on common rules for the allocation of slots at community airports provides common rules throughout Europe for slot allocation. These are aimed at providing airlines with fair and equal access to airports across the EU through independent and transparent slot allocation procedures. Members are required to ensure that independent airport slot co-ordinators are appointed to manage slot allocation at airports where capacity problems occur.
EU law does not allow either the Government or the CAA to have any role in slot allocation apart from the limited exception provided by the public service obligation procedure. EC Regulation No 1008/2008 allows member states to impose public service obligations to protect air services to airports serving a peripheral or development region or on thin routes to any airport on its territory where such a route is considered vital for the economic and social development of the region.
It would be open to regional bodies—for example, local enterprise partnerships and the devolved Administrations—to apply to the Secretary of State for Transport to impose a PSO on an air route if they feel that a case can be made which satisfies the EC regulation. If approved, this would permit slots to be ring-fenced at a relevant London airport. However, one of the important principles of the PSOs is that they can be imposed only when it is necessary to ensure adequate services between two cities or regions, rather than for the purposes of linking individual airports—a point recognised by the noble Lord, Lord Empey. Importantly, that means that when judging whether a region has adequate services to London, it will be necessary to take into account the level and nature of services to all five of London’s main airports, as well as surface transport connections.
Unfortunately, I have to repeat what I said before: there is no other mechanism for the Government to intervene in the allocation of slots at Heathrow or other London airports. Under European law, the potential for the ring-fencing of slots at Heathrow to protect regional services is to be dealt with by the rules on PSOs only. Therefore, any proposals to override the strict criteria and processes by which European Governments can intervene in route operations would be incompatible with EU law. I think the noble Lord understands that but still seeks a solution.
Lord Berkeley
On the basis of the noble Earl’s argument, it would seem that there can be no grounds for having a third runway at Heathrow until all four of the other airports that he just mentioned are full.
Earl Attlee
My Lords, this is not a debate about the third runway. Whether we have a third runway at Heathrow is not relevant. If we got a situation in which we had a third runway and then ran out of capacity at Heathrow, we would still have the same problem.
In addition, the application of traffic distribution rules—the TDRs—is also governed by EU law, which prohibits the implementation of discriminatory rules, including on geographical grounds. As a result, the introduction of TDRs to protect particular regional air services is not an option as it would also be incompatible with EU law. If the amendment seeks to empower the CAA to give a direction to the airport to structure its charges so as to discount airport usage for regional services, I regret that this would not be possible for a number of reasons. If it is not in the interests of users of air transport services on the grounds of the range, availability, continuity, cost and quality of airport operation services, it would not be consistent with the primary duty for the CAA to give such a direction.
In addition, EU directive 2009/12/EC on airport charges introduced common principles on the levying of airport charges at community airports above a certain size to ensure transparency and consultation. That directive was transposed into UK law through the Airport Charges Regulations 2011. Airport charges must not discriminate between users but charges can vary in the interests of the public and in the general interest, provided the reasons are relevant, objective and transparent. The CAA has an enforcement role regarding the Airport Charges Regulations, so it would not be consistent for it to direct on the structure of airport charges. However, as your Lordships are aware from the opening remarks of the noble Lord, Lord Empey, the EU slot regulations are in the process of being reformed in Europe at present. The European Commission’s “Better Airports” package includes proposals to amend the EU slot regulations, which provides an opportunity for the UK to highlight this issue with the European Commission and to explore the inclusion of measures to help secure the ongoing provision of air services between UK regions and congested London airports.
I fully understand the concerns behind the noble Lord’s proposed new clause, but I am unable to support it for the reasons given. Nevertheless, I assure the Committee that the Government are committed to supporting regional airports and regional connectivity. We will also consult on a new aviation policy framework, which will include a focus on regional airports. We will also issue a call for evidence on maintaining the UK’s international connectivity. I would welcome the contribution of the noble Lords and their constituents to that debate and I hope that the noble Lord, Lord Empey, will consider withdrawing his amendment.
Lord Bradshaw
Before the noble Lord, Lord Empey, speaks, I have to say that that is one of the most convoluted answers that I have ever heard. We say in these debates that we will read Hansard, but we shall do so with a wet towel around our heads this time. I believe it is incumbent on the Government here in London to find a method by which the air services to Belfast, of which I was a regular customer, can be maintained. They are incredibly expensive now compared with similar flights elsewhere. The customer is being short-changed. I hope that the Minister and his colleagues will bear it in mind that this must be put right in any review of aviation legislation.
Earl Attlee
My Lords, I could paraphrase what I have just said by saying that we cannot do what the noble Lord wants because of EU regulations but the EU is working on it.
Lord Empey
I am grateful that I needed no wet towel for that answer. I thank the Minister for his response. It is a very convoluted issue with all these parallel processes taking place. However, at the end of the day, there is a problem that could exist in the future, although it does not exist right now, and we should not be in the position of being entirely at the mercy of a particular airline or of being involved in some kind of commercial tug of war that can isolate a region. This is deliberately not a Northern Ireland-only issue.
To sum up, I thank the Minister. I shall continue to work on this and I believe that there is an appetite to do something about it. I will take the advice of the noble Lord, Lord Bradshaw, and read Hansard, and I will keep open my option of returning to this matter on Report. However, in response to the Minister, I beg leave to withdraw the amendment.
Lord Rosser
“(11A) An order under this Part is to be made by statutory instrument.
(11B) A statutory instrument containing an order under subsection (11) must not be made unless a draft of the instrument has been laid before, and approved by resolution of, each House of Parliament.
(11C) Subsection (11B) does not apply where an order made under subsection (11) substitutes a greater sum for the sum specified in subsection (4)(a) to take into account an increase in the general level of prices, in which case it is subject to annulment in pursuance of a resolution of either House of Parliament.”
Lord Rosser
My Lords, the amendment addresses a recommendation from the Delegated Powers Committee. Paragraph 2 of Schedule 8 enables the Secretary of State to increase by negative order the £1 million threshold specified in sub-paragraph (4)(a) of Schedule 8 as the amount of annual turnover above which an airport operator is eligible for certification by the Civil Aviation Authority as a relevant airport operator.
When the Delegated Powers and Regulatory Reform Committee looked at the Bill, it apparently had in front of it a memorandum from the Department for Transport, which the department had prepared for the committee, explaining the delegated powers in the Bill. The report on the Bill that we now have from the Delegated Powers and Regulatory Reform Committee states that paragraph 64 of the memorandum—which must be the memorandum from the Department for Transport—explains that the purpose of the power in Schedule 8 to increase the £1 million threshold,
“is to enable the amount to be increased, for example to take account of any inflation”.
The Delegated Powers Committee said:
“If it is the Government’s intention that the purpose of the power … is to enable the Secretary of State by order to increase the threshold in line with inflation, this should be specified on the face of the Bill, in which case the negative procedure is appropriate. But if the threshold is to be increased for other reasons, the affirmative procedure should apply”.
My amendment seeks to specify that the Secretary of State can increase the threshold figure only by the affirmative resolution procedure unless the increase is made to keep in line with inflation, in which case the negative resolution procedure will be used.
I hope that the Minister will accept the amendment, which, unless we have misunderstood it, seeks to put into the Bill the views that the Delegated Powers Committee expressed in its report. Although the memorandum from the Department for Transport indicated that it would enable the amount to be increased to take account of any inflation, in which case the negative procedure would be appropriate, clearly if the Government were going to do rather more than simply seek to increase the figure in line with inflation, I would share the view of the Delegated Powers Committee that the affirmative procedure should apply. The purpose of the amendment is to seek to achieve that objective. I beg to move.
Earl Attlee
My Lords, I am grateful to the noble Lord, Lord Rosser, for tabling the amendment. An amendment of this kind would address a recommendation of the Delegated Powers and Regulatory Reform Committee in its helpful report on the Bill, which was published four days before the start of Grand Committee. I have no complaint, but we will need a little more time to determine which way to go. However, I agree with the general aim of the amendment and have much sympathy with it.
The current drafting of the amendment is not technically correct. It would need alternative drafting to make a consequential amendment to the Airports Act 1986, where the provisions are to be inserted. I therefore wish to consider the matter further, with the intention of bringing forward a government amendment on Report. However, I do not anticipate having any difficulty with accepting the advice of the DPRRC. I hope that this reassures your Lordships that my intention is for a government amendment to be brought forward on this, in order to respond effectively to the DPRRC recommendation that if the purpose of the order provided for in sub-paragraph (11) of paragraph 2 of Schedule 8 is to ensure that the threshold can be increased for reasons other than inflation, the current negative procedure should be amended to an affirmative procedure to give Parliament greater scrutiny. With this assurance, I hope that the noble Lord will withdraw his amendment.
Lord Rosser
I thank the Minister for that very helpful reply. I fully accept that the amendment might not be worded in the appropriate manner. It appears from what he said that he intends to take the matter away with a view to producing an amendment that is in the right place in the Bill and says the right things to achieve the recommendation of the Delegated Powers and Regulatory Reform Committee. On that basis, I beg leave to withdraw the amendment.
Earl Attlee
“( ) Section 74 (restriction on disclosure of information) is amended as follows.
( ) In subsection (3)”
Earl Attlee
My Lords, the amendments in this group are minor and technical amendments to paragraph 3 of Schedule 9, which contains the consequential provisions for amendments to be made to other Acts. In particular these are amendments to the consequential provisions relating to Section 74 of the Airports Act 1986. Their purpose is to tidy up the consequential amendments in the Bill to Section 74(4) of the Act. The current Bill does not provide for amending Section 74(4) of the Airports Act 1986 and the amendments seek to correct this. Section 74(4) provides that the restriction on disclosure of information does not limit the disclosure of information in reports of the Competition Commission under Section 45 of the Act, and does not apply to information that has been made public as part of such a report.
Section 74(4)(a) will be redundant once Part 4 of the Airports Act 1986 is repealed. This is given effect to in Clause 76(1) of the Bill. However, paragraph (b) will continue to be relevant to information previously disclosed in Competition Commission reports under Part IV of the Airports Act 1986. If Section 74(4) were left as it is, it would not be technically incorrect. However, it is desirable to make this minor amendment to ensure that redundant references are removed, while ensuring transparency over the effects of past reports published by the Competition Commission. I beg to move.
Earl Attlee
“( ) In subsection (4)—
(a) leave out paragraph (a), and(b) in paragraph (b), for “such a report” substitute “a report of the Competition Commission under section 45”.”
Earl Attlee
Earl Attlee
My Lords, this is another minor and technical amendment to paragraph 7 of Schedule 10. The schedule contains the main transitional provisions for the regulation of operators of designated airports under the Airports Act 1986. Paragraph 7 provides the power to amend the schedule. The amendment is being made because sub-paragraph (1) of paragraph 7 is no longer required following the minor and technical amendment made to Clause 107 during the Commons Committee stage which contains a power with the same effect. The amendment deletes sub-paragraph (1) of paragraph 7 because it repeats what is set out in Clause 107. Doing so, however, requires sub-paragraph (2) to be amended to make reference to Clause 107. The amendment does not alter the effect of sub-paragraph (2) of paragraph 7 because we believe that it is important to maintain that certain provisions in Schedule 10 should not be able to be amended through paragraph 7, such as the interim period ending at 31 March 2014. This is the last day of the current regulatory settlement known as Q5, and we do not wish to disturb the current regulatory settlement period. I beg to move.
Earl Attlee
House of Lords
Civil Service: Training and Development
(11 years, 10 months ago)
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Baroness Tyler of Enfield
To ask Her Majesty’s Government, in the light of reductions in Civil Service numbers and training budgets, and the closure of the National School of Government, what steps they are taking to ensure that civil servants receive the necessary training and development to provide high-quality policy advice to Ministers.
Lord Wallace of Saltaire
My Lords, as the House will be aware, we published the Civil Service reform plan on 19 June, which set out recommendations on training and development, among other proposals. Civil Service Learning is now in place to provide greater choice, flexibility, quality and value for money. It ensures that the current and future skills requirements of civil servants are met. Civil servants can access more than 130 e-learning resources, 75 classroom-based courses and 4,000 learning resources through the Civil Service Learning website. The new policy curriculum is also available through Civil Service Learning. It provides a comprehensive range of policy training and was developed in consultation with people currently working on policy and with subject matter experts in specific policy areas.
Baroness Tyler of Enfield
I thank the Minister for his helpful reply. Given that these reforms are coming at a time when the Civil Service is reducing in size by some 23%, thereby putting a premium on sharper and more agile policy advice, which as the reform plan itself says should be clearly based on “robust evidence”, will the Minister explain what evidence exists to show that opening up the policy development process to external competition, including from the private sector, will lead to higher quality, more cost-effective and, above all, impartial policy advice?
Lord Wallace of Saltaire
My Lords, it is not entirely the case that all Civil Service training was provided by the public sector before this. The evidence is to be found in particular in the rather critical NAO report of last year. Among other things, it quotes the Civil Service people survey of 2010, which said that,
“only 48 per cent of civil servants said that the learning and development they had received in the last 12 months had helped them to be better at their job”.
A lot in the NAO report was critical of the inefficient and divided provision of training, particularly between different departments. It discovered among other things that the cost of comparable courses in different departments varied by a factor of four.
Lord Peston
My Lords, do we not have to be extremely careful in going down this kind of path? We have a first-class Civil Service that is actually the envy of the rest of the world. Certainly, when I was a special adviser, although I had my disagreements, they were disagreements at a level that enabled me to appreciate both the integrity of civil servants and how excellent they are. Are we not in danger of undermining the Civil Service with this kind of approach, rather than appreciating the excellent people who work for us?
Lord Wallace of Saltaire
My Lords, I would have loved to have met the noble Lord when he was a special adviser to observe his skills. We are working with Ashridge, Roffey Park, Westminster Explained and a number of other providers. As we have been working with them, we do not see that this in any sense endangers the impartiality or quality of the Civil Service. Roffey Park, as noble Lords know, is a non-profit making organisation that provides top-class skills. We think that there are advantages in having central control of the Civil Service buy-in, which is Civil Service Learning, but with a variety of provision by a variety of providers.
Lord Hennessy of Nympsfield
Could the Minister explain to the House exactly what was wrong with the National School of Government?
Lord Wallace of Saltaire
My Lords, the National School of Government provided extensive residential accommodation for extensive residential courses. The Civil Service and other providers are moving away from extensive residential courses to shorter ones, very often for one day each. It is intended that the different mix will be better met and more efficiently provided by a range of different providers.
Baroness Fookes
My Lords, are civil servants given any training in the precise workings of this place and, indeed, the other place? Sometimes, the impression is given that the ignorance is complete.
Lord Wallace of Saltaire
My Lords, certainly there are training courses for civil servants in how to work with Parliament, particularly for those going into private offices. I have met a number of civil servants who have been through such courses.
Lord Anderson of Swansea
Does not the Minister protest too much? Is not the key driver of this move away from the school and a return to learning on the job simply cost saving?
Lord Wallace of Saltaire
It is not the key driver, but it is one factor. The National Audit Office report’s discovery led from the next generation human resources proposals of 2009, so we are talking about some continuity from one Government to another. The discovery that the provision across different departments was so remarkably unco-ordinated and could be provided much more cheaply should naturally be taken into account by any Government—the previous one or this.
Lord Hunt of Wirral
My Lords, I warmly welcome these reforms. I declare an interest as a former Civil Service Minister and underpin the remarks that have been made. Does the Minister appreciate the importance of recognising the integrity, independence and impartiality of our Civil Service, while embracing the need for further education and training?
Lord Wallace of Saltaire
My Lords, I am very happy to put on the record yet again our deep commitment to a high-quality and impartial Civil Service. I remind everyone that the challenges to the Civil Service at the moment—the data revolution and a whole set of new ways of working—are such that we need to look on a regular basis at the balance of training provided and the way in which one may necessarily have to change to adjust to different circumstances.
Baroness Hayter of Kentish Town
My Lords, I am tempted to ask whether the Government are now training civil servants to deal with ministerial U-turns, but I will not. I have a serious question. Last week, the Prime Minister set out a new programme of welfare reform: not for this Government, but for after the next general election. Will civil servants now be working on that policy agenda and preparing policy advice for the ideas set out by the Prime Minister?
Lord Wallace of Saltaire
My Lords, that was a good joke. The Prime Minister’s speech set out proposals for what he thought the Conservative Party should do post-2015. That is rather beyond my brief.
Lord Cormack
My Lords, what is being done to ensure that civil servants communicate in plain, concise English? Will he arrange for all civil servants to be given a copy of Sir Ernest Gower’s classic work, The Complete Plain Words, so that they write and speak English and we get rid of the appalling jargon that disfigures so many public documents?
Lord Wallace of Saltaire
I thought that the noble Lord was going to pay attention to Civil Service spelling mistakes. Perhaps I should inform the House that I discovered some rather bad spelling mistakes in Hansard last week, which I have reported to the Hansard writers.
Baroness Symons of Vernham Dean
My Lords, perhaps the Minister could answer the question put by my noble friend on the Front Bench. Is the Civil Service now being asked to work on the welfare reforms spelt out by the Prime Minister the other day? It is a simple question.
Lord Wallace of Saltaire
My Lords, the Prime Minister was setting out some long-term thoughts on how the policy should be developed after 2015. I have no knowledge of the Civil Service being asked to work on that at present.
National Offender Management Service: Indeterminate Sentences
(11 years, 10 months ago)
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Lord Ramsbotham
To ask Her Majesty’s Government what progress the National Offender Management Service prisoner co-ordination group is making in preparing individual release plans for those serving Indeterminate Sentences for Public Protection.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, the role of the indeterminate sentence prisoners co-ordination group is not to prepare individual release plans. It is for the prisoner’s offender supervisor and offender manager to draw up a sentence plan to assess the prisoner’s risk factors and then to propose a risk management plan to the Parole Board once the prisoner has completed his tariff.
Lord Ramsbotham
My Lords, I thank the Minister for that reply. The problem is that 6,500 prisoners are serving indeterminate sentences, with 3,500 over their tariff and 311 more than four years over it. The problem was put into sharp relief last week at an inquest in south Wales into the death of an indeterminate sentence prisoner who was a year over his tariff. Two weeks before he took his own life he was told at the prison to which he had just been moved that not only was the course that the Parole Board required him to complete before release not available in that prison, he was told that no such course would be available for two to three years. This problem needs to be tackled with urgency. Whether I have the name of the board right or not, I hope that the Minister will be able to assure the House that someone in NOMS is tackling individual problems with urgency.
Lord McNally
As I explained in my original reply, there is an individual case manager for each prisoner. However, I understand the noble Lord’s point. One of the original criticisms of this method of sentencing was that it created a Catch-22 whereby although you have to carry out a range of courses in order to make yourself available for parole and to convince the Parole Board that you are ready for release, those courses are not always available. Part of the reform programme that we have put in place, in parallel to the changes in the LASPO Act, is to try to make sure that prisoners are able to undertake reform training, and also to give the Parole Board greater flexibility in making its judgments on whether other aspects, rather than specific training programmes, can be taken into account in order to justify freedom. It is a difficult and delicate business. We are dealing with people who are in prison for serious offences and there must be a proper process to assess whether they should be allowed to go back into the community.
Lord Dholakia
My Lords, the Government were right to abolish IPP sentences—they were bad for the criminal justice system and bad for the prisons. As has been said, more than 6,000 inmates are currently in our prisons under IPP. If there is such a considerable delay in providing offender reform courses for inmates, could not the Prison Service use volunteers to help deal with it? Many prisoners also often find that despite assurances from the Parole Board about open conditions and release, the Prison Service is not meeting those assurances.
Lord McNally
That is why, in answering the noble Lord, Lord Ramsbotham, I referred to the fact that the Parole Board can now take into account other aspects of prisoner activity that might contribute to the assessment of whether prisoners can be safely released. We are also making sure that there is much more co-ordination of the policy so that there is an understanding in the various prisons of what is available and so that much greater use is made of compulsory intervention plans. However, it is a difficult problem. As the noble Lord, Lord Ramsbotham, said, there is a build-up of more than 6,500 prisoners on IPP sentences, and it will take time to unwind the system. We are unwinding it, and more prisoners are being released after proper assessment. However, we cannot simply release prisoners who have received such a sentence because of the severity of their crime or the assessment that they are a long-term danger to the public.
Lord Lloyd of Berwick
My Lords, the noble Lord has clearly taken on board that this is a very serious question for those who are beyond their tariff. Can he give any indication of when the Parole Board is likely to see them? Can he suggest whether there is not some way that those who have committed less serious crimes could be released by some form of executive action?
Lord McNally
The LASPO Act provides for the possibility of executive action on this matter and for a change in the balance of judgment to be made by the Parole Board. For the moment the Government are waiting to see the impact on overall numbers of the new systems that we have put in place. About twice as many IPP prisoners are being released now than were released two years ago, but we are also facing the problem that judges are still imposing IPPs. I believe that we will have the first net reduction this year, with more people being released than are coming in under the new system. We hope to be able to announce later this year when the new sentencing system included in the LASPO Act will be introduced.
Transport: Road Traffic
(11 years, 10 months ago)
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Lord Sheldon
To ask Her Majesty’s Government what action they have taken to improve the flow of road traffic in the United Kingdom.
Earl Attlee
My Lords, the Government provide funding and guidance to local authorities to support them in managing congestion on the local road network, including reducing the impact of roadworks. We have made better regulations to allow pioneer lane-rental schemes, are consulting on plans for roadworks permit schemes, and are increasing roadworks overrun charges. On the strategic road network, measures are being introduced to shorten the length of time that motorways are closed following incidents.
Lord Sheldon
I thank the noble Earl for that very useful Answer. However, the improvement of road traffic is much limited by more than 90% of all passenger transport. When there are rounds of crossroads, they reduce crashes by more than 50%, and stop signs at intersections have also reduced crashes dramatically by more than 50%. The other means that the noble Earl has put forward are very useful, but can he suggest how we are going to handle all these problems?
Earl Attlee
My Lords, I did not quite catch the proposal that the noble Lord was making. I think that he was talking about roundabouts as a means of reducing accidents. Roundabouts indeed reduce accidents because the collisions are less brutal and therefore any injuries are less serious, but they increase congestion a bit because the throughput is not as high as with a grade separated junction, which is even safer. In my initial Answer I talked about a range of measures to reduce congestion, which I know can be infuriating for all motorists.
Baroness Chalker of Wallasey
My Lords, can my noble friend persuade more boroughs to use lane rental than are currently doing so? Some are good at using lane rental; others are very limited in using it. In the past it has been a good way of speeding up repairs, thus reducing road congestion. Some activity needs to be taken with individual boroughs.
Earl Attlee
My Lords, my noble friend makes a good point. Through the Traffic Management Act 2004, all local authorities have a “network management duty” to secure,
“the expeditious movement of traffic”,
including pedestrians, on their highway network, and to facilitate the same on the networks of other authorities. Local authorities are required to appoint a traffic manager to oversee this obligation and must monitor their own performance, but my noble friend will understand that we also have the spirit of localism.
Lord Broers
Does the Minister agree that the Technology Strategy Board has made a wise decision in assigning one of the new catapults to transport? One of the main aims of that catapult will be to develop a comprehensive, UK-wide model for transport that will operate in real time and be able to react to emergency situations. I declare my interest as chair of the Transport Knowledge Transfer Network that led to this proposal.
Earl Attlee
My Lords, the noble Lord makes an important point about what we can achieve with technology. It is particularly important for the Highways Agency to be able to measure where congestion is and then to use its variable message signs to advise motorists to seek another route. In addition, although satnav navigation systems are in their infancy, we are starting to get the full benefit from them.
Lord Davies of Oldham
My Lords, is the Minister aware that during this past year the Mayor of London has pursued a smoothing traffic flow priority, which prioritises motorists over safety? Is he further aware that pedestrian deaths are up by 33% during this period and cyclist deaths by more than 21%? I express the hope that, in answering this question, the Minister’s brief will be more secure than it was last week when he answered a question of mine on fares to and from the Scilly Isles.
Earl Attlee
My Lords, I am confident about the accuracy of this brief, but regret that during our discussions last Monday I stated that the return fare on the “Scillonian III” for Scilly Isles residents was £20.50. However, this is in fact the single fare and there may be other qualifications. I am very sorry about this, since it made my position appear stronger than it really was, to the detriment of the noble Lord’s.
The noble Lord asked me detailed questions about the management of traffic in London. He will appreciate that that is a matter for the mayor. It is disappointing that overall fatalities have increased slightly, the reasons for which we have not yet examined fully.
Lord Bradshaw
Part 6 of the Traffic Management Act 2004, to which the Minister has referred, gives local authorities powers to manage traffic—for example, yellow box junctions and right turns—which they can enforce through their own staff. However, is the Minister aware that the regulations have never been extended outside London? He should take it from me that bus services would be immeasurably improved if local authorities could discipline people who block the highway.
Earl Attlee
My Lords, I shall draw my noble friend’s point to the attention of Mr Norman Baker, the Minister responsible.
Lord Tomlinson
My Lords, during this Question Time, we have heard reference to catapults and lane rentals. I am aware of the injunction that we heard from the noble Lord, Lord Cormack, for us to use plain, simple English. Can somebody please advise us what a catapult and a lane rental are?
Earl Attlee
My Lords, I said to the noble Lord, Lord Davies of Oldham, that my brief was accurate, but it does not include anything about catapults. However, I agreed that technology would provide benefits.
Lord Crickhowell
My Lords, is my noble friend aware that, while the British public have been content to face disruption due to the jubilee and are perhaps slightly less content about disruption due to the Olympic Games, they would find it intolerable to have the whole of central London brought to a standstill, perhaps for several weeks in preparation and afterwards, for a grand prix to be held?
Earl Attlee
My Lords, I anticipated an Olympics question. My first advice to all users of transport is to visit http://www.getaheadofthegames.com, which provides extremely good advice on how to avoid congestion. It is inevitable that there will be some congestion if we are to have a successful Games.
NHS: Definition of Exceptional Case
(11 years, 10 months ago)
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Baroness Masham of Ilton
To ask Her Majesty’s Government what is the definition of an exceptional case needing surgical and medical care through the National Health Service, and who makes the decision.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the department has not issued definitive guidance on this difficult issue. Indeed, there is a paradox in the whole concept of defining an exception. However, good practice in the NHS suggests that a patient can be considered for treatment which is not normally provided locally if the patient has exceptional clinical need or is likely to derive exceptional clinical benefit. The decision is made by the local commissioner.
Baroness Masham of Ilton
My Lords, I thank the noble Earl for that reply. However, is he aware that there is a young doctor in Northallerton, North Yorkshire, whose PCT has denied her a vital operation for a genetic pancreatic condition? If she does not have this operation, she will remain in excruciating pain all the time, she will not be able to work, and there will be a risk of cancer.
Earl Howe
My Lords, I hasten to reassure the noble Baroness that I have every sympathy with the individual in question, and I was aware of this particular case. The chief executive of the NHS will shortly be writing to her clinical tutor to suggest a possible way forward. However, I should put on record my view that the commissioner is acting reasonably in insisting that its decision on exceptionality should depend solely on the clinical need of the patient, and not on any broader social factors. If there is now good clinical evidence to support the use of this particular treatment, commissioners should be considering whether to make it available to all patients with similar clinical needs, and not just to a few individuals.
Lord Ribeiro
Is my noble friend aware that the pancreatic unit at Leicester is not able to do any islet cell transplantation operations because the PCT refuses to fund them? The excuses used to justify not funding these operations are that these may be “procedures of limited value” and “experimental surgery”. There are, in fact, four clinical units throughout the UK doing islet cell transplantation, with good records and good outcomes. I want to know whether the PCTs are not funding these operations in order to present a clean sheet to the incoming CCGs in April 2013, or whether there is another reason.
Earl Howe
My Lords, no, that is not the reason. My noble friend is quite right that this treatment has been around for a little while. However, it is not yet in mainstream practice. It is expensive, it is not routinely available in the NHS, and indeed NICE has published interventional procedure guidance which concludes that it,
“shows some short term efficacy, although most patients require insulin therapy in the long term”.
That does not seem to me to be a resounding endorsement of this treatment.
Lord Winston
My Lords, will the Minister be kind enough to help us by defining what is meant by exceptional clinical needs?
Earl Howe
There is no clear-cut answer to that question. A patient might be suffering unusually severe symptoms from a given condition, or they might suffer from some comorbidity, with the result that in the absence of treatment his or her quality of life would be unusually severely affected. The underlying principle should be that the patient has some exceptional characteristic which would justify more favourable treatment being given to them than to the average patient with that condition.
Baroness O'Loan
Given the vulnerability of the patients, the exceptional nature of the illness in such cases, and the consequential problems in terms of access and capacity to appeal, will the Minister tell the House what arrangements exist to scrutinise the fairness and consistency of decisions by PCTs and by their exceptional cases review processes?
Earl Howe
My Lords, under the NHS Constitution, all patients have the right to an individual review of a decision not to fund a particular treatment if they and their doctor believe that it would be appropriate. They also have the right to an explanation of the basis of the decision. The commissioner must in turn have a process to enable such individual funding requests to be considered, so the watchwords here are transparency and publishing an explanation.
Baroness Gardner of Parkes
Does the Minister agree that there are other decision-making bodies? I refer in particular to the UK National Screening Committee. Is he aware that, probably correctly, it makes its decisions only on research results? Why does it claim that it does not have the money to spend on research into Streptococcus B infections, when international research shows a clear choice for screening as opposed to risk assessment? That change that has been made in other countries has resulted in reductions of strep B infections in children of 80% in the USA, 60% in Spain, 82% in Australia and 71% in France. The screening of pregnant mothers could prevent that very serious condition, which can be fatal, being passed to a small number of babies.
Earl Howe
My Lords, the UK National Screening Committee advises Ministers and the National Health Service in all four UK countries on all aspects of screening policy, including for group B Streptococcus carriage in pregnancy. The committee is currently reviewing the evidence for screening for that condition in pregnancy against its criteria. It will take into account the international evidence and a public consultation on the screening review will be opening shortly.
Lord Collins of Highbury
My Lords, the Minister said that this treatment is not routinely carried out. The doctor concerned, who works in the NHS, is aware that pancreatectomy is carried out in other PCTs. Can the noble Earl explain where it is being carried out so that we can understand what is routine and what is not?
Earl Howe
My Lords, I hope that my earlier answers gave a clear indication of the definition of exceptionality, which should demonstrate to the House that something that is exceptional is not routine. Our advice is that that treatment is not routinely available in the NHS. There is a handful of centres in England with doctors who are trained to carry out the operation, but although the technique has been in use since 1977, it is available only in a few centres worldwide, which does not suggest to me that other countries are ahead of us in this area.
Delegated Powers and Regulatory Reform Committee
The Chairman of Committees
That Lord Marks of Henley-on-Thames be appointed a member of the Select Committee in place of Lord Carlile of Berriew, resigned.
Lord Foulkes of Cumnock
Can the Chairman of Committees give us a clear assurance that the removal of the noble Lord, Lord Carlile, from this important committee is not connected in any way with his excellent article in the Telegraph describing Mr Clegg’s House of Lords reform proposals as third rate?
The Chairman of Committees (Lord Sewel)
My Lords, I have to be a bit careful here. I am sure that the generous comments of the noble Lord, Lord Carlile, on Mr Clegg’s proposals were not at all a consideration in this effect.
Northern Ireland Act 1998 (Devolution of Policing and Justice Functions) Order 2012
(11 years, 10 months ago)
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Lord Cormack
I would like to point out to those who are concerned with the future of this place that we have on the Order Paper today a number of things, each one of which could be debated at length. However, because we are such a restrained, responsible House, we shall not be debating them at length, but an elected Chamber at odds with the other place might well choose to do so.
Earl Attlee
My Lords, this is a very simple Motion. It refers the instrument to a Grand Committee and that has been agreed by the usual channels.
Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2012
(11 years, 10 months ago)
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Local Authorities (Mayoral Elections) (England and Wales) (Amendment) Regulations 2012
(11 years, 10 months ago)
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Lord Wallace of Saltaire
That the draft regulations be referred to a Grand Committee.
Electoral Registration Data Schemes Order 2012
(11 years, 10 months ago)
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Lord Wallace of Saltaire
That the draft order laid before the House on 9 May be approved.
Relevant documents: 2nd Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 25 June.
Statutory Auditors (Amendment of Companies Act 2006 and Delegation of Functions etc.) Order 2012
Baroness Wilcox
That the draft order laid before the House on 15 May be approved.
Relevant documents: 2nd Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 25 June.
Crime and Courts Bill [HL]
(11 years, 10 months ago)
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Lord McNally
“Transfer of immigration or nationality judicial review applications
(1) In section 31A of the Senior Courts Act 1981 (transfer from the High Court to the Upper Tribunal)—
(a) in subsection (2), for “, 3 and 4” substitute “and 3”,(b) omit subsection (2A),(c) in subsection (3), for “, 2 and 4” substitute “and 2”, and(d) omit subsections (7) and (8).(2) In consequence of the amendments made by subsection (1), section 53(1) of the Borders, Citizenship and Immigration Act 2009 is repealed.”
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, this amendment will remove restrictions contained in Section 31A of the Senior Courts Act 1981. It will enable applications for or permission to seek judicial review in immigration, asylum and nationality cases to be transferred from the High Court in England and Wales to the Upper Tribunal.
As noble Lords will be aware, this House has considered this issue before. In 2009, the House thought it appropriate to allow the High Court to transfer fresh claim judicial reviews to the Upper Tribunal. These are judicial reviews that relate to a refusal by the Home Secretary to treat further submissions as fresh asylum or human rights claims on the basis that they are not significantly different from the material previously considered. These cases have been heard in the Upper Tribunal since October 2011 and the process is working well. This amendment would potentially enable any class of immigration, asylum or nationality judicial review to be heard in the Upper Tribunal.
The further categories of cases that would be transferred to the Upper Tribunal would have to be set out in a direction, or directions, made by the Lord Chief Justice with the agreement of the Lord Chancellor under the provisions in the Constitutional Reform Act 2005. We envisage that the transfers will take place in a staged fashion to increase slowly the types of judicial review dealt with by the Upper Tribunal. The ability to transfer such cases would play an important role in improving access to justice. Immigration and asylum judicial review cases currently form a high proportion—around 70%—of the caseload in the administrative court. The total number of these cases has doubled in the past five years, with around 8,800 being received in 2011. Many of these cases are relatively straightforward. This volume of cases is unsustainable for the administrative court. It keeps High Court judges from other complex civil and criminal cases that they should be hearing. It has created a backlog and has added to waiting times for all public law cases heard by the administrative court.
I recently met the president of the Queen’s Bench Division and the president of the Upper Tribunal immigration and asylum chamber to discuss the progress that has been made in the Upper Tribunal since it was created in 2010. I am persuaded that it now represents the most appropriate venue for the majority of judicial reviews of this type. As the avenue for appeals against a decision of the First-tier Tribunal, the Upper Tribunal deals with thousands of appeals each year. Since acquiring this jurisdiction it has received nearly 200 fresh claim judicial reviews, which have been dealt with more quickly. Fresh claim cases are on average dealt with in seven weeks, compared to an average of 11 weeks for the administrative court. This has not been at the expense of quality. The judges who sit in the Upper Tribunal have a high level of expertise, particularly in relation to in-country conditions and human rights implications, and are regularly joined by judges of the administrative court.
The Upper Tribunal’s expertise in the field of asylum and country guidance cases has been recognised by the higher courts in the UK and the European Court of Human Rights. It is able to make well informed decisions that will deliver justice in these types of judicial review cases, in the same way as the High Court has done in the past. I beg to move.
Lord Avebury
My Lords, this amendment would allow judicial reviews of immigration and asylum cases and nationality matters to be transferred from the High Court, where judicial review is currently heard, to the Upper Tribunal, as my noble friend has explained. To many of your Lordships, this must feel like Groundhog Day. Parliament made clear its views on whether JRs should be transferred from the High Court into the tribunals once in 2007, during debate on what is now the Tribunals, Courts and Enforcement Act 2007, and again in 2009, during debates on what is now Section 53 of the Borders, Citizenship and Immigration Act 2009. It has said no and has said so powerfully. The arguments against the Upper Tribunal being entrusted with this responsibility still hold good.
The 2007 Act established a new regime, bringing together several tribunal jurisdictions into one structure comprising the First-tier Tribunal and the Upper Tribunal, or UT for short. The Act allowed for the transfer of certain JR applications from the High Court to the UT but, as a result of amendments made during its passage, excluded immigration and nationality JRs from the cases that could be transferred. Parliament returned to this matter, as my noble friend has reminded us, in 2009 during debates on the then Borders, Citizenship and Immigration Bill and again rejected a proposal that would permit the wholesale transfer of immigration and nationality JRs.
The compromise reached was that a JR concerned with a decision on a fresh claim for asylum—that is, one made after an earlier claim and any appeals against its refusal had finally been rejected—was made transferable. Since 2009, the once separate Asylum and Immigration Tribunal has been transferred into the two-tier structure, with an immigration and asylum chamber in the First-tier Tribunal and in the UT. Meanwhile, on a case-by-case basis, the High Court has transferred a few JRs against local authorities concerning the age of separated children seeking asylum to the UT where they have ended up in the immigration and asylum chamber. However, age-dispute JRs can be transferred because they are not decisions about immigration or nationality and are therefore not affected by the 2007 Act. These cases start in the administrative court, but can be transferred to the UT on a case-by-case basis. There have been only four reported cases to date.
Fresh-claim JRs are transferred as a class. There are no reported cases yet and only one case that the tribunal was to hear. The UT has no experience of hearing JR cases so there is no way of assessing whether it is likely to cope well or badly with them. Meanwhile, although there is power to transfer fresh-claim judicial reviews from the Outer House of the Court of Session in Scotland to the UT, that power has never been exercised. I can do no better than cite the comments of the late Lord Kingsland on Report on the Tribunals, Courts and Enforcement Bill. He said,
“first, the Government have broken their promise to your Lordships’ House not to introduce primary legislation permitting the transfer of judicial review matters in asylum and immigration cases until we have sufficient evidence that the system for judicial transfers in other classes of case are working well. Secondly, the Opposition and the noble Lord, Lord Thomas of Gresford, would be extremely unhappy to permit such transfers unless we were satisfied that the transferred AIT single-tier regime to the Upper and Lower Tribunals did indeed have the effect of leading to much fairer and more timely decisions, thus reducing substantially the overall number of judicial review cases … Thirdly, as I have indicated, judicial review is a crucial component in the struggle to protect the individual. Many of these cases raise issues, at best, of the freedom of the individual and, at worst, of torture and death. It is vital that it remains open to someone in such cases to have the application heard by a High Court judge”.—[Official Report, 1/4/09; cols. 1126-27.]
There is no such evidence yet. Powers to transfer JRs into the UT are being sought when it has done only a handful of age assessment cases and has not built up any track record whatever in dealing with fresh-claim JRs. High Court judges have sat in the UT, but there are also judges in that chamber who were adjudicators and special adjudicators of the former Immigration Appellate Authority and its successors. They have never heard cases outside the immigration and asylum tribunal jurisdiction, but the amendment would allow them to deal with JRs on which they have zero experience.
Speaking for the then Government in 2007, the noble Baroness, Lady Ashton of Upholland, accepted that JRs in immigration cases were particularly sensitive. The point was underlined by a forceful observation from the noble and learned Baroness, Lady Butler-Sloss, in Grand Committee in 2006. She said:
“I support my noble and learned friend Lord Lloyd of Berwick in relation to the requirement to have someone of the level of a High Court judge to hear a judicial review in the tribunal. It would be invidious for there not to be a judge of that rank dealing with it. I support my noble and learned friend very strongly”.—[Official Report, 13/12/06; col. GC 68.]
Then there was the noble and learned Lord, Lord Lloyd of Berwick, who said at Second Reading of the Borders, Citizenship and Immigration Bill:
“If the effect ... is that the administrative court would be bound to transfer judicial review applications in all immigration cases, I would be strongly opposed to it”.—[Official Report, 11/2/09; col. 1142.]
The then Minister, the noble Lord, Lord West, winding up that debate, said that,
“the senior judiciary are very supportive of the clause”—[Official Report, 11/2/09; col. 1211.]
that is, the clause providing for the transfer—which he said was shown by the responses of the President of the Queen’s Bench Division, the Master of the Rolls and the Senior President of Tribunals to the consultation on immigration appeals. However, the Master of the Rolls had merely indicated that he supported the views of the President of the Queen’s Bench, who in turn stated that proposals for transfer of JRs in general were welcome, but emphasised that:
“Some of them are plainly suited to the Administrative Court and should remain there”.
The Senior President of the Tribunals agreed with him. The Court of Session judges did not welcome the proposal. They said that,
“any decision as to a more general transfer of judicial review jurisdiction in this area—
immigration—
“should be made only once the Upper Tribunal has gained extensive experience of implementing its proposed remit”.
No such extensive experience has been gained. Others, including the Immigration Law Practitioners Association, the Constitutional and Administrative Law Bar Association, the Glasgow Immigration Practitioners’ Group, the Law Society, the Refugee Legal Centre, the Refugee Council and individual lawyers, have expressed views similar to those of the judges of the Court of Session.
Lord Woolf
As the noble Lord has made clear, there is a considerable history here. When he is referring to the bodies that have indicated their objections, could he help the House by indicating whether the objections are indeed to the present amendment or to an earlier one?
Lord Avebury
As I understand it, my Lords, these representations and views have been expressed by the bodies that I have mentioned in response to this particular legislation. I am relying particularly on the excellent briefing that we have received from ILPA, which quotes all those authorities.
The amendment would allow for the transfer of any immigration or nationality JR by decision of the High Court, the Northern Ireland High Court or the Court of Session in the individual case, and empower the Lord Chief Justice, with the agreement of the Lord Chancellor, to direct that all immigration and nationality JRs or any specific class of these JRs must be transferred. The temptation would be to exercise the powers in an effort to reduce the load on the higher courts, but the right solution is to improve the quality of decision-making so that there are fewer litigants seeking JRs. The number is likely to fall in any case because of the LASPO Act provision that legal aid is no longer available for ordinary immigration cases.
ILPA has set out constructive suggestions for reducing the number of JR applications and indeed the burden on the appeals system as a whole. In 2009, for instance, it requested that UKBA disclose information on the number of immigration and asylum JRs that are conceded by the agency or in which the agency has agreed to make a fresh decision without the need for the process to be seen all the way through. The agency told ILPA that it was too expensive to retrieve this information, but it gave some data on the very large number of immigration JRs that are withdrawn: 1,185 cases in 2006 and 1,532 in 2007. We do not have more recent figures but I hope that my noble friend will tell us what the latest figure is for 2011, to compare with a total of some 9,000 given by my noble friend Lord McNally in his letter to the chair of the JCHR on 12 June.
As was recognised in 2006-07, immigration and asylum JRs are particularly sensitive. It remains the case that the tribunal has not demonstrated the same ability to deal with UKBA’s conduct as a litigant as has the High Court. The agency’s failures to respond in a timely manner to directions from the tribunal to disclose relevant matters or adequately to plead its case are problems that continue to beset all too many cases.
I will not try the House’s patience by going through all ILPA’s suggestions, but there is one that I think will particularly appeal to your Lordships. The Home Office could address the many hundreds of Zimbabwean cases that have contributed substantially to the workload since 2005 by reviewing and, where appropriate, conceding. Many of these cases will include findings of fact justifying a grant of refugee status in the light of the country guidance determination in RN (Zimbabwe), which has just been held not to have been overturned in JG and CM (Zimbabwe), the text of which is awaited.
In conclusion, the reasons given in your Lordships’ debates in 2007 and 2009 for not transferring more JR cases to the UT—that immigration and asylum JRs were the most sensitive cases, and the new chambers’ handling of JRs required testing first—still hold good. The number of cases going to the High Court and Court of Appeal could be reduced by other means, and restricting access to the higher courts would merely encourage or allow for poor decision-making. Decisions of the Court of Appeal on appeals from the UT show that it continues to be the higher courts, rather than the UT, that call for the UK Border Agency to account for its conduct as a litigant.
Lord Woolf
My Lords, I will say a few words in support of this amendment. In order to understand its importance, one has to take into account the matters that were so clearly outlined by the noble Lord, Lord Avebury, just before I rose to my feet. The history that he has described indicates that this is not an amendment that should be lightly accepted. Time has moved on since some of the matters to which he referred arose, and the experience so far of the quality of the tribunals, particularly the Upper Tribunal, has been particularly good.
The other important matter is the resource of High Court judges. The demands for the services of High Court judges are extensive. At present, there is the grave danger that judicial review will not be able to achieve one of its most necessary characteristics, which is to deal expeditiously with the urgent applications that come before it. This is critical because sometimes the very fact of the application for judicial review can and does delay matters of great importance—I hope am not overstepping the mark in saying matters, often, of national importance. The information that is available as to the pressure on High Court judges makes clear that they are overstrained. That is one side of the picture.
The other side of the picture is that the Upper Tribunal has huge expertise, which except in a very small number of cases is not available to High Court judges. Therefore, it is not apparent that they have the ability to deal with these cases as expeditiously and effectively as the tribunal. The danger in not accepting this amendment is that the desire for excellence could be the enemy of the good, and I urge the Committee to be sympathetic to it. It is my belief that justice can and should be ensured, as it always is in this country when these matters are dealt with by the tribunal as proposed here. I know that those who are responsible for arranging the proper dispatch of business in the different parts of the High Court attach the greatest importance to this amendment. They see it as a lifeline.
Lord Beecham
My Lords, I was not a Member of your Lordships’ House at the times when, as the noble Lord, Lord Avebury, reminded the Committee, similar matters were debated at some length. Therefore, I come to this amendment with an open mind, which creates something of a precedent in my case. I listened very carefully to the Minister’s explanation and justification of the amendment and, of course, to the critique of it from the noble Lord, Lord Avebury. Although many of us have received extensive briefings about various aspects of this Bill and other legislation, I have not received any particular briefing from any of the organisations referred to by the noble Lord, Lord Avebury, on this point.
I initially leant towards his line of argument, but am comforted in the first instance by the fact that the Lord Chief Justice’s role will be critical in initiating any further transfers, as well as by the wisdom and experience of the noble and learned Lord, Lord Woolf, of course, who commends the amendment to the Committee. Perhaps when he replies the Minister will indicate whether it is the Government’s intention to review progress at some stage, perhaps in conjunction with the Lord Chief Justice, to see whether the fears that the noble Lord, Lord Avebury, enunciated are grounded in relativity, and if they are to create an opportunity for a change in policy, either slowing down the additional transfers or possibly rethinking the policy.
As we have been reminded on previous occasions, it is the Government’s policy to conduct a post-legislative review within three to five years. Perhaps an indication that that will also be the case in relation to this matter might satisfy—for the time being, at any rate—some of the doubts that have been raised. If it is necessary to step back in the light of experience, that could then happen. For the moment, I am disposed to accept the Government’s amendment and rely very heavily on the support given to it by the noble and learned Lord, Lord Woolf.
Lord McNally
My Lords, I am very grateful to the noble Lord, Lord Beecham, for that indication of the Opposition’s support for this amendment. I gladly give him, and the noble Lord, Lord Avebury, an assurance that what we are doing will be kept under review in close consultation with the judiciary.
It is true that this matter was discussed in 2009, as the noble Lord, Lord Avebury, said, but we have now had three years’ experience of the workings of the Upper Tribunal in these areas and we have also had representations from the senior judiciary about how the present system is clogging up the High Court and bringing some of the pressures to which the noble and learned Lord, Lord Woolf, referred.
I have not taken lightly the decision to bring this back to the House. In a meeting, the president of the Queen’s Bench Division and the president of the Upper Tribunal convinced me of two things: first, that we would be taking some pressure off the High Court and High Court judges by doing this; and, secondly, that by moving these cases to the Upper Tribunal we would in no way diminish the quality of justice available. On the contrary, as the noble and learned Lord, Lord Woolf, indicated, a great deal of the expertise for judging these cases is in the Upper Tribunal.
I take the point that the noble Lord, Lord Avebury, made about the UK Border Agency’s withdrawals. There are varied reasons for cases being withdrawn but, coupled with other government reforms, we are getting a better system for dealing with these cases from the UKBA. The senior judiciary is broadly in favour of the amendment as a sensible solution to the backlogs in the High Court and an opportunity to transfer cases to the most appropriate part of the justice system. There has been strong judicial involvement in the discussions preparing for this amendment, and the judiciary is keen to ensure that it is successfully introduced. As the noble Lord, Lord Beecham, said, the Lord Chief Justice will be closely involved with the Lord Chancellor in gauging the pace of movement on this so that we get the twin benefits of faster, efficient, high-quality justice in immigration cases and some elbow room in the High Court to deal with the important cases that the noble and learned Lord, Lord Woolf, mentioned.
I hope the noble Lord, Lord Avebury, will be content to take those assurances and to accept that this decision has been taken on the basis of the experience of the past three years, which we believe is entirely favourable to the move that we are making. That is coupled with the assurance that we will keep the matter under review and will be in close contact and consultation with the senior judiciary to ensure that the move is completely in keeping with the access to good justice that is the aim of this amendment.
Lord Avebury
My Lords, can my noble friend answer the question I put to him about how many cases were withdrawn by the UKBA—to correspond with the figures I gave for 2006 and 2007? If a very large number are being withdrawn, and thus the UKBA is conceding that the original decision was wrong, surely that proves that there are other methods of reducing the pressure on the High Court rather than transferring all these cases to the tribunal.
The Earl of Sandwich
My Lords, I am not sure that the Minister answered the point made by the noble Lord, Lord Avebury, about the relative inexperience of the Upper Tribunal in immigration. He quotes the wise and the good, and we have heard from the noble and learned Lord, Lord Woolf, but surely we are not making a decision on the basis of advice only but on the actuality of the court over the period.
Lord McNally
The point was made that the Upper Tribunal over the past three years has demonstrated very clearly that it has both the experience and the expertise to deal with these matters. The Upper Tribunal’s expertise in reducing backlogs in the Administrative Court has been demonstrated. I do not have the most up-to-date figures on UKBA withdrawals, but in my closing remarks I accepted that one issue was the UKBA’s tendency in the past to withdraw objections. Reforms that are being taken forward by my right honourable friend the Home Secretary aim to deal with some of those criticisms of the UKBA.
However, that does not take away the central thrust of this proposal that since 2009 the Upper Tribunal has shown itself to be working well, and we are not rushing our fences in this case. Both the Lord Chancellor and the Lord Chief Justice will be closely involved in gauging the movement of cases to the Upper Tribunal, but no one has seriously doubted its competence or expertise to deal with these matters. On the contrary, it has shown itself to be remarkably efficient at cutting time for dealing with cases, which must be in the interests of justice.
Lord McNally
Lord McNally
Lord McNally
My Lords, these amendments all relate to the provisions on the deployment of the judiciary. Of particular note is Amendment 140, which introduces an emergency procedure regarding the appointment of deputy judges of the High Court when there is an urgent need to do so. The Bill introduces a Judicial Appointments Commission process for appointing deputy High Court judges and authorising circuit judges and recorders to sit in the High Court. This is an important reform to increase transparency regarding these appointments.
Amendment 140 would deal with situations where there is an urgent and unforeseen demand for a deputy High Court judge and it is not practicable to draw on any judges of the High Court or any of those who have been selected previously by the Judicial Appointments Commission, or to deploy any other judge who is authorised to sit in the High Court or Crown Court in the time available.
The amendment inserts new Section 94AA into the Constitutional Reform Act 2005. The purpose of this new section is to specify clearly circumstances in which the normal Judicial Appointments Commission selection exercise may not be applied in the appointment of a deputy judge of the High Court for a definite period. This may be needed in exceptional circumstances, such as a number of judges being unwell or suffering some other unexpected misfortune, meaning that a particular area of expertise is required at short notice. The amendment specifies what criteria must be applied if the Judicial Appointments Commission is not to select deputy judges of the High Court. It also clearly limits the duration of the appointment to the disposal of the particular business that gave rise to the use of the power.
Amendment 145 inserts a new Part 3A into Schedule 13 of the Bill. The new part deals with the deployment of judges to the Court of Protection. Our new deployment policy has been applied in this jurisdiction and all judicial officeholders are now able to be nominated to sit in the Court of Protection, including deputies and temporary appointees. Of course, in this and all jurisdictions, judges may be deployed only if the Lord Chief Justice determines that the judge possesses the necessary expertise and experience and deems in all other circumstances that it is appropriate for that particular judge to be deployed to that specific jurisdiction. In this jurisdiction, there has been a particular difficulty in ensuring that the court is fully resourced with judges that have the necessary skills and ability to hear these complex and often difficult matters. The amendment enables the Lord Chief Justice to provide appropriate judicial resources from a broader pool of candidates; it also widens the group of judges who can be appointed to act as the senior judge of the Court of Protection, handling certain administrative functions to that court.
The other amendments in this group on judicial deployment are either consequential or drafting amendments to ensure that we have made all the necessary changes and adjustments to Schedule 13 of the Bill. I will not detain the Committee further with this group of amendments, but I can provide further details of these amendments if needed. I beg to move.
Baroness Butler-Sloss
Perhaps I could ask the Minister what may be a rather stupid question. Unfortunately, I do not have the Mental Capacity Act in front of me, but I assume that the President of the Family Division and the judges of the Family Division and the Chancery Division are still on the list of those who will be trying these cases, as they are usually the judges who do it.
Lord McNally
I tread on very thin ice, but I think that I can assure the noble and learned Baroness that that is the case. If not, I shall make sure as soon as possible that the Committee knows that I am wrong.
Baroness Hamwee
I want to ask my noble friend a question about Amendment 140. He described the circumstances and need for flexibility in the ability to appoint temporary High Court deputy judges. I would like to ask about the business for which they would be needed, in proposed new Section 94AA(2)(a), which refers to both an “urgent need” and the “disposal of particular business”. He mentioned the need for special expertise, but has he any further examples of what the “particular business” might be? I take it that we are not being asked to agree to temporary appointments to deal with urgent business per se. It is the term “particular business” that interests me. I could have pictured this clause better if it did not refer to “particular business” but to “business” in general. I am sorry that I did not give the Minister notice of the question. He may wish to come back to it at a later point.
Lord McNally
I, too, am rather sad that my noble friend did not give me notice of the question. I am pleased that we are bringing in a role for the Judicial Appointments Commission in the appointment of deputy High Court judges. To put it bluntly, there was a suspicion in some areas that the appointment of deputy High Court judges was the last surviving remnant of the “tap on the shoulder” system of appointments. Therefore the proposals to bring the appointments commission into the process are important.
However—I say this in the presence of the noble and learned Lord, Lord Woolf, with all his vast experience—we were determined not to put the Lord Chief Justice of the day into a straitjacket. He has to be responsible on a day-to-day basis for deploying the judiciary and, if there is a need to appoint a deputy in an emergency, we should have the ability to do so. Hence, in introducing the provision, there are many references to exceptional circumstances and a definite period so that this emergency procedure would not lead, again, to a way of appointing deputy High Court judges by a tap on the shoulder. It leaves the Lord Chief Justice of the day with the wriggle room to deploy efficiently but makes sure that the main appointment of deputies now comes within the ambit of the Judicial Appointments Commission.
As for specific examples, the best I can do is to write to my noble friend giving her some examples, which I hope will reassure her. I shall, of course, put a copy of the letter in the Library of the House for the benefit of the Committee.
Baroness Turner of Camden
Fairly recently I asked questions in the House about employment tribunals and I was told by the Government that an investigation into them was currently proceeding and that we would be told the results in due course. Does the change of title listed in Amendment 146 from “chairmen of employment tribunals” to “Employment Judges” form part of that general investigation?
Lord McNally
Yes, my Lords, it is part of the general process of reform at both the tribunal level and in other parts of the judiciary. So there will be employment judges from now on.
Lord Thomas of Gresford
Perhaps I may help my noble friend by illustrating the kind of particular business there could be. In the old days it was not so much a tap on the shoulder as a ring-round by the Lord Chancellor’s Department to find someone who could go and do particular cases on very short notice. I recall being asked to go to Leeds with the inducement that I could stay in the judges’ lodgings—not much of an inducement, I may say—to try three large medical negligence cases. They said, “Don’t worry, they’ll all settle”. In fact, they all stood up. That is the sort of instance when counsel on both sides are all ready to go ahead on a fixed date but there is no High Court judge to take it. Everybody assumes that the cases will settle but they do not.
Lord McNally
Not for the first time when I find myself out on the thin ice, my noble friend supplies a plank for me to walk back to dry land. I thank him for that intervention.
Lord Beecham
I am glad that the noble Lord is not emulating Rasputin in terms of his trips across the ice.
The Opposition do not take issue with the amendments but it is interesting that in a move to simplify the system we have a complex series of amendments. They add several pages to Schedule 13. By sheer chance today, a Mr Patrick O’Brien, a research associate of the Constitution Unit, has written a blog—I suppose that is what it is—about the issue of judicial appointments under the Bill. He makes the point:
“The new system in its entirety will, if anything, be even more complex than the present arrangements. It will be a hydra with three heads—the Lord Chancellor, Lord Chief Justice and the Senior President of Tribunals (and indeed five heads if you include the formal roles of the Prime Minister and the Queen), all of whom will have roles in approving appointments of various types—and at least five variants of appointment commissions/panels in addition to the JAC. There is the potential for further variations on these commissions/panels though the use of regulations. As things stand, the use of regulations in the Bill adds complexity and uncertainty to the CRA rather than removing it”.
Can the noble Lord give an indication of when, if at all, regulations will be introduced and what they might cover? Mr O’Brien goes on to say: “The CRA”—Constitutional Reform Act—
“is not just addressed to civil servants”—
or Members of your Lordships’ House or indeed the other place. He continues:
“It has constitutional significance and”,
should be,
“comprehensible to the general public”.
The noble Earl, Lord Attlee, referred to improvements in satnav technology when he was answering a Question on transport earlier. The implication of Mr O’Brien’s article is that we need the equivalent of satnav to navigate through this complex field of appointments. Having said that, we do not object in principle but it would be helpful if a guide were available to the public as well as to the practitioners so that they can see how the new system is supposed to work. Again, as with the previous amendment, I assume that the Government will be monitoring developments and will ensure that problems are dealt with in due course.
Lord McNally
My Lords, I am extremely grateful to the noble Lord, Lord Beecham, for his indication of support and for some sensible suggestions that I hope will assist the Committee. We will be publishing draft regulations before Report. The idea of a simplified guide on how these will impact is very sensible and I will take that back to my right honourable friend the Lord Chancellor. Amending existing legislation can be extremely complex when fitting in new proposals to existing legislation.
The noble and learned Lord, Lord Falconer—I was going to say my noble friend—along with the noble and learned Lord, Lord Woolf, showed a certain pride of authorship in the new disposition of our legal system after the reforms of the earlier part of this century. What we are trying to do, in our different ways, is build on reforms that have given us an effective system. These include promoting greater diversity in our judiciary. As we were discussing the other day, we are also conscious of the important nexus of the system, with the President of the Supreme Court, the Lord Chief Justice and the Lord Chancellor.
Lord McNally
(b) paragraph 38 of Schedule 12 has effect—(i) as if a reference to the office of deputy judge of the High Court were inserted at the beginning of the list in sub-paragraph (4) of that paragraph, and(ii) as if “second” were substituted for “first” in sub-paragraph (5) of that paragraph”
“(3) After section 94A of the 2005 Act (appointments not subject to section 85: courts) insert—
“94AA Appointments not subject to section 85: High Court deputy judge
(1) Where this section applies to an appointment, section 85 does not apply.
(2) This section applies to the appointment of a person as a deputy judge of the High Court if it appears to the Lord Chief Justice, after consulting the Lord Chancellor, that—
(a) there is an urgent need to take steps in order to facilitate the disposal of particular business in the High Court or Crown Court,(b) it is expedient as a temporary measure to make the appointment in order to facilitate the disposal of the business, and(c) there are no other reasonable steps that it is practicable to take within the time available in order to facilitate the disposal of the business.(3) An appointment to which this section applies is to be made—
(a) so as not to extend beyond the day on which the particular business concerned is concluded, or(b) so as not to extend beyond the later of—(i) the day on which the business is concluded, or(ii) the day expected when the appointment is made to be the day on which the business is concluded.”(4) In section 85(2A)(d) and (4) of the 2005 Act after “94A” insert “, 94AA”.”
“Part 3ADeployment of judges to the Court of Protection5A (1) Section 46 of the Mental Capacity Act 2005 (judges of the Court of Protection) is amended as follows.
(2) In subsection (2) (persons who may be nominated as court’s judges) omit the “or” at the end of paragraph (d) and, after paragraph (e), insert “,
(f) a District Judge (Magistrates’ Courts),(g) a judge of the First-tier Tribunal, or of the Upper Tribunal, by virtue of appointment under paragraph 1(1) of Schedule 2 or 3 to the Tribunals, Courts and Enforcement Act 2007,(h) a transferred-in judge of the First-tier Tribunal or of the Upper Tribunal (see section 31(2) of that Act),(i) a deputy judge of the Upper Tribunal (whether under paragraph 7 of Schedule 3 to, or section 31(2) of, that Act),(j) the Chamber President, or Deputy Chamber President, of a chamber of the First-tier Tribunal or of a chamber of the Upper Tribunal,(k) the Judge Advocate General,(l) a Recorder,(m) the holder of an office listed in the first column of the table in section 89(3C) of the Senior Courts Act 1981 (senior High Court Masters etc),(n) a holder of an office listed in column 1 of Part 2 of Schedule 2 to that Act (High Court Masters etc),(o) a deputy district judge appointed under section 102 of that Act or under section 8 of the County Courts Act 1984,(p) a member of a panel of Employment Judges established for England and Wales or for Scotland, (q) a person appointed under section 30(1)(a) or (b) of the Courts-Martial (Appeals) Act 1951 (assistants to the Judge Advocate General), (r) a deputy judge of the High Court,(s) the Senior President of Tribunals,(t) an ordinary judge of the Court of Appeal (including the vice-president, if any, of either division of that court),(u) the President of the Queen’s Bench Division,(v) the Master of the Rolls, or(w) the Lord Chief Justice.”(3) In subsection (2)(b) for “Vice-Chancellor” substitute “Chancellor of the High Court”.
(4) In subsection (4) (a judge nominated under subsection (2)(d) or (e) must be appointed senior judge of the court) for “or (e)” substitute “to (q)”.
(5) In section 4(5)(f) of the Human Rights Act 1998 (things done by certain judges in Court of Protection) for “Vice-Chancellor” substitute “Chancellor of the High Court”.”
“Part 7Amendments following renaming of chairmen of employment tribunals12 (1) In the following provisions for “chairmen”, or for “chairmen of employment tribunals”, substitute “Employment Judges”—
Constitutional Reform Act 2005: section 3(7B)(d) and (e),
Courts Act 1971: Part 1A of Schedule 2,
Courts and Legal Services Act 1990: Schedule 11,
Employment Tribunals Act 1996: sections 3A, 5A, 5B(4), 5D(2)(e) and 7B(6),
Judicial Pensions Act 1981: section 12(1)(c),
Judicial Pensions and Retirement Act 1993: section 26(12A)(i), and
Tribunals, Courts and Enforcement Act 2007: sections 4(1)(e) and (3)(d) and 47(5)(c)(iii), paragraph 12(1)(c) of Schedule 1 and paragraph 7(1)(a) of Schedule 2.
(2) In the following provisions for “chairman of employment tribunals” substitute “Employment Judge”—
Constitutional Reform Act 2005: Part 3 of Schedule 14, in both places,
Tribunals, Courts and Enforcement Act 2007: paragraph 6(1)(e) and (4)(b) of Schedule 7, and
Judicial Pensions and Retirement Act 1993: Schedules 1 and 5.
(3) In sections 10(4) and 30(2B)(b) of the Employment Tribunals Act 1996 for “Chairman” substitute “Employment Judge”.
(4) In Part 3 of Schedule 1 to the House of Commons Disqualification Act 1975 for “or member of a panel of persons appointed to act as chairmen or other members of employment tribunals” substitute “Employment Judge, or member of a panel of members of employment tribunals that is not a panel of Employment Judges”.
(5) In paragraph 5(2)(g) and (5)(vii) of Schedule 7 to the Judicial Pensions and Retirement Act 1993 before “chairman” insert “Employment Judge, before 3 November 2008 called”.”
EU Council
(11 years, 10 months ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, this may be a convenient moment to repeat a Statement made by the Prime Minister about the European Council. The Statement is as follows.
“I am sure that the whole House will be deeply saddened by the death of three British servicemen in Afghanistan yesterday. These brave soldiers were demonstrating great courage to prevent Afghanistan once again becoming a haven for international terrorists and helping to keep us safe here in the United Kingdom. The suspected perpetrator is in custody and we will do everything in our power, with the Afghan national security forces, to ensure that justice is done. This tragic incident again demonstrates the very real risks that our soldiers face every day and we will learn all the lessons that arise from it. I know that everyone in this House will want to send their support to our brave troops and their families at this difficult time.
Turning to the European Council, Britain had three objectives at last week's European Council. The first was for eurozone members to take the urgent action needed to deal with the immediate crisis. The second was to secure a comprehensive growth package firmly focused on Britain's priorities and the third was to send a clear message to the rest of Europe about what Britain expects from the budget negotiations to come.
Under the previous Government, we could have been liable for financial support for these measures, as members of the EU bailout fund. But this Government have repatriated that power, so the British taxpayer is not involved.
On longer-term issues, eurozone members agreed important steps towards closer integration following a discussion of a report by the president of the European Council and others. It is vital for Britain—and for the strength and prosperity of the whole European Union—that they do this in the right way. I secured agreement that as this work goes ahead the “unity and integrity of the single market” will be fully respected. On the specific proposal of a banking union, I ensured that Britain will not be part of any common deposit guarantees or under the jurisdiction of any single European financial supervisor. I am very clear that British taxpayers will not be guaranteeing any eurozone banks and I am equally clear that, while we need proper supervision of our banks, British banks will be supervised by the Bank of England, not the ECB.
The original draft of the growth compact included a whole section on economic and monetary union which implied that a banking union might apply to all 27 countries. A number of countries worked to ensure that that whole section was removed.
We want a budget that is focused on growth not a focus on growth in the budget. EU members as a whole are €3.5 trillion more in debt now than when the last budget was negotiated and we have to face up to that tough reality. I made it clear that without the British rebate we would have the largest net contribution in the EU as a share of our national income. Without the rebate, it would be double that of France and almost one and a half times bigger than that of Germany. So the British rebate is not up for renegotiation. It is fully justified.
On foreign policy, the Council welcomed the EU oil embargo against Iran which came into force yesterday. On Syria, we called for united action by the UN Security Council to add more robust and effective pressure on Assad’s regime, including the adoption of comprehensive sanctions.
Europe is changing rapidly and fundamentally, and this presents real challenges for all countries. Those inside the eurozone have to face fundamental choices about whether to limit their national democracy and provide financial support to the weaker members, and like others outside the eurozone, in Britain we also face big choices too.
As Europe changes to meet the challenges of the eurozone, so our relationship with Europe will change too. There are those who argue for an in-out referendum now. I do not agree with that because I do not believe that leaving the EU would be best for Britain. But nor do I believe that voting to preserve the exact status quo would be right either. As I wrote yesterday, I do not believe that the status quo is acceptable. But just as I believe it would be wrong to have an immediate in-out referendum, so it would also be wrong to rule out any type of referendum for the future.
The right path for Britain is this. First, we must recognise that in the short term the priority for Europe is to deal with the instability and chaos. Secondly, over time we must take the opportunities for Britain to shape its relationship with Europe in ways that advance our national interest in free trade, open markets and co-operation. That should mean, as I argued yesterday, less Europe not more Europe: less cost, less bureaucracy, less meddling in issues that belong to nation states.
Thirdly, all party leaders will have to address this question. But it follows from my argument that far from ruling out a referendum for the future, as a fresh deal in Europe becomes clear, we should consider how best to get the fresh consent of the British people.
Finally, as I have said, as the eurozone moves to a banking union, we must ensure that Britain can take responsibility for sorting out its own banking sector. On the unfolding banking scandal here in the UK, we need to take action right across the board, introducing the toughest and most transparent rules on pay and bonuses of any major financial centre in the world, increasing the taxes banks must pay, ensuring tough civil and criminal penalties for those who break the law, and above all, clearing up the regulatory failure left by the previous Labour Government.
The British people want to see two things. They want to see that bankers who act improperly are punished and they want to know that we will learn the broader lessons of what happened in this particular scandal. On the first, the Serious Fraud Office is looking at whether there are any criminal prosecutions that can be brought, and it is using the full force of the law in dealing with this. On the second, I want to establish a full parliamentary committee of inquiry involving both Houses and chaired by the chairman of the Commons Treasury Select Committee. This inquiry will take evidence under oath, have full access to papers, officials and Ministers, including Ministers and special advisers from the previous Government, and it will be given, by the Government, all the resources it needs to do its job properly. The Chancellor will be making a full Statement, but this is the right approach because it will be able to start immediately, it will be accountable to this House, and it will get to the truth quickly, so we can make sure this never happens again.
I commend this Statement to the House”.
Baroness Royall of Blaisdon
My Lords, I thank the Leader of the House for repeating the Statement by the Prime Minister on the outcome of the European Council meeting.
On the tragic news from Afghanistan, all our thoughts are with the families and friends of the soldiers concerned. This news reminds us once again of the risks our troops face daily and of our duty to do everything we can to protect them.
The Prime Minister in the other place included in his Statement on Europe a statement on banking. Leaving aside the admirable vote of confidence in his Chancellor, who is following the Prime Minister's Statement with his own Statement on banking, we on these Benches believe that it is right that the Prime Minister has reconsidered the position that he set out last week on the need for a full inquiry. However, we are not convinced that the way forward on this issue is the Joint Committee that he is proposing. It does not suggest that the Government have grasped the scale of the problem. We know that politicians investigating bankers will not convince the people of this country; nor is it the way we can build the consensus that is needed for real change. After all, there have already been a number of Select Committee reports into the banking crisis.
The crisis surrounding the banks now demands an inquiry similar to the inquiry into press behaviour currently being carried out by Lord Justice Leveson. We appreciate that the Leveson inquiry has been uncomfortable for politicians on all sides, but that is exactly how it should be. We will continue to argue for a full and open inquiry, independent of bankers and politicians, and we will table an amendment to the Financial Services Bill to this effect in order to get a proper inquiry that will be trusted by the people. We do not believe that we will rebuild public trust by having politicians investigating bankers. Like the Leveson inquiry, an inquiry needs to be searching, to expose what has been happening and to get to the truth. Furthermore, as we on these Benches hope will be the case with the Leveson inquiry, it needs to bring forward remedies to stop the practices, whether in journalism or in banks, that the public and all Members of this House oppose. That is how eventually trust will be rebuilt.
I turn now to Europe and the European Council meeting. On Syria, let me associate these Benches with what the Statement said. There was an agreement reached at Geneva on Saturday, but in truth there was little progress. The divisions within the international community on this issue mean that too little is being done to bring the escalating violence to an end. In that context, can the noble Lord, the Leader of the House, update your Lordships’ House on the position of Russia regarding a future for Syria without President Assad?
The European summit took place against a backdrop of the continuing crisis in the eurozone, a global recovery faltering, and a double-dip recession here in the UK. The central challenge is how we can have a Europe not of austerity and unemployment but of jobs and growth. On that central issue, the Government cannot be part of the solution because the Government are part of the problem. They have no answers and nothing to offer. On growth, the Prime Minister used an instructive phrase in his post-summit press conference. He said that,
“just as we had to tackle the euro crisis, so we have to tackle the growth crisis”.
He then added:
“Britain has been driving this debate”.
That really does suggest someone getting increasingly out of touch with reality because as the Prime Minister was speaking figures were coming in showing that the double-dip recession, created in Downing Street, was worse than we thought. The UK is one of only two countries in the G20 to be in a double-dip recession, with long-term youth unemployment having doubled during the past year. The summit agreed extra resources for the European Investment Bank for youth unemployment. Why do the Government appear to support action on this crucial issue in Europe while failing to act here at home? There can be no solution to the growth crisis unless we tackle the crisis of demand in the European economies and globally. Did the Prime Minister advocate any measures at the summit to bring this about?
On the banking regulator, what specific legal safeguards will the Government seek to secure between now and December’s final proposals to protect Britain’s interest in the single market? On the eurozone and bank recapitalisations, it is welcome that direct help can be provided to eurozone banks, but do the Government really believe that the funds that eurozone countries are making available are adequate? On the Patent Office, the Prime Minister says that the outcome is a sign of his success, but, as he argued for the office to be headquartered in London, how could the decision to base it in Paris be a diplomatic triumph?
I turn finally to the Prime Minister's position—or should I say positions?—on Europe. On Friday, the Prime Minister ruled out a referendum on Europe, saying:
“I completely understand why some people want an in/out referendum … I don’t think it’s the right thing to do”.
However, hours later, 100 Conservative Back-Benchers in the Commons and the former Defence Secretary called for an in/out referendum. Then, mysteriously, on Sunday, the Prime Minister hinted that he was ruling in a referendum. The Foreign Secretary then went on television and said:
“The Prime Minister is not changing our position”.
Three days, three positions. First, it was no; then it was yes; now it is maybe. Can this House have some clarity about the Government’s stance? First, has there been a change in the Government's position? Secondly, the Prime Minister spoke about a referendum being connected to the renegotiation of powers. Are the Government now saying that they might be in favour of withdrawal from the European Union if they do not get these powers? That would be a new position. Is it the Government’s position? Thirdly, can the Leader of the House explain the following? The Prime Minister said last October that,
“there is a danger that by raising the prospect of a referendum … we will miss the real opportunity to further our national interest”.—[Official Report, Commons, 24/10/11; col. 27.]
Why is the Prime Minister doing precisely that now?
Will the Leader of the House confirm that the Prime Minister’s raising this issue has nothing to do with the national interest? He is doing so not to sort out the crisis of growth here at home or across the EU, or to tackle the disgrace of youth unemployment, but in an effort to manage the divisions in the Conservative Party.
Five years ago, then in opposition, the Prime Minister said that his party should stop banging on about Europe, but now he is the man getting out the drum. The country is confused about this Government and Europe—a veto that never was, a referendum which may happen, but not now. This is a party, the party opposite, talking to itself and not to the country. Britain deserves better. It is time that the Government started doing better for the people of this country.
Lord Higgins
My Lords, could my noble friend make it clear whether we are having one Statement or two?
Lord Strathclyde
My Lords, perhaps I may clarify to my noble friend that there will be two Statements this afternoon, the second of which will be repeated by my noble friend Lord Sassoon, as is laid out on the screens, and will come immediately after Back-Bench time on this Statement.
As ever, I thank the Leader of the Opposition for her remarks. She asked plenty of questions and I shall try to deal with them fully. She expressed dissatisfaction at the Prime Minister having said that there should be an inquiry into banking and the LIBOR problem, because it was the wrong sort of inquiry. She said that her party would put down an amendment to a Bill before this House. She expressed disappointment with what the Government were doing, which is a pity, because I would have thought that one place where there is a good deal of expertise was in Parliament. To have a Joint Committee of both Houses looking at this matter, with Members of our Economics Affairs Committee sitting with their colleagues in the House of Commons, should surely be enormously welcome. It should also be able to respond quickly. We hope that it will get to work straightaway, call witnesses over the next few months and report by Christmas so that recommendations can be included in the Vickers Bill in the New Year. That seems to be an appropriate way forward.
The noble Baroness asked for our thoughts on Syria. She correctly recognised what a difficult situation it is. The situation remains grave, with hundreds of people dying every week. However, the Foreign Secretary was engaged this weekend in intensive talks in Geneva on a transition plan which included the Foreign Ministers of Russia, China, and other countries. The result is one step forward, which is worth having. We agreed with Russia and China that there should be a transitional unity Government in Syria, which should be made up of people from the present Government, the opposition, and other groups on the basis of mutual consent. It would of course exclude President Assad. We must now try very hard to bring this about. We are putting a great deal of energy into doing so, but nobody is under any illusions of just how complex all of this going to be, given the situation that exists in Syria.
The noble Baroness, the Leader of the House—
Lord Strathclyde
Sorry, the noble Baroness the Leader of the Opposition, the former Leader of the House, also talked about the Europe of jobs and growth. She said that the Prime Minister could not deliver this in the United Kingdom, and asked why he therefore thought he could deliver it in Europe. That is to completely misunderstand what this Government have been doing, and, of course, to misunderstand quite deliberately. We want to rebalance the economy, with private sector growth taking the place of government deficits. We want prosperity shared across all parts of the UK. We want to become a world leader in advanced manufacturing and knowledge-based industries and services, and to remain the world’s leading centre for financial services. We have done this by cutting corporation tax, ensuring access to finance, dealing with the red-tape challenge, and many other brave and sensible pieces of action which will take the Government forward, from where we were under Labour’s misrule towards long-term growth and prosperity based on real jobs.
The noble Baroness asked about the European Patent Office. She said that it was not going to be based in London. This has been discussed and debated for over 23 years. It is an area in which Britain excels. The Council has decided that the patent office should be based in three parts of the European Union: in London, Paris and Munich. The most significant part of it as far as we are concerned—pharmaceutical and life science industries—will be based here in London. It will bring a turnover of over £100 million-worth in legal services into the United Kingdom.
Much of what the noble Baroness asked about concerned the referendum. I have believed for a long time that the real muddle on European policy lies in the party opposite, and not in our party at all. We said that an in/out referendum is not the answer right now, and we stick to that. A referendum on a choice between the status quo and coming out completely when Europe is changing would be the wrong choice. It would be a bad time to make a decision. Europe is changing a great deal, probably more so currently than it has done for very many years. Indeed, it is entirely right for my right honourable friend the Prime Minister to look at how we want to change our relationship with Europe, and as the end point becomes clear, to consult the British people either in a general election or a referendum. I regard that as a very strong position. If the Labour Party disagrees with consulting the British people, they should say so.
Lord Dholakia
My Lords, first, I welcome the sentiment expressed by the Leader of the House and the Leader of the Opposition about the death of the three British soldiers in Afghanistan. Our prayers and thoughts will remain with their families and friends.
I have two questions for the Minister. On the compact for growth and jobs, which will release €125 million for immediate investment, the noble Lord was broad enough to explain the area that may benefit Britain. Could he be more specific about what the real benefit to Britain will be from that money? Secondly, it is proposed that a group of eurozone members might pursue various measures, such as a financial transaction tax, through enhanced co-operation among themselves. If they do, will the Government ensure that Britain’s rights under the single market are maintained?
Lord Strathclyde
My Lords, my noble friend’s last point is crucial. There was real concern at the European Council and suggestions from other countries that a European banking supervisory system would be precisely that—for all the banks in Europe, including those in the United Kingdom. My right honourable friend the Prime Minister and others said that that should not and could not be the case, and we ensured that the final terms of the agreement ensured that British banks would not be a part of that but would continue to be regulated by the Bank of England. Within the eurozone area, it is of course entirely appropriate that they look at ways to improve banking supervision, ensuring deposits and working more closely together. That, too, should be welcomed.
As for growth, we are all pointing in the same direction. We want deregulation. We want a clearer completion of the single market, particularly in digital and energy. That will have an important impact on the European economy and, in particular, on the United Kingdom economy.
Lord Hannay of Chiswick
My Lords, does the Leader of the House accept my welcome that the lessons of last December seem to have been learnt on this occasion and that the Prime Minister has recognised that the right way to protect British interests is to stay at the negotiating table, not to reject any participation in negotiations? In my view, that is highly welcome.
As the Prime Minister begins to dance with wolves on referendum issues, does the noble Lord agree that it does not make much sense to parody the situation and the choice before us by talking about more Europe or less Europe? If we read the European Council conclusions, which I am glad the Prime Minister subscribed to, we see a great deal of more Europe in them in relation to the single market. There are references to patents, to the digital single market and to the single market in services, all of which require more Europe. It makes no sense at all to say that the British position is in favour of less Europe.
On Syria, does the Minister recognise that the Russian situation may not be one that we can work our way around? I am not criticising for one minute the attempt made in Geneva to achieve common ground, but it is doubtful whether that achievement is real or just apparent. If it is not real, it will surely be necessary to go to the Security Council to table a resolution imposing measures on the Syrian regime if it does not observe and honour the provisions of the Annan plan and put it to a vote, come what may. The only way you can find things out in the Security Council is by eventually putting it to a vote. If the Russians wish to veto it, they will do so, and that will be their responsibility.
Lord Strathclyde
I shall take those points in order. The noble Lord welcomed the fact that the Prime Minister wants to work together with his European partners. Of course, that has always been the case, including last December, when my right honourable friend was ready to support treaty change for the 27 in return for specific and practical proposals, which we put forward to safeguard the integrity of the single market. These proposals were not an opt-out for the UK, as some have suggested; they would have applied to the EU as a whole. However, other countries blocked them, and without those protections it was entirely correct that my right honourable friend used his veto.
Of course, there are some vital parts of the EU that have a positive impact upon the United Kingdom, and we should seek to preserve these. Equally, it is right for the Government to conduct a national audit of what the EU does and what the implications are for this country. Extensive preparatory work is progressing, and when that is complete we shall make a further announcement to Parliament.
As for Syria, I see entirely the force of what the noble Lord has said about putting down a UN Security Council resolution. It is, of course, a delicate matter. I do not think that the issue has advanced as far as that, but the option must be open to the Security Council to put forward a resolution.
Lord Lawson of Blaby
My Lords, is it not clear that the present situation in the eurozone is unsustainable, that it remains unsustainable despite the changes agreed with the European Council, and that sooner or later—sooner better than later—countries that are part of the monetary union will have to decide whether they are going to enter into a full-blooded political union or whether they should dissolve the single currency altogether? If the former, which I do not think it will be, there is no way this country can remain part of the European Union. If the latter, as I hope, and the single currency is dissolved, we can remain in the Union and I hope they will have learnt their lesson.
On the LIBOR scandal, I welcome a proposal to set up a Joint Committee of both Houses under the chairmanship of my excellent former special adviser. I am particularly glad that it will be a Joint Committee that includes Members from this House.
Lord Strathclyde
My Lords, on the first question, I do not know whether the eurozone is unsustainable. I do know that there is a crisis that needs to be resolved, and the sooner it is resolved the better. Our view is that at the end of last week a bold step was taken in the direction of trying to solve the crisis. Certainly, the financial markets liked it. Whether it is going to be enough, quickly enough, it is too early to tell. As the Government have said, there is a remorseless logic to how the eurozone operates, which is why we decided not to join it.
I am glad that my noble friend welcomes the Joint Committee on LIBOR and the banks. I think he is a member of the Economic Affairs Committee of this House, so he may well find himself a member of that Joint Committee, which would see a reversal of the roles between its chairman and him.
Lord Barnett
My Lords, could I clarify the Prime Minister’s position on an in/out referendum? My noble friend the Leader of the Opposition asked the question and the Minister did not seem to be clear in his answer. Is the Prime Minister’s position that he is opposed to an in/out referendum, full stop?
Could I also, I think, congratulate the Government? The Minister seemed to confirm what was reported in the Times last week, but which I did not see anywhere else, that the Government and the Prime Minister have agreed to give €1.3 billion to the European Investment Bank to help growth in Europe. It seems an odd thing to do, given that I would have thought that the Prime Minister’s primary consideration was to promote growth here. However, I would welcome such a proposition. Could the Minister confirm this?
Lord Strathclyde
First, my Lords, I thought I had made it pretty clear that the Prime Minister and the Government are not in favour of having an in/out referendum now. It is not the answer right now, but who knows? I would not support one, and I do not think that the Government would, because it is not the right choice to make. The right choice to make is that since Europe is in flux we should see where it ends up and where the relationship changes, if it does. We already have provision, agreed by Parliament, that when power moves from the United Kingdom to Europe there should be a referendum, so referendums should not concern us very much. However, if that relationship changes, perhaps the right thing should be to consult the British people, either in a general election or in a referendum.
As for growth, we were very much part of the group that called for a credible EU growth agenda. The European Council endorsed our growth priorities on Friday. For instance, we secured agreement for the immediate implementation of actions to eliminate unjustified barriers on services. This alone could add 1.6% to EU GDP over the next few years.
Lord Ryder of Wensum
My Lords, is not the use of “growth” incredibly mistaken in the context not only of my noble friend’s Statement but of the European Council’s conclusions, which I have before me? Indeed, the first paragraph of the Council’s conclusions states:
“The European Union will continue to do everything necessary to put Europe back on the path of smart … and inclusive growth”.
Perhaps my noble friend can explain the difference between growth and “smart … and inclusive growth”. Furthermore, I would be very grateful to know precisely what the Prime Minister’s definition of growth is, because I have been confused in recent weeks by his understanding of it. Growth in the long term in the European Union can be sustainable only by continuing to liberalise every country within it and by introducing supply-side measures. If my noble friend agrees that the Prime Minister accepts this principle, can he please let us know what supply-side measures the Prime Minister has been trying to persuade his European colleagues to implement in recent weeks?
Lord Strathclyde
My Lords, I, too, read those words from the conclusions of the Council’s meeting, which say:
“on the path of smart, sustainable and inclusive growth”.
I suspect that in different countries within the EU, it means rather different things. The conclusions go on to say that it should provide,
“a coherent framework for action at national, EU and euro area levels, using all possible levers, instruments and policies”.
It then directs the reader to the annexe.
That leads me to my noble friend’s second question. I entirely agree with him that growth in Europe will come from sustaining, liberalising measures within the European economy. Again, we have been at the forefront of that by arguing for sound money, for spending European money better and more wisely, and wasting less of it, for decentralisation and for reducing bureaucracy. All these measures are the kind of things that have worked in the past and will work again.
Lord Stoddart of Swindon
My Lords, the Statement refers to the British rebate. If there are proposals for changes to Britain’s rebate, can the Leader of the House say whether they would they have to be agreed by veto or QMV? My second question concerns the growth arrangements that four countries agreed on before the summit. Will Britain be making a contribution to that and will it add to the £150 billion to which we are committed through the ECB and the European Investment Bank? Finally, does he agree with Dr Liam Fox that Britain should negotiate a new relationship with the European Union and, indeed, that,
“life outside the EU holds no terror”?
Lord Strathclyde
My Lords, on that last point, there is no proposal for the United Kingdom to leave the EU, so the whole question simply does not arise. No analysis has been made, nor is likely to be made, of what life would be outside, and my right honourable friend has no intention of proposing a referendum on whether we should be in or out of the EU. There are substantial benefits to our remaining a member.
Yes, we are committed to funding aspects of the European Investment Bank. Many of these have been debated and discussed in the past.
Finally, the British rebate is absolutely fundamental to our monetary relationship with the EU. We will not agree to giving it up. The noble Lord asked me whether, if it were to be changed, it would be under unanimity or under QMV. I think that I am right in saying that it would be under unanimity; if that is not the case, I shall write to him.
Lord Deben
Does my noble friend accept that we will be more likely to get the rest of Europe to help us, and do the things that we want in terms of growth, if occasionally we emphasise the advantages of our membership instead of constantly suggesting that all sorts of things have to be changed? Will he please ask for a bit more positivity in our discussions about Europe?
Lord Strathclyde
There are many of us on all sides of the House who no doubt would like to be positive about the EU, but there a number of aspects to change over the course of the past 15 years that we do not believe should be dealt with at a European level; we would like to repatriate some of these things back to the United Kingdom. I know that my noble friend Lord Deben may not be entirely in agreement with all of that, but dare I say that when we have seen this audit of competences, there may be more agreement around the House as to what should be done at a national rather than a European level than seems to be the case at the moment?
Lord Grocott
My Lords, I have listened very carefully to the Leader’s explanation of the Prime Minister’s position on a referendum. I think that I am an average member of the public and I still have not got the faintest idea what his position on a referendum is. Does he seek a fundamental renegotiation of the terms and conditions of our membership of the European Union, which he would then like to put to the people in a referendum? In which case, I ask the Leader what shred of evidence his leader has from his prime ministership of two years’ standing that any other member of the European Union is prepared to agree to a fundamental renegotiation of Britain’s position within the European Union. Should he fail to get a fundamental renegotiation, will he then put that failure to the British public in a referendum? Presumably, his recommendation then would be that we should say no, and come out.
Lord Strathclyde
My Lords, I do not think that the noble Lord was trying to be helpful there at all. He was making his own case and asking questions on his own terms. The plain fact of the matter is that there is currently a fundamental reorganisation within Europe, a reappraisal of different relationships, particularly within the eurozone, which is inevitable, given the crisis that has engulfed the eurozone countries. It may, therefore, lead to a renegotiation; whether or not that is fundamental, it is too early to say. All that my right honourable friend the Prime Minister was saying is something that I think is glaringly obvious: if, under those circumstances, we wanted to change our relationship with Europe, and if that end point became clear, why on earth would we not wish to consult the British people, either in a referendum or at a general election?
Arrangement of Business
(11 years, 10 months ago)
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Lord De Mauley
My Lords, in view of the fact that the second Statement has not yet started in the other place, I am afraid that I am going to have to beg to move that the House do now adjourn during pleasure, I suggest for 10 minutes.
Baroness Falkner of Margravine
My Lords, in the 20 minutes that we have had for this European Council Statement, not a single female Member of this House apart from the noble Baroness, Lady Royall, was able to subject the Government to scrutiny. I therefore wonder whether the House will consent to hear me put a question to the noble Lord the Leader on the European Council. My question is to do with the banking union.
Lord Stoddart of Swindon
My Lords, the Motion is whether the House should adjourn.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, the point is that the debate that we are now on is about whether or not the House should adjourn during pleasure for 10 minutes. I suspect that it is probably my fault that we are in this position. I said that the first Statement should not start before 4 pm; it started pretty much on the dot of 4 pm, and perhaps if we had delayed it for another 10 minutes we would have been able to continue without a gap at all. I am in a bit of a quandary because I would have hoped that the Statement in the Commons from the Chancellor of the Exchequer would have already begun.
Baroness Hayman
Perhaps I could offer a potential solution to this. If, on the debate on whether the House should now adjourn during pleasure, the noble Baroness were allowed to make the point that she had not been able to put certain questions to the Leader of the House on the previous Statement and to explain to the House what those questions would have been, and perhaps the feminist dimension to them, and then the noble Lord the Leader were to answer that, we might even find ourselves in a happier position regarding the second Statement.
Lord Strathclyde
That is an astonishingly good idea. Although we are still on the Question of whether or not the House should rise during pleasure for 10 minutes, perhaps my noble friend Lady Falkner could reconsider what she was going to say.
Baroness Falkner of Margravine
My Lords, I am extremely grateful to the House and to the noble Baroness, Lady Hayman, for coming up with that ingenious solution. My question would have been to do with the banking union and the lack of clarity about the relationship between the enhanced powers of the ECB, as it will be the banking regulator and supervisor, and the Bank of England, because significant issues of UK banking priorities would be affected by banking union. I wonder if the noble Lord might have been able to tell the House, had he had the opportunity, whether Section II of the report on EMU, which says that,
“Member States will be closely associated … and regularly consulted”,
would also apply not to the 17 countries that are not in the eurozone or the eight that are applying to be in the eurozone, but to those that are neither applicants nor in the eurozone in terms of the relationship between the banking authorities.
Lord Strathclyde
My Lords, if that is the question that my noble friend would have asked, perhaps I can crave the indulgence of the House in giving her the answer that I would have given if she had been within the 20 minutes for Back-Bench time. I am not entirely sure whether it makes a difference that we have not had a female Member of the House asking a question; I think that it is a wonderful thing that my noble friend has asked a question, but I would hate to be in a position where we reserved a certain amount of questions for either male or female Members. For my part, I think that the female Members of this House play a most valuable role, and in some debates rather a bigger role than some of the male Members.
My noble friend’s question was to do with the common regulatory regime for EU banks; in other words, what the relationship will be between the ECB in its new role in relation to regulators, supervisors and banks in non-eurozone countries. The euro countries have agreed to establish a single supervisory regime involving the ECB. Throughout this whole process, we have been entirely clear that the UK will not participate in that. The details need to be worked out over the coming months but we are very clear that any supervisor must not undermine the single market or UK financial services. The European Council has agreed that any proposals must include,
“concrete proposals on preserving the unity and integrity of the Single Market in financial services”.
I see that the Chief Whip has arrived on the Front Bench. We have an unusual convention that we repeat Statements and do not pre-empt them. I was rather hoping that the Prime Minister would have finished his Statement by now and that the Chancellor of the Exchequer would be on his feet. I wonder if it would be appropriate, even though we are still discussing this Motion as to whether or not we should adjourn for pleasure for 10 minutes—
Lord Foulkes of Cumnock
I will try, as usual, to be helpful by saying a few words on this Motion about adjourning for pleasure. I do not think that we should. At least the Leader of the House was candid enough to confess that this timetabling was his mistake, but it is not the first mistake he has made in relation to the business of the House. In fact, in this instance, he is a serial offender. He ought to be very grateful to the noble Lords, Lord Hamilton and Lord Myners, to myself and others for insisting—and putting it to a Division, which was won, with the support of the Opposition—that the Committee stage of the Financial Services Bill be held on the Floor of the House. Given the events of the last few days, it would have been outrageous if it had been taking place in the Moses Room, hidden from public attention. Now, we can be sure that all of it, including the amendments, will be taken here on the Floor of the House.
When we have that debate, I hope that we will have, for once, the presence of the Minister of State at the Department of Trade and Industry, the noble Lord, Lord Green, who is never here, never answers Questions, never participates in debates and leaves it all to the poor noble Lord, Lord Sassoon, who does a wonderful job under the circumstances. It would be particularly helpful to have the noble Lord, Lord Green, here, because on 28 November 2005, it was announced that he was to become group executive chairman of HSBC. He has more knowledge from the time when all of this took place. He was chairman of one of the biggest banks and so can give us some inside information, if he is allowed to. I hope the Leader of the House will confirm—
Lord Myners
I wish to be helpful to the House. It is also worth pointing out that the Minister, the noble Lord, Lord Green of Hurstpierpoint, was chairman of the British Bankers’ Association when these manipulations of the BBA’s LIBOR rate were taking place. It is reported that the executive of the BBA was aware that manipulation was taking place but took no action. How can this allow the noble Lord, Lord Green of Hurstpierpoint, to continue to be a credible adviser to the Chancellor of the Exchequer on banking, a role that he seems to have taken over from the poor noble Lord, Lord Sassoon, for whom we all have a great affection?
Baroness Royall of Blaisdon
My Lords, I wish to apologise. I am grateful to my noble friend Lord Foulkes for bringing these issues to the attention of the House. We have had a very worthwhile discussion but I wish to place on record my thanks to the government Chief Whip. As I understand it, it was at the Opposition’s request that the Statement was promptly at 4 pm, for the convenience of some Members of my Benches and of the whole House. I do not wish to cast aspersions on the Leader of the House when, in fact, I should be the one taking the blame.
Lord Strathclyde
I am very grateful for that. I have very broad shoulders on these things, but it demonstrates that I made yet another mistake in giving way to the noble Lord, Lord Foulkes.
As for the noble Lord, Lord Myners, let everybody just remember what his role was in all this as a very senior Minister in the Treasury in the previous Government.
Lord De Mauley
My Lords, in view of the fact that the Chancellor of the Exchequer has now started, I beg leave to withdraw my Motion.
FSA Investigation into LIBOR
(11 years, 10 months ago)
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The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, I shall now repeat a Statement made by my right honourable friend the Chancellor of the Exchequer in another place. The Statement is as follows.
“Mr Speaker, on Thursday I updated the House on the Financial Services Authority’s investigation into Barclays and the attempted manipulation of the LIBOR market in the years running up to and during the crisis. The House has just heard from the Prime Minister, and I would like to give more details of the steps we are taking.
This morning, I spoke to Marcus Agius, who confirmed that he was resigning as chairman of Barclays because of the unacceptable standards of behaviour within the bank. The Treasury Select Committee is calling the chief executive of Barclays to account for himself and for his bank on Wednesday. I look forward to hearing his answers.
As I also said last week, every avenue of possible criminal investigations for individuals involved in attempted manipulation of LIBOR is being explored. However, in the view of its chairman, the noble Lord, Lord Turner of Ecchinswell, the powers that were given to the authority do not allow it to pursue criminal sanctions. People in the country ask why it did not have the necessary powers. Those who set up the tripartite system must answer for that. People ask whether these gaping holes in the existing law mean that no action at all is possible. After all, fraud is a crime in ordinary business; why should it not be so in banking? I agree with that sentiment, and I welcome the Serious Fraud Office’s confirmation that it is actively and urgently considering the evidence to see whether criminal charges can be brought, particularly in relation to the current Fraud Act and in relation to false accounting. It expects to come to a conclusion by the end of this month. We would encourage it to use every legal option available to it.
I would like to address three further issues today. First, what happens to the money we get from the fines; secondly, urgent changes to the regulation of LIBOR and other markets to prevent such abuse occurring again and to ensure the UK authorities have the powers they need to hold those responsible to account; and thirdly, the wider issue of what went so badly wrong in the culture of our banking system and the way it was regulated which allowed such fundamental failures of basic standards of conduct to go unchecked and unchallenged.
Last week, I said that we wanted to ensure that fines paid by the financial services industry in future go to the Exchequer. Today, I can confirm we will propose amendments to the Financial Services Bill in the autumn to make this happen. This will remove a long-standing anomaly and bring the regulator into line with regulators in other sectors of the economy. The new arrangement will apply to fines received from 1 April 2012 so that it includes the Barclays penalty. From now on, the multimillion pound fines paid by banks and others who break the rules will go to the benefit of the public, not to other banks.
That brings me to the second question of the urgent changes we need to make to the regulation of LIBOR to prevent this ever happening again and to ensure that in future authorities have the appropriate powers to prosecute those who engage in market abuse and manipulation. I have today asked Martin Wheatley, the chief executive designate of the Financial Conduct Authority, to review what reforms are required to the current framework for setting and governing LIBOR. This will include looking at whether participation in the setting of LIBOR should become a regulated activity, the feasibility of using of actual trade data to set the benchmark, and the transparency of the processes surrounding the setting and governance of LIBOR.
The review will also look at the adequacy of the UK’s current civil and criminal sanctioning powers with respect to financial misconduct and market abuse with regard to LIBOR. It will assess whether these considerations apply to other price-setting mechanisms in financial markets to ensure that these kinds of abuses cannot occur elsewhere in our financial system.
We need to get on with this and not spend years on navel-gazing when we know what has gone wrong. I am pleased to tell the House that Mr Wheatley has agreed to report this summer so that the Financial Services Bill currently before Parliament or the future legislation on banking reform can be amended to give our regulators the powers they clearly need.
The review is essential to ensuring that we mend the broken regulatory system introduced by the previous Government, which allowed these abuses to happen. But the manipulation of the most-used benchmark interest rate reveals that there is a broader issue of the professional standards and culture in some parts of the financial services industry that was allowed to grow up in the years before the crisis and which may still need change.
I do not think a long, costly public inquiry is the right answer. It would take months to set up and years to report. We know what went wrong. We cannot wait until 2015 or 2016 to fix it. In just six months’ time we will be bringing forward the banking reform Bill that will implement the recommendations of Sir John Vickers’s Independent Commission on Banking. This will bring far-reaching, lasting change to the structure of British banks, ring-fencing retail banks from their investment banking arms. Let us see whether we can use this banking Bill to make any further changes needed to the standards of the banking industry, and the criminal and civil powers needed to regulate it and hold people to account for their behaviour.
As the Prime Minister said, we propose that Parliament establishes an inquiry into professional standards in the banking industry. The Government will, in the coming days, lay before both Houses a Motion to establish a Joint Committee drawn from the Commons and the Lords. It should be chaired by the chair of the Treasury Select Committee, the honourable Member for Chichester. He and his committee have already been quick off the mark in investigating the issue, and we certainly await their hearings this week to proceed.
I propose that the terms of reference should be these: building on the Treasury Select Committee’s work and drawing on the conclusions of UK and international regulatory and competition investigations into the LIBOR rate-setting process, consider what lessons are to be learnt from them in relation to transparency, conflicts of interest, culture and the professional standards of the banking industry. I propose that it should be able to call witnesses under oath, including current Members of Parliament and Lords. I can confirm that we will provide the committee with the resources it needs to do the job. I would suggest to the House that we ask the Joint Committee to report by the end of this year, 2012. That is enough time to do the job—and to do it well—but not so long that this issue drags on for years, and it means, in very practical terms, that we can amend our banking Bill to take on board its recommendations.
I hope that all parties will support the Motion we put forward. The failure to regulate the banks in the boom years cost this country billions. The behaviour of some in the financial services has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to the economic prosperity of the country.
We are changing the failure of regulation; reforming the banks. Now it is time to deal with the culture that flourished in the age of irresponsibility and hold those who allowed it to do so to account.
I commend this Statement to the House”.
My Lords, that concludes the Statement.
Lord Eatwell
My Lords, I am most grateful to the noble Lord, Lord Sassoon, for repeating the Statement made by the Chancellor of the Exchequer in the other place. I welcome the content of the Statement as far as it goes, but it does not go far enough.
It is difficult to exaggerate the seriousness of the LIBOR scandal for three reasons. First, because of the manipulation of this key benchmark rate, a London standard recognised throughout the world has accordingly affected financial transactions worldwide, directly impacting on the financial well-being of millions of families and firms.
The Serious Fraud Office has powers to investigate and to bring prosecutions in cases of fraud defined as,
“an act of deception intended for personal gain”.
This includes publishing false information to mislead investors as well as fraudulent trading. I am no lawyer, but common-sense interpretation of those words would suggest that the people with whom we are dealing have indeed been practising deception for personal gain. But they are not simply persons with some sort of criminal bent; they have been moulded by the environment in which they work and by what is regarded as acceptable practice on a day-to-day basis—fine for the firms for which they work, just so long as they make money for them.
Secondly, their actions have done enormous damage to our financial services industry in general and to the City of London in particular. They have not merely undermined but blown up the City’s hard-earned reputation for integrity and fair dealing and, most of all, destroyed the trust without which no honest financial system can operate. Every honest firm should welcome effective regulation. I am sick of hearing that regulation limits the operations of free markets and that if legislation results in more effective regulation banks will leave the country. Now we know just how free those markets actually are. We should not be held to ransom.
Thirdly, the financial services industry is, I am afraid, an industry with form. In the same week as we learnt of the manipulation of LIBOR, we learnt of the mis-selling of interest rate swaps, following on from the PPI mis-selling scandal. As the Chancellor commented, all of this is on top of the irresponsible lending practices at home and abroad that brought about the international financial crisis—practices in which British banks played a leading role, inflicting huge economic costs on the British people.
In the light of those three factors, an inquiry should meet the following criteria. First, it must address the culture of banking and the financial services industry as a whole in relation to the internal organisation of industries and the regulatory framework in which they operate. Secondly, it must address the key question of the boundaries of civil and criminal culpability. Thirdly, it must fundamentally reassess the scope of regulated activities. The inquiries that have been announced today meet only one of those criteria—the second, on the boundaries of civil and criminal culpability. I am delighted to hear that Martin Wheatley will conduct a speedy investigation into the narrow issue of the setting of LIBOR and the related issues of criminal sanctions.
The proposal for the parliamentary inquiry fails on the following grounds. First, the scope of the terms of reference, although it sound quite broad, is in fact limited to the lessons learnt from,
“regulatory and competition investigations into the LIBOR”.
So it is just about the lessons learnt from that particular problem, not the broader issues of professional standards in the industry as a whole and the structure of the industry. Secondly, it fails to address the overall question of the scope of regulated activities. Thirdly, a parliamentary inquiry will fail to restore public trust by creating a national consensus about what has got to be done. I have great respect for the chairman of the Commons Treasury Select Committee, not least because of the excellent critique of the Financial Services Bill by his Select Committee. Let us note that the most important elements of that critique have been pointedly ignored by the Government. A parliamentary inquiry is bound to appear to the public to be too introverted—a closed, establishment shop to which they have limited access, working within terms of reference that are far too restrictive. That is why there must be a full public inquiry that addresses all the issues at stake. As the Chancellor said, we know what has gone wrong. Yes, indeed, we do—but, at the most fundamental level, we do not know why or how.
I quite understand the argument that a proper inquiry might take too much time, but that can be easily dealt with by instructing the public inquiry to deal with issues sequentially. After Mr Wheatley’s report there could be an interim report on the immediate LIBOR issue, described in the terms of reference for the parliamentary committee. Following on from that, a much more considered report on corporate failings in compliance, culture, governance and organisation throughout financial services is the only full answer to the question: why did this happen? We owe the honest, committed people in the financial services industry that inquiry to lift the cloud that will otherwise hang over them.
The development of the financial services industry in this country has been guided by great public inquiries: the Macmillan Committee in the 1930s and the Radcliffe Committee in 1958 produced landmark reports. Now is the time for another. The reforms of the 1980s, while bringing many benefits, have had potentially disastrous, unintended consequences. There is a need for fundamental reform to the structure, style and content of the financial services industry to provide a framework for successful development in the future.
The Government have been bold in establishing the Vickers inquiry and bringing forward the current proposals and they deserve credit for that. However, the current proposal for a parliamentary inquiry, I regretfully say, by its very limitations—and especially the limitations of the terms of reference—can only do harm.
I should like to ask the Minister a couple of brief questions. First, why have the Government limited the scope to lessons drawn from international regulatory and competition investigations into the LIBOR rate-setting process? Why does it not go wider? Secondly, when did the Treasury first know of the substance of the FSA inquiry into LIBOR-fixing at Barclays?
Lord Sassoon
My Lords, I am grateful for the welcome that the noble Lord, Lord Eatwell, gave to the Statement. However, I am sorry that he thinks that the immediate action that the Government have taken is not appropriate and that he would like it to go further.
I cannot think of a better way of getting a national consensus and getting rapidly to the heart of these issues than through a Joint Committee of the two Houses—not least because, as we saw two weeks ago in the Second Reading of the Financial Services Bill, there is extraordinary and relevant expertise that can be brought to bear from this House alone. There was a remarkable debate on that Bill in which two former Chancellors, three former Treasury Permanent Secretaries, former members of the Court of the Bank of England, other former Treasury Ministers and leading financial journalists all spoke. We should not undersell the great expertise that can be brought to bear through the Joint Committee, which will have public hearings and be able to call, under oath, whomever it chooses to call. I do not agree with the noble Lord that we should go through some other route.
I remind your Lordships that recent public inquiries and those that are still live have taken an extraordinary amount of time and cost a huge amount of public money. Leveson, established in July 2011, has so far cost £2.8 million; Baha Mousa, started in May 2008, ran for more than three years at a cost of £13 million; the Mid-Staffs inquiry started in June 2010 and is still running—it is nearly finished—and so far has cost £11.8 million. These are expensive and long inquiries. For the safety and good order of our financial services markets, we need to get on with the inquiry and a Joint Committee is the appropriate way to do so.
The proposed terms of reference will come back to your Lordships’ House via a Motion that will go through both Houses. I do not read them as being limited in the way that the noble Lord, Lord Eatwell, seeks to limit them. The proposed terms of reference refer to drawing on and building on both the Treasury Select Committee’s work and the conclusions of the UK and international regulatory and competition investigations into the LIBOR rate-setting process. Then I read what follows, which states,
“consider what lessons are to be learnt from them in relation to transparency”—
that is LIBOR and the work of the Treasury Select Committee—
“conflicts of interest, culture and the professional standards of the banking industry”.
I read that as the committee being able to go extremely wide in its investigation and I am sure that it will do so. I certainly do not believe that there is a problem of the sort identified by the noble Lord.
As to when the Treasury first knew about the substance of the LIBOR-fixing allegations and investigation at Barclays, naturally Treasury officials have been in contact with the FSA during its investigations to consider LIBOR policy as it is in contact with FSA officials about many other things that they do. As was the case under the previous Government, it would be inappropriate to disclose the details of meetings while this is an area of developing policy.
Baroness Kramer
My Lords, I said last week that there was public outrage, and that outrage has only been growing. Mr Diamond remains in post; he just does not get it. That now raises questions about the fitness of Barclays’ board, which also just does not get it. Does the Minister agree that this matters? I very much welcome the review that Martin Wheatley will lead. Whatever changes are made to the rate-setting of LIBOR will always depend on engagement with the major banks. Therefore, there must be confidence that the banks fully understand their role in providing that information.
The other area of outrage, as I recognise it, is the perceived impotence of the FSA in being able to pursue sanctions for activities that are so widespread that, according to the Telegraph, they have their own technical term—the,
“dislocation of Libor from itself”.
Will the Minister explain why there is no scope under Clauses 397 and 400 of FiSMA, which I can quote if he wishes, to pursue individuals and the officers who supervise them? Surely an amendment could be put into the Financial Services Bill. It would be welcome if there was any way for it to be retrospective. Can he also explain why it was the CFTC in the United States that jumped on the issue in May 2008, based on information from whistleblowers, whereas with the same information the FSA did not become engaged until 2010? Obviously, I am dependent on media reports. Can we please look at the powers, resources and capacity of the FSA to ensure that it is never again in such a position?
Lord Sassoon
My Lords, first, I will not comment further on the senior executives of Barclays. Clearly the chief executive is coming before the Treasury Committee later this week and will be asked a lot of questions that will further elucidate those aspects.
On the question of prosecution, the basic flaw is that the setting of LIBOR was not and is not a regulated activity, so the FSA does not have a direct way in. My noble friend is right to be quizzical and shake her head but that is the position as it was under FiSMA and the construct put in place by the previous Government. If the FSA wanted to bring criminal prosecutions, as it has done with the civil settlement, the attempted fixing of LIBOR is an activity that is ancillary to a regulated activity. The construct is difficult and the chairman of the FSA has pointed out the difficulties.
As I said in repeating my right honourable friend’s Statement, most normal people would assume that there was a prima facie case to look at the Fraud Act and false accounting and that is precisely what the SFO was doing. Through the inquiries that are going on, we will look at what needs to be done to plug gaps in the financial services legislation. For the avoidance of doubt, I should tell my noble friend that there will certainly be no retrospective legislation in respect of criminal action because—before anybody else jumps up—it would be against the European Convention on Human Rights. I am sure that my noble friend would not want us to go there—and she acknowledges that.
As to which regulator started work when, I would not rely too much on what the newspapers say. As with all these things, I am sure that in due course the regulators will look into their conduct and the lessons to be learnt. I certainly would not take as gospel the newspaper reports of who started when.
Lord Barnett
My Lords, the Minister is obviously aware that this has not just started. It has been going on for years and it could not have involved only Barclays but virtually every major bank, not only in the UK but elsewhere. Barclays could not have been handling this on its own. Listening yesterday to the chairman of the FSA, the noble Lord, Lord Turner—who unfortunately is not in his place—the FSA knew nothing whatever about it, nobody in the Bank of England seems to have known anything about it, and now the noble Lord, Lord Sassoon, tells us that the Treasury has known about it apparently for only a short while. We obviously recognise that to be the truth, but should there not be criticism of some of the people involved here? The sheer incompetence of not knowing anything about it deserves some kind of criticism.
I appreciate that the Minister cannot say that he will listen and change anything, because it is a matter for the Chancellor. However, my noble friend Lord Eatwell put a lot of serious points to him and I hope that he will take them back to the Chancellor to ensure that there are some changes. There should be some changes now.
Lord Sassoon
My Lords, first, as we discussed last week, there are a significant number of other banks under investigation. Secondly, we could debate the history of this for a very long time, but this Government are moving extremely fast on a number of fronts to plug the gaps through one or both of the pieces of legislation that are or will shortly be before Parliament. We need to get this right, which is what we are doing.
Lord Blair of Boughton
My Lords, could I ask about the statement that the FSO will begin to consider criminal charges in the next month? I follow the noble Baroness, Lady Kramer, in referring to the level of outrage in the country about these events. The SFO could announce today that it is launching a criminal investigation. It is about not criminal charges but a criminal investigation into conspiracy to defraud, because if this is not a conspiracy to defraud, then I have never seen one—and I have seen a few.
Lord Sassoon
My Lords, just to repeat: the SFO is actively and urgently considering the evidence to see what criminal charges can be brought. It expects to come to a conclusion by the end of this month. That is exactly where it should focus its efforts.
Lord Marlesford
My Lords, unlike the noble Lord, Lord Eatwell, I see much merit in a parliamentary inquiry, especially if, as has been suggested, it includes people of the talent and experience of my noble friend Lord Lawson. There are many from all sides in this House who can do this. It is an inquiry that needs, above all, practitioners and people from the financial world rather than lawyers, and it does not prevent further inquiries in due course.
However, four points of action were put forward by the Prime Minister under the heading of banking in his Statement. Three of them are quite clearly covered by the Chancellor’s Statement but one is not. That is a confusing matter and I would like enlightenment. In the four actions proposed by the Prime Minister, one was,
“increasing the taxes banks must pay”.
What was the Prime Minister referring to?
Lord Sassoon
I am grateful to my noble friend for confirming that a Joint Committee is the way to take this forward. We have already increased the tax on the banks by putting a special levy on them so that the big banks effectively do not take any advantage of the lowering of corporation tax, which other parts of industry have already benefited from. This tax on the banks is enduring and will raise far more than the one-off tax that the previous Government brought in. So we have already done that.
Lord Myners
My Lords, I broadly welcome the Chancellor of the Exchequer’s Statement, and in particular the appointment of a Joint Committee, the report to be produced by Mr Martin Wheatley and the timetable to which both those reports are working.
I would like to return to the point I made to your Lordships’ House earlier about the BBA. It is increasingly clear that the British Bankers’ Association was very aware of what was going on—the collusion that was leading to fraud. The chairman of the BBA at that time is now a Minister in Her Majesty’s Government. Will the Minister assure us that the work being done by Mr Wheatley will look at the BBA’s role? It appears that there is a prima facie case that the BBA colluded in and supported a corrupt act. I am grateful that the Minister and the Chancellor have confirmed that there is no lacuna in legislation that prohibits criminal prosecution of the quite monstrous things that appear to have occurred here.
I have two further short questions. There was no suggestion by the Minister that any action would take place to lead to an inquiry and the payment of compensation to those who lost out as a result of this systemic collusion and manipulation of an important rate. That includes taxpayers, because there were a number of arrangements between the central bank, the Treasury and banks that were based on the LIBOR rate. Will the Minister confirm that there will be an appropriate investigation about whether the taxpayer was disadvantaged? Finally, will the Minister explain why the FSA’s fine was so small compared with the fines imposed by the American regulators?
Lord Sassoon
My Lords, on the first point, presumably if there is evidence that the BBA colluded in criminal activity, that will be well within the scope of the work that the SFO might do. As for the wider question about the role of the BBA, the review of LIBOR will look comprehensively at governance, which comes very much back to the BBA role and what, if any, that should be in the future framework.
On the question of whether there should be compensation, our difficulty at the moment is that we do not know whether LIBOR was successfully manipulated as opposed to there being an attempt to manipulate it. From the evidence that has already been made public, we know—
Lord Myners
The American regulators were very clear that LIBOR was manipulated. They were unequivocal in that statement. They understand the subtleties of the issue.
Lord Sassoon
My Lords, if the noble Lord will hear me out, we know that there was attempted manipulation from the evidence that has already been made public. I do not know on what basis the American authorities have come to that conclusion, and it may just be semantics, but the authorities are currently investigating whether LIBOR was actually manipulated.
It is also worth bearing in mind that, in the case of Barclays, it was the dollar LIBOR rate and not the sterling LIBOR rate that was the subject of the attempted manipulation that has come out. I completely agree with the noble Lord, Lord Myners, that these investigations need to carry on, but we cannot come to any conclusion about the answer.
Lastly, I answered a question about the fine last week, but I will repeat it in summary. This is the largest fine that the FSA has ever handed down, which indicates the seriousness of this matter within a UK context—the US has a completely different approach to the way it imposes penalties. The most important and relevant point is that this is the largest ever fine in the UK handed down by the FSA.
Lord De Mauley
My Lords, there is plenty of time. Perhaps we can hear from the Cross Benches and then from my noble friend.
Lord Elystan-Morgan
My Lords, if I may, I will make a point in support of the very pertinent submission made by the noble Baroness, Lady Kramer. This is not a question of who should prosecute or who can prosecute. A simple, straightforward criminal offence was created in Section 397 of the Financial Services and Markets Act 2000; I checked it. That provision deals with a false statement or declaration that is made deliberately or misleadingly and that distorts a market. It is an offence that is punishable on indictment with a maximum of two years’ imprisonment. There would seem to be ample prima facie evidence that such an offence has been committed. In the circumstances, bearing in mind the damage done and the ruthlessness with which such practices were conducted, is there any reason why persons responsible should not stand trial?
Lord Sassoon
My Lords, I am sure that the FSA will listen to the analysis given by the noble Lord, Lord Elystan-Morgan; and if it has not already got to the bottom of it, it will take his points on board. The authority is acutely aware that it needs to press on, but the noble Lord, Lord Turner of Ecchinswell, has made it clear that it is very difficult, which is why the FSA seems to be taking the lead on this.
Lord Higgins
My Lords, it would seem that Barclays’ defence is, “We had to cheat in order to preserve our reputation”. That suggests that the bank is seriously misguided in the way it looks at these matters. Certainly there is a case for a parliamentary investigation, which I support. It is equally true that we should be absolutely clear that the terms of reference are the right ones for such an investigation.
If I may, I will make a very narrow point. As I understand it, the proposal is that the Joint Committee should be chaired by the Member for Chichester, Mr Tyrie, for whom I have the very greatest respect. However, as I was myself chairman of the Treasury Committee for some 14 years, I question whether it is appropriate that his energies should be diverted from the Treasury Committee, where he is doing an excellent job, by being chairman of this authority. This is too heavy a burden for one person, however talented, to take on, and we ought to consider that point.
Lord Sassoon
My Lords, on my noble friend Lord Higgins’ first point, there were two distinct periods during which Barclays was found to have attempted its manipulation. The first period was before the financial crisis, when its traders appear to have been driven by pure greed and tried to drive rate up. The second period was during the financial crisis when the preservation of Barclays’ reputation seemed to be the main driver and it was attempting, it seems, to move the interest rate down. I think there were those two distinct motivations.
Regarding the committee chair, notwithstanding the suggestion that the chair of the Treasury Committee chairs the Select Committee, I would guess that the formal position is that the committee itself will decide who the chair will be. I imagine that this will be taken up either in the Motion itself, in which case your Lordships will have a chance to take a view on it, or the committee will decide who the chair will be in due course.
Baroness Williams of Crosby
My Lords, I want to pursue for a moment the sheer seriousness of the situation that the noble Lords, Lord Eatwell and Lord Blair, and my noble friend all pointed to. I can think of nothing more likely to undo the prospect of this country’s return to prosperity from the crisis than the present, huge doubts about the trustworthiness of the financial system. When I extensively read newspapers from the United States, what comes out very loud and clear is the view that as a result the major beneficiaries will be countries that are in direct rivalry and competition with the City and that hope to gain from what they regard as an extremely dangerous problem that we have brought upon ourselves.
I am satisfied with the prospect of a parliamentary inquiry and I accept what the noble Lord said about the necessity for speed and getting on with it. The noble Lord, Lord Eatwell, and my noble friend Lord Higgins asked about the terms of reference. The missing term of reference that troubles me is the inquiry’s relationship to the role of the regulators. The Daily Telegraph may not be a very good source, but it is becoming completely clear that there were seminars, discussions, meetings and debates throughout 2007 and 2008 about LIBOR, and if anything is likely to be true about those rumours and suggestions it is vital that we explore whether our present regulatory structure is adequate to deal with an issue as serious and as far-reaching as this one. I therefore, with great respect, suggest to the Minister, probably with the support of the Opposition, that the terms of reference should at least extend to the roles of regulators, to the reasons why they failed to probe into this matter at an earlier stage and to what steps could now be taken to give them the confidence and the resources to enable them to do better in future.
Lord Sassoon
My Lords, I certainly agree with my noble friend that these are all relevant and important questions. It is equally important that the proposed Joint Committee’s terms of reference should be clear and should focus on transparency, culture and professional standards. The role of the regulators is rather different, but I am sure that the Treasury Select Committee, in the normal course of its business, will want to ask questions about those matters in due course. However, I take on board what my noble friend has to say.
Crime and Courts Bill [HL]
(11 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Touhig
“( ) In fixing such an amount, and subsequent additions, account must be taken of the person’s relevant weekly income, excluding housing benefit and child benefit, and allowance must be made for the protection of a reasonable financial subsistence level, in the manner used to determine the initial fine.”
Lord Touhig
My Lords, this amendment will extend the means-testing system currently used in the calculation of court fines so that it also applies to the calculation of additional costs which, under Clause 20, will be imposed on people as a result of late or incomplete fine repayments.
The rationale behind means-testing in the justice system is laid out clearly in the magistrates’ court sentencing guidelines, which make clear that while financial punishments should cause a degree of hardship, they should not force people below an income level required to meet their most basic needs. Furthermore, they should impact equally upon offenders regardless of their financial situation. On this basis, fines are set as a percentage of the offender’s relevant weekly income, minus child benefit and housing benefit.
However, as the Bill now stands, those who miss payments for whatever reason will be liable for extra costs that take no account of their means at all. Consequently they may be left owing significant sums that they simply cannot afford, even being forced to cover repayments using benefits that were protected in the calculation of the initial fine.
This has raised serious and urgent concerns among charities and others working with vulnerable individuals and families. The Catholic Children’s Society in Westminster has said that imposing costs on parents without taking account of their financial means presents a serious risk to their children. It states:
“Child benefit exists to support children’s basic needs and is quite rightly excluded from the calculation of fines … It would be iniquitous to undermine this by adding further non means-tested costs that could jeopardise children’s wellbeing … Ultimately, under the government proposals children will suffer because of their parent’s inability or failure to meet payment deadlines. This is neither a just nor acceptable situation”.
If the current system of means-testing is applied to the new financial penalties outlined in the Bill, such a situation can easily be averted. Offenders with dependent children will still be penalised for not meeting fine payments in full or on time, but the sanction will protect the amount required for meeting those children’s essential needs. Similarly, all those required to make extra payments, regardless of their family situation, will maintain the basic amount needed to cover fundamental costs such as food and housing.
It should be emphasised that, with basic subsistence levels being accounted for in this manner, the Government’s aims of incentivising timely payment and reducing the cost of recovering fines will not be undermined. In fact, with means-tested amounts as opposed to arbitrary or standard sums being imposed, repayment may be more likely, as people will be subject to payments that they can realistically meet rather than face mounting debts that they may have no real chance of ever paying off. Equally, by maintaining safeguards against forcing people into unsustainable financial situations, the public purse will be protected from potentially significant expenses in the long term.
In response to the points that I made at Second Reading, the Minister, the noble Lord, Lord McNally, said that,
“if the offender provides accurate means information at the outset of their engagement with the justice system and keeps to the payment plan set out by the court, enforcement action will not take place”.—[Official Report, 28/5/12; col. 1067.]
However, as those working on the front line know only too well, in reality a whole array of circumstances prevent people keeping to their payment plans.
I welcome recent government pilot schemes to aid compliance such as text-messaging reminders when payments are due, but these will not provide a universal fail-safe against offenders defaulting on amounts owed, nor are they intended to do so. As I have previously stressed, people should face up to their financial responsibilities and should not be exempt from covering any extra costs that the Courts and Tribunals Service incurs as a result of their deviation from their agreed payment plan. However, the principles of equality and basic subsistence that underpin other financial penalties must apply here. I hope, therefore, that the Minister will take that on board and consider extending the current means-testing system to apply to the new financial penalties as outlined in the Bill. I beg to move.
Lord Elystan-Morgan
My Lords, I support the amendment proposed by the noble Lord, Lord Touhig. Clause 20 as I understand it writes new Section 75A into the Magistrates’ Courts Act 1980. Under that new section, the costs incurred in the collection of a fine should be added to it. No discretion is given to a magistrates’ court, once the machinery has commenced, to decide whether to make an order. The Bill states quite baldly that those costs shall be added. There is no question, therefore, of a court saying, “Well, in the circumstances, we do not think that it would be appropriate to make an order here”. Once those basic facts have been proven, the machinery runs in a way that is less than fair.
Lord Ponsonby of Shulbrede
My Lords, I support my noble friend Lord Touhig in the detail of what he is proposing. I agree that when costs are added they should be means-tested as were the original fines when they were put in place.
I want to raise a separate issue which I raised also at Second Reading, and this is probably the best amendment with which to do so. When magistrates impose new fines, they very often do not know the level of the outstanding fines. It is not unusual for a magistrates’ court to go through hundreds of cases in a day when they are dealing with small matters and to put on hundreds of fines. They will never know, in my experience, what the level of outstanding fines is. This is clearly unsatisfactory because it can, and in many cases does, force people into an unstable financial situation. If the courts had known the level of the outstanding fines, they might have looked at other sentencing alternatives which were more appropriate for the person who is unable to pay their fines.
I have raised this issue with colleagues who are magistrates. It is feared that, if this provision were made mandatory, the administrative procedures would be brought to their knees because, as I said, literally hundreds of fines can go through in a single sitting. The administrative system should be set up so that magistrates and judges can get information on the level of outstanding fines in reasonable time before they go ahead and sentence. As I said, this is a slightly different matter from the burden of the amendment, but it goes to the heart of practicality of imposing fines.
Lord Beecham
My Lords, in speaking to my noble friend’s amendment, I shall deal also with my opposition to the question that the clause stand part. Before I do so, I am sure that your Lordships would wish to join me in extending to the noble and learned Lord, Lord Mackay of Clashfern, who is not in his place today, congratulations on his 85th birthday. It would be good to see that in the record of the House.
I support the amendment moved by my noble friend Lord Touhig and have little to add to it, save that the Minister will have received a letter from Mr Paul Nicolson of the Zacchaeus Trust which was sent to my noble friend and copied to a number of your Lordships. It illustrates the nature of the problem that my noble friend has addressed, but with particular reference to the outsourcing of the collections enforcements system under Clause 20(2). This proposes an amendment to the Magistrates’ Courts Act which prescribes that:
“All functions of fines officers may be contracted-out”;
my opposition to stand part refers to this.
Mr Nicolson’s letter sets out a case for doing that. The amendment went down before I had heard from him, so we were of a like mind without knowing it at the time. One of the concerns that he expresses—which has been touched on by my noble friend—is that the cost of enforcement is likely to rise significantly to the extent that it is contracted out: courts officers do not, of course, charge the same amounts as bailiffs. The Minister will have seen from Mr Nicolson’s calculations that whereas court costs and a fine officer might add £135 to a fine of around £200, where bailiffs are involved, that figure could rise very substantially indeed because they charge a great deal more. I will be moving an amendment in relation to bailiffs a little later.
The letter suggests that the privatisation, if you will, of enforcement is likely to aggravate the problem. It says that contrary to the Government’s view—and I do not know if the Minister will be able to comment on this—
“fines officers do make judicial decisions”.
If they were privatised, that would be effectively privatising an element of judicial discretion. The letter goes on to say that, at present:
“The magistrates will set the level of the fine and then issue a collection order. It is then the fines officers’ duty to collect the fine. They decide: a) the weekly/monthly level of payment; b) whether it should be changed if there has been a change of circumstances; c) to send out bailiffs to defaulters”,
and, importantly,
“d) whether to send the case to the magistrates for reconsideration”,
if it is found that the defaulter is vulnerable or the fine is disproportionate and should be reconsidered.
Mr Nicolson supposes that the Government will argue that these are purely administrative tasks; I do not know whether the Minister will be advancing that argument. However, from his point of view, and I guess that of the Zacchaeus Trust, these are effectively part of the judicial functions of the court and should not be privatised, with all the additional costs to defaulters that that would involve.
I therefore support the amendment. My opposition to clause stand part is designed to invite the Government to explain the rationale for further contracting-out of this function, how it might operate, and to what extent it is expected that this service will be privatised and at what cost to the public purse and to debtors. I hope that the Government will perhaps reconsider this. We may otherwise have to revert to it at Report. It seems a step too far in terms both of the burdens it will impose, and of the principle of contracting out a significant role like this beyond the court system.
Baroness Northover
My Lords, I thank the noble Lord, Lord Beecham, on behalf of my noble and learned friend Lord Mackay. The age of 85 is indeed the new 65, as he clearly manifests. I also thank the noble Lord, Lord Touhig, for his amendment.
Clause 20 enables the costs of collecting or pursuing unpaid fines to be recovered directly from the defaulting offender and ensures that there are strong incentives for offenders to pay fines promptly. Ultimately, collection costs, as the noble Lord has outlined, will be added directly to an offender’s fine if the offender fails to pay the fine to the agreed timetable and costs are occurred in pursuing payment.
Once a person has failed to pay their fine, much of the work that goes into pursuing that fine clearly involves labour intensive processes; for example, sending reminder letters, tracing offenders, validating offender information or arranging deductions from benefits or earnings. It cannot be right that a proportion of offenders do not pay their criminal fines in full or in a timely manner. This undermines the effectiveness of fines as a criminal punishment and costs millions of pounds per year to pursue. It cannot be right that the taxpayer should have to pick up the costs of pursuing unpaid fines from some.
We recognise that we must, of course, make allowances for the fact that some offenders lead chaotic lives and are vulnerable. Therefore, these costs will not apply to those who pay as ordered or who remain in contact with the court and comply with their payments plans which fines officers are more than willing to set up for those offenders struggling to pay their fine. This clause is aimed at those who deliberately evade payment.
We understand the concerns of the noble Lord, Lord Touhig, in this matter. Clearly we must make allowances for the fact that some people find themselves in hardship and find it difficult to pay their debts. That does not mean that the courts ought to permit those convicted simply to ignore the sentence imposed on them. Fines are a criminal sentence and taxpayers should not be subsidising those who avoid payment for whatever reason. If a person is vulnerable or is having difficulty paying their financial penalty, this needs to be discussed with the fines officer.
Under the fines collection scheme, much of the work of managing the payment of fines is the responsibility of the fines officer. Fines officers can arrange more manageable payment terms with offenders who have not defaulted and provide a key link between the offender and the court to ensure that the fine is paid as ordered by the court. Fines officers can also provide advice to offenders to help them understand what has been ordered by the court and can explain the implications of default. This includes advice on where offenders can get help with managing their finances where that is needed.
Indeed, as my noble friend Lord McNally said at Second Reading,
“if the offender provides accurate means information at the outset of their engagement with the justice system and keeps to the payment plan set out by the court, enforcement action will not take place”.—[Official Report, 28/5/12; col. 1067.]
Hence, no additional cost will be incurred. We really cannot emphasise strongly enough the need for offenders, especially those considered to be vulnerable, to keep in continuous engagement with the fines officers. In addition, if on experiencing financial hardship a person wishes to appeal or to be referred back to the court, the court will have the discretion to remit part or all of the administration costs following consideration of all the issues.
In setting the level of fine, it is the judicial responsibility of the court itself to evaluate the circumstances and seriousness of the offence against the financial means of the offenders. Under Clause 20, it is proposed that the administrative costs will be fixed and proportionate to the actual costs of collection, and will be applied where there is default in payment after sentencing. It would not be appropriate to give the fines officer the ability to exercise a judicial discretion when setting the level of costs in the same way as is done for fines.
Following sentencing, where a person’s financial information has not been supplied or verified, fines officers and administrative staff set about trying to engage with the offender, gathering further information, such as whether the person is in receipt of benefits, and verifying the person’s income and other details. Fines officers can then assess the best approach to assist the offender and enable payment. Our aim in the future is significantly to improve the level of information that a court has in order to fix the fine at an appropriate level in the first instance. That is an important step in ensuring that fines are more manageable for those in hardship while remaining an effective punishment for committing a criminal offence.
Lord Touhig
Would I be right in thinking that, without any form of means test for the additional fine, it could be greater than the original fine?
Baroness Northover
In theory, I suppose that that could be the case. The important issue here is that the offender stays closely in touch with the fines officer. If an offender has a very small fine decided because of their circumstances, ways to pay that should be sorted out and the offender assisted in that regard. Only a very small fine would be overtaken by the cost of pursuing it, one would imagine. As I said, it is extremely important for the offender and the fines officer to work through the implications of the decision taken by the court.
Lord Touhig
My Lords, I must say that I am somewhat disappointed by the Minister’s response. I entirely agree—I said it at Second Reading and I have said it today—that people should be responsible for paying the debts that are due. If they are fined for an offence, they should be responsible for paying those debts. However, as the Minister said, people often live chaotic lifestyles. We think that it is right that the guidelines of a magistrates’ court make it clear that, although the fine should provide a degree of hardship, it should not leave people with an income on which they cannot survive. Surely we should protect children and the person’s ability to pay for food and housing. Those are three basic things: children, food and housing.
Baroness Northover
I remind the noble Lord that I said that, if offenders find themselves in the circumstances that he describes, they can go back to the court and the administration cost, too, can be varied or set aside. It is not as cast-iron or concrete as the noble Lord suggests.
Lord Touhig
I apologise. I accept the point that the noble Baroness made in her earlier response. The point I seek to make is that if we think that the guidelines to the magistrates should take account of those elements, surely it is right that any additional fine should take account of those elements. At the end of the day, because of the lifestyles of some people, some fines will never be paid. That is wrong, but they will not. The taxpayer will end up paying more if children are not properly cared for. Social services will be involved. Someone will lose a house and have to go into emergency accommodation. The Government are storing up a problem here which could be avoided by simply saying, yes, if a form of means testing is used to determine the initial fine, any additional fine should have the same application.
I regret that the Government do not see it that way. There is clearly much work that we must do as missionaries to persuade the Government, before the Bill passes, of the error of their ways. With those few remarks, I beg leave to withdraw the amendment, but give notice that I shall come back to it at a later stage.
Lord Beecham
“75B Minimum size of charging order
The Secretary of State shall by regulation prescribe the minimum amount above which a charging order may be granted in respect of a judgment debt, which shall be laid before, and approved by a resolution of, each House of Parliament.”
Lord Beecham
This is a probing amendment dealing with the question of charging orders. Creditors may seek to obtain a charging order against the assets of a judgment debtor, including his or her home, and that can lead to an order for sale. In 2009-10, 566 such orders were obtained.
The Government have been consulting on a proposal to impose a financial threshold below which such action could not be taken in respect of unsecured debts, particularly in relation to consumer credit cases, where the debtor is in fact already paying a premium for the loan through higher interest rates affecting the risk to the creditor.
The whole process began with a report from Citizens Advice in 2009 called Out Of Order, which recommended just such a threshold and which led to the previous Government publishing a consultation paper in February 2010. That was followed in March 2010 by an OFT publication entitled Irresponsible Lending Guidance—in itself an admission of the seriousness of the problem. The key guidance called on creditors to make it clear that charging orders might be obtained which could lead to the sale of the property charged and therefore to the loss of the home at the time of the entry into the consumer credit agreement. It also, significantly, warned creditors not to harass or threaten debtors with the loss of the home if they did not in fact intend to enforce such an order. This, of course, underlines the fact that the problem is not just a financial one, but also encompasses the anxiety and stress caused to debtors and their families. As the evidence base for the recent consultation points out:
“In considering whether to make an order for sale, the court will balance, against the rights of the creditor to recover the debt, the rights of the debtor and his/her family in respect of the family home under Article 8 of the European Convention on Human Right … in all cases judicial discretion will be exercised”.
While the latter point is true, it is unlikely to assuage debtors’ fears of losing the family home pending a hearing and a judicial determination.
At present, the information about the number of relevant cases is limited. It would be reasonable to infer that in the past two years numbers will have risen in light of the recession—the “Breadline Britain” so poignantly portrayed in the recent Guardian series. However, the figures rely on monthly returns from individual county courts, so again in the words of the evidence base, there is “scope for collection error” in the statistics, both as to the total numbers and whether they are ultimately enforced. There is still less information about the cost to the public purse of the consequences of people losing their homes—for example, through re-housing, temporary accommodation and children being taken into care.
Given the move to a single county court, will the Government consider establishing a more robust system for tracking the data and costing the outcomes, so that policymakers, and indeed the public, are given a clearer view of the dimension of the problems? The coalition agreement pledged action to deal with this problem and at page 12 of the Government’s programme for government promised, among other things, that they would,
“ban orders for sale on unsecured debts of less than £25,000”.
Unsurprisingly, the credit industry opposed the principle of a threshold, both when the idea was first floated in 2009-10 and during the recent consultation. In the event, it appears that the Government have substantially backtracked and have announced an intention to apply a threshold of only £1,000, so that charging orders and the threat of losing one’s home will remain for debts of that very modest amount or above. This is surely a major breach of the pledge in the coalition agreement. By definition, it threatens homeowners, not people in social housing or in receipt of housing benefit whom the Prime Minister and other Ministers, regretfully, are too often at pains to vilify. It is another example of a policy that will hit the working poor hard, just as some of the other changes will hit this group as hard or harder than the very small minority who abuse the system.
The Government have pointed out that creditors who are thwarted under a threshold scheme might resort to bankruptcy proceedings. I suppose that risk exists. If they did, however, at least they would not rank above other creditors who had not priced for the risk in the first place by charging a premium for the credit.
I hope that the Government will reconsider the level of the threshold. This amendment does not seek to prescribe a particular level, but rather to establish the principle and a requirement for parliamentary approval of any regulation establishing such a level. That is what the Delegated Powers Committee recommended in its second report; an affirmative resolution procedure for the establishment or alteration of a threshold level. It is clearly necessary for the threshold to be realistic and proportionate, and £1,000 patently does not meet those criteria. It would be interesting to learn from the Minister—perhaps not today because this is not, after all, her departmental concern—the rationale behind the Government’s abandonment of its pledge in the coalition agreement and its reduction of the threshold from £25,000 to the nugatory figure of £1,000. I beg to move.
Baroness Northover
My Lords, I thank the noble Lord, Lord Beecham, for bringing to the Committee’s attention the issue of charging orders. The power to prescribe the minimum amount above which a charging order may be imposed already exists, although it has not yet been implemented. That power is enshrined in Section 94 of the Tribunals, Courts and Enforcement Act 2007, which gives the Lord Chancellor the power to make regulations to provide that a charging order may not be made to secure a sum of money below a certain amount. While differently expressed from the noble Lord’s amendment, it will achieve the same end.
It should also be borne in mind that a charging order is only a means of securing a sum of money ordered to be paid under judgment and that it requires an order for sale of the charged property for ultimate enforcement. Section 94 of the 2007 Act includes a second power for the Lord Chancellor to provide that an order for sale may not be made to enforce payment of a sum below a certain amount.
Lord Beecham
My Lords, I am grateful to the Minister for her reply. She has certainly supplied some information, but I am afraid she has far from convinced me that the Government’s stance is correct. The effect of this failure to set a minimum threshold is to put homeowners in a particularly invidious position. By definition, it is only they whose homes are threatened if they are in debt. As I say, it stems from a consumer credit arrangement that already insures the creditor because they charge more for credit. Effectively, they are getting two bites of the cherry; they receive more for the credit facility and will have the opportunity to take these proceedings. Of course, judicial discretion exists, but as I have already indicated, it will leave people in considerable fear of losing their homes, pending an outcome. That is deeply unsatisfactory.
The noble Baroness has referred to evidence that was received. Obviously the consumer credit industry would be opposed to the imposition of a threshold which should apply both to the charging order and to sale, but it would be interesting to know what other groups were against it.
For the moment, I am prepared to withdraw the amendment, but it is something to which I think we shall be returning on Report.
Lord Beecham
“36B Regulatory system for bailiffs
The Secretary of State shall establish a new regulatory system for bailiffs.”
Lord Beecham
My Lords, I am engaged in a series of probing exercises today. Not being a dentist, it is not a familiar role. This amendment deals with the thorny question of bailiffs. Again, this is an area of law on which the Government have been engaged in consultation with a view to strengthening the system of debt collection and debt enforcement. They have come up with some proposals, but rather than deferring action until the next Session of Parliament, I would urge them to take the opportunity to bring forward those proposals for inclusion in this Bill. We will, after all, still be in Committee when the House returns after the summer Recess. If it were delayed beyond then, there may well not be time in this Session of Parliament to deal with this issue. Admittedly, the consultation has only just ended—I think it ended last month—but I suggest that it is not beyond the Government’s capacity to seek to deal with it by an addition to this Bill after the summer.
There has long been concern about the law covering debt enforcement by bailiffs, whether under county court judgments, under a warrant for execution or under the magistrates’ court, to collect fines, council tax arrears, compensation or maintenance in family cases, when acting on a distress warrant or liability order. In the High Court, High Court enforcement officers are employed to enforce writs of execution. The whole area is, in the Government’s view, “complex, unclear and confusing”, with a history stretching back centuries and sometimes with language to match. It is understandable that, as the Ministry of Justice stated in its consultation paper of February 2012:
“This confusion can result in bailiffs and enforcement officers misrepresenting their … authority”.
I must stress that the concern is not, essentially, over the actions of employees of the courts but over private bailiffs. There are unfortunately many cases in which bailiffs have acted in unacceptable ways and beyond their powers, and there is widespread concern about their charges, which the debtor must meet. I cite one example, which was quoted by the Zacchaeus 2000 Trust—again, chaired by the Reverend Paul Nicolson—in its briefing on what was the LASPO Bill. It cited the case of a firm of bailiffs that, without going through the necessary procedure, seized goods from a single mother with an 11 month-old baby and another young child. She was on benefits and suffered mental health problems. She owed £2,365—a substantial amount. The goods seized included a kettle and a toaster. The firm said that it was permissible to seize the kettle and toaster because the mother had a pot and a cooker.
There are worse cases than that. Last September, a bailiff called on a pregnant woman, saying that she owed £58 in council tax. She had received no communication about this. When she asked the bailiff to hold on while she got dressed and moved to close the door, the bailiff kicked the door in, injuring her leg and hip. When the police were notified and sought information from the bailiff’s firm, they were denied on the rather spurious grounds of data protection. There was another case in Wales in which a bailiff obtained a walking possession illegally, harassed a woman in the street in front of her friends and contacted her through a social networking website. As a final example, in south-east England a 19 year-old woman failed to pay a £118 fine for improper use of a child’s train ticket and, although she requested a payment plan, was visited by a bailiff who threatened to seize her mother’s goods—not her’s but her mother’s—if the bailiffs were not paid £418. He abused the young woman’s mother, threatened to remove her car and said that he could take anything in the house and break the door down to do it.
These are matters of great concern and, in fairness to the Government, they have acknowledged that there needs to be considerable improvement in the whole system. The previous Government sought to address some of these issues in the Tribunals, Courts and Enforcement Act 2007, which was designed, inter alia, to improve the regulation and practices of bailiffs and change the way that debt collection and enforcement is carried out. Part 3 of that Act, which has yet to be implemented, would introduce a complete code setting out the bailiffs’ power of entry onto premises, what goods can be seized and sold, what fees can be charged and the whole process from the serving of notice to the distribution of sale proceeds.
One aspect of Part 3 of the 2007 Act would create a proper system for the independent regulation of bailiffs, which is at present sadly lacking. There is no nationally recognised qualification or standard of competence for bailiffs, who can merely be certificated by the county court in relation to certain types of debt enforcement, including road traffic debts, council tax and non-domestic rates. In addition, they need to be certificated to distrain for rent—although Part 3 of the 2007 Act, if and when it is implemented, would also limit that to cases of commercial properties and rents, rather than domestic rents.
The previous Government made some initial moves to improve matters by setting up an online register of certificated bailiffs—so that debtors could check whether the bailiffs were in fact recognised to that extent—a Criminal Records Bureau check for would-be bailiffs when applying for certification and some minimum training requirements. The present Government took matters forward in January, and I welcome that, by setting out the National Standards for Enforcement Agents to be adopted by councils and other authorities for use by those working for them. This is a voluntary code and requires, for example, that bailiffs refrain from using threatening behaviour or unlawful force to gain access to premises, or from discussing a debt with anyone except the debtor. They have to withdraw if only a child is present on gaining entry and have a duty of care to elderly, disabled or vulnerable people. So far as they go, those are useful measures and, to their credit, the Government seek to enshrine these principles and other measures in law, and to reply to the consultation that concluded in October.
However, it is critically important that the new regime includes rigorous criteria for the independent accreditation of bailiffs, backed by an effective regulatory regime with regular monitoring and an accessible complaints system. The courts and other statutory bodies must have a special responsibility both for staff they directly employ on enforcement and those with whom they contract. In my view, the Government are moving in the right direction but need to act to carry out the intentions of the 2007 Act and take them further, so that we can avoid the disgraceful behaviour of what are no doubt a minority of bailiffs, who were exemplified in the cases to which I have referred. I again urge the Government to clarify today what they have in mind, if they can, but certainly, if at all possible, to go beyond simply replying to the consultation in October by bringing forward amendments to this Bill so that the matter can be dealt with as part of this legislation and concluded in this Session. I beg to move.
Baroness Northover
My Lords, I am grateful to the noble Lord, Lord Beecham, for explaining his thinking behind this amendment. He described what are, indeed, horrendous accounts. There have been debates over many years about this problem. Let me start by saying that we understand the concerns about bailiffs. The Government have given a commitment to providing more protection against aggressive bailiffs and are working to this end. I thank the noble Lord for his welcome for the progress that we have been making.
In January, the Government announced the updating of the National Standards for Enforcement Agents, with a view to defining acceptable behaviour for bailiffs. This was the first step in the Government’s plans to change the way that bailiffs are regulated and to make sure that they operate fairly to all concerned. Then, in February, we launched a public consultation which set out how we plan to provide more protection against aggressive bailiffs while still enabling effective enforcement. The package of proposals seeks to restore balance to the system; to improve clarity so that both debtors and creditors know where they stand; to strengthen protections for the vulnerable; and to ensure that individuals, business and government are able to collect the debts that they are owed.
Our aim is to respect the competing rights of both the creditor and the debtor. Unless there is prompt and effective enforcement, the authority of the courts and public confidence in the justice system are undermined. Creditors are entitled to collect what they are owed, while debtors should be protected from the kind of oppressive pursuit of their debt that the noble Lord has just described. This consultation set out a number of specific proposals, which, among other things, seek to: set out to whom and under what circumstances reasonable force to enter premises will be available; set out when and how a bailiff can enter a property; create minimum entry standards and certification processes to ensure bailiffs are fit to operate; prohibit the use of force against a person, with additional safeguards to protect children; make clear which items an enforcement agent may not take from someone’s home; make clear what fees bailiffs can charge for the range of debts that they collect for local government, courts and businesses; and remodel and clarify the complaints process available to the debtor. I hope that all of those proposals would address the noble Lord’s points.
The consultation, as the noble Lord, Lord Beecham, acknowledges, closed only recently on 14 May and we are now carefully considering the responses, with a view to publishing our response in the autumn. This has therefore been a timely debate and we will certainly take account of the noble Lord’s views. I will make sure that what he has just said is fed into the MoJ.
Like the noble Lord, the Government are clear that aggressive bailiff activity is unacceptable. We are committed to bringing forward effective proposals in due course to protect the public and ensure that bailiff activity is proportionate. I hope that, with those assurances, and having had the opportunity to raise this important issue, which we fully recognise, the noble Lord will be prepared to withdraw his amendment and await the Government’s proposals later in the year.
Lord Beecham
I thank the Minister for her very full reply. I am certainly prepared to withdraw the amendment. Can she give me an indication as to whether the Government will at least consider using the Bill as a vehicle for the welcome changes that she suggests will follow? I would have thought it feasible to do that, given that we will not have completed Committee by the time we return. When we return, we will have further work to do on the Bill as it stands and since there is likely to be very broad support across the House for the changes that she proposes, it would not be too difficult to add these matters to the Bill. I do not ask for a firm commitment but for an indication that the Government will at least consider doing that.
Baroness Northover
As an extremely junior member of the Government, that would be going way beyond what I am allowed to do, but the important thing is not to pre-empt consideration of the consultation. The noble Lord may assume as to what may emerge from people’s responses to that consultation, but it is appropriate for Government to give due consideration to what comes in, and we will make proposals in due course.
Lord Beecham
“(1A) Before issuing any order under subsection (1), the Lord Chancellor shall first report to Parliament that the following principles have been adhered to in any decisions made under subsection (1)—
(a) the protection of witnesses, victims, defendants, parties and jurors, who shall under no circumstances be recorded;(b) the promotion and proper administration of justice;and filming shall not be permitted if it would cause undue prejudice to any person involved in the proceedings.”
Lord Beecham
We now come to debate the broadcasting of court proceedings. This has already taken place in respect of certain proceedings of the Supreme Court. There is a suggestion in the Bill that this should be significantly widened. My amendments support the principle, but set out guidelines as to the way in which change might be made and also take into account—implicitly, I have to say, rather than explicitly—the recommendation of the Delegated Powers Committee that any changes should be made by regulation; again to be approved by parliamentary vote.
Amendment 147ZC proposes that in making an order as to which categories of case might be broadcast and when that might happen, the Lord Chancellor should apply principles that should be first reported to Parliament. The basic principle is surely that broadcasting of court proceedings is for the purposes not of entertainment but of promoting understanding of the judicial system and thereby reinforcing public confidence in it. It is not by any means to be a YouTube of incidents, as opposed to proper, sensible coverage of an important area of public life, the justice system.
Amendment 147ZC requires the Lord Chancellor, in making any order extending categories of broadcasting, to confirm that principles have been adhered to, including, most essentially, the protection of witnesses, victims, defendants, parties and jurors, who shall under no circumstances be recorded; the promotion and proper administration of justice; and that filming should not be permitted if it would cause undue prejudice to any person involved in the proceedings. That is a fairly straightforward provision designed to protect the integrity of the system.
The decision in an individual case should, of course, be a matter for the judge. There may well be cases in which the judge decides that it is not appropriate, in all the circumstances, to take advantage of the permission to allow broadcasting that the Bill, if enacted, would confer. Amendment 147B simply says that, in making a direction that broadcasting should be permitted, the court or tribunal should have regard to the principles that I have adumbrated, which would, if the amendment is accepted, apply to the Lord Chancellor in widening the range of potential broadcasts in the first place.
Clearly there are legitimate concerns about the extent to which broadcasting might impinge on people’s positions, particularly parties to the case. I do not think that the Government envisage extending coverage to the whole process of trials, rather to particular aspects. Some of these are mentioned in other amendments, in particular sentencing, remarks on sentencing, and perhaps arguments by a counsel. Such matters should be dealt with properly by regulation, taking into account the factors mentioned in Amendment 147A.
I hope that the Government will respond positively to these suggestions and I look forward very much to hearing the views of other noble Lords who have tabled amendments. This is an area of considerable public interest and concern. There is a way forward, the Government are on the right lines, and with some safeguards we would be prepared to support the principle of extension. The question, of course, is where one draws the line and that is a matter which we will no doubt be debating this evening and further on Report. I beg to move.
Baroness Hamwee
Amendment 147A is in my name and that of my noble friend Lord Thomas of Gresford. I do not take issue with the principles set out in Amendment 147ZC, moved by the noble Lord, Lord Beecham, except that I question the term, “undue prejudice”. I wonder whether filming should be permitted if it might cause any prejudice, but that is a minor point.
I am pleased to see the government amendment providing for the affirmative procedure; it will give us the opportunity to debate the extension of the subjects that can be broadcast. I have no doubt with my amendments that the Government intend to see how it goes, limiting the items as they have described. The two paragraphs listed in our amendment may look less than the Government had proposed for the initial—experiment is perhaps too loaded a term—experience of filming, recording and broadcast, but my noble friend Lord Thomas corrected my drafting and said that the term “judgments” covered everything that was needed in the first paragraph. However, this development seems to me to be so significant that I am not convinced that it should not be stated in the Bill and that any extension of it should not be the subject of primary legislation.
I agree with those who predict pressure from the broadcasters for an extension so that there is livelier material for the 6.30 news and so on. Even “Today in Parliament”, admirable though it is, chooses the livelier and racier exchanges, and that is entirely understandable—it seeks to balance those with the important items that get discussed in both Houses, and it has half an hour to do so. When one is looking for a clip of only a few seconds, one is bound to want something that will grab the audience’s attention. Of course, a wider understanding of the justice system must be a good thing. I do not want to sound too paternalistic, but there must be a danger that an extension that popularises and simplifies would lead to a loss of subtlety and complexity. The noble Baroness, Lady Kennedy of The Shaws—who has far more experience of the courts than I do—spoke powerfully about this at Second Reading.
At Second Reading I mentioned the issue of counsel playing to the gallery. It occurs to me that others may do so as well. The experience of the riots last summer, and what came out regarding the behaviour of some of those who were charged and what was prompting them, has made me wonder whether people in that situation might themselves seek to use proceedings that were broadcast in order to continue the political statements that they were making. The Government always say that we must beware of the lack of legislative opportunities but, as we generally get a criminal justice Bill each year, that does not necessarily seem to be the best argument.
When we have secondary legislation—I acknowledge that there have been improvements in the reporting by departments of consultation that has taken place before secondary legislation comes before your Lordships—it is likely that there will be a variety of views on the details of the extension and the parts of court proceedings that would be covered. These will be difficult to deal with because of the inability to amend secondary legislation. My general point is that this is so important a step that it should require the closest consideration.
As ever, when one looks at one’s own drafting immediately before standing up to speak to an amendment, one sees the faults in it. I should perhaps have included the word “only” after the phrase,
“an order may be made”,
but this is Committee so I hope that your Lordships will not hold that against me. I do not regard approval of the very limited recording that is currently proposed as amounting to approval in principle for recording and filming in court to such an extent as to avoid the need for the consideration, on the basis of primary legislation, of an extension to this.
Lord Thomas of Gresford
My Lords, I support my noble friend in the amendment that is also in my name. She referred to people using television for their own purposes. There has been an example of that recently in Norway, where your Lordships will recall that a defendant has made every use that he possibly could to carry his message to the public. Your Lordships may think that that is an example of the sort of thing that we wish to avoid.
The noble Baroness, Lady Kennedy of The Shaws, was somewhat caught today by the two back-to-back Statements and was due to preside over the important recognition of the anniversary of the 7/7 massacres. Consequently, she is not able to be here to promote her Amendment 147AA. She has no problem in relation to the higher courts and neither do I—there is no reason why the Court of Appeal or the Supreme Court should fear exposure to the cameras—but she is concerned, and I share her concern to a considerable degree, that the sentencing remarks can possibly lead to problems, as my noble friend Lady Hamwee has just pointed out.
I have no doubt that sentencing remarks would be used only in high-profile cases with salacious details or where celebrities were involved. It would not be long before there was pressure, when sentencing remarks were made, for the camera to show the face of the defendant as he received his sentence or, even worse, the faces of the victim or their families at that critical moment about which I spoke at Second Reading. I am very concerned about that. We must avoid the business of the court being made entertainment for people. Criminal court is a very serious matter and the parameters must be considerably restrained. I support the amendment in my name and that of the noble Baroness, Lady Kennedy.
Lord Pannick
My Lords, I welcome Clause 22. Broadcasting will enhance the public understanding of our justice system, which in general works efficiently and fairly. It is important that members of the public are able to see that this is so through modern means of communication. As is often said, justice should be seen to be done.
There is also, of course, the possibility that allowing the cameras in may illuminate areas of court proceedings that are in need of reform. I entirely agree with what has already been said about the fundamental undesirability of cameras showing the evidence or, as the noble Lord, Lord Thomas of Gresford, said, the reactions of witnesses or victims at any stage of the court proceedings. I am sure that the Minister’s intention is to have regulations that would prohibit any of that, and I look forward to hearing what he says about why that matter should not be addressed in primary legislation.
I am a bit concerned by the final words of Amendment 147ZC, moved by the noble Lord, Lord Beecham, which say that filming would not be permitted if it would cause “undue prejudice” to any person involved in the proceedings. I can well understand that a defendant in a notorious case, in which there was a very strong argument for broadcasting the sentencing remarks, may say that to single him out for broadcasting would indeed involve prejudice. It would be most undesirable if people were able to present such an argument.
I am very concerned about Amendment 147A in the names of the noble Lord, Lord Thomas of Gresford, and the noble Baroness, Lady Hamwee. As I understand their amendment, it would prohibit the broadcasting of any part of the argument in, for example, the divisional court or the Court of Appeal, despite the fact that the issues raised may be of considerable public importance. If that is the noble Lords’ intention, that seems highly undesirable.
Baroness Hamwee
Perhaps I could make it clear: in this amendment we aimed to set out what we understand the Government’s current intentions to be.
Lord Pannick
I am grateful to the noble Baroness. I would hope that the Government would allow, at the discretion of the judge, the broadcasting of the arguments in the divisional court and in the Court of Appeal—cases, of course, where there are no witnesses. There is no evidence; these are matters of law. Some of them—one could easily give examples—are matters of fundamental public importance. If, as is the case, the whole of the proceedings in our Supreme Court can be broadcast, including the arguments that are being addressed, it would seem highly desirable that the broadcasters should be allowed, at the discretion of the judge, to broadcast the arguments in the lower courts.
The noble Baroness, Lady Hamwee, expressed a number of concerns about broadcasting. I am sure the noble Baroness is right that the danger is that broadcasters may be looking at the most sensational cases, and will broadcast snippets of the proceedings and may sensationalise matters. However, that is already the case in relation to print journalism and I see no reason at all why Parliament should be more concerned to regulate the content of what is communicated to the public through broadcasting than through print journalism.
I also have to say, as someone who has appeared in a number of cases in the European Court of Human Rights and the Supreme Court that have been broadcast, that her fears that counsel will play to the gallery are unfounded. I am not aware of any evidence that, once the case gets started and the submissions are being made, those who are presenting the arguments do other than focus on persuading the court. Indeed, were they to do otherwise and present themselves as actors with a view to impressing a wider audience, they would undoubtedly soon suffer the unemployment that is endemic in the acting profession. They are also regulated by the Bar Council.
The noble Lord, Lord Thomas of Gresford, expressed understandable concern that there should be no risk in this country of any broadcast of the equivalent of the recent conduct of the Norwegian defendant. I suggest to noble Lords that a discretion for the trial judge would prevent that. In any event, witnesses, victims and defendants could not be broadcast.
We should welcome Clause 22. Many of the concerns that have been expressed, I submit, are unfounded, and I hope the Government will allow broadcasting at the discretion of the trial judge—certainly of sentencing remarks and judgments in the Court of Appeal but also, I would hope, of judgments in the lower courts such as the Divisional Court and the High Court generally, and arguments in the courts below the Supreme Court.
Lord Borrie
My Lords, after hearing my noble friend Lord Beecham on my own Front Bench and the spokesman from the Liberal Democrat Benches, I was a little anxious that we were going to be extremely restrictive on this opening-up of the courts to television, radio, et cetera. The noble Lord, Lord Pannick, has redressed the balance by putting an emphasis on what I might call “open justice”. The phrase, “Justice must be seen to be done” is not just one we trot out when dealing with matters of significance, in terms of enabling the public to know the arguments for this or that, it is a meaningful phrase that has its origins in the reality that people used to attend courts, especially the local magistrates’ courts, in great numbers. I remind your Lordships that in the 19th century, and to some extent the 20th century, newspapers, especially local newspapers, used to have journalists on tap who would report at great length—pages and pages—on the evidence, arguments and judgments given in the magistrates’ courts. That was the way in which the public could assess what was going on in their name in the courts of justice in this country.
As a matter of fact, sadly or otherwise, nowadays journalists on local newspapers very rarely go to magistrates’ courts and do that job that used to be done by their predecessors. It follows that people today know less about what goes on in their local courts than was the case, and the Government’s proposal in Clause 22 redresses the matter. I agree entirely with the noble Lord, Lord Thomas of Gresford, and found myself nodding as he said that we do not want such television performances as that of the Norwegian defendant in the case to which the noble Lord referred. The defendant was skilfully using the fact of being in court to retail political and other propaganda, for the benefit not of the justice system being better understood but of the kind of extreme views that he held.
As the noble Lord, Lord Pannick, indicated, it should be possible to broadcast lawyers and judges arguing legal matters or otherwise, or judges sentencing when a trial comes to an end. As the Government are making a relatively new and welcome advance in these matters, we should not be too restrictive. That does not mean I necessarily disagree with my noble friend Lord Beecham on the matter of detail to which he referred, but I had the feeling he might be a little too restrictive—or cautious, it might be sufficient to say—and preferred the open approach of the noble Lord, Lord Pannick.
Baroness Northover
My Lords, as we have heard, the amendments tabled by the noble Lord, Lord Beecham, the noble Baroness, Lady Kennedy, and my noble friends Lady Hamwee and Lord Thomas of Gresford seek to clarify, in their different ways, the circumstances in which court broadcasting is to be permitted. There are also a number of government amendments in this group, which I will explain.
The noble Lord, Lord Beecham, is right that this is about promoting understanding of our judicial system, as happens in various other countries, and I welcome what he and the noble Lords, Lord Pannick and Lord Borrie, said about the Government being on the right lines. We recognise the risks outlined by my noble friends Lady Hamwee and Lord Thomas of Gresford. We have considered this very carefully and I am sure the implementation of these changes will be carefully monitored by all. We have heard from both sides in this argument—from what the noble Lord, Lord Borrie, described as “open justice” to concerns that coverage should not have negative consequences.
Clause 22 will allow the Lord Chancellor, with the agreement of the Lord Chief Justice, to lift the ban on filming in courts in certain circumstances and set out the limitations surrounding those. The provisions build on the successful broadcasting of the proceedings of the Supreme Court. The Government initially plan to use the order-making power in this clause to allow the broadcasting of judgments and advocates’ arguments in cases before the Criminal and Civil Divisions of the Court of Appeal. Cases in the Court of Appeal normally deal with complex issues of law or evidence, and victims and witnesses rarely appear in order to provide new evidence. Given the complexity of legal issues in Court of Appeal cases, we believe that allowing advocates’ arguments to be filmed in addition to judgments would be more likely to improve public understanding than filming judgments alone. Over a longer period, we expect to allow broadcasting from the Crown Court, but to limit it to the judge’s sentencing remarks after the conclusion of the trial. We believe that this will help to increase the public’s understanding of sentencing, with low risk to the proper administration of justice.
Lord Beecham
My Lords, I reiterate that the Opposition support the thrust of the Government’s policy. We are glad that the Government have accepted the recommendation of the Delegated Powers Committee about requiring the affirmative procedure. We share the Government’s view that it is important to develop understanding of the judicial process and to promote public confidence in the justice system to which, in our view, their proposals would contribute.
The Minister referred to a triple lock. There is, in fact, a quadruple lock because, as she said in the latter part of her reply, the judge or tribunal can determine what can be shown on the occasion of the trial. That is fundamentally important. We all agree with the horror expressed by the noble Lord, Lord Thomas of Gresford, at the prospect of anything like the Norwegian experience being replicated in our courts. It is clear that that would not happen under these proposals. However, I hope I will not be accused of scandalising the judiciary if I point out that it is not necessarily just the parties to a case that might play to the camera. There was a Judge Pickles—I do not think he was related to the Secretary of State of the same name—who acquired a certain reputation for playing not to the camera but to the media during his judicial career and, emphatically, afterwards. I do not think any of our present judges would follow that course. I am sure they would resist the temptation to do so.
Lord Thomas of Gresford
I hope that we do not get to the American situation where lawyers come out on to the steps of the court and make submissions about the way the case is going and so on. That is something that the profession should stop. I do not know that it is necessarily a matter for the Government.
Lord Beecham
I entirely agree with the noble Lord but, as the noble Lord, Lord Pannick, pointed out, the profession would be in a position to stop that at both levels. It would clearly be very undesirable for that to happen. It is clearly also incumbent on the media to behave responsibly, but we expect that of the media and all too often find them wanting in that respect. However, I think the framework here would be adequate to deal with that situation.
I am caught between two views of Amendment 147ZC. The noble Baroness, Lady Hamwee, would prefer that the word “undue” was removed so that the amendment would read,
“filming shall not be permitted if it would cause prejudice to any person involved in the proceedings”.
The noble Lord, Lord Pannick, would prefer all reference to prejudice to go. That suggests that perhaps my formulation is better balanced than either of the other propositions. Fundamentally, how far to permit broadcasting will be a decision for the judge taking into account the interests of all parties present. We have to have confidence that the judiciary will discharge that duty.
It seems to me that there ought to be some guidelines on the way that this is approached, perhaps embodied with the wording of the amendment or something of an improvement upon it. Perhaps the Government would wish to consider that matter when we come to Report. In the mean time, I think there is broad support for these proposals, which we welcome, and I beg leave to withdraw the amendment.
Lord Pannick
“Scandalising the judiciary Abolition of offence of scandalising the judiciary
The offence of scandalising the judiciary under the common law of England and Wales and the common law of Northern Ireland is abolished.”
Lord Pannick
In the absence of the noble Lord, Lord Lester of Herne Hill, for which he has asked me to apologise to the Committee, I move Amendment 148, which raises the question of whether it should continue to be a criminal offence to insult the judiciary. The amendment is in my name and those of the noble Lord, Lord Lester of Herne Hill, the noble and learned Lord, Lord Mackay of Clashfern, and the noble Lord, Lord Bew, who I am very pleased to see in his place.
This area of the law has been the object of ridicule since Mr Howard Gray, the editor of the Birmingham Daily Argus, was prosecuted in 1900 for an unflattering article about Mr Justice Darling’s conduct at the Birmingham Assizes. That judgment is the foundation of the modern law. The official law reports state, somewhat sanctimoniously, that it was not necessary to set out the offending remarks but fortunately the Law Times informed its readers of the contents. In his newspaper article Mr Gray had described the learned judge as,
“an impudent little man in horsehair, a microcosm of conceit and empty-headedness”.
He added that:
“No newspaper can exist except upon its merits, a condition from which the bench, happily for Mr Justice Darling, is exempt”.
The editor suggested that the judge, assessed on his merits, would have been, “a successful bus conductor”.
Mr Gray’s invective—one might describe it as 50 shades of Gray—was not appreciated by the courts, although his comments are kinder than the view since taken by legal historians of Mr Justice Darling’s contribution to jurisprudence. Mr Gray was prosecuted, made a grovelling apology before the Lord Chief Justice, which kept him out of prison, and was fined £100 and ordered to pay costs.
When I was a law student in the 1970s cases such as Mr Gray’s from the early years of the 20th century were regarded as historical curiosities with little, if any, contemporary relevance. In 1984, in the Appellate Committee of this House, Lord Diplock described the application of contempt law to statements scandalising the judiciary as “virtually obsolescent in England”.
This area of our criminal law could, and would, have been left as a legal relic—a matter of concern only to historians and students—but it has recently had life breathed into it by the Attorney-General for Northern Ireland, Mr John Larkin QC. It is because of the recent case that this Committee is being asked to consider whether this area of the law should be reformed.
Lord Bew
My Lords, I rise briefly to speak on Amendment 148 and to express my support for the sentiments expressed so eloquently by my noble friend Lord Pannick. There is no doubt, as he made clear, that the case for this amendment has been dramatised by the events of April and May of this year, when the Attorney-General for Northern Ireland raised his intention to bring contempt of court proceedings against Mr Peter Hain, former Secretary of State for Northern Ireland, on the publication of his memoirs and observations that he made therein on a member of the Northern Ireland judiciary and a case of particular importance when he was Secretary of State. The reaction of Parliament was quite dramatic, with 120 MPs rallying to Mr Hain’s defence. In Question Time on 18 April, the right honourable Mr David Blunkett in the other place asked the Prime Minister:
“Should not respect for the independence of the judiciary be balanced with the rights of individuals to fair comment on that judiciary?”.
The Prime Minister replied, expressing sympathy for that sentiment, and said that,
“there are occasions … when judges make critical remarks about politicians; and there are occasions when politicians make critical remarks about judges. To me, that is part of life in a modern democracy, and we ought to keep these things, as far as possible, out of the courtroom”.—[Official Report, Commons, 18/4/12; col. 317.]
In mid-May, following a less than enthusiastic response in the political world to his original move, the Attorney-General for Northern Ireland effectively set aside the proceedings. There has been a tendency to regard the whole business as an explosion of provincial self-regard now thankfully passed, but that is a short-sighted way in which to look at what has happened. The Attorney-General made it clear that he would not have set aside the proceedings until the receipt of the letter from the former Secretary of State for Northern Ireland, Mr Hain. In that letter, Mr Hain effectively argued that it had not been his intention in any way to challenge the independence and fairness of the judiciary in Northern Ireland. This is an important point, because I think it quite likely that the Attorney-General for Northern Ireland had in mind the dictum of Lord Russell of Killowen, perhaps the greatest of all the Northern Irish judges of the last century. In 1900, as Chief Justice of England, he offered a dictum in this sort of case that intention was crucial and that there had to be a calculated and clearly deliberate attempt to challenge the independence of the judiciary. By his letter, the former Secretary of State for Northern Ireland, Mr Hain, put himself on the right side of that dictum by saying that he had no intention in any way to challenge the independence of the judiciary in Northern Ireland.
What this reveals is that the Attorney-General and Sir Declan Morgan, the Lord Chief Justice, as far as I can understand from the remarks that he made at the time that this was a public matter, believe that there was in principle a case in law here, and a legal case that could be taken. That is why we have proposed this amendment. If there is any possibility that there could be such a case brought, which I think would widely be regarded as absurd, we must do what we can to eliminate that possibility.
In this country, we have a long tradition of freedom of speech, from which the judiciary is not immune. John Bunyan’s The Pilgrim’s Progress is a classic example in the 17th century of how that tradition has operated. In the view of those of us who support the amendment, the common-law offence of scandalising the judiciary is obsolete and has an unnecessary chilling effect on free speech.
Lord Borrie
My Lords, some 40 years ago I co-authored a text book entitled The Law of Contempt. Some 50 pages were devoted to the subject now before us in this Committee of scandalising the court. I should add that the current edition of that book is written by a group of somewhat younger lawyers, and since my name appears only on the spine of the book I no longer receive any royalties and therefore have no interest to declare. However, I admit to a certain nostalgic interest for this curiously and rather charmingly worded crime of scandalising the court, which is the subject of Amendment 148. It is the opinion of a number of eminent lawyers; in addition to those who have spoken, we also have the noble Lord, Lord Lester of Herne Hill, and the noble and learned Lord, Lord Mackay, whose 85th birthday it is today. That has been recorded already by the Minister.
I accept from the noble Lord, Lord Pannick, that the offence of scandalising the court has somewhat dubious and ancient beginnings and that it has largely fallen into desuetude, at any rate in this country, although it is quite often used in ex-colonies of Britain that have adopted our law. The reason for its doubtful origins is that a Chief Justice in the 18th century gave a judgment that there was such an offence as scandalising the court but never actually gave that judgment in court. It was recorded and given as his view, but that to lawyers is a very dubious precedent.
As for the purpose of the offence, it is said to help to ensure that the authority of the courts is not undermined. Furthermore, potentially at least, as both proponents of the amendment, who have spoken already, have said, the offence or its existence has a chilling effect on freedom of speech and the freedom to criticise judicial decisions. However, I have to admit—this was not mentioned by the two previous speakers—that the 1974 Phillimore committee said that there was not much evidence that the press was unduly inhibited by this aspect of the law. In 1987, the Daily Mirror referred to the judges in the Spycatcher case as “fools”, alongside an upside-down picture of the Members of this House who were sitting in their judicial capacity. No prosecution followed.
It is over a century ago that in the case of Gray, to which the noble Lords, Lord Pannick and Lord Bew, referred, Lord Russell of Killowen said that,
“any act done or writing published calculated to bring a court or a judge into contempt, or to lower his authority, is a contempt of Court”.
I need not give the facts about the references to Mr Justice Darling, as they have been given by the noble Lord, Lord Pannick. In addition to the points that were made, one phrase used by the journalist there was that Mr Justice Darling was,
“a microcosm of conceit and empty-headedness”.
Lord Justice Sedley, a current judge of the Court of Appeal, to whom the noble Lord, Lord Pannick, referred, wrote recently that the reference to Mr Justice Darling was among the,
“finest passages of invective in the annals of British journalism”—
not a bad record, I suppose. I think I am right in saying that there has been no successful prosecution for this offence since 1931. That surely gives a great deal of emphasis to the point made by the noble Lords, Lord Pannick and Lord Bew, that this offence is out of date. There would be hardly any loss, and not much gain either in practical terms, if the crime were abolished.
Lord Goldsmith
My Lords, the Minister may have something to say in support of this offence and I look forward to hearing it. Subject to that, the case made by the noble Lords, Lord Pannick and Lord Bew, is unanswerable.
However, I wish to make one or two comments about it. I know all the individuals who were referred to in the almost prosecution by the Attorney-General for Northern Ireland, Mr John Larkin, including the would-be defendant. I am sure that the decision to proceed was taken in good faith—they are all people of good faith—but it is the first time that I recall the potential use of that offence. I was the Attorney-General for Northern Ireland for six years and I was never asked to, nor did I, consider that offence in Northern Ireland—or, indeed, in England and Wales, of which I was also Attorney-General. There does not seem to be any need for the offence and I never saw any need for it at the time. It will be also interesting to know whether the Minister has anything particular to say in relation to Northern Ireland and to what the noble Lord, Lord Bew, had to say. I see also sitting in his place today a former Lord Chief Justice of Northern Ireland.
In supporting the noble Lord, Lord Pannick, and subject to what the Minister has to say, I wish to draw attention to one point and to sound a note of caution. The noble Lord, in the course of his observations, asked why we should protect judges as we do not protect other public officials. However, I am concerned about allowing too much freedom in relation to attacks on judges. I do not mean that we should protect them through the criminal law—that is not appropriate—but I believe that a degree of self-restraint is important in retaining public confidence. Indeed, it is not members of the public or even former politicians who often pose the greatest risk. From time to time when I was in office I had to have conversations, as did other legal officers, with members of our own Government about their observations on cases they had lost; they rarely made them about cases that they had won.
Expressing that reservation, and making it clear that I do not believe that the criminal law is necessary to protect judges in those circumstances, I hope that if the amendment is agreed it will not be taken as invitation to a free-for-all in relation to criticism of judges— there is a proper place for that. However, there is a need for self-restraint so that the independence of the judiciary is maintained; so that judges do not have to be involved in slanging matches when responding to accusations made against them; and so that confidence in the judicial system is maintained.
Lord Carswell
My Lords, as your Lordships are aware, I was for some 20 years a judge in Northern Ireland. In that capacity, I had the function on many occasions of conducting criminal trials without a jury of very serious terrorist offences. It was a very responsible and difficult job and, in that capacity, I was scandalised more than once. I do not know whether that is a declaration of interest, but it certainly explains what I am about to say to your Lordships.
I did not consider for a moment instigating a prosecution or suggesting to the Attorney-General—who was not the noble and learned Lord, Lord Goldsmith, but a predecessor—that a prosecution should be bought. There were deeply scandalous assertions in a certain newspaper that I had come to the conclusions I had reached in criminal trials on the instructions of the Government, more or less, without saying it, as their cat’s paw. I was deeply offended and I deeply resented it. I was scandalised, but not for one moment would I have considered asking the Attorney-General whether he would consider bringing contempt proceedings—or, rather, a scandalising prosecution.
My reason is very simple: judges have to be able to take these things. There may be a point beyond which they should not have to lie down and put up with the slings and arrows, but there are other ways of dealing with it than this offence. That is the reason it has fallen into desuetude: it is not necessary in modern conditions; not necessary for a sophisticated society; and not necessary for judges who have to have the hardihood to put up with comments which sometimes may be unfair, badly based and just plain vulgar rudeness. However, that is part of what they have to do: they have to shrug their shoulders and get on with it. It is for that reason that, although I was very cross at the time about it, I certainly did not invoke the criminal law. I support the amendment.
Lord Beecham
We are addressing these issues in wonderfully archaic language. The “scandalisation” of judges; the “murmuring” of judges in Scotland, which puts me in mind of the murmuration of starlings—it is, apparently, the collective noun for starlings—and here we are in this High Court of Parliament considering this arcane offence.
Like the noble and learned Lord, Lord Goldsmith, I deprecate the tendency of politicians of all political colours and Ministers of different Governments publicly to criticise judges when decisions have gone against them. I also deprecate the tendency of the tabloid press in particular to denounce the judiciary for perceived leniency, or whatever it might be, from time to time. However, as other Members of the Committee have made clear, that does not justify applying a criminal offence and criminal sanctions to those who are critical, rightly or wrongly, of what the judiciary has done.
Scandalising the judiciary has not always been the province of politicians or the media. One of the most frequent scandalisers of the judiciary was that eminent Conservative lawyer and Lord Chancellor, Lord Birkenhead, known as FE Smith. He frequently clashed with judges. On one occasion the judge, in an irritated spasm, inquired, “Mr Smith, what do you think I am here for?”, to which he replied, “My Lord, it is not for me to question the inscrutable workings of providence”. That came as near as anything to scandalising that particular judge. I do not think it was Mr Justice Darling, whose reputation has been adequately canvassed tonight.
We certainly support this amendment. It is clearly timely to dispose of the revival of a procedure that is quite antiquated and unnecessary. I hope that the Government will accept the amendment.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, every so often this House produces a little nugget of a debate that is extremely important and that will bear further reading and study. I am grateful to all noble Lords for their contributions, and to the noble Lord, Lord Beecham, for his murmuring of starlings.
Lord McNally
Murmuration. We learn something new every day in this House. I also thank him for another good FE Smith story.
The noble Lord, Lord Pannick, introduced the amendment with his usual eloquence and well-structured argument, marred only by a terrible joke about Fifty Shades of Grey, but at least yet another book was plugged in this debate. We have all been rushing to eBay to get the remaining copies of Borrie on defamation, which will be worth getting; and of course Peter Hain’s memoirs, as has been rightly pointed out, have been given far greater coverage than I recall their getting when they were published.
Nevertheless, what has been discussed is extremely important. I very much welcome the contribution of the noble and learned Lord, Lord Carswell. As a judge in Northern Ireland, he and his fellow judges were so important in upholding the rule of law in the most difficult of circumstances, and in so doing he not only has our admiration but we are all in his debt for his courage and consistency. For him to say that he thought that the law was not necessary weighs heavily in making any judgment. I also share the views of the noble and learned Lord, Lord Goldsmith, and the noble Lord, Lord Beecham, about getting the balance right between politicians and judges.
I understand what the Prime Minister meant when he spoke in the other place about there always being a little bit of rough and tumble between the two in the modern age. I think I have said at the Dispatch Box that a little bit of dynamic tension between politicians and the judiciary in a democracy does not go amiss. The warning from the noble and learned Lord, Lord Goldsmith, is correct, and he will not be surprised to know that the present Lord Chancellor—I cannot speak for the present Attorney-General or the Solicitor-General—has not been slow to remind exasperated Ministers that it does not help to start opining on this. The balance of contributions was right that it will happen occasionally, but if it became too much of a free-for-all it would genuinely undermine public confidence in the judiciary and in the workings of our legal system. The warnings are well made.
Lord Pannick
I am grateful for the Minister’s positive response to this debate. I share the views of the noble and learned Lord, Lord Goldsmith, that self-restraint in criticising the judiciary is to be encouraged. Much of the criticism of the judiciary that we hear is ill-founded and unsubstantiated. This amendment is certainly not intended to encourage criticism, and certainly not unfounded criticism; its only point is that the criminal law is not the appropriate means of protecting the judiciary’s reputation. As the noble and learned Lord, Lord Carswell, recognised in his superb work as Lord Chief Justice of Northern Ireland and told the Committee today, confidence in the judiciary is not simply promoted by criminal proceedings. As the Minister said, it is significant that the noble and learned Lords, Lord Carswell and Lord Goldsmith, with their experience, have spoken in favour of this amendment, to which the noble and learned Lord, Lord Mackay of Clashfern, added his name.
The noble Lord, Lord Borrie, pointed out that the continuing existence of the offence of scandalising the judiciary does not inhibit the press much. There are two responses to that. First, it is not much of a recommendation for maintaining this area of criminal law if it has no effect, with no successful prosecution since 1932. Secondly, and more importantly, the recent conduct of the Attorney-General of Northern Ireland unfortunately may well have an inhibiting effect on others who are considering making critical comments about the judiciary. The noble Lord, Lord Borrie, teased me about wanting instant change. It is of course 112 years since the prosecution of Mr Gray, and if no one can present an argument for retaining this offence, I do not see why it is necessary to wait for a Law Commission report in years to come.
The Minister accepted that there is unlikely to be a gap in the law. I entirely accept that on a matter of this sort, before bringing forward any amendment of their own, it is right and proper that the Government would want to consult the judiciary and the devolved Administrations in Scotland and Northern Ireland. By Report, I very much hope that the Government will have formed a view in the light of such consultation. For the time being, with grateful thanks to the Minister, I beg leave to withdraw this amendment.