House of Commons
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Oral Answers to Questions
(12 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr William Bain (Glasgow North East) (Lab)
1. If he will estimate the change in the number of voters on the electoral register between 1 December 2014 and 1 December 2015.
The Deputy Prime Minister (Mr Nick Clegg)
Before I answer the hon. Gentleman’s question, I am sure that the whole House will join me in offering our deepest sympathies to the family of PC Ian Dibell and his colleagues in Essex police. Our police officers keep us safe day in and day out, and they act when they see public safety at risk, whether on duty or not. PC Ian Dibell was a dedicated professional who sadly has paid the ultimate price.
The Government are committed to ensuring that the maximum number of eligible people are registered to vote. Our impact assessment report on individual electoral registration predicted that the current completeness of the electoral register is expected to be maintained during the transition to IER. As part of IER, we are actively exploring ways in which we can make it as easy and secure as possible for citizens to register to vote—for example, by enabling online registration. The Government are also working to raise registration rates among under-registered groups prior to the transition to IER.
Mr Bain
May I associate myself, and doubtless all right hon. and hon. Members, with the Deputy Prime Minister’s opening remarks?
Will the Deputy Prime Minister join me in welcoming the increase in voter registration of 40,000 in the past four years that has been secured by Labour-run Glasgow city council? Is not this rise of more than 10% in danger of being wiped out by his proposals for individual voter registration, which when tried out in Northern Ireland took more than one in five voters off the electoral roll?
The Deputy Prime Minister
The hon. Gentleman might be unaware of the record on overall levels of registration during the years in which his party was in office. In 2000, 91% to 92% of all people were registered; in other words, 3.9 million people were missing from the register. By December 2010, the completeness of the register had gone down to 85% to 87%. Labour therefore presided over 2 million people being lost from the register —not a record that I suggest he should be proud of.
Mr Philip Hollobone (Kettering) (Con)
Many people go missing from the register when they move home. What is being done with estate agents and letting agencies to make sure that people are registered when they change their address?
The Deputy Prime Minister
We have been working with those involved to make sure that the system is as complete as possible. That is in addition to many other measures that we have developed, most notably the data-matching work that we have done such that many people do not need to register if they already exist on a database. All the evidence is that that will provide automatic registration for a very large number of people.
Wayne David (Caerphilly) (Lab)
Many people believe that the number of electors on the new electoral register will be significantly depleted by December 2015. Given that this is when the new boundary review is to begin, would it not be sensible to use the old register for the boundary review?
The Deputy Prime Minister
As we have seen from the latest statistics, the old register appears to be much more flawed than the hon. Gentleman’s question implies. We are trying to learn from that experience and from other experiences such as individual voter registration in Northern Ireland. We are not only carrying out the data-matching initiative that I mentioned, but moving the 2013 household canvass to early 2014 to make sure that it is as up to date as possible ahead of the next general election; phasing the transition over two years to carry forward existing electors who are not registered under the new system in the first year so that they are eligible to vote at the next general election; and writing to all voters with reminders and doorstep canvassing in 2014.
Brandon Lewis (Great Yarmouth) (Con)
Does the right hon. Gentleman agree that individual voter registration will get us not just a fairer but a much more accurate voting system?
The Deputy Prime Minister
Absolutely. Let us remember that the point of this measure, and the reason why both parties on the Government Benches agreed to put it in the coalition agreement and to accelerate the process started under the previous Government is to bear down on fraud on the electoral register. I hope that all Members from all parts of the House think that we need to stamp on that.
Valerie Vaz (Walsall South) (Lab)
2. What assessment he has made of the implications for his policies on constitutional reform of the introduction of a British Bill of Rights.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
The hon. Lady will know that the Commission on a Bill of Rights is investigating the introduction of a UK Bill of Rights, building on our responsibilities under the European convention on human rights. It is due to report at the end of this year. We look forward to its report, but I do not want to pre-empt its conclusions.
Valerie Vaz
I thank the Minister for his response. Given that there are absolute rights and qualified rights under the Human Rights Act 1998 and the margin of appreciation doctrine, does the Minister know whether the commission is considering the possibility of the Human Rights Act sitting alongside the Bill of Rights in a happy coalition of rights and responsibilities?
Mr Harper
I do not know whether that is what the commission will recommend. It gave us some welcome interim advice on reform of the European Court of Human Rights, which was helpful in the negotiations that secured the agreement of all 47 members of the Council of Europe to some improvements, which were welcomed on both sides of the House. I will wait to see what the commission recommends at the end of the year.
Mr William Cash (Stone) (Con)
Will the Minister confirm that, far from nibbling away at this problem, which many of us fear is what the commission is doing, any Bill of Rights will be based on Westminster legislation, not on European Union legislation or the European convention on human rights?
Mr Harper
Again, I do not know what the commission will recommend. It contains distinguished and eminent lawyers on both sides of the argument. I think that it will come up with a very good report, and the Government will consider what it says. I remind my hon. Friend that this country signed up to the European convention on human rights only because this House decided that it should do so. We will listen to the commission’s conclusions and act on those that the Government support.
Ms Margaret Ritchie (South Down) (SDLP)
Given the special circumstances that exist in Northern Ireland, will the Minister have direct discussions with the Secretary of State for Northern Ireland about Northern Ireland’s human rights legislation and a separate Bill of Rights for Northern Ireland?
Mr Harper
My understanding is that discussions are under way on that point, but that the parties in Northern Ireland have not been able to reach a consensus. My right hon. Friend the Secretary of State for Northern Ireland will continue to have discussions, but he wants to reach a consensus among the parties in Northern Ireland before making progress.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
Is it not a fundamental right of the British people to elect those who make our laws? Is it not a reasonable expectation that Parliament, once it has agreed that principle, will not allow it to be prevented by delay?
Fiona Mactaggart (Slough) (Lab)
3. What progress he expects to make on reform of the House of Lords; and if he will make a statement.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
On the very subject that we were just discussing, the House will this afternoon conclude day two of the debate on the House of Lords Reform Bill. I look forward to the House supporting our Bill, which builds on a lot of the work that was done by the Labour party. We heard some good speeches from Labour Members yesterday, including the right hon. Members for Neath (Mr Hain) and for Kingston upon Hull West and Hessle (Alan Johnson), in support of the Bill.
Fiona Mactaggart
If, as looks possible, the programme motion is defeated tonight, will the Minister promise the House that he will move an allocation of time or committal motion before the recess?
Mr Harper
If the hon. Lady is committed to reform, which I believe from her record she is, I hope that she will support all the motions relating to the Bill on the Order Paper so that we can make progress—something that the Labour party never managed, despite the good work that it did, in all the years that it was in office.
Nick de Bois (Enfield North) (Con)
8. The Deputy Prime Minister will be aware of the reports that the House of Lords Reform Bill is linked to the eventual passage, or not, of the boundary changes. As somebody who has an interest in that matter because, unfortunately, I do not face very good boundary changes, will the Minister confirm for me whether he will go ahead with that link?
Mr Harper
My right hon. Friend the Deputy Prime Minister was asked that question by my hon. Friend the Member for Epping Forest (Mrs Laing). He made it clear that there is no specific link between different parts of the Government’s programme. Of course, we will urge Members from both coalition parties to support the whole of the Government’s programme, as we have to date.
Rosie Cooper (West Lancashire) (Lab)
4. What his policy is on the holding of a referendum on his plans for House of Lords reform.
Huw Irranca-Davies (Ogmore) (Lab)
6. What his policy is on the holding of a referendum on his plans for House of Lords reform.
The Deputy Prime Minister (Mr Nick Clegg)
We are not persuaded by the arguments for holding a referendum on Lords reform. All three main parties committed to reform at the last election, and the views of the public are clearly and consistently in favour of introducing democratic legitimacy to the House of Lords.
Rosie Cooper
The Deputy Prime Minister said in the House yesterday:
“Surely, it is simply time to trust the British people.”—[Official Report, 9 July 2012; Vol. 548, c. 26.]
Can you explain why you do not trust the British people to decide on the House of Lords in a referendum?
Mr Speaker
I am not going to be explaining anything, but the Deputy Prime Minister might want to try.
The Deputy Prime Minister
First, as I said, unlike other issues on which we have held referendums, on which there were profound differences between the stated positions of the political parties, all the main parties in the House have committed to reforming the other place for many years in their manifestos. Secondly, at a time like this, on a subject on which we are supposed to agree and when much of the country expects us to instil democracy in Parliament, it would be difficult to justify wasting about £80 million asking the public a question that they do not find controversial in the first place. That would nonplus many members of the public.
The final, very important point is that we as a country are going to face a hugely important issue in a referendum on the future of the United Kingdom during the course of this Parliament. I genuinely ask the hon. Lady, other members of her party and others who advocate a referendum to reflect seriously on the wisdom of saying that there should be another, parallel referendum that the public are not clamouring for, at a time when we are seeking to settle the future of the UK.
Huw Irranca-Davies
The Deputy Prime Minister says that he is not persuaded; let me try. There have been referendums on devolved Governments in Wales, Northern Ireland and Scotland, on devolution for the north-east, on the alternative vote and on city mayors. Why can he not accept the genuine argument that to ensure the validation of such a major constitutional change as he proposes, we must put the question to the people on precedence as well as on principle?
The Deputy Prime Minister
Both the hon. Gentleman’s question and yesterday’s debate have revealed that House of Lords reform is immeasurably more controversial here than anywhere else in the rest of the country. The rest of the country thinks that there is a simple choice to be made—are we in favour of more democracy or less? Are we in favour of the simple principle that the people who make the laws of the land should be elected by the people who have to obey them? No one else thinks that is controversial, only the politicians, so why do we not just get on with it?
Tom Brake (Carshalton and Wallington) (LD)
What conclusions does the Deputy Prime Minister think the public will draw if this House is incapable, with or without a referendum, of reforming a House of Lords packed with prime ministerial appointees and hereditary peers?
The Deputy Prime Minister
We rightly take pride in our democratic traditions in this country. We send young servicemen and servicewomen to fight for the principle of democracy elsewhere in the world, and we tour the world talking to other countries about how they should instil greater democracy. I think the rest of the world would look at this great mother of Parliaments and ask why on earth it was not possible for us to practise what we preach.
Dr Julian Lewis (New Forest East) (Con)
Why does the Deputy Prime Minister not have the guts to admit that the reason he fears a referendum on this issue is that he knows perfectly well that when people get to examine his recommendations they will utterly reject them, just as they did with the alternative vote?
The Deputy Prime Minister
As ever, my hon. Friend brings to bear a healthy and consistent degree of suspicion. I have set out the reasons why the case for a referendum has not been made. It would be expensive, difficult to justify to the public, who do not think it is necessary, and ill timed when we as a country have a much bigger question to address, which is the future of the United Kingdom, let alone the future of one of our parliamentary Chambers.
Sadiq Khan (Tooting) (Lab)
Does the Deputy Prime Minister agree that even without a programme motion, it is perfectly possible for the House of Commons to debate, scrutinise and amend the House of Lords Reform Bill, and get it out of the Commons, in a sensible time? If he does not agree, why did his manifesto and that of the Conservatives commit to abolishing programme motions for Committee stages?
The Deputy Prime Minister
My own view, which I have always been very open about, is that a Bill of this complexity and self-evident controversy—at least in this place—is unlikely to progress without being properly timetabled in one shape or form. I should just ask the right hon. Gentleman this: is it not time he had the courage of his convictions? He says he believes in House of Lords reform, but he wills only the ends, not the means—[Interruption.] Will he just listen? The history books will not judge him kindly if he takes refuge in procedural obfuscation when this is a time for people to stand up and be counted.
Keith Vaz (Leicester East) (Lab)
5. When he expects to bring forward legislative proposals to reform the law of succession.
The Deputy Prime Minister (Mr Nick Clegg)
Finally a question not on the House of Lords.
I congratulate the right hon. Gentleman on his excellent work. He has been a steadfast campaigner for reform of the law of succession. I can confirm that we will bring forward UK legislation to give effect to changes to the rules of succession once we have secured the consent of the other Commonwealth realms. As he is aware, that work is being co-ordinated by the New Zealand Government, with whom we are working very closely. It is worth noting that the change on gender will apply to a child born after the date of the Perth announcement, namely 28 October 2011, even if the birth happens before the legislation is passed.
Keith Vaz
I thank the Deputy Prime Minister for that answer, but it is sad that we have waited a year since I met him and offered my ten-minute rule Bill as the vehicle for this change. I realise that the change will be backdated, but it would be greatly embarrassing if a royal child were born before we finally settle the matter. Does he have any plans to go to New Zealand to meet the Prime Minister there to try to get this matter speeded up?
The Deputy Prime Minister
As the right hon. Gentleman knows, thankfully the embarrassment would be spared if a child were born after the date at which the Perth decision was made. The rights of that unborn child are properly protected by the procedures. Just like him, I would love to wave a magic wand and dispense with such outdated and anachronistic rules governing whom a person in the line of succession can marry and those on male primogeniture, but we must move as a convoy with the 16 other Commonwealth realms. For one reason or another, that takes a bit of time.
Mrs Eleanor Laing (Epping Forest) (Con)
The House appreciates the progress that the Deputy Prime Minister and the Government have made with the Commonwealth Heads of Government, but does he agree that, surely, during this jubilee year when people not only in the UK, but right across the Commonwealth, have shown that they hold our Queen in extremely high regard, nobody could possibly argue that a woman cannot succeed to the throne?
The Deputy Prime Minister
On this if not on other issues we have debated recently, I fervently agree with my hon. Friend. The idea that a younger son should become monarch instead of an elder daughter simply because he is a man is incomprehensible in this day and age.
Glyn Davies (Montgomeryshire) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Deputy Prime Minister (Mr Nick Clegg)
As Deputy Prime Minister, I support the Prime Minister on a full range of Government policy and initiatives. Within the Government, I take special responsibility for our programme of political and constitutional reform.
Glyn Davies
The Deputy Prime Minister often speaks of the importance of fairness in our society. There is a crisis meeting in London tomorrow of dairy farmers from across Britain about the reductions in prices imposed on them by processors. Will my right hon. Friend join me in condemning that outrageous behaviour?
The Deputy Prime Minister
Like many hon. Members on both sides of the House, I have met dairy farmers in my constituency who are distressed by the fluctuating prices in the milk and dairy market. As my hon. Friend knows, the Department for Environment, Food and Rural Affairs is actively engaged, and it will look closely at the representations that will be made tomorrow.
Ms Harriet Harman (Camberwell and Peckham) (Lab)
How much has children’s participation in school sports fallen since the Deputy Prime Minister’s Government abolished the school sports partnership, which Labour introduced?
The Deputy Prime Minister
I cannot give the right hon. and learned Lady a precise figure, but I hope that—
The Deputy Prime Minister
Because I am not a walking encyclopaedia. I do not have all these facts and figures. [Interruption.] Oh, I am sorry. Am I also guilty of not knowing every single departmental statistic? I am sure the hon. Lady would have had the figure at her fingertips if she were in my position. Honestly!
None the less, I hope that the right hon. and learned Lady will co-operate with the Government in a positive spirit as we enthuse many, many children to take up sports that they have not taken up before and as we move towards this historic occasion of the Olympics.
Ms Harman
The truth is that the Deputy Prime Minister does not know, and neither do the Government, because they have made it their business not to know by abolishing the school sports survey. Like people up and down the country, we are concerned about this, and our freedom of information requests to local councils show that the amount of PE teacher time spent organising school sport has fallen by 60%. At a time when everyone wants more children involved in more sport, will he admit that what his Government have done is a travesty, and will he reinstate the school sports partnerships?
The Deputy Prime Minister
I certainly remember the travesty under the right hon. and learned Lady’s Government of the industrial-scale sell-off of school playing fields. She never listened to complaints from us when that was going on. I think she should celebrate the fact that in this year, the year of the Olympics, thousands upon thousands of children are taking up sports they have never done before as part of the school Olympics.
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)
T3. I am sure that the Deputy Prime Minister will agree that for far too long there has been an emphasis in NHS mental health services on crisis management rather than on the prevention and the community support that patients require. Will he outline what steps the Government are taking to address this problem and properly to look after patients with mental health problems in the community?
The Deputy Prime Minister
I strongly agree with my hon. Friend. I hope he has noticed that the operating framework recently published by the Department of Health for the NHS in England sets out priorities for the NHS that, for the first time, stipulate the expansion of access to psychological services as part of the overall commitment to the full roll-out of the improving access to psychological therapies programme by 2015. I know that the Minister of State, Department of Health, my hon. Friend the Member for Sutton and Cheam (Paul Burstow), has dedicated a lot of time to this. I say to Members on both sides of the House who spoke in that very moving debate recently on mental health that they played a remarkable role in breaking down some of the taboos by speaking about an issue that afflicts one in four people in his country and which has often been kept in the shadows, leaving people to suffer in silence. It is finally being talked about in a more grown-up and open way.
Mrs Mary Glindon (North Tyneside) (Lab)
T2. The Deputy Prime Minister wants the House of Lords to be more accountable, yet his Government are giving new dictatorial powers to elected mayors to veto decisions made by elected councillors. Will he say where the accountability is there?
The Deputy Prime Minister
I do not think they would be dictatorial powers in the hands of someone who has been democratically elected, but perhaps the hon. Lady sees some consistency between that position and defending unelected Members of the other place. I do not.
Mr Mark Spencer (Sherwood) (Con)
T7. It is vital that the electoral roll is accurate, but young people are quite poor at getting their names on to it. What measures can the Deputy Prime Minister take to ensure that they are engaged in the democratic process and put their names forward to cast a vote?
The Deputy Prime Minister
Interestingly, registration rates among young people in Northern Ireland are now higher than they are here, so we have looked carefully at what has been done in Northern Ireland to reach out in different ways to young people in order to tell them how to register and, crucially, to ensure that they are informed at the right time, so that they go on to register and get their names on the electoral roll.
John Cryer (Leyton and Wanstead) (Lab)
T4. When this place passes a Bill that changes the power of the ballot box, which, it is generally agreed, the House of Lords Reform Bill undoubtedly does, how can the Deputy Prime Minister justify the argument that people are not entitled to a referendum?
The Deputy Prime Minister
As I explained earlier, although House of Lords reform greatly exercises people here—people in Westminster get terribly hot under the collar—most people in the country at large think it a fairly common sense reform to introduce a slither of democracy to a legislative Chamber. It is not an issue on which the main parties, formally speaking, disagree, and a referendum would be very expensive and, as I said, cut across an all-important referendum on the future of the United Kingdom.
David Mowat (Warrington South) (Con)
T10. There is a body of opinion in Scotland that says that the upcoming referendum should have a third option: devo-max. Does the Deputy Prime Minister agree that putting that option on the ballot paper in advance of detailed discussions with the UK Government would be misleading and wrong?
The Deputy Prime Minister
I disagree with people who want to turn the referendum on Scotland’s place in the United Kingdom into a sort of smorgasbord or multiple-choice exercise. That is playing cat and mouse with the Scottish voters. There should be a simple question —whether Scotland remains part of the United Kingdom: yes or no? In our view, that question, in plain, simple terms, should be put to the Scottish people as soon as possible.
Mr Stephen Hepburn (Jarrow) (Lab)
T5. You were elected on the promise to scrap tuition fees, yet you trebled them, to such an extent that there is now a 12% reduction in the north-east in university applications. How can we trust you on anything, let alone House of Lords reform?
Mr Speaker
First, I have not broken any pledge. Secondly, I hope that the hon. Gentleman is not inclined to distrust me, but I will assume that his question was directed at the Deputy Prime Minister.
The Deputy Prime Minister
First, I have never hidden the fact that, as leader of a party that has 8% of MPs in this Chamber, I cannot deliver—much to my regret: not enough people voted for us at the last general election—every single line, and every crossed t and dotted i of our manifesto. That is the nature of plural compromise politics, and it is something that some of us are grown up enough to acknowledge.
On the all-important issue of the number of applications to university in the recent UCAS figures, which have been published overnight, the proportion of English school leavers applying to university is, in fact, the second highest on record. The percentage of 18-year-olds from disadvantaged areas applying to university is, according to the figures we have seen overnight, higher than at any time under the Labour Government.
Karl MᶜCartney (Lincoln) (Con)
The Deputy Prime Minister believes that we need 360 new elected politicians in Parliament. If I may be so bold as to paraphrase a well-respected former Prime Minister, Sir John Major, does this current Deputy Prime Minister agree that if the answer is more party-selected elected politicians, we are obviously asking the wrong question?
The Deputy Prime Minister
The impression that is sometimes given of the House of Lords—where it is seen through a sepia-tinted filter and everyone there is a dispassionate observer of the scene, unsullied by politics entirely—unfortunately does not quite conform to the truth. More than 70% of the Members of the House of Lords are there because of decisions taken by people such as me, not the British people. The largest number of people who are in the House of Lords through their former vocation are retired MPs, so we can take a choice: either we give the British people a say in who is there or we simply turn it increasingly into a retirement home for ex-MPs.
Kelvin Hopkins (Luton North) (Lab)
T6. When will the Government report on their Trident alternatives review, and will the Deputy Prime Minister commit to publishing the findings, which has not been the case with the Trident so-called value-for-money review?
The Deputy Prime Minister
The review on the alternatives to a like-for-like replacement of the Trident system is ongoing, according to the stipulation in the coalition agreement. My hon. Friend the Minister for Defence is heavily involved with it, and I am sure he will come to this House and seek to make a statement when the work is complete.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
With the successful launch of the “Better Together” campaign, we now have campaigns in place for both sides of the argument on the future of Scotland. Has my right hon. Friend had a rational or sensible explanation from the Government of Scotland of why they want to deny the people of Scotland an early say in our future?
The Deputy Prime Minister
Bluntly, no—perhaps we will get an explanation in this place. I do not think the uncertainty of this endless boxing and coxing, and playing cat and mouse with the Scottish people on the part of the Scottish Government, does Scotland any good. It is damaging to investment. Indeed, a number of investors in Scotland and business groups have been saying that the uncertainty is bad for the Scottish economy, at a time when we are clearly facing economic difficulties in the United Kingdom as a whole. I therefore agree with my hon. Friend that it is time that we got on and simply put a simple, single question to the Scottish people, so that they can decide what their future is: in the United Kingdom or not.
Robert Flello (Stoke-on-Trent South) (Lab)
T9. If the Deputy Prime Minister gets another mauling in the House today, will he finally change his mind about giving proper scrutiny to the House of Lords Reform Bill in this House, and if not, what will it take?
The Deputy Prime Minister
As the hon. Gentleman knows, the previous Labour Government introduced countless constitutional Bills that touched on our constitutional future in relation to the European Union, all of which were timetabled. We have been asking those on the Opposition Front Bench over and over again how many days the Opposition would like on the timetable but, still, answer comes there none.
Mr Peter Bone (Wellingborough) (Con)
Yesterday, the Deputy Prime Minister did an able job in defending himself against all the protests coming from behind him. Has he noticed that a silent protest is taking place today, in that Conservative Ministers have not come to support him on the Front Bench? There are 10 Ministers here who are not Whips, and only three of them are not Liberal Democrats.
The Deputy Prime Minister
The hon. Gentleman made a similar head count yesterday. His forensic fascinations, first with the early death of the Prime Minister and now with exactly who is on the Front Bench, continue to fascinate me. I am waiting with bated breath to see what his next rather peculiar fascination will be.
Paul Flynn (Newport West) (Lab)
T11. Will the Deputy Prime Minister extend his commendable enthusiasm to trusting the people and extending democracy by giving our people a right that is enjoyed in almost every other free country in the world—that is, will he allow them to vote on whether Charles, William or A. N. Other should be our next Head of State?
The Deputy Prime Minister
I am struggling enough simply to make the case for what I see as the plain vanilla, common-sense proposition that the people in the other place who make the laws of the land should be elected by those who have to obey the laws of the land. I do not agree with the hon. Gentleman’s proposition, but let us focus on the argument on the other place right now, as it has not yet been fully won.
Mrs Helen Grant (Maidstone and The Weald) (Con)
Does the Deputy Prime Minister agree that the Government’s apprenticeship programme, which offers a brilliant alternative to the strictures of academia for many people, could provide a fantastic boost for social mobility in Britain?
The Deputy Prime Minister
I strongly agree with my hon. Friend. The apprenticeship programme is one of the things that Government Members should be proudest of. We are expanding opportunities for young people through increased apprenticeships on a scale never before seen in the post-war period, and we will be delivering 250,000 more apprenticeships than were planned by Labour. My hon. Friend is absolutely right to say that, for those who do not think that an academic qualification at university is the best route when they leave school or college, apprenticeships are a great tried and tested way of giving them the opportunities that have been denied to them for so long.
Ian Lucas (Wrexham) (Lab)
T12. Wrexham Remploy workers, whom the Deputy Prime Minister refused to meet in April this year, have been told at the final hour that their jobs have been taken away from them. Will he now meet those people whom he wants to put on the dole even though a private investment company has offered to keep them in work? The Government, and the Deputy Prime Minister, have refused to let that happen.
The Deputy Prime Minister
As the hon. Gentleman might know, the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller), will be making a statement on this matter straight after Deputy Prime Minister’s questions. He will also know that the recommendations on the reform of the Remploy factories across the country—
The Deputy Prime Minister
Perhaps he could just listen to the answer. Those recommendations were made not by Ministers or politicians; they were made by a number of authoritative figures who decided that segregation in the—
Mr Speaker
Order. The Deputy Prime Minister is contending with a great deal, about which I am sure he makes no complaint. I know that the hon. Member for Wrexham (Ian Lucas) wants an answer—that message is clear—but he must not keep ranting from a sedentary position. It is not statesmanlike, and ordinarily, I expect him to be statesmanlike.
The Deputy Prime Minister
Liz Sayce, the expert in question, said that the practice of effectively segregating people in one part of the labour market, away from everyone else, was not a sensible way of protecting their interests in the 21st century.
Amber Rudd (Hastings and Rye) (Con)
Many of my constituents have written to me to express their support for House of Lords reform, but many have also taken the opportunity to remind me of our need to reduce the cost of politics. Will the Deputy Prime Minister tell us whether the reforms will significantly increase the cost of politics?
The Deputy Prime Minister
In effect, when the reforms across Parliament are all said and done, they will be cost-neutral.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
T13. In May, the Deputy Prime Minister obliged my Newcastle constituents to vote on mayors. In May last year, he obliged them to vote on the alternative vote system. In November, which is not usually a warm month in Newcastle, he is going to force them to vote on police commissioners. Why, then, will he not give them the right to vote on the most wide-ranging constitutional change that he is proposing?
The Deputy Prime Minister
I have sought to answer this question as best I can a number of times before. The hon. Lady cites police and crime commissioners, and she is right: the people will be able to elect them. I ask her quite simply: why is it okay to elect police and crime commissioners, but not to elect the people who shape the laws over which those police and crime commissioners have to preside?
Tim Farron (Westmorland and Lonsdale) (LD)
Will my right hon. Friend join me in observing that there are four times as many members of the House of Lords over 90 as there are those under 40, and reflect on the fact that this rather implies that this Parliament as a whole does not represent younger people in particular? What measures can the Government take to involve younger people more in our democracy? In particular, will he look again at giving votes to 16 and 17-year-olds?
The Deputy Prime Minister
As my hon. Friend knows, I am very sympathetic to that cause, but it does not constitute part of the coalition agreement. As I have been saying exhaustively over the last 24 hours, it is important for all Members, particularly those of the two coalition parties, to fulfil the spirit and letter of that coalition agreement. On the issue of the interesting demographic profile of the House of Lords, it is not just one of age; it is also very striking that close to half the people in the House of Lords come from London and the south-east. What does that say about the geographical representativeness of one of our legislative Chambers? One of the great virtues of our reforms is that it will guarantee places to people from all the regions and nations of the United Kingdom.
Mr David Winnick (Walsall North) (Lab)
If the programme motion on House of Lords reform is moved and lost, what effect will that have on the coalition?
The Deputy Prime Minister
I very much hope it will be won, as I think it would be inconsistent—this appears to be the position of the hon. Gentleman’s party—to vote in favour of the principle of reform but to deny this House the ability to deliver reform. That, in my view, would be a synthetic, skin-deep and cynical commitment to reform.
Claire Perry (Devizes) (Con)
Does the Deputy Prime Minister agree that the main dog’s breakfast around here is the financial inheritance left us by the Labour party? Is he as proud as I am of the fact that we have cut its deficit by a quarter since the election?
The Deputy Prime Minister
I strongly agree. During the heated exchanges on House of Lords reform, I think we forget that the central purpose of this Government is indeed to rescue, repair and reform the British economy, which has been so severely damaged by the Labour party.
Dr William McCrea (South Antrim) (DUP)
The Deputy Prime Minister has said that the present House of Lords is a “flawed” institution. Having listened to the debate thus far, does he agree that many Members believe that the reforms he proposes could lead to a flawed institution?
The Deputy Prime Minister
I pay tribute to the hon. Gentleman’s work in the Joint Committee. One thing I heard yesterday was a number of Members making allegations that the Bill has been a rushed or botched job, and that we have somehow invented it out of thin blue air. As distinguished Opposition Members rightly pointed out, this blueprint for reform owes as much, if not more, to the work of the right hon. Member for Blackburn (Mr Straw) and to Robin Cook’s commission on the future of House of Lords. In many respects, it is a carbon copy of the proposals for reform stretching back to 2008 and many years before that. Before we vote this evening, it is important to remember that this is not something simply invented by this coalition Government; it is very much something that draws on the inspiration and wisdom of many people and reformers who have gone before us.
Phil Wilson (Sedgefield) (Lab)
1. What recent assessment he has made of the performance of the Serious Fraud Office.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
8. What recent assessment he has made of the performance of the Serious Fraud Office.
The Attorney-General (Mr Dominic Grieve)
Her Majesty’s Crown Prosecution Service inspectorate has been asked to carry out an inspection of the Serious Fraud Office. It is intended that the inspection should assist the new director, and it has been timed accordingly. In my superintendent’s role, I have regular meetings with the director and other senior officials.
Phil Wilson
The Attorney-General has said that he does not plan to publish the results of the current review into the operation of the Serious Fraud Office. Will he give his reasons for that and reconsider his current plan to keep us and the public in the dark on this issue?
The Attorney-General
It is not accurate to say that I have indicated that the report will not be published. The position is that such reports are not normally published, but due to the unusual and understandable level of interest, I think it important that as much as possible should be put into the public domain. I will make it my business to ensure that that happens. I should explain that the reason it may not be possible to publish all of it is that there have to be safeguards to prevent prejudice to ongoing investigations, but subject to that, I would wish to see the results made available.
Jonathan Reynolds
Having spoken to my constituents at the weekend, I know that there is no doubt that they would have preferred a judge-led inquiry into the banks. During last Thursday’s debate, the Attorney-General told us that a quick inquiry would clash with ongoing criminal investigations by the Serious Fraud Office. What assurances can he give us that the Select Committee inquiry, which will be wrapped up by Christmas, will not create the very clash that he warned us about last week?
The Attorney-General
Provided that the Select Committee conducts its business in the best traditions of the way in which I would expect a Committee of this House to do so, any difficulties that may arise in relation to an ongoing criminal investigation ought to be surmountable, and indeed I made that clear during last week’s debate. The difficulty that I identified with part of the motion that had been tabled on behalf of the shadow Chancellor was that it was quite prescriptive in terms of what it wanted the judicial inquiry to do. I foresaw that that could cause particular extra problems.
Nicholas Soames (Mid Sussex) (Con)
Would the Attorney-General consider making arrangements to enable people to move in and out of the SFO on a more regular basis, so that the experience of working for the organisation could be more widely spread throughout the private sector?
The Attorney-General
To-ing and fro-ing between prosecutors and the private sector is always desirable. The SFO does a great deal of work in trying to recruit from the private sector, encouraging individuals to work there for a period and then return. That is a very good way of acquiring expertise, and I know that the current director will have it very much in mind.
Tom Brake (Carshalton and Wallington) (LD)
In examining the wider performance of the SFO, will the Attorney-General consider the relationship that will exist between the role of the National Crime Agency and its economic crime unit and the activities of the SFO?
The Attorney-General
It is clear that there will be close co-operation between the SFO and the National Crime Agency and its economic crime command. However, in setting up the agency we gave careful consideration to whether there was any point in moving the SFO into it, and the conclusion reached was that the SFO’s work was so distinctive that it did not fit naturally into the agency’s work, and so important that it should be maintained as a separate entity.
Emily Thornberry (Islington South and Finsbury) (Lab)
The Americans spend massive amounts of money on prosecuting fraud. Indeed, the increase in their budget this year is more than the total amount that we spend on the SFO. On this side of the Atlantic, we are cutting our budget by 25%. No wonder the bankers laugh at us. Too many people in the City believe that the rules apply only to little people and not to them.
While we welcome the additional £3 million for the prosecution of LIBOR offences which was announced in the Financial Times and which has been hastily gathered from the crumbs that have fallen from the Treasury’s table, we ought to note that it amounts to only 5% of the Barclays LIBOR fine. Is it not too little too late? Will the Attorney-General take account of the call this week from the Leader of the Opposition for the establishment within the SFO of a properly funded, dedicated banking and financial crime unit, recruiting the best and headed by a high-profile prosecutor, so that those fraudulent, thieving bankers can be sent to prison like the common criminals they are?
The Attorney-General
As the hon. Lady will know, the SFO and its directors have indicated that they have initiated a criminal investigation. At no point during the time for which I have had superintendence has it been suggested to me by any director of the SFO that they were not able to take on a case that they considered that they should be able to take on because they did not have enough funds to do so.
The Attorney-General
What happened last summer was that the perfectly sensible decision was made that the Financial Services Authority should initiate its regulatory inquiry, and should liaise with the SFO while it was being carried out until the regulatory investigation was finished. When it was finished, the SFO considered the matter, and has initiated a criminal inquiry.
That said, I fully accept the hon. Lady’s point: it is possible that we could spend more money on the SFO. I should also point out, however, that within the totality of funding for prosecutorial functions in England and Wales, the level of funding for the SFO is similar to that which prevailed under the last Government—and it is not, of course, the only prosecutor of fraud.
Mr Speaker
I am sure that we are now much better informed, but anybody would think that these lawyers are paid by the word.
Philip Davies (Shipley) (Con)
3. How many sentences he has asked the Court of Appeal to review because they appear to be unduly lenient since May 2010; and in what proportion of those cases the sentence was subsequently increased.
The Attorney-General (Mr Dominic Grieve)
The Attorney-General’s Office records show that from 10 May 2010 to 6 July 2012 the Solicitor-General and I have referred the sentences of 188 offenders from 135 separate Crown Court cases to the Court of Appeal. One of those offenders’ sentences has yet to be considered. Of 187 individual sentences that have been considered since May 2010, the Court considered 87% to be unduly lenient and increased the sentences of 155—or 83%—of them. Annual statistics are published on my Department’s website, and the 2011 figures were published last week.
Philip Davies
May I warmly congratulate my right hon. and learned Friend on taking forward these unduly lenient cases and making sure that proper sentences are handed out? However, can he tell us what remedial action is taken against the lily-livered, wet, soft, liberal judges who hand out these unduly lenient sentences in the first place to make sure that this does not happen again?
The Attorney-General
I am afraid that I do not entirely agree with my hon. Friend’s basic premise. Just to get the position in perspective, I should say that 95,795 sentences were passed in the Crown Court in 2011, and we had referred to us in that period some 377 requests to reconsider sentences. Many of those requests were in fact wrong, and the total number we referred reflects the sorts of cases that we identify where a mistake has been made. I have to say to him that I am afraid that in human affairs such mistakes will always be made, which is precisely why we have the mechanism we have got to try to ensure that they are corrected.
Tony Lloyd (Manchester Central) (Lab)
It would be odd for me to agree too often with the hon. Member for Shipley (Philip Davies) but, nevertheless, there is genuine public concern about levels of sentencing. It is certainly true, on one level, that too many people go to prison, but it is also a matter of fact that at any point in time there are cases that do trouble the public. A 71-year-old man being given a four-year prison sentence for sexually assaulting a very young child is not seen as the kind of punishment that the public would expect. Nobody wants overly harsh sentences, but we do want realistic sentences, so how do we assess the judges?
The Attorney-General
May I say to the hon. Gentleman that I can only do my job? I have a job, laid down by statute, to review cases where it is thought that the sentence may be unduly lenient, and if I think it is, I will refer it. The success rate that we have been enjoying seems to indicate that, broadly speaking, on most of the references we make the Court agrees with us. It is worth pointing out that there are sentencing guidelines, which lay down very clearly how a judge should go about sentencing. In some cases, although the public may be unhappy about a sentence, it may conform to those guidelines. If the lawyers who advise me and I consider that that is so, the case may not be suitable for a reference.
Yvonne Fovargue (Makerfield) (Lab)
4. How many successful prosecutions for fraud were brought by the Serious Fraud Office in 2011.
The Solicitor-General (Mr Edward Garnier)
Owing to their complexity, SFO cases rarely conclude in the same year in which the prosecution, still less the investigation, begins. In 2011, the SFO concluded 14 fraud cases and 28 defendants were convicted; a further seven bribery cases were brought to a successful conclusion.
Yvonne Fovargue
With the SFO budget being cut by 25% over the course of this Parliament, what advantages does the Solicitor-General think the introduction of deferred prosecution agreements will bring, apart from plugging the financial hole in fraud investigations through plea bargains with corporate perpetrators?
The Solicitor-General
Deferred prosecution agreements bring with them self-evident advantages: they will ensure that companies are brought to justice, through confession, through whistleblowing or through investigation; they will bring speed, as a resolution in these matters will be brought forward much more quickly—the average SFO case takes about three and a half years and costs about £1.5 million; they will bring compensation to victims; they will avoid collateral damage to innocent parties; and they will provide an additional weapon in the prosecutor’s armoury. I hope that the hon. Lady would welcome that.
Margot James (Stourbridge) (Con)
5. What assessment he has made of the decision by the Crown Prosecution Service inspectorate to review the handling of disclosure in complex cases; and if he will make a statement.
The Attorney-General (Mr Dominic Grieve)
The duty of disclosure is a key part of the criminal justice system and therefore Her Majesty’s Crown Prosecution Service inspectorate has plans to undertake specific work on disclosure. That includes both a focused review of the disclosure of sensitive material in cases involving sexual offences, which is planned for this autumn, and a joint inspection with Her Majesty’s inspectorate of constabulary on complex cases, which is currently being scoped.
Margot James
I am grateful to my right hon. and learned Friend for his answer but I am concerned, as are the British Association of Psychotherapists and the Association of Women Barristers, that the way in which disclosure is sometimes handled in cases of rape and sexual assault affects pre-trial treatment decisions and inhibits victims from undertaking counselling. Will the Minister give me his assurance that those concerns will be addressed by Her Majesty’s Crown Prosecution Service inspectorate in the upcoming review that will, I understand, be announced in the next few weeks?
The Attorney-General
I can reassure my hon. Friend. The final scoping for the inspection is not yet complete but it will include examination of a significant number of sexual offences cases to ascertain whether the disclosure of medical records, including, where applicable, counselling notes, complies with the prosecution’s duty of disclosure and policy and the potential impact of any non-compliance. As I hope she will appreciate, although the other part of the disclosure inquiry is particularly about the problems that came out of the south Wales case of Lynette White, those two things are not mutually incompatible.
Mr Dominic Raab (Esher and Walton) (Con)
7. What steps he is taking to increase the rate of successful prosecutions in counter-terrorism cases.
The Attorney-General (Mr Dominic Grieve)
The Crown Prosecution Service, police and security services work closely together to build a strong evidential case to enable those suspected of involvement in terrorism to be charged wherever possible with appropriate criminal offences. A post-case review is held after every prosecution and, where appropriate, lessons learned and good practice are used to improve future prospects of successful prosecution and conviction.
Mr Raab
I thank the Attorney-General for that answer. According to Home Office data, convictions under terrorism legislation have fallen by 100% since 2006 while convictions for false accounting have fallen by 82% since 2004. Is it not time that we better armed our prosecutors with tools such as intercept evidence and greater use of plea bargaining so that we can take a more robust approach to disrupting and deterring joint criminal enterprises, whether they are terrorism or fraud in the banking sector?
The Attorney-General
I have had the opportunity to discuss this with the CPS and it is not thought that the processes we have require widespread reform. The CPS and the Security Service already work closely together from the earliest stages of an investigation, exploring options to strengthen the evidence and follow lines of investigation that lead to sufficient evidence on which to charge. Early formation of the prosecution team and collaborative working with international partners are regarded as essential in securing convictions. I have not seen the statistics to which my hon. Friend referred, but mercifully the number of prosecutions for terrorism-related offences is small and I would be just a little wary of trying to extrapolate a trend in view of the numbers of cases involved. For example, I know that in the early part of this year there were a number of notably successful prosecutions in that field.
Robert Flello (Stoke-on-Trent South) (Lab)
I am slightly concerned about the whole question of terrorism at the moment, as points are being raised by residents of parts of London about missile batteries on the roof and so on. Has anything crossed the Attorney-General’s desk about the legal implications of that or about cases being taken to court?
The Attorney-General
I am not quite sure how best to answer the hon. Gentleman’s question. The Crown Prosecution Service is a demand-driven organisation. As and when its services are called on, it will do the work to help the police with investigations. That is what it does day in, day out and what it will certainly continue to do over the course of the Olympics.
Rushanara Ali (Bethnal Green and Bow) (Lab)
9. What progress he has made on introducing fast-tracked prosecutions during the London 2012 Olympics and Paralympics.
The Solicitor-General (Mr Edward Garnier)
The arrangements for fast-track prosecutions during the Olympics and Paralympics are in place and they have been agreed by the courts, the Crown Prosecution Service, the police and representatives of defence lawyers in London. Olympic offences originating from the hon. Lady’s part of London will be dealt with at Thames magistrates court and Snaresbrook Crown court, with priority cases being dealt with at Highbury Corner magistrate’s court.
Rushanara Ali
The Crown Prosecution Service has been quoted by the media as saying that offences classified as “Olympic offences” will be fast-tracked through the courts during the Olympic and Paralympic games. Will the Solicitor-General explain what is meant by an “Olympic offence”, and does he think that it is right that Crown and magistrates courts near Olympic venues or traffic hubs should close or reduce their sittings during the games?
The Solicitor-General
I think the media are quoting a letter shown to them by the shadow Attorney-General—
The Solicitor-General
The hon. Lady has not seen it either. We are both in the dark, that is wonderful—[Interruption.] The shadow Attorney-General does not know anything, apparently. Let me enlighten her—[Interruption.] She is obviously in a hurry to learn.
The criminal justice system Olympics working group has adopted the following definition of an Olympic offence:
“any offence…committed and charged in the period 1st July to 30th September 2012, and is…stated by any Court to be directly connected to the 2012 Olympic or Paralympics Games”.
It is a definition of a type of crime, not a new offence.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
When fast-track courts were used following the riots, there was a feeling among magistrates that district judges had been used extensively and the lay magistracy had not been used as much as it could have been. Will that happen in Olympic cases, or is the Solicitor-General looking carefully at this?
The Solicitor-General
I am sorry, but I found it quite difficult to hear my right hon. Friend, but in so far as I heard his question, the courts will be manned by all appropriate judges. At the Crown court, clearly there will be Crown court judges; in magistrates courts, district judges will be deployed and, where appropriate, justices of the peace will sit in banks of three.
Syria
David Morris (Morecambe and Lunesdale) (Con)
I am extremely proud to present this petition on behalf of nearly 1,000 of my constituents. I am very proud to say that, despite the lateness of the hour, the lead petitioners are in the Public Gallery. They are Philipp Von Der Wippel, who is a German exchange student from Munich, Sean Brearton, Joe Bird and Leandro Rispoli. They are ably led by a young man called Ibrahim, who is from a Syrian family. Sadly, the security situation in Syria is so dangerous that I cannot give his surname for fear of reprisals against his family. They are joined by Ibrahim’s brother, Karim, who has also been very active on the issue. Once again, to protect his family, I will not state his surname. These petitioners started their campaign in Heysham high school in my constituency, and have signed up fellow students, along with their friends and family.
The petition says that Her Majesty’s Government
“must do everything in its power to assist in the removal of President Assad of Syria and support the humanitarian effort to aid the people of Syria.
Wherefore your Petitioners pray that your Honourable House shall urge the Government to consider taking steps to support the people of Syria in their ambition to build a free, stable and safe country.”
That is a reminder of the strength and depth of feeling on the Syrian issue. We in this House and beyond must do everything that we can to help bring about regime change in Syria, and to try to alleviate the horrendous situation faced by the Syrian people.
Following is the full text of the petition:
[The Humble Petition of pupils from Heysham High School and others,
Sheweth,
That the petitioners believe that the Government must do everything in its power to assist in the removal of President Assad of Syria and support the humanitarian effort to aid the people of Syria.
Wherefore your Petitioners pray that your Honourable House shall urge the Government to consider taking steps to support the people of Syria in their ambition to build a free, stable and safe country.
And your Petitioners, as in duty bound, will ever pray, et cetera.]
[P001106]
South Bank Royal Mail Delivery Office
Ian Swales (Redcar) (LD)
The Royal Mail proposes to close the South Bank delivery office in my constituency and move its activities to its Cannon Park office in Middlesbrough. This will cause great inconvenience to local residents and will result in job losses in a hard-pressed area.
I present a petition from 3,420 of my constituents which states:
The Petition of residents of Redcar Constituency,
Declares that the Petitioners are opposed to the closure of the South Bank Delivery Service.
The Petitioners therefore request that the House of Commons urges the Department for Business, Innovation and Skills to ask Royal Mail to listen to residents and reconsider proposals to close the South Bank Delivery Office.
And the Petitioners remain, etc.
[P001107]
Specialist Disability Employment
(12 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)
With permission, Mr Speaker, I would like to make a statement on Remploy.
I am sure that hon. Members agree that Remploy employees must be first and foremost in our minds today. That is why they have been notified first of the decisions of the Remploy board, in advance of this statement.
In her independent review, published last year, disability expert Liz Sayce made it clear that segregated employment is not consistent with equality for disabled people. The Sayce review sets out that money should support individual disabled people, not segregated institutions; it also recommends that Remploy factories should be set free from Government control. It cannot be right that the Government continue to subsidise segregated employment, which can lead to the isolation of disabled people. It is no alternative to promoting and supporting disabled people in mainstream jobs, the same as everyone else. I have been absolutely clear that the £320 million budget for disability employment services has been protected, but by spending it more effectively we can get thousands more disabled people into work. It is important that the money is spent in a way that is consistent with what disabled people want, consistent with this Government's commitment to disability equality, and consistent with helping more disabled people to live an independent life.
When Labour put in place the Remploy modernisation plan in 2008, they started a process, with £555 million provided to put the factories on to a proper financial footing. The right hon. Member for Neath (Mr Hain), who I see is in his place, told the House in 2007:
“The reality is that without modernisation Remploy deficits would obliterate our other programmes to help disabled people into mainstream work.”—[Official Report, 29 November 2007; Vol. 468, c. 448.]
As a result of those decisions, 29 factories were closed as part of that process. What is clear to us now is that the performance targets and the modernisation plan were not realistic, the reduction in costs could not be achieved, and the modernisation plan has failed.
In 2010-11, factories made losses of almost £70 million; that is money that could and should have been used to support thousands more disabled people into work. That is why the Government took the decision in March to implement Liz Sayce’s recommendations that we stop funding Remploy factories that have been losing millions of pounds, year after year, but we are committing to doing everything possible to minimise the number of redundancies.
Today I can inform the House that the Remploy board has considered in detail 65 proposals to take factories out of Government control as part of a commercial process. Those proposals have been scrutinised by a panel, independent of Remploy, established by the Department. The Remploy board and the Government have done all we can to support bids and safeguard jobs. That includes providing a wage subsidy of £6,400 for disabled members of staff, and a professional advice and support package worth up to £10,000 for each employee-led bid. On that basis, nine sites have had business plans accepted and will now move forward to the “best and final offer” stage, at which detailed bids will be considered. Back in 2008, when the then Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne)—I do not see him here today—started the modernisation process and closed 29 factories, there was no such offer. No factories were given the opportunity to continue outside of Government control; that is something that we wanted to change.
Remploy is hopeful that current negotiations may lead to the transfer of business and, importantly, the retention of jobs. That currently means that 27 Remploy sites will no longer operate. Details of those sites will be placed in the House of Commons Library, so that all hon. Members can see them; they will be able to get those details, and consider them fully. [Interruption.]
Mr Speaker
Order. There is a statement. There will be plenty of opportunity for Members to ask questions, and they can rely on me to protect their rights, but at this stage, the Minister must have her statement heard.
Maria Miller
Remploy employees have been informed of the board’s decision this afternoon. The Remploy board will now move into a period of individual consultation with Remploy employees. Undoubtedly, for those employees who have been told that their factories are closing, this is difficult news, but let me make one point absolutely clear: we are doing everything we can to ensure that Remploy workers who are affected will receive a comprehensive package of support and guidance to make the transition from Government-funded sheltered employment to mainstream jobs. [Interruption.]
Mr Speaker
Order. We now face the unenviable situation of having an exchange across the Chamber. Mr Heaton-Harris, calm yourself. If you wish to give vent to your views, behave like the good man you can, at your best, be, and you might succeed in catching the eye of the Chair. If you are not able to do that, you might find it more difficult.
Maria Miller
We have put in place £8 million to guarantee tailored support for up to 18 months for every single disabled person affected by the announcement today. That includes a personal case worker to help individuals with their future choices, and access to a personal budget for additional support. We are using the expertise of Remploy employment services, which, despite the difficult economic times that we are in, has, over the last two years, found jobs for 35,000 disabled and disadvantaged people, many with similar disabilities to those that people working in Remploy factories have. We are also working with the Employers Forum on Disability to offer targeted work opportunities for disabled people through “first shot”, including guaranteed interviews, job trials, work experience and training. We have set up a community support fund to provide grants to local voluntary sector and user-led organisations, and we have protected the budget for specialist disability employment services, which is £320 million, on average, for every year of the spending review period. What is more, we have added to that: we have added £15 million specifically to Access to Work, which means that 8,000 more disabled people can be supported into work as a result of today’s announcement.
This is an ongoing process that will continue over the summer recess. I commit to keeping right hon. and hon. Members updated on the status of the business plans that are going through to the next stage. I will provide a further update on progress when the House returns in September.
Our approach has been led by disabled people and disabled people’s organisations. Many of them have welcomed the move to end the pre-war practice of employment segregation, and it should be welcomed in all parts of the House and by all hon. Members who believe in equality for disabled people. By spending these protected Government funds more effectively, we can support thousands more of our constituents into work. What is more, we can spend the money in a way that fits the needs and aspirations of disabled people in the 21st century, promoting disability equality and supporting disabled people to lead full and independent lives.
Mrs Anne McGuire (Stirling) (Lab)
I thank the Minister for advance warning of her statement and indeed an advance copy of it.
I am somewhat surprised, however, that the Minister failed to identify the factories where there are no agreed business plans. With your indulgence, Mr Speaker, I shall quickly run through them: Acton, Ashington, Barking, Birkenhead, Bolton, Cleator Moor, Gateshead, Leeds, Leicester, Manchester, Newcastle, North London, North Staffs, Oldham, Penzance, Pontefract, Preston, Southampton, Spennymoor, Wigan, Worksop and Boston Spa; in Scotland, Wishaw; and in Wales, Aberdare, Abertillery, Merthyr Tydfill, Swansea and Wrexham. Other staff at risk include modernisation staff. It is disappointing that the Minister did not put that on the record.
May I try to lay to rest the issue of segregated employment? As the Minister and many others in the House are aware, there are strong views about so-called segregated employment, but many people who work in Remploy factories, and in other supported businesses throughout the UK, do not see themselves as segregated. They see themselves as exercising the same choice as non-disabled people have when they choose employment. We need to get away from the split between segregated and so-called non-segregated employment. I hope that the Minister will take that on board.
May I ask the Minister one or two questions about her statement? Why does she continue to declare that she is implementing the Sayce review, when Liz Sayce stated:
“Employees and management of Enterprise Businesses should be given a sufficient window (for instance, six months) to put forward a business plan to this expert panel setting out how the business will become viable without Government subsidy”?
That refers to six months. What we have had is a 90-day window to implement a closure programme. I am astonished that the Minister continues to use Liz Sayce’s report as some sort of human shield to disguise what she is doing.
The scale of the closures announced today vincidates Liz Sayce’s view that if only nine factories have been able to put together a business proposal in that 90 days, her six-month window would have given a far greater opportunity to some of the other factories to access such business expertise. The Minister made great play of the £10,000 for business advice for employee-led bids. Those involved would be hard pushed to get business consultancies for £10,000 to put together a business plan for some of the factories.
The time frame for closure does not take into account the challenge of winding up businesses and supporting people, many of whom have complex disabilities. Why has the Minister also decided to renege on the agreement made with those in the so-called modernisation group? There was an agreement with former employees that was supported in all parts of the House when the modernisation programme was announced, and many will be disappointed, if not surprised, that what was supported in opposition has been abandoned in government.
Will the Minister clarify the position of the Remploy pension scheme and how the Government will honour their responsibilities to that scheme? Given that the Government’s Work programme is missing its target for disabled workers by 75%, what new support is the Minister putting in place to support Remploy workers who will lose their jobs?
Frankly, there are times when I wonder whether the Secretary of State understands any of Remploy’s arguments as he sits and sniggers when he is not making disparaging comments about disabled workers.
Can the Minister distance herself from the harsh economic climate in which we find ourselves? Even if she is minded to make this decision, doing so in the current economic climate makes it look as if she is abandoning her duty of care to disabled employees who have given many years of service to a company that the Government own—a company that this country owns.
The Minister mentioned the Access to Work programme. She might wish to remind the House that Access to Work numbers are plummeting under this Government—[Interruption.] Well, the DWP figures seem to indicate that the Access to Work uptake has not been as good as she sometimes indicates to the House. In 2007, when my right hon. Friend the Member for Neath (Mr Hain) announced the modernisation programme, the now Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling), said:
“Let me assure Remploy and its employees that the next Conservative Government will continue the process of identifying additional potential procurement opportunities for them and the public sector work force.”—[Official Report, 29 November 2007; Vol. 468, c. 451.]
Where is that Minister now, and what action has he taken in government to fulfil the promise he so glibly gave in opposition?
Finally, there is a programme that the Government have paraded around, telling us how wonderful it is: the regional growth fund. The National Audit Office has said that jobs created by the regional growth fund cost the taxpayer between £4,000 and £200,000. It has also said that 90% of the jobs could have been delivered at a cost of £26,000 a job, which is slightly more than the subsidy for Remploy workers and those losing their jobs today.
I do not disagree with the Minister that this is a difficult decision—many Opposition Members have been through some of these issues before—but I charge her, in a situation in which tens of people are chasing every job in some of the constituencies where Remploy factories are closing, with having abrogated her responsibility to disabled workers who have given a lifetime of service to Remploy.
Maria Miller
The right hon. Lady has very strong views on this matter, but perhaps I could ask her to consider the views of disabled people. Let me bring to the House’s attention a quote from Disability Wales, an organisation whose views many hon. Members on both sides of the House might value:
“Disability Wales… does not see Remploy as either progressive or forward thinking in their approaches to service provision. Although they may once have been seen as providing opportunities for disabled people, they are now standing in the way of full integration and indirectly hampering individuals’ chances of progression.”
I am afraid that that is what the people of Wales feel, and that reflects what many other organisations that represent disabled people in this country feel.
The right hon. Lady talked about the important issue of jobs, but I really wish that she would check her facts before coming to the House. If she were to do so, she would see that Access to Work is actually spending more money than ever before in supporting disabled people across the country. Yes, there is more that we can do, and that we are doing, because what we inherited was what Liz Sayce called the best secret in government. We are going out and marketing Access to Work actively to make sure that more people can use it to get into work. [Interruption.] The hon. Member for Garston and Halewood (Maria Eagle) says from a sedentary position, “You have to get a job”, and she is absolutely right. The individuals affected by today’s announcements live in areas where Remploy’s employment services arm has actually helped 10,500 disabled people into work over the past year alone, and indeed 35,000 over the past two years. She might be happy about having disabled people shut away in segregated factories but I am not, so on that we will have to disagree.
The modernisation plan is four years into its five-year process, and what is clear to us is that at least we are able potentially to take out of Government control some of the factories that have been subject to the initial phase 1 stage, which were judged by our independent advisers not to be financially viable. We still have to look at phase 2 factories—some 18 of them—that are judged to have more chance of financial viability, and I look forward to bringing hon. Members up to date on our progress with that in the summer.
On the pensions scheme, I reassure the right hon. Lady that we will protect in full all the accrued rights of participating members. As to the modernisation group, I also assure her that we are having ongoing conversations about how we can help to ensure that some of the people involved are not affected by redundancy. Perhaps I can talk to her in detail about that at a more appropriate time.
Mr Speaker
Order. There is extensive interest in this very important subject, but there is also enormous interest in the second day of the Second Reading debate on the House of Lords Reform Bill, which I am inclined to accommodate, so I shall try to get in as many as I can now, but I need short questions and short answers.
Nicky Morgan (Loughborough) (Con)
I welcome the Minister’s statement and, in particular, the emphasis on Access to Work, especially for those with mental health disabilities, in which I am specifically interested. Will she say a little more about how Access to Work is helping those with mental health problems to have fulfilling jobs?
Maria Miller
My hon. Friend takes a great interest in the area and will be pleased to know that we are doing more to market Access to Work to people who have learning disabilities or mental health problems. Access to Work is an excellent scheme, but even more people with mental health problems need to participate in it, and we have an active marketing programme behind achieving that.
Mr Peter Hain (Neath) (Lab)
Has the hon. Lady any idea how arrogant and out of touch she sounds this afternoon? This is a shameless betrayal of thousands of disabled workers who have been in sheltered employment—not segregated employment, but sheltered employment—all their lives and will never find jobs when there are no jobs to be had in areas such as mine, where 10 people are chasing every job vacancy. How can she so cynically misrepresent the modernisation plan that I announced at the end of 2007—£555 million, dependent on Government-supported procurement and public sector-backed job opportunities? None of that has been put in place. It has not failed; it has not been allowed to succeed by this out-of-touch Government.
Maria Miller
I thank the right hon. Gentleman for coming in for today’s statement and for being able to participate in the statement process, because he more than anybody knows the very real dilemma that was faced under the previous Administration with Remploy, and I pay tribute to the work that he did to try to give Remploy an opportunity to get back on its feet. He will know that there are more than 12,000 disabled people in his constituency, and the Neath furniture factory will continue through the summer process, which I am sure he welcomes. I hope that he would want to ensure that more of those 12,000 people receive the sort of support that I know he feels can work.
Stephen Lloyd (Eastbourne) (LD)
Will the Minister, for absolute clarity, confirm two things: first, that every single penny spent will go to help disabled people into mainstream employment; and, secondly, that it will be in addition to any money provided by the Work programme also to help disabled people into employment?
Maria Miller
I am pleased to confirm to my hon. Friend that we have a £320 million protected budget; that as we move forward, I want to see all that money supporting people into mainstream employment—into all the same jobs that any of us would want to take up outside this place; and that this money is in addition to any finances that are available for the Work programme.
Ian Lucas (Wrexham) (Lab)
For the last 16 Saturday mornings, Remploy workers in Wrexham have been out campaigning to keep their factory open. I cannot explain why the private sector bid in connection with the factory has been rejected. If the Minister believes in the policy, will she come and meet the Wrexham Remploy workers and explain it? She should be ashamed of the statement that she has made today, and to say that the people of Wales support it is a lie.
Mr Speaker
Order. I must ask the hon. Gentleman to withdraw any suggestion that the Minister has lied to the House. I am sure he would want to withdraw that suggestion.
Maria Miller
I very much admire the vigorous way in which the hon. Gentleman has supported his local factory. Having met him and spoken to him at great length, I know that he is simply trying to stand up for his constituents, and I respect that. I have to say to him, though, that the bid that was put forward on that factory has been considered by commercial experts. I am not a commercial expert. Remploy directors and an independent board have been looking at the bid, so it would not be appropriate for me to discuss it with his constituents. I gently remind him that while we have here a difficult decision for the 40 people who work at the Wrexham factory, he must also consider the 7,400 disabled people who live in his constituency and who will benefit greatly from the way in which we are taking this programme forward.
Conor Burns (Bournemouth West) (Con)
Will the Minister join me in wishing Giles Verdon and his team at the Alder Hills Remploy site in my constituency well as they develop their business plan to move from being a state enterprise to a social private enterprise? Without asking her to enter into an open-ended commitment, may I ask her whether there would be any flexibility if some of these sites need a little more time than has been set out today?
Maria Miller
Of course, I echo the comments that my hon. Friend has made. With regard to the timing of the next stage of this process, it is very important that we use the time that we have available. To confirm and clarify the timing of the bids process, it will have been some five and a half months for those going through to the second stage of the bid round. We will take the time that is needed to make sure that bidders get the information that they need and the access to the support that is there for them to make sure that as many of the bids as possible are as successful as they can be.
Ian Lavery (Wansbeck) (Lab)
Thousands of disabled people will be heading home tonight certain of one thing, and that is a lifetime of unemployment. What advice would the Minister give to those individuals and their families with regard to employment in future? Is she not absolutely ashamed that this despicable, cruel act has happened on her watch?
Maria Miller
I can absolutely understand that hon. Members are speaking with a great deal of passion, because this is a very important issue that affects some of the most vulnerable people in our constituencies. However, I gently remind the hon. Gentleman that if we are truly going to be people who stick up for disability equality and for disabled people in this country, who number some 6.9 million, then these are the changes that we need to make and that disabled people and disabled people’s organisations have called for. The previous Government were fully aware of that. The modernisation plan has not done what was required, and we are now taking that money and making it work harder for disabled people.
Tracey Crouch (Chatham and Aylesford) (Con)
Royal British Legion Industries, which is based in Aylesford, employs many disabled people in its factories. We must be very mindful in this place that whenever politicians make an announcement about disability employment, it can be incredibly frightening. Will the Minister therefore reassure my constituents that this Government will do all they can to continue to provide good-quality employment for disabled people?
Maria Miller
My hon. Friend is absolutely right to remind us all that what we say here can cause a great deal of fear and concern among the people we represent. Therefore, at all points in time, we should stick to the facts. In this case, the facts are that the £350 million budget for specialist employment support is being protected and that today’s announcement will mean that more than 8,000 extra disabled people will be able to be supported. She speaks with a great deal of knowledge in this respect. The organisation that she mentions has also been involved in the Work programme, which is also there to support disabled people.
Ann Clwyd (Cynon Valley) (Lab)
When Margaret Thatcher was Schools Secretary she was known as “Margaret Thatcher, Milk Snatcher”. You, Minister, are now known as “Maria Miller, Remploy Killer”. Are you proud of that?
Maria Miller
I am sorry, but that is exactly the sort of statement that this House should not look kindly on. The right hon. Lady knows, because she has been in this place for a lot longer than I have, that we should choose our words carefully because people listen carefully to what we say. The 13,600 disabled people in her constituency will be asking why she is not more supportive of a Government who are ensuring that there is £15 million extra to support them, as well as ensuring that the 37 people in the factory in her constituency receive the support that they need to go forward into mainstream employment.
Sir Tony Baldry (Banbury) (Con)
Surely the test is what support we can all give to disabled people to help them get back into the world of work, irrespective of where they live. As far as I am aware, there is not and never has been a Remploy facility in Oxfordshire or anywhere in the Thames valley. Will my hon. Friend confirm that she will do everything she can to ensure that the Access to Work programme gains the maximum possible synergy with the many work clubs and job clubs up and down the country, so that any disabled person who goes to such a club will know about the programme and how to get into it?
Maria Miller
I commend my hon. Friend for taking the kind of attitude that other hon. Members should take on this issue. He rightly points out that many parts of this country, not least as a result of the actions of the right hon. Member for Neath (Mr Hain), do not have access to a Remploy factory. We need to ensure that no postcode lottery appears. I am sure that my hon. Friend will be pleased to know that in the south-east—I think his constituency will fall into this area—almost 4,000 people have been helped through the Access to Work programme already, with some £10 million of expenditure. Through the measures that I have announced today, we will ensure that more people are helped.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
Shamefully, the Minister did not even take the time to read out the list of the closed factories. Had she done so, she would have noticed that the list includes Motherwell Remploy, which has not existed for 11 years. How is that dealing with fact?
Maria Miller
The hon. Gentleman will know that a list of the factories that are affected is attached to copies of the statement. I am sure that Mr Speaker, who I know wants to make progress, would not have thought that reading out a list of factories was the right thing to do.
Paul Maynard (Blackpool North and Cleveleys) (Con)
Does the Minister agree that young disabled people have higher aspirations than to spend 40 years of their working lives in segregated employment, shut off from society, being sheltered—what a ghastly, offensive phrase that is. Segregated employment has no role in today’s society. What we want is equality of employment rights.
Mr Speaker
I appreciate the Minister’s courtesy. What she says is, of course, a matter for her. I should just make it clear to the House and to those attending to our proceedings that the content of the statement is entirely a matter for the Minister. Whether she chooses to provide a list or not is her prerogative. I respect the sincerity with which she addressed the House.
Robert Flello (Stoke-on-Trent South) (Lab)
Last year, many of my constituents, in their supported environment at North Staffs Remploy, put in for voluntary redundancy because they could see the writing on the wall. They were turned down because, it was said, they were key workers. They now find that they will get just statutory redundancy, rather than the enhanced money that was available last year. Does the Minister think that that is fair and right? Perhaps she would like to come to my Remploy and talk to the workers, such as Steve and others, who will have night after night of sleepless nights because there are no jobs for them in Stoke-on-Trent. They will not be able to sleep at night—will she?
Maria Miller
Again, I understand the strength of feeling; the hon. Gentleman is trying to ensure that the people in his constituency are supported in the way that they need to be. I gently remind him that the estimated average redundancy of somebody in a Remploy factory will be about £19,000, which is more than double the average that would be received under the statutory scheme. It is important that people get the right level of support, so we are making £8 million available to support individuals into mainstream employment. [Interruption.] The hon. Gentleman asks what jobs are available. I remind him of the many hundreds of jobs that the employment services have found for disabled people in his constituency.
Harriett Baldwin (West Worcestershire) (Con)
When the Select Committee looked into Remploy, we took evidence from union bosses who had enlisted some of the people in the factories. Does the Minister think they have helped the difficult situation by giving leaflets to employees saying, “If you lose your job, you will lose your humanity”?
Maria Miller
I commend the work of the Select Committee in highlighting that. I agree that it is unfortunate, but I do not know whether it is surprising. It is certainly saddening to hear of a trade union taking such action. I have to say, I have had a number of constructive meetings with the unions over recent months. I would point out also that it is estimated that as a result of our redirecting funding to Access to Work, an additional £200 million of value will be realised from the specialist disability employment programme. Perhaps the Committee might want to examine that.
Sir Alan Meale (Mansfield) (Lab)
What consideration has the Minister given to the role of the specialist training colleges? Will she guarantee to support them so that they might endeavour to help clear up the current situation and help people who need support?
Maria Miller
I confirm that I met the specialist disability training colleges some three weeks ago and have further extended the contracts available to them to provide specialist support. They will have an important role, and we are working with them to ensure that we define that role carefully so that it meets the needs of disabled people.
Angie Bray (Ealing Central and Acton) (Con)
Those working in the Remploy factory in Acton will obviously be disappointed by today’s news. Can my hon. Friend provide some reassurance that they will get full support as they lose their jobs, and will she give us some details of the timetable for that support?
Maria Miller
Both the Secretary of State and I have visited the Acton factory in my hon. Friend’s constituency, and I know that this will be a difficult time for the 31 people who work there. I can confirm that we are already ensuring that a tailored package of support is in place for each individual who is affected. It is important, however, to acknowledge that that factory, like the others that we are discussing, has sizeable operating losses—more than £700,000-worth last year. I am sure she will agree that we could use that money better to support more disabled people into work.
Sheila Gilmore (Edinburgh East) (Lab)
Does the Minister not appreciate that she is, in effect, setting off one group of disabled people against another? Surely it is not necessary to have some people lose the jobs that have given them so much in their lives in order to help other disabled people. We should think of much better ways of doing that.
Maria Miller
I simply do not accept the hon. Lady’s premise. Through the work that we are doing today, we will support thousands more disabled people into work. If she were to examine the consultation responses that we received, she would see that the overwhelming majority of disabled people and disabled people’s organisations thoroughly support our measures.
Mr David Evennett (Bexleyheath and Crayford) (Con)
I strongly support my hon. Friend’s statement. Is it not the case that for every person working in a Remploy factory, we could support eight disabled people to take up and retain a mainstream job for the same amount of money? Surely that is the right way forward.
Maria Miller
My hon. Friend is absolutely right. In these difficult economic times, we have to ensure that the protected £320 million works better for disabled people in this country.
Paul Goggins (Wythenshawe and Sale East) (Lab)
This is a sad day for the staff at Wythenshawe Remploy, who have fought hard for the past five years to keep their factory open. They have become more efficient and increased their sales. My deep regret is that the Minister has failed to identify the £250,000 of additional print work that would have enabled that factory to break even and stay in business. How will she track the 1,421 people whom she is making redundant today, and will she commit to making a monthly report to Parliament about how many of them find alternative employment?
Maria Miller
I had a meeting with the right hon. Gentleman and I know that he comes to the debate with genuine concern about his constituents. He will know that the financial situation of the factory in Wythenshawe was such that it was not possible for a valid financial case to be made even with the sort of extra business he mentioned—there were operating losses of more than £300,000 and 19 disabled people employed in the factory.
The right hon. Gentleman is absolutely right, however, that this will be unlike the previous round of redundancies, under which there was insufficient tracking in place. When it came to it, we simply did not know how many people moved into employment, although we know that many affected by the previous round retired. We have learned from that mistake. With the permission of the people affected, we will put in place a comprehensive system of tracking. I will undertake to ensure that hon. Members get appropriately regular updates on progress.
Tom Brake (Carshalton and Wallington) (LD)
For Government plans to provide and retain employment opportunities for people with disabilities to succeed, benefits will need to be flexible. We will also need to recognise that costs for people with disabilities can go up as their independence increases, and that costs vary according to the technological support they need. Will the Minister guarantee that benefits will be flexible in that way?
Maria Miller
The right hon. Gentleman is absolutely right that disabled people have extra costs of living and extra costs for working. We are committed to reforming the disability living allowance into the personal independence payment, to ensure that we continue to recognise those costs, but in a more targeted way. We are also putting £15 million extra into Access to Work to provide the sort of flexibility he describes.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I have a number of concerns about the bidding process for the Remploy sites under threat of closure, but will the Minister confirm that the assessment panel was given only three days over a weekend to consider all 65 bids? Does she consider that extraordinarily short time scale to be sufficient for proper scrutiny of those bids?
Maria Miller
What I know is that proper scrutiny has taken place, and that we need to ensure the programme makes good progress so that we can ensure that the people affected are informed in a timely manner.
Mr Lee Scott (Ilford North) (Con)
Does my hon. Friend agree that getting young people with special needs into work in front-line jobs is vital? Will she join me in congratulating another employer that yesterday came on board with the project to get young people into work in my area?
Maria Miller
I am glad to commend my hon. Friend’s work and I am looking forward to visiting the project in his constituency. He highlights the importance of supporting young disabled people into employment. I was pleased in the past couple of weeks to announce that Access to Work will also be available in future to young people undertaking work experience.
Toby Perkins (Chesterfield) (Lab)
Workers at the Remploy factory in Chesterfield will be relieved to know that there is a glimmer of light—the site is one of those invited to make a bid. On that note, will bids be accepted from organisations that no longer have a policy of disabled people first? Will disabled people still be prioritised in bids from such organisations?
Maria Miller
In evaluating the bids that will be taken forward, our first priority is to ensure that the bids that protect most jobs for most disabled people are given priority.
Bob Stewart (Beckenham) (Con)
Will the Minister reassure me that personal caseworkers will have the resources to tailor a place of work when assisting a disabled person to find work, so that they help the person as much as possible? Will she also assure me that those resources will be available at the point of delivery?
Maria Miller
My hon. Friend is right to focus on the support package we are putting in place to ensure that people affected by today’s announcement get all the help they need to get into mainstream employment. That will be in the form of both a personal budget, which can give the flexibility to ensure that training is put in place for individuals, and access to any of the mainstream programmes that the Government run, including Work Choice, the Work programme and Access to Work.
Chris Evans (Islwyn) (Lab/Co-op)
The union convener at Croespenmaen Remploy factory, Ian Lloyd, has been told that Croespenmaen might have a buyer but will not find out until September. As the Minister might be aware, this gives the workers there some hope. Will she guarantee, first, that they are not being led up the garden path and, secondly, that they will have all the support in place at the moment?
Maria Miller
I was pleased to have a meeting with the hon. Gentleman, who has been a doughty advocate for his factory and constituency, and obviously it is good that we will be moving forward with the bid. We will work hard to do everything we can to make bids successful, but obviously they have to be commercially viable and provide jobs for disabled people. Those are our priorities.
Chris Heaton-Harris (Daventry) (Con)
My apologies, Mr Speaker, for the tiny burst of excitement earlier.
Will my hon. Friend remind me how many factories were closed down by the last Labour Government and what support package they put in place to help workers made redundant in 2008?
Maria Miller
My hon. Friend will know that 29 factories were closed under the previous Administration, and it was an error not to put more support in place for people affected. I am sure, if Labour did it again, it would do things differently, because it became apparent very early on that, of the 1,611 disabled people who left factories as a result of the modernisation redundancy programme, very few got into work. However, given the package that we have put in place today and the record of Remploy employment services over the past two years—they have helped 35,000 disabled people to get into work—we are living under a very different set of arrangements.
John McDonnell (Hayes and Harlington) (Lab)
The Minister referred to this as a difficult decision, but for the Remploy workers watching this debate it is a tragic decision. She has just mentioned the numbers who left work last time who have never been employed since. How many can she guarantee will be in secure employment in 12 months’ time?
Maria Miller
I can guarantee that by using the money differently we can help more disabled people into work. As a result of today’s measure, some 8,000 disabled people can get into work who would not have had that support otherwise.
Andrew George (St Ives) (LD)
The Penzance Remploy factory in my constituency has contributed not to segregation but to an integrated spectrum of employment opportunities for disabled people, and today’s news will come as a bitter disappointment, especially in view of the fact that it has worked tirelessly with the local college and the Brandon Trust to find an alternative model. I do not know whether the Minister indicated that the door was still open on some of those listed among the 27 today, but would she be prepared to meet me and representatives from my constituency to explore alternatives to today’s announcement?
Maria Miller
My hon. Friend obviously speaks up strongly for the Penzance factory, which employs 32 disabled people, but the problem is that in employing them the factory runs an operating loss of more than £700,000 a year. It is unfortunately difficult to resolve that situation and achieve financial stability, however, and, although I am always available to meet him, I am not sure how satisfactory the outcome of such a meeting would be for him.
Jim McGovern (Dundee West) (Lab)
I have visited the Remploy factory in my constituency so often that I am almost on first-name terms with most of the work force, and I can assure the Minister that they do not regard themselves as a segregated work force. There seem to be two lists—one of factories with no agreed business plan and one of those inviting bids—but Dundee’s factory does not appear on either. What does the future hold for the Remploy factory in Dundee?
Maria Miller
The Remploy factory in the hon. Gentleman’s constituency will be taken forward; I am not sure why that is not on his list.
Mr Frank Doran (Aberdeen North) (Lab)
Our thoughts today must be with the 1,400 Remploy workers losing their jobs and facing probably a lifetime of redundancy. Of course, I am delighted that my factory in Aberdeen is going forward, which is a tribute to staff and management at the Aberdeen factory. It has been achieved, however, in spite of Remploy management’s failure to provide any useful information that would have allowed for any financial planning or even to talk about taking forward social enterprises. I hope that the Minister will ensure that in the second phase these things will be a key part of the process.
Maria Miller
I thank the hon. Gentleman for his comments. As for the factory in his constituency, I spoke to the Scottish Government this morning. They are keen to try to continue with their support, as they have been working with us throughout the process. We will of course take forward any lessons from the first stage of factories into the second stage, but I think the process has been handled well and thoughtfully, and with the right level of professionalism.
Pat Glass (North West Durham) (Lab)
The Spennymoor Remploy factory is not in my constituency, but it is just a mile over the border and it employs severely disabled people from the Crook and Willington area of my constituency. Is the Minister seriously telling me that severely disabled people—three members of the same family in one case—will get alternative employment in a constituency where unemployment has more than doubled since this Government came to power?
Maria Miller
The hon. Lady obviously wants to ensure that people in her constituency are well provided for, and I hope that she will be reassured by the comments I have made today about the employee support plan and the £8 million that the Government have put in place. Spennymoor is not in her constituency, but she will know that in the constituency of Bishop Auckland, where it is located, there are more than 13,000 disabled people, compared with the 40 disabled people who work in the factory. We have to work together to ensure that more disabled people are supported into work. We know that more than 500 disabled people in the area were supported into mainstream work by Remploy employment services in the last year alone. The jobs are there if people get the right support.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The Edinburgh Remploy plant employs a number of people in my constituency. Obviously I am pleased that it is one for which bids are to be invited in the next stage of the process. Can the Minister give an indication of the time scale by which the process is to be completed, so that people can have some certainty about whether they will be in continued employment?
Maria Miller
To reiterate what I said earlier, through the summer process the bids being taken forward will be able to gather more of the detailed, commercially sensitive information that they require to be able to make a full and final offer. That process will be completed around the beginning of September, and I would of course be happy to keep hon. Members updated if they have an interest outside their constituencies.
Mr Clive Betts (Sheffield South East) (Lab)
The Remploy workers in the factory in my constituency in Sheffield are unanimous that they want to keep their factory open. With her use of terms such as “segregated employment”, the Minister gives the impression that her ultimate objective is the closure of all Remploy factories. What reassurance can she give to the workers in Sheffield that their factory is safe in her hands?
Maria Miller
I say to both the hon. Gentleman and the Remploy workers in his constituency that we are taking forward the Sayce recommendations. She said clearly that the factories should be set free of Government control. That is the process that we are working on at the moment. I hope that the hon. Gentleman would want to ensure that the 17,500 disabled people in his constituency get more help and support. Let me also remind him that Remploy employment services has done an outstanding job in his constituency, helping more than 1,300 disabled people into mainstream jobs—just the sort of jobs that disabled people would like more of, as they are telling us clearly.
John Woodcock (Barrow and Furness) (Lab/Co-op)
We are obviously hoping to secure a successful bid in Barrow. However, further to the questions from my hon. Friends, and after the alarmingly pejorative tone in which the Minister has described workers being “shut away” by Remploy, will she be requiring any successful bids to target future opportunities specifically at disabled people?
Maria Miller
The hon. Gentleman has misread my tone. I can absolutely tell him that I am working very much with disabled people on the programme that we are putting forward today. It is led by disabled people, and the plan that we are following is very much led by the recommendations in the Sayce report. It is good news that we are able to do further work on the bid for the hon. Gentleman’s factory, and I hope that he will perhaps be able to support the factory in that. However, the broader reform that we are talking about will do much more to help the 12,000 disabled people in his constituency.
Mr William Bain (Glasgow North East) (Lab)
I can assure the Minister that people in my constituency and throughout Scotland will be standing shoulder to shoulder with the workers and those campaigning to keep all 36 Remploy factories open. Given that she is prepared to consider bids for the Springburn factory in my constituency, will she give a guarantee to the 46 workers there that there will be no compulsory redundancies if the factory is sold?
Maria Miller
The terms of the bid that is progressing in the hon. Gentleman’s constituency are being dealt with by the commercial directorate of Remploy, so I cannot comment on that point. I would, however, again draw the House’s attention to the words of the right hon. Member for Neath (Mr Hain), who is no longer in his place. He has stated:
“The reality is that without modernisation Remploy deficits would obliterate our other programmes to help disabled people into mainstream work.”—[Official Report, 29 November 2007; Vol. 468, c. 448.]
Is that really what the hon. Member for Glasgow North East (Mr Bain) wants to see? I do not think so.
Chris Bryant (Rhondda) (Lab)
The vast majority of disabled people who are in work in my constituency work in mainstream jobs. They are delighted to do so, and I am delighted that they are doing so. However, Remploy in Porth plays a significant role for quite a lot of people, and the workers there are doing valuable jobs, including recycling information technology equipment and wiping hard drives, which might have been useful for News International at one point. If the Government were prepared to ensure that all Government Departments put their IT recycling through Remploy in Porth, the factory’s future would be guaranteed. Porth is not on either of her lists, however. What is going to happen to Porth?
Maria Miller
The hon. Gentleman knows that the 130% increase in public sector procurement that was included in the modernisation plan was simply unachievable. Having visited the Porth factory and met the workers there, I know how important it is to his community, but I would also remind him that the 71 people in that factory are only a few of the more than 12,000 disabled people in his constituency.
Point of Order
David Tredinnick (Bosworth) (Con)
On a point of order, Mr Speaker. I wonder whether you have heard the reports on the 4 o’clock news that the programme motion will not be moved this evening. Can we expect a statement on that matter, please?
Mr Speaker
I have not heard the reports—I was not listening to the 4 o’clock news—and, as the hon. Gentleman well knows, that is not a matter for me, and it is certainly not a point of order.
We come now to the ten-minute rule motion—[Interruption.] Before I call Dr Julian Huppert, I appeal to right hon. and hon. Members who do not wish to hear the presentation by Dr Huppert and who are leaving the Chamber to do so quickly and quietly, so that the hon. Gentleman can present his motion, which we await with eager anticipation.
Local Services (Planning)
(12 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Dr Julian Huppert (Cambridge) (LD)
I beg to move,
That leave be given to bring in a Bill to enable local planning authorities to require the granting of planning permission prior to the demolition or change of use of premises or land used or formerly used as a public house or local independent shop, to enable local planning authorities to require the granting of planning permission if premises or land will be used for a supermarket; and for connected purposes.
I am sure that the whole House would agree that we all seek to protect local communities, and the essence that holds them together and makes them different from other communities. We know that our villages, towns and cities are becoming ever more alike. There are ever more chain shops and supermarkets, progressively turning every high street into a clone town, and those vital community hubs, the British pubs, are closing down across the country. It is vital that we keep and support our pubs and local independent shops; otherwise, we risk losing them for ever.
The Bill that I seek to introduce today would help local communities to protect their shops and pubs. It would tweak planning law—only slightly—to rebalance the playing field in their favour. Technically, it would allow the use of locally determined use classes to separate local independent shops from chains, and supermarkets from other grocers, as well as placing new constraints on changing use away from pubs. Critically, it would be up to the local council to use the measure if it wished to do so. Every area is different, and no council would be forced to use it if it was not appropriate for its area.
I certainly do not claim that the measure will fix every problem faced by local shops and pubs. Independent shops face many wider problems, some of which have been identified in the Portas review. For example, they face institutional landlords who will, in some cases, deal only with national chains and not even consider renting premises to an independent shop. This is affecting a start-up in Cambridge, Caffè Sicilia, at the moment. Supermarkets have the economic might to drive out local shops, and pubs face challenges from the sale of cheap alcohol in those supermarkets, as well as from predatory pubcos, demand for housing and much else. We can take a stand, however, and hand local people the power to separate independent shops from chains, supermarkets from grocers, and pubs from estate agents.
What exactly is the scale of the problem? Let me start with pubs, many of which are at the core of their communities. I believe that Cambridge has some of the greatest pubs in the country, such as the Eagle, where Watson and Crick announced that they had discovered DNA, the secret of life. In reality, it is the local community pubs, those that do not have a famous story to pull in the punters, who will benefit the most from local control. Many fleeting conversations over a drink between academics and entrepreneurs who have created partnerships and founded companies have made Cambridge into the city it is today.
There are more than 80 pubs in Cambridge, serving very different communities: some local, some attracting people from across the city. We have great pubs such as the Maypole, the Empress, the Cambridge Blue, St Radegund and the Devonshire Arms. Over the last three years, however, more than 20 pubs have closed in Cambridge. This is replicated nationally, with 12 pubs closing every week. This is not simply some cold fact of life that our constituents should have to accept and deal with.
Many of these pubs are profitable. The Flying Pig, near Cambridge station is immensely popular and is doing better every year, especially since becoming a free house. Built in 1832, it was one of the first buildings on Hills road, but it is threatened with demolition to be turned into flats. In my old ward of East Chesterton, the Green Dragon is now the only trading pub. The local Penny Ferry, Dog and Pheasant and Haymakers are all boarded up, and local councillors struggle to find planning grounds to protect them.
Rural pubs face similar threats. When the only pub in a village closes, that is a huge blow for the residents there, as well as posing a risk in respect of drink-driving. Pubs are, ultimately, a responsible place to drink: landlords can control excessive drinking, and rural pubs can quite literally keep whole villages on the map. Pubs are valuable economically, too—each pub injects an average of £80,000 into a local economy, and pubs in Cambridge alone employ just under 1,500 people, many of them young—as well as promoting the intangible “well-being” that local councillors must be able to protect. So pubs provide a valuable service to local communities, beyond just the purely economic. The Government’s national planning policy framework recognised that fact, but still more is needed. We should help local people to protect their pubs.
Much the same is true when it comes to independent local shops and the high streets they create. Nationally, 12,000 local shops closed in 2009. On every high street across the country, we can see many of exactly the same shops—chains of coffee shops, clothes shops, betting shops. Now chains have many advantages—economies of scale, for example—and they can afford better lawyers and get cheaper rent. There is nothing wrong with having some of them. If there are too many, however, our high streets become identikit clones of each other. We lose the variety that makes our towns and cities special and different from each other. Our shopping options become ever blander and the range of options available diminishes more and more, as we see the demise of the specialist, the different, the quirky.
Some high streets have already succumbed, and could be anywhere in the country. Others fight on: Bridge street and Mill road in Cambridge are good examples, well worth visiting. They work together to look after their areas, and have strong local groups to help each other; but across the country, the traffic is largely one way. Independent shops turn into chains, but they rarely go back the other way. This has economic effects, as well. The proliferation of chain shops is often a false economy for local residents. At their worst, they can temporarily sell below cost to force independents to close, but when they are the only shop in town, prices can go back up again. More of the takings get sucked away from local people. A 2009 report by the New Economics Foundation found that twice as much money is kept in a local community if people buy locally than if they buy from a chain.
There is, of course, a particular issue around supermarkets, which are growing strongly in number. In Cambridge alone, there are no fewer than 15 branches of Tesco. In and of themselves, supermarkets are not a problem—people choose to shop there—but an individual supermarket or supermarket chain can utterly dominate a local economy. Monopoly powers apply nationally, but the residents of Mill road in Cambridge care very little about whether a supermarket holds a national monopoly. They care immensely, however, if it is the only local place to shop and if a supermarket has a local monopoly that eradicates a local high street much loved for its diversity. Currently, planning law simply does not allow for a discrimination between Abdul Arain’s Al-Amin grocery store and the Sainsbury’s planned for the other side of the road, but residents know that they are a very different proposition.
People know what it means to live in a free-market economy, and they appreciate that if shops are unprofitable, they cannot stay open. What I am talking about today is giving councils the power to stand back, if they wish to, and ask, “Would this supermarket represent a local monopoly? Would it actually decrease choice and competition? Would it ultimately produce a worse place to live?”.
I asked my constituents, and others more broadly via Twitter, to suggest which Bill to propose today, and this issue was suggested by very many of them. The Bill has received support from many residents, from local independent shops in Bridge street, Mill road and elsewhere, and from pub landlords in Cambridge. An online and a paper petition have received hundreds of signatures. Nationally, the Bill has secured the backing of CAMRA, the Campaign for Real Ale, which has been immensely helpful throughout the process; the all-party parliamentary Save the Pub group; the Local Government Association, which represents all our councils; and a strong cross-party group of MPs.
The Government have shown some commitment to localism. It has been observed in the past that Britain is one of the most centralised countries in the western world, and it has been a pleasure to welcome some of the devolution that we have seen over the last few years—including that provided for by the Localism Act 2011—but there is still far more to do. When the Localism Act was working its way through both Houses, I fought for more local power along with a number of colleagues. The so-called Cambridge amendment tabled in the other place, to which I have referred in this place, would have granted powers comparable to the power that I am proposing today. It was not accepted—much to the disappointment of Cambridge city council, which had proposed it—but perhaps this approach will be more successful. In the words of CAMRA,
“we need to give communities a much greater say over the future of valued local services such as pubs.”
CAMRA also says that the
“proposed Bill would go a long way to protecting local pubs and the communities they serve.”
This is, appropriately, independent retailer month. Let us in Parliament do something to mark it. I urge all Members to support the motion, and also to shop locally and sample their local pubs.
Question put and agreed to.
Ordered,
That Dr Julian Huppert, Caroline Lucas, Tim Farron, Greg Mulholland, Simon Wright, Mr John Leech, Sir Peter Bottomley, Grahame M. Morris, Jim Dowd, Andrew Stephenson, Nicola Blackwood and Jonathan Reynolds present the Bill.
Dr Julian Huppert accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 26 October and to be printed (Bill 58).
Mr Peter Bone (Wellingborough) (Con)
On a point of order, Mr Speaker. The media have announced that there will not be a programme motion. According to Standing Order No. 63, by rights the Bill should not be committed to the whole House, but should go to a Public Bill Committee upstairs. Will that procedure apply in this case?
Mr Speaker
I do not think that Standing Order No. 63 applies in this case, given that the programme motion has been tabled. I am happy to take further advice on the matter, and to consider whether the hon. Gentleman’s point is valid—
Mr Speaker
—but help may be at hand, both for the hon. Gentleman and the House, courtesy of its Leader.
I beg the right hon. Gentleman’s pardon. I thought that he was seeking to respond to the point of order, but no. However, we shall hear from him very soon.
Let me simply say that Members take a huge interest in the debate on Second Reading of the Lords Reform Bill. Almost 90 right hon. and hon. Members have applied to speak, and that fact is reflected in the six-minute time limit. Obviously, there is no time limit on Front-Bench speeches, but I am sure that Front Benchers will tailor their contributions accordingly. I also ask Members please not to come to the Chair inquiring whether, and if so when, they will be called. We will do our best to accommodate as many of them as possible.
House of Lords Reform Bill
(12 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
21:59 - The House divided: - Ayes: 462 / Noes: 124 - Question accordingly agreed to.
The Leader of the House of Commons (Sir George Young)
We have listened carefully to the debate so far, confident that we will get a significant majority on Second Reading tonight. But for Lords reform to progress, it needs those who support reform to vote for reform and to vote for that reform to make progress through this House. It is clear that the Opposition are not prepared to do that, so we will not move the programme motion tonight. We remain committed to making progress on Lords reform, and with Second Reading behind us we will then consider how best to take this agenda forward and how best to secure progress through the House for reforms that have the backing of this House. The Government will move a timetable motion before we make progress in the autumn, in accordance with the rules of the House.
Ms Angela Eagle (Wallasey) (Lab)
The Government’s decision to withdraw the programme motion today is a victory for Parliament. The Leader of the House has talked about a timetable motion, but will he now confirm, so that there is no doubt, that if this Bill passes its Second Reading tonight, it is the Government’s intention to bring forward immediately a motion to commit the Bill to debate on the Floor of this House? Will he also confirm that it is not now the Government’s intention to bring forward a guillotine on this Bill, having effectively lost the argument for a timetable today? We must have the time to debate this Bill and scrutinise it adequately.
Sir George Young
I have nothing to add to what I have just said, apart from this: there will be business questions on Thursday, and at that point I hope to be able to tell the House more about the Government’s proposals.
Sir Menzies Campbell (North East Fife) (LD)
Does my right hon. Friend have any sense of optimism that, following the announcement he has just made, the Labour party will at last tell us how many days it wants?
Sir George Young
I say to my right hon. and learned Friend that I am ever optimistic, but, as he will have noticed during the exchanges yesterday, despite repeated requests, the Opposition were never able to put a figure on the number of days that they would have found adequate.
Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)
Will the Leader of the House give way?
Mr Blunkett
I am very grateful to the right hon. Gentleman, who is indeed a gentleman and always has been. Will he confirm what he said a moment ago in reply to my hon. Friend the Member for Wallasey (Ms Eagle): that a timetable motion will actually be brought forward in the autumn by the Government, and as a consequence the only way in which this House can show its displeasure at this constitutional abomination of a Bill is to vote against it on Second Reading tonight?
Sir George Young
I respect the right hon. Gentleman, but I would not draw that conclusion. The issue on Second Reading is whether the House supports the principle of the Bill, and I very much hope that the House will do so. As I said, there will subsequently be a timetable motion, which the House will have an opportunity to debate and vote on, and it is at that point that the right hon. Gentleman will be able to express any concern that he may still have.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
May I commend the Government for the wisdom of their decision today? But may I put it to my right hon. Friend that whatever moral authority this Bill had it has now lost? I commend his determination to reflect on what to do next, but may I beg him to make no further commitments about what might be decided, because I think that the authority of the coalition will be undermined if it proceeds with a Bill that it is unable to obtain?
Sir George Young
With great respect, I have to disagree with my hon. Friend. Whether the Bill has “moral authority”, to use his words, depends on the verdict of the House on Second Reading. If the House gives the Bill a majority on Second Reading, the House is perfectly entitled to make progress with it, and I indicated in my statement that in the autumn we hope to come back with a timetable motion in order to make progress. But we do now have some moments for reflection.
Sir George Young
I will give way one last time, as I am conscious of Mr Speaker’s injunction about the large number of people who want to speak.
Jesse Norman
I am enormously grateful to my right hon. Friend for giving way. Let me make it clear from the Conservative Benches that the very substantial opposition from within the Conservative party, not just that from Labour, was responsible for the withdrawal of the motion. That should be perfectly clear and reflected in the record.
Sir George Young
On these matters, I listen to my right hon. Friend the Patronage Secretary, who indicated some dissent with the proposition put forward by my hon. Friend. I always agree with the Patronage Secretary.
In response to your injunction, Mr Speaker, I shall now move on to what I was going to say about the merits of the Bill on Second Reading. I want to address the issue of the primacy of the House, which was a matter that concerned many hon. Members yesterday. As the first Conservative Front Bencher to speak in the debate, however, I hope the House will understand if it I say why I think my party should continue to support the Bill.
The House will recognise that I could have no conceivable problems with the Bill, given that some of the ideas originate in a book that I co-authored in 2005, to which the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) referred yesterday. I have spoken in favour of reform in just about every debate since 1997—and there have been many—and, like many colleagues, I have supported reform in the Lobby. I respect the views of my colleagues who oppose our reforms, but I point out that the last time the House voted on this topic in a free vote in 2007, the majority of Conservative Members voted against a fully appointed second Chamber.
Some have branded the Bill a Liberal Democrat measure, but I invite the House to look at the list of the Bill’s sponsors. As far as I am concerned, the Bill has strong Conservative antecedents, and I would have been happy to introduce it if we had had a majority Conservative Government. My party has a long and proud history of constitutional reform. Although other issues might make the hearts in North West Hampshire beat a little faster, we have always been concerned with the health of Parliament.
At the 1955 general election, the Conservatives under Anthony Eden announced in their manifesto:
“It has long been the Conservative wish to reach a settlement regarding the reform of the House of Lords, so that it may continue to play its proper role as a Second Chamber under the Constitution.”
Three years later, it was a Conservative Government under Harold Macmillan who navigated through Parliament one of the few reform Bills of the past 100 years, the Life Peerages Act 1958. I say to my colleagues who are unhappy about this Bill that when the then Government introduced the 1958 Bill, it was in the teeth of sharp objections from some Conservatives in both Houses, but I believe that everyone now accepts that that was a sensible reform. I believe the same is true of our proposals to move progressively from an appointed to an elected House. I see nothing Conservative about retaining a wholly appointed upper House in the 21st century.
Conor Burns (Bournemouth West) (Con)
My right hon. Friend referred to the free vote in this House in March 2007. I remind him that in the vote on the wholly appointed element of the proposals, 17 current Conservative Ministers and six Conservative members of the Government Whips Office voted for that 100% appointed Chamber. They will now be compelled to vote against their beliefs.
Sir George Young
I am sure that my hon. Friend’s point is absolutely accurate, but that does not destroy the point I made a few moments ago, which was that on a free vote in the previous Parliament, the majority of Conservative Members voted against a wholly appointed House. As a matter of interest, the whole House voted by a majority of two to one against a fully appointed House.
Sir George Young
I will give way to the right hon. Gentleman, but I am not going to give way for ever.
Mr MacShane
The Leader of the House is making the perfectly fair point that different parties at different times have had manifesto and party commitments to reforming the House of Lords. We can be agreed on that. The Prime Minister is offering a referendum to the people of the Falklands and a possible referendum on Europe and we have had a referendum on the alternative vote system, so will the Leader of the House explain why the British people are not being offered a referendum on the biggest constitutional change since 1832 as a final part of the Bill?
Sir George Young
I say gently to the right hon. Gentleman: what happened to the Lisbon referendum? I do not know whether the right hon. Gentleman was in the Chamber yesterday, but my right hon. Friend the Deputy Prime Minister dealt with the question of a referendum on several occasions. He dealt with it again in Deputy Prime Minister’s questions today and it is dealt with in our response to the Joint Committee’s report. In the 1990s, under the leadership of my right hon. Friend the Foreign Secretary, the Conservative party opposed Labour’s changes to the composition of the upper House, not because we wanted to retain the hereditary peers, but because we took a principled stand to argue—with very little dissent—for “no stage 1 without stage 2”. Our fear, disputed forcefully by Labour at the time, was that if we did not move immediately to an elected House after the abolition of the hereditaries, progress would inevitably stall. That was my party’s view at the time, and how right we were.
Let us remember that, in their response to Lord Wakeham’s report in 1999, the previous Government said that they would
“make every effort to ensure that the second stage has been approved by Parliament before the next general election.”
That was the 2001 election, when they told us we were going to elect the first tranche. Yet with three large majorities, three White Papers, two Green Papers, one royal commission, one Joint Committee, two Acts of Parliament and two sets of free votes, Labour missed a golden opportunity to move on to the second stage, despite support from many Conservatives and Liberal Democrats.
Pete Wishart (Perth and North Perthshire) (SNP)
Will the right hon. Gentleman give way?
Sir George Young
I propose to make a little more progress, and then I may give way again.
No political party ever voted for the halfway House that we now have, and no one wanted that to be the lasting settlement, or imagined that it would be. Although their Lordships do a diligent job, I believe their work is undermined by their lack of democratic legitimacy. It is simply unacceptable that just five people have appointed over 75% of the Members of our second legislative assembly. Tony Blair appointed 316 peers during his time in office. I find that difficult to defend.
Pete Wishart
Should we not just go home? The Leader of the House knows it is all over; Government Members know it is all over. We have more important things to debate and decisions to make today. Let us just say, “Enough is enough,” and call the whole shooting match off.
Sir George Young
The hon. Gentleman can go home, but the Government plan to proceed with their legislative programme.
Mr William Cash (Stone) (Con)
On the question of election, would the Leader of the House be good enough to explain how it can possibly be justified that the Lords in question should be elected for 15 years?
Sir George Young
The average length of service now is 24 or 26 years, so the proposal is an improvement.
Sir George Young
No, I am going to make some more progress.
We have ended up with exactly what the Conservatives warned against at the time. As my right hon. Friend the Foreign Secretary said when he was Leader of the Opposition:
“if we are not careful we are going to have a House of Lords dominated by the cronies of the prime minister of the day”.
I say to Members of my own party that they cannot argue for “no stage 1 without stage 2” and then block stage 2. We have been committed to a mainly elected second Chamber since 1999 and this commitment was in our last three election manifestos.
Let me address briefly the issue of primacy, which came up repeatedly during yesterday’s debate—
Sir George Young
No.
Some colleagues accept the case for reform, but are opposed to the idea of election. We heard yesterday that giving the House of Lords a more democratic mandate might somehow undermine the primacy of this House. I have never believed in the one-dimensional view of the relationship between the two Houses, in which if one Chamber gains in authority, the other must lose. That point was made by my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso)—the only Member, incidentally, who has experience of both Houses. I have always believed that a reformed, more accountable second Chamber will strengthen Parliament as a whole. As the Wakeham report concluded:
“Our ambition for the reformed second chamber is that it should enhance the overall ability of Parliament as a whole to hold the Government to account. It should do this by using its particular strengths to develop arrangements which complement and reinforce those of the House of Commons.”
Most of the time, the Commons and the Lords are not rivals, but partners in holding the Government to account. I would argue that over the past 10 years, the House of Lords has gained in authority, not at the expense of this House, but at the expense of the Executive. I would further argue that if the legitimacy of the House of Lords were to be enhanced by the injection of some democracy, its authority would be further enhanced, not to the detriment of the Commons, but better empowering Parliament as a whole to do its job. Those who believe in a stronger Parliament should welcome, not obstruct, a more effective second Chamber.
Sir George Young
I commend the right hon. Gentleman on his persistence, which is now rewarded.
Mr Spellar
I thank the Leader of the House for his usual courteous generosity. He claimed that what he says follows a long line of Conservative tradition, so can he explain why there is not a single Conservative Cabinet member on the Front Bench to support him?
Sir George Young
I now regret giving way to the right hon. Gentleman, because I am sure that there are other Members who would have made a more worthwhile point if they had intervened. Looking around, I see a large number of colleagues behind me, and I have all the support that I need.
On primacy, the fact is that Members of this House are all elected on the same day, on the basis of a party manifesto. We are elected to the pre-eminent House in Parliament—pre-eminent because it sustains the Executive, controls supply, and produces the Prime Minister. We submit ourselves for re-election, which is when the country gives a verdict on our performance. None of those conditions would apply to the second Chamber as proposed in the Bill. Elected Members would not be elected all at the same time, but over a longer period—a move supported by the Joint Committee on the draft House of Lords Reform Bill. The other place would have no mandate to rival the mandate of those in this House; indeed, some Members of the other place would be not elected, but appointed. The notion that they could somehow convert themselves into an equally legitimate Chamber that could challenge the authority of this House is simply far-fetched.
Jacob Rees-Mogg (North East Somerset) (Con)
Will my right hon. Friend give way?
Sir George Young
No, I am pressing on. Nothing in the Government’s Bill changes the current status of the second Chamber, which is clearly defined as complementary and subordinate to this House. Its only powers are those given to it by this House, which remains pre-eminent. The second Chamber would simply not be able—even if it wanted to—unilaterally to change its powers after reform, any more than it can now.
Another misconception relates to the Government’s preferred electoral system for the second Chamber. An assumption has arisen that, somehow, Members of the upper House who are elected on party lists will have been parachuted in by the party leadership. I say as delicately as I can that this has not been my party’s experience with Members of the European Parliament, some of whom have proved robustly independent in their opinions, and in expressing them, and were certainly not the preferred candidates of the leadership. Indeed, this argument ignores totally the democratic hoops through which candidates must jump before being selected: primaries, public meetings, and the scrutiny to which people seeking election are properly subjected.
Whereas there is a closed list in the European Parliament, we propose a semi-open list, so voters can overturn the order predetermined by parties. Ultimately, colleagues who have an issue with the Government’s proposals will want to analyse and probe them in Committee, but I do not believe that the list system will have the consequences that some have suggested.
Margot James (Stourbridge) (Con)
My right hon. Friend mentioned elected Members of the European Parliament. Does he not agree that just because another elected Member has one’s constituency as part of their region, it does not mean to say that they are interfering in one’s work all the time? No MEP has ever interfered with my work.
Sir George Young
And how very wise Members of the European Parliament are not to interfere in my hon. Friend’s constituency.
I turn finally to the issue of the progress that we have sought to make with the Government’s legislative programme, and with the Bill in particular. The Deputy Prime Minister established and chaired a cross-party Committee to develop policy and explore the contentious issues. There was a five-hour debate once the White Paper and draft Bill were published in 2011. There has been more than 22 hours of debate on the subject in the upper House since the beginning of the year.
Wayne David
As the Government now accept that there is a need for consensus on the issue, will the Leader of the House give a commitment to open meaningful dialogue immediately with the Oppositioning?
Sir George Young
The hon. Gentleman almost tests my patience. We are always open to discussion through the usual channels on issues such as this. I have to say gently to him that before we had even tabled the programme motion, the Labour Opposition said that they would vote against it. That did not indicate the sort of consensual interchange of ideas that the hon. Gentleman has just invited me to engage in.
We established a Joint Committee to consider the draft Bill. That Joint Committee held evidence sessions on 16 separate days—approximately 48 hours of parliamentary time—with the Minister giving evidence on four separate occasions. After the Joint Committee had concluded, we responded to it and we have amended the Bill before the House in the light of its recommendations.
As I confirmed to the House at the beginning, the Government will not proceed this evening with the programme motion. I want sufficient time to debate and vote on these issues, but I also want sufficient time for the House to scrutinise other important Bills in our legislative programme—major reforms to the banks, public service pensions, electricity markets, adoption and support for children with special needs, the state pension, the creation of a national crime agency, and the rest. Some substantial constitutional measures have passed through Parliament in the past two years—on fixed-term Parliaments, the referendum on the alternative vote, reducing the size of the Commons and the referendum lock on powers to Europe—yet the coalition also pressed ahead with sweeping reforms to public services and getting on top of the deficit.
I know that a number of my colleagues on the Government Benches have objections in principle to what is in the Bill, and I listened to them with respect yesterday. They are likely to register their objections on Second Reading. But if the House gives the Bill a Second Reading, I hope they will respect that decision and the need to make progress with others measures in our programme for the current Session.
I hope that Back Benchers on both sides of the House will see the Bill for what it is: a serious attempt at long last to strengthen Parliament’s ability to hold the Government to account, which will raise the game of the Executive and empower the individual citizen. I commend the Bill to the House.
Ms Angela Eagle (Wallasey) (Lab)
Yesterday we heard a string of passionate and heartfelt speeches about this, the most persistent and difficult piece of unfinished business. On the way into the Chamber we had a flurry of Twitter traffic and nudges and winks which culminated in the statement made by the Leader of the House.
After yesterday’s Liberal Democrat day in this two-day debate, we have arrived at the Conservative day. The right hon. Gentleman promised me last week that there would not be any difference in tone and approach between the two days. I have detected a slight difference since he made his opening statement, but we have now arrived at the Conservative day, opened by the Leader of the House with his usual courtesy and good humour. At least, I thought his speech was a bit dodgy at the beginning, but he recovered his humour and courtesy. The debate will be wound up by the Parliamentary Secretary, Cabinet Office, the hon. Member for Forest of Dean (Mr Harper).
The Minister with responsibility for political and constitutional reform embarked on a kamikaze tactic on the radio yesterday in support of the Bill when he asserted that Winston Churchill would vote for it if he were here tonight. Let me give the hon. Gentleman a little friendly advice. Never think that it is possible to know more about the political views of a great statesman, a parliamentarian and a war leader than his grandson does. If his grandson happens to be a Member of the House and might be listening to the radio while re-reading his op-ed which torpedoed Government policy in The Daily Telegraph, it is probably better to keep such dubious insights to oneself.
The Deputy Prime Minister did not make himself any more popular among those on the Government Benches when he appeared to denigrate the work of the Lords during his opening speech yesterday. It was noticeable that it took an age before any of his Liberal Democrat colleagues decided to try to help him cope with the friendly fire from behind. His cause was not helped by the Liberal Democrat peer, Lord Oakeshott, who referred to some thankfully unnamed peers as “deadbeats” and “has-beens”. I presume he excluded himself from that colourful description of his colleagues, although I am not sure the compliment would be returned.
Surely we should be able to discuss this important constitutional reform without resorting to such abuse. Surely the issue is not so much about the personal attributes of individual Members of the second Chamber as about how they came to be there.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
It is my position, as the husband of a Member of the upper House, to speak dispassionately and without disparaging that House, but surely the hon. Lady must recognise that, as in this House, a wide variety of personalities are to found there, although not a very wide variety of ages, but all its Members have one thing in common: none of them was elected to be there.
Ms Eagle
I agree with the right hon. Gentleman. I support replacing the current House of Lords with a wholly elected second Chamber. At the last election I stood on a manifesto that contained a commitment to legislate for a wholly elected second Chamber. On all the occasions when the Commons has considered Lords reform in the 20 years I have been a Member of this House, I have always voted for a democratically elected second Chamber, unlike everyone on both Front Benches. It is a matter of principle for me that those who legislate should always bring a democratic mandate to the task.
The Labour party is committed to an elected second Chamber, which is why we will vote for one tonight when we support the Bill on Second Reading. We will do so despite our reservations about the Government’s current proposals, which I will turn to in a moment. The Government’s decision to withdraw the programme motion today is a victory for Parliament. Although we will support the Bill’s Second Reading, we could not have supported the Government’s attempts to curtail debate with a programme motion. We welcome the fact that they have faced up to this reality and withdrawn the motion.
Guy Opperman (Hexham) (Con)
Yesterday the shadow Justice Secretary was asked four times how long the Opposition would require to consider the Bill. Will the hon. Lady enlighten the House on how long the Opposition require now?
Ms Eagle
I am trying to give the hon. Gentleman an answer that befits the scale of the issues we face, rather than answer a silly question in the way he asked it.
As I was saying, we need to ensure that the Bill has proper scrutiny, because it would replace a wholly appointed second Chamber with an elected one. It would not have been right for the Government to limit the time that a democratically elected House can spend debating proposals to extend democracy. The Opposition believe that it is important that Parliament, not simply the Executive, is in control of the debates on the Bill. We believe that every part of the Bill needs proper scrutiny, because under the terms of the Parliament Acts it is possible that this Bill, as it leaves this House, will be the one that makes it on to the statute book. That makes it absolutely imperative, in our view, that all parts of the Bill are effectively scrutinised here.
Mr Peter Bone (Wellingborough) (Con)
The hon. Lady is making a powerful point, but it should not be up to the Executive or the shadow Executive to determine how much time the House takes to debate the matter; that should be for the House to decide. The Bill should not be programmed in any way whatsoever.
Ms Eagle
We look forward to seeing what proposals the Government actually bring forward. I tried earlier to get a few hints from the Leader of the House, but he seems not to know the answer yet. I hope that we will know soon what the Government intend to do, but the principle that the entire Bill must have adequate scrutiny and that when it leaves this place, it must be fit for purpose is the one that is in our minds.
Mr Stephen Dorrell (Charnwood) (Con)
Opposition Front Benchers asserted yesterday that the timetable motion on today’s Order Paper would not give adequate time for the Bill to be debated as it goes through the House, so they must have some idea of how much time is adequate if they were able to reach that conclusion. Just why was the question asked by my hon. Friend the Member for Hexham (Guy Opperman) on how many days are adequate a silly one in that context?
Mr Jenkin
Programme motions are, in fact, a modern convention. Constitutional measures used to go through the House without any timetable motions, or even guillotines, at all, and with any major constitutional measure on which the Government are determined to deny any referendum, a proper discussion of the relevant Bill is the only check and balance that this House has on change in our constitution.
Chris Bryant (Rhondda) (Lab)
But one practice that has existed for hundreds of years is the one whereby, when a Bill receives its Second Reading, it is committed by virtue of a resolution of the House either to a Bill Committee—since 2006, a Public Bill Committee—or to a Committee of the whole House. It looks as though if the Bill gets its Second Reading tonight, it will be in complete limbo, which the Pope abolished several years ago. So is it not essential that we have some clarity on where the Bill is going to go, preferably before it gets its Second Reading?
Ms Eagle
My hon. Friend is exactly right, and that is why I attempted to obtain some clarity from the Leader of the House when he made his bombshell announcement at the beginning of this debate. We would appreciate some certainty from Government Front Benchers on how we can deal with the issue.
The Leader of the House and I have something important in common: we were both Members prior to the introduction of the routine programming of business, and we both know that it is possible to scrutinise effectively a Bill that does not have a programme motion attached, because we used to do so all the time. The Government, following their climbdown today, will have to come forward with new proposals, and the Opposition look forward to seeing what they are, but let me confirm for the record that, after adequate scrutiny, we want the Bill to go to the other place.
Labour has a proud record of reforming the Lords. We have been responsible for all the major changes to the other place over the past 100 years: the removal of hereditary peers, the introduction of an elected Speaker and the creation of the Supreme Court. We wanted to go further and tried in the previous Parliament to pass legislation in favour of an elected Chamber, spending extra time trying to forge a cross-party consensus.
This Government seem to spend so much time on inter-coalition diplomacy, however, that they keep forgetting to work with Her Majesty’s official Opposition, and on issues of constitutional change, that is an insult and a mistake. We will support the Bill’s Second Reading, but the Government’s proposals give us cause for concern in a number of areas that we will need to explore further, so I thought that it would be helpful to the House if I set some of them out.
I was elected on a manifesto promising a referendum on House of Lords reform. That is why the Prime Minister’s and Deputy Prime Minister’s argument—that a referendum is not needed because reform featured in all three party election manifestos—is so disingenuous. Our manifesto offered people a choice. It is the Government who are seeking to deny the electorate a say once the new arrangements have been forged and decided here.
Ian Austin (Dudley North) (Lab)
If all three manifestos proposed House of Lords reform and the electorate had no choice, does that not strengthen the case for a referendum, rather than diminish it?
Dr Julian Lewis (New Forest East) (Con)
I support the point made by the hon. Member for Dudley North (Ian Austin). I was first elected to this House in 1997, when the question of replacing the pound with the single European currency was active. The Government and the Opposition said, “Wait and see—we’ll let you know after the election whether we’ll keep our own currency,” while the Liberal Democrats said that they were going to scrap it and replace it with the euro. The electorate had no choice on that matter. I think that everyone agrees today that there should have been a referendum if there had been such a proposal.
Mrs Anne Main (St Albans) (Con)
The Liberal Democrats stood on a manifesto that said:
“Liberal Democrats will do things differently, because we believe that power should be in the hands of people, not politicians. We will give people a real say in who governs the country”.
I would say that people need no bigger say than on the constitutional changes that are being proposed. I do not see what is any different about the need to have a referendum and talk to people about who is going to be governing the country.
Ms Eagle
The hon. Lady makes a point of great insight and acuity. I merely say to her that the Liberal Democrats also campaigned on the slogan, “No more broken promises”.
Our Government held referendums on setting up the Welsh Assembly, the Scottish Parliament, the Northern Ireland Assembly and the office of London Mayor. This Government have legislated so that every tiny adjustment to European treaties now requires a referendum. Only last year, there was a referendum on extending the powers of the Welsh Assembly. Although some might like to forget it, there was a referendum on adopting the alternative vote for UK general elections. Only this May, a number of English cities held referendums on directly elected mayors. I cannot for the life of me see why the people of Birmingham and Bristol got to vote in a referendum on an elected mayor but are to be deprived of a vote on an elected second Chamber. On major constitutional questions, by convention and by right, the British people have the final say in a referendum. It follows that we believe that there should be a referendum on an elected second Chamber.
Tony Lloyd (Manchester Central) (Lab)
I think that my hon. Friend was in the Chamber earlier when the Deputy Prime Minister justified the lack of a referendum on the grounds of cost. She might reflect on the fact that the same Deputy Prime Minister deferred the elections for police commissioners from May, when the cost would have been minimal as they would have coincided with the local elections, to November, on the grounds of their importance. Those elections may be on important matters, but I suspect that they are not as important as total constitutional reform. Why can the Government spend money on one form of election but not on a referendum of this importance?
Mrs Eleanor Laing (Epping Forest) (Con)
The hon. Lady asks why the Government do not want to go ahead with a referendum. I wonder whether the answer might be that if a question were put to the British people the affirmative answer to which was, “You will have 450 extra elected, salaried, full-time politicians,” the British people might say no.
Ms Eagle
I am not sure that the answer to the question is “823—and counting—appointed politicians who legislate” either, so I am sorry to have to disagree slightly with the hon. Lady. The important principle is that when changes of this importance are being decided, the British people should have a say.
Ian Swales (Redcar) (LD)
Will the hon. Lady remind the House of whether her party had a referendum on the removal of 550 hereditary peers from the Lords?
David Miliband (South Shields) (Lab)
Is not the significant difference that in our 1997 election manifesto there was a clear and discrete commitment to the removal of hereditary peers, and that in our 2010 manifesto, there was equally a clear commitment to hold a referendum? Does that not show the consistency of my hon. Friend’s position?
Ms Eagle
I have given way a lot and I want to get on to another worry that we have over the legislation, which we want the debate to focus on in the days and weeks ahead.
The Bill makes an interesting and controversial assumption on the powers of the second Chamber. We are asked to believe that, despite the shift to 80% election, there will be no change in powers. It is important to safeguard the supremacy of the Commons after any reform. Unless the powers and privileges of the two Houses in relation to each other and the conventions covering the way in which they interact are dealt with explicitly, there will be the strong possibility of more frequent conflict between the two Houses post-reform. A mere statement about the supremacy of the Commons in clause 2 is unlikely to be sufficient for the purpose.
Even as we speak, the Salisbury-Addison convention is crumbling away before our eyes. On previous experience, we can expect it to be disregarded much more when there is a Labour majority in the Commons than when there is a Conservative majority.
Mr Blunkett
This is a crucial point. Is it not the case that the preamble to the Parliament Act 1911 presumed that if there was election to the upper House in the future—what would be described as a popular mandate—it would inevitably regain further powers? Clause 2 eliminates the preamble, but not the point that it was making back in 1911.
Ms Eagle
My right hon. Friend is right that the move from a wholly elected Chamber to one that is almost entirely elected inevitably raises questions about the relationship between and the powers of the two Chambers which we should debate in this place.
With issues that do not feature in the party manifestos, the situation will be even more fraught. The situation with secondary legislation will also be problematic. This is uncharted territory. That does not mean that we should run away from reform, but we must not simply cross our fingers and hope that these issues will miraculously be resolved or will not crop up.
Rory Stewart (Penrith and The Border) (Con)
Among all the discussion about reform, does the hon. Lady agree that the great opportunity for reform that is being presented, which those from every part of the House should support, is to ensure that, in future, any major constitutional change of any sort in this country goes through a proper procedure, including a referendum? That would bring us into line with every other democracy of the 21st century, about which we have heard so much.
Ms Eagle
I hope that the hon. Gentleman would agree that I have been making the case as strongly as I can for a referendum on this issue.
The matter of powers has to be dealt with effectively in primary legislation. We cannot behave as if the Parliament Acts never existed. Merely asserting that they are still on the statute book is not nearly adequate as a mechanism for determining the relative powers of the two Houses.
There are also questions over the length of the terms and the term limit. The core principle of a democratically accountable Parliament must surely be that the legislators are accountable at the ballot box for their decisions. Members of the current House of Lords, as was pointed out more than once in yesterday’s debate, never have to account for their decisions at the ballot box. That is the essence of the democratic deficit that we are all trying to address. However, the Government are proposing a second Chamber where Members will never be accountable for their decisions, because they will be prevented from standing for a second term. That needs to be looked at again.
Along with our concerns over the restriction on re-election, we also have concerns about the proposed length of the terms. Members of this House are elected for five-year terms. It is not immediately apparent that electing Members to a second Chamber for terms as long as those that are proposed will provide much democratic legitimacy, especially when the terms are drawing to a close. There is merit in having longer terms of office in the second Chamber, but we hope to reach agreement on Report on more sensible and practical terms.
We also have concerns about the Government’s proposed electoral system, which we could probably spend many hours talking about. Their preference is a semi-open list, whereas we favour an open-list, proportional representation approach. We will explore the chances of a change in that system during the passage of the Bill.
Chris Huhne
Is not the logic of what the hon. Lady says about accountability that anybody who is not going to stand in a subsequent election should no longer have a vote? Would that apply to Members of this House who had declared that they intended to stand down?
Mrs Main
On the hon. Lady’s point about safe seats and unaccountability, the average time in office for a Member of Parliament is two terms, which was previously eight years. The Bill would enshrine safe seats for 15 years, which is double the expected length of time spent here by a Member of Parliament who has to face the public.
Anna Soubry (Broxtowe) (Con)
The hon. Lady makes some important points, but does she not agree that it is important that we stop playing politics and start actually doing politics? If we do not put through a proper reform of the House of Lords, we will lose a once-in-a-generation golden opportunity. To achieve proper reform, will she now work with the Leader of the House, whom she clearly respects, so that we can get a proper timetable for seizing that golden opportunity?
Ms Eagle
I respect the hon. Lady, but it is important that she recognises that it is not playing politics to disagree with a programme motion on such an important matter on which the Government decided without consulting the Opposition. I hope she has realised from listening to my speech that the Opposition are serious about achieving reform of the second Chamber. I hope that we can work together to make progress on scrutinising the Bill appropriately.
The Government propose an 80% elected second Chamber, and 80% is better than zero, but a wholly elected second Chamber would be better still. A House in which one in five Members are not elected could still be one in which the unelected hold the balance of power. Indeed, they could decide every vote. Would that Chamber be truly accountable to the British people? That needs to be reconsidered.
Mr Jack Straw (Blackburn) (Lab)
May I take my hon. Friend back to the issue of programme motions? She came here before we introduced them, and by the way, I regret that we ever did. [Interruption.] Yes, and I have been consistent on that. Does she accept that before programme motions were introduced, a number of major and constitutional Bills went before the House and were dealt with satisfactorily? New Members perhaps do not properly appreciate that a programme motion not only closes debate according to a timetable but restricts the rights of Back Benchers much more than an ordinary and open motion of committal to the Floor of the House.
Ms Eagle
My right hon. Friend makes an extremely good point. As I said earlier, both the Leader of the House and I have experience of getting Bills on to the statute book perfectly sensibly before the era of programme motions. The House is capable of doing that, and it can do it again.
The Opposition have other concerns about the Government’s proposals which we hope to explore further in Committee and on Report, but we will support Second Reading, because we believe the House should ensure that the Bill is properly scrutinised.
Sir Alan Beith
It ought to be recognised that the hon. Lady has made very constructive points this afternoon, but she is not really arguing for a motion that ensures that issues that she and other hon. Members regard as important are debated with some protected time. At the end of the day, it should not be possible to block the Bill merely because some hon. Members will continue talking with that deliberate intent.
Ms Eagle
The difference between filibuster and debate is usually easy to see. The Opposition have said that we want the Bill to go to the Lords.
This is a historic opportunity to reform the House of Lords and I hope we achieve it, but Lords reform alone will not solve the big democratic challenge we face in the UK, which is the disengagement, apathy and cynicism that is such a notable feature of our society. Ours is not the only advanced democracy with that problem, but we must tackle the anti-politics mood. I believe passionately that politics can transform lives and help us to rebuild our society, but the corrosive cynicism of the anti-politics age in which we live is hard to overcome.
I fear that an elected second Chamber will not solve that. Lords reform is long overdue, but we face even greater challenges to our democratic system and values that we can meet only by believing more deeply in democracy and by having more and not less accountability. I do not underplay the profound impact that big constitutional change has on how we do government—it shows that we are putting our democratic values into action where it counts. We should seek to spread the light of accountability and democracy into all corners of our society and challenge the move to plutocracy that has been so evident in the developed democracies in the past 30 years. The Labour Government’s decision to devolve power to Wales, Scotland and Northern Ireland has had a beneficial impact on how we do government in the UK. Although Lords reform is unfinished business and business we must get right and get on with, it is only a small part of the answer to the more profound problems we face.
Every argument I have heard for the status quo runs up against the fact that the British people are shut out of the House of Lords. Each large new influx of coalition peers makes the ever more bloated House even more unsustainable—it now has 823 Members and rising. That is especially true as the size of the Commons is being reduced for narrow party political interest to its lowest number since the Great Reform Act of 1832.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
The hon. Lady mentions the influx of life peers. Will she support a ballot of life peers, as was held for the hereditary peers, to bring their numbers down to something more manageable?
Ms Eagle
There are all sorts of issues with exits from and entry to the House of Lords, which we should debate in the time we now have available for the Bill.
It is plain that the Lords as constituted is absurd and unsustainable. We should propose to the British people replacing it with a wholly elected second Chamber. Except during the interregnum, the House of Lords has existed for hundreds of years, but never once have the British people had a say on whether it should continue to exist. Let us therefore reshape the Bill and reshape the Lords, and ask the British people for their endorsement.
Mr Speaker
Order. Before I call the first Back-Bench speaker, may I, for the benefit of the House, now respond substantively to the point of order raised with me earlier by the hon. Member for Wellingborough (Mr Bone)? Standing Order No. 83A provides that, where notice is given of a programme motion, Standing Order No. 63 shall not apply. That means that, if the Bill is read a Second time this evening, it will not be possible for Ministers or others to move to commit the Bill, whether to Committee of the whole House or elsewhere. The Bill will remain uncommitted for the time being. I hope that that information is helpful to the House.
The six-minute limit on Back-Bench speeches now applies.
Gareth Johnson (Dartford) (Con)
Thank you, Mr Speaker. I am not sure what I am more surprised about—the fact that we are having this debate at all or the fact that I am the first Back Bencher called to speak. I am very grateful to you, Sir.
It is ironic, therefore, that I speak with some reluctance. I have never defied the party line before, and it is something I hope not to do throughout my time in Parliament, but the Bill is fundamentally wrong. I have been a loyal supporter of both the Government and my party, but I am proud to be British, proud of our constitution and proud of our Parliament. The other place forms an essential part of our constitution, our heritage, history and culture, and once it is gone, it is gone. Seven hundred years of history will be undone if we support the Bill.
I want to be able to look my children in the eye and say, “I did not forsake the British constitution. I said no.” The House of Lords is unique because Britain is unique, and we should celebrate that fact, not try to change it. If MPs are not going to protect Parliament, who is? The Lords will just be seen as looking after themselves, as and when they block this measure, so it is down to us. There is nobody else.
Chris Huhne
When my hon. Friend stood at the last election, did he draw his electors’ attention to the contents of the Conservative party manifesto that read:
“We will work to build a consensus for a mainly-elected second chamber to replace the current house of Lords, recognising that an efficient and effective second chamber should play an important role in our democracy and requires both legitimacy and public confidence”?
Gareth Johnson
There was no commitment in the manifesto I stood on effectively to abolish the House of Lords.
We need to be brave enough to say that the Lords works. It is not perfect, but it works. These proposals will ensure that the Lords operates in a party political manner. Legislation will be blocked or supported for purely party political reasons, rather than simply because the Lords believes that the legislation is wrong.
Richard Harrington (Watford) (Con)
I agree with most of the points my hon. Friend makes, but does he agree that it is possible to be in favour of reforming the House of Lords without supporting these ridiculous proposals and filling it full of party political hacks?
Gareth Johnson
My hon. Friend makes a valid point. Very few Members of this House think that the House of Lords is perfect in every way, but we do not want radical overhauls and an elected House of Lords, as suggested by this fundamentally flawed Bill.
Governments are currently created by single elections—general elections—and the reviewing Chamber acts as a check and balance without—[Interruption.]
Mr Speaker
Order. There are a lot of very noisy conversations taking place in the Chamber. These are serious matters, and I think we owe the hon. Gentleman whom I have called first the courtesy of a fair and decent hearing.
Gareth Johnson
The reviewing Chamber acts as a check and balance without the necessity of playing to the gallery. The contradictory nature of the two Houses of Parliament ensures that genuine revision of legislation takes place, and it is that essential difference between the two Houses that the Bill seeks to eradicate.
I oppose the principle of an elected second Chamber, but the details of the Bill are also wrong. Fifteen-year terms fly in the face of democracy. Even Robert Mugabe has not tried a term of office for that length of time. Fifteen years without any possibility of facing the electorate gives a mandate to that senator without any kind of accountability. The wealth of expertise that exists in the Lords will go, to be replaced by people who really wanted to be Members of this House.
Dr Sarah Wollaston (Totnes) (Con)
There are 79 Members in the other place who have expertise in engineering, medicine and health, and science and technology. Does my hon. Friend agree that all those specialties would be lost, despite the requirement for eight years or more experience?
Gareth Johnson
And there are many more, of course, who have expertise in government.
The Lords will end up as a dumping ground for failed party candidates and those who do not fancy facing the electorate more than once every one and a half decades. The Bill states that the Commons will remain supreme. That much we can legislate for, but we cannot legislate to control the amount of influence that the new Lords would have. A senator with a higher proportion of votes in a region will claim greater legitimacy than an MP in the same area. For centuries the Commons and the Lords have tended to work well together. A democratically elected Commons is complemented by an appointed and hereditary revising second Chamber, but the proposals in this Bill will set both Houses against each other. More than that, they will set senators against each other—those who are elected against those who are not. Make no mistake, Mr Speaker: this Bill does not just reform the House of Lords; it effectively abolishes it in all but name.
In conclusion, I feel bitterly disappointed that I shall be voting against my party—sick to the pit of my stomach, in fact—but I shall leave this Chamber with my head held high, able to look myself in the mirror. The House of Lords works. It has stood the test of time. We abolish it at our peril.
Ann Coffey (Stockport) (Lab)
I was a member of the Joint Committee on the Draft House of Lords Reform Bill. We sat from July 2011 to March 2012, for about 90 hours in total. We heard from many witnesses, who had very different and sincerely held opinions. The Committee members also held divergent views. There were those who thought that we should have sat for longer, but I am not sure that those divergent views would have been reconciled, however long we had sat.
I do not intend to go into every detail of the reasoning behind every recommendation, but I want to draw the House’s attention to one important division, on a recommendation that the Committee agreed by 16 votes to six: that if there were to be elections, there should be 80% elected and 20% appointed, as a means of preserving expertise and placing the mandate of the Lords on a different footing from that of the Commons. That proposal has been criticised. However, I would point out that it will retain the best features of the existing Lords, with room for independent experts from outside politics. There will be 90 independent Members, which is more than currently turn up to contentious votes in the present House. The evidence is that the electorate favour an elected House, but there is also evidence that they value independence in their representatives. I am sure that if there had been a proposal to have a 100% elected second Chamber, there would also have been strong criticism from parts of this House. In fact, it is difficult to foresee any proposals that would not be subject to criticism.
Some of the proposals in the Bill are not new. My right hon. Friend the Member for Blackburn (Mr Straw) made similar proposals on size, appointments, powers, remuneration and long, non-renewable terms in the 2008 White Paper, which said:
“Provision that members of the second chamber could serve only a single term would help enhance the independence of, and reinforce the distinct role for, members of the second chamber…There is widespread consensus that elected members of the second chamber should serve a single, non-renewable term of 12-15 years.”
The White Paper did not become a Bill.
Mr Straw
Does my hon. Friend accept that the proposal that we agreed for long single terms of between 12 and 15 years derived from the recommendations of Lord Wakeham and his royal commission back in 2000? It might be wise for hon. and right hon. Members on the Government Benches to look at what Lord Wakeham had to say in support of that.
Ann Coffey
I entirely agree with my right hon. Friend.
That White Paper did not become a Bill. There was a banking crisis at the time, and, as we have seen over the past 100 years, it is never the right time to reform the Lords. There is always a good reason not to change. However, the present House of Lords is unsustainable, simply on a practical level. If the current pace of patronage were to continue, its membership would rise to about 1,100. There would be so many peers that, soon, every town in the British isles would have its name in some Lord’s title. There is also a health and safety issue, with so many bodies in such a limited space, all trying to squeeze through the Division Lobbies.
Some say that the answer is to limit the numbers, but I have little confidence that the House of Lords could do that. For example, there was a debate recently in the Lords on a proposal to change the way in which their lordships address each other. One peer said:
“I think it is a retrograde step to start changing an age-old custom, particularly when it comes to ‘noble and gallant’, ‘noble and learned’ and ‘noble friends’. As I said on an earlier occasion, a right reverend Prelate shall ever be a ‘right reverend Prelate’.”—[Official Report, House of Lords, 8 November 2011; Vol. 732, c. 160.]
The motion was lost. Change comes hard to the House of Lords. At some point, however, the numbers will have to be dealt with. Does anybody seriously believe that numbers can be dealt with, and patronage not?
Reform of an unelected House in which some Members sit by virtue of their birth and others sit courtesy of their friends is inevitable. Reform of the House of Lords is as inevitable as reform of the expenses of Members of Parliament. Then, as now, this House thought that it could hold back reform, but it could not do so. This issue is not about us preserving our privilege and our position; it is about what is in the public interest and what makes for good governance. The electorate are changing. Social media are changing the way in which we interact with our electors, and their expectations of us are changing.
I am in the same position as many Members of Parliament, in that more people voted for other candidates in the last election than voted for me, but I represent the constituency of Stockport: those who voted for me and those who did not. In this House, we value that constituency link, and many of the issues that Members pursue are pursued on behalf of constituents. Indeed, there are many examples of excellent cross-party co-operation on issues that do not, and should not, divide the parties. Part of the frustration for Back Benchers in this House results from getting Ministers to listen to those issues and to make sensible amendments to legislation.
I believe that, if Ministers knew that they faced a more assertive House of Lords, they would be less inclined to dismiss the genuine concerns of Members of this House about particular aspects of policy or legislation. They would know that, even if they could dismiss the concerns in the Commons, they would face the same concerns in the Lords, but without the same willingness of the Lords to back down as they do now. Ministers might also consider giving this House more time to discuss Bills. That might put a stop to successive Governments making amendments in the Lords that they have refused to make in the Commons, thus sending out a message that the Commons is ineffectual.
There are many excellent Members of the House of Lords whose opinion and expertise I value. This is not about the power and privilege of the House of Commons versus the power and privilege of the House of Lords; it is about improving governance in the public interest, and improving the way in which we fulfil our role as representatives of the public. It must ultimately be about the people we serve.
Stephen Lloyd (Eastbourne) (LD)
It is a privilege to speak in this debate. I am a new MP; I have been in the House for only two years. Yesterday, I sat for a number of hours listening to the various speeches, and I found some of them quite surreal. As I understand it, there is a majority in this House who support House of Lords reform. The three political parties have had it in their manifestos for many years—or for ever, in the case of the Liberals—but I genuinely found some of the speeches in yesterday’s debate surreal. Reflecting on some of the contributions of my colleagues on the Government Benches, I noted that a number of them who spoke so actively, nay aggressively, against democratising the other place happen to be very Eurosceptic. Over the last couple of years or so, I have often heard them express their loathing of the European Union as an institution, usually by saying that it is undemocratic, unaccountable and thrives on patronage. Curiously, however, many of them spoke yesterday about how much they loved the House of Lords. I found that surreal.
Dr Julian Lewis
On that very point, when the power of the European Union and its institutions is reduced to the low level of the power of the House of Lords, a lot of us Eurosceptics will be very happy indeed.
Stephen Lloyd
I look forward to that day because it will mean that the hon. Gentleman will be supporting the democratisation of our Parliament, which I think is a good thing.
Equally, a number of esteemed colleagues on the Government Benches expressed outrage at the alleged threat from the Liberal Democrats over this Bill. I must admit that I found that quite rich because unless my memory confuses me, many of those very colleagues, outraged at the perfidious Liberal Democrats’ threats over the Bill, have been vituperatively threatening the Liberal Democrats—day in, day out—ever since the coalition came into being. To misquote the esteemed Corporal Jones from “Dad’s Army”, “Perhaps they don’t like it up ’em.”
Mr Jamie Reed (Copeland) (Lab)
I respect the hon. Gentleman’s contribution, but how do he and his party colleagues respond to the Prime Minister’s tacit approval for the Conservative Back-Bench rebellion against this Bill today?
Stephen Lloyd
I can answer that by moving on to my observations about the contributions made yesterday by some of my Opposition colleagues, which I also found surreal. Let me go through them. [Interruption.] Talking of coalition, whatever the challenges of two parties working together as we are in this coalition, which I actively support because of the state of the economy, it is interesting to look at the coalition between Blair and Brown in your 13 years, which was internecine every week. I take no lessons on that from Opposition Members.
Mr Speaker
Order. The House is lapsing into improper use of language. I do not know why the hon. Gentleman is referring to my 13 years. Debate goes through the Chair. I think he is referring to Opposition Members, but he should avoid using the word “you” in this context.
Stephen Lloyd
Thank you, Mr Speaker; I stand corrected and apologise.
Another point I discovered yesterday was that when it comes to debating the House of Lords, reactionary views are not restricted to my right-wing colleagues, as I heard some of them coming from Opposition Members. Even though the Labour party has supported House of Lords reform for many years and some Labour Members spoke with great passion, insight and conviction, I was struck by the unadulterated hatred towards the Lib Dems that was expressed in a number of speeches—[Hon. Members: “Aah.”]—for the temerity to try to bring in an elected second Chamber at last. It was quite incredible.
Stephen Lloyd
I am going to continue. I was talking about a parade by some Labour Members of brute tribalism over a Bill that is uncannily similar to one that their own party tried to introduce in 2007-08. It reminded me why, thank God, I left the Labour party 30 years ago. I believe that the Labour party’s official position on this Bill, which provides the best chance to democratise the second Chamber in 100 years, has been absolute humbug. Labour’s decision to vote against the programme motion would have killed the Bill, but if that had happened, the party would have said, piously and publicly, that they would have supported Second Reading. Government Members and not a few Labour Members know that that was absolute humbug.
I agree that the Bill is not perfect and that it is a compromise. I would make some improvements to it, some of which I hope will be implemented in Committee. The fundamental reason why I will support the Bill on Second Reading and, hopefully, as it goes through its subsequent stages is quite simple: in the year 2012, it is the people who should decide who represents them. The House has some unfinished business from 100 years ago. It really is time to bring democracy to the House of Lords. I will be supporting the Bill.
Mr Jack Straw (Blackburn) (Lab)
As the House will be aware, I spent the last four years of the previous Labour Government leading on the issue of Lords reform. The House voted decisively in March 2007 for an 80% or a 100% elected second Chamber and against all other alternatives. I then chaired the cross-party working group, which worked hard and constructively to develop detailed proposals for reform. The Deputy Prime Minister has taken that work forward. Many, though not all, of the Bill’s proposals have come, as my hon. Friend the Member for Stockport (Ann Coffey) pointed out, from the proposals that we brought forward. That includes the key proposal—I am sorry that I do not have time to go into all the arguments in its favour—for single, non-renewable 15-year terms and a ban on those elected to the other place from being able to stand immediately for this place. Although there is much in the Bill that could and should be improved, I support the measure, and I shall vote for it if the House divides tonight.
In the limited time available, I want to focus on one key omission from the Bill—a proposal for a referendum. During our period in government, I probably piloted through this House more constitutional Bills than any other Minister.
Mr Straw
I had such wonderful support from my right hon. and hon. Friends for all those measures.
On some, such as the Human Rights Bill and the Freedom of Information Bill, there was an understanding across the Chamber that it was appropriate for Parliament to have the final say. On others, however, there was a growing consensus that matters affecting the location and balance of powers in our constitutional arrangements required the endorsement of the British people because the fundamentals of the constitution belong to the people and not to us.
Among the measures I sought to introduce was the European Union constitution Bill, which made very significant changes in respect of our obligations within the EU. The Labour Government’s initial view was that we should do what successive Governments had done, most notably over Maastricht, and have this House make the final decisions. In making that case, as in previous debates on the principle, I advanced arguments against introducing a referendum for that Bill that were similar to those put forward by the Deputy Prime Minister. Those arguments related to cost, complexity and the fact that two of the main parties—his and mine—supported the measure. I have to say, however, that behind that—unwritten and unspoken—was the fear, particularly among my colleagues who were enthusiasts for the measure, that the British people might give the wrong answer. I believe that that fear also lies behind the refusal of a referendum in this case, even though I want a referendum and will passionately argue for a yes vote in any referendum.
Mr Straw
I entirely accept the hon. Lady’s point. In my written text, the word “wrong” is in inverted commas. Of course I accept what she says—that there is no wrong answer from the British people, and we have to respect the result of what they say.
The more I made the case against a referendum on the EU constitution, the less convinced I became by my own arguments; and, significantly, it was, among others, Liberal Democrat leaders who were most influential in causing me to change my mind. The Liberal Democrats were strongly in favour of the constitution, but argued that the measure was of such constitutional importance that it should be for the British people to decide. I then persuaded Tony Blair and the Cabinet that we must organise a referendum, and we would indeed have done so but for the fact that the French and the Dutch voted “no” before we could do it.
For reasons about which I wrote to you and the Deputy Prime Minister, Mr Speaker, I could not be in the Chamber yesterday, but I have read the report of the speeches with great care. The Deputy Prime Minister made many points of considerable substance, but I have to say that on the referendum issue he was, at the very best, treading water. His argument against a referendum lacked both conviction and coherence. He talked about cost and about the distraction caused by a Scottish referendum, and he claimed that a referendum was unnecessary because all three parties had agreed on the principle of reform.
The Deputy Prime Minister knows that the £80 million cost of a referendum is a one-off which creates no continuing liability. That is what the contingency reserve is for. As for his point about the alleged distraction caused by the Scottish referendum, it is frankly absurd. The Scottish referendum has a different time scale, and will involve just one UK voter in 10. However, the Deputy Prime Minister was at his most disingenuous when he claimed that agreement between the Front Benches trumped the need for the British people to decide. It does not.
Mark Reckless (Rochester and Strood) (Con)
The right hon. Gentleman has accused the Deputy Prime Minister of being disingenuous, but he has also cited an instance in which, he says, he persuaded members of his Front Bench to change their minds and support a referendum. Is he telling our Front Benchers that they should do the same, but should then change their minds again and break their promise?
Mr Speaker
Order. May I say to the right hon. Member for Blackburn (Mr Straw), who is immensely versatile in his use of legitimate parliamentary language, that he might wish to reconsider his use of the word “disingenuous”? He has a very versatile vocabulary, and I feel sure that he can deploy another word.
Mr Straw
I am happy to do so, Mr Speaker. I will substitute the word “unconvincing”.
I hope that the hon. Member for Rochester and Strood (Mark Reckless) will concede that I was persuaded by the arguments advanced in this place in favour of referendums. I am now urging the Deputy Prime Minister to do the same.
As I was saying, the fact that those on the Front Benches may agree on this measure does not trump the need for the British people to decide. Indeed, it strengthens the imperative for the British people to have the final say.
Mr Straw
I apologise, but I will not.
It is precisely when the political elite agree that our democracy is most at risk. In any event, is there not a prior question which should decide the issue of whether or not to hold a referendum, namely whether the measure is of such constitutional importance, and affects the balance of powers in our arrangements to such an extent, that it is owned by the British people and not by the political elite in the House of Commons?
The Deputy Prime Minister ignores two other facts as well. First, whatever the agreement between the Front Benches, this measure, as we have seen, is highly contested within, certainly, the two main parties. Secondly—and I offer this very practical point to those on the Front Bench in a spirit of support for the measure—for as long as a referendum is refused, those who take a contrary view, regardless of whether the Bill is subject to a programme motion, will use every method offered by the Standing Orders of both Houses to disrupt its progress, because this House on its own lacks the legitimacy to pass it. In contrast, the moment the Deputy Prime Minister agrees to a referendum, he will find both Houses much more constructive. That is exactly what happened in the case of the EU measures.
The Deputy Prime Minister destroyed the arguments that he was advancing against the principle of a referendum when, in responding to the hon. Member for Penrith and The Border (Rory Stewart), he conceded the possibility of referendums on phases 2 and 3 of the reform. He has conceded the principle of a referendum on a subsidiary issue; what he must do now is concede it on the main issue as well.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
Yesterday we were treated to nearly 40 speeches on this topic, of which only 10 were in support of the Bill. However, the speech that stuck in my mind more than any of the others was that of my hon. Friend the Member for Ealing Central and Acton (Angie Bray), who was in danger of giving politics a good name by putting her principles before her career. I think that her speech united members of our party behind her, and behind those who, sadly, take a view that is very different from that taken on our Front Bench.
I use the word “sadly” with great emphasis, for, like my hon. Friend the Member for Dartford (Gareth Johnson), I am not a rebel. I once abstained on an issue of importance —the imposition of VAT on static caravans, as it happens—but that is about as big a nuisance as I have been in the two and a half years for which I have been here. The decision to vote against the Bill, however, has been the easiest that I have had to make in those two and a half years.
I will leave the constitutional expertise to others, but I will say that my decision was made so easy by three regrets. The first is presentational. I may be in a small minority, but I am one of those people who do not become infected by the view that we must have a democratic House of Lords. I do not want a democratic House of Lords, and that is precisely why I shall vote against the Bill. I want objectivity, expertise, experience and wisdom, all the qualities that we are told so often that we do not have in this House. I do not want Members of the House of Lords to be subject to the electoral and party pressures to which we may be subject here.
We seem to have spent the last goodness knows how many hours—some would say years—worrying desperately about what this place should look like, and not worrying nearly enough about what it should actually do. To those who keep saying, “This is all very tedious, so let us just get on with it”, I would respond, “Yes, this is all very tedious, so let us get on with not doing it, and instead do the work for which we are paid.”
My second regret is constitutional. It reflects the view expressed by the former Home Secretary, the right hon. Member for Blackburn (Mr Straw), that the constitution is not the property of the Government. In fact it is not really the property of Parliament, and it is certainly not the property of the Liberal Democrats. However, it is the property of the nation, and I find very indigestible the experience of standing here and watching it being used—some would say “abused”—for the sake of what will be, at best, two and a half years of coalition management. That is one reason why the decision that I shall make at 10 pm will be such an easy one.
Let us be honest. We talked a great deal about the timetable yesterday, but this is not really about the timetable. Of course the timetable is important, but the reason we are so agitated is that this is actually a rotten Bill. [Hon. Members: “Hear, hear.”] It will do nothing for the reputation of Parliament, nothing for the reputation of politicians, and nothing to reconnect us with voters who, after several years of disconnection, are looking for inspiration. They want to see us doing the things that we were elected to do, rather than becoming involved in self-indulgent vanity projects inside this building.
I have to say, with enormous sadness, that if we get anywhere near the Parliament Acts as a means of concluding this particular debate, we will convert a rebellion into a mutiny. The strength of the arguments presented yesterday demonstrated that the legislation needs to go back to the drawing board. It demonstrated that those who genuinely favour constitutional reform, improvement and devolution in the House of Lords are willing to do business, but not with a gun held to their head. That would be an act of extraordinary vandalism.
My third regret is political. Last week, again with great sadness, I supported measures to disband 17 Army units. This week, we are being asked to create 360 new politicians to add to the 122 who have already been created in this House, all of whom will earn a great deal more money than our servicemen could ever hope to earn. That is simply too big a pill for me to swallow.
Simon Hart
No, I will keep pressing on, if the right hon. Gentleman does not mind.
An obvious reason for regret, which I think we all recognise, is that this Bill is not for the benefit of the nation. It is for the benefit of coalition management, and some would say that it is perfectly justified for the purposes of our Liberal Democrat colleagues. However, it is difficult to march behind generals whom we know are not particularly committed to this either—we know that because the Prime Minister has indicated it to us and because we speak to our own Ministers. This measure is not in the DNA of the Conservative party and actually the party is united on this point. The vote may say something else, but the party, with one or two exceptions, is pretty united in its opposition. We have only to look at the Hansard record of the vote—
Simon Hart
No. We have only to look at the voting records of our Members back in 2011 to realise that.
I shall finish now, although I know that is a great disappointment to our Front Benchers. This is a battle we do not need, it will cost money that we do not have and it will cause rifts that look unappealing to the outside world. This will do nothing for voters. We spent years combating the political and constitutional vandalism of the former Government. I do not want to be part of such vandalism, which is why I would vote against the programme motion, were we to have one, and why I will vote against the Bill on Second Reading this evening.
Karl Turner (Kingston upon Hull East) (Lab)
I want to make my position clear from the outset: I will be supporting this Bill on Second Reading, because, like many others, I was elected on the manifesto promise of Lords reform. However, there was a difference in my manifesto pledge, because Labour wanted a 100% elected second Chamber and a referendum on the issue.
Anybody trying to understand this reform will be confused, because the Bill is missing a guiding principle. The legislative drafters clearly failed to ask the question: what is the purpose? What are the Government trying to achieve? The Bill casts around attempting to placate both pro-reformers and anti-reformers at the same time: it quibbles between accountable and unanswerable; and it cannot pick between elected and expert. The Bill is trying to be all things to all people—it appears that it is entirely Liberal Democrat on that basis.
A full exploration of the failings of the Bill is beyond me in the time available, but I do wish to make three points. The referendum issue is a major one for me, but such provision is completely absent from the Bill. Major constitutional change should be very definitely put to the people, as Labour demonstrated when our Government agreed the devolution in Wales, Scotland and Northern Ireland. Other examples are, of course, available, including this Government’s referendum on the alternative vote.
Chris Huhne
Does the hon. Gentleman agree that there is an exact parallel between the proposal in this Bill and what the Labour Government did in introducing the first direct elections by proportional representation for the European Parliament elections? Will he remind the House when the Labour Government held a referendum on that issue?
Karl Turner
The right hon. Gentleman makes a fair point, but this situation is very different. There are numerous examples under the previous Government where people were given the decision on constitutional reform—
Karl Turner
That is one example, as my hon. Friend reminds us from a sedentary position.
My second area of concern is the Government’s logic that an unelected House of Lords is also an unaccountable House of Lords. I cannot say that I disagree with that logic, but the Government’s plans to rectify the issue are wholly inappropriate. The Bill proposes a single, non-renewable 15-year term, and if we add that up, we find that it does little to improve accountability. Some would say that rather than improve the democratic element, it makes things less democratic. Once elected and safely in their 15-year term, these people will be able to do and say what they think, and they will not have to follow any particular line. In fact, they will not even have to turn up. This could be said to be just a bung for party loyalty: 15 years’ salary without really having to do much more than that.
The Government also seek greater democratic legitimacy, but state that they will maintain a 20% appointed membership. Those who disagree will say that that is not enough, while those who want an elected element will say that it is too much. The Government have tried to split the difference but have left us with a foot in each door, so we will not quite have an elected House but we will not quite have an appointed House either. The Deputy Prime Minister has argued for the need for electoral legitimacy but undermines his argument by maintaining an appointed element. Furthermore, the Government have failed to use this opportunity to reform the place and role of bishops in the Lords.
Mr MacNeil
The hon. Gentleman is making a good speech. I merely ask him this: if he supports Lords reform, will he not take this opportunity to overcome the inertia over the past 100 years regarding the House of Lords, grab the opportunity with both hands and move the debate on, so that, in a democracy, we can have more elected people in a democratic parliamentary Chamber?
Karl Turner
I absolutely support reform but, as I said from the outset, I am keen on reforming the Lords to the full and having a completely elected second Chamber. I am afraid that this Bill does not offer anything like what I stood for at the last general election. Surely if we are trying to increase democracy and legitimacy, having ex officio religious positions is, in itself, discriminatory.
I accept that the principle of this Bill matches the commitment of all three main political parties in this House, but the Bill is woefully inadequate in terms of achieving its goals. No more time should be spent on this Bill than is necessary, but the Bill fails to achieve many of its declared goals and, in some cases, might make the current situation worse. The Bill must be subject to full and proper scrutiny in the later stages. Constitutional changes are difficult to make, so we must we get this right.
Penny Mordaunt (Portsmouth North) (Con)
This Bill is concerned with the very heart of the constitutional settlement of this country. It is not just about the abolition of a 700-year-old institution; it is about the way in which a Government are formed and sustained, and about the primacy of the Commons—the elected House. To pretend that nothing in the relationship between this House and the other place will change should this Bill pass into law is folly, whether it be wilful or unwitting.
Penny Mordaunt
I will not give way, because of time and the fact that many colleagues want to speak.
There are aspects of the House of Lords that should be reformed, but elections address none of them. On reform to improve the working of the scrutinising and revising Chamber, I am convinced that we in this House and those in the other place would come to a speedy consensus. There would be no opposition to the introduction of retirement procedures, to the reduction in the number of working peers, to the weakening of party patronage or to the forfeiture of the right to sit by peers who break the law. Such measures address the concerns of our time and could be enacted without affecting the constitutional settlement. There must be good reason to reject this path of consensus.
We are told that if we believe in democracy, we must support elections, that the laws of the land should be made by people elected by those who obey the laws of the land and that there is a democratic deficit in our polity because the upper House is not elected. That is disingenuous; there is no democratic deficit because the will of the elected House is unambiguously superior. The will of the people cannot be gainsaid. It is only through pretending that peers are law makers that one can confect a democratic deficit from the supremacy of the elected House. Of course, peers are not legislators; they are scrutinisers and revisers, and they accept that settled role in the constitution. However, it is absolutely true that those with the legitimacy of a democratic mandate will expect to be legislators. These new senators will not accept the limitations that are currently readily accepted in the other place.
The Bill would have the primacy of this House continue after reforms are made, but it does not explain why. Consent to taxation by the populace through its representatives in Parliament has been a thread that has endured through the near 800-year history of this institution. The House’s sole privilege of the purse has existed since the reign of Charles II. In the last century, the right of the Lords to frustrate the will of the Commons was denied it by the Parliament Acts and by the self-denying Salisbury doctrine.
When an elected upper House would have a mandate from the taxpayer why should it be denied a say in financial matters? On what legitimacy would the Parliament Acts rest if the House against which the Commons is imposing its will has been elected by the people? How can the Salisbury doctrine endure when the Deputy Prime Minister’s new senators will presumably be elected on party manifestos of their own? What will the Commons do but back down when an elected upper House opposes it with the support of the people? How can a Government endure when they cannot carry their legislation through the other place? In such circumstances, how can Governments continue to be formed solely on the basis of a majority in the House of Commons?
The Executive and the legislature derive their legitimacy from the same electoral mandate, which is why comparisons with the US are so bogus. Elections to a reformed upper House would weaken that essential relationship between the election of the Commons and the formation of a Government. Why is that not admitted? Why do the proposers of the Bill believe that they can hold back the natural forces of constitutional change with clause 2? That clause simply states that the Parliament Acts “will continue to apply”. No explanation is offered of their continued legitimacy. The clause would also repeal the preamble to the 1911 Act, because it is merely
“a short statement of the Government of the time”.
The preamble contains the seeds of the Act’s destruction, explaining that legislation would follow to create an elected upper House and to codify its powers, in essence nullifying the validity of the Parliament Act.
The Bill before us can seek to repeal a preamble, but it cannot repeal the self-evident truth: to change the Lords is to change the relationship between it and the Commons. The Bill labours under the delusion that nothing will change. In repealing the 1911 preamble, the Bill’s promoters admit that the powers of Governments are but transitory. The Government of today are soon the Government of yesterday and soon enough the Government of yesteryear. Constitutional reform is not an experiment; it can be undertaken only when there is just cause, not at the whim of whoever happen to be today’s politicians. The 1911 Act solved a constitutional crisis. There is no crisis now, but the Bill will surely create one.
Colleagues can vote on the principles of the Bill confident in the knowledge that the undertakings in the programme for government have been delivered. A commitment was made to whip both coalition parties to support the AV referendum, but there was no such commitment on Lords reform. Proposals have been made and it is now up to the advocates of those reforms to convince Members of this House that they are right. An unfettered debate will allow arguments on both sides to be made, and we can then vote on the principles of this momentous decision. I am glad that the programme motion will not be moved and the Government should comfort themselves with the fact that so many principled and sound constitutionalists sit on their Benches and stand ready to work on a Bill for Lords reform on which there is consensus.
The fact is that the progenitors of this Bill have tied a chain around one of the central pillars of our constitution and are pulling at it for all they are worth, cheerfully telling us as the marble begins to crack that its removal will not bring down the entire edifice. I will not be party to that; I will not support this Bill.
Mr Nigel Dodds (Belfast North) (DUP)
I am grateful for the opportunity to take part in this debate. Many Members on both sides of the House have already spoken with conviction both against and in favour of the Bill. They have made it clear that they will follow their conviction into the Lobby tonight, whatever the personal cost to their careers and so on.
It is also clear that there are those speaking both for and against the Bill, whatever their views in the past and now on House of Lords reform, who are motivated not by its contents but by what is happening in the politics of the coalition, and a decision on whether to support or defeat the coalition. It is clear that there are those who would not dream of supporting such a Bill in normal circumstances but are doing so to keep the coalition together or secure other gains, just as there are those who would not normally dream of trying to derail what some might call the best chance of reform there has been in years, or is likely to be for the foreseeable future, but are doing so to cause problems on the Government Benches. It is no wonder that people outside politics looking in sometimes feel a bit cynical.
When I heard the arguments advanced eloquently by the right hon. Member for Blackburn (Mr Straw) and others on a referendum, I cast my mind back to not so long ago when the Government of the day, of whom he was a member, espoused the view that there should be a referendum on the new constitution for Europe, in the Lisbon treaty. When some cosmetic changes were made to the presentation of that new European constitution, however, which certainly affected the balance of power between the House of Commons, Parliament and Europe, how people were governed here and how laws were made, we were told that there should be no referendum and that it was a matter for this House. We should now listen to the calls for a referendum while bearing in mind what people have said previously about referendums on what I regard as a more fundamental point—the relationship between this House, this nation and Europe—even than reform of the House of Lords.
Clearly, arguments have been advanced in favour of the Bill. The argument has been around for 100 years and was in the manifestos of the three main parties. There is clearly an argument about laws being scrutinised and made by people who are elected, which, again, is why I believe in a referendum on our relationship with Europe. Laws coming out of Europe should equally be democratically mandated.
Sammy Wilson (East Antrim) (DUP)
It is quite right that if laws are being scrutinised and made, that should be done by elected representatives. If they are elected for 15 years on a party list system, however, is that really a way of holding any parliamentary body to account?
Mr Dodds
My hon. Friend makes a very good point and I shall come on to it shortly.
Let me complete my point about the arguments that have been advanced. The Government have made some efforts to protect the supremacy of this House and it is fair to point out that the other place is not currently reflective of age, demographics or all the rest of it. For instance, on the question of Northern Ireland, our party has more reason to complain than most about the current make-up of the other place. The powerful arguments advanced against the Bill must be taken into account in reaching an overall decision on how to vote on this important issue.
It is clear that the Bill has been brought forward now not for entirely valid reasons but for reasons primarily of political expedience. It is not the result of building consensus that such constitutional change is needed now and in this form. Whatever arguments are advanced against the House of Lords, in many cases the solutions that are advanced cause as many problems, if not more, than the things that they are designed to solve. Giving more democratic legitimacy increases the possibility of creating a rival Chamber that will challenge this House. Keeping a proportion of unelected Members in the other place is at odds with the arguments advanced about democracy.
What will happen, for instance, if a decision is taken in the House of Lords that depends on the votes of unelected Members, transitional or otherwise, who share the views of the majority in this House? That creates all sorts of problems. Having elections according to a different electoral system to that used in the House of Commons elections creates problems with authority. Having a different system for elections for Great Britain from those used in Northern Ireland causes difficulty and might have to be considered if the Bill advances. People who rail against the lack of democratic legitimacy seem to have no problem with the lack of democratic legitimacy in the EU institutions and laws.
The most important argument, in my view, is that this is a time of economic crisis when people are struggling with the cost of living, worried about their jobs and so on, so is it the right time for the Government and this House to be dealing with such an issue? I know that the Government and Parliament can multi-task and do all sorts of things, but this is about perception and reputation, and this House has struggled in that regard in recent times. This will add to the problems with politics overall.
The Prime Minister was right to say that Lords reform was a third-term issue rather than something that should be dealt with now. If we are going to deal with changes, let us address the problems in the House of Commons. Let us introduce the business committee to give Members from all parties a greater say in what happens. Let us deal with the two classes of Members of this House, with some who do not take their seats and some who do. Those who do not still benefit from all the advantages, including the extra advantage of party political funding, which they can spend on all sorts of party political interests whereas we cannot.
On balance, we will vote against the Bill tonight. We know that people have different views in our party and elsewhere, but collectively we will vote against it.
Richard Harrington (Watford) (Con)
Mr Speaker, I reluctantly have to tell you that I will not support the Bill. The reason why is not that I am against reform of the House of Lords; I think that many of the criticisms of the House of Lords made by hon. Members on both sides of this House—for example, on grounds of age, demographics and lack of accountability—are valid. In fact, for many reasons I am in favour of reform of the House of Lords. Neither is my reason for opposing the Bill the one given by the hon. Member for Eastbourne (Stephen Lloyd) in what I thought was a good speech. He said that, yesterday, some right hon. and hon. Members seemed to show venom against the Deputy Prime Minister personally. I am not one of those Members. Indeed, I am not one of the people whom the hon. Gentleman mentioned who dislike Liberal Democrats; in fact, some of my best friends are Liberal Democrats. I support very much of what the coalition does and what our Liberal Democrat colleagues do. I am passionately against the Bill, however, because it would perpetuate a monopoly of the political classes in the legislative procedure.
We have here a Chamber to which 650—or, as it will become, about 600—people are elected, properly and democratically. Nearly all of us belong to one of the legitimate political parties. That is a very good system for the core of democracy. We do not need to replicate it in a second Chamber, where people are elected for 15 years, from exactly the same gene pool—exactly the same pool of political parties as we all come from. That is fundamentally wrong. It would deny democracy in respect of a large group of talented people who would not dream of standing for a political party. I include my party in that, the coalition parties collectively and the Opposition parties.
Democracy and legislation are a lot richer if a way is found to bring into the process people who would never dream of standing on a party political ticket. I am against the privilege and patronage of the current system in the House of Lords. I am in favour of reforming that House significantly. I want a proper system of appointment, as happens in Germany, of people from different sectors of society representing people of different ages, regions and interest groups. Politics is essentially a system of balancing interest groups. We have to find a way to appoint people without the patronage of Prime Ministers, Opposition leaders, donors and all the people who have rightly been criticised for their role in appointing Members of the House of Lords.
Under the proposed system, everyone would be a slave to a party manifesto, because saying “I am a scientist,” “I am a footballer,” “I am an academic,” or “I am a talented musician” would not get people who should be in the House of Lords on to a party list. They would be elected not because of their specialty, but because they agreed to a general party manifesto, which we do —something I agree with.
My constituents in Watford are already faced with elections for parish councillors, three district councillors, a directly elected mayor, Members of Parliament, Members of the European Parliament and now police commissioners. Do right hon. and hon. Members really think that an eighth category of election will really make this country more democratic? I do not. The number of people voting is going down time after time. I cannot accept that having people on party lists, as in the proposed system, will make this country more democratic by making the House of Lords more representative.
Consequently, Mr Speaker, on this Bill, for the first time and, I hope, the last time in my short and somewhat less than illustrious political career—unlike that of right hon. and hon. Members on both sides of this Chamber and, of course, yours—I will oppose my party’s view and my coalition’s view. I urge Members on both sides of the House to consider the proposals carefully and to do what I and many of my colleagues think they should do, which is reject the Bill, not because they are against reform but because they are in favour of the House of Lords being reformed in a responsible, modern and sophisticated way that does not make it a further tool of party hacks.
David Miliband (South Shields) (Lab)
It is a pleasure to follow the hon. Member for Watford (Richard Harrington). I hope in my six minutes to pick up two of the key points that he made and that were made very forcefully by Labour Members yesterday. I have been spurred to speak by the fact that I find myself on the opposite side of the debate from some comrades on this side of the House with whom I have worked very closely over the past 10 or 15 years. I have asked myself why my view is so diametrically opposed to that stated by, for example, my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), who spoke passionately about the constitutional disaster that the Bill, he believes, represents. I do not share his view for two reasons, and I shall use my time to explain why.
First, my difference with my right hon. Friend and other right hon. and hon. Members who have spoken is that I take a different view of the inadequacies and dangers of the current system. My right hon. Friend the Member for Salford and Eccles (Hazel Blears) rightly drew attention to the Hansard Society study of how politics is held in disrepute. That study shows not just disengagement, but disaffection; not just misunderstanding, but deep mistrust; not just confusion, but contempt for politics and for Parliament. We have to take our share of the blame for that, but so does the House of Lords.
Once a fortnight, I teach A-level politics at my old comprehensive school. I was there this morning. That experience brings home the gap between the debates, the procedure and the structure of our Parliament and what exists outside. It is not just that a lesson on the British constitution seems like a trip to Hogwarts and games of quidditch; it is more fundamental than that. At a time when politics needs to be more transparent and inclusive, the unelected structure of the other place makes politics opaque and exclusive.
Yesterday, the hon. Member for Altrincham and Sale West (Mr Brady) made the very good point that we need reform in this place, and the hon. Member for Cities of London and Westminster (Mark Field) spoke with real passion about that. I want to work with them on those reforms, but the need for House of Commons reform is not a reason to close our eyes to the need for reform of the House of Lords.
Richard Drax (South Dorset) (Con)
Does the right hon. Gentleman agree with me that it is not so much that the system needs reforming, but that, sadly, some Members in this place behaved disreputably which has brought politics into disrepute?
David Miliband
Clearly the antics of some Members—a very small minority—brought Parliament into disrepute, but I regret that, two or three years ago, more of us did not speak up and say that 95% or 99% of Members in all parts of this House come into public life for public purpose, not for private benefit. Our problems are, in a way, deeper than a couple of rotten apples who abuse the system.
Mr George Howarth (Knowsley) (Lab)
My right hon. Friend says that the current system is opaque and exclusive. Does he agree that one way to prevent that from happening on this issue is to have a referendum?
David Miliband
I ran on a manifesto that included a referendum and I support it absolutely.
Let me deal with the argument that elected Lords will represent a shocking precedent and a threat to the constitutional order, because they will be political partisans—not to say apparatchiks—put on party lists. I remind right hon. and hon. Members that 80% of the current House of Lords were nominated by party leaders, and the figure is higher if we look at voting numbers in that House. Yesterday, the hon. Member for Hereford and South Herefordshire (Jesse Norman), who is not in his place, said that the Lords defeated the Blair Governments 430 times and invited us to believe that that proved that the Lords were mighty enough already. The truth is that the problem was not the power of the House of Lords, but the fact that there was an in-built Conservative majority when we came to power in 1997.
The second issue that I want to deal with is more important. It goes to the issue of the relationship between the House of Commons and the House of Lords—something to which the hon. Member for Portsmouth North (Penny Mordaunt) referred. I have long argued for a single package of reform for both Houses, but the alternative vote farrago or fiasco has put paid to that, and we need to cut our Lords cloth accordingly, given that we know that the electoral system for this place is not changing in the foreseeable future.
Many of those who have attacked the Bill have done so on two mutually contradictory grounds. They have said that election to the Lords will mortally wound the primacy of the House of Commons—the point that the hon. Lady made—and neuter the power of Government in the process. At the same time, they have argued that 15-year terms will not provide sufficient accountability for Members of the new House of Lords, and that it is necessary for the new elected Lords to have more regular engagement with the electorate, but opponents of the Bill cannot have it both ways. The truth is that 15-year terms were designed, in 2007-08, to minimise the challenge of an elected Lords to the Commons. The electoral alternative to 15-year terms is five or 10-year terms, with re-election. That really is a recipe for a challenge to the primacy of the House of Commons. To oppose 15-year terms is to oppose any direct election at all. That is a perfectly principled position, but not one that I hold.
David Miliband
I will come back to my right hon. Friend if I can. The real question is whether an elected second Chamber with 15-year terms will overwhelm the conventions and understandings that establish the primacy of this place, and that we all defend. I can see the truth in the argument that an elected upper House will be more demanding of the Executive, and lead to more robust debate. It might—probably will—make life more difficult for Government, though contrary to the editorial in The Times and what the hon. Member for Portsmouth North said, Cross Benchers will be protected, and will hold the balance of power in the new House. Personally, I think that a more robust challenge to the Executive from the second Chamber would be a good thing. It would make for a better Parliament. To be fair to myself, I argued for that when I was in government, as well as in opposition.
I cannot, however, see the truth in the argument that that greater challenge—that more robust debate—will lead to such difficulties that the Lords will overrun the Commons. This House will form the Government, control the finances, and have the constituency link; this House will always have the most recent—and only—electoral mandate; and this House will hold up its sleeve the ace of the Parliament Acts, which regulate the role of the other place on financial matters, and provide that this House will get its way.
In Lord Pannick’s submission to the Joint Committee on the draft Bill, he made the point that
“it is absolutely vital…for the reform Bill to specify with clarity whether or not it is the intention that the Parliament Acts should continue to apply”.
That is the Government’s intention. We must make sure, in Committee, that in all scenarios, the Parliament Acts are completely protected. The Parliamentary Secretary, Office of the Leader of the House of Commons, the hon. Member for Somerton and Frome (Mr Heath), said yesterday that he did not want justiciability, and I understand that argument. If we are to go with that argument, we must be absolutely sure that we cement the role of the Parliament Acts, which Lord Pannick says is possible.
Mr Robert Buckland (South Swindon) (Con)
Will the right hon. Gentleman give way?
David Miliband
I just do not have time; I am really sorry.
Lord Pannick’s point is that if we want to achieve that aim, we must cement the role of the Parliament Acts in the Bill. We can do that in Committee, and must make sure that we do it properly.
I apologise to my right hon. Friend the Member for Salford and Eccles and the hon. Member for South Swindon (Mr Buckland), but I shall not be able to give way; I have only 25 seconds left.
The issue before us is not whether the proposals are perfect, or even whether a Bill based on the manifestos of all three parties deserves a Second Reading. It is whether the proposals improve on an unelected and unaccountable House of Lords, and the current indefensible set of arrangements. The Bill is not about neutering the Commons; it is about bringing our democracy into the 21st century, and I urge all colleagues in all parts of the House to support the Bill in the Lobby.
Julian Sturdy (York Outer) (Con)
It is a pleasure to follow the right hon. Member for South Shields (David Miliband). I appreciate that many Members have asked to speak in this debate, so I shall try to keep my contribution brief. I have a very clear view on the principle of reforming the other place. In essence, I am a strong believer in representative democracy. Of course, I fully accept that the House of Lords has many attractive qualities at present. The appointment of knowledgeable individuals from a wide range of differing professions and backgrounds adds to the diversity of our Parliament, as a number of Members have said, and ensures that legislation is scrutinised on a number of different levels. Nevertheless, appointments rather than elections to Parliament are, by nature, a second-rate form of democracy. Democracy is at its strongest when voters feel empowered.
Dan Rogerson (North Cornwall) (LD)
I have been elsewhere for some of the debate, so I may have missed this point being made earlier, but does the hon. Gentleman think it significant that the former career that has the most representation in another place is that of MP?
Julian Sturdy
I thank the hon. Gentleman for his intervention. Yes, I am aware of that, and I do think it is a problem. That is something that I would like reformed, and it is why, ultimately, as I shall go on to say, I will support the motion tonight.
Members of the other place often do great work, and I do not seek to diminish their efforts. However, our Parliament should reflect the full will of the public, and the make-up of our two great Houses of democracy should be subject to the will of those at the ballot box—it is simple democracy. After careful deliberation, I have reached a firm decision. Ultimately, I believe in a largely elected upper House, and will vote in favour of that principle. However, despite my underlying support for the end outcome, I have a number of concerns about the path that the Government have outlined.
First, I must express my doubts about the timing. As expected and feared by many of us, the Bill is attracting a great deal of attention and debate in the Westminster bubble—far more, I must say, than on the streets of York Outer. On the one hand, that may be reassuring. Any attempt to reform our constitution should be debated properly and in full. However, in the light of the economic uncertainty in the eurozone and the wider economic crisis, I simply do not believe that reforming the House of Lords is an urgent matter of governance. In truth, the timing is woeful, and that undermines the whole debate.
Secondly, some of the proposals cause me concern. As I mentioned, I am a believer in democracy and elections, and I respect what the right hon. Member for South Shields said on this subject, but offering those who aspire to election to the other place a 15-year term seems to be pushing the notion of representative democracy a bit far. We often defend our democracy by saying to the public that they can kick out a poorly performing MP or Government within five years. To triple that rule of thumb somewhat diminishes the principle on which the reform is based. I would be much happier with a term length nearer 10 years. That would strike a slightly more acceptable balance.
Mr MacNeil
What can the public do at the moment to kick out an underperforming life peer?
Julian Sturdy
Well, they cannot do anything, and that is why I will vote in favour of the Bill on Second Reading, but I am expressing my concern.
Thirdly, I am concerned about the apparent rush to sign off this reform when there are many other outstanding constitutional matters. The West Lothian question—the hon. Gentleman might have a view on this—is one such example. Surely, if we are to undertake a democratic and fundamental piece of constitutional reform, we should simultaneously look to resolve wider constitutional dilemmas.
Lastly, I must ask the ministerial team to ensure that clause 2 is reinforced. If we are to maintain an efficient legislative process, we must ensure that the House of Commons retains its supremacy in the parliamentary process. I am sure that many Members present will be aware that Members in the other place are concerned that this supremacy would be threatened, under the proposals.
In conclusion, my message to the House today is that we should tread carefully. If we are to embark on this delicate and historic matter, we must do so properly. Many Members who are concerned about these initial proposals need the opportunity and time to debate them. We should either take our time and get it right, or not do it at all.
Frank Dobson (Holborn and St Pancras) (Lab)
Nothing will persuade me to support the Bill. I opposed the Labour Government’s proposals, and this Bill is far worse. I have not heard any convincing arguments in its favour. Most of them boil down to the syllogism, “Something must be done. This Bill is something. Therefore this must be done.” Such sophistry has been augmented with the line, “We must act now to complete the unfinished business left for 100 years, and we must get on with it.” Well, if we have waited for 100 years, we really ought to try to get it right and not botch it, and the Bill is undoubtedly a botch.
The plain fact is that an elected second Chamber would be very different from an unelected House of Lords. No self-respecting elected Member would accept for very long being bound by the conventions that restrict the unelected Lords. If the Lords were to lose their democratic deficit, they would replace the deficit with a surplus—a democratically legitimate surplus—of the dynamism, commitment and energy that election brings to the political process and which we all try to demonstrate.
Frank Dobson
No. I ought to get on.
Not content with what the Lords do now, an elected Chamber would demand new duties to reflect their new democratic legitimacy, and with those duties would go new powers. I have to say to all those who are in favour of this proposal that “new powers” is the phrase that dares not speak its name in this debate. Until we get clear what job we want the second Chamber to do, we cannot sensibly decide how it should be made up. As I first said about 10 years ago, we are being asked to pick the team before we know what game it is going to play. An elected second Chamber would not play the touch rugby played under the present rules. An elected Chamber would lurch into the contact version of that game, crunching tackles and rucks and mauls with the Commons. Yet the Bill pretends that that problem does not arise.
Worse than that, the Bill does not look at what is wrong with Parliament as a whole. It has long been my view and long been my experience that Parliament is not working very well. It is not good at holding Governments to account. It is not good at controlling the raising and spending of tax. If anybody questions that, how can any of us justify the decades-long failure to pass laws which stop tax evasion? Parliament certainly is not good at passing laws that work as those who proposed them intended or that are readily understood by the people who have to try to make them work.
The House of Commons is undoubtedly the dominant Chamber, so most of the fault with Parliament must lie with us, not with the Lords, however good or bad that institution. We need to look radically at how we improve our performance. Then we need to consider, once we have done that, whether we need a second Chamber, and if so, what its functions can be. That is extremely important, because in these turbulent times people, and in particular young people, are becoming disillusioned with the political process, and not just with us. There is a danger that they will become disillusioned with democracy as a whole. We must start doing our job better before we start messing around with the House of Lords.
Dr Julian Lewis (New Forest East) (Con)
It is a pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson), especially as what I have to say will illustrate in a practical way the point at the heart of his speech, which was the importance of the specialist role of the upper House as presently constituted.
In a marvellously robust speech yesterday, the right hon. Member for Salford and Eccles (Hazel Blears), who is in her place again today, described the proposals in the Bill as a deceit.
“They are expressed in the language of high moral purpose”,
she said,
“but they are really about pretty low politics.”—[Official Report, 9 July 2012; Vol. 548, c. 71-72.]
She was absolutely correct. Having failed to gain an AV armlock on the Commons, the Liberals are aiming for a PR stranglehold on the Lords. Since legislation must pass through both Houses of Parliament, this will require perpetual appeasement of Lib Dem demands, even if the Conservatives or Labour win an overall majority in the Commons at the next election.
Yet much more is at stake than the institutionalisation of third-party power by creating an upper House based on proportional representation, for we will lose the ability to improve legislation—the point made by the right hon. Member for Holborn and St Pancras—by considering amendments purely on their merits.
Yesterday, the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), a Lib Dem and a former Member of the second Chamber, said at column 54:
“First, in my view the House of Lords is broke. It does not actually work”,
and at column 55:
“Secondly, we need to take the best of what exists. For example, the reason the House of Lords works well is that the Whip is lighter”.—[Official Report, 9 July 2012; Vol. 548, c.54-55.]
I shall now explain from personal experience why he was right in column 55 and wrong in column 54.
In the 15 years since I entered Parliament, I have managed to change the law only once, when the Labour Government allowed a rare free vote on a matter affecting the security of MPs. But in the 15 years before I entered Parliament, I worked closely in connection and in co-operation with a small group of peers and, between 1984 and 1990, it proved possible to alter the law on three important occasions. This was entirely because of the way the House of Lords works.
Consider the Trade Union Act 1984, when we briefed the Lords on the merits of postal ballots for union elections, compared with the counting of heads at tiny branch meetings. Dozens of peers were persuaded and, despite the best efforts of Government Whips against them, an appropriate amendment was carried. Back in the Commons, the same amendment stood no chance of success because of the much tighter controls on Back Benchers. Nevertheless, in response to the Lords amendment, the Government decided to offer a proposal of their own—to try making postal ballots the norm and to create central registers of trade union members. Four years later, this led directly to the introduction of compulsory postal ballots, as the Lords had originally proposed. If the upper House had been predominantly elected, and especially if it had been elected on a PR list system, the initial amendment, which eventually led to the introduction of postal ballots, would never have been passed.
Even more clear-cut were the changes to the Education Bill in 1986 and to the Broadcasting Bill in 1990, both of which were amended in respect of the balanced treatment of politically controversial issues. In each of those cases, the more independent-minded peers were willing to listen to, and be persuaded by, arguments that when such subjects were presented in the classroom or in the media, it must be done in an even-handed manner. Such was the strength of their case that the amendments made in the Lords to both those Bills were allowed to remain intact when they returned to the Commons.
An upper House filled mainly from party lists of professional politicians would have been no more receptive to any of those arguments than the House of Commons, where almost all the votes are strictly whipped and where defying the Whip is seen as an act of career-changing rebellion. The willingness of Members of the House of Lords to judge arguments on their merits, and to amend legislation accordingly, stems not just from the limited discipline which can be imposed upon them, however. It derives, in large measure, from the fact that many peers are appointed after reaching the summit of their professions. They therefore have an expertise which full-time MPs might have achieved had they not switched careers to enter the Commons.
It is not the same to be a potential expert who decided instead to become a full-time politician in mid-career as it is to be an actual expert, who entered the Lords after reaching the top of the medical profession, the armed forces, business, the Church or the arts. Even the ex-MPs in the Lords have generally left further career ambition behind them. By contrast, young full-time politicians may well be able to see the strength of an argument for amending a Bill, but their careers are still in front of them and only a minority will put ambition aside.
This dismal Bill would be the end of the House of Lords as a place where laws are fine-tuned, and I urge all colleagues to reject it.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
Like my hon. Friend the Member for Stockport (Ann Coffey) and others, I served on the Joint Committee on the draft House of Lords Reform Bill and so have heard much evidence on the future of the House of Lords, but I want to refer later to the impact of all these proposals, and perhaps others, on the future of the House of Commons.
When I came into the Chamber this afternoon, I was of a mind—I still am—to support those on my Front Bench and vote for the Bill on Second Reading, but the more I see of the shenanigans on the Government Benches, including what has happened this afternoon on the programme motion, the more I wonder whether I am making the right decision.
What I do believe to be right, and my reason for serving on the Joint Committee, is that there is indeed a challenge and an opportunity for us to look at the House of Lords and come up with better ideas than have emerged thus far. I am comforted in that by “Erskine May”, and my interpretation of what he wrote is that if the Bill collapses, it is unlikely that a similar Bill will be accepted for a long time to come.
The Bill is imperfect. The alternative report, which I signed, indicated some of the difficulties, some of the arguments not addressed and some of the issues that should be put before this House. I came here today to support the Bill’s Second Reading, to support very strongly the referendum and to oppose a programme motion. Whatever else might be said today and whatever other changes might be made, that remains broadly my approach to the matter.
The alternative report to which I have referred was extremely helpful, and I am sorry that Members have not heard more about it. It mentioned, for example, the Scottish Constitutional Convention and its preparations for the Scottish Parliament. The convention called on the whole of civic society, including politicians, Churches, trade unions, community councils and many others, and on that basis of wide consultation we have the Scottish Parliament as it is today. Why, then, can we reasonably object to the referendum that these issues invite? Do we not trust the people? Time and again we are urged to listen to what people are saying, which I think is right. I hope that the alternative report helped to clarify matters. It did so to the extent that, on the advice of Lord Pannick and Lord Goldsmith—paragraph 227 of the report is the relevant part—reference to the Parliament Acts was included in the new Bill before us in an attempt to make greater sense of the matter.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
My right hon. Friend’s reference to Scottish devolution is particularly appropriate in relation to a referendum. The Deputy Prime Minister said earlier today that the case for House of Lords reform was so big that no referendum was needed, yet my right hon. Friend has correctly highlighted the fact that, despite the strength of support for devolution in Scotland, the referendum procedure was still used there. It was used not so much to endorse that change, but to embed it. With an unwritten constitution, it is that embedding of a change that I think is most important.
Mr Clarke
My hon. Friend makes a valid point, and one that is worthy of more consideration.
The Joint Committee sought to serve both Houses in our report, and we were a very mixed group, including independents, Conservatives and Lib Dems. I note that its Lib Dem members voted the whole way throughout the Committee’s considerations, which leads me to think that there might just be another agenda, and some of us have drawn attention to that this afternoon. A number of us signed the alternative report, including six Privy Counsellors and the Bishop of Leicester, the Convenor of the Lords Spiritual. He said that it was not enough simply to talk about bishops because we ought to be dealing with inter-faith matters. This is a diverse society. The House of Commons has not as yet reflected that, but if we get the opportunity to do so in the House of Lords, we ought to take it.
I complained yesterday in an intervention on the Deputy Prime Minister, to which he responded inadequately, that the Joint Committee did not even have the opportunity to consider costs. Even today the Government have been very reticent in the information they have given the House. They refer to the Bill, but it leaves most of the decisions to the Independent Parliamentary Standards Authority. There are varying levels of respect for IPSA in this House, but whether that is the right way to go in these matters is worthy of more thought.
Mrs Laing
Does the right hon. Gentleman agree that it is simply wrong that the Joint Committee’s report and the alternative report have never been debated in this House and that the debate we are having right now is about the narrow confines of the Bill, rather than the whole issue of parliamentary reform, and does he agree that we need a constitutional convention?
Mr Clarke
I absolutely agree with the hon. Lady and respect her contribution to the Joint Committee. Like me, she signed the alternative report. I think that we were entitled, and that that House is entitled, to consider the validity of elected Members in both Houses. If the Government succeed in taking the Bill forward, I think that it would be naive in the extreme to think that we could have another largely elected House that would be prepared simply to accept what we have to offer without saying, “Look. We were elected as well.” In some cases its Members will be elected by millions of people, in contrast to the small number who might have elected some of us. So concerned were the Government about those small numbers in this place that, almost without a whimper, we are approaching a situation in which the number of Members elected democratically to this House will be reduced by 50—hardly a democratic way of dealing with modern Britain.
I believe that the legislation governing the relationship between the House of Commons and the House of Lords, or whatever follows it, should include codified mechanisms for conflict resolution. I do not believe that existing conventions are enough, as I think we can see in the United States of America. Despite its difficulties, the House of Representatives found that when things changed it was less important than it had thought it was, and that is something we ought to bear in mind.
We have an opportunity in both Houses. The challenge is there for us to ensure that democratic, representative government applies to every part of our legislature. However, the Joint Committee could not even have the advice of the Attorney-General—my heavens, if there are criticisms of us I would accept that one—but this House is entitled to that advice. I will end on this point: some people ask whether this is the right time, but my question is whether this is the right Bill. On the evidence I have seen so far, it is not.
Conor Burns (Bournemouth West) (Con)
May I begin by warmly welcoming the Government’s decision to withdraw the programme motion this evening? That is unquestionably a victory for this House over the Executive, because we can imagine that the conversation between the Chief Whip, the Leader of the House and the Prime Minister did not go like this: “Well, Prime Minister, we are delighted to assure you that we have got the votes in the bag to pass the motion,” with the Prime Minister responding, “Oh, excellent—withdraw the motion tonight.” This is this House asserting its will over something very important to it. I look forward with interest to hearing more about the threat of the conversation between the usual channels—I always remember Tony Benn’s warning that the usual channels were the most polluted waterways in western Europe.
I want to start with this simple assertion: the House of Lords works. It does its job effectively as a revising Chamber, not as a rival Chamber, and that is demonstrated by the number of amendments made to our legislation in the Lords which we choose to accept here in the Commons.
I want also to deal with one of the arguments—
Conor Burns
Let me just make some progress.
I want also to deal with some of the arguments that the Deputy Prime Minister has made. He says of the Lords: “It’s become too big.” I absolutely agree that it has become far too big—so we should stop sending so many people there, then it would not be so big. The average number of peers created under Lady Thatcher was 18 a year, under John Major 26 and under Tony Blair 37, but under the coalition we already average 58. I must say, do not make it too big and then say that is a reason to abolish it. Do not also accuse those of us—
Chris Huhne
The hon. Gentleman surely avoids a key point, which is that the previous, Labour Government faced an inbuilt Conservative majority in the Lords and tried to compensate for that. The coalition Government then wanted to deal with an equivalent imbalance against them, and the situation is unsustainable. We will go on expanding unless reform is dealt with.
Conor Burns
The right hon. Gentleman is absolutely right that the situation is unsustainable and untenable, and that is why many of us are in favour of reform: we are in favour of introducing a mechanism for peers to retire; we are in favour of a limit on their numbers; and we are in favour of strengthening the independent House of Lords Appointments Commission. In short, we are in favour of some of the excellent ideas contained in his right hon. Friend Lord Steel’s draft Bill.
Let us deal with the issue of how we legislate for our supremacy. What are the candidates going to do? Are they going to say to their electorates, “Vote for me, for I have no ideas, I am not going to publish a manifesto, I am not going to tell you what I am going to do if I go to the House of Lords”? Of course they are not. We cannot legislate for the supremacy of this House when another House is elected, and some of the people who tell us that we can are the same people who told us that we could insert clauses into the Maastricht treaty that would guarantee stability in the eurozone. We are setting off on the conveyor belt to conflict between this House and the other place, and it is an unsightly and an unseemly act for a Government to carry out.
I have always had a reverence for the institutions of our country and a profound love of history. The right hon. Member for South Shields (David Miliband), the former Foreign Secretary, who has now left the Chamber, talked about this place and about showing it to young people, and when they come here they see how our democracy has evolved and the battles that previous generations of parliamentarians waged to have this place as the supreme will of the people. When we slam the door in Black Rod’s face, that is not some pantomime theatre; that is an assertion of our historic belief in the power and rights of this Chamber.
Stephen Williams (Bristol West) (LD)
I thank my hon. colleague for giving way. When he takes his constituents, schoolchildren or otherwise, into the other place, does he think that they all find it extraordinary that the people who sit there are completely unelected—or do they think that it is wonderful?
Conor Burns
I think they are impressed that we accept more than 80% of the amendments that peers send back to us, and that in the other place there are people with great expertise—world-renowned people who would never dream of putting their names on a party list, going to central office, seeing Gareth Fox and getting on to the candidates’ list. It just would not happen, in any way.
I received a text last night from my old history teacher, who spent his entire career inspiring young people with a love and reverence of our country and its institutions, and he said to me:
“An elected Chamber would be a disaster and lead to the dilution of the Commons.”
I could not put it better myself.
I faced tonight a dilemma that I have finally resolved in my own mind. I cannot support this Bill on Second Reading. I could not look myself in the eye if I voted for it on Second Reading, and clearly that is incompatible with membership of Her Majesty’s Government, so I informed the Chief Whip this morning that I have resigned as Parliamentary Private Secretary to the Secretary of State for Northern Ireland.
I am doing that in order to vote for something that I believe in strongly and on principle. I want to see a fully appointed second House, and I will go into the Lobby with the aim of trying to preserve that, in the same way that other, current members of the Government—17 Ministers and, indeed, the Minister of State, Northern Ireland Office, my right hon. Friend the Member for East Devon (Mr Swire), to whom I was PPS back in August 2010—went into the Lobby in 2007 in support of a fully appointed second Chamber. I will go into the Lobby in the same way also that six members of the Conservative Whips Office went into the Lobby in 2007 in support of a fully appointed second Chamber.
What an Alice in Wonderland world we now live in, that voting for something which has been a mainstream view in our party for decades—indeed, generations—now leads to incompatibility with serving in the Government.
Martin Horwood (Cheltenham) (LD)
If it was such a mainstream Conservative philosophy, as the hon. Gentleman says, how did Lords reform sneak into the party manifesto, the coalition agreement and the Queen’s Speech?
Conor Burns
It is a very mainstream view within the Conservative party, and I totally agreed with my right hon. Friend the Prime Minister, who still has my full support and loyalty, when he told the Association of Conservative Peers that this was a very urgent issue for a third term. As we have yet to win a first term on our own, a third term is quite a way off.
I support this Government in every way, and I bitterly regret the fact that I will vote against the Government tonight. I support the Prime Minister and I support what the Government are trying to do; I even have some coalition-coloured ties to demonstrate that support. I see my friends from Northern Ireland on the Opposition Benches, and I genuinely regret the fact that I will not be able to continue to make such a contribution in the Northern Ireland Office. As someone who was born in north Belfast, who spent the early part of their life there, who is a Catholic and a Unionist and who recognises, understands and, indeed, feels both traditions in Northern Ireland, I think that taking such action is a matter of great regret, but I do it with passion and belief, and confident that it is the right thing to do.
I tell the House—and this should worry every single Member, in every corner and on both sides—that the number of comments I have had from people expressing amazement that a Member of this House in 2012 is prepared to resign on a point of principle, shows us how diminished and deluded our politics has become in this country. We need more days such as today, when this House is prepared to assert its will and to tell the Government what they can and cannot do.
I end with this, because I think that she was a great parliamentarian—my hon. Friends think that I am going to quote someone else, but I am not. The right hon. and noble Baroness Boothroyd, who served with distinction in the Chair over many years, said in one of the papers this morning, to those of us who will do what I will do later this evening,
“you are doing the right thing by your constituents, by your country and by Parliament”.
Mark Durkan (Foyle) (SDLP)
In following the hon. Member for Bournemouth West (Conor Burns), I acknowledge the strength and sincerity of his contribution, but I strongly and sincerely disagree with his views on these matters. I pay tribute, none the less, to his conduct and to his positive contribution as a Parliamentary Private Secretary in relation to Northern Ireland, where his insights and instincts were hugely appreciated by all parties and by people outside of party politics as well.
The Social Democratic and Labour party does not take seats in the House of Lords. As a point of principle, we do not believe in taking seats in a Chamber that is unelected, and in any other situation people in this House would see a wholly unelected Chamber as being anomalous, anachronistic, absurd and, indeed, a constitutional atrocity.
Only a few weeks ago, here in this Parliament, we hosted Aung San Suu Kyi. The majority of the parliamentarians who were present and called to assemble to hear her speech, however, were unelected, and she was talking about the importance of elective democracy. That is an irony which should not be lost on anyone in this House or, indeed, in the other House.
I have listened to many arguments from Members on both sides of the Chamber, and people seem to be turning themselves inside out in relation to the different position that they now hold on programme motions, compared with how comfortable they were with such motions when their party was in government and was the absolute master practitioner of them.
I have listened to Government Members raise queries about the West Lothian question, and they might rightly feel affronted that in this Chamber elected Members who are not from England are able to pass laws that affect England, but they seem to have no problem at all with unelected people from wherever passing laws, or with their numbers being inflated and added to all the time.
There are easy ways of dealing with primacy. The Parliament Act needs to be affirmed, but it also needs to be amended and updated. There is no reason why that could not be done if the Bill receives a Second Reading and we go on properly to amend it. Primacy can also be reflected in ensuring that this Chamber is the sole seat of the Executive. There should be no Ministers in the other place. If it is meant to be a revising, second legislative Chamber, its role should be primarily to do with legislation and its revision, and it does not need any Executive membership. Ministers can go to that Chamber and speak to and answer for their Bill, but they need not be Members of the other House.
We have heard the arguments about 15-year terms. If the fixed-term Parliaments had been for four years, then three terms would equal only 12 years, which would be more reasonable than 15 years, but unfortunately we are stuck with that because the legislation gave us five-year terms. However, it is better that people are elected for 15 years than appointed for life.
As regards how we can justify the Parliament Act in terms of maintaining financial privilege in this House, we can do that because the people elected to the other House will be, in some ways, unaccountable. The only people who should have powers over taxation are those who will be accountably representative. The justification is to say that there should be no taxation without accountable representation.
I, like others, would criticise many aspects of the Bill and hope to see them amended and changed if it were to make progress—although of course it now has the “uncommitted” status that the Speaker told us about earlier. Many people have said that there is a strong case for having some appointed Members, but I am not sure about that. If there is such a case, I want to hear it tested and proved further. Perhaps that is the issue that would most justify a referendum. If there is to be constitutional reform with a democratic House of Lords, and if other people will continue to be appointed through some obscure system, perhaps that should be subject to the decision of the people. They will have the right to elect the first set of Members, so perhaps they should have a say in a referendum whether they want the other Members as well.
On the question of the bishops, I am not comfortable with the idea that there should be a Bench of prelates drawn from one Church alone. If there is a case to be made, as I have heard people argue, for a pastoral Bench from which people can speak on the basis of certain ethical and faith-informed values, its Members should not be confined to one denomination or one faith. Perhaps they should not have votes either, because they should not want to be sullied or compromised in relation to party political matters.
Ian Paisley (North Antrim) (DUP)
The hon. Gentleman diminishes the role that the bishops have played in the other House, but he must accept that on welfare reform they led the charge that brought that matter back to this House and got it to change its position.
Mark Durkan
I would accept the hon. Gentleman’s point if he and his party colleagues had not voted against the bishops’ amendment on child benefit, which said that it should be excluded from the benefits cap. If there is a case to be made for the bishops on the basis of the contribution that they have made, which I do not decry, I still do not know why they should be solely confined to the Church of England and why that is ordained in the Bill.
Members are telling us that the Bill is not wanted by the public and that it will be a waste of parliamentary time and a distraction, yet some of them would have been prepared to vote against the programme motion to say that they wanted even more time taken up on it in this Chamber and elsewhere. A wise observation is that irony in politics is usually hypocrisy with panache. There is a lot of irony in the strange positions articulated by many Members on both sides of the House, and there is a lot of panache in the way that they have presented their cases, but of course, Mr Deputy Speaker, I have heard no hypocrisy.
Mr Edward Leigh (Gainsborough) (Con)
We have heard many fine speeches over the past two days, but one of the finest was made by my hon. Friend the Member for Bournemouth West (Conor Burns). Of course, I have absolutely nothing to lose personally by voting against the Government tonight, but he has. However, I assured him this morning that the French have a phrase, “Reculer pour mieux sauter”, which means, “To retreat better to leap forward”, and that is what he will do. The House always respects somebody who resigns on a point of principle, and it has always been a matter of great regret to me that I did not do it over Maastricht. I have lived to regret that, but he will not regret his decision, I assure him.
The good speeches have been those based on principle. There has been a lot of criticism of the Deputy Prime Minister, but I thought that he gave a good speech because it was based on his own principles, although I did not agree with him. He was like a young officer at the battle of the Somme, marching forward, assailed on all sides, ultimately to senseless destruction, but there was nothing wrong with what he was arguing for. I do not usually like to be party political, but the two weakest speeches came from the Opposition Front Benchers, who, like St Augustine, said that they want to stop sinning but not yet. They said that they are in favour of the Bill but have not been prepared to answer consistent questions about how much time they want for it.
On a great constitutional issue such as this, one has to be prepared to argue from first principles. I am afraid that I am a Conservative and therefore generally wish to conserve things. Certainly if something is working, I wish to conserve it. I know it is a bit of a cliché, but Lord Falkland’s dictum that when it is not necessary to change it is necessary not to change is true of the House of Lords. Basically, it works, and I do not want to change it. I start from that point of first principle and will not easily be budged from it.
What is so important about this Bill that the Government are prepared to wade through months of purgatory to try to secure it? We heard earlier that apparently the Catholic Church has abolished limbo, but it has not yet abolished purgatory, and if this Bill is allowed to continue our party will be in purgatory, as we were over Maastricht, for week after week and month after month. What is the great point of principle? When the whole country is assailed by such appalling difficulties and problems, when we know that the economy is not going anywhere, when we are constantly having to wade through blood and make cuts where we do not want to make them, what is so important about this Bill? Why have the Government, with, dare I say it, some parliamentary incompetence, placed themselves in a position whereby they have handed power to the Opposition? I criticise the Opposition, but they are only doing their job. Labour is a ruthless operation when it comes to opposition—it is much better at it than we ever are—and it is playing this very well in trying to gum up the whole works.
What about all the other Bills? Are they not important? Are we not here to try to achieve something?
Chris Huhne
Is the hon. Gentleman aware that on D-day, when we invaded France, this Parliament was discussing Rab Butler’s Education Bill? Does he not agree that Governments, on balance, should be able to walk and chew gum at the same time?
Thomas Docherty (Dunfermline and West Fife) (Lab)
The hon. Gentleman has repeatedly talked about weeks and months. May I assure Members on both sides of the House that the Opposition have made it clear that we do not intend to wreck or filibuster the Bill? This is about genuine debate, and there is no confusion as to the position that the Opposition will be adopting.
Mr Leigh
I think that that was said with a bit of irony and that the hon. Gentleman protests too much. Of course the Opposition are not going to wreck the Bill, which, at an appropriate moment, they will allow to get to the other place—after they have ensured that the country has had the unholy spectacle of our discussing, week after week, while this appalling recession is going on, an issue that, I can assure him, is of no interest whatsoever in the Dog and Duck in Scunthorpe. What on earth are we doing?
What is so wrong with the House of Lords? The point that I make continually is that whereas over the past 15 years, we in the Commons have had the collective courage to defeat the Government only 10 times, our friends in the other place have defeated the Government no fewer than 576 times. That point has been made already, but it is a powerful one.
I argue against this reform from first principles because, inevitably, the people who will be elected to the House of Lords will be politicians. When I made that point to the Deputy Prime Minister yesterday, he said that they would be a different sort of politician. What is a different sort of politician? We are all politicians and we are all ambitious. Although we deny it, we all want office. There is nothing wrong with that. Therefore, to a greater or lesser extent, we are all creatures of the Whips Office. We have to accept that. We come into politics because we have the ambition to become Ministers and to achieve something. The point has been made again and again that many people in the other place are past ambition.
Why do we want to abolish an institution that has held the Government so closely to account that, in the past 15 years, it has defeated them no fewer than 576 times? The fundamental problem is that once the House of Lords is elected, it will become the poodle of the House of Commons. The real problem is not with the primacy of the House of Commons, but that the Executive are all-powerful. It is only in the other place that there is any decent scrutiny and that the Government are occasionally defeated.
I am not only worried that the Government will have an easier ride in the reformed House of Lords; we must ask ourselves why our friends in the Liberal Democrat party are so determined to get the Bill through. It is so important to them because once it is passed, half of our legislature will be elected by proportional representation and, therefore, the Liberals will have a permanent lock on half our Parliament. It will be impossible for people such as me who want constantly to come forward with radical ideas from the right and for Labour Members who want to come forward with radical ideas from the left to wade through the dominance of the Liberal establishment in the other place. There would never have been the kind of reforms that Mrs Thatcher achieved in office under that system. Many people in this House may think that that would have been good, but I think that it would have been a great shame.
That is why this is an important Bill, why we should be discussing it up and down the country, and why we have to defeat it. We cannot just measure this argument in terms of programme motions; we have to measure it in terms of what is right for our country. What is right for our country is to retain the system of an elected House of Commons and a revising second Chamber that does an excellent job of improving legislation. We must leave it alone and defeat this Bill tonight.
Mike Gapes (Ilford South) (Lab/Co-op)
We have been here before, in the last Parliament. In those debates, I was one of many Labour Members who voted for the abolition of the House of Lords. In an ideal world, I would have that option today. As that option is not available, I also regret that we do not have the option of an indirectly elected second Chamber.
There are perfectly good and thriving democracies in the world, and indeed constitutional monarchies, that are unicameralist, such as Sweden and New Zealand. There are also indirectly elected second Chambers in some Commonwealth countries. For example, in India, each of the states elects people to go to the Rajya Sabha. Its Prime Minister, Manmohan Singh, was elected in that way and has never stood for a direct election anywhere. There are models that we could follow that would improve our democracy. However, instead of learning from international experience and establishing such a constitutional convention, we have this half-baked hybrid, which the Government had attempted to railroad through, until they realised today that it was not acceptable. If we are to have a second Chamber, it should be small and clearly subservient, have limited and defined powers, and should meet only occasionally.
Why do so many amendments come from the House of Lords, as has been mentioned? It is because we do not deal with legislation properly in this House, and because, as the hon. Member for Foyle (Mark Durkan) said, we have the Ministers in this Chamber. The Executive dominate the parliamentary system. If we had a system like Sweden’s, in which many Ministers are not Members of Parliament, we could have a different relationship with the Executive and the scrutiny role of this House would be much stronger. Instead, we have a deal between whichever Government are in power and the Opposition Front Benchers in the House of Lords to get through certain amendments and clauses. Legislation comes back from the second Chamber that this House has never had a proper chance to deal with.
In my 20 years in this House and in my role on Select Committees, I have become increasingly frustrated about these issues. As a Parliamentary Private Secretary in the Home Office and the Northern Ireland Office, I saw the Government face many defeats in the House of Lords, particularly on Home Office legislation. We had the clauses dealt with and when they came back to this House, they were never discussed properly. We need to reform this House and we need to have a stronger definition of the relationship between the Executive and the legislature before we give greater credibility—dangerous credibility—to a second Chamber that will undermine the democratic Chamber.
The Deputy Prime Minister claimed that he was introducing the Bill because people had voted for it in 2010. No they did not. Nobody voted in the 2010 election for these proposals and it is not honest to say that they did.
I also challenge the Deputy Prime Minister’s reference to “fixing” a problem. Yes, there is a fix going on. As the hon. Member for Gainsborough (Mr Leigh) just said, the fix will ensure that people who would never get elected, and might even come fourth, in a parliamentary constituency anywhere in the country will get into the House of Lords for 15 years under the proportional representation regional list system. They will then be able to go around London, or whichever region they represent, cherry-picking issues and appearing at residents’ associations or religious groups, while we are here in this House attending to our parliamentary business. That will not be good for democracy. It will lead to cynicism and undermine the truly representative nature of the constituency link.
Having been in the House for 20 years, I had hoped that there would be a reasoned amendment on Second Reading. There is no opportunity for me to vote for a reasoned amendment. Therefore, for the first time in 20 years, I will go against my party’s Whip and vote in the No Lobby against the Bill tonight.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I commend the hon. Member for Ilford South (Mike Gapes), who is breaking ranks with his party for the first time. It is a big step after such an illustrious career in this House.
The Government may well be withdrawing the programme motion, but I want to address the continuing threat of a timetable motion. Any attempt to force through a constitutional Bill of such significance and controversy represents an abuse of Parliament. Nobody whom I have heard speak in this debate is against reform of some form. Nobody supports the House of Lords as it is. The problem that this House always has to battle with is that, although there may be a consensus in favour of reform, there is no consensus on any particular reform. That is why so many seasoned Westminster watchers are so utterly perplexed about the determination with which the coalition is pressing ahead with this suicidal Bill. I suspect that it will prove to be a grievous self-inflicted wound for the coalition, perhaps even fatal, if it persists with it. Today’s dignified retreat nevertheless represents an abject defeat on the Bill, as there is little that saps the authority of an Administration more than an inability to obtain its business.
If a timetable motion were to be passed, it could prove the worst case for the coalition. A cobbled together, under-scrutinised proposal would undoubtedly get through this House in some form and then paralyse the upper House for the rest of the Session, only to be reintroduced in the next Session and forced through using the Parliament Act. I am describing not a worst-case scenario but the Government’s actual plan for conducting the progress of the Bill—to submerge this Parliament in a quagmire of Lords reform.
Sir Bob Russell (Colchester) (LD)
Do I interpret from the speech of my hon. Friend and neighbouring MP a desire for the coalition to collapse?
Mr Jenkin
It is not as though the Government were not already beset by problems and challenges on an awesome scale, as many Members have said. Economic growth is well below forecast, borrowing is still far too high and the unresolved and unresolvable euro crisis is probably leading us towards some kind of economic precipice. We are facing an economic emergency, as well as all the other challenges of government in a time of recession. This is the last moment for any Government to choose to pick a fight to alter any part of the constitution, when there is clearly no real consensus or common understanding of what needs to be done.
The debate so far can leave no one in any doubt that this is a massive constitutional change, but the Government have utterly failed to address the most fundamental questions about the upper House. What is the House of Lords for? Does it operate effectively as it is? Would the changes be likely to improve or impair its effectiveness? The answers are pretty straightforward. First, it is intended to be a revising Chamber, not a senate or a rival to the House of Commons. Secondly, as the Deputy Prime Minister has himself admitted on many occasions, the current Chamber is very effective. Thirdly, the changes seem to be intended to supplant expertise and experience with more party politics, which is hardly likely to improve the Chamber’s effectiveness.
The Bill addresses no evident crisis of the legitimacy of our constitution, yet it threatens to create a political crisis on top of an economic crisis. There is no public clamour for the change, and there are no crowds in Parliament square crying out their support. That is why the Government fear a referendum on the Bill, because the voters would certainly reject the idea of replacing the current effective, proven and appointed House with more elected politicians, appointed to lists by their respective parties on ludicrous 15-year terms.
So what is the Bill really about? The Deputy Prime Minister should be careful about accusing others of having ulterior motives, because what is his? The Bill is about power. It is about the Government remaining in office now and about the Liberal Democrats building a power base for when they are not in office. It is the product of a stitch-up, a deal between two coalition parties to stay in power. It is a bid permanently to shift the balance of power away from this House and towards a more legitimate House of Lords.
May I address the extraordinarily charming and eloquent speech given by the right hon. Member for South Shields (David Miliband)? He said that the Bill’s opponents were trying to have it both ways, but it is its supporters who are trying to have it both ways. They cannot argue that an elected Lords would be more legitimate but in the same breath insist that the relationship between the two Houses would remain the same. The issue of primacy is just one of the fundamental issues that we will need to address before the Bill leaves this House.
That brings me to the continuing threat of a timetable motion. To timetable a constitutional measure under the current circumstances would be unconscionable. I say to my hon. Friend the Parliamentary Secretary that the much quoted Winston Churchill would be heaving in his grave with fury and indignation at the mere suggestion. The timetable is a modern invention, only introduced in 1997. The guillotine used to be an absolute exception, and even then was never used on a constitutional issue.
The Bill has 60 clauses and 11 schedules containing a further 158 paragraphs. The Government’s withdrawn motion would have allowed 60 hours in Committee, which would have been taken up by Divisions, urgent questions, statements and points of order as well as debate. That would have left, perhaps, an average of half an hour for each clause, let alone the schedules. Primacy, powers, accountability, remuneration, costs, expenses, staffing support, IPSA, financial privilege, the scrutiny of regulations, elections, voting systems, eligibility, constituencies, the question of a referendum or not—how many other topics will there be to debate, or must we have the freedom to debate should we so choose?
Constitutional measures used to pass through the House before there were timetables. Both the Parliament Acts themselves passed through the House without a timetable or guillotine. No timetable should be imposed, because our ability to scrutinise legislation in full is just about the only real check or balance in our constitution to protect it from the tyranny of a simple Commons majority.
As it stands, we are being asked to give a Second Reading to a Bill that will invite the Government to fast-track a massive constitutional change, which will nevertheless distract us from the crisis that demands our attention, which may fundamentally change the character of the government of our country, which fails to address the most fundamental questions about the upper House, which represents gerrymandering of the constitution and is the product of a stitch-up to stay in power, for which no referendum is to be provided, and on which the Government are determined to curtail debate.
Sir Stuart Bell (Middlesbrough) (Lab)
I am grateful for the opportunity to follow the hon. Member for Harwich and North Essex (Mr Jenkin). I will seek not to respond to what he said but, if possible, to build upon it.
Like the Leader of the House, I have sat through debates on Lords abolition and reform for many a year. My hon. Friend the Member for Wrexham (Ian Lucas) said yesterday that the Lords had far too many Members
“who are there simply because of who their fathers were”.—[Official Report, 9 July 2012; Vol. 548, c. 120.]
I remember the late Jack Jones going further in a party conference speech in 1977, saying that in those days three quarters of the Members of the House of Lords had inherited their position by birth, and that their ancestors were, by and large,
“cattle robbers, land thieves, and a few were court prostitutes.”
We are perhaps more subtle in our use of our language these days, as my hon. Friend showed.
The Leader of the House referred to a book that he had written in 2005 on Lords reform. I wrote a pamphlet in 1982 called “How to abolish the Lords”. I have to accept that the title was somewhat sexed-up by the Fabian Society, because it actually dealt with reform rather than abolition of the Lords. I have seen some of the suggested reforms come to pass, notably a Supreme Court of the judicature and the creation of a Ministry of Justice, all under a Labour Government.
I complained in my pamphlet that Labour had introduced only one reform, the Parliament Act 1949, but now I stand corrected. My right hon. Friend the Member for Tooting (Sadiq Khan) went through a number of reforms that Labour introduced during its term of office from 1997 onwards, and my hon. Friend the Member for Wallasey (Ms Eagle) built upon those points.
My hon. Friend the Member for Rhondda (Chris Bryant) told those of us who proposed to oppose the Bill that the current House of Lords was unsustainable, a point reaffirmed by my hon. Friend the Member for Stockport (Ann Coffey). And so say all of us—no one here supports the current House of Lords. We are all for reform, and many reforms have been referred to in the debate. To my hon. Friend the Member for Rhondda and others who say that the Lords is unsustainable, I would quote Bernard Shaw, which Lord Kinnock has often quoted: “If your face is dirty you wash it, you don’t chop off your nose.” The Bill would hive off a part of our constitution. The Deputy Prime Minister spoke yesterday of the monarch giving up her prerogatives in relation to the Bill and reminded us that the constitution is the monarch, the Lords and the Commons. Yet a third of it is about to be hived off.
In what the hon. Member for Gainsborough (Mr Leigh) said was a good speech—it actually reads better than the delivery—the Deputy Prime Minister also talked about what I call the alarums and scarums that there have been in the past when the Lords has been about to be reformed, from those who said that there would be an impact on the primacy of the Commons. The actual words that that the Deputy Prime Minister used were “from disaster to apocalypse”. The one thing the Deputy Prime Minister did not say was that, when we talked of a primacy conflict with the Lords in the past—the conflict never happened—the Lords was not elected. That is the difference. The proposals will mean an elected House of Lords, and that conflict is therefore inevitable. It is obvious.
I pray in aid the Liberal Democrats. Lord Ashdown said that an elected upper House would not challenge the supremacy of the Commons, but it would challenge its “absolute supremacy”. I can advise him that the only difference between “supremacy” and “absolute supremacy” is the adjective. He also spoke of checks and balances. He was supported by Lord McNally, a Justice Minister, who declared that an elected second Chamber would have the right to say no to the Commons.
I pray in aid further the hon. Member for Westmorland and Lonsdale (Tim Farron), who declared that Members elected to the Lords by proportional representation would have greater legitimacy than those elected to the Commons under first past the post. I wrote to him yesterday to invite him to correct that statement if it was inaccurate. I have not heard from him.
My hon. Friend the Member for Rhondda picked up the suggestion of a Joint Committee that would be a concordat between the two Houses to resolve the question of the conventions. That can be achieved only if the House of Lords delaying powers in the Parliament Acts, on which the Government rely, can be reduced from 13 months to six months.
I join my hon. Friend the Member for Ilford South (Mike Gapes), who said that he has never voted against the Whip in 20 years. I have never voted against the Whip in 29 years, but I will do so tonight. I will do it on principle, and because I do not believe in anything in the Bill. The Bill is in purgatory and limbo, and it will not survive in its present form.
Rory Stewart (Penrith and The Border) (Con)
It is unfortunate that the debate has turned into an attack on the Liberal Democrats. This is a huge opportunity for reform. There has been a lot of talk about the 21st century and democracy, and there is an important democratic opportunity in the Bill that I hope the Liberal Democrats will lead us in taking.
We have heard much about 21st century democracy. There are many different kinds of democracy. We have the trunk of the democracy, meaning the directly elected legislature, which in our case is this place; the crown of the tree, which is the rule of law; and the root, which is the constitution. The constitution is an example of something on which we can work together.
What kind of democracy do we have in that context? We can have as many different kinds as there are trees: we can have flowers on it, like a cherry tree, or strange brown leaves like a beech in winter, or needles like a pine tree. Within our democracy, we have judges who are not elected, as we have heard ad infinitum, and generals who are not elected. Certain powers are taken away from the House and given to non-elected people as part of our democracy. For example, the Labour Government were proud to take away control of interest rates from Parliament and to give it to an independent central bank. Government Members were proud to take control of economic forecasting away from this place and give it to the Office for Budget Responsibility. Indeed, there was a lot of consensus on taking away investigative powers from the House and giving them to the independent, judge-led Leveson inquiry.
Exactly what balance of elected and unelected people we want within a democratic constitution is an interesting question. Like the Chinese, we could elect our generals; like the Americans, we could elect judges; or, like the Canadians, we could have an appointed upper Chamber. What determines that balance in a democracy is what we want to do and the problems we are trying to solve.
The problems of 1909—this is my point about the 21st century—are not, sadly, the problems of today. The Senate in the US was created to deal with an over-mighty sovereign and the problem of the relationship between the territories, such as the states, and the population. The problem that the Liberals tried to solve in 1909 was that the hereditary peerage deliberately blocked financial regulation—the Liberals largely solved it with the Parliament Act 1911.
Since then, our countries and our parties have changed. Many things in our manifestos in 1909 are no longer in our manifestos today, because the nature of our problems has changed. The problems we are dealing with today are not the problems of 1909. We can see that in elected second Chambers throughout the world. The kinds of problems that led to the creation of the directly elected Australian Senate after 1900, which inspired the reforms in the UK, and the problems that led to the creation of the directly elected Italian Senate in 1948, have passed. Throughout the 1940s and 1950s, there was a reduction in the number of bicameral legislatures.
We need to solve the problems of today. They are problems of local democracy, on which the Liberal Democrats should be proud of taking the lead; they are problems of accountability in large multilateral institutions such as the European Union, on which I hope hon. Members together can take a lead; and they are problems of professionalism and expertise.
However, perhaps the greatest democratic challenge for this country in the 21st century—I hope the Liberal Democrats will take the lead on this—is the root, meaning the constitution. It is in that respect that we are behind every other country in the world. Other countries have indirectly elected or appointed bicameral legislatures, but not a single responsible country remains that allows itself to change constitutional law as though it were ordinary law. The constitution protects the citizen from the Government. For that reason, the Government, who are temporary, have no right to interfere with the constitution of the people.
We felt differently about that in 1909. We flattered ourselves that we had a huge constitutional tradition, history and culture in the other place that forced us to debate and investigate those great issues. That time has passed, and today we find ourselves isolated in the world as the only country—the source of constitutionalism —that tries to behave as though there is no difference between constitutional law and non-constitutional law. Other countries, such as the Nordic countries, have a solution—they have a gap between two Parliaments, or they can demand a two-thirds majority or a referendum. In our case, we used to have a free vote and no guillotine motion.
Let hon. Members together take the great opportunity to ensure that constitutional change, which was positioned in the Liberal Democrat manifesto and endorsed by the Deputy Prime Minister and the majority of Government Members, happens in future only through a referendum.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I have been impressed by many of the speeches today and yesterday. I felt rather ashamed of the House last week—the debate on the banking crisis was not the greatest day for the Chamber—but these past two days have made me very proud to be a Member because the quality of the contributions has been rather fine, whether I have agreed or disagreed with them.
The hon. Member for Gainsborough (Mr Leigh)—he and I served as Chairmen of Select Committees on the Liaison Committee and know each other well—said that he was a Conservative and that people would not expect him not to be one. I came into politics as a radical, and hon. Members would expect me to continue as one. I have therefore been worried about my choices for this evening. I ran on the Labour manifesto, which contained a commitment to reform of the House of Lords. Like most hon. Members, I do not like voting against my party, but the fact is that the more I contemplated the situation today, the more I convinced myself—this happened quite early in the debate—that the House of Lords reform pledge in the Labour manifesto would not have resulted in this Bill. I am under no obligation tonight, then, to vote for a piece of legislation that no Labour Government, had we won the last election, would have brought before the House. So I shall not be voting for Second Reading.
Being a radical, I believe that the Liberal Democrats must be given a lot of recognition and admiration. Every way we look, political culture in our country is in a pretty bad way. In 1950, 85% of people were engaged in politics, but now that figure is down to 65%, and 6 million people do not even bother to register. Even in this time of crisis, with the economic challenges creating a serious situation for the people whom we represent, very few people vote in local elections. In general elections, too, there have been very low levels of participation.
Furthermore, membership of political parties is at an all-time low, as Members on both sides know. Labour and the Conservatives have the same miserable membership figures—there is not much between us—and the numbers of active members in our constituencies are not what they used to be. The Liberal Democrats are also struggling. Our political culture is in crisis, yet nothing in the Bill will radically tackle the malaise in our country and political system. In fact, the Bill takes our minds off the worrying aspects of our political system. We have to do something. Being old-fashioned, I would have liked either a constitutional commission or—dare I dig up this idea—a royal commission, the latter being much favoured by former Labour Prime Minister, Harold Wilson.
We ought to give the Liberal Democrats credit, however, for recognising the malaise and coming up with a couple of answers. The first was proportional representation, although they were defeated on that and I did not think it the quick fix, or even the difficult fix, they thought. They have also come up with Lords reform. I think they do it with the best of motives.
Chris Huhne
The alternative vote system can never be described as proportional representation. It is a majoritarian system. PR has never been put to the people of this country.
Mr Sheerman
I was trying to be kind to the Liberal Democrats, but obviously it has not worked.
By their own lights, the Liberal Democrats are trying to do something about the malaise in our political culture. The rest of us, in the other political parties, have to recognise that there is something deeply wrong with the levels of participation and democratic activity.
Ian Swales
This is not a Liberal Democrat Bill, but a coalition Government Bill.
Mr Sheerman
I understand that perfectly. I know the system and what the coalition Government are about, and I sympathise with the position that the two parties are in. They have to work together and make these agreements, and they are having a problem at the moment, but the fact is, as we all know, that the Liberal Democrats have persuaded the Conservatives to include certain things in the coalition agreement.
I want to look back over my time as an elected representative in this House. We have had more constitutional change in this Chamber in the past 30 years than at any other time in the history of our country, and everyone has become an expert on the constitution. The previous speaker, the hon. Member for Penrith and The Border (Rory Stewart), is an expert on the constitution. We have had many experts on the constitution. I can remember when people on both sides said that referendums were not British, and I can remember criticising the first referendum on membership of the European Union promoted by Tony Benn. I called it, “Tony Benn out of Benito Mussolini”, because dictators love referendums. They are a way out of the problems of weak leadership. The House does not need referendums for everything.
The Bill could have been amended to constitute a positive reform of the House of Lords. There is no need for an elected Lords filled with party apparatchiks similar to those down here. The danger of the Bill is not that the other place will get strong and flex its muscles and that we will become weaker; my concern is that it will simply become a pale and timid shadow of this place. Nobody wants that. I want a strong, reformed upper House. With the time and the opportunity, we could have reached an agreement on an all-party basis, but tonight I will not be voting for Second Reading.
Mr Deputy Speaker (Mr Nigel Evans)
Order. The time limit is reduced to five minutes.
Mr Stephen Dorrell (Charnwood) (Con)
It is a pleasure to follow the hon. Member for Huddersfield (Mr Sheerman). I have the same aspiration as he has for the other place, but I draw the opposite conclusion about the Bill. Over the past couple of days, I have listened to a number of speeches, few of which have been full-hearted in their support for the Bill. I am quite strongly in support of the principles set out in it, however, because I believe they provide an effective answer to the challenge of creating a stronger House of Lords to check the legislative torrent that has become the habit of Executives over-dominant in the House of Commons.
Several speakers have said that the answer to Executive dominance of the Commons is to change the balance in the latter, and reformers have set out to deliver that objective over the 30-odd years I have been here. Let us stand back and look at the results. Under Conservative Governments before 1997 and Labour Governments between 1997 and 2010—and even occasionally under this coalition Government—it became too easy for Ministers to bring measures to the House, to get them approved by the House and to pass them without effective check in the House of Lords. It was too easy for those measures to end up on the statute book.
My hon. Friends the Members for Gainsborough (Mr Leigh) and for Dartford (Gareth Johnson) asked what was the question we were seeking to answer. In introducing an elected element into the House of Lords, we are seeking to answer the question first posed not by the coalition or, with respect, by the Liberal Democrats, but by Lord Hailsham 50 years ago when he spoke of an elective dictatorship. Under our system, we have a general election and a Government are elected based on a majority in this place, but that does not provide sufficient checks and balances, particularly on the legislative ambitions of Ministers.
Jesse Norman
It is an interesting solution to an elective dictatorship to propose two elective dictatorships. The Blair Government was defeated four times in the Commons and 460 times in the Lords. Does my right hon. Friend wish to replicate the record of the Commons in the Lords?
Mr Dorrell
My hon. Friend repeats a point made several times in the debate, and I accept that it is a serious point. His point is about the Blair Government. My hon. Friend the Member for Gainsborough quoted 576 defeats in the Lords, presumably over a slightly different time scale. However, those defeats were over individual measures in a Bill, and they often came back to be reversed by this place.
When we stand back from the matter, we see that the House of Lords cannot be said to provide the check on ill-developed, badly thought out legislation. Too often, Ministers are tempted down the road of trying to create legislative monuments for themselves. Occasionally, when I sat on the legislative committee in the Cabinet—in another existence, many years ago—we heard it argued that we needed a Bill from a particular Department to create a political centrepiece for the Government’s programme. That is not a good reason for proposing legislative change. To be effective, legislation needs to be properly thought out. It is far better seen as a rifle than a blunderbuss.
Mr Dorrell
I do not agree with my hon. Friend. Either the Bill will create a logjam—because people in the other place, with a different mandate and a more leisurely time scale, have the willingness and the capacity to create an effective check—or the other place will merely be a poodle. We can pay our money and take our choice between those two arguments. Personally, I think that the longer mandate, as well as all the other elements of the primacy of the Commons which are included in the Bill, are more likely to create an effective check on the legislative ambitions that I have mentioned. In other words, for me, the issue in the Bill is not the balance between the Lords and the Commons; it is the balance between Parliament as a whole and Whitehall. I am a strong supporter of a more effective Parliament, in order to create a more effective check on the legislative ambitions of Whitehall.
We have heard various speeches. Some have argued for a unicameralist approach. I have made it clear why I am not in favour of a unicameralist approach. I am in favour of a strong second Chamber that will create a genuine check on the legislative ambitions of Whitehall. I am persuaded that the best way of providing that is to introduce an elected element into the upper House.
Nick de Bois (Enfield North) (Con)
Does my right hon. Friend not find it ironic, however, that he is presenting his case in a Parliament during which, over two years, we have seen more changes in Government policy as a result of effective scrutiny and demand from both MPs and peers?
Mr Dorrell
I am not going to be drawn into developing the examples that we have seen in the last couple of years, but we have seen examples in that time of legislation that has been passed by this House—and, ultimately, passed by the other House—despite it being acknowledged that the ambition could have been achieved without the grand legislative context in which the measures were included.
The question for the House this evening is extremely simple: to elect or not to elect? I am in favour of election.
Thomas Docherty (Dunfermline and West Fife) (Lab)
I am grateful to catch your eye, Mr Deputy Speaker, in what has been a superb second day of this two-day debate.
I noticed that when the Deputy Leader of the House closed the debate yesterday evening, he referred to the fact that it was “half-time” in the football game. I can only assume that Mike Bassett has been coaching those on the Government Benches on their tactics, given the absurd situation in which we find ourselves. As my hon. Friend the Member for Wallasey (Ms Eagle), the shadow Leader of the House, pointed out last Thursday, we would have Liberal Democrat Ministers arguing for one case on the first day and Conservative Ministers arguing a different case on the second day. We saw that yesterday, when the Deputy Prime Minister said that we had to have a programme motion and that the Bill would collapse without one because it would be filibustered out. Today we heard the Leader of the House say that, actually, that was not the case at all, and that the Bill would still proceed without one. Perhaps when the Minister sums up he can clarify which of the two parties in the coalition he will be supporting in the months ahead.
It is a great fallacy that this debate is about reformers versus traditionalists. Every Member who has spoken has argued the case for reform. The argument is about what reform should be—or, indeed, the argument of those Members who wish to abolish the House of Lords as it stands. Members on both sides of the House have genuinely wrestled with some deeply held views. I pay tribute to my hon. Friends who, although having reservations, were going to support us on the programme motion. I equally pay tribute to hon. Members on the other side of the House who have wrestled with their consciences and their party loyalties long and hard, and have come to the principled decision that the constitution of our country is more important than the narrow party politics of the coalition. Both sides should be equally commended for the principles that they have defended in the last few days.
There are some other fallacies that need to be tackled. This is a Liberal Democrat Bill. We know that from the sheer number of Lib Dems who have sat through the debate.
Chris Huhne
It is very clear that this is a coalition Bill. If the hon. Gentleman had been in the Chamber when the former Justice Secretary and former Foreign Secretary, the right hon. Member for Blackburn (Mr Straw) was speaking, he would know how substantial the resemblance between this Bill and the proposals brought forward by the previous Labour Government is.
Thomas Docherty
I was here throughout the afternoon, but the fact is that a plethora of Liberal Democrat Ministers have been clearing their diaries. Indeed, I cannot recall the last time when so many Liberal Democrat Members were in the Chamber.
Thomas Docherty
They were certainly not here for the tuition fees debate, and they were certainly not here to support the Secretary of State for Culture, Olympics, Media and Sport either, when that issue was discussed just a few weeks ago.
The hard reality is that this is a bad Bill. However, I intend to vote for it on Second Reading this evening, because I believe that the situation can be salvaged. There are some measures that I hope the very reasonable Parliamentary Secretary, Cabinet Office, the hon. Member for Forest of Dean (Mr Harper) will take back to his boss, the Deputy Prime Minister. One, for example, concerns those who may stand for election. The Government have said, quite reasonably, that no one can serve as a Member of Parliament and stand for the senate, or whatever it will be called—
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
The House of Lords.
Thomas Docherty
Sorry, the House of Lords. However, there is no such provision to stop Members of the senate/House of Lords standing for the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly or, indeed, a local authority, or vice versa. That will lead, inevitably, to examples of what we have already seen in Scotland, where list MSPs have perched on the shoulders of constituency MSPs, cherry-picking casework and local issues. That will inevitably lead to a challenge to the authority of MSPs, Assembly Members and local authorities. I hope that the Government will reflect on that and make the appropriate changes when we reach the Committee stage, hopefully in the autumn.
The other thing that has been raised which genuinely needs to be addressed is the issue of Church of England bishops. I do not believe that the Church of England should sit in the House of Lords or the senate.
Thomas Docherty
The hon. Lady says, “Hear, hear,” yet she will be voting—and will continue to vote, I am sure, throughout the Bill’s progress—to keep the current arrangement. I am sticking to my principles; I am sorry that she has left hers outside. These are some of the issues that need to be examined.
Lorely Burt
Is the hon. Gentleman saying that the idea of a secular Parliament is wrong? If that is the case, I do not quite understand how that is in conflict with the idea of having an elected House of Lords. Perhaps he could enlighten me.
Thomas Docherty
I suggest that the hon. Lady should go and read her Liberal Democrat Bill.
There are many issues that have to be tackled in Committee. When the Minister replies, we would be grateful if he could set out when exactly he will table a committal motion. If that is not to happen in the very near future, I wonder whether he could confirm that the Government intend to take advantage of the gap that may be created to bring forward some other Bills that they had promised to bring forward. They include the private Member’s Bill, which I have helpfully tabled, to introduce a statutory register of lobbyists. Indeed, I know that the Minister is absolutely delighted—[Interruption] —that is why he is not paying attention—about the Bill that we have brought forward.
I will not keep the House any longer, because many Members wish to speak. I congratulate again those Members on both sides of the House who have wrestled with their positions, come to a sensible position and forced the Government to listen to the will of this House.
Mr Robert Walter (North Dorset) (Con)
I support the coalition: I believe that it is the best way to deal with the financial crisis that we inherited from the previous Government. I want the Prime Minister to complete the job, and I want him to be re-elected in 2015, but this Bill is not necessary to deal with that financial challenge or with any of the problems that face our nation.
I was elected to the House just over 15 years ago. In my first 10 years as a Member, I heard nothing from my constituents about House of Lords reform. In 2007, when we last debated the matter in the House, I got two letters: one for, one against. I then received absolutely nothing for five and a half years, until this piece of legislation was introduced. I now get e-mails, of course, and I have received 11 on the subject: three in favour of the Bill and eight against.
I make that point because I understand from my reading of the weekend press that the Deputy Prime Minister feels that the Bill represents a way for the Liberal Democrats to reconnect with their supporters. I have fought four elections in which the Liberal Democrats have run me a very close second, and never have I heard any of the Liberal Democrat candidates who fought me talk about this matter. I have never read about it in any of their “Focus” leaflets or election addresses. They have consistently won about 20,000 votes in my constituency, yet they have managed to mobilise only three of those voters to write to me and ask me to support this Bill. I am not sure that “reconnect” is the right term for the Liberal Democrats to be using in this context. Whatever the problem Britain faces, the answer is not more elections or 450 more elected politicians.
The Bill’s supporters kindly sent us all a document yesterday, entitled “Lords Reform: A Guide for MPs”. It opens with a section called “The Problem”, which defines the problem as the number of Members in the second Chamber. I agree that the House of Lords is too big. Let us talk about that. Let us talk about reform and about the size of the Chamber, but we do not need to completely overturn the constitution in order to deal with the size of the other place. The solution is not 450 senators, elected from party lists by proportional representation. We know how that system works, because we have 73 Members of the European Parliament representing the same regions. There are probably Members of this House who can name all the MEPs in their region, but I can tell them that most of my electors cannot name the MEPs in ours.
Those MEPs earn £86,000 a year, plus travel expenses, subsistence and everything else that goes with the job. The proposed elected Lords would be on a basic salary of £32,800, which is about the same as a primary school teacher—I am not saying anything against primary school teachers—and they would get no second home allowance or travel allowances. There is therefore a question of quality and one of legitimacy. I believe that a House elected by proportional representation would challenge the Commons.
The penultimate page of the document that we were all sent yesterday states:
“It may not be the end of the reform story. Perhaps in 15 years’ time…people will want to re-examine the relationship between the Houses to reflect the experience of a substantially elected chamber interacting with the Commons.”
So this would not be the end of the story.
Mr Deputy Speaker (Mr Nigel Evans)
Order. Please would the hon. Gentleman face the House? We cannot hear him.
Conor Burns
I am sorry, Mr Deputy Speaker.
My hon. Friend is making some incredibly powerful points, not least on the centrality of the possibility of an elected Chamber challenging the supremacy of this Chamber.
Mr Walter
My hon. Friend is absolutely right. I envisage a situation in which a media campaign against something that we were doing in this Chamber could mobilise public opinion in favour of reforming the Parliament Acts.
The present House of Lords needs reform, but on balance, it does a good job. It is a most effective revising Chamber. It provides detailed scrutiny of legislation, particularly secondary legislation and that emanating from Brussels. Where would we get such a great pool of talent—former defence chiefs, ambassadors, judges, Cabinet Ministers and all the other talents from the arts, industry and science—under the proposed new arrangements? Would such people stand for election? I do not think so. I shall simply repeat a phrase that has already been used several times in the debate: if it ain’t broke, don’t fix it.
Mr Geoffrey Robinson (Coventry North West) (Lab)
I will be brief, as many Members wish to speak and time is limited. There are three principal positions that can be adopted in relation to the time-honoured problem that we are debating. People can favour a wholly appointed second Chamber, a wholly elected second Chamber or the abolition of the second Chamber—known euphemistically as the adoption of a unicameral Parliament. There is no prevailing majority in this House for any one of those solutions, so, to put it at its worst, we have to find a way of muddling through, or of evolving the conventions and arrangements that govern our business in this House and in the other place. Over the years, those arrangements have not done us too badly. Many people have criticised them—unjustly, in my view—saying that we cannot get our business through or on the grounds of elective democracy. That is not the problem that this country faces.
Let us look at the evidence from other countries. The US Senate has a carefully constructed, almost European-style, blueprint for checks and balances, but it is almost impossible for Congress to govern. It is impossible for it to pass legislation to deal with the world crisis. It is even impossible for both Houses of Congress to pass a health Bill, as the legality of that legislation is now being challenged. That is the route down which we could go if we are not careful.
There is nothing wrong with the Government’s proposals in principle, because there is no principle about them. They are doing no more than muddling through, and in the worst possible way. Their objections are so bad simply because they do not reflect our genius for evolving our procedures and conventions for dealing with the problems that we face at any particular time.
One thing that we all learn from being in this House is that the language of politics is the language of priorities, and the art of good governance lies in concentrating on our priorities and succeeding in realising them through the management of our problems. House of Lords reform is not a priority—it will probably not be a priority in any Government’s lifetime—and this measure could not have been introduced at a worse time than now, when we face the most threatening international monetary and financial crisis since the second world war.
Comparisons were drawn by an eminent ex-Minister of the Liberal party in respect of chewing gum and thinking at the same time; we managed to carry out the invasion of Normandy at the same time as we were debating the national health scheme, or the education system, as I think he said. Such a comparison is absurd, because of the simple point that Normandy was a national priority; it was the salvation of the country; it was a victory of the second world war; it was absolutely a No. 1 priority. Looking beyond that, what were the two priorities in relation to which the British nation as a whole was fixed? It was fixed, of course, on health and education.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I know that my hon. Friend speaks with sincerity, but does he really think there will ever come a time when somebody will not cite some particular issue—national or international—as a reason for not having this discussion about the House of Lords? It will always be the wrong time; there will always be more important issues for some people.
Mr Robinson
I take my hon. Friend’s point and accept it, but this is not really a priority. If we accept that the language of politics or the art of government are about achieving our priorities and managing the problems that are in the way of achieving them, I cannot see the House of Lords as a big problem at the moment. It really is not. It may well be an anachronism with its robes, its frumpery and all that; yes, I would love to get rid of it. For those who want reform, as I do, however, the proposals put forward by Lord Steel seem to deal with the matter. They seem to deal adequately with all my principal objections to how the House of Lords works, how it is constituted and how it deals with various aspects of ritual that people either like or do not like. The proposals deal with it all. If we had a set of provisions broadly based on what Lord Steel had proposed, I believe that we could have gained cross-party agreement, but we have not got that. We have a dog’s breakfast of a Bill.
Martin Horwood
Tom Paine first suggested reforms of the House of Lords more radical than those suggested by Lord Steel, and that was in the 1790s. If the hon. Gentleman supports reform, when exactly are we going to make it a priority?
Mr Robinson
I do not see that it is a priority, and I have no intention personally of speaking to it as a priority. It is not a priority; what is it stopping us doing? The priority at the moment is to get agreement between the two parties that form this so-called Government or this so-called coalition. That is what is preventing the Tory majority from carrying through their programme. Every day we read about it, and every Government have the same problems to a greater or lesser extent, and these are the in-built checks and balances of our very system. No Government find it easy to get their business through. The whole problem in government is getting business through, and in most areas we do not apply the guillotine or a timetable motion. I do not see the problem in the same light or from the same perspective as many other Members who see it as a priority.
Let me explain the points I find most objectionable about this Bill. The 15-year term is an affront to the concept of accountability. What legitimacy is conferred by that if no accountability comes with it? Clearly there is none. I intensely dislike PR—it is a personal view, and the issue can be debated across the Chamber, but such matters are in-built. The objective is the same as that which has been sought since Lloyd George first converted to PR way back in 1920 when he realised he would not win by any other means. He was always a man of great principle. That was when PR became Liberal dogma, and it is has remained as such ever since.
Above all, if we are to have a massive constitutional change of this kind, we should have a referendum. That is why I supported Tony Benn—yes, I did—when we had the first referendum on the European Community, which amounted to a massive change to the country’s constitutional arrangements. That is why, with a clear conscience and a glad heart, I shall vote against Second Reading tonight—quite simply because a basic element in the Labour party proposals as I remember them was the idea that this matter should be subject to a referendum of the British people. If that were part of the arrangements now, they would probably be kicked out, but above all else one would feel much happier in voting for them. As things stand, I shall vote against Second Reading.
Andrew Griffiths (Burton) (Con)
Having sat through the whole of this debate, let me say first that I am grateful to be called, but secondly that I pay tribute to the way in which this debate has been conducted. It has been thoughtful and, on the whole, respectful. It has actually moved the debate forward.
I rise with some sorrow because I consider myself a loyal Back Bencher. I have tried my best in my two years in this place to support my Government in their legislation, but for the first time I am faced with the decision of having to vote against my Government and against my Prime Minister. I do so with no relish and with a heavy heart, but I think many of us have come to the conclusion that we simply cannot accept this Bill. It is bad for the country, it is bad for Parliament and it is bad for our constituents. For that reason, I will vote against the Government tonight. I do that not to give the Prime Minister a bloody nose, not to send a message about the coalition, not even to upset my Lib Dem coalition colleagues—I always prefer to put work before pleasure.
A number of colleagues have mentioned the e-mails they have received from their constituents—some for and some against the Bill, but all in small numbers. I received an e-mail from a constituent this morning, which said, “Dear Mr Griffiths, Yesterday I was made redundant. Why is Parliament spending its time navel gazing?” That, I think, is the heart of the matter. Parliament is looking inward rather than looking outward, at the challenges that we face in governing the country.
It is difficult for me to reconcile some of the promises that we have been given with what will actually happen. We have been promised that there will be no conflict between this House and the newly elected House of Lords, but that promise fails to take account of the nature of the beast with which we are dealing. We are dealing with politicians, and politicians have a mandate. They want power, they want to make decisions, and they want to represent their constituents.
I will say to an elected House of Lords, “This House has primacy.” The Lords will say to me, “I was elected like you, but I was elected under a more proportional system than you.” They will say, “I have a much bigger constituency than you”—which will be true—and they will say that they have been elected for a longer term than me. Most important, they will say, “We are full-time legislators.” As a constituency MP, I spend some of my time here in the Chamber debating issues and some of it dealing with constituency queries.
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)
My hon. Friend is making a good speech, but I disagree with him. Does he not accept that a Chamber that is only 80% elected and 20% appointed inherently maintains the primacy of this place?
Andrew Griffiths
That is rather like saying that someone can be a little bit pregnant. We are changing the relationship between this place and the other place fundamentally, because the other place will have democratic accountability and legitimacy with it.
Christopher Pincher (Tamworth) (Con)
Does my hon. Friend not agree that giving more power to the other place without giving it more responsibility is a bit like what Stanley Baldwin described as the prerogative of the harlot throughout the ages?
Andrew Griffiths
My hon. Friend has made a very good point, and I commend the work that he has done in opposing the Bill. He has done a fantastic job, and I pay tribute to him and to others in the House.
I also struggle with the idea of having to confront my constituents, who are being expected to deal with austerity. We are expecting people to accept the cuts that the coalition claims are necessary if we are to put the country back on its feet and deal with the mess that we inherited, but at the same time we are telling them that politicians may decide to spend £153 million on more politicians. How can I look my constituents in the eye—the workers in my local council who have been made redundant, and the public sector workers who are having to accept pay freezes and make more contributions to their pensions—and say to them, “Yes, but what is important is for us is to have elected representatives costing £153 million”?
I find it worrying that the Government have tried to persuade us that savings made in the House of Commons can be offset against the extra costs in another place. We all recognise that reducing the number of Members here represents a massive saving, but that money should not be spent on more politicians in another place. I am also worried about the 15-year term. The possibility that Members of an upper Chamber elected in 1997 with Tony Blair’s mandate and Tony Blair’s election result would have only just finished sitting strikes me as undemocratic in the extreme.
Martin Horwood
How, then, can the hon. Gentleman justify defending an institution in which Members appointed by Tony Blair are still sitting?
Andrew Griffiths
Because we all recognise that those people in the other place have expertise and knowledge, and they are not at the whim of the vagaries of the political process. They are not politicians and they are not standing for election; they do not choose to kiss babies and knock on doors. They are there because they are independently minded—
Andrew Griffiths
I think we all accept that there are people in the other place we would perhaps not choose, but they continue to do a good job. The Lords have served this country well for 300 or 400 years. We adopt this Bill at our peril, which is why I will be voting against it.
Rushanara Ali (Bethnal Green and Bow) (Lab)
The Labour party has a long and proud history of standing up for our democratic rights—standing up for the rights of the people over the rights of the privileged few. As many of my right hon. Friends have mentioned, more than 100 years ago, the 1910 Labour manifesto recognised the need for change in the House of Lords. At that time, the House of Lords was not just unelected, but filled with hereditary peers. The only claim to power those people exerted was a belief in their right to rule due simply to birth. Under the previous Labour Government, we removed 90% of the hereditary peers, and I am incredibly proud of that important achievement. It is one of many achievements that were part of that reform process.
As the mother of Parliaments, Britain has been at the forefront of democratic reform, but it remains one of the few countries to appoint its second Chamber, in an approach seen by many internationally and in the UK as outmoded and lacking in legitimacy. Labour has been arguing for these changes for a very long time, because we believed then and we believe now that it is right that those who make our laws are accountable to the people. We believe that it is right that they should have a democratic mandate that empowers them to decide on the law of the land. That commitment continues, as reform of the House of Lords is just part of our project for rebuilding our politics. This is not a wholesale condemnation of Members of the House of Lords but instead a chance to renew and open up our politics, to learn from the problems of the past and build on what is good.
The House of Lords is just not fit for purpose. If we wish to call ourselves a modern democracy—I believe that all Members agree on that—we need a second Chamber that is fit for purpose. As many experts in this House have pointed out, the second Chamber plays a vital role as a constitutional safeguard, so it is crucial to have a second Chamber that represents the people of Britain—a Chamber that looks like the people it seeks to speak for.
Some 70% of the Members of the second Chamber are explicitly party political, which somewhat undermines the argument that the Lords are independent from the political process. As others have pointed out, many important sectors of our society remain under-represented. I am thinking about those from the fields of education and policing, and the lack of people from working-class backgrounds. Diversity is not a quality we could honestly attribute to the other place; it is not great here, but it is improving. Only 22% of the peers are women, ethnic minority representation remains low and the average age in the other place is 68. All that in a Chamber that is one of the largest in the world, with more than 800 Members.
The Lords still does not have the diversity that it ought to have. House of Lords reform could provide the chance to redress some of the imbalances, and not only in terms of diversity, because we could address some of the big questions raised in the debate today and yesterday about the major challenges of re-establishing trust in our political process and ensuring legitimacy. As many of my colleagues have said, this is an important opportunity to ensure that the House of Lords is fit for the 21st century and that this is genuinely about rebuilding trust in our political process. The debate we are having today and I hope we are likely to have in the coming weeks and months is about addressing some fundamental issues facing our constitution. That is why it is vital that we have proper time for discussion and debate and I am glad that the Government have decided to drop the programme motion. I hope that we will have more time for debate.
There are real, important issues about which Members feel passionately and that the country is observing closely, so it is vital that we do everything we can to ensure that House of Lords reform ensures democracy and is fit for this century. I will support the Bill and I encourage others to do the same.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
I have sat in the Chamber for two days and I have heard some wonderful speeches, but it was not until my right hon. Friend the Member for Charnwood (Mr Dorrell) got up that any sort of case was made in favour of an elected House of Lords. He made the case on the basis that we have an over-powerful Executive and that we need a more effective House of Lords to deal with it. From that point onwards, I disagreed with him.
My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) pointed out the extreme paradox in the Bill, which is that if one is proposing an elected House of Lords, one inevitably expects those Members to be ever more effective and if they are ever more effective, they will be ever more effective at challenging the primacy of this House. I would have a non-monetary bet with anybody in this House that, if the Bill is passed, within five years we will have a constitutional crisis on our hands along American lines, with gridlock between the two Houses.
Many Members have commented on how effective the House of Lords is at present. They have cited the fact that the Blair Government were defeated 460 times in the House of Lords, whereas we in this House only defeated them four times. I would like to know from the proponents of the Bill what it is about the House of Lords that needs changing. Yes, we can all agree on a lot of things—the numbers, the retirement, the criminals and getting rid of the hereditaries—but what needs fixing at the present time? I would say that very little needs fixing; in fact, there is a lot that is very good about the House of Lords. My hon. Friend the Member for North Dorset (Mr Walter) pointed out that ambassadors, ex-generals and members of the medical profession sit there. I heard a wonderful speech the other day from Baroness Grey-Thompson, who has won 10 gold medals in the Paralympics and has so much to contribute to the House of Lords. Will such people really be elected under the proposed system? I doubt it.
Let us turn to the Bill. It proposes that Members are elected for 15 years. The hon. Member for Ilford South (Mike Gapes) pointed out very clearly what will happen, as they will go around cherry-picking the issues to get publicity. That is not good for democracy. The promoters of the Bill say that they will deal with that problem by not giving them expenses to have a constituency office. Will we have two classes of elected peers––those who can afford to have constituency offices under their own means and those who cannot? That is one of the many flaws in the Bill.
The electoral method proposed for Great Britain in the Bill is the d’Hondt system, deliberately designed in Europe to favour the minority parties. Funny, that, is it not? Then we want to confuse the electorate totally, so we give them a different system in Northern Ireland with a single transferable vote. What a way to run a Bill.
We then come on to the whole business of a referendum. I give this House notice that if the Bill reaches Report, I shall table an amendment on a referendum. I am sure that many of my hon. Friends will support a referendum. I was delighted to hear from the right hon. Member for Tooting (Sadiq Khan), the Opposition Front-Bench spokesman, that Labour Members would support a referendum. I hope that together, if the Bill gets anywhere near the statute book, we can at least ensure that we ameliorate the worst aspects of it by putting the question to the British people. If the British people approve of it, I will be happy, but I suspect that in a referendum they will not and I will be even more happy if they do not.
We must be very clear about what we need to do and we need a clear vision of what we want both Houses to do. We need the Electoral Commission to work that out. Then, instead of trying to fix one half, let us try to fix the whole thing. There is no doubt that our electorate think that Parliament is not as effective as it should be—that is proved by the fact that turnouts in our elections are decreasing.
I am delighted that the Government have withdrawn the timetable motion. I look forward hugely to debating the Bill in Committee, but I look forward even more keenly to the Government taking a long, hot summer and withdrawing this bad Bill altogether.
Graeme Morrice (Livingston) (Lab)
There can be little doubt that House of Lords reform is pretty low down people’s list of priorities, political or otherwise, but it is important to recognise that the reforms in the Bill, albeit that there is much in it that could be improved—that is an understatement—go right to the heart of how our democracy functions and how we conduct politics in this country.
With the public’s opinion of politicians still at rock bottom, this debate on reforming the second Chamber offers us a chance to present our political process in a new, more modern and transparent way, which will, hopefully, prove attractive to many people. As has been widely pointed out in the debate so far, all three of the main political parties broadly agree on the need for reform—an opportunity that, on balance, it is right for us to seize and make the most of. If we accept that it is important to make this change, we also need to take whatever time is required to make sure that we get it right.
I will focus the rest of my remarks on just three of the many important issues covered by the Bill. First is the question of whether the final reform package agreed by Parliament should be put to the public. Labour’s manifesto was clear on that: we stated that we would put reform proposals
“to the people in a referendum”.
Mr Tom Clarke
In Scotland, we had the convention, then an Act of Parliament was passed by this House and another place and then we had the referendum. Does my hon. Friend agree that that was the right way to deal with it?
Graeme Morrice
Yes, I totally agree. The process that applied in Scotland was very consensus-based.
There are clear precedents for putting questions of major constitutional change to the people in this way, including devolution in Wales and, as we have just heard, in Scotland, as well as—lest we forget—last year's ill-fated attempt to change the system of election to this House. People will rightly ask why this significant reform of the second Chamber does not warrant the direct endorsement of the public, particularly when it was deemed right to hold a referendum on the afore-mentioned changes. The public debate that would be generated by a referendum and the legitimacy that a strong public vote in favour of reform would give the new Chamber would certainly also help to cement the changes and strengthen our democracy. Whatever the view of the public may be, I am quite sure that most people would feel it is right that they be consulted on such a major constitutional reform. I do not believe that the case against holding a referendum has been articulated in any convincing way so far, and given the enthusiasm of many Government Members for referendums on other matters, I hope that the Government will think again and give voters the final say on House of Lords reform.
The second major question I wish to comment on is the percentage of the new Chamber that is to be elected. Again, our manifesto was clear on this, calling for a wholly elected second Chamber—a position I have always supported. Indeed, it was also the policy on which every Liberal Democrat Member fought the 2010 election, although we know that their manifesto promises do not count for much.
Mr Alan Reid (Argyll and Bute) (LD)
Yes, that was in our manifesto, but this is a coalition Government and coalition involves compromise. The compromise that was agreed between the two coalition parties was that 80% be elected—and 80% is an awful lot better than zero, so I hope that, at the end of the debate, the hon. Gentleman will support the Bill.
Graeme Morrice
The Liberal Democrats have compromised their principles on this and many other issues.
We have an opportunity to wipe the slate clean on patronage in the other place and agree a wholly elected, fully democratic Chamber. A partly appointed Chamber will remain open to accusations of cronyism, even if the appointments are made in a much more transparent fashion.
Another point relating to whether to have the wholly elected Chamber that many of my constituents have expressed strong feelings about is the place of bishops in the Lords. My constituents have been unanimous in their view that this reform is an opportunity to end the automatic right of bishops to sit in the Lords. I very much hope that whatever form the new second Chamber takes, it will contain a diversity of representatives, but they should be there because the people have put their trust in them at the ballot box, rather than because they hold a particular religious office.
My final point on elections to the second Chamber relates to the electoral system that will be used. If it has to be a proportional representation system—I understand the rationale for using a different system from that used to elect Members to this House—why not use a fully open list system, which puts much more control back into the hands of voters, while remaining relatively easy to understand?
The final question that I want to focus on is the length of the term of membership of the reformed second Chamber. The Bill proposes single, non-renewable, 15-year terms. That long term, coupled with the proposal that Members of the reformed Chamber should not be allowed to re-stand, is a real concern. It would certainly do nothing to improve accountability, and would actually risk undermining the intended aim of making the second Chamber demonstrably more democratic. There is every chance that voters would feel that a vote for a representative who, once elected, would have absolutely no obligation or incentive ever again to listen to the views of their constituents would not be very worth while at all. There is a real possibility that it could have the effect of depressing turnout in elections to the reformed Chamber.
Shorter terms, with the possibility of re-election, would confer greater legitimacy, and give people confidence that we are serious about having a democratic second Chamber, rather than just some sort of Lords-lite. I support the historic opportunity to reform the House of Lords, but we must get it right. As other hon. Members have highlighted, such an opportunity is not likely to come along again in a hurry, so it is imperative that we take our time to consider the detail carefully, and make decisions that will last and best serve the people of the United Kingdom.
Mr Robin Walker (Worcester) (Con)
It is a pleasure to follow the hon. Member for Livingston (Graeme Morrice), and I agree with him on one point—his strong support for a referendum. If one thing comes out of this debate, it is that issue. My hon. Friend the Member for Penrith and The Border (Rory Stewart) made the interesting point that we should perhaps look at having a referendum lock on any major constitutional changes in future.
Having listened to well over 12 hours of this debate, I agree with the hon. Member for Huddersfield (Mr Sheerman) that it has been very good. A number of people who are usually loyalists have spoken out on points of principle, which is hugely important and very welcome. Whatever else is decided tonight, and however the votes go, there has been an important victory for Parliament in our having stopped the programme motion, which it would have been wrong to pass.
Like the hon. Member for Stoke-on-Trent Central (Tristram Hunt), I should declare a family interest: after 31 years in this House, 16 of them spent on the Government Front Bench, my father went to the other place and served a number of years there. I do not intend to detain the House with family history, but it is worth noting, for the sake of those who like to characterise the other place as a haven of privilege for the few, as the hon. Member for Bethnal Green and Bow (Rushanara Ali) did, that Lord though my father may have become, he was not a scion of an ancient family, but the younger son of a factory worker and shop steward—someone who made his own way in the world and earned his place on the green Benches and the red through merit, hard work and experience.
It seems to me, as a very junior Back Bencher, that much of the debate that I have listened to over the past two days has been about a battle between theory and practice: between the idealistic pursuit of democracy, which is admirable, and an understanding of the way it actually works; and between the many loud voices of political correctness and the calmer voices of political experience. When my right hon. Friend the Member for Mid Sussex (Nicholas Soames) and the right hon. Member for Birkenhead (Mr Field) agree, they are generally right. When experienced former Ministers, such as my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind), and the right hon. Members for Sheffield, Brightside and Hillsborough (Mr Blunkett), and for Holborn and St Pancras (Frank Dobson), all speak out against a Bill, they should be listened to.
It is notable that a number of distinguished former Speakers of this House, including Lady Boothroyd and, in the past, the late Lord Weatherill, spoke out against unthinking democratic reform, because they knew very well the strengths and the shortcomings of both Houses. It is especially notable that no former Prime Ministers have been championing the cause of reform. Instead, the one Prime Minister in living memory who pushed through changes to the second Chamber while in office now warns, to quote Tony Blair’s recent editorial in the London Evening Standard, that
“there is almost no public appetite for such reforms. And there might be even less as the full implications of the Bill become clear. By making the Lords largely elected, with elections in May 2015, the character of the Upper House would be irrevocably changed. It would be a place dominated by politicians, and probably second-rate ones at that, given the Commons’ continued dominance. It would also be likely to challenge the Commons far more, stringing out the legislative process and embroiling every stage in party-political wrangling.”
Those who unthinkingly argue that we must have democracy in both Houses need to answer those concerns. They also need to bear in mind the role of the second Chamber as primarily a revising and amending Chamber. The expertise of its Members has been adequately addressed by other Members here, but does that mean that there should be no reform of the second Chamber? Of course not. I would strongly support reforms to introduce a term limit for life peers, to create an independent appointments commission and to limit the power of prime ministerial patronage to create peers, as well as the reforms set out by the noble Lord Steel.
We should be seeking reforms that build on the strengths of our second Chamber, broaden its horizons, and eliminate its weaknesses. What we should not do is press on with creating an elected second Chamber without recognising what the consequences would be—another tier of elected politicians more beholden than any before to the party political system, another layer of expensive professional politicians, a group who from the moment of their first election will be itching to take on the authority of this Chamber and to show that they have just as much right, if not more, to initiate and determine the course of legislation, as we do.
I am a proud democrat. I believe profoundly in the representative democracy that this House enshrines. The coalition agreement said that we would seek consensus to bring forward proposals on House of Lords reform. As yesterday’s and today’s debate has shown, there is no such consensus. Before this debate I was going to say that given the crises affecting our country and the world, the vital importance of the other work that needs to be done and the irrelevance of this debate to the vast majority of our constituents, I could not in all conscience vote down a programme motion. However, I was persuaded by the arguments in this debate that the only way that we would get the issue properly dealt with would be to do so. I am very glad that the Government have done the right thing and listened to the will of the House on that.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
The rebellion on the programme motion has ended and the rebels have won. I congratulate those rebels, because it was the right thing to do.
I do not argue for the House of Lords to be reformed. I want it to be abolished. I do not say that to offend or with disrespect to anyone who has served there. I say it because these Houses of Parliament have evolved over 800 years and I believe that our democracy now has the strength, character and history to take that next step and operate as a single legislature. The description “mother of Parliaments” was neither offered nor given as a testament to a monolithic institution incapable of change. It was offered as a compliment to a political system which gave birth to so many others. It was and is able to change.
I accept the proposition that in the 21st century there should be no place for an unelected Chamber, but when I wake up from my utopia I realise that I have to come back to reality—the Government Bill before us. I do not find a plan to modernise; I do not find a plan to improve our democracy. I see a plan cobbled together to keep a coalition partner sweet. I understand that, but the Liberals always pick the wrong issue to sweeten. The Government decided to put their head down and bully-shove this ill-thought reform through—a plan, to use the words of Rudyard Kipling,
“Twisted by knaves to make a trap for fools”.
I recognise that my desire for a unicameral system may be a step too far for many in the House, but at least it has the virtue of integrity, a commodity that the Government plan sadly lacks. There are numerous issues that need to be addressed. I shall deal with just one, as time is short. The primacy of the House of Commons has been mentioned several times in the debate. Many Members have commented on this but nobody from the Government Benches who is supporting the proposals has yet offered a legitimate argument that would explain how an elected upper Chamber with a legitimate electoral mandate could be curtailed in its use of that mandate by this place.
Is not the very reason that we seek to introduce democracy in the second Chamber to make it accountable to the people though a ballot box? Is it not that very argument for democratisation, its purportedly strongest point, which also becomes its weakest link? Therein lies the rub for all hon. Members. At best the Bill before us is a stab in the dark. At best it is guesswork about how the relationship between the House of Commons and the second Chamber would develop.
As the right hon. and learned Member for Kensington (Sir Malcolm Rifkind) explained yesterday, the Parliament Act 1911 was passed because until then, apart from on matters of taxation, there was an equal right of veto on the business of Parliament. The Parliament Act 1949 merely reduced the amount of time the House of Lords could delay Commons legislation. That argument now goes full circle. With the proposal to have two elected Houses, how is the primacy of this place to be maintained? Clause 2 says absolutely nothing about that. All that would be needed is for one newly elected Member of the House of Lords to stand up and say, “No. I, too, have been elected and the Commons shall not override my views.” What then?
Mr McCann
No, I will not give way, because many other Members want to get into the debate and time is short.
Will the mother of Parliaments becomes the resting place for a constitutional stand-off? There could be nothing worse than everyone in this House, despite knowing the Bill’s flaws, carrying on regardless and saying nothing about it. Even a nude emperor would blush at the stupidity.
In conclusion, I recognise Walter Bagehot’s view:
“With a perfect Lower House it is certain that an Upper House would be scarcely of any value. If we had an ideal House of Commons… it is certain that we should not need a higher chamber.”
What can be more perfect than a Chamber with democratically elected Members representing every part of this United Kingdom? If the second Chamber cannot be improved through consensus, and if those improvements cannot be endorsed by the people in a referendum, then one thing is for sure: having a second Chamber in its current form, with limited power and unable to challenge the decisions of elected politicians, is preferable any day of the week to an ill-thought-out plan that seeks to introduce constitutional change for cynical political advantage.
Richard Drax (South Dorset) (Con)
I learned today from an hon. Friend in the Tea Room that my parentage has been questioned on the PoliticsHome website, apparently because I have voted against the Government on three recent issues. Members will be glad to hear that I shall continue with that illegitimacy in the Division Lobby tonight.
The hon. Member for Huddersfield (Mr Sheerman) made an interesting point earlier—I intervened at some point—on the electorate not being interested in what we have to say in this place. One of the reasons they are not interested is because clear blue principles have to a large extent been lost to the great god of spin. I believe that the vote tonight is a matter of principle.
The upper House works, and it works well. History proves that it does. Yes, there are issues—too many—such as when Members of the House of Lords retire, and concerns about who is appointed and how, but we do not need another elected House. If elected, surely they must have a manifesto. Can hon. Members imagine having a senator—apparently that is what they might be called—in their constituency with a manifesto, and a manifesto to do what: to revise well; to advise even better? It is ludicrous. Conflict will be the inevitable consequence. Of course, the question is who will stand for election. The question of what sort of person might stand for election to the second Chamber has been mooted by many hon. Members tonight. We need an upper Chamber with the knowledge and expertise to revise and advise as it always has, and we have one.
As my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) said, we are talking about accountability. Surely it is not the job of Members of the House of the Lords to be accountable to the electorate; we have that role. They are accountable for revising and advising on legislation. So why are we considering destroying a system that has worked well for hundreds of years? Regrettably, I feel that the reason, as Members have hinted strongly, is to appease our coalition partners. The Liberal Democrats have discovered the power of being the piggy in the middle, so it is no accident that they support a form of PR for the upper House: the balance of power could lie in their hands. How can we justify that when we are elected under the first-past-the-post system? The alternative was resoundingly rejected by voters last year.
Let us be clear: we are being asked to cast aside hundreds of years of governance in exchange, I believe, for a partisan raid on our very constitution and democracy. The Deputy Prime Minister says on many occasions that we are the only country not to have an elected second Chamber, and I think he refers to somewhere in darkest Africa, but as always, dare I say, he misses the point. No other country has a long and honourable history like ours, or a democracy like ours.
To allow this Bill to go through would be a capitulation too far. The Daily Telegraph put it neatly yesterday as a stark choice:
“between high principle and low politics.”
We hear that the boundary review could be at risk if we do not push the Bill through. I believe that it would be dishonourable behaviour, were the Liberal Democrats to renege on that particular issue. We gave them a referendum on the alternative vote in exchange for the boundary review. If we agree to this Bill, what will their next demand be? This country, our country, which deserves the very best, will get less.
We have heard tonight the adage, “If it’s not broke, don’t fix it.” It isn’t broke, but may I suggest that we fix it very gently?
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
This is a complex Bill, but at its heart there is of course a simple principle that those who make the laws for the people should be elected by the people, and that is why I shall certainly support the Bill’s Second Reading.
That principle of election, if it is to be made as real and as complete as possible, also requires accountability, and that is why I have grave reservations about the proposals for 15-year terms with no possibility of re-election. I shall look for amendments to that as the Bill makes its way—eventually—through the House.
I also do not see why election requires 450 Members in the reformed upper House. At an earlier stage, it was suggested that 300 would be sufficient, but even that is on the high side. If the new House is to have Members with a revising role but no constituency responsibilities, it does not need anything like the suggested 450 Members, and, if the number of Members of a second House were lower, some of the cost objections that have been raised would be less powerful both in this House in debate and in a referendum.
I support the principle of election, so I also agree with Opposition colleagues who argue against reserved places for Church of England bishops. Many bishops who attend the Lords do offer an independent and critical voice, and it has challenged over-mighty Governments of all parties, but such a challenge should come from those whose authority to speak is derived from election, not from appointment. As many Members have pointed out, the additional objection is that, by giving a privileged place to leaders of one faith group, we discriminate against every other faith group, let alone against agnostics and atheists.
I am glad that the programme motion has been sent away for another day, because it limited, as is normal, not only the total number of days for debate, but the subject for debate on each day. So there were bound to have been occasions when, because of statements or whatever, and after Front Benchers’ speeches, perhaps only six, seven, eight, nine or 10 Back Benchers would have been able to join in the debate, and that would have been unacceptable on an issue about which so many Members have strong views.
Mr Tom Clarke
Does my hon. Friend not agree that the Bill, in many cases and in many places, is opaque? For example, it does not indicate whether, in the other House that is going to emerge, Members will even be paid during the parliamentary recess. Given that so many questions are bound to be asked, it would be ridiculous to confine ourselves to a particular time limit.
Mark Lazarowicz
Indeed. As my hon. Friend the Member for Wallasey (Ms Eagle) said, given that the Bill might end up in exactly the same format going through under the Parliament Act procedures, it is vital that we get it right first time while it is here. It would be ironic if a measure that is designed to improve scrutiny ended up restricting scrutiny here in this Chamber.
The programme motion has been taken away, but that does not necessarily mean that the Bill will not go through this place, although it will certainly take longer to do so. If it does not go through, that will not be because of actions on the part of Labour Members, as some Liberal Democrat Members have suggested; it will be because the Conservative side of the coalition has pulled the rug from under its Lib Dem partners, and the Lib Dems will have to draw their own conclusions about the future of the coalition.
I want to say a few words in support of the call for a referendum. I have not always been as enthusiastic as some colleagues about the case for referendums on almost any constitutional change, but it is now broadly accepted that any major constitutional change should be submitted for endorsement to those it affects. Having seen referendums approved for much less significant changes than this one, I cannot see any argument against a referendum ultimately being agreed to as part of a final requirement of endorsement by the people.
I suspect that the real argument as to why the Government—certainly the Liberal Democrats—are against a referendum is that they fear, particularly after the experience of the AV referendum, that they would lose it. I draw a different conclusion from that experience from that which some Liberal Democrats seem to have reached. I supported AV and campaigned for it. However, in the case of the AV referendum, hardly anyone who campaigned for AV really believed that it was the ideal solution, and they did not give it any enthusiastic support. That is the danger that will face the Government if and when this matter comes to a referendum. [Interruption.]
Mr Deputy Speaker (Mr Nigel Evans)
Order. There is too much background noise—please keep it to a minimum.
Mark Lazarowicz
The Bill is in danger of being a measure that does not have the kind of popular support that would be required. The answer to that problem is not to do away with the idea of a referendum but to improve it to make it more radical and democratic. We should make those changes during the course of the Bill’s passage through this House, and I will certainly support that.
Alun Cairns (Vale of Glamorgan) (Con)
As a strong supporter of the coalition Government and the need for strong government at a time of financial crisis, I find myself in the extremely difficult position of not being able to support them this evening. Within the limited time frame available, it would be difficult to go into all the reasons now. We have heard excellent speeches by Members in all parts of the House. I want to focus on two key issues in the Bill: first, the primacy of the House of Commons; and secondly, the impact on elected Members of this House and their relationship with their constituents.
At a general election, through the first-past-the-post system, the public will decide to support or change the Government. The Government will generally get their way through the manifesto. The other place holds the Government to account according to the manifesto. It will offer advice and often slow things down to enable the Government in the House of Commons to rethink, but by convention this House will always get its way. Electing Members to the other place will change that. The relationship between both places will change, and election to the other House will give its elected Members the moral right to reject legislation that comes from this place. Conventions that have developed and evolved over many generations will become a thing of the past.
Think of it, Mr Deputy Speaker. A new Government might find that they cannot get their way. There will be constitutional deadlock and the ping-pong that we have experienced on some occasions will become commonplace. Some Members argue that that is not the case and that the Parliament Acts will preserve the primacy of this House. However, using the Parliament Acts will become commonplace. It will no longer be a significant step, but merely part of the normal process of any Government in this House who seek to get their way and to force their legislation through.
That means that the elected Members in the other place will be second-class citizens. If this House can simply force its will through, time and again, on every piece of legislation because the Members of the other place are not important enough to make a difference, why should Members of this House show them any respect at all? That will create an unsustainable situation.
The second element of my speech, in the limited time that I have, relates to the relationship that there will be between elected Members in the other place, Members of Parliament and our constituents. I have been a regional Member of the Welsh Assembly and have observed the activities of regional Assembly Members of all parties. The result will be that our constituents will have several elected Members who are responsible for the same areas of policy and legislation.
Regional Members will have a habit of picking and choosing the issues that they think are the most important and most popular. They will deal with significant issues when it suits them and will be nowhere to be seen when there are awkward and uncomfortable issues for the electorate. They will accept all the credit, but none of the responsibility. That will undermine the role of the Member of Parliament in relation to their constituents and weaken the Member of Parliament.
The relationship between the Member of Parliament and the elected Members in the other place will become competitive. Regional Members will focus on specific areas in marginal seats. There is nothing in the legislation to prevent an elected Member of the other House from spending all their time and resources in the most marginal part of the most marginal constituency in an attempt to further their cause of being elected to this place.
Jake Berry (Rossendale and Darwen) (Con)
I am sure that my hon. Friend is aware that that issue is covered in the Bill. There will be a bar on people going straight from the other place into this House should it become an Act of Parliament.
Alun Cairns
I am grateful to my hon. Friend for his contribution. However, the activities of a regional Member will certainly undermine the activities of a Member of Parliament. I will give two examples from the Welsh Assembly. One regional Assembly Member opened two constituency offices in one marginal seat, even though they had responsibility for two thirds of the geography of Wales. Another regional Assembly Member focused all their activities, surgeries, street surgeries and campaign meetings on the most marginal area of the most marginal seat to further their party’s cause. It can therefore be done on an individual or party basis. We should bear it in mind that the elected Members of the other place will by and large be party appointments, so they will be able to focus all of their activity in that way.
The reforms will undermine the independence of the other place and its Members, and lead to constitutional deadlock between the two Houses.
Mr William Bain (Glasgow North East) (Lab)
This has been a fascinating debate for Members of the House, but perhaps a perplexing one for the public. A recent study by Democratic Audit showed that the public are increasingly distrustful of our political institutions and of corporate power, and are saying in ever-larger numbers that we face a crisis of democracy. That speaks to one conclusion: there must be a major democratic resettlement, with democratic reform of the second Chamber a key component.
Labour has always recognised that a programme of radical economic and social justice in government can take place alongside strong political reform. In the second general election of 1910, Keir Hardie stood for re-election in Merthyr Tydfil on a manifesto of introducing a minimum wage, home rule, votes for women and ending, not mending, the House of Lords. At the last election, our prescription for the democratic chasm that is the unelected second Chamber was a different one, and I am proud to stand tonight on an agenda of putting a wholly elected second Chamber to the people of the country in a referendum.
As the Executive have tightened their control over this House, a democratic second Chamber to offer an enhanced check and balance has become increasingly vital. We need only heed the lessons from Scotland, where the Scottish National party has been able to exert complete command over the single-chamber Scottish Parliament and all its Committees through an overall majority obtained with 45% of the vote at the last Scottish general election, even under a system of proportional representation. Unicameralism without electoral reform or a redistribution of power between Parliament and the judiciary would risk strengthening Executive power in Parliament, far from limiting it.
The current unelected second Chamber is a hangover from a mediaeval era of democratic illegitimacy. It has mushroomed from 666 Members in 1999, when nine out of 10 hereditary peers were ejected, to more than 830 now. The other place is one of only three second chambers in the world, alongside those in Kazakhstan and Burkina Faso, whose size outstrips that of the first chamber.
The second Chamber is also wholly unrepresentative of the modern United Kingdom. It fails to provide a sufficiently strong voice to the different nations and regions of the UK, as well as to working-class people, young people, the disabled, women, ethnic minorities and the lesbian, gay, bisexual and transgender community.
We are told that an unelected Chamber is more independent-minded than this partisan House, but a detailed analysis of results in the other place between 1999 and 2006, by Meg Russell of University college London’s constitution unit, shows that the Government were more likely to suffer a defeat because of partisan voting than because of the presence of independents in the second Chamber.
In February, 71% of people outside this House backed the principle that those who make the laws should do so on some form of electoral mandate, and 39% believed that the unelected principle should end entirely. The Bill is far from perfect, which is why it needs more scrutiny than the Government were prepared to concede before this afternoon. A 15-year term without a right of recall is an odd mandate to confer upon an elected Member, and the Bill still reserves seats for clergy from the Church of England. The UK would remain one of only two legislatures in the world, along with Iran’s, to continue such religious representation, even though 60% of the public say that bishops should not sit in Parliament.
I suspect that a long tussle faces this House and the other place.
Mark Lazarowicz
My hon. Friend refers to a long tussle. Is it not fair to say that it is right that there should be such a long tussle and long debate, precisely because the Bill would make such a fundamental change?
Mr Bain
Indeed, and in the period of that long tussle we have to decide whether we are prepared to accept that an 80% elected second Chamber is better than a second Chamber that has no elected Members. It would be risible for us to continue with an anti-democratic Chamber that has 92 hereditary peers, with vacancies filled in bizarre parodies of by-elections with electorates comprising as few as two peers and the public completely excluded.
It has been 100 years since the passage of the first Parliament Act. We have had a century of debate. Now is the time for action, and I encourage all Members to support the Second Reading of the Bill this evening.
Nick de Bois (Enfield North) (Con)
I am grateful for this opportunity to share a few words with the House. I made a simple promise to my electorate in May 2010. I said: “I will always put first my country; second my constituency and third my party and serve you in that way.” There are few other causes than voting against the Bill that serve both my constituents and my country so well. I cannot support the Bill.
When I stood in 2010, I did not realise that it could be the last election when voters would elect a House of Commons in the knowledge that they were, in effect, electing the Government. In 2015, they could very well simply be electing one of two Chambers that will ultimately lead them to gridlock.
I am certainly not prepared to rush legislation on a major constitutional issue. I am pleased the Government have seen sense today and withdrawn their attempt to time limit the debate, but they must heed the House and not attempt to do that at a later stage. This is a constitutional issue, make no mistake about it. I hope the House sends a signal tonight that the Government do not have the authority to proceed on their timetable as opposed to the timetable of this House. That is another reason why I will vote against the Bill tonight.
Chris Huhne
When the hon. Gentleman faced the electorate in his constituency at the general election, did he draw attention to the fact that he disagreed with his party’s manifesto on urging a mainly elected second Chamber? That is what the Conservative manifesto said.
Nick de Bois
Let me nail the myth that the Liberal Democrats continually present: there was no consistency among the three major parties in the House. We agreed to work for a consensus. If nothing else has been shown in the House today, it has been shown that there is no consensus for electoral reform—I suggest the right hon. Gentleman has not been listening.
I shall not detain the House much longer. My regret is that the debate has been about the composition of a second Chamber and not about its function, outcomes and what we want it to do. I was shocked to find myself agreeing with the right hon. Member for Holborn and St Pancras (Frank Dobson), who used the analogy of selecting a team before knowing what game is to be played. We have spent time debating whether we should have an elected Chamber, but we have given no thought to its role and the relationship between both Houses and the Executive. Until we answer that question, it is impossible for us to determine the form of any proposals.
I support the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Forest of Dean (Mr Harper) and draw attention to what he said in 2007. In saying that he could not accept the content of the Bill being debated at that time, he said:
“A democratic upper House would challenge…conventions, and because we would not have had a debate about the proper role of the two Houses and the relationship between Parliament and the Executive, we would not be in a good position to make decisions”.—[Official Report, 7 March 2007; Vol. 457, c. 1587.]
I accept that, as result of the Bill, we have discussed some elements of what we expect from a second Chamber, but we are starting at the wrong end.
Sadly, to the many Opposition Members who declare how concerned they are about the Bill but who are not prepared to vote against it and then work to form a consensus on a Bill that we can all accept, I say, “Shame on you.” This is a lost opportunity for our Parliament, our democracy, our constituents and, above all, our country.
Nia Griffith (Llanelli) (Lab)
My comments are not intended to be judgmental about the many Members of the other place who do such good work; instead they are directed at how those Members are selected. The current method of selection is not appropriate for the 21st century. Labour reduced the number of hereditary peers by 90% back in 1999, but we need to go further: we need to abolish appointed peers and have a properly democratic and elected second Chamber.
As time is short, I shall confine my comments to two issues. The first concerns the bishops, who are not representative of all Christians in the UK, never mind those of different faiths or no faith at all. The Church of England is not the established Church of the United Kingdom. The Church in Wales was disestablished in 1920, in Northern Ireland there has not been an established Church since 1871 and the Church of Scotland Act 1921 acknowledged that the Kirk had never been the established Church of Scotland and so could not be disestablished. Many countries specifically separate Church and state, even countries with a clearly dominant religion, such as Italy or Spain.
Equality legislation in this country outlaws discrimination between men and women, yet for this reformed 21st century second Chamber, the Bill proposes to include bishops from the Church of England, which has fudged on equal rights. After years and years, yet again this week the Church is fudging on women bishops, and we have had nothing but exceptions and excuses, and a ridiculous amendment—[Interruption.]
Mr Speaker
Order. I apologise for interrupting the hon. Lady, but hon. Members should calm down. Those who have just spoken—and it is great that they have—should extend the courtesy of a decent hearing to the person who is now speaking.
Nia Griffith
We have had nothing but excuses and a ridiculous amendment that would allow parishes that do not accept women bishops to request a male bishop. This would not be allowed in other workplaces and would be a disgrace even within a non-established Church or religion, but it is utterly deplorable that a so-called established Church chooses to flout the spirit of the law of the land. It is totally unacceptable to give 12 places with voting rights in a reformed 21st century second Chamber to bishops in an organisation that still does not give equal rights to women to allow them to become bishops and which has actually contemplated an amendment that would undermine their authority.
I oppose reserving the 12 places for bishops of the Church of England in the second Chamber because it is not the established Church of the whole UK, because the appointment of bishops does not conform to the spirit of equality legislation and because it is high time that we separated Church and state. If this is really a reform for the future, it is a good opportunity not to include bishops. I ask the Government seriously to consider that issue.
I also have considerable concerns about the proposal in the Bill to appoint, rather than elect, 20% of the Members of the reformed second Chamber. What system of appointing Members could command the confidence of the public? Whoever does the appointing and whatever the procedures, it would be difficult to eliminate all trace of suspicion. We are also told that appointing Members brings in expertise, but what sort of expertise and for how long? Someone who is an expert today might not be a leader in their field in 15 years. There are other ways in which Parliament could bring in experts to advise when necessary, so what is the point of appointing 20% of Members?
Another odd argument is that not electing part of the new second Chamber would preserve the primacy of this House. As my hon. Friend the Member for Foyle (Mark Durkan) said, there are many ways of defining powers and processes that would ensure the primacy of this House. I would far prefer a 100% elected second Chamber, but this at least is a start, and even though there might be flaws in the current proposals, I shall be voting for Second Reading.
Wayne David (Caerphilly) (Lab)
There are many of us in the House this evening who believe that reform of the House of Lords is not the most important issue facing our country. With all the problems our country faces, reform of the other place should not be a Government priority. However, the Government have placed a Bill before us and it is our duty to ensure that it is debated properly and thoroughly. That is what we have sought to do.
Over the past two days this House has had a good debate. More than 60 Members have caught your eye, Mr Speaker. Indeed, such has been the demand for speaking time that the length of Members’ speeches has been limited. Some Members have been against change, but many more have made a good case for reform of the other place. I, too, honestly believe that there is a powerful case indeed for democratic reform. That was a commitment that we on the Labour Benches expressed in our general election manifesto, and it is a view to which we still hold firmly.
However, to believe in reform is not to argue in favour of any kind of reform. The details of how the biggest change in our constitution for 100 years will come about are vital. It is all the more important that the details of the Bill, which Members on both sides of the House have seriously questioned, are thoroughly examined. A number of Members have raised their concerns about the primacy of this House. They include, for example, my hon. Friend the Member for Middlesbrough (Sir Stuart Bell), the hon. Member for Bournemouth West (Conor Burns), whom I commend on his statesmanlike resignation speech, and the hon. Members for Portsmouth North (Penny Mordaunt) and for The Cotswolds (Geoffrey Clifton-Brown), as well as many others. Apart from some Liberal Democrats, few would deny that the primacy of the House of Commons must not be jeopardised, but the Bill, as many Members have pointed out, is woefully inadequate on this crucial issue. Indeed, only yesterday Lord Pannick drove a coach and horses through the Government’s flimsy argument.
Unbelievable though it may seem, the Government seem to believe that referring to the Parliament Acts in the Bill, combined with a large dose of wishful thinking, will be enough. I do not believe that it will be, and there are very few people who share their misplaced optimism. Keeping one’s fingers crossed is not a sound basis on which to embark on Lords reform. As a number of Members have said, the issue is as follows. At present, the primacy of the House of Commons rests on the Parliament Acts, a set of conventions and the fact that the House of Commons, because it is elected, has a legitimacy that is lacked by the House of Lords. The Government have said that the Parliament Acts will remain in force, but also that they believe that the existing conventions will simply continue and that the post-reform relationship will therefore be unproblematic. That view flies in the face of virtually all informed opinion and it defies common sense. Once we have an elected Chamber without clear rules or conventions, it is inevitable that its Members will feel that they have the democratic authority to challenge the House of Commons.
Charlotte Leslie (Bristol North West) (Con)
Does the hon. Gentleman share my concern that although there exists a rough set of plans in Lord Steel’s reforms which could command consensus in this House, a consensus for House of Lords reform is being held hostage because of a determination to talk about one aspect, namely elected Lords?
Wayne David
It is indeed important to establish a consensus. I will come to that crucial point.
It is also important to have a comprehensive view of how our constitution must change, but the essential point is that the Government’s proposals will, I believe, result in the two Chambers of Parliament being locked in endless conflict, resulting in government grinding to a halt. That is not in the interests of democracy.
Members have raised a wide range of other concerns in this debate. A number expressed concerns about the issue of hybridity. Some have expressed bewilderment at why the Liberal Democrats favour it when they argued for a wholly elected Chamber in their manifesto. However, as a number of Labour Members have pointed out—they include my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty)—we are, after all, talking about the Liberal Democrats, and principle is not one of their strong points. I will make an offer to the Liberal Democrats tonight. I say to them: work with us and we will support you in working for what is in the Liberal Democrat manifesto—a fully elected second Chamber.
Members have expressed concerns today about the voting system, and about the particular kind of proportional representation that is being proposed. The hon. Member for The Cotswolds referred to the weakness of the d’Hondt system. Many Members are also perturbed about the proposed size of the second Chamber, and the proposal for part-time and full-time Members. Then there is the cost. The Government were reluctant to come forward with accurate figures, but we know that reform will not be cheap.
Significantly, a number of Members have already begun to dig down into the details of the Bill. They have expressed their unease about ministerial appointments and about the vagueness of the Government’s intentions. Several Members have also questioned the complex transitional arrangements that would take us from 2015 to 2025, but one of the biggest concerns that Members have expressed relates to the single, non-renewable, 15-year terms. My right hon. Friend the Member for South Shields (David Miliband) made a powerful case in favour of such terms, but other Members made the point that only an accountable system can be fully democratic. It is said that if there is no re-election, there can be no accountability, and the House clearly needs to examine that issue in greater detail.
In the course of this excellent two-day debate, hon. Members have pinpointed with accuracy and passion the wide range of complex and important issues that we, as legislators, have a duty to get right. As we have heard time and again from Members on both sides of the House, a major constitutional change such as this requires a referendum. As we all know, referendums have been held on devolution in Wales, Scotland and Northern Ireland. They have also been held on proposals for a Mayor of London and a Greater London assembly. There was a referendum to decide whether there should be an assembly for the north-east of England, and a referendum last year on the alternative vote system. There have been referendums on whether to have mayors in nearly 50 towns and cities, and on whether the Welsh Assembly should have more powers. There was even a referendum in Wales on the opening of pubs on Sundays, yet the Deputy Prime Minister says that there cannot be a referendum on the most important constitutional change in 100 years.
Ian Swales
Will the shadow Minister tell us whether there was a referendum on the House of Lords Act 1999?
Wayne David
I shall respond to the hon. Gentleman by making two points. First, that was hardly a profound constitutional change. Secondly, the provisions were in our manifesto, and we implemented them.
Let us not forget that the Joint Committee on the draft House of Lords Reform Bill came to a forceful conclusion. The last paragraph of its report states:
“The Committee recommends that, in view of the significance of the constitutional change brought forward for an elected House of Lords, the Government should submit the decision to a referendum.”
That was the unanimous view of the Joint Committee. We heard yesterday that the Deputy Prime Minister had accepted some of the Committee’s recommendations. That is to be welcomed, but we have to question why he did not accept its most powerful recommendation. Surely it cannot be the case that he favours referendums only when it suits him.
The Government have claimed that there is no need for a referendum because Lords reform was in all three party manifestos. It is true that a commitment to Lords reform was in our manifesto, along with a promise to hold a referendum on the matter. It was also in the Liberal Democrats’ manifesto. I respectfully point out—[Interruption.] No doubt the Chancellor has come to say sorry, Mr Speaker. I respectfully ask the Deputy Prime Minister, who has obviously had someone come in to give him advice, to acknowledge that we need consensus. I believe that that is true; we do need consensus for Lords reform. That is said in the Conservative party manifesto, which brings me to my next point.
Important constitutional change can be brought about only through consensus. That was the view of the last Labour Government and it is our view today. Despite repeated offers by us to work with the Government to establish common ground, those overtures have been greeted with a deathly silence. That is a great shame, but it helps explain why this Bill is seen by so many as partisan.
Finally, this has been an interesting and indeed historic couple of days. There is a lack of clarity about where we go from here. I look forward to hearing the Minister provide that clarity, but I say to the House that Labour Members stand ready to be positive and to work effectively for reform of the second House, and I hope that the Government will respond to our positiveness.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
I was very pleased that my right hon. Friend the Chancellor of the Exchequer joined us because he is, along with many other Conservative members of this Government, one of the sponsors of this coalition Bill to reform the House of Lords.
I made it clear in 2007 that I thought that the most important relationship was between the Executive and Parliament, and that the Executive were too powerful. I am happy to reaffirm that now as a member of the Executive, as the right hon. Member for South Shields (David Miliband) also said. I still believe that, and I believe that what we are about here is making Parliament stronger to keep the Executive under control.
This coalition Government have made important reforms to strengthen this House of Commons. We implemented the Wright reforms, we have elected Select Committee Chairmen and we have introduced the Backbench Business Committee—not always a comfortable experience for the Government, but the right thing to do. This Session, we will introduce a House business Committee. Now it is time to get on to reform the other place, and my right hon. Friend the Member for Charnwood (Mr Dorrell) set out clearly in his speech and in his article in The Guardian exactly why we should do so—to make sure that a stronger Commons will make life more difficult for Ministers and make Ministers think harder about legislating. That was an argument that my right hon. Friend the Leader of the House set out clearly, as well.
We have heard from many members of the Joint Committee. The hon. Member for Stockport (Ann Coffey) reminded us in an excellent speech that we should pay attention to the views of our constituents. In a recent YouGov poll, 39% of the public said that the way peers are elected to—I mean get to—the House of Lords [Interruption.] I would be very happy to elect them. The public say that they do not like the way in which peers are currently selected. That is the top thing they do not like about our political system. Whenever people are asked in polls, the overwhelming majority want to elect a significant number of Members of the other place.
Mr Harper
No, the right hon. Gentleman did not leave me any time to take interventions, so I am afraid I am not giving way to him. He spoke for far too long.
The right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) set out clearly in his excellent speech the trends over the last decade whereby this Government have built on the work done by others, including the right hon. Member for Blackburn (Mr Straw). His White Paper of 2008 was similar to the proposals we have set out, which is why Labour Members will, I hope, support the Bill on Second Reading.
The proposal in the Bill is very simple—that those who make the laws should be elected. I thought that my hon. Friend the Member for New Forest East (Dr Lewis) demonstrated beyond doubt in his example that Members of the other place influence and make the law. He and I, however, draw opposite conclusions from that. He draws the conclusion that we should keep an appointed House; I draw the conclusion that those Members make the laws, so they should be elected.
We have adopted a consensual approach. We established a cross-party Committee chaired by my right hon. Friend the Deputy Prime Minister, and when we finished that process, there were only three areas of disagreement with the Labour party. Labour Members wanted a referendum—we were very clear about that—they wanted 100% and not 80% of Members to be elected, and they preferred a list system to the single transferable vote. We have moved on the latter in a spirit of consensus, which I hope will be reflected.
Mr Harper
No, I will not.
We then established a Joint Committee which considered our draft Bill for nine months, giving it exhaustive scrutiny. The Committee agreed with its central propositions, but recommended a number of changes, more than half of which we adopted. One of its most important recommendations was that the reformed second Chamber should have an electoral mandate. In a Division that was won by 13 votes to nine, nine Members of the House of Commons voted for an elected second Chamber and only one did not. That was a very clear result, and I think that we should accept it. [Interruption.] We will have a debate about the referendum in Committee. [Interruption.] My right hon. Friend the Leader of the House will set out the next steps for the timing of the Committee debates—which will take place when the House returns in the autumn—during business questions on Thursday in the usual way, following what I hope will be a very clear and decisive vote in support of Second Reading tonight.
Let me now touch briefly on the proposed alternatives. Many Members have mentioned a Bill presented by Lord Steel. That Bill would achieve only two things. It would allow peers to retire, but even Lord Steel recognises that significant numbers are unlikely to do so without what he called a bronze handshake and what I call redundancy pay. I am afraid that, given the current financial times, our constituents would not understand it if we spent public money on rewarding some of the better-off members of society for leaving the other place, and without such payments the Bill would not achieve its objectives. It would also not remove any of those in the other place who have been convicted of criminal offences. On the basis of the two propositions that it advances, it will fail.
Finally, let me say something about the way in which we will proceed. The Leader of the Opposition said that he wanted the Bill to be out of the House of Commons in sufficient time for it to be debated seriously by the other place. The programme motion that we placed on the Order Paper, which will not be moved, would have meant our debating the Bill in the House of Commons until November. If the Opposition want the Bill to leave this House and go to the other place, they need to agree on a sensible number of days for debate. The only alternative is for Members to be willing to sit during the summer, or overnight, or for the House to do nothing but debate this Bill. That is not the right way in which to proceed. The hon. Member for Brighton, Pavilion (Caroline Lucas) approached the matter in a constructive way by tabling an amendment. She did the right thing: she engaged in the debate.
I hope that, following the lead given by the hon. Member for Nottingham North (Mr Allen), the Chairman of the Political and Constitutional Reform Committee, there will be proper negotiations between the usual channels, and we have allowed time for that to happen. I also hope that every Member who votes for the Bill’s Second Reading tonight and agrees to its principle will ensure that we can get it out of the House and into the other place and achieve reform, because I believe that there is a consensus in favour of that reform. We will test the opinion of the House tonight, and I am confident of the result. I commend the Bill to the House.
Question put, That the Bill be now read a Second time.
Business without Debate
Petitions
David Morris (Morecambe and Lunesdale) (Con)
I am extremely proud to present this petition on behalf of nearly 1,000 of my constituents. I am very proud to say that, despite the lateness of the hour, the lead petitioners are in the Public Gallery. They are Philipp Von Der Wippel, who is a German exchange student from Munich, Sean Brearton, Joe Bird and Leandro Rispoli. They are ably led by a young man called Ibrahim, who is from a Syrian family. Sadly, the security situation in Syria is so dangerous that I cannot give his surname for fear of reprisals against his family. They are joined by Ibrahim’s brother, Karim, who has also been very active on the issue. Once again, to protect his family, I will not state his surname. These petitioners started their campaign in Heysham high school in my constituency, and have signed up fellow students, along with their friends and family.
The petition says that Her Majesty’s Government
“must do everything in its power to assist in the removal of President Assad of Syria and support the humanitarian effort to aid the people of Syria.
Wherefore your Petitioners pray that your Honourable House shall urge the Government to consider taking steps to support the people of Syria in their ambition to build a free, stable and safe country.”
That is a reminder of the strength and depth of feeling on the Syrian issue. We in this House and beyond must do everything that we can to help bring about regime change in Syria, and to try to alleviate the horrendous situation faced by the Syrian people.
Following is the full text of the petition:
[The Humble Petition of pupils from Heysham High School and others,
Sheweth,
That the petitioners believe that the Government must do everything in its power to assist in the removal of President Assad of Syria and support the humanitarian effort to aid the people of Syria.
Wherefore your Petitioners pray that your Honourable House shall urge the Government to consider taking steps to support the people of Syria in their ambition to build a free, stable and safe country.
And your Petitioners, as in duty bound, will ever pray, et cetera.]
[P001106]
Ian Swales (Redcar) (LD)
The Royal Mail proposes to close the South Bank delivery office in my constituency and move its activities to its Cannon Park office in Middlesbrough. This will cause great inconvenience to local residents and will result in job losses in a hard-pressed area.
I present a petition from 3,420 of my constituents which states:
The Petition of residents of Redcar Constituency,
Declares that the Petitioners are opposed to the closure of the South Bank Delivery Service.
The Petitioners therefore request that the House of Commons urges the Department for Business, Innovation and Skills to ask Royal Mail to listen to residents and reconsider proposals to close the South Bank Delivery Office.
And the Petitioners remain, etc.
[P001107]
Credit Unions (Modernisation)
(12 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mrs Madeleine Moon (Bridgend) (Lab)
I declare an interest as a member of Bridgend Lifesavers credit union. Bridgend Lifesavers is a community-based credit union founded in 2000. It has gone from strength to strength, with 3,000 people benefiting from its services and an expanding network of collection points, including a high street collection shop in Bridgend town centre. Last year the union had savings of more than £1 million and had made loans of more than £500,000. I would like to put on record my admiration for the hard work of everyone connected with Bridgend Lifesavers who have made it such a success. I would also like to put on record the fact that I am the vice-chair of the all-party parliamentary group on credit unions.
This debate has come at an important time for credit unions and the financial services sector. Not a day seems to go by without another story of mis-selling, rate fixing or large bonuses, and it is little wonder that trust in banks has dropped to an all-time low. A ComRes poll at the end of June found that only 10% of people trusted bankers to tell the truth. Increasingly, people are looking for financial services that have the sense of social responsibility and the credibility that credit unions represent. Credit unions already fulfil a vital role helping people who ordinarily struggle to get a bank account or affordable credit.
With the publication of the Department for Work and Pensions feasibility report on credit union expansion, credit unions are at a crossroads. I want to use the time that I have to examine that expansion and to seek assurances from the Minister that any changes that he makes will be carefully made and considered to avoid the goose that laid the golden egg meeting an untimely and scrambled end. The feasibility report concluded that no change is not an option, and it is clear from credit unions themselves that they feel that they are not reaching their full potential.
The report picked up on the gap in the financial services market. Financial exclusion needs to be addressed urgently. Some 1.4 million people in the UK do not have a transactional bank account, but credit unions can fill that gap where banks appear unwilling to do so. Around 7 million people in the UK use high-cost credit. A survey carried out by Unite concluded that the third week of every month is rapidly becoming Wonga week, with 82% of the 350,000 respondents saying that their wages cannot last the month and 12% saying that they turn to payday loan companies to see them through to the end of the month. The House has heard frequently of the exorbitant rates of interest those companies charge and the financial hardship that that can lead to. A survey carried out by Save the Children on the costs of child care found that a third of parents in severe poverty have had to go into debt in order to meet those costs.
Jessica Morden (Newport East) (Lab)
Does my hon. Friend agree that it is easy to understand how child care costs can push people into debt, because for many families those costs are equal to the cost of their mortgage or rent?
Mrs Moon
My hon. Friend is completely right. We must take on board the fact that those are families who want to work and who get into debt in order to continue working, because they know that continuing to work will give their children a better start in life. They need support, and credit unions can give them a better level of support.
Greater competition for the high street banks and the more widely available source of affordable credit are both things that credit unions can offer. Therefore, what should be done to nurture credit unions and ensure that they can fill the gap while achieving long-term sustainability? The main recommendations of the feasibility report can best be summarised as the need to increase efficiency, to increase revenue and to increase skills. I understand that the Government plan to take forward the report’s recommendations and that the additional earmarked investment of £38 million will be conditional on the credit union industry meeting a number of agreed milestones for collaboration, modernisation and expansion. I hope that the Minister will elaborate on how that will work in practice.
I shall look at the changes in turn. Increasing efficiency, from the point of view of greater automation, reorganisation and collaboration, makes sense. Close working among credit unions and the ability to provide a greater variety of services to a larger customer base is clearly important, but I want to sound a note of caution. Part of the appeal of credit unions is their ethos of independence. In the section, “The Way Forward”, the report recommends that the Government select the best performing credit unions, which make commitments to fulfil certain requirements. The Department for Work and Pensions has suggested that, for that to work, credit unions would need to form consortiums of 15, with a joint minimum membership of 120,000.
Jim Shannon (Strangford) (DUP)
I thank the hon. Lady for bringing this matter to the House. In my constituency credit unions play a vital role in local communities and deliver to the people who really cannot afford banks. Does she agree that the Government changes should take into full consideration the importance of small credit unions and what they deliver to local communities?
Mrs Moon
I thank the hon. Gentleman for his intervention. That is exactly where I was going in my speech. The average size of a credit union is around 8,000 members, but many fall below that, including Bridgend Lifesavers. Its membership is growing, but it is still about 3,000, so it would be excluded from the modernisation plans. In fact, it would be impossible to meet the target of 120,000 members given that we do not have that total membership across Wales. Wales is a vibrant and active country for credit unions, and I have no problem being ambitious about what they can achieve, but I would like an assurance from the Minister that smaller credit unions that provide valuable services to their communities, such as Bridgend Lifesavers, will not get lost in a stampede aimed at economies of scale. Perhaps we could hear about the measures to be introduced to protect smaller, but still valuable, credit unions. I recognise the need to increase revenue through the expansion of membership and by increasing the products available and the interest rate that credit unions are able to charge.
Demand for credit unions is certainly not a problem, as the feasibility report’s research found. Of 4,500 consumers on a low income who were contacted, 60% expressed a desire for local trusted services, such as those provided by credit unions. The crunch came when they were asked about their awareness of local credit unions, with only 13% of those surveyed being aware of the services that unions provided. That might in part be explained by the previous links required for membership, so the legislative reform order that came into force in January will, I hope, tackle that issue, and I thank the Government for taking the measure forward.
The feasibility report emphasises the need to raise consumer awareness and to develop a strong credit union brand. A national marketing campaign is needed not only to reach those on lower incomes, but to broaden the appeal of credit unions generally. In the United States and in Canada, 40% of people are members of credit unions. The credit union is not just a low-income organisation; it is active across the income spectrum.
Damian Hinds
The hon. Lady has mentioned a couple of countries and could have also mentioned Northern Ireland. We have just heard from a colleague from Northern Ireland, where credit unions are widespread, well understood and well known, and, notwithstanding her point, which we all accept, about the benefits of small credit unions, that demonstrates the benefits of scale. If lower-cost operations are to reach out to more people, including to low-income customers, scale will have significant benefits.
Mrs Moon
I thank the hon. Gentleman for his intervention. Of course scale has benefits, and I recognise that, but we must not kill off small credit unions that are going to grow—and perhaps the publicity campaign will help them to grow. We must not say, “Credit unions cannot expand; we are only going to service the large ones and stick with them,” otherwise unions in countries such as Wales, where they are growing, will find themselves isolated and unable to meet the growing needs of those who want the low-cost credit that they offer.
Tessa Munt (Wells) (LD)
The critical thing, which the hon. Lady mentioned a moment ago, is that credit unions should not take up just those who really need the help that they offer. It is important that people with funding are able to invest in credit unions, so that there is a much wider investment base for those who can afford to place their money there, and so that unions do not just soak up the difficult situations of people in difficult circumstances.
Mrs Moon
The hon. Lady is right. I gave the example of 3,000 members in Bridgend Lifesavers, with a balance of £1 million and loans of £500,000. Such membership and a balance of £1 million shows commitment and what can be achieved by even small credit unions, and that is why it is important that we continue to support them and allow them to expand.
I should like the Minister to provide more details of how his Department, perhaps working with colleagues in the Treasury and in the Department for Business, Innovation and Skills, intends to address the issue of awareness. Will he commit to working with credit unions to develop a national marketing campaign?
Another way to help credit unions is by linking them to the post office network, which would help them to raise awareness and to achieve a boost in revenue. Consumer Focus, in its report “Credit where credit’s due—The provision of credit union services through post offices”, highlighted the potential value of that link-up and how it could be achieved. People trust and value the Post Office brand, and there are 12,000 post office branches—more than bank and building society branches combined—which would offer a nationwide, visible platform for credit unions and greatly increase the availability and diversity of services.
Looking at what needs to be done, the report suggests that credit unions would need to develop shared back-office functions with Post Office Ltd and shared banking platforms. Credit unions might also be required to pay a fee to Post Office Ltd. That idea has widespread support, but it is a big step for all concerned, so will the Minister elaborate on what role his and other Departments will play in facilitating it, and on the stage that has already been reached in making it a reality?
The feasibility study suggested that long-term financial sustainability could be achieved if the interest rate ceiling of 2% that credit unions can charge on loans is lifted to 3% on reducing balances. The modelling included in the study suggests that the 3% loan rate would need to apply only to loans below £1,000. The 3% rate would make credit unions more sustainable, but at the same time they would not lose one of their biggest attractions—affordability. That is important, because this is often about the small purchases of essential items such as cookers and freezers that families need. That is borne out by what Brian Rees of Bridgend Lifesavers said to me:
“A regulation for 3% maximum interest would be very helpful. As you appreciate, lending very small amounts of money is very expensive and we presently don’t cover costs below £500. 3% is nowhere near ‘a door step rate’ but it would help us to sustainability.”
I understand that the Government are planning to consult on this measure, and I hope that the Minister will listen to those concerned about the pros and cons of adopting it. Should it be decided that it offers a short-term solution, I hope that legislation can be brought forward as soon as possible. Credit unions can achieve what we want them to achieve, and they themselves want to achieve, only if they are given the capacity to do so.
Finally, I turn to the demand for credit unions to develop a broader skills base and, by extension, better qualifications for their staff and directors. The Association of British Credit Unions, which is a great supporter of the all-party group on credit unions, has identified that as a challenge to the sector. Some progress has been made, but while the feasibility report suggests that for credit unions to demonstrate that they are worthy of Government support they need to have appointed a director to work with their board, it does not offer much detail on the time scale or how it expects that to be achieved. I would be grateful if the Minister could furnish us with further details.
Credit unions offer a ready-made solution to many of the problems that we are facing, but in supporting and enabling them to grow and expand services we must not lose sight of what they stand for and their value to the communities they serve. I, and the many Members who support their local credit union, look forward to hearing the Minister tell us about the support that can ensure that these valuable community-based sources of financial aid are encouraged to grow, develop and prosper.
The Minister of State, Department for Work and Pensions (Steve Webb)
The fact that this is a well-attended debate notwithstanding the fact that Parliament’s focus has been on other matters today reflects the importance of the issue, and I congratulate the hon. Member for Bridgend (Mrs Moon) on raising it. I pay tribute to the work of the all-party group on credit unions. I see that its chair and vice-chair are here, and, I sense, some of its other members. We as a Department very much support and welcome the work of that group. My noble Friend Lord Freud is closely engaged with it, and he will continue to be so.
The hon. Lady paid tribute to Bridgend Lifesavers, her local credit union. I am happy to add my tribute to the work that it and many other small, medium-sized and large credit unions do in providing affordable credit at a time when there are, as she said, many sources of unaffordable and exploitative credit. I think that we are united across the House in wanting the credit union movement to prosper. That is why the Government have identified a further £38 million for the credit union expansion programme to which she referred and to which I will return in more detail. She asked that the goose that laid the golden egg should not reach a scrambled end, so we will take a gander at the evidence.
The hon. Lady made the important point that the difference between the United Kingdom and other countries is that we have massive potential for expansion of credit unions. As she said, 2% of the adult population of this country are in credit unions, while that figure is 40% in America and 70% in Ireland. I am pleased to say that credit union membership has just broken through the 1 million barrier. That is a significant milestone, and we praise everyone who has been involved in reaching it. The question is how we move on to the next million.
There is a balance to be struck between cherishing the historical traditions and roots of the community credit union, and recognising that the small community credit union will not survive indefinitely without ongoing state subsidy, unless we do something about revenues, costs and awareness, which the hon. Lady also raised. The working group that we set up, which was expertly chaired, identified a number of things that had to happen.
We are asking groups of credit unions to work together as part of this process not so that they lose their individual identity, which is crucial, but so that they benefit from scale in the things that they all have to do, such as their back-office functions, publicity, branding, the automation of decision-making or working on their websites. Notwithstanding the individual characteristics of each credit union, much that credit unions do is common to all of them.
Through the expansion project, we are not trying to help an individual credit union in a local place to expand; we want the entire movement to expand. That is why we want to support significant projects that will be of benefit across the sector. There is no reason why Bridgend Lifesavers or any other credit union should not be part of that, but they have to see themselves as part of a bigger project. We are trying to generate a step change in the scale, efficiency and activity of credit unions.
The hon. Lady is right that there is no shortage of demand, but a big shortage of awareness. She asked about publicity campaigns. I can confirm that we anticipate supporting national marketing campaigns for credit unions. We see a value in branding and marketing via the collaborative process that I have talked about.
The hon. Lady asked about the link with post offices. One of the challenges is that if we want post offices across the country to provide access to credit unions, it will only be viable if there is a common brand. While there will still be Bridgend Lifesavers, there might be a common credit union brand so that there can be standardised stationery in post offices and standardised training for people behind the counters. The Bridgend post office will not deal only with the local credit union. That is how we see the link with post offices working, but we are not at that stage yet. Part of the point of the expansion project is to create the scale and branding that would enable the post office link-up to be more effective than it currently is.
We see great potential for expansion in the credit union movement. To give just one example, when universal credit comes in and payments not just of regular benefit, but of housing benefit, are made direct to claimants, budgeting skills will be critical so that people can manage their money and ensure that it gets through to the landlords. Credit unions in a local area will be well placed to assist people with things such as jam jar accounts to ensure that although the individual sees the money and becomes familiar with it, just as they would with a wage, it gets through to the landlord. I am aware of credit unions that are generating a business from that by saying to social landlords that they will run such accounts when the money is paid direct to the claimant to ensure that the landlords get their money, obviously with the consent of the account holder. Social landlords are willing to pay for that service because it is valuable in guaranteeing their rent. That we are moving the entire working-age housing benefit system over to the universal credit platform offers huge potential for the expansion of credit unions, which I am sure the movement will harness.
The hon. Lady asked specific questions about the feasibility study. The proposition was that, as I have said, £38 million would be required between 2012 and 2015. We are looking for tight project management and discipline to maximise the chances of success. In a sense, it is a payment-by-results model. In the past, when the Department has funded growth funds, they have helped and the money that has gone in has been lent, but there has not been a step change in the infrastructure. That is what we are trying to achieve. We want to keep the values and ethos of the credit unions, but are also keen to see professionalism and efficiency, because the point of all of this is to achieve value for money for the lower-income saver.
The hon. Lady raised the issue of interest rates, which we have considered. It is a sensitive issue. We have the rather strange situation at the moment in which credit unions are the only financial institutions that are regulated for interest rates. That seems anomalous in a sense, considering the interest rates that the same client group routinely pays—we have heard about Wonga week. We therefore believe that there could be a modest change, perhaps from 2% to 3%. It would be a permissive change—if credit unions did not want to make it or did not feel they needed to, they would not have to—but we believe it would be a move in the right direction.
That change is a sensitive and difficult issue and will take a bit of time to make, not least because two separate Departments hold the reins of the legislation. If credit unions are ready for the challenge of modernisation and expansion, we will support them. The Treasury will start the process of the rate cap consultation this autumn, which will lead to the Treasury and the Department for Business, Innovation and Skills making any regulatory change next summer. The credit unions will then need time to prepare for and implement the change, so provisionally we are looking at the following April. That is quite a long time away, and if the process can be speeded up we will certainly be willing to consider it, but we need proper consultation because it is a sensitive issue. However, the hon. Lady said that her credit union supported raising the cap, and we are sympathetic to that and want to make progress as rapidly as we can.
For projects to qualify, we will want them to include automated decision making, which is much more efficient, integrated and centralised services and the provision of new financial products. I mentioned jam jar accounts, but there are many more. We will want partnerships to be developed to expand projects such as payroll deductions. As my hon. Friend the Member for Wells (Tessa Munt) said, credit unions are not just about low-income households, and it will help if we can get a spectrum of people using credit unions and make them more mainstream, I imagine with a bit of cross-subsidy. We also want projects to improve marketing, and in due course there will be the potential for working with post offices. Cumulatively, those approaches will lead to a major uplift in membership and create the delivery capacity required to deal with demand.
As the hon. Member for Bridgend said, the credit union expansion project report was recently published. We have already engaged with the credit union sector this month to inform it of the project’s requirements. Early next month we will advertise the procurement process for the exercise, and we anticipate that it will move fast, with proposals being received perhaps the following month. We want to get on with it. Ideally, we want to have contracts in place by January. Although the interest rate change is perhaps happening a bit slower than she would wish, it is a priority of the Government to get the money through, get the contracts in place and get things moving. We want that to happen by the turn of the year or not long thereafter.
The hon. Lady mentioned some research that she had seen on the scale of the demand for credit unions. The credit union expansion project commissioned its own research, and we were struck by the fact that of the 4,500 people surveyed, three in five said they would use credit union services if such were available. As she and the chair of the all-party credit unions group, my hon. Friend the Member for East Hampshire (Damian Hinds), will know, credit union use is still patchy. There are still places where nobody is aware of a local credit union, and one of the challenges of the project is to improve geographical coverage so that even if someone does not have a local credit union they can access one through, for example, a local post office. We want people to be aware of the credit union brand through national advertising, because credit unions will not get their next 1 million users in good order without breaking out geographically.
On the good that credit unions can do, the evidence that we have shows that 1.4 million people do not currently have a transactional bank account. I was impressed when I met a representative of my local credit union in Bristol. I must admit that before I spoke to her, I was not aware of the range of services that it offered. She described how online access and other things that we take for granted in our regular banking are now becoming far more normal in credit union accounts. We have to get away from the image of credit unions as the poor man’s banks and recognise that low-cost lending by an organisation and people who are familiar is attractive to people, particularly given the current reputation of some of the banks. We need to build on that trust and confidence and expand awareness, and that is what the current project is about.
It is very striking—this is also from our research—that up to 7 million people are using sources of high-cost credit. Even with a higher interest rate of 3% a month rather than 2%, people would save hundreds of pounds by borrowing from credit unions compared with borrowing from Home Credit, and far more compared with borrowing from other institutions.
It was crucial for our research to involve credit unions as well potential consumers. We were encouraged that four in five of those we consulted
“recognised the need for fundamental change in their organisation and that they wanted to offer a wider range of modern financial services to…consumers.”
This is a decision point for the movement. In the past, we have subsidised some credit unions and felt that they did not modernise and move forward when they had that public subsidy. When the public subsidy was withdrawn, a number of them closed or had to merge to avoid closure. We do not want that to happen. Therefore, we are both standing alongside the credit union movement and inviting it to take up the challenge.
The Government believe credit unions have a bright future. I am sure hon. Members on both sides of the House will work together to ensure that it happens.
Question put and agreed to.
Westminster Hall
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
BBC
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
It is a pleasure to introduce the debate under your chairmanship, Sir Roger. The reason why I sought the debate was a strong interest in how the BBC is scrutinised and what is happening in this organisation. My first recollection of the BBC is from the time when I used to go back to Poland, in communist times, and see my grandfather. At the end of the day, we would draw the curtains and quietly listen to the BBC World Service. Of course, in those times, it was illegal to listen to outside broadcasters. If people were caught, they were punished. My grandfather and many other Poles behind the iron curtain were very relieved and grateful to be able to listen to the BBC World Service because it brought them the truth, which, regrettably, they were not able to get from communist propaganda and the media there.
The experience that I have described was very positive, but I want now to read out a quote from The Economist in July 2010 that encapsulates my thinking and that of many other Conservative MPs. It says:
“Here is a curious paradox about British conservatives. Challenge them to defend grand British institutions, from the Royal Family to the House of Lords or the lack of a written constitution, and they argue passionately about the dangers of tampering and meddling with things that evolved organically over time. They will talk about the British genius of leaving well alone. Perhaps you would not start from here, they may concede, and parts of our system may look a bit odd to outsiders, even extravagantly so. But these fragile accretions work rather well, they say, and would not survive piecemeal attempts to reform and tweak them. If it ain’t broke, in other words, don’t fix it.
And yet, get the same British conservatives onto the subject of the BBC, and they turn into wild-eyed Jacobins, yearning to punish and slash and burn and stick the heads of senior BBC staff on spikes.”
I have to say that that rather encapsulates my thinking about the BBC. I do not understand what it is about this organisation that gets my blood pressure rising and gets me so upset and irritated. I hope to be able to raise some of the issues that certainly frustrate me as a parliamentarian and a representative of taxpayers.
The BBC was set up in 1929, and of course I understand that in the late 1920s it needed to have state funding. However, the 1920s were a very different era from today. We have to think—I give this very important challenge to my hon. Friend the Minister—about how appropriate it is in 2012 for this broadcaster to receive such huge amounts of taxpayers’ money. The BBC is insulated from reality with that comfort blanket of taxpayers’ money. It knows that, no matter what it does, billions of pounds of taxpayers’ money will be poured into its organisation. I feel passionately that there is a lack of urgency, a lack, if I may say so, of innovation and a lack of determination to compete due to the secure nature of its state funding. I would like to know from the Minister what plans he has to ensure that more commercialism is brought to the BBC and that it is forced to pay for itself, rather than relying on taxpayers’ money.
I personally object to having to pay £145.50 every year to have a television licence. The public affairs department at the BBC keeps telling me how wonderfully cost-effective that is—much cheaper than any other broadcaster—but I personally object to having to pay £145.50 for the privilege of having a television licence. In 2012, it is somewhat out of date that citizens have to pay for the privilege of owning a television set. One should automatically be able to have a television and watch it without the need for a licence.
Alun Cairns (Vale of Glamorgan) (Con)
I congratulate my hon. Friend on succeeding in securing so important a debate. I recognise his doubts in relation to the licence fee and the guaranteed income that the BBC receives. Would his doubts be satisfied if there were greater transparency over how that money was spent? Every local authority in England publishes every invoice for amounts in excess of £500. Does he think that that would be an admirable model for the BBC to follow?
Daniel Kawczynski
I completely concur. The BBC has been guilty in the past in the sense that trying to extract information from it has been like pulling teeth without anaesthetic. I do not understand why it has to have this cloak-and-dagger mystery surrounding how it spends taxpayers’ money, because at the end of the day—we must remember this—it is taxpayers’ money. I want to ram that point home over and over again. We are scrutinised here in the House of Commons because we are funded by taxpayers. The BBC is also funded by taxpayers and it has to be as transparent as Parliament is trying to be.
Mr Don Foster (Bath) (LD)
Does my hon. Friend therefore join me in welcoming the coalition Government’s very early decision to introduce the requirement that the BBC opens up its accounts to the National Audit Office?
Daniel Kawczynski
Yes, I concur with my right hon. Friend. I am a great supporter of the coalition Government, and what he refers to is one of their early success stories.
I reiterate to the Minister the need for commercial activity and, dare I say it—this will be anathema to the BBC—some form of privatisation. I see people in the Public Gallery shaking their heads, but we have to think the unthinkable and challenge the BBC, because it does not understand the meaning of reform and adapting to the modern era. I would like also to talk about the salaries of senior executives.
Mr Foster
I apologise for interrupting again so soon, but on the issue of the commercial sector, is my hon. Friend aware that a day’s viewing on Sky costs roughly £1.50, whereas a day’s viewing on the BBC costs 40p? The private sector is not doing very well by comparison, particularly when we bear in mind the fact that 26% of Sky viewing is of BBC programmes anyway and has already been paid for.
Sir Roger Gale (in the Chair)
Order. Before the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) replies and continues his speech, I remind all hon. Members that, for the purposes of debate, the Public Gallery is invisible—it does not exist. It does not matter how much members of the public are gesticulating, Members should not recognise them.
Daniel Kawczynski
Yes, I apologise for that, Sir Roger, but the particular gesticulating was rather irritating and I wanted to highlight it. [Laughter.] May I carry on by saying that I do have a concern about the salaries of senior BBC executives? The outgoing director-general had a salary of more than £800,000. Of course, the BBC says that that remuneration is commensurate with other levels of remuneration in the industry and that in fact it is less than that for comparable positions in other organisations. Again, I find it very difficult to comprehend how someone working in the public sector, with taxpayers’ money, can have such a large salary.
To answer the point raised by my right hon. Friend the Member for Bath (Mr Foster), which I had forgotten to do, Sky may cost more, but at least I have the option of paying or not paying for a Sky subscription. I do not have the option of not paying the BBC its licence fee—I have no option—so there is an important distinction there.
I am told that the new director-general will take a pay cut—to a mere £450,000 per annum. I do not believe that I am the only person in the country who is concerned that the director-general of the BBC will receive such an enormous salary. We must ask ourselves what is so special about running the BBC that means that the director-general receives twice the remuneration of the Prime Minister of the United Kingdom. We all, particularly those of us who have come from the private sector, acknowledge that we need to take pay cuts to do this job. We believe in what we do and understand that we are working in the public sector and paid with taxpayers’ money, so we cannot receive the same salaries that we received in the private sector. People in very senior positions in the BBC must also try to understand that, particularly in the very difficult economic circumstances the UK faces. It is essential for them to take a lead on this. I look forward to hearing what the Minister has to say about increased transparency in the salaries of senior executives and what steps are being taken to cut those salaries further.
One must not forget that there are many extremely hard-working, good BBC employees in regional radio who are paid rather small salaries. I would like to highlight the great differences in remuneration between those at the very top and other people working in the BBC.
I was very upset about the BBC’s coverage of the jubilee celebrations. I watched it; I thought it was scandalous, shabby and rather unprofessional. It is part and parcel of what I call the “dumbing down” of the BBC—not treating the audience in a sophisticated way, but being what it must perceive to be modern and trendy. It did not understand its importance. [Interruption.] The hon. Member for Bishop Auckland (Helen Goodman) may laugh, but this is part and parcel of debating and putting forward different and contrasting views.
Helen Goodman (Bishop Auckland) (Lab)
I am surprised that the hon. Gentleman was not at street parties and had time to watch the BBC coverage of the jubilee.
Daniel Kawczynski
Even I am allowed to watch a very important celebration like the special 60th anniversary of Her Majesty coming to power. I quickly tuned away from the BBC and switched to—
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I understand the passionate case that my hon. Friend makes. It is a free market; people can switch to other channels. He must recognise that the biggest viewing figures for all such national events are still with the BBC, but that is choice as opposed to compulsion. In terms of the BBC’s future and accountability, does he agree that, with technology, licence fee payers could be more involved in the appointment of, and indeed could vote for, non-executive directors to represent them on the board of the BBC Trust?
Daniel Kawczynski
Yes, that is a reasonable and sensible point, but I am trying to get my hon. Friend the Minister to understand and take on board the wishes of those citizens, like myself, who do not want to watch the BBC or pay a licence fee of £145.50. At the moment, I do not believe that the BBC is as good as other channels on television. He may say that it is impossible—“You cannot detach yourself from this additional tax. You have to pay it and you have no alternative.”—but in this era we should think differently. I cannot believe that I am the only British citizen who does not want to watch the BBC and does not want to pay the licence fee.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
My hon. Friend puts his case forcefully; his reputation precedes him. Perhaps he could move on to more positive elements of the BBC, such as BBC Radio Shropshire, of which I know he is an enormous fan. That is paid for by the licence fee.
Daniel Kawczynski
My hon. Friend the Minister knows that I would not miss an opportunity to refer to BBC Radio Shropshire. It is a gem—the one glimmer of light in the whole organisation. I will come on to BBC Radio Shropshire shortly.
I have a serious point about the lack of foreign news on the domestic BBC. I am always amazed at how much trivial information is given out by the BBC in its news bulletins. There is very little about what is happening in parts of the world such as Latin America. For example, an extraordinary coup took place in Paraguay just the other week, and, of course, there was no coverage of it on the BBC. I could mention all sorts of interesting political developments in Africa, Latin America, the far east and eastern Europe that the BBC simply does not cover. It is difficult for people to understand what is happening across the world if the BBC constantly focuses on celebrity gossip and the UK to the exclusion of important and detailed constitutional changes taking place around the world.
I heavily criticise the fact that the BBC does not show foreign films. The reason why people speak such eloquent English in other European countries is that they are constantly watching English films with subtitles. It is a wonderful way for people, particularly the young, to learn another language. They watch a foreign programme and, particularly if it is a series that they like and watch weekly, listen to the audio, but read the subtitles in their own language. I challenge anybody in the room to say how often they see foreign films shown on the BBC with subtitles. It is a very rare occurrence and I would like it to happen more often.
I would also like to challenge the interview style of certain interviewers. I refer particularly to Mr Paxman. I do not know what problem this man has got; perhaps he is not getting enough exercise or something. There is something wrong with this man—something fundamentally, emotionally wrong with the way in which he interviews people. Most politicians who are interviewed by him immediately clam up and seize up, and the interview is not very conducive to finding out what they think. They are guarded and do not want to interact fully, engage or explain what they are pursuing, due to the sheer aggression and patronising tone that this man always brings to interviews. When the Economic Secretary to the Treasury was interviewed recently, I was appalled at the way he treated her: the derisory contempt and the patronising tone—highly aggressive and highly rude.
I suppose that some people might get some form of titillation from watching such a combative interview style, but they must ask themselves, where does it get the audience? Are they any closer to understanding what the Minister seeks to say or the policy of the person being interviewed? I rather suspect that the answers are a mystery to the person watching, because the focus has been on the aggression. I have asked the BBC how much money it spends on anger management courses, but I have yet to receive an answer. It should put some of these people on anger management courses, because they really need to get a grip.
I am not asking for interviews in the style of communist Romania, with sycophants interviewing communist apparatchiks in easy interviews. Interviewers should not accommodate politicians, but there are countries where the relationship between the interviewer and the politician is much healthier and focused on the questions, rather than the conduct of the interviewer.
Of course, I also have complaints about John Humphrys, by whom I have been interviewed on the “Today” programme. He is extremely patronising and arrogant, and does not let one answer any questions. That is in huge contrast to when I was interviewed on the BBC by Mr Andrew Marr. I wrote a biography of Colonel Gaddafi and was invited in not as a politician but as an author. It was fascinating that the tone of the interview was completely different. Mr Marr was interested in what I had to say and asked probing questions in a manner conducive to starting a communication. I felt that the listener was interested in the interaction we were having. Being interviewed at the BBC as an author is, in my experience, different from being interviewed as a politician.
Of course, I am coming to the one ray of light in the BBC world, which is, as my hon. Friend the Minister pointed out, Radio Shropshire, a wonderful organisation run by Mr Tim Beech. It is important to me because it is meaningful; it is where the BBC works. Because it is focused on Shropshire and has local presenters, who talk about local issues affecting my constituents and the community where I live, it is, for me and my constituents, a meaningful body. I admire it greatly. However, again, the BBC focuses just on inner-city areas and neglects rural parts of the country. For example, there is no television camera at BBC Radio Shropshire, in Shrewsbury. Someone who happens to live in Shropshire, the largest land-locked county in England, cannot be interviewed by the BBC. On Saturday, the BBC telephoned me for an interview about the elections in Libya, and bombarded me with telephone calls. I said, “Look, I’m sorry, I can’t do it, because there is no television camera here in Shrewsbury.” The BBC said, “We’ll have to take you to the nearest station, which is Birmingham.” I am not going to do a 90-mile round trip on a Saturday afternoon, when I am with my family, to do a five-minute interview about elections in Libya. The point I am making is not just that politicians in Shropshire must travel 90 miles to do television interviews. There are many charities and important voluntary sector organisations in Shropshire that would like to take such opportunities, but it is impossible for them because the nearest television camera is in Birmingham, which is a 92-mile round trip from Shrewsbury.
Dr Thérèse Coffey
It so happens I was on BBC Suffolk this morning, discussing lively political issues. In Ipswich we have a camera, so my hon. Friend may want to suggest to the editor that he get one. Would my hon. Friend at least give recognition to the fact that after a vigorous campaign by Members of Parliament, the BBC has put local radio firmly back into the future of the BBC and should be congratulated on rethinking its proposed regional strategy?
Daniel Kawczynski
Yes, I agree with that. It is an important point and I want the Minister to take cognisance of the fact that Conservative Members of Parliament are interested in the regionalisation of the BBC and in making it more meaningful for local residents. I am delighted for my hon. Friend the Member for Suffolk Coastal (Dr Coffey) that there is a camera in Ipswich. I have written to the director-general of the BBC about the lack of one in Shrewsbury and lobbied senior BBC executives for the past seven years, to no effect. I hope that, as I have raised it again with the Minister today, some action may be forthcoming to ensure that the important county of Shropshire will have a television camera.
It costs £124.6 million to collect the licence fee, and I want hon. Members to remember that figure. I have been in touch with the BBC public affairs department, which says that that is extremely good value for money, and that those involved are doing a great job. However, let us remember what £124 million is. Sometimes we refer to these figures without trying to understand their gravity. In 2012, when we must make cuts because of the state of the public finances, is it right and appropriate to have two licensing centres, one of which, I believe, is in Preston and the other in Darlington? Is that the optimum way to handle matters? I have asked the BBC to tell me how many people work in those centres, and the response from the public affairs department is, “We don’t know, and that is not a relevant question.” It has a contractor to do such things. I am worried about that, because we should know how many people work at the TV licensing centres.
I want to know why the operation costs £124 million. Think for a moment, Sir Roger, what we could do with that money. Is the present method the only way to collect the licence fee, or are there other innovative ways in which it could be done? I shall say something which will shock hon. Members: I do not want to pay the licence fee, but is it possible for some sort of direct taxation to be used? I do not know; I am only throwing that idea into the air, because I would like the Minister to explain what work he has done on assessing how the licence fee can be collected better, and how the cost of doing it can be reduced from £124.6 million.
I feel passionately about foreign affairs. I am the chairman of the all-party groups on Saudi Arabia and Libya and have a strong interest in Mauritania. Not many people talk about Mauritania, but it is where the Arab spring and democratisation started. I am always amazed: I argue frequently with BBC people who criticise certain countries—Mauritania in particular; I say to them, “Have you actually been?” “No.” There is a liberal élite—as I keep referring to it—at the BBC, which is always judgmental, high-handed and opinionated, without doing research on the ground about what is really happening in Saudi Arabia, Mauritania and other Arab countries. I suggest that before those people cast aspersions on or express opinions about those countries, they must spend time doing research. If they give the wrong impression about countries such as Mauritania, it may preclude or hinder some British companies from interacting with or investing in them.
One of the most important aspects of the debate comes from a friend of mine, with whom I was at university, who works for the BBC in the north of England. He has given me a document to read out, but he has asked to remain anonymous. Such is the culture of fear in the BBC: people who work there fear they will be reprimanded if they say anything negative. My friend writes:
“Over the past 12 months…the BBC has been insisting that freelancers earning over…a certain amount per year (in the region of £10,000 p.a) shall set up service companies, and invoice the BBC through the company rather than individually.
The BBC are running scared of the HMRC. IR35 rule. They were afraid that if the revenue were to closely examine the working arrangements of many freelance professionals, with reference to their work for the corporation, then HMRC would possibly rule that the freelancers were in fact in full time employment with the BBC. This would render the BBC liable for employers’ national insurance contributions totalling many hundreds of thousands of pounds. To escape this possible liability, the corporation has insisted on the service company arrangement, otherwise new contracts would not be issued to the individuals concerned.”
Let me pause there for a moment. Those employees, some of whom have worked for the organisation for many years, are being told that if they do not set up their own companies and invoice the BBC through those companies, their contracts will be terminated. I find that behaviour staggering and highly deplorable. My friend goes on to say:
“That was the stark ultimatum issued by the BBC. Many freelancers are extremely unhappy with this arrangement which brings with it extra costs in setting up the company and extra accountancy fees. And of course this immediately puts the individual in the spotlight as far as NI contributions are concerned. It is they (the freelancers) not the BBC who could now be liable for National Insurance contributions as the individual is now employed by their own service company - but it gets the BBC off the hook!! It should be noted that individual freelancers have never been paid for time off for sickness or holidays. At the same time the BBC continues to impose strict contract conditions on such freelancers (even through the service company) as far as work outside the BBC is concerned. However there are exceptions to this rule, with a number of high profile (and extremely well paid) personalities still allowed to expand their portfolio of work outside the corporation, with, in many cases, high profile television advertising commissions or newspaper features. Whether or not this is allowed seems to boil down to the amount of ‘clout’ the individual has—in other words would the BBC not wish to lose their services? If the answer is that it would not, then they (the freelancers) seem to be able to do what they wish and for whom they like. The BBC is acting like a bully and getting away with it whenever it can, riding roughshod over loyal freelancers who have served them without the protection of staff contracts, in some cases for many years.”
I have given a copy of this letter to the Chairman of the Public Accounts Committee, who has taken a great interest in it and has promised an investigation. The behaviour of the BBC in this regard is scandalous and I urge the Minister to give it his very close attention.
I thank you, Sir Roger, for giving me the opportunity to speak, and I look forward to hearing the Minister’s contribution.
Sir Roger Gale (in the Chair)
Order. There are, I think, nine hon. Members present. No doubt all of them wish to rise to extol the virtues of their local BBC radio stations, all of which are on a par of excellence with BBC Radio Kent. The fact of the matter is that we are short of time. I propose to call those on the Front Bench at 10.40. To be as helpful as I can to hon. Members, I do not propose to impose a time limit, but you can do the maths for yourselves. I will call first those who have written in to Mr Speaker to indicate a desire to speak. The batting order is: Mr McDonnell, Mr Foster, Andy Slaughter, Sheryll Murray and Glyn Davies. I have noted that Mr Mulholland, Thérèse Coffey, Alun Cairns and Jim Shannon are all in the Chamber and wish to speak, and your names are a matter of record. If you do not wish to participate in the debate, or feel that you might not get called, you are free to intervene if any hon. Member wishes to give way.
Greg Mulholland (Leeds North West) (LD)
On a point of order, Sir Roger. I wrote in yesterday, so that letter should have been received.
Sir Roger Gale (in the Chair)
The point of order is noted, but the letter is not on file. We will do the best we can. If all hon. Members exercise self-restraint, we should be able to get everybody in.
John McDonnell (Hayes and Harlington) (Lab)
On my calculations, we have about four minutes each, so I will be as brief as I can. I congratulate the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) on the way in which he introduced the debate. The affection in which he is held in certain parts of the House is clear.
The last issue the hon. Gentleman raised is something we are all concerned about and we will certainly take it up. May I gently suggest to him that he should tell his friend that joining the trade union might help because it, too, is raising such issues? He also mentioned the scandal of Shrewsbury not having a TV camera. Of course we will raise that matter that as well, and we may even have a “whip round” at some stage to assist him. I am pleased that he has secured this debate, and I look forward to hearing the coalition parties’ response to his proposals for the full privatisation of the BBC or its funding directly through taxation. We are looking for a creative approach from the Front Benchers.
John McDonnell
I think the hon. Gentleman was simply suggesting ideas for the coalition manifesto at the next election. Such ideas seem to be coming daily from a wide range of Back Benchers at the moment.
Later today in Parliament, a group of trade unions will launch the report, “BBC Cuts: There is an alternative”. They include the Broadcasting Entertainment Cinematograph and Theatre Union, the Musicians’ Union, the National Union of Journalists, Unite the Union, and the Writers’ Guild. I urge all Members to come along to that launch. The report outlines the concerns of the unions, which are representing their staff, about the threat to the BBC itself. It might well fit in with what the hon. Gentleman has said. The unions believe that the freeze in the licence fee for the coming period and the loading on of additional responsibilities mean that some of the BBC’s core activities are being cut, and that the BBC is under threat. Although I do not want to go into the murky past of how that licence fee settlementcame about, I have to say that undue influence was exerted by Rupert Murdoch and Murdoch junior. Their statements at the Mactaggart lecture in 2009 were translated a fortnight later by the Secretary of State in an article in The Sun, but let us not go into that in any depth, because the Leveson inquiry may well demonstrate the undue influence that the Murdoch empire exerted on the eventual settlement of the licence fee.
The implications of that licence fee settlement are that 2,000 jobs will go at the BBC; and that there will be £340 million of extra funding responsibilities for the World Service, S4C, the roll-out of super-fast broadband, local TV and BBC monitoring. In news, 140 jobs are already going. Something that might cheer up the hon. Gentleman is that three “Newsnight” reporters are going as well, but I am not sure which ones; he might wish to suggest a few names. Three Radio 4 news reporters are going, as are 17 posts across Radio 1, and one extra in news services. Twenty-eight posts are going in the newsroom, including nine studio staff. The News Channel is losing a presenter, the radio newsroom is losing two senior broadcast journalists, and six posts are to go in other areas.
Members—including the hon. Member for Suffolk Coastal (Dr Coffey), who has now left her seat—have mentioned the effective lobby that we all undertook on a cross-party basis to try to save as much as we could of local radio, but that only stopped cuts worth some £15 million; others are going ahead. There are plans, too, to axe 31 posts in national TV current affairs. Editions are being cut from Radio 4’s “Law in Action” and “The Report”, while “Beyond Westminster” and “Taking a Stand” are coming to an end. The BBC plans to halve its spending on party conferences and reduce programme presentation from them; six jobs are going at Millbank, along with four posts in live political programmes.
The Asian Network is still under threat. International news coverage will be affected, with a number of sponsored reporters’ posts around the world being closed. Whatever the criticisms of the World Service, many people rely on it as the only accurate journalism accessible to them on a whole range of fronts. Those are the concerns that many people have about the future of the BBC. They add to the other concerns we have about major sports events being lost to paid TV and the threat to the BBC as a major sponsor of creativity, arts and entertainment.
I share the hon. Gentleman’s concern about some of the BBC’s priorities, especially regarding the high pay of some of the staff. I agree that, as has been suggested, the remuneration committee should be populated by representatives of the staff as well as the listening public. In that way, we may well control some of the high salaries.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) on bringing this matter to the House, and it is good to know that a Member can ask the Backbench Business Committee for a debate one week and have it the next week; that is good news.
Does the hon. Member for Hayes and Harlington (John McDonnell) share the concern of many people inside and outside this House that although BBC executives are, as he said, highly paid, regional programmes—including those on BBC Radio Ulster and on BBC TV in the Province—are being affected detrimentally? One of the downfalls of the current system is that there are fewer people on the ground and less community involvement.
John McDonnell
The hon. Gentleman is absolutely spot-on. The hon. Member for Shrewsbury and Atcham said that there are high salaries at the top of the BBC, and low salaries at the bottom and on the front line. That issue must be addressed, and can be through the remuneration committee, which should include staff and listener representatives. That way, pay could be controlled.
Daniel Kawczynski
The hon. Gentleman said that three members of staff were being made redundant on “Newsnight”. Our understanding is that Mr Paxman earns about £800,000 per annum. If he were prepared to receive a measly £200,000 per annum, we could save those other three jobs.
John McDonnell
I look forward to the hon. Gentleman putting that to Mr Paxman in his next interview. Having said that, he makes a valid point about high salaries overall; we all agree on that issue.
However, we are not just talking about BBC salaries internally. What I find amazing is how much is being spent on consultants. The unions have produced their own figures on that subject, and they say that £3 million went to Deloitte’s alone in 2010-11. In fact, £8 million was spent on consultants that year, despite the 20% cuts overall within the BBC. There is a profligacy that must be addressed by management, and it would be best addressed if they take their staff with them in examining these issues.
Some bizarre and wasteful projects have gone ahead. The new Broadcasting House building in central London cost more than £1 billion, and the Public Accounts Committee has criticised the BBC’s flawed digital media initiative, which wasted £26 million. There are real issues that the BBC must address.
At the end of the day, however, the reality is that for every £1 spent on the BBC, another £2 is generated in income right the way across the economy. That is not the case with Sky. For every £1 spent on Sky, only 90p comes back to the rest of the economy; the rest goes out of the country. So, we must recognise the asset that the BBC is and, therefore, the need for continuing investment.
That is why I support the continuation of the licence fee, but the licence fee debate does need to be reopened. There was a fix at the height of the Murdoch influence, during that weekend in October 2010, and there was a lack of transparency, as has been demonstrated by the Culture, Media and Sport Committee’s criticism of that process. If we do not reopen the licence fee debate, my fear is that we will see a gradual erosion of BBC services and that it will lose some of its core functions. In the long term, that could undermine that generation of creativity—particularly in entertainment—that is helping us to rebalance our economy away from an over-reliance on finance and back towards manufacturing, thereby protecting the long-term future of the creative industries.
That is why I would welcome the Secretary of State reopening the dialogue and discussion about the future of the BBC in a creative way, and his engaging today with the unions, whose report is an incredibly constructive contribution to this debate.
Sir Roger Gale (in the Chair)
May I again urge self-restraint upon Members?
Mr Don Foster (Bath) (LD)
Sir Roger, BBC Radio Bristol is excellent.
As chairman of the all-party group on the BBC, I have to say that we are critical friends of the BBC. We believe that it is the best public service broadcaster in the world, and that that is helped by competition from some other excellent broadcasters in the UK. We accept that, as the hon. Member for Hayes and Harlington (John McDonnell) has rightly pointed out, there are a number of areas where the BBC does not get things right. He gave some examples, and others could include the Jonathan Ross affair or, more recently, the dire coverage of the jubilee celebrations, which my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski)—I, too, congratulate him on securing this debate—mentioned.
Generally, however, the BBC is an excellent organisation. It is now enjoying the highest level of customer satisfaction since records began; it is more trusted than ever before; its news service is the most trusted of all news services within the UK; and as the hon. Member for Hayes and Harlington said, it gives very good value for money to the economy of the UK. Not only does the BBC invest £1 billion directly into the creative economy—helping freelancers and small companies, including independent production companies—overall, it brings more than £8 billion into our economy. That means that for every £1 of licence fee, we are getting £2 into the economy. So the BBC is brilliant for the economy, and it is great for cultural activities and sporting activities. Also, let us just think of what is about to happen: the Olympics are about to start and the BBC, as the main broadcaster, will be providing 2,500 hours of coverage. For the first time ever, it will cover every single sport in the games on a variety of different platforms.
Greg Mulholland
My right hon. Friend is right to highlight sport. However, does he recognise the very real concerns that still exist about the coverage of sport below the national level—below competitions such as the premier league, the Guinness premiership and rugby league’s super league? Such coverage will suffer under current proposals.
Mr Foster
My hon. Friend is absolutely right. We know that television coverage of any sport can massively increase participation and involvement in it, and far too many of the so-called “minority sports” are not receiving the level of coverage I would like them to receive.
Given that there is very limited time, I want to pick up on a few of the points raised by my hon. Friend the Member for Shrewsbury and Atcham. First, he says that there should be more transparency in terms of executive pay. Frankly, I do not know what he means by that. If he goes to the BBC website, he will be able to find the precise salaries of all the senior executives. Indeed, he will be able to see not only that information but all the expenses of senior executives, produced on a quarterly basis. I am sure he will be very pleased to see that those expenses are down 35% year on year over the last couple of years.
However, if my hon. Friend is not satisfied with that information and wants more than just senior BBC executives’ salaries to be revealed, he can look further down the BBC website, where he will see the salaries of a further 462 senior and not-so-senior BBC managers; I checked the website myself a few seconds ago and saw that information for myself. Again, he will doubtless be pleased to see that the pay bill of those managers has gone down by 13.6% and their number has gone down by 8.5%. Also, as has been referred to by the hon. Member for Hayes and Harlington, further work is ongoing to reduce costs, with a 25% pay bill cut and a 20% cut in headcount. So, the call for more transparency is unnecessary; there already is transparency.
Jim Shannon
The right hon. Gentleman says that BBC wages are revealed and accessible every year, but in Northern Ireland some are not. Can he say whether there is one rule in one part of the country and one rule elsewhere?
Mr Foster
I suggest that the hon. Gentleman go directly to the National Audit Office, which can now look at that information following the coalition agreement to that effect. I am sure that he will be able to check that information with the NAO and the BBC.
Time is very short, so let me turn to the issue of foreign coverage. I am not sure whether my hon. Friend the Member for Shrewsbury and Atcham has had time to pick up a copy of today’s Metro. If he has, he will have seen comments by the man who is, in my view, the greatest writer of TV programmes, Aaron Sorkin, who produced the fabulous “The West Wing”. He said in today’s Metro:
“I was in London during Hurricane Katrina and watched the BBC news coverage. That was the first time I ever…watched news about America at length while away in a foreign country. I could not believe the difference in the coverage compared with US news – it was night and day. The BBC is fantastic”.
Of course, if Mr Sorkin has sleepless nights, as I do, he can always turn on the excellent world news coverage of the brilliant BBC World Service.
My hon. Friend the Member for Shrewsbury and Atcham also raised the issue of the cost of licence fee collection. Of course, we would all like to see it reduced, but during the last 20 years it has been significantly reduced as a cost of income, going down from more than 6% to the current figure of 3.4%. Of course, work is being done to reduce it still further.
My hon. Friend suggested that we should collect the licence fee through the tax system. I understand that the Institute of Economic Affairs has said that it costs £20 billion to collect tax at the moment. If we collected the licence fee through the tax system, presumably he would be standing here in Parliament saying, “Why are we spending extra money on collecting tax? Think what you could do with that money.” Of course, that is an interesting question. However, 3.4% of income is not a bad rate for the collection cost of the licence fee.
Finally, I say to my hon. Friend that the problem with privatisation is that it would end up providing far fewer services and far fewer opportunities to meet minority interests, because commercial organisations will not spend their time on those interests, and the minority sports, for example, would totally lose out. The great benefit of having the BBC is that it can cover those things that other broadcasters will not cover. And with that, I will end.
Mr Andy Slaughter (Hammersmith) (Lab)
If that was the right hon. Member for Bath (Mr Foster) being a critical friend, I would hate to see him being sycophantic. I am afraid that the BBC’s uncritical friends do it as much damage as those, such as the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who would like to see it privatised and sold off to Mr Murdoch. However, I praise the hon. Member for Shrewsbury and Atcham for having secured the debate.
My vision is very different. I support the licence fee, and I want the BBC to succeed and thrive, because the alternatives do not bear thinking about. I am afraid, however, that the opportunity is given to extreme alternatives because the BBC constantly lets itself down. I only have a few moments to speak, and as the MP who represents White City and Shepherd’s Bush, I am going to be a little parochial and talk about my own experiences, which are somewhat emblematic of how the BBC has lost its way.
A May 2004 press release stated:
“The BBC’s new Media Village at White City in London will be officially opened tomorrow evening…by Jonathan Ross”—
no less. It went on:
“The Media Village development will play a central role in the regeneration of the wider urban area”.
It also stated that there would be five new buildings by distinguished architects, on a 17-acre site, providing 6,000 jobs for 6,000 people.
Three and a half years later, The Daily Telegraph reported:
“The BBC is to sell Television Centre, its headquarters in West London, to help plug the hole in its finances… Property experts say the site, which houses many of the BBC’s senior executives, could sell for more than £300 million.”
The BBC described the decision to sell as
“another milestone in the BBC’s property strategy”,
while Danny Baker called executives behind the decision “soulless crumbs” and “half-wits”. Of the two, my view is slightly closer to Mr Baker’s.
The situation is now much worse. By 2020-21, the entire media village site will also have been vacated, and 7,000 jobs will have gone from my constituency. Why? Because the BBC has failed to see the possibility of retrenchment and the need to cut back on costs. I was told by a prominent insider that the BBC had three gears for growth: fast, faster and tardis. It has built Salford—a soulless project—and the vanity project of Broadcasting House; consequently, the only site it can dispose of is White City, and 60 years of history there will go, through sheer poor planning.
The BBC was at the centre of a vision for the White City area as the media centre for not just this country, but probably Europe. Instead, we will have faceless developments of multi-storey luxury flats for foreign investors. In fact, the future of the first major BBC site, at Wood lane, would have gone before a planning committee tonight were it not for legal challenges by residents that have forced the report to be withdrawn.
The only silver lining might have been if the BBC was making a lot of money out of the disposals, to subsidise programme making and to avoid the sort of staff cuts that my hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about. The BBC manages such things so badly; it has sold the sites at an undervalue. The proposal for the Wood lane site is what we call the poor man’s Shard—a 35-storey block of luxury flats. I am told that the BBC sold the site at an undervalue, and no doubt—it is in the press—it is also selling its TV centre site at an undervalue, getting a poor deal for licence payers.
I hope that the new director-general will change the BBC’s culture and management. The BBC’s history, certainly during the time that I have represented the area as an MP, has been tragic, in its service to licence fee payers and to my constituents. I wish that I had more time to talk about what I believe to be editorial and managerial mistakes made by the BBC. Three years ago, the BBC thought it was a good idea to bring Britain’s leading fascist to the centre of one of the most multicultural areas of the country, to appear on “Question Time”, and after the invasion of Gaza, it declined to broadcast the Disasters Emergency Committee appeal, despite the thousands of deaths and the destruction of infrastructure.
Those examples reveal deep problems at the heart of how the BBC is run, and the last thing that it wants is for us to say, “Carry on; you’re doing a wonderful job.” I genuinely want the BBC to continue as a leading world broadcaster, but that will not happen without major reform right at the top of the organisation.
Sheryll Murray (South East Cornwall) (Con)
This debate is exceptionally important, and I congratulate my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) on securing it. The BBC is such a prominent news outlet for the public that, if there are issues concerning its performance and quality of reporting, it is appropriate that we discuss them.
There is a great distinction between local TV and radio and national coverage. The local presenters in Cornwall are very efficient, and TV programmes such as the local “Politics Show” and “Spotlight” are always informative, as is Radio Cornwall, which has a large number of listeners throughout the county and beyond, through the iPlayer. Recently, I have had some concerns about the cuts affecting those valuable shows and programmes such as Laurence Reed’s phone-in, which has a big social benefit for many housebound people in Cornwall. I am really pleased that we do not seem to have lost the phone-in. I was disappointed, however, when I heard about an alleged incident involving one of my local BBC radio interviewers and a local councillor last week. The councillor informed me that the interviewer refused an opportunity to interview another councillor with a different view from his preferred story, using the words, “That’s not the angle I want.” I will raise the matter with the local BBC controller, because I understood that BBC reporting, both nationally and locally, was supposed to be unbiased. The fact that the story was angled against the local council causes me concern.
Nationally, there have been some clear instances of exceptionally poor coverage. I have received a lot of letters from constituents about the Thames jubilee flotilla—an issue mentioned by other Members today. The coverage was described as “inane” and “mind-numbingly tedious” by Stephen Fry on Twitter, and an hon. Friend described it as “low-grade celebrity-driven drivel.” My constituents would have preferred presenters with comprehensive maritime knowledge, focusing on the participant vessels, most of which were interesting and had a lot of history attached to them, rather than on the crowds and the celebrities, and I agree with them. Some of my constituents were not able to go to London to see the flotilla for themselves, so they relied on the BBC and ended up frustrated and upset that the coverage was ruined by celebrities who did not understand what they were talking about. A pilot gig from Cornwall, the Ginette, owned by the Tamar and Tavy Gig Club, made the long journey to take part in the flotilla, and the crew deserved recognition for their efforts, as did so many of the other participants.
The BBC licence fee is basically a tax, so why should people pay for such unsatisfactory coverage? The licence fee has not kept up with technology. Shows can now be watched on computers, tablets and phones, and if we plug them in to charge them we could be breaking the law. I believe that the licence fee needs reform. It is an out-of-date tax that gives the BBC an unfair advantage in an incredibly competitive market. I do not believe that a licence fee is wrong, so long as coverage is worth paying for. The BBC needs to improve its coverage of important events. The BBC also needs to be accountable. Will the Minister confirm that we need to consider this out-of-date system and address these issues of great concern to the public?
Glyn Davies (Montgomeryshire) (Con)
I congratulate my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski), my immediate neighbour. Our constituencies are close together and we often share campaigns because many services available in my constituency are also available in his. This is another day when we are working together, although not completely in terms of our contributions.
I love the BBC. I love it as I might love an opinionated, aged aunt or an opinionated teenage daughter. I criticise the BBC; watching it, I often share the frustration and anger that hon. Members have discussed. It raises my blood pressure. I have never reached the stage of wanting to see leading BBC staff members’ heads on spikes, but it certainly makes me angry.
However, I never forget how hugely important the BBC is in Wales. My interest in politics is Wales and Welsh issues. The BBC has a huge part to play in Wales, probably bigger than anywhere else in the United Kingdom. It has a special role in the promotion and development of the Welsh language. Since S4C was established in 1982, the BBC has played an incredibly important part in working with S4C. That relationship has changed as a result of recent legislation, and is much closer. S4C has a massive role in the development of the language, and it has been hugely successful. Since its beginning, the BBC has provided 10 hours a week of programming for S4C. It produces “Newyddion” and “Pobol y Cwm”, and they are a fundamental part of what makes Wales.
The BBC also underpins the musical tradition in Wales. It has its own national orchestra of Wales, which gives 50 concerts a year, produces educational projects in which 15,000 people participated last year and broadcasts concerts on Radio 3. It takes Wales out into the world as nothing else does. Wales is a small nation, and the BBC enables us to reach beyond. I know that Welsh Members of Parliament have a reputation for making perhaps more noise than might be justified, bearing in mind our numbers, but the BBC takes us out to the world. It produces “Gavin and Stacey”, “Merlin” and “Sherlock”, all created in Wales, as are “Doctor Who” and “Torchwood”. That is Wales in the world, and it is fantastically important for us.
BBC production underpins the creative sector in Wales. Privatisation has been mentioned, but the BBC underpins a huge part of the private sector creative industry in Wales by commissioning programmes. It is massively important to the sector. We have our own producers who have become world-renowned. Jeremy Paxman has been mentioned in this debate. Hon. Members might try being interviewed by Mr Vaughan Roderick, who knows every bit of information it is possible to acquire for the past 50 years. Anybody as feisty as Felicity Evans will match Jeremy Paxman any day. The BBC in Wales is a hugely important institution.
Of course the BBC makes me angry, as it makes all of us angry. It has inherent biases. I am angry about its bias towards European integration, which I often think underpins a lot of what it does. It has a ridiculous obsession with supporting onshore wind, which makes me so angry sometimes that my television has been in danger of my doing it damage. However, we must remember that even if it has a bias, we know about it. If we buy The Guardian, we know that it will lean to the left. If we buy the Daily Mail, we know that it will lean to the right. I feel comfortable that I know about the prejudices in the BBC.
The message of today’s debate is this. Let us hold the BBC to account, and let us criticise it when we think it should be criticised, but let us never forget that the BBC is a fantastic institution that takes Britain out to the world in a way that nothing else does. It certainly takes Wales out to the rest of the United Kingdom, and to the world as well.
Greg Mulholland (Leeds North West) (LD)
I congratulate my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) on securing this debate, and I thank right hon. and hon. Members for being brief in order to allow us all to speak. It is much appreciated.
I rise to give an update on the campaign, led by the all-party parliamentary rugby league group and supported by all the other sporting groups in Parliament, to save BBC local radio’s hugely important role in promoting all our sports. The issue goes back to the decision to freeze the licence fee until 2017, and the difficult choices that we all acknowledge the BBC has had to make. The BBC published its proposals for changes in “Delivering quality first”, but it also published proposals for BBC local radio at the same time, which got little coverage and achieved virtually no real understanding even among the major sporting associations. The proposals will mean a loss of local programmes on BBC local radio on weekday afternoons and of all local programming between 7 and 10, which of course means the loss of any sports magazine shows, discussions or programmes about sport, as well as the significant loss of live commentary and a reduction in the number of games covered in all sorts of sports.
If I may be so bold as to correct something said by my right hon. Friend the Member for Bath (Mr Foster), this is absolutely not about minority sports; it is about all sports. BBC local radio does a wonderful job of supporting smaller sports that are not covered anywhere else, but I am talking about this country’s four main team sports: football, cricket, rugby league and rugby union. They would be affected by the proposals. We—those of us who are English, at least—have all bemoaned our disappointing performance in Euro 2012. How can our team not perform better when we have the best league in the world? We must recognise that in order to compete, we need to encourage people at grass-roots level to take up sport in the first place, and that is what is being threatened.
We were delighted to host a meeting on 13 December of all-party sports groups. We got the BBC in front of us and launched a campaign to get members of the public—fans of all the sports—to write to the BBC. I am delighted to say that that campaign received a record response from the public, who then responded to the consultation on local radio. A significant proportion were rugby league fans, but other sports were also represented.
We were delighted when, on 25 January this year, Lord Patten announced that he had indeed listened and instructed the BBC to review his proposals for local radio. He was clear and specific to those making the decision that his instruction arose from the undue effect on sport and local sport. In particular, the BBC Trust asked the BBC to review three key areas: scaling back plans for local radio to share programmes in the afternoon; ensuring that local radio stations have adequately staffed newsrooms; protecting specialist content outside peak times.
The changes were announced on 16 May. We were absolutely delighted that the savings would be £8 million rather than the original £15 million, that the impact on stations’ content had decreased to £2.1 million from £8.5 million and that the majority of staff would retain their own afternoon programmes. However, it remains a key concern that there will be common national output between 7 and 10 o’clock. We ask the BBC to reconsider that proposal, which will continue to damage local sports. We are delighted that the BBC Trust has listened so far, but it must go further. We want to keep working with it. The rugby league group and other groups in Parliament will continue to press the BBC Trust and work with it to face local challenges without creating a detrimental effect on local and grass-roots sport throughout the country.
Helen Goodman (Bishop Auckland) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) on securing this important debate at an excellent moment in the history of the BBC, given that it has a new director-general. I hope that the director-general will read this debate and take to heart many of the things that hon. Members have said.
All hon. Members present agree with some of the things that the hon. Gentleman has said. I think we all agree that there is too much pay inequality in the BBC. It is good that the new director-general has agreed to a reduced salary—he will be paid less than his predecessor—but I fear that the issue reflects pay inequalities in the sector in general, which seem to be, if not at banker standards, extremely high. The hon. Gentleman also has a point about aggressive and biased interviewing. I remember reading the transcript of a “Today” programme interview with Jacqui Smith when she was Home Secretary, in which she was not able to complete one single sentence. As the hon. Gentleman has said, that is not illuminating for the listener.
The hon. Gentleman mentioned the possibility of privatisation and further reforms to the licence fee, but I do not believe that that is where the BBC should go. The fact is that most of the television news that people watch in this country—70% of it—is on various BBC channels, and that is because they trust the BBC news. That is a good thing, and the BBC has a good reputation. I will deal with whether it could improve its editorial quality, but its reputation is a positive. I do not think that the Panglossian view expressed by the right hon. Member for Bath (Mr Foster) is totally right. Those are the facts. We do not want the BBC to be less trusted than it is at present.
Although the hon. Member for Shrewsbury and Atcham talked about privatisation, he did not mention what was at one point the Murdoch agenda of breaking up the BBC. There have also been some discussions about whether the BBC should be treated on all fours with the commercial broadcasters when Ofcom reviews the competition rules. The Secretary of State has asked that question and, while it is worth asking it, I want to explain why the answer is that the BBC is different from the commercial broadcasters and should be treated as such.
First, there is the issue of public accountability, a point that the BBC itself made in its submission. It is a valid argument, but perhaps the BBC is not as open as it thinks it is, which has led to some of the frustrations voiced by hon. Members. Secondly, the licence fee gives the BBC a privileged position, so we can expect high standards from it.
What we are really trying to achieve in news and in television coverage in general is greater diversity. One route taken by the BBC—this should be taken into account—is to put out 25% of all production to independent producers, which means that there is internal plurality within the BBC’s programme making.
The really powerful people in television in this country, however, are the commissioning editors, a small number of whom have a huge amount of power over what we watch. They presume to know what the public want, and they measure their success according to ratings, but that is only half the story. I want the views of the public to be taken into account more directly when commissioning. In a recent experiment, Channel 4 asked the public what repeats they wanted to see, but it would be far more interesting if we asked audiences what programmes they would like to be made about subjects that they have not seen any coverage of. I am sure that if we put the same question to listeners of Radio 1 and of Radio 4, they would come up with different ideas, but we should involve the public far more in public commissioning. The hon. Member for Shrewsbury and Atcham might then get the programmes on Mauritania that he would like to see, but perhaps not.
Daniel Kawczynski
The hon. Lady mentioned the important word “diversity”. Does she agree that the BBC needs to do more to ensure that senior executives are more diverse and that more of them come from more diverse backgrounds and from ethnic minorities? Senior executives are far too white, far too privileged and come from a very small section of society.
Helen Goodman
Diversity is the exact issue that I want to address. There are various dimensions to diversity. A big survey on how women are used in programming focused on the number of women employed by the BBC and the number of women experts whom it interviews. It found that the number of women used is way below that of men, which is not acceptable, because women also pay the licence fee. We cannot tolerate it.
Does having more men in management result in a better picture on the screen? The new director-general is, of course, a man—as Jack Lemmon was told at the end of “Some Like It Hot”, “Well, nobody’s perfect.”—but I hope that he will continue the process of enabling us to see more women on screen.
My final point on diversity relates to the regions, which many hon. Members have mentioned. With apologies to my hon. Friend the Member for Hammersmith (Mr Slaughter), who made a devastating critique of the BBC’s property portfolio management—he seems to have renamed himself the hon. Member for White City—the BBC is, and is perceived to be, very London-centric. A major effort was made to address that by moving to Salford. The fact is that Salford and London are two places and there are many more places across the entire nation. We want to see programmes that reflect life in many other areas.
For example, it is the Durham miners ‘gala this Saturday. Eighty thousand people will be in Durham listening to speeches at this huge cultural festival, which has been going on for 125 years. I have never seen any national coverage of the miners’ gala. We will get it this year, because the leader of the Opposition, my right hon. Friend the Member for Doncaster North (Edward Miliband), will make a speech, but we should receive the coverage anyway. It should not require that speech for people to see such a major event. The regions and the issue of diversity are extremely important.
Mr Slaughter
I do not disagree with my hon. Friend. Had the BBC not gone to where it did in Salford, it could have gone into Moss Side or into a deprived area, which White City is, of course, although the BBC never engages with the community there. The development in Salford is utterly soulless and completely cut off from the rest of the world. Moreover, what does my hon. Friend think of the Broadcasting House development on one of the most expensive real estate sites in the world?
Helen Goodman
I have not yet visited the new building. There is more to say about dumbing down and received wisdom, but I am sure that the whole Chamber would like to hear from the Minister, so I will draw my remarks to a close.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
It is a great pleasure to serve under your chairmanship, Sir Roger. Given your previous life as a journalist, I am sure that you were itching to participate in the debate, but you have carried out your duties with suitable neutrality and aplomb.
I congratulate my hon. Friend—I mean that—the Member for Shrewsbury and Atcham (Daniel Kawczynski), for whom I have spoken in the past and to whom I am utterly devoted for securing this important debate. Regardless of whether or not I agree with parts of his speech, if it does not win The Spectator speech of the year award at the parliamentarian of the year awards, I will want to know the reason why. I also congratulate the hon. Member for Hayes and Harlington (John McDonnell), my right hon. Friend the Member for Bath (Mr Foster), who spoke with his usual verve, the hon. Member for Hammersmith (Mr Slaughter), my hon. Friends the Members for South East Cornwall (Sheryll Murray), for Montgomeryshire (Glyn Davies), and for Leeds North West (Greg Mulholland), and the Opposition spokesman, the hon. Member for Bishop Auckland (Helen Goodman), on their important contributions. If I may say so, drawing myself up to my full patronising height, very few political points were scored and all hon. Members made their contributions as, I think, critical friends of the BBC.
May I use this opportunity to offer my congratulations to George Entwistle, the new director-general of the BBC, who was appointed last week? I am sure that he will prove to be a fine director-general. I have met him only once, but he seems to have received, from those who live and work in that world, a uniformly good press on his talent and ability to work with people.
Mr Vaizey
I gather that that was an inauspicious debut for the new director-general. I join my right hon. Friend in saying that I, too, am a fan of the BBC. I thank my hon. Friend the Member for Montgomeryshire for highlighting additional work the BBC does under the radar. For example, in Wales, the BBC supports the orchestra—an important reminder of its wide-ranging work. When we focus on aspects that we do not like or that merit criticism, we should remember the many wonderful things the BBC does.
I was unfortunate not to see the BBC’s jubilee coverage—I watched the event live—so I cannot comment on its quality, but perhaps I can use this moment to congratulate Lord Sterling, the chairman of the National Maritime Museum, on commissioning Gloriana, the wonderful barge that sailed down the Thames as a tribute to Her Majesty’s diamond jubilee. I recently visited the BBC headquarters in Scotland. It was a useful reminder of the BBC’s important presence in the regions—not just in Scotland or Wales, but in Salford and other cities in England. Of course, I bow to no one in my praise of the excellent quality of the output of BBC Radio Oxford.
Greg Mulholland
I just want to put on record that, although the hon. Member for Hammersmith (Mr Slaughter) has every right to defend, and bemoan the loss of, services in White City, his comment about the media city in Salford was utterly ignorant and nonsensical. I have visited that wonderful complex, and it is linked by a matter of minutes to Manchester city centre and from there to other cities in the north of England.
Mr Vaizey
Forgive me for the use of the vernacular, Sir Roger, but it appears that things are really kicking off now, and we have only seven minutes of the debate left. If the hon. Member for Hammersmith would like to come back on that point, I will of course give way.
Let me deal with some of the issues that were raised, particularly by my hon. Friend the Member for Shrewsbury and Atcham who secured the debate. I do not think that the BBC lacks innovation—one only has to look at iPlayer or the Space. The BBC innovates as much as any other public broadcaster. I do not believe that it pulls back from competing. In fact, most criticism from other media companies about the BBC is that it is too competitive. Nor do I think that the BBC is uncommercial. BBC Worldwide, headed by an excellent chief executive, John Smith, now commands sales of more than £1 billion a year and returns almost £200 million in profit.
The salaries issue is vexed and constantly exercises hon. Members. We should recognise that the new director-general of the BBC will be paid approximately a third less than his predecessor, with the salary reducing from £671,000 to £450,000. That is still a lot of money by anybody’s standards, but we should recognise that he will be running an organisation that employs 22,000 people and has an income of £3.5 billion a year.
Sheryll Murray
Will my hon. Friend the Minister not acknowledge that someone being paid so much in excess of the Prime Minister seems, to the general public, very unrealistic?
Mr Vaizey
I certainly agree with my hon. Friend that some executive salaries cause concern. There is no doubt that they will continue to be debated, but we should also recognise that from a high of approximately £800,000, the salary of the director-general of the BBC has been reduced considerably. As my right hon. Friend the Member for Bath pointed out, details of executive salaries are now available on the BBC website. My personal view is that I would like greater transparency. Talent salaries could be more transparent, and outside interests could be considered for some of the more prominent broadcasters. Viewers have a right to know the additional earnings of people who work for the BBC and whether there is a potential conflict of interest.
The subtext of another perennial issue raised in the debate is that we would all like to run the BBC, so that we could fashion it to our own interests. My hon. Friend the Member for Shrewsbury and Atcham has an interest in foreign news and is concerned that not enough coverage is being given to the impeachment of President Fernando Lugo in Paraguay. That is a view. I would say that the BBC has covered the conflict in Syria and the Arab spring very effectively. I am a devoted fan of “From Our Own Correspondent” on Radio 4 and the web. The hon. Member for Bishop Auckland would like the Durham miners’ gala to be covered; I would like the Olivier theatre awards to be covered. My hon. Friend the Member for Shrewsbury and Atcham would like to see more foreign films. The BBC recently broadcast the film “City of Life and Death”, and we are now devoted fans of Danish and Scandinavian television thanks to broadcasts on the BBC.
The future of the licence fee will no doubt be debated when the renewal of the charter comes up in the next few years. The licence fee is the most effective way to support the BBC and enshrine its independence. The cost of collections has halved, and the income from the licence fee has increased by more than 25%. We have frozen the licence fee, recognising the pressure on hard-working families, and that is, frankly, making the BBC live within its means.
The hon. Member for Hammersmith pointed out some of the concerning decisions the BBC has made in managing its estate. That is an example of the BBC suffering through bad management, not a lack of revenue. Furthermore, we have succeeded, as part of the coalition agreement, in ensuring that the National Audit Office has fairly unfettered access to the BBC’s books. When an issue arises, such as whether the BBC has spent money wisely in managing its estate, it will be possible to have an independent view from the NAO. That is a very important part of the transparency and accountability of the BBC.
My hon. Friend the Member for Shrewsbury and Atcham mentioned IR35 and contractors. I will go back and look at that issue, which comes up time and again. I am particularly concerned about some well-remunerated employees of the BBC being paid through a company. The issue is normally raised with regard to the possibility that appropriate tax is not being paid, rather than the BBC shirking its responsibilities in paying national insurance, but I will consider that in more detail and engage with my hon. Friend if he wishes to pursue the matter further.
I stress the important principle, which I think unites us all in the Chamber, that the BBC is independent, and independent of the Government. It is one of the finest, if not the finest, public service broadcaster in the world, so when we criticise the BBC, it is worth remembering that it is a jewel in this nation’s crown.
Scottish Separation
(12 years, 5 months ago)
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Graeme Morrice (Livingston) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I am delighted that I have been able to secure this Westminster Hall debate on a vital issue to the future of Scotland and its people, in view of the pending referendum.
Before I move to the substantive part of my contribution, I should like to say a few words about the referendum campaign so far. I congratulate those responsible on the recent launch of the cross-party Better Together campaign, which will lead the debate on the positive economic and social case for Scotland’s remaining an integral part of the United Kingdom. In stark contrast to the vacuous and celebrity-driven launch a few weeks earlier of the campaign by those who advocate separation, the Better Together launch, ably fronted by my right hon. Friend the Member for Edinburgh South West (Mr Darling), drew on the experiences of real Scots the length and breadth of the country who spoke passionately about why they believe we are stronger within the UK. This grounded campaign is based on hard facts and figures, exploring the many positive benefits of being part of the UK and exposing the deficiencies in the separatist plan to end this highly successful political, social and economic union.
On the other side of the debate, the Scottish National party and the Trotskyist fringe parties had, somewhat predictably, fallen out among themselves even before Alan Cumming had had time to board the plane to return to his New York home. The splits quickly became even wider when the recently appointed head of the so-called yes campaign ruled out a second referendum question on devo-max, an option Alex Salmond and the SNP are desperately clinging to as they face up to the fact that they cannot win the first question. Even the well-respected senior Scottish nationalist, Margo Macdonald, called at the weekend for a single, simple question on separation and criticised the yes campaign for refusing to spell out the details of what independence would mean.
Lindsay Roy (Glenrothes) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing this vital debate. Can he explain why he believes that a referendum should be based around a single question? What are the problems with multi-option referendums?
Graeme Morrice
I am grateful to my hon. Friend for his intervention. As I continue with my contribution, I will come to that point and develop an argument accordingly.
According to reports yesterday, it now looks like the Greens could soon follow Margo Macdonald’s lead, potentially leaving the SNP in the ludicrous position of being the only party supporting a multi-question referendum on the issue that it has spent its entire existence campaigning for.
Mr Mike Weir (Angus) (SNP)
The hon. Gentleman is talking nonsense. The SNP position is and always has been that it is in favour of independence. As the First Minister has made clear, if there were a demand from civic Scotland for a second question, it would be considered. To go on about this is nonsensical. Perhaps the hon. Gentleman would like to get to the meat of this debate.
Graeme Morrice
I note the hon. Gentleman’s intervention. I am surprised that, although for its entire existence the raison d’être of the Scottish National party has been independence, it wants to get sidelined on the issue of devo-max or devo-plus, without the questions being defined.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
Does the hon. Gentleman agree that, if the SNP truly wanted to get to the meat of the debate on separation, it would press ahead, agree the process—the referendum, the single question—and get on with it? Alex Salmond and the SNP are prevaricating over process.
Graeme Morrice
I could not agree more. I will certainly develop that theme as I progress in my contribution.
Sadly, the other predictable aspect of the campaign so far is the level of vitriol already displayed by the so-called cyber-nats—small-minded people who seem to glory in spewing forth hatred about their opponents on every available website and online forum. The contributions of these people, who often hide behind online anonymity, only serves to harm the debate on Scotland’s future, not to mention our nation’s reputation as a welcoming and tolerant place. Although I am willing to accept that some of these extreme nationalists have nothing officially to do with the SNP or the yes campaign, it would be refreshing if more senior SNP figures condemned and disowned their extremist bile. Any interventions?
Mr Weir
Yes, some horrible things are said on Twitter, but there are also, if people want to use such terms, cyber-Brits, who make equally vicious attacks on nationalists. It is terrible that the hon. Gentleman is being so one-sided. This is supposed to be a debate about the economic arguments, but we have heard nothing about that, which is typical of the no campaign so far.
Graeme Morrice
I am coming on to the meat of the debate. The hon. Gentleman doth protest too much.
I shall now move on to the meat of this morning’s debate—the economic consequences of Scottish separation. Some Scots regard the potential economic consequences of breaking away from the UK as neither here nor there. So important to them is the dogma of Scotland going its own way that even if every shred of available evidence demonstrated beyond any doubt whatever that Scotland would be worse off outside the UK, they would still not hesitate to break up Britain. To most Scots, that stance—call it the “Braveheart” factor, or whatever—is simply not credible. Although the debate is and should be about more than economics, there is little doubt that at its crux are the economic consequences of separation. The vast majority of our fellow citizens are interested in what will improve their lives and those of their families and the communities in which they live.
It is hard to deny that, in these turbulent economic times, the size, strength and stability of the UK economy gives Scotland’s businesses a huge advantage over their competitors on the continent and elsewhere. Scotland’s biggest market is the rest of the UK and it has undoubtedly benefited from being an integral part of the world’s oldest and most successful single market. I believe that most people in Scotland already recognise and embrace this. A survey conducted by the Scottish social attitudes survey at the end of last year showed that fewer than one in three Scots back separation, which was roughly the same figure as in 2005. Hon. Members will also have noted the results of the latest opinion poll on separation, conducted by TNS BMRB after both campaign launches, which puts those opposed to separation on 50% and those in favour on just 30%. The latter figure is the lowest received in favour of separation in five years of surveys by the Edinburgh-based pollster and means that in just six months a deficit of nine points for those backing separation has more than doubled. Judging by these figures, even the most ardent nationalist would struggle to argue that the yes campaign had got off to a good start.
Putting opinion polls aside and accepting the premise that, to coin the well-known phrase from American politics, “it’s the economy, stupid” that will determine the outcome of the referendum, let us turn to the available evidence on the key economic questions. Some of the most interesting expert contributions to the debate so far have come from Professor John Kay, a former economic adviser to Alex Salmond. Writing for The Scotsman shortly after the Scottish Parliament elections in May last year, Professor Kay said:
“Independence, if achieved, would bring complications—both political and economic. The reality is that Scotland would gain little by full independence. In the modern world, economic sovereignty for small nations is inescapably limited, and political sovereignty is largely symbolic.”
More recently, while speaking at The Scotsman’s “Economics of Independence” conference, Professor Kay spoke of his belief that Scotland faces five years of economic uncertainty if it opts to separate from the UK.
The potential economic damage ensuing from a long period of transition to a separate Scotland was highlighted at the same conference by oil expert Professor Alex Kemp of Aberdeen university. Professor Kemp said that the complex process of transferring responsibilities from UK Departments to a separatist Scottish Government would involve
“negotiations extending over a considerable time”.
Such fears about the potential impact of a vote for separation, and the instability and uncertainty inflicted on Scotland’s economy, have been voiced by many other academic and business leaders over the past few months. Even one of the SNP’s highest-profile supporters and financial backers, the highly successful businessman Sir Tom Farmer, does not support its separation plans. He stated in a recent BBC interview:
“I’ve never seen or heard anything yet that’s convinced me independence is the right way forward for Scotland. It’s not just about money, but, if it ended up that the country was going to be in dire poverty because of independence, I don’t think anybody wants that.”
For my part, I have drawn on the best available evidence for the likeliest economic impact on Scotland of separating from the UK. I want to focus on three aspects of the economic debate: oil and gas revenues; the share of the UK’s public debt that Scotland would assume if it were to separate from the UK; and a separate currency in Scotland.
Those three vital economic and financial questions were among several highlighted in the excellent Select Committee on Scottish Affairs report on “The Referendum on Separation for Scotland: Unanswered Questions”, published in February this year. I take the opportunity to pay tribute to the Committee’s excellent work. Under the skilled chairmanship of my hon. Friend the Member for Glasgow South West (Mr Davidson), it has embarked on a forensic investigation of the many unanswered questions that hang over the separation debate. My hon. Friend and his colleagues—I see one present today—deserve the thanks of all Members of this House for the detailed and meticulous way in which they are examining so many important points worthy of further detailed consideration, not least the economic matters on which I will now focus.
Lindsay Roy
Of the many unanswered questions, which one gives my hon. Friend the greatest cause for concern?
Graeme Morrice
That question begs the question: many questions give me concern—not least, defence.
I now move on to North sea oil, which has long been regarded by the supporters of separation as the jewel in the crown of a Scotland outwith the UK. The Library standard note on “Scotland’s economy: current situation and issues related to independence”, published in April this year, highlights three key issues when considering this critical question—the division of the UK continental shelf and, therefore, of the oil reserves; future production levels; and the price of oil.
The argument has always been that a separate Scotland should be due the lion’s share of the North sea’s oil, and that the tax revenue from the fields would therefore accrue to Scotland. The suggestion that a separate Scotland would be due most of the North sea’s oilfields, however, is very much open to debate, and most experts agree that nothing concrete could be concluded before the negotiations on separation. Furthermore, the boundary issue aside, the reality is that oil and gas can simply no longer be relied upon in the way that the SNP has always suggested, because of the production and price questions.
Fossil fuels are a declining resource, and the trend of reduced production is now clear. Oil and gas production is falling rapidly; in 2011 it was down by 19% on the previous year, and recent Department of Energy and Climate Change figures show that oil production fell by 13% in the first quarter of this year and gas production by 14%. Future projections suggest that many North sea fields will have ceased production by the 2020s, while the cost of extraction is increasing year on year.
Oil also has a history of price volatility. The Library note shows that it has varied in recent years from a low of nearly $9 a barrel in November 1998 to a peak of almost $150 a barrel in July 2008. The price of oil is closely linked to production, with a low oil price making it less economical to invest in hydrocarbon extraction. In terms of tax revenues from oil, the 2008 Kemp and Stephen paper referenced in the Library note stated:
“It should be stressed that the projections of tax revenues are subject to much uncertainty. Thus oil prices have been very volatile and this should remain the case over the next few years.”
Oil and gas of course remain an important part of the Scottish and UK economies, and will do so for many years, but to bet Scotland’s economic future on the sector is naive at best and foolhardy at worst. Those latest figures highlight the importance of a balanced economy that is not over-reliant on one industry. They also demonstrate one of the many benefits of Scotland being part of the UK economy: we are able to work together in partnership to share the risks and rewards involved in harnessing our energy resources.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
My hon. Friend is making an important point on energy. Does he agree that the current support regime for renewable energy is levied on consumers throughout the whole of Britain and, because Scotland is where the resource is, that support goes disproportionately to Scottish generators? Does he realise that about 10% of consumers are in Scotland, but that about 30% of the support goes to generators in Scotland? Is that not another example of us working well together and getting the most benefit from a renewables future?
Graeme Morrice
I entirely agree with what my hon. Friend says, and it is a further argument.
Mr Weir
Why is Scotland, of all countries, incapable of having a regime to support renewable energy? Countries such as Norway, Lithuania and Ireland can all do it. Also, if we are talking about the cost of energy, why does a generator in the north of Scotland have to pay £21.96 to feed into the grid, while a generator in London receives a payment of £13.35? The existing system is hardly fair.
Graeme Morrice
I certainly agree that Scotland is capable of sustaining a renewable energy industry, but we will do better together within the United Kingdom.
I now want to move on to the share of the UK public debt burden that should be assumed by a separate Scotland. That a breakaway Scotland would have to shoulder some of the UK’s public debt is beyond question. What is certainly open to debate, however, is how the debt to be assumed should be calculated and what factors would contribute to those calculations, including the share of the debt accrued through the bank bail-out. Members are aware of a number of recent studies to have explored this critical question.
February’s National Institute of Economic and Social Research report on the economy of a separate Scotland explored the difference between apportioning debt per capita or pro rata, concluding that there is only marginal difference between the two. The report stated:
“With a pro rata transfer of existing UK public debt, Scotland would enter independence heavily indebted with no insurance from fiscal risk sharing or fiscal transfer mechanism with the rest of the UK.”
The Institute of Economic Affairs report published just last month suggested that a separate Scotland could be saddled with an eye-watering £110 billion national debt. The report highlighted that, with the UK’s debt having recently topped £1 trillion and the expectation that it will rise even further by 2015, Scotland’s share could be even greater than £110 billion. The report’s author, Dr Richard Wellings, suggested that that high debt, which would be comparable to Portugal’s at present, coupled with decreasing oil revenues, as already referenced, would almost certainly require urgent cuts to public spending. Even calculating the public debt on the basis of population size, a proposal described as reasonable by a spokesperson for the First Minister, the report made Scotland’s share of the debt around £93 billion—still a significant burden for a small nation—and around three times greater that the Scottish Government’s current budget.
Mr William Bain (Glasgow North East) (Lab)
My hon. Friend is making a compelling argument for Scotland staying part of the United Kingdom. Does he think that it is unbelievable arrogance by those who want Scotland to leave the United Kingdom that they have not yet devised a debt target for a separate state? How on earth can the public be informed in a referendum if they deny people that information?
Graeme Morrice
My hon. Friend makes a valid point. The SNP’s argument seems to be predicated on contesting the robust figures provided by the experts in support of Scotland remaining part of the UK. Despite the differences in some of the figures that have been suggested, there is absolutely no doubt that, as the David Hume Institute report that was published in March indicated, the figures reached
“will be determined as much, if not more, by politics as by statistics”.
The undeniable point is that a separate Scotland would have to take on considerable and currently unknown public debt. Regardless of what the exact figure might be in the hypothetical scenario of a yes vote—clearly, we would not know that until negotiations on Scotland’s secession from the UK were complete—that debt, coupled with a relatively volatile tax revenue base, is likely to have a significant effect on future public expenditure, so why take the risk in the first place? Furthermore, a whole raft of additional costs that a separate Scotland would incur in setting up embassies, collecting taxes, creating new institutions to replace those broken up by separation and establishing a welfare system and armed forces, and so on, would add further to that uncertainly.
The currency to be adopted by a separate Scotland is arguably the question on which the SNP and those who advocate separation have undergone most contortions in recent times, and that is saying something. Until recently, most nationalists were strongly in favour of joining the euro, and lukewarm, at best, about the pound. As the influential SNP MEP Alyn Smith said at the party’s 2009 conference:
“We are a Nordic, European country, currently part of a debt-laden sub-prime toxic assent currency…we don’t want to be part of and which is not serving our interests well.”
At the same conference, the Scottish Government Finance Minister, John Swinney, declared that he was in favour of joining the euro, but that the final decision to join should be determined by a referendum. In January 2009, Alex Salmond said:
“I think there is a strong argument for the euro, and I think as sterling declines even further that argument is being made very strongly.”
Now, even they have realised that that is not such a sensible idea, and they have become converts to retaining sterling, although without bothering to have any discussion whatever with the UK Government. That is an astonishingly cavalier approach to such a vital question.
Between the SNP’s enthusiasm for the euro and its recent conversion to keeping the pound, it has debated options for introducing an entirely separate Scots currency. Veteran nationalist, Jim Sillars—a former key ally of Alex Salmond—even proposed last year that a separate Scotland should adopt a Scottish dollar, although I understand that no one from the Scottish Government has written to Barack Obama about it yet.
It is widely accepted that a separate Scottish currency would be a serious disadvantage to business. Although the commitment to a separate Scotland retaining sterling may sound more credible, as the recent article on the high price of separation in The Economist highlighted, it would be a monetary union without fiscal union, which has proved disastrous for the eurozone. It would, of course, be fraught with well documented problems, especially on fiscal responsibility and the lender of last resort, which were highlighted in the Library’s standard note on Scotland’s economy, which I referred to earlier.
Under formal monetary union with the UK, as has been widely highlighted, the Bank of England would continue to form monetary policy for both the remaining UK and the separate Scotland, so removing a key aspect of economic independence from the tools available to a Scotland operating outside the UK. Even if no formal monetary policy was agreed, the Library note states that
“in such a scenario, Scotland’s monetary policy would be determined by the Bank of England which would only be considering the interests of the rest of the UK.”
Mr Bain
My hon. Friend is being generous in giving way. Is the situation not even worse? The economic madness of separating fiscal and monetary policy would be detrimental to Scotland’s economy, and a democratic deficit would be created. As Members of Parliament, we can scrutinise what the Chancellor does on defining financial stability and regulating the banking sector. Which of Scotland’s parliamentarians would have democratic accountability in the proposals that Alex Salmond has come up with?
Graeme Morrice
None of them. That is clearly a problem, and a step backwards.
Mr Weir
My understanding is that when Gordon Brown—perhaps I should still call him the right hon. Member for Kirkcaldy and Cowdenbeath—was Chancellor, his greatest boast was that he had made the Bank of England independent. How does Scotland have any influence on it at the moment?
Graeme Morrice
In terms of setting interest rates and so on. The Chancellor still has a role in that regard —a role that a separate Scottish Government in an independent Scotland would not have. There would be no accountability, no influence and no say in that, and the UK Government have confirmed that officially.
Whichever way one looks at the matter, the SNP’s policy of retaining the pound sterling as a separate currency for Scotland is a proposal engulfed by uncertainty. At the same time, the SNP insists that a separate Scotland would be entitled to automatic membership of the European Union—a position that is in serious doubt, as highlighted by last year’s well documented Library standard note on “Scotland, independence and the EU”, which states:
“There is no precedent for a devolved part of an EU member state becoming independent and having to determine its membership of the EU as a separate entity, and the question has given rise to widely different views.”
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Even assuming good will on both sides of the argument for an independent Scotland trying to renegotiate terms with the EU—I do not believe that there is any reason to assume hostility from other EU member states—the fact is that the EU is not, to put it kindly, the swiftest-moving institution. Is it not likely that even with the best will in the world the new arrangements would take a long time—years—to finalise, yet again leading to the continued uncertainty about which we heard earlier?
Graeme Morrice
I certainly agree with that proposition. Going back to the 1992 general election campaign, I recall that the SNP talked about independence within Europe. I note that it is not banging on about that now.
For the sake of argument, let us assume, although it is unlikely, that a separate Scotland would be permitted to join the EU immediately. We know with some certainty that such a position would require Scotland to commit to joining the euro at some point in the future, taking the nationalists back to the same risky and unpopular position that they have tried desperately to abandon. Again, it seems to be beyond doubt that the unknown risks posed by breaking up Britain are significant and that the uncertainty about which currency the country would use could not possibly be good for business or families in a separate Scotland.
I have tried to focus on a few of the numerous essential economic consequences of separation. I could have looked at many others, including whether the tax base of a separate Scotland could sustain a separate Scottish economy and what personal and business taxation rates would have to be levied, whether the Scottish Government could meet existing UK Government state and public sector pensions commitments, what the impact would be of turning our biggest trading partner into our biggest competitor, what the cost would be to our economy of losing UK Government shipbuilding contracts and what a separate Scottish Government could borrow. I am sure that other Members will want to address those and other questions in the time that remains.
I would like to go back to where I started and the wider debate on this subject. It has been fascinating to watch the twists and turns of the SNP over the past few months. It has demonstrably failed to answer a series of critical questions about the consequences of its plans to separate Scotland from the UK, despite that having been its raison d’être for more than 75 years. Those in the SNP leadership must wonder where they can go next, as they face up to the prospect of support for separation flatlining, no matter how far into the future they push the referendum.
Many in nationalist circles must also be asking themselves how their leaders have managed to squander the considerable political capital that they enjoyed just over one year ago. What remains clear is that the economic dimension to the separation debate is crucial, and there is an absolute responsibility on the UK and Scottish Governments to publish the best available information and projections of the potential economic consequences of breaking up the UK, as debate on that crucial question continues and intensifies. Ultimately, as long as economic evidence continues to show that Scottish families will be better off remaining in the UK, coupled with the wider social, cultural and political strength derived from our interdependence with the rest of the UK, Scotland’s place as an essential part of a strong United Kingdom will be secure for many years to come.
Sir Roger Gale (in the Chair)
Order. I do not propose to impose a formal time limit on speeches, but I imagine that John Robertson, who will follow me in the Chair, will wish to call the Front-Bench speakers at about five past 12. Five Members have written in advance to express a desire to speak, and I shall call them in this order: Dr Whiteford, Mark Lazarowicz, Mike Weir, Anas Sarwar and Jim Shannon. Other Members may wish to intervene in the knowledge that they are unlikely to get called in the time that we have available.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I am happy to have the opportunity to speak in today’s debate, and I congratulate the hon. Member for Livingston (Graeme Morrice) on bringing such an important issue before the House of Commons.
Before we embark on what the future of Scotland might look like, it is important to reflect on the past. If we do not understand our history, including economic history, we are in danger of becoming victims of it, and there is no way round the fact that over the past 30 years, successive Westminster Governments have let the Scottish economy languish. Our economic growth has lagged well behind that of our neighbours and competitors in the UK, Europe and further afield.
In the three decades before the current financial crisis, growth in Scotland averaged only 2.1%, against 2.7% in other comparable small EU countries, and across the G7 countries. That chronic underperformance has had adverse consequences for generations of people in Scotland, and we must ask ourselves why it has happened. Unless we think that there is something inherently inferior about Scotland or Scottish people, or some inherent weakness in the Scottish economy, we must conclude that such underperformance is a direct consequence of poor political and economic policy decision making, and a systematic failure to address the weaknesses and maximise the strengths of the Scottish economy.
David Mundell
I am interested to hear what the hon. Lady has to say about policy making and political judgments. Does she still support the Scottish Government’s previous position of joining the arc of prosperity with Iceland and Ireland?
Dr Whiteford
The Minister makes an interesting point, and it is important to look at the performance of small nations in the vicinity of Scotland. My constituency in the north-east of Scotland is close to Norway, which I think has outperformed every country in Europe over the past three decades. We should also look at the impact of the recession and at how smaller countries such as Austria, Denmark and Sweden have been more resilient and managed to experience a less deep economic crisis. Even countries such as Iceland that went so far down during the economic crisis have bounced back with much greater dexterity than the UK economy—[Interruption.] The Minister is smiling, but he should be hanging his head in shame at the economic recession that this country is slowly trying to scramble out of. That is a shameful record for a country that has the potential to be prosperous.
Dr Whiteford
I will not give way to the hon. Gentleman just now, but I will later in the debate.
The other key issue connected to the economic languishing of Scotland is the inequality that we have allowed to develop, and the impact that that has had on our society. We live in a United Kingdom in which the top 10% of earners receive about 27% of the income, while the bottom 10% receive just 3%. To my mind, that is not a United Kingdom but a deeply divided kingdom that puts the UK in the top quartile of most unequal countries in the OECD. According to the Institute for Fiscal Studies, inequality has increased by around a third in Great Britain since 1979. In Scotland today, 780,000 people are living in relative poverty—15% of the population. That is way too high; it is causing real hardship and the long-term cost is immense.
Mr Bain
I agree with the hon. Lady about the scarring effect that poverty has on the people of Scotland. While on the issue of high pay, will she explain why last week in the Chamber her hon. Friend the Member for Dundee East (Stewart Hosie) was complaining about the potentially burdensome effect that proposals put forward by the Business Secretary could have on large companies in Scotland? It did not sound as if he was much of a friend to the workers.
Dr Whiteford
The Scottish Government have introduced a living wage for all public sector jobs for which they are responsible, and I welcome everybody who supports decent pay for working people. I did not hear my hon. Friend’s speech last week, so I cannot explain its context. I think, however, that we have to tackle inequality, and particularly women’s inequality in the workplace, which has been a long-standing problem in Scotland.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Will the hon. Lady give way?
Dr Whiteford
I will not give way just at the moment, although I will in a bit. The problem of inequality is particularly frustrating because, in spite of a period of unprecedented growth in the global economy, the previous UK Government missed a genuine opportunity to deliver a more prosperous and fairer society. It is hard not to reach the conclusion that those opportunities for growth were squandered by an unsustainable boom that had too few beneficiaries.
Graeme Morrice
I am listening intently to the economics of the hon. Lady’s argument. She will be aware that a lot of these things are currently within the gift of the SNP Administration of the Scottish Government. Is she also aware that before 2007, when the Labour-led Scottish Executive were in power for eight years, growth in Scotland was above the UK average? Since 2007, however, growth levels in Scotland have been below average for the UK.
Dr Whiteford
I thank the hon. Gentleman for his intervention, but I am slightly confused. My understanding is that according to almost every indicator—whether unemployment, employment or foreign direct investment—the Scottish economy is outperforming the UK economy. It would behove the hon. Gentleman well not to make too much play of the previous Administration’s record. Even in recent weeks, we have seen the debts that have been stacked up through poor private finance initiative investments. The Labour party took on the mantle of its Tory predecessors, and stacked up £31 billion in PFI debt. The chickens have fairly come home to roost in the past few weeks, and we are seeing NHS trusts starting to go bankrupt. Those choices left us sharply exposed to the worst financial crisis for a generation, and now the present Government’s austerity measures are strangling recovery and pushing more of our citizens below the breadline.
The failure of successive Westminster Governments to make economic policy decisions for Scotland that help our economy grow and resonate with the values of the people of Scotland has convinced me that we need the opportunity to bring decision-making powers home to Scotland so that we can set better priorities and maximise our economic potential.
Cathy Jamieson
I welcome the opportunity to make a brief point about the living wage. The hon. Lady has suggested bringing decision making closer to home. Will she explain why the East Ayrshire council SNP administration has yet again refused to pay the living wage to council employees?
Dr Whiteford
I am grateful to the hon. Lady for that intervention. However, across Scotland, the Scottish Government have shown their commitment to living standards through a range of measures including on pay, prescriptions and all kinds of things that Labour could have dealt with when it was in power and chose not to.
There are various myths about Scotland’s economic position, some of which we have already heard this morning. I am glad that we have not heard too much about the biggest myth of all: that Scotland cannot pay its way. That is simply because the evidence just does not stack up. The reality is that the official Government expenditure and revenue figures show that Scotland has a smaller fiscal deficit than the UK as a whole—not just this year or last year but over the past five years. Even when North sea oil revenues fell by 50% in 2009-10, Scotland’s fiscal position remained stronger than that of the UK as a whole. In the most recent figures for 2010-11, Scotland accounted for 9.3% of UK public spending but 9.6% of UK tax revenue. Our 9.6% of UK tax was generated with just 8.4% of the population, which adds up to £1,300 for every man, woman and child in Scotland.
However, despite the relative strength of the public finances, as a result of the financial crisis and the fiscal mismanagement of successive UK Governments, the UK has a legacy of debt—as, indeed, the hon. Member for Livingston pointed out. Scotland will have to deal with that debt, whether we are independent or not. I put it to the hon. Gentleman that if UK public debt was allocated on a per capita basis, for 2010-11—the last year for which figures are available—Scotland’s net debt would be 51% of GDP compared with 60% for the UK as a whole. Let us not pretend that that is good, but it is certainly not as bad as some people might think. We must consider the reality of the current situation without necessarily looking at Scotland in pure isolation.
Scotland’s fiscal position is stronger than that of the UK, and it will remain so if we remain committed to utilising Scotland’s strong economic foundations and asset base to ensure fiscal responsibility. Recent figures published by the Office for National Statistics showed that, in 2010, Scotland was the third richest part of the UK—behind London and the south-east—with a gross value added per head of 99% of the UK average. That is excluding oil and gas output. If Scotland’s geographical share of oil and gas is included—the internationally recognised way to distribute such a resource—the GVA adds up to 115% of the UK average. That makes us approximately the 6th highest in the OECD.
Dr Whiteford
I will not, thanks. I will try to make some progress.
I represent a constituency that is very much at the heart of the energy sector, so the maturation of the oil and gas fields presents economic challenges and opportunities. That is why it is so important for us to continue to invest in renewable energy, carbon capture and energy supply chains. Yet renewable energy producers in Aberdeenshire are paying £21.49 per kilowatt to connect to the grid, while London-based generators are being subsidised by £13.35 per kilowatt. That is a classic example of Westminster policy making undermining our economic potential.
Tom Greatrex
I am very grateful to the hon. Lady for giving way because I know that time is short. On that point, her party’s position is that there should be a postage stamp model in relation to transmission charging. I understand—I see her colleague the hon. Member for Angus (Mr Weir) nodding—that that is still the position. Is she aware of the cost of that to consumers? Ofgem has outlined that it will be £7 billion, which will be put on to consumers’ bills. Does she think that that is acceptable?
Dr Whiteford
The geographical reality with which we are dealing is that much of our renewable energy potential is located on and off the coast of Scotland. We have 10% of wave energy potential, 25% of tidal energy potential and 25% of offshore wind resources. That is a huge legacy across Europe, and we have to make the most of it. At a time when climate change puts pressures on all our energy supplies and when we absolutely have to reduce carbon emissions, that kind of investment has to happen. We must not discriminate against people in the more outlying parts of these islands because that is where such energy can and must be produced.
We absolutely need to capitalise on that opportunity to create jobs and build on our existing research strengths in our world-class universities, which are consistently being assessed as among the top in the world. In the area of science, engineering and technology, relative to our GDP, Scotland is currently No. 1 in the world for research. We also have a worldwide reputation for excellence in medicine and life sciences. We are doing very well at attracting multinational businesses to Scotland, as well as in relation to a growing number of indigenous companies.
Dr Whiteford
I would like to give way to the Minister, but I am not going to because I am conscious that other people want to contribute.
We also have real international competitive advantages and excellence in key sectors such as food and drink—another area that is very important to my constituency—and, despite difficult times for the banking sector, we have a strong and broadly-based financial services industry, where there has recently been some welcome diversification and investment. I see that as a solid foundation for Scotland economically and there is no reason why, with those opportunities, we cannot succeed. Scotland has the assets and the fiscal balances and, with the ability to make independent policy decisions, we would have the tools to grow our economy.
Another myth that has been touched on today is that we would want to abandon sterling. I want to make it absolutely clear that no one is proposing dispensing with sterling. Retaining the pound is in the interests of Scotland, the rest of the UK and the currency itself. A free flow of goods, services, labour and capital is in everyone’s interest, and a sterling zone will provide businesses both in Scotland and in the rest of the UK with the certainty and stability for trade, investment and growth.
There is no doubt that monetary policy underpins price and macro-economic stability, but it is a blunt tool for tackling Scotland’s other economic challenges. It will not address youth unemployment; it will not directly lead to investment in infrastructure or promote innovation; it will not boost skills, target overseas investment or promote investment in key sectors; and, to come back to the point I made at the start, it will not integrate our tax, health, education and benefit systems to maximise economic opportunity and tackle inequality. That is why I believe we need to be independent and to have real policy-making powers in Scotland.
Dr Whiteford
I will not, thank you.
Frankly, the Scottish Parliament would do a better job of welfare reform than the UK Government, who seem intent on vilifying people who do not have a lot of money. Instead, we could develop a more workable system. The Scottish Parliament is already doing a better job on health, and we are not going down the road towards privatisation. In addition, we are doing a better job on education, and we are not charging students £9,000 a year to complete their studies in higher education. The current levers open to the Scottish Parliament do not go nearly far enough to realise our economic potential.
Anas Sarwar
The hon. Lady is clearly very passionate about the case for independence. I just have a brief question. Did she make a submission to the Scottish Government’s consultation and, in her submission, did she ask for one question or for two?
Dr Whiteford
I do not want to go down the road of discussing the referendum, but I have always been very clear that I want one question on the ballot paper. I am happy to have that debate, but I am also listening. It is very sad that politicians are not listening to what people who are not involved in political parties are saying about this. Many of them are contributing and we have seen some very interesting ideas and good proposals from a diverse range of sources. It would be good if all of us listened to what people in civil society are saying to us. I am very clear about where I stand on the issue: I want Scotland to have the powers of an independent country, and I will argue vociferously for that. I do not see what is complicated.
I would like Scotland to have the power to make better tax policies. I would like us to have capital borrowing powers, so that we can make the investments in our infrastructure that we so badly need. I would like us to be able to build the houses and the roads we so badly need. I would like us to have the ability to incentivise the development of new technologies in renewable energy and the low carbon, life science, small business and tourism sectors. Those are the places where our economic growth will come from. If we were putting the investment into those sectors, it would have a huge impact on our economy.
If we had influence over the Crown Estate, which manages our seabed out to 12 miles and almost half our foreshore, we would be in a much stronger position to co-ordinate the efforts of manufacturers, the energy sector and regulation and planning to deliver the full benefits of the marine renewables energy revolution for Scotland.
Being independent would also enable us to boost our international profile. It would help us to contribute to key decision making in Europe and beyond and it would give us powers to boost our connectivity and linkages with our key trading partners. At a time when the emerging economies are growing so fast, it is crucial that we have an opportunity to connect with them directly and more effectively than we are able to do at the moment.
All these things give us a chance to tackle inequality. I just point to the apprenticeship scheme—25,000 young Scots will get an apprenticeship this year alone. By creating training opportunities, bringing people into the work force and retaining their skills, frankly, we can save the welfare state millions of pounds in unpaid benefits. If we had a joined-up system, with co-ordination between economic, education and welfare policies, those savings could be reinvested better than they are at the moment and used to boost economic activity.
I envisage Scotland thriving and prospering, but right now I am watching an austerity agenda running out of control while the UK economy stagnates. I believe that Scotland can do better and has the opportunity to do better. That is why I want the Scottish Parliament to have the levers of independent governance at its disposal. That does not mean that there will not be hard decisions to make, but it does mean taking responsibility for improving life in Scotland and building a vibrant and resilient economy that supports our people and reflects our values.
Sir Roger Gale (in the Chair)
Order. In view of the time, I am revising the schedule. I am sorry, Mr Lazarowicz, but Mr Shannon has been in the Chamber since 9.30 this morning, so I will call Mr Shannon next; you may find this strange. I will then call Mr Lazarowicz—Mr Robertson has arrived in the Chamber and will take the Chair—then Mr Sarwar and, if there is any time left, Mr Weir. I call Jim Shannon.
Jim Shannon (Strangford) (DUP)
Thank you for bringing me forward in the schedule, Sir Roger. I hope that hon. Members understand the reason for that. I appreciate it very much.
First, I congratulate the hon. Member for Livingston (Graeme Morrice) on bringing this matter to the Chamber today. It is not often that I disagree with my Scottish National party colleagues. We agree on many issues, mostly bread-and-butter issues, on which we strive together to make life for all our constituents better. However, I cannot agree with them when it comes to Scottish independence and I certainly want to place that on the record.
We all know the film “Braveheart”. It is well known to everyone. It is a wonderful film, one that I have watched on numerous occasions and, if I am spared, I will certainly watch again. The star of the show is that well-known Scotsman, Mel Gibson. In that film, the English are killing the natives, abusing the womenfolk and stealing the land—there is total destruction.
[John Robertson in the Chair]
If that were really the case, Mr Robertson, I would be the first person to jump to the aid of my Scottish National party colleagues to support them, but it is not. It is only a film; it is only make-believe. The reality is very different. Today we are strengthened by the Union. We all bring our talent, our culture and our history to the UK. Scotland, Wales and my own Northern Ireland contribute to the United Kingdom. We make it stronger by being part of it because we bring to it all the talents that we have. We have extensive relations with all regions. Personally, I am descended from the Stewarts of the lowlands of Scotland. My history is intertwined with the Scottish nation and family. That is something I am tremendously proud of and that I state regularly at the many occasions I speak at.
I believe that, economically, Scotland will be poorer after independence. It may have to increase taxes. Although the hon. Member for Banff and Buchan (Dr Whiteford) said that the decision had already been made in relation to sterling, I think that many of us feel that if it has been made, it has been made only recently. It will have to increase taxes, slash spending or increase borrowing after independence. What will happen to the Ministry of Defence bases in Scotland? Other hon. Members have mentioned that. What about nuclear power? Many decisions will have to be made.
The CBI director general stated that, post independence, Scotland would immediately have to face a large budget deficit, potentially bigger proportionally than the UK’s. The stability of Scotland’s economy is uncertain because of potential or possible independence. Banks have not universally or wholeheartedly expressed support. There is uncertainty. A question mark hangs over the issue. There are problems in the Scottish economy. Everyone in the United Kingdom has problems in relation to the economy, but Scotland has its problems. Independence will not lift it out of that; indeed, everything points to just the opposite.
The hon. Lady mentioned the territorial waters, and I would like to draw the House’s attention an issue in this regard. I represent Portavogie, where the Northern Ireland fishing fleets are very strong. They work together with the Scottish fleets and fish together. Will independence strengthen that or will there inevitably be battles over fishing rights and territorial waters? I want to see the strength within the Union continue, and equality of opportunity for Northern Ireland fishing fleets and Scottish fishing fleets, and for Welsh and English ones as well. I believe that North sea oil, while it is off the coast of Scotland, is my North sea oil in the same way as it is everyone else’s within the United Kingdom. That is the fact of the matter. Many would be of that opinion.
I do not believe that there is a clamour for independence. I make it my business to speak to every Scottish person I meet. I am a member of the Orange Institution. I make it my business to talk to the people who are in the Orange Order, and they tell me that they want to stay within the United Kingdom. Those outside the Orange Institution whom I speak to tell me that they want to stay within the United Kingdom, as well. As a Northern Ireland MP and a Democratic Unionist, I am committed to the Union for all of the UK—for Wales, for Northern Ireland, for England and for Scotland together, because together we are strong. If we divide, we are weak. I say to my Scottish National party colleagues, whom I am very fond of, that I cannot support them and will never support them when it comes to independence for Scotland.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I will keep my remarks as brief as possible, given the number of hon. Members who want to speak. The hon. Member for Banff and Buchan (Dr Whiteford) gave a comprehensive presentation of the SNP case for independence, but what struck me about it was something we increasingly see in the SNP arguments for independence: that on the one hand, independence is needed because it would make Scotland a better place; but on the other, independence would not change much, either. That is an inherent contradiction that we increasingly see in the SNP policy, precisely because there is a realisation that separation—full independence—is not attracting popular support, so the SNP and those supporting independence are trying to move back from it.
It is not just on economic issues that we have seen that. There is the famous quote, which I think is from the First Minister:
“on independence day…the Queen will be our Head of State, the pound will be our currency and you will still be watching your favourite programmes on the BBC.”
That is an example of how the argument is made that nothing much would change. Of course, on economic policy, fiscal policy and monetary policy, we see that even more.
Ann McKechin (Glasgow North) (Lab)
Does my hon. Friend agree that it is very strange that the First Minister came down to London about a month ago to address the Institute of Directors and intimated to it, but not to the Scottish Parliament, that he intended to align income tax rates, after separation, with those in the rest of the UK? We must ask—why bother?
Mark Lazarowicz
Indeed. That takes us to a point that I intended to deal with later but will deal with now. We are referring, with respect, to the arguments advanced by the hon. Member for Banff and Buchan, who is from the SNP. She seemed to be arguing at one point that Scotland would have a different approach to taxation and redistribution policy, suggesting, presumably, that it would be a higher-tax, higher-spending type of country. On the other hand, the First Minister is saying, as my hon. Friend the Member for Glasgow North (Ann McKechin) pointed out, that income tax in an independent Scotland would be the same as in the rest of the UK. Of course, for the past six years, the SNP Government could have used the existing powers, if they had wanted to, to increase tax in Scotland and increase public spending, but they have not. The SNP is apparently in favour of a lower corporation tax rate in Scotland, yet it tells us that it would maintain the free movement of labour, services and capital throughout the UK. If that is the case, it is difficult to visualise Scotland having a separate corporation tax rate.
The issue of sterling has been—
Mark Lazarowicz
With respect, I had better not, given the time.
The issue of sterling was raised. As we were reminded in an intervention, the Bank of England and monetary policy were of course made independent of politicians by the decision of a Labour Chancellor. However, the SNP Government have said that they want to see a seat for Scotland on the Monetary Policy Committee of the Bank of England. They are trying to have it every which way. There are many areas in which we see that type of contradiction. An important one is, of course, the suggestion that the Bank of England would continue to regulate the financial services industry, even in an independent Scotland. That is incredibly important. The financial services sector is important in Scotland, particularly in my constituency and the constituencies of many other hon. Members.
Decisions such as how banks can advertise financial products and the requirements to maintain stability in terms of their capital base would be regulated by an institution in another country, over which we would have no say if we were a separate, independent state. That leaves aside the question, raised by Scottish Financial Enterprise, of whether it would be legal under EU rules to leave the regulation of our financial services sector to a foreign—as it would then be—country.
We have heard those in the SNP say that they do not want regional pay rates for the civil service, but the biggest regional pay difference across the UK would be if we were a separate country and the rates were negotiated on, presumably, a Scottish basis only. We see contradictions in many areas. Because the SNP recognises that voters and the public do not want full separation, it wants what some describe as independence-lite, but I describe as separation with a major democratic deficit, as my hon. Friend the Member for Glasgow North East (Mr Bain) pointed out.
At best, the new Scottish Government could seek to negotiate with the Government of the remaining UK to have input on matters that affect Scotland’s interests, but they could not do that as a right, and would have to rely on the good will of a new UK Government. There is no reason why there would necessarily be ill will between the two successor states if Scotland separated; but obviously, a UK Government who no longer had Scotland as part of their state would have different interests and perspectives from one that still included Scotland. Scotland has MPs, Ministers and a voice in Parliament, where Ministers and the Chancellor can be held to account—for example, for actions in relation to the Bank of England. All of that will disappear after the separation of an independent Scotland.
It seems to be the worst of all possible worlds—a democratic deficit of no interest to Scotland, with no benefit to Scotland. Let us build on what we have with devolution, as expanded under the Scotland Act 2012 and current proposals, and improve it where we can. Let us get down to using the existing powers and not spend the next few years coming up with a new constitutional arrangement which, at the end of the day, will not even be independence in the full sense of the word, but, given the SNP arguments, will fall well short of it. It would be no good for Scotland or the UK.
John Robertson (in the Chair)
I intend to call the Front Benchers at six minutes past 12. I have two names here, so, gentlemen, sort it out.
Anas Sarwar (Glasgow Central) (Lab)
It is a pleasure to serve under your chairmanship, Mr Robertson. Having known you through Glasgow politics, I will be very strict with my time; I do not want to incur your wrath. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing the debate. The discussion today shows the passion and energy in the debate. I will take this opportunity to get to the facts of what Scotland would look like if it was a separate country.
I want to make a few quick points at the outset. The referendum is not about whether we think Scotland can survive; of course Scotland can survive as an independent country. It insults the intelligence of the Scottish people to suggest that it could not survive as an independent country. The choice on the ballot paper is not one of survival; it is whether we believe that Scotland is a fairer, more prosperous place as part of the UK or as a separate country. I believe the second, which is why I will make a positive case for Scotland remaining within the UK.
Scotland has played a key role in the success that is the UK. We have 300 years of shared history, security and prosperity. A Scot was the founder of the Bank of England, a Welshman created our national health service and an Englishman created our welfare state. Those are things of which we should be collectively proud, and that is why, in the run-up to the referendum, we will make the emotional, political, social and economic case for Scotland remaining part of the UK.
I want to touch on one point about the positive-negative case. It is often said that those who support the UK are negative about Scotland and those who support separation are positive about it. I argue the opposite. The people of Scotland are talented enough, creative enough, ambitious enough and innovative enough to be successful in the UK. It is for the separatists to tell us why they think that Scots are not.
We heard from the hon. Member for Banff and Buchan (Dr Whiteford), the successor to Alex Salmond, that a single-question referendum is her preference, so let us stop the games and get on with the substantive arguments. Another SNP Member is here, the hon. Member for Angus (Mr Weir), and I am willing to take an intervention if he can tell us whether, if he put in a submission to the Scottish Government’s consultation, it was for one question or two. I am happy to take an intervention if he wishes.
Anas Sarwar
There we have it: two SNP MPs saying that they have put in submissions, both saying that they would prefer one question. Perhaps they could get on the phone to their leader and pass on the message that he should stop being so feart and just get on with the referendum and let Scots make the choice.
I have one minute on the substantives of the economic debate, so I will be very quick. I genuinely believe that Scotland’s influence is greater as a permanent member of the United Nations Security Council and NATO, not for prestige, but to fight tyranny and repression around the world. We benefit from membership of the G8, where a Scottish leader, as Prime Minister of the UK, tackled the global economic crisis to stop a recession becoming a depression.
Scotland’s compassion is better demonstrated by being a partner in the Department for International Development, which is headquartered in Scotland, employing 490 people, with a budget of £7 billion. What would happen to those jobs if we were a separate country? We benefit from shared infrastructure, defence and foreign affairs, as does shipbuilding on the Clyde and jobs. We would not be in that position if we were a separate country.
We benefit from sharing the risks and rewards. We saw the collective strength of the UK in bailing out Scotland’s banks. Would that have been possible if we were a separate country? We benefit from the fact that we are a larger single market—our current biggest business partner is England. If we became a separate country, it would become our biggest competitor. We also benefit from being part of the strongest monetary union in history. Leaving would mean that we would have to have our own currency, join a weaker euro or leave a foreign country to set our interest rates and our borrowing and spending limits.
I could go on and on, but I see you, Mr Robertson, nodding at me to finish. Let us end the games about what a referendum will look like and get on with the big choice and have the debate. After the referendum, let us get on with making Scotland a fairer and more prosperous place.
Mr William Bain (Glasgow North East) (Lab)
It is a pleasure to serve under your chairmanship once again, Mr Robertson. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing this important and timely debate, coming as it does in the week when support for separating Scotland from the rest of the UK has fallen to as few as three in 10 people.
Mr Bain
I will give way to the hon. Gentleman a little later; I want to make progress first.
I commend my hon. Friend the Member for Livingston and other hon. Members who have participated this morning in helping to ensure that the discussion on Scotland’s constitutional and economic future is informative and comprehensive, as we head towards what the Scottish people want—a clear, decisive, legal, single-question referendum on whether to stay within the United Kingdom or leave for good.
There are three points that the debate this morning has crystallised in the minds of hon. Members and those we represent. At a time of economic uncertainty in the eurozone, with economic demand predicted to fall this year and 16 million people out of work, it would be an act of folly to separate fiscal, monetary and financial policy in the way that Scottish National party members have proposed. Both the eurozone and our economies are faced with a classic liquidity trap. Keynes was very clear that fiscal, monetary and financial policy must not work against one another in such circumstances. We in the Opposition have huge concerns about how the Government are avoiding any flexibility on fiscal policy to stimulate demand and kick-start growth at home. It is a failure of policy, not a failure of the state of which we are an integral part.
The overwhelming evidence from respected economic commentators, such as Martin Wolf and John Kay in evidence to the Select Committee on Scottish Affairs, is clear and unambiguous: separation would lead to higher borrowing costs for a separate Scotland. Even under the SNP’s purported split of oil and gas revenues, with 90% being apportioned to a separate Scotland—not the universally accepted position under international law—the national debt inherited by a separate Scotland would be 70% of GDP.
On a per capita split of oil and gas revenues, debt would rise to 80% of GDP by 2014. On the deficit, even using the SNP’s preferred measure, including a geographical split of oil and gas revenues, the average deficit would have been 4% over the past five years. Three leading credit agencies have indicated that Scotland would not inherit the UK’s credit rating on separation, which would increase borrowing costs.
The First Minister says that, with the oil and gas revenues, Scotland would be the sixth richest country in the world, but to achieve that the great centraliser would have to become the great nationaliser, and there is no prospect of even the present First Minister expropriating the assets of overseas oil and gas companies to which he is in such thrall.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Is my hon. Friend aware of what was said at the meeting of the UK oil and gas industry group a few days ago—that it is likely that the gas price, because the US is about to go into surplus in gas and the price is falling, may be set in the North sea area at a much lower level than now, which would undermine the revenues coming from the North sea to any future Government of the UK or Scotland?
Mr Bain
Indeed, that is a powerful point. This year’s report by the National Institute of Economic and Social Research concluded that Scotland would be a significantly indebted nation on separation, with a substantial trade deficit, no insurance from risk sharing and no further fiscal transfers, which would leave us over-dependent on those very fluctuating oil and gas revenues. The strain would have to be put on borrowing or tax hikes to fund current spending.
As the economist, Brian Ashcroft, pointed out recently, the only tools available to a separate Scotland to manage aggregate demand would be of the limited fiscal variety remaining under the terms of a currency union treaty with the United Kingdom; so if inflation took off, there would have to be tax rises, a fall in public spending, or a combination of the two—hardly a recipe for economic stability or social fairness.
Those campaigning for separation never tell us what the size or role of the state would be in a post-separation world. They are keen to promise voters everything from higher benefits and pensions to lower taxes, but never with any viable fiscal prospectus to underpin such aspirations. Their ambition is to have Irish levels of taxation, but Scandinavian-style public services. That is a cruel deception to sell to the electorate, and that fatal flaw in the argument has contributed to the fall in support for separation in recent months.
Mr Bain
I will make this point and then give way to the hon. Gentleman.
Without a central bank to print money and control the money supply, a separate Scotland would find itself with higher long-term borrowing rates and higher interest payments on Government debt, whether with the Bank of England as lender of last resort or even with a less structured relationship with sterling. Those problems with rising costs of borrowing would manifestly worsen if oil and gas revenues continued to fluctuate as predicted. Martin Wolf wrote in the Financial Times on 19 January about the higher borrowing costs that a separate Scotland would face:
“It would need to lower its debts quite rapidly. This would require even greater austerity than in the UK as a whole. Given its close ties to the rest of the UK, Scotland could not get away with taxing corporations or skilled people more heavily than its neighbour. So the bulk of this extra austerity would surely fall on public spending.”
The First Minister came to London a few months ago and, as my hon. Friend the Member for Glasgow North (Ann McKechin) said, boasted to the Institute of Directors that he would always align income tax rates in a separate Scotland with those of the United Kingdom. He now says that his key fiscal policy would be to cut corporation tax to 20%. However, the Institute for Fiscal Studies said in its green budget report this year that increasing corporate tax competition between the nations of the UK would increase business compliance costs and lead to a race to the bottom on tax rates and revenues collected. The Scottish Government’s own figures reveal that lowering corporation tax by just 1% results in a loss of revenue for the Scottish taxpayer of between £67 million and £83 million a year. So the First Minister is prepared to throw away up to £166 million of taxpayers’ money a year on a punt that Laffer curve economics works, when the evidence from the United States is that it fails every test of economic fairness.
Whatever happened to that young radical who interrupted a Tory Budget in 1988 to protest against the reduction in the top rate of tax by Lord Lawson? Whatever happened to his dream of a land of bountiful plenty with freedom from London rule? He wants London to regulate Scotland’s banks, insurance, mortgages and pensions, and to set Scotland’s interest rates—with no reference to the needs of our economy—and income tax rates. We are told that Scotland would have equality in the world, but that is instead a manifesto for complete economic instability.
With business investment slumping, the construction sector on its knees, infrastructure crumbling and our green jobs sector without the capital that it needs, how on earth can the First Minister believe that Scotland’s future lies in lining the pockets of the banks and big business, by promoting a fiscal climate that would encourage short-term profit taking instead of long-term investment? If he cannot identify crony capitalism as being as much a part of the problem in Scotland’s economy as it has been in the rest of the UK, no wonder he can never be part of the solution.
As my hon. Friend the Member for Livingston has said, having to join the euro would also damage Scotland’s economy. The evidence from most credible experts is clear: if Scotland were to be admitted to the EU as a new state, having left the United Kingdom, it would have to make an in-principle commitment to membership of the euro. That would mean compliance with the Maastricht convergence criteria, with further spending reductions to follow. The destination would be clear, and it would be bad for job creation and growth in Scotland.
At a time of uncertain economic prospects in the UK, we need strong fiscal and monetary union to support job creation and diversification of the Scottish economy. Scotland Office figures from January 2010 show that net fiscal transfers from the UK to Scotland over the two decades to 2008 were of the order of £75.8 billion, and, even factoring in every penny from oil and gas revenues, there was a net transfer of £30 billion over the same period.
We need a central bank that can fully support the Scottish economy, without ifs or buts. The best means of securing that is by maintaining the fiscal and monetary union that has been successful within the United Kingdom for three centuries. Some nationalists claim co-ownership of the Bank of England, even in the event of separation, and the Finance Secretary laughably even claimed to have the right to appoint a member to the Monetary Policy Committee, but that is the politics of denial. In quitting the United Kingdom’s fiscal and monetary union, Scotland would also abandon the unconditional guarantees provided to it by that financial system, including the Bank of England’s role in ensuring macro-economic stability for Scotland.
Paying another state to set interest rates and prop up part of the banking system, without a collective institution that could be held democratically accountable by Scotland’s elected representatives, would be the worst of all worlds. Scotland’s parliamentarians would not be able directly to scrutinise or influence the Chancellor’s decision on the fiscal mandate or the definition of financial stability under the Financial Services Bill, which is vital in the precise remit that the Financial Conduct Authority will have in relation to our financial system. We would lose the potential to influence the Chancellor’s decisions on income tax, even though the First Minister has said that he would always follow them. There would be no influence over major macro-economic issues such as the Bank of England’s inflation target, set by the Chancellor in consultation with the Governor.
Labour Members consider it clear that Scotland benefits from fiscal, welfare, monetary and financial union with the rest of the UK. When other countries across Europe are bringing down obstacles to co-operation, it would be absurd for us to erect new barriers at home. We would survive as a separate state, but our ambitions should be higher than that for the people of Scotland. If we are to thrive and prosper, strong devolution within the United Kingdom, while meeting the current huge economic challenges together, is the best solution. I hope that the Minister will reflect the message that we have heard this morning and increasingly from the Scottish people about their future: we are far weaker as separate states, and far better together.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
As always, it is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for Livingston (Graeme Morrice) on securing this debate on the economic consequences of Scottish separation, and on his detailed and positive case for why Scotland would be better off remaining part of the United Kingdom. I also want to thank all hon. Members who took part in the debate, including the hon. Member for Strangford (Jim Shannon) who set out the positive Unionist case and talked about the support for Scotland staying within the United Kingdom that comes from other parts of the United Kingdom.
The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) identified the increasingly perplexing issue of the separatists arguing on the one hand that everything would be different in a new Scotland, and, on the other, that everything would be the same—if we are in any way worried about any particular aspect of separation.
The hon. Member for Glasgow Central (Anas Sarwar) gave his usual erudite exposition of the issues, and was commendably brief. The nub of the matter is that we must get on with the debate about whether or not Scotland should remain a part of the United Kingdom, and about what would be better for Scotland.
The hon. Member for Glasgow North East (Mr Bain) made a persuasive case for Scotland remaining part of the United Kingdom. I will not repeat his points; suffice it to say that—other than his criticism of the Government—I agreed with everything he said.
The contribution of the hon. Member for Banff and Buchan (Dr Whiteford) was brave because she mentioned independence—something that, as I understand it, is not encouraged nowadays in the Scottish National party. Then both she and the hon. Member for Angus (Mr Weir) went on to say that they supported a single-question referendum. I am glad that they said that here in this debate.
David Mundell
The hon. Gentleman must convey that message to Mr Salmond. If Mr Salmond is in agreement with members of the Scottish National party, he has the opportunity to proceed now with a single-question referendum. It is he who is prevaricating on the issue of the referendum, and not this Government, who have offered to facilitate the SNP manifesto commitment to a single-question independence referendum.
Mr Weir
The Minister is missing the point completely. The referendum is for the Scottish people. There has been a consultation, of which we are awaiting the results, as to whether or not there is demand for a second question. It is about not the First Minister driving that demand but whether there is demand from the Scottish people.
David Mundell
I tend to agree with the editorial of the Daily Record, which often, in my experience, reflects the views of the Scottish people. It has described Mr Salmond’s current tactics as a
“desperate-looking ploy that has left Salmond isolated and open to public ridicule.”
That is the case. Although separation is the Scottish Government’s policy and not ours, we have made it clear that, as a Government, we are prepared to facilitate a legal, fair and decisive referendum to settle this issue.
Michael Connarty
Is not Mr Salmond feart of having a single-question referendum?
David Mundell
I am sure that many people will make that analysis. The UK Government referendum consultation showed a strong majority in favour of a single question and robust reasons why that should be the case. Seventy-five per cent of respondents agreed with the UK Government that a single question would ensure a decisive outcome. The support for a single question is clear and growing, and today’s Scottish papers—if the SNP takes any notice of them—confirm that.
All three pro-UK parties have made it clear that they support a single-question referendum. Even the SNP officially support a single question. Both campaigns in Scotland are in favour of a single question. Margo MacDonald and the Greens have now joined the call for a single question on independence. The coalition Government are offering the Scottish Government the opportunity to deliver a legal referendum by giving them the legal power that they do not currently hold. We are offering to deliver the SNP’s manifesto commitment.
The SNP won a majority at the 2011 Scottish Parliament election on the basis of a manifesto commitment to an independence referendum, not to further devolution, and it is on that single question that it can claim to have a mandate. Independence is of course the founding principle of the SNP; this is its big chance to hold the referendum that it has pledged to hold in successive manifestos. If the SNP now does a U-turn and demands a second question on the ballot paper, it will be an up-front admission of defeat and an acknowledgement that the First Minister believes that he cannot win a single-question referendum on separation.
Tom Greatrex
The hon. Member for Angus probably let the cat out of the bag when he talked about the Scottish Government’s and SNP’s consultation. When the results of that are analysed, does the Minister think it would be interesting and useful to see how many contributions asking for a second question came after the May local government elections, and how many came from SNP councillors and SNP members on a standard format?
David Mundell
That will indeed be an interesting analysis. It is quite clear that the SNP and the First Minister are prevaricating on the question of the referendum. We have been calling for talks with the First Minister to be resumed so that Scotland’s two Governments can work together to deliver a legal, fair and decisive referendum. We need to get the referendum process agreed as soon as possible, so that we can get on to the real debate about Scotland’s future and whether Scotland should remain part of the UK.
Anas Sarwar
Did any SNP parliamentarians, or the SNP itself, put in a submission to the UK Government’s consultation, and if so, did they ask for one question or two?
David Mundell
The SNP did make a submission to the UK Government consultation and we welcomed it. As SNP members have stated, the SNP’s position is to have a single-question referendum. The Daily Record editorial today said:
“Salmond should stop playing games and start campaigning on the issues if he still believes he has a chance of realising his lifelong dream of independence. We need a proper decision as soon as possible. Then Scotland’s leaders can get back to more pressing matters”,
such as the economy, employment and education. That is the UK Government’s position.
In stark contrast with the Scottish Government, we are committed to getting the referendum process agreed and to getting on with the real debate. We have announced a programme of work that will set out in the period leading up to the referendum the benefits of remaining part of the United Kingdom. I am convinced, as are many Members here, that we will convince the people of Scotland that we are better together as part of the United Kingdom.
Community Banks
(12 years, 5 months ago)
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Guy Opperman (Hexham) (Con)
The case for local community banking and the break-up of the Royal Bank of Scotland to create a series of local banks has never been stronger. Since the global financial crash, the merits of a vibrant system of local banks have become apparent; it is the issue of our time. We need to look at finding new ways to unlock the finance that households and small businesses need. We need new local banks that will promote competition, reinvigorate community lending, improve the finances of small and medium-sized enterprises, and encourage local saving. They would work on the principle of using local credit to support manufacturing and start-ups, and they would not leave the disadvantaged at the mercy of loan sharks and money changers.
Local banking works. We should bear it in mind that 70% of German lending to SMEs is via local banks. And we wonder why the German economy is doing better than ours. The experience of other countries that have a thriving local banking sector—countries such as Germany, the US and Switzerland—has demonstrated that smaller, locally focused institutions are the ones that provide economic resilience. Studies of the humble German savings banks—or Sparkassen, as they are called—which form a network of 430 independent but mutually supporting local institutions, show that they have made modest but steady profits through both boom and recession. By comparison, the mighty Deutsche Bank has plunged from huge profits to calamitous losses.
In this country, we have a missing tier of banking. Let us consider the period between December 2007 and December 2011, which saw a sharp decrease in lending by the large commercial banks in Europe. In that period in Germany, large commercial bank lending fell by 18%; in Switzerland, it fell by 34%; and in the UK, it fell by 17%. During the same period, however, lending by local savings banks rose; the German savings banks saw lending rise by 18% and the Swiss cantonal banks saw lending rise by 22%. But in the same period the UK saw neither a rise nor a fall in lending.
John Stevenson (Carlisle) (Con)
I am grateful to my hon. Friend for giving way and indeed for securing this very important debate. Does he agree that what we need in the UK is a two-tier banking system? We need the large banks nationally, but we also need—as he is suggesting—smaller banks operating at a local level. Having a two-tier system would be beneficial to our economy overall.
Guy Opperman
I completely agree with my hon. Friend and I entirely applaud the Government’s approach—by way of the Vickers report—to addressing the problems with the larger banks. Everyone can see that there is a fundamental problem with large banks and their failure to lend. The fact is that they are almost operating as a monopoly; the largest six banks run the show completely.
The other end of the telescope and the other end of the problem is the lack of local banking. My hon. Friend talks about a two-tier banking system and I agree that, instead of having a single monolithic and almost monopolistic banking structure in which only the five or six big banks lend money, we need the larger banks—of course—but we also need the smaller banks operating at a local level.
Quite frankly, we have lacked that system in this country. Ever since the 1930s, approximately, the banks and building societies in the UK have become ever larger as some of them have been swallowed up by their neighbours and by their more predatory rivals. Consequently, we have gone from having a large variety of banks and building societies to having fewer and fewer banks and other organisations working in the banking community. Of course, that has the effect of reducing competition, reducing the ability for a new entrant to gain access to the market and reducing the ability of businesses to gain access to credit.
I must stress at the outset of my speech that the present crisis in banking and in bank lending is not in any way the fault of local branch staff. I assure the House that those staff are just as frustrated as I am at their inability to run accounts as they used to in the old days. I come to this particular debate with a background in business and with two years of experience as a constituency MP in Northumberland, where I have repeatedly seen decisions on lending being made by a Hexham bank manager, or another local Northumberland bank manager. Those decisions then become part of the responsibility of the credit risk team whenever there is any difficulty with the account.
If an individual SME has a problem with its account, such as a bad debt or a problem with cash flow, it is almost impossible for it to go back to the same manager and argue the case that it is a viable, proper business going forward. That is because the decision-making process has been taken away from the individual local bank manager in Hexham, Ponteland or wherever. What happens now is that the decision is not even taken in Newcastle or anywhere else in the north-east but by a credit risk team that is many miles away. I have attempted to go to those credit risk teams to make a case, but of course it is almost impossible to do so. That system must change. Again, I make it clear that what I am saying today is not a criticism of local bank staff who are working throughout the country. It is a criticism of the board members in London, who seem to have totally forgotten their fundamental role.
I was interested to see that the Leader of the Opposition has commented on banking in the last few days. Like the Church, we always welcome new converts, given the past record. However, the necessary reform of the banks is being left to this Government, as we bring the banks to heel with the Vickers report, clear up the LIBOR mess and implement a much stronger system than the light-touch regulation that we saw before.
Change will not happen without competition. Yesterday the Leader of the Opposition was extolling the need to create more competition for our banks. However, on 23 April in the Financial Services Bill Committee the Opposition voted to prevent competition in banking. I was present for that debate, which saw the Opposition introduce amendment 28, which would have deleted clause 5 of the Bill, thereby deleting the requirement for enhanced competition. So I must ask the question: how can one be in favour of local banks while stopping competition?
The Leader of the Opposition is also out of touch if he thinks that the answer to this banking crisis is to force banks to close some of their high street branches. That is hardly what the voters in my part of Northumberland are crying out for; that much is certain. Residents in Haydon Bridge and Haltwhistle who are losing their local bank branches will tell the Leader of the Opposition that the problem with the banking sector was casino banking and greed, and not—as we heard from Labour this week—having too many local branches. My constituents want to see local branches providing a local service.
Chris White (Warwick and Leamington) (Con)
I congratulate my hon. Friend on securing this debate. I would like to know his thoughts on how our local communities can hold these banks to account. Although having local community banks is an excellent idea, if we create smaller banks out of RBS how can we ensure that the local communities will have control over those banks’ priorities? In my constituency, industries such as the green energy industry and the video games industry have big potential for growth. How can local communities ensure that local banks are given the mandate to tailor themselves to local business needs?
Guy Opperman
The reality is that Hampshire, for example, has done what I am talking about and set up the Hampshire bank, or Hampshire Trust. It is backed by the local chamber of commerce and by local authorities. It is regulated, so it is possible to have a county bank that is regulated, but on a lighter-touch basis—I use that phrase again—than the larger banks such as Barclays or HSBC. Moreover, if we broke up RBS, which I will come on to discuss, the individual shareholders would have a say in a local county bank.
How do we create local banks? First, one must address the barriers to entry, which are considerable. Metro Bank has recently been established in London and the south-east, but only at huge cost and only after overcoming many hurdles. The example of the Hampshire bank shows that county banks can be created. I see no reason why we cannot do the same in Northumberland, or in the wider north-east region, and set up “The Bank of Northumberland” or “The Bank of the North-East”.
However, the truth is that a banking licence is notoriously difficult and costly to obtain. To try to remedy that situation, along with my hon. Friend the Member for Chichester (Mr Tyrie), who is the Chairman of the Treasury Committee, I met the chairman of the Financial Services Authority, Hector Sants, at the beginning of March. My hon. Friend and I sat down and tried to explain the problems to Mr Sants, and I am pleased to say that under this Government the FSA is considering trying to reduce the barriers to entry for smaller local banks.
On 12 March, the FSA’s chief executive wrote to me:
“We are conscious of the balance to be struck between ensuring high standards at the gateway, and the importance of allowing innovation and appropriate levels of access for new firms.”
He added:
“there has been public debate about the potential advantages of new entrants in the area of small, regional banks focused on servicing the SME sector. In such cases we will be proportionate in our approach and would invite all firms with a viable business model and appropriate levels of resources to a pre-application meeting to help guide them through the application process”.
In those circumstances, and with the background of a banking crisis, we need to look at the elephant in the room that is the Royal Bank of Scotland. The Government are understandably impatient to sell the 83%-nationalised bank, but the health of the public finances ultimately depends on the health of the economy, which itself rests on the stability and usefulness of the banks.
The taxpayer bail-out and the subsequent problems of RBS are well documented, and it now seems clear that the chances of the Government selling RBS as it is, and making a profit, or anything like one, are but a dim flicker at the end of a long tunnel. What the Government did with Northern Rock was undoubtedly the best option and the only real one, but RBS is different. I see RBS as an opportunity—as the Americans often say, “Don’t waste a good crisis.” We have a unique opportunity to seize the moment, and to ensure that RBS is managed for the benefit of the taxpayers, who own 83% of it, thereby transforming the banking sector. I suggest that we do not sell RBS as it is, but break it up, decentralise the branch management and use it to form the basis of devolved local community banks—imagine a local bank for every city or county—linked, where possible, with the local authorities and chambers of commerce.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I had not intended to speak—I just wanted to listen—but for clarity, will the hon. Gentleman say whether he is suggesting a form of mutualisation of RBS?
Guy Opperman
In real terms, the current RBS would go back to the people on a local basis, and if the hon. Lady listens I will explain how the shares could be devolved.
We would end up, I suggest, with dozens of little banks like 3i. The 3i Group plc is a large FTSE 100 company that started out as a Government business bank, as a support mechanism to get the country out of the 1930s depression. The new banks would be governed locally, with lending decisions made by managers who understood the local economy better than anyone at a London head office ever could. The managers would be embedded in their local economy, and could base their judgments on knowledge of people and businesses without being overruled by a credit risk computer or centralised targets. Their success would be intertwined with the success of the local economy.
I suggest that breaking up RBS is only half the solution. The next fundamental question is: what do we do with the Government shares? We could sell them, but I disagree with that proposal. We should give all 45 million people on the electoral roll the Government-owned RBS shares, making every voter a shareholder of a local bank created from the devolution of the RBS branches. Each local bank would coincide with a county or city council, and in my patch that would create a bank of Northumberland, with every adult in the county as a shareholder. Each bank’s lending powers would be limited to persons and businesses within its council boundary, and with residents as shareholders, the bank’s administration could be run by the existing council, to save costs and dovetail with existing infrastructure. If the plan went ahead, the 45 million shareholders would dwarf the 10 million that were created in the 1980s through the sell-off of BT and British Gas. It is crucial to remember that the Government did not bail out the banks—the public did. Their hard-earned money kept the banks afloat, and it is now time for them to share some of the rewards.
As well as giving taxpayers an effective rebate in the form of shares, the move would help to restore confidence in the banking industry, and boost the economy. The public is rightly fed up with a system that has become overwhelmed by small vested interests, a London-centric base and personal greed. What better way to repair that than by giving every voting member of the public a stake and a say in our state-owned bank? I accept that people could sell the bank, but the force of having 45 million British taxpayers holding banking shares could help transform the economy even if individual shares were sold. The alternative—there is one—is to give the shares and the branches to local authorities, which would be localism in its purest form, with state banking returned to a position of support for local communities, building on the German, Swiss and US models.
I am grateful to the Speaker for the opportunity to put my case today, and I thank the New Economics Foundation think-tank for its support. The endowment of local community banks, constrained not to lend beyond county borders and able to provide support for local businesses, is an important part of supporting local economies and communities across the country. With a mission to recycle savings locally and expand credit for productive loans that benefit the local area, but on a sound commercial footing, the strength of the case for reinstating a system of community banking is ever increasing. I suggest that we do not need to replace the commercial banking sector, because we can offset it and balance it out with a new system of banking. That would certainly introduce competition into a sector that is crying out for it, and transform banking in this country.
The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for Hexham (Guy Opperman) on securing this important debate. He raised some interesting and important points to which I hope to respond.
First, let me make it clear that the Government believe that it is important for consumers to be able to access an appropriate range of financial products and services, and that we are committed to fostering a strong, diverse and competitive banking sector. To achieve that, we must ensure that consumers can apply competitive pressure and hold their banks to account for the services they offer. In a competitive market, customers should be able to vote with their feet and switch their custom to banks that provide the best products and services for their needs. The Government are, therefore, committed to fostering diversity and promoting competition in the banking sector.
To help with the delivery of those aims, the banking industry has committed to introducing a fast, safe and hassle-free switching service, which will ensure that by September 2013 customers can switch accounts within seven days. That is further to transparency measures that are already being implemented more widely in the personal current account market, including making charges clearer on customers’ monthly statements, and providing an annual statement of charges for each customer.
As well as people having the freedom and information to switch banks according to their needs and wishes, it is important that new firms are free to enter the sector. I am pleased that we have seen a number of new entrants into the current account market in recent years, including Metro Bank, and it is essential that the regulatory regime facilitate that wherever possible. That is why the Chancellor announced in the banking reform White Paper that the Bank of England and the Financial Services Authority will conduct reviews of the prudential and conduct requirements for new entrants to the banking sector, to ensure that the requirements are proportionate and do not pose excessive barriers to entry or expansion for new, and prospective new, entrants. The conclusions of those reviews will be published in the autumn when the FSA and the Bank of England set out the detail of the new supervisory models for the Prudential Regulatory Authority and the Financial Conduct Authority, and the FSA and the Bank of England have committed to introducing the changes in advance of the new regulatory structure, where possible.
The Government are also committed to promoting mutuals and fostering diversity in financial services. By promoting financial mutuals, the Government are ensuring that consumers have an alternative model, which can provide competition to the shareholder-owned banks. Last Thursday, we set out the Government’s vision for the building society sector in “The future of building societies”. The document, which has been warmly welcomed by the sector, confirms the Government’s support for the distinctive alternative offering provided by building societies. It outlines the Government’s intention to remove unnecessary barriers to growth, and to help create a more level playing field with banks. In addition, in January the Prime Minister announced that the Government will introduce a co-ops consolidation Bill, which will raise the profile of the co-operative alternative and make it easier to adopt it as a corporate form. By ensuring there is an environment in which building societies can not only survive but thrive, the Government are facilitating a mutually owned source of competition for the big banks for many generations of home owners and savers, and supporting building societies with ambitions to expand their business models: for instance, into providing vital lending to small businesses.
Promoting diversity in financial services goes wider than banks and building societies. Credit unions can act as an excellent alternative, providing affordable financial services to people who would not otherwise be able to access them. This Government have taken action to help promote credit unions and their role of offering financial services to their communities. We have removed unnecessary burdens by bringing into force a legislative reform order giving a much wider group of people the ability to take advantage of the benefits of credit union membership. We have brought Northern Ireland’s credit unions under the regulatory oversight of the FSA so that from April, for the first time, the deposits of Northern Ireland credit union members will be protected by the Financial Services Compensation Scheme, enabling members to save with credit unions with confidence. We have also announced a credit union expansion project, which will invest £38 million to help credit unions modernise and grow in order to offer a real alternative to high-cost credit providers. Through all those actions, the Government are creating an environment where credit unions can offer an alternative and compete with banks to serve families and businesses that need to save and borrow for their future.
My hon. Friend discussed the Royal Bank of Scotland and advocated its playing a role in supporting the creation of local community banks. The Government’s shareholdings of RBS are managed on a commercial and arm’s-length basis by UK Financial Investments Ltd, a company wholly owned by the Government. UKFI’s overarching objective is to protect and create value for the taxpayer as shareholder, with due regard to financial stability and promoting competition. UKFI’s role is to manage the investments, not the banks. The banks retain their own independent boards and management teams to manage the banks commercially without interference from shareholders. Like all banking service providers, they must balance customer interests, market competition and other commercial factors when considering their strategy, so the Government do not tell RBS or any other bank where to operate branches.
On shares for the people—my hon. Friend explained his proposal in detail—UKFI will consider the full range of alternatives for investment and make its recommendations based on market conditions, an assessment of investor demand and value for money considerations. However, the ultimate decision to proceed with any transaction will rest with the Chancellor.
My hon. Friend also described the difficulties that local business can face in accessing finance from banks. I assure him that the Government recognise that small and medium-sized enterprises are fundamental to economic recovery. That is why the Chancellor launched two credit easing schemes in March 2012. The national loan guarantee scheme reduces the cost of borrowing for SMEs by 1%, and the business finance partnership will invest £1.2 billion through non-banking lending channels. Together, the schemes support SMEs in accessing cheaper finance while diversifying the range of finance resources available, stimulating the non-bank lending sector. At Budget 2012, the Government also extended the enterprise finance guarantee, which will enable over £2 billion of lending over the next four years to businesses with insufficient collateral or track record.
We continue to help UK businesses access the finance they need. That is why the Chancellor and the Governor of the Bank of England announced the new funding for lending scheme at Mansion House on 14 June. The scheme will support credit for the whole economy by making it easier for banks to lend to businesses and families. In return for additional new lending across the whole economy, the scheme will reduce bank funding pressures, which have been increasing due to instability in the international financial markets. We are working closely with the Bank of England on the design of the FLS and will release further details shortly.
As I mentioned in my opening remarks, the Government believe that it is important for consumers to be able to access an appropriate range of financial products and services and are committed to fostering a strong, diverse and competitive banking sector, a point raised by my hon. Friend. I hope that it is clear to him from the initiatives I have described that we are pursuing a substantial agenda in that area through both regulatory and non-regulatory means.
The regulatory landscape is changing, just as customers’ needs are, and the financial services sector will need to continue to evolve to take account of that. At the same time, it is important that it continues to meet the needs of ordinary customers, an issue that I know is close to my hon. Friend’s heart.
I thank my hon. Friend once again for raising these important issues and bringing them to my attention and that of the House, and I thank my hon. Friends the Members for Carlisle (John Stevenson) and for Warwick and Leamington (Chris White), and the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), for their contributions.
Guy Opperman
Clearly, the disposal of RBS, in whatever shape or form, is ultimately for the Government and the Chancellor of the Exchequer, having considered a full range of alternatives, market conditions and value for money. If it is not commercially viable to return RBS to the private sector, will the option of returning it to a local banking organisation, as I have described, be considered?
Mr Gauke
My hon. Friend is absolutely right that that is a decision for the Chancellor of the Exchequer. All I will say at this point is that I am confident the Chancellor will want to consider all options, particularly in the circumstances my hon. Friend describes. Numerous factors would need to be taken into account in any decision, including value for money for the taxpayer.
The Government are clear that banks and building societies should serve the economy. I assure my hon. Friend that the issue will continue to receive the highest level of attention from Government. We are grateful to him for raising so many important issues in this debate.
NHS Services (Trafford)
(12 years, 5 months ago)
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Paul Goggins (Wythenshawe and Sale East) (Lab)
I am pleased to be able to hold this debate. I am particularly pleased that my hon. Friend the Member for Stretford and Urmston (Kate Green) is with me. I hope she will have the opportunity to catch your eye later in the debate, Mr Robertson, and make a short contribution. I am also pleased to see the Minister of State, Department of Health, the right hon. Member for Chelmsford (Mr Burns) in his place, as I know that he takes a particular interest in the NHS in Greater Manchester. I look forward to hearing what he has to say in response to my comments and my hon. Friend’s.
This is a timely debate. It is expected that in the next few weeks, a major consultation will be launched in Trafford on proposed changes to the provision of hospital services in the borough. That is, rightly and understandably, attracting huge interest in the community in Trafford and elsewhere. Last week, 5 July, was the 64th birthday of the national health service. That has particular resonance in Trafford, as it was at Park hospital, now Trafford General hospital in the constituency of my hon. Friend the Member for Stretford and Urmston, where the story of the NHS began. That was the NHS’s birthplace. Aneurin Bevan went to that hospital on that day in July 1948 to launch the national health service, which remains the best health service anywhere in the world.
Last Saturday, my hon. Friend and I joined hundreds of local people in Trafford on a march and rally organised by the campaign to save Trafford general hospital. Many parts of the community were represented, including the two main political parties in Trafford—they were both represented in good numbers—and it was evident that the affection for and commitment to the national health service in Trafford remains, just like everywhere else in the country, as strong as ever.
I think that Aneurin Bevan would be truly shocked, 64 years on from that historic day when he launched the national health service at Park hospital, to learn that the life expectancy of a man who lives in the poorest part of the Trafford borough is 11 years shorter than that of a man who lives in the wealthiest part of the borough. The gap for a woman is six years. That is a gross inequality in health. Our main objective, irrespective of party, must be to reduce such massive and gross health inequalities in our communities.
The Minister of State, Department of Health (Mr Simon Burns)
The right hon. Gentleman makes an extremely valid point, in the light of which I have no doubt that he will welcome the fact that, for the first time—and, ironically, under a Conservative Government—there is enshrined in primary legislation a duty on the Secretary of State for Health to work to minimise health inequalities.
Paul Goggins
As I have said, Members of all parties should work together, although the legislation the Minister refers to contains many other elements about which I am a great deal more sceptical. In any event, tackling health inequalities should be at the forefront of our minds. If the national health services in Trafford are to be redesigned, that needs to happen in a way that helps us to tackle inequalities that blight lives and bring them to a premature end. We need a system of integrated care in Trafford that is capable of dealing with those issues and that can help us to tackle, in a meaningful way, the difficult problems of heart disease, diabetes, cancer and stroke that blight so many lives and bring them to a premature end. That has to happen. Frankly, the debate about integrated care in Trafford has gone on for long enough. We are signed up to it and it needs to come to fruition.
This time last year, there was great concern in Trafford about the future of Trafford general hospital. There had been serious financial problems at the trust and there was real fear in the community that those who run the NHS and who make decisions intended to privatise the hospital. I am pleased that, eventually, that did not happen and that Central Manchester University Hospital NHS Foundation Trust acquired the Trafford trust, so that Trafford general hospital, Stretford memorial hospital and Altrincham hospital are all still part of the NHS family. That has been widely welcomed throughout Trafford, but it is clear that further changes are on the way. It is vital that we have a full and frank consultation to inform the process of change that will, no doubt, ensue.
One particular issue—and the main focus of this debate—is the likely impact of changes to hospital services in Trafford on the nearby hospitals in the city of Manchester. If the consultation proposes to replace the accident and emergency department at Trafford general hospital with an urgent care centre, there is concern about the implications for Manchester hospitals, particularly Wythenshawe hospital, which is part of the University Hospital of South Manchester NHS Foundation Trust—UHSM—in my constituency.
Many Trafford residents already use hospitals outside the Trafford borough for their NHS treatment. Indeed, I estimate that about 130,000 of the 230,000 people who live in Trafford consider Manchester Royal infirmary in central Manchester and Wythenshawe hospital in south Manchester to be their local hospitals—the hospitals they have easiest access to. It is also true that, if someone suffers a major trauma, a stroke or a serious heart attack, they would not be taken to the A and E unit at Trafford hospital, even if they were a Trafford resident; they would go instead to one of the local teaching hospitals in either Manchester or, perhaps, Salford.
The end result of the geographical link between Trafford residents and hospitals in Manchester—and, indeed, of the requirements of the complex conditions from which people suffer—is that more than half of Trafford residents who need to attend an A and E unit go outside of Trafford in order to do so. That means 25,000 patients who live in Trafford going to Wythenshawe hospital for their A and E treatment. That is a third of all the Trafford residents who require A and E appointments in any one year.
UHSM estimates that if the A and E unit at Trafford general hospital closed, that would mean 7,600 additional patients at Wythenshawe hospital’s A and E unit in any one year. At present, Wythenshawe hospital treats 88,000 people at an A and E unit that was designed for 70,000 patients, so there is considerable concern at the prospect of patient numbers in excess of 95,000 if the changes are introduced. In addition, half of all unplanned admissions of Trafford residents to hospital are admissions to Wythenshawe hospital. It is estimated that, if the changes are introduced and if the A and E department at Trafford general hospital closes, 1,900 additional patients could be admitted, on an unplanned basis, to Wythenshawe hospital. In total, that means an extra 9,500 patients coming in for either A and E or an unplanned admission.
Even if the integrated care system that we all want is able to divert people from hospital and reduce the number of hospital admissions, there would still be significant additional pressure on Wythenshawe hospital. I have seen some estimates of the number of patients who may be diverted from hospital as a result of the changes. Some of the professionals involved in making the assessments predict that, even if the system is successful, a 20% diversion would be heroic. That means that Wythenshawe hospital’s A and E department would need more beds, more theatre time, more examination cubicles, more resuscitation bays and even a new fracture clinic. Although the tariff arrangements may pay for patients’ treatment, the capacity and the facilities will simply not be there, which brings me to the core of my argument: the facilities have to be there if we are to see the kind of major changes that may be proposed. If we do not have additional capacity at Wythenshawe, the consequence will be growing queues and cancelled operations. Nobody wants that to happen.
The case for additional facilities is being made by the UHSM management, but the silence of the response so far from the Greater Manchester cluster is deafening. We need engagement with those who run the cluster, so that we can start to get some proper answers to the problems. It is not as though this is a new issue. Elsewhere in the north-west in recent years, when Burnley’s A and E unit closed down, additional facilities were made available at Blackburn, and, when Rochdale’s A and E department was downgraded, there was investment in the Pennine acute trust. We are asking for the same process to be applied to Manchester hospitals if the A and E department at Trafford general hospital is replaced by an urgent care unit.
As I said, I hope that my hon. Friend the Member for Stretford and Urmston will catch your eye in a moment, Mr Robertson. My constituency next-door neighbour, the hon. Member for Altrincham and Sale West (Mr Brady), who, sadly, cannot be here today, has asked me to say that he fully supports my argument. He has also asked me to say specifically:
“Wythenshawe is the most important acute hospital for most of my constituents and I share the view that any additional demand at Wythenshawe arising from changes elsewhere will need to be properly resourced.”
We are looking today for a guarantee from the Minister that the necessary funding will be made available for the expansion of facilities at Wythenshawe hospital. UHSM should not be expected to take the financial risk to provide those facilities; the money has to come from elsewhere within the NHS.
The Central Manchester University Hospitals NHS Foundation Trust will face similar issues, although perhaps to a lesser extent, because the numbers are not as great. Of course, the relationship between central Manchester and Trafford general is different, because they are now part of the same organisational arrangement. However, the issue will still be there. If more patients are presenting at central Manchester for A and E and unplanned admission, there will be an additional burden that runs the same risk of longer queues, longer waiting times and cancelled operations. I am sure the Minister does not want to see that.
I look forward to hearing what the Minister has to say. I hope he is able to give a positive reassurance—indeed, a guarantee—that the facilities that will be required at Wythenshawe if the other changes go through will be made available. It would be wrong for my constituents who live in Manchester to discover that, because of changes in Trafford, they will face longer queues at A and E and operations being cancelled—that would be unfair. We have to see investment up front. We all want the integrated care model to work, but those patients will not disappear into thin air. Many more patients will be looking for their treatment outside Trafford if the A and E department becomes an urgent care centre. I hope the Minister will engage with that issue, and that we can have a positive assurance from him today.
Kate Green (Stretford and Urmston) (Lab)
I am grateful for the opportunity to contribute to this debate, Mr Robertson. I thank my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) and the Minister for allowing me to make a few remarks on behalf of my constituents.
The proposals for Trafford will clearly have a direct and significant impact on my constituents. As my right hon. Friend said, they are the cause of considerable local concern, exemplified by the substantial numbers of local people who joined the march and rally organised by the Save Trafford General campaign on Saturday. As my right hon. Friend said, they included politicians from across the political spectrum.
As we have always sought to say to the Minister, we understand that having fewer people go into hospital in the first place and, when they do have to be admitted to hospital, getting them back home as quickly as possible to recover is the outcome that we should all be striving for. We understand and welcome the integrated care approach as a means to bring that about, but that approach, which has been talked about for a number of years in Trafford without significant progress, cannot be delivered without the necessary and substantial investment in front-line community health provision and primary care. That will be even more true if, as we hope and expect, fewer patients will go to hospital in Trafford—or, indeed, in Manchester—and there is a concerted effort to undertake more preventive community health provision to achieve that result.
It is very important that the Minister gives assurances—not to me, but to my constituents—that the necessary investment in community and front-line health provision to produce an effective model of integrated health care and improve health outcomes is guaranteed. We need not only the up-front investment to enable that transition from hospital provision to more community provision, but an indication from the Minister that any savings from reduced hospital admissions and hospital stays in Trafford will be reinvested in front-line preventive care.
I understand that the proposed changes are not primarily financially motivated. We see them as motivated by a desire to achieve the very best health outcomes. None the less, it is a concern that the deficit at Trafford general has risen substantially in recent years. It would be helpful if the Minister explained how that deficit has come to grow significantly and how the proposed changes will have an impact on the ability to balance the books. The Minister will be aware that a two-stage transition is proposed for services at Trafford, with an initial reduction to below level 1 emergency care provision over more restricted hours, but ultimately perhaps moving right down to a minor injuries unit in a period of not less than two to three years. Will the Minister assure us that neither the move to option 2b, as it is called, nor the move to option 3, will be implemented unless and until the necessary community provision to make those respective models work effectively has been put in place?
I would like to raise one other matter with the Minister. Clearly, the proposed changes will lead to more patient journeys from Trafford to other nearby hospitals. I understand that the North West ambulance service expects to have additional resources in the light of those extra patient journeys. However, it would be welcome if the Minister offered guarantees that those resources will be put in place. That is a particular concern as the patient transport service, which in a sense backfills for some of the emergency ambulance cover, is out to tender. I would welcome an assurance from the Minister on that.
I endorse my right hon. Friend’s comments on waiting times and service standards at neighbouring hospitals. If the changes go ahead, we need guarantees that they will enhance, not diminish, the standards of health care at Trafford. We look forward to receiving those assurances from the Minister this afternoon.
The Minister of State, Department of Health (Mr Simon Burns)
It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the right hon. Member for Wythenshawe and Sale East (Paul Goggins) on securing the debate and the hon. Member for Stretford and Urmston (Kate Green) on her contribution. Like the right hon. Gentleman, she shows a keen and continuing interest in the provision of health care in her constituency and in Greater Manchester. If I do not respond to all the points that they have made—I will seek to respond to as many as possible—I will definitely write to them as quickly as possible after the debate.
As ever with such issues, it is important to not only recognise, but pay tribute to the NHS staff in the constituencies of the right hon. Gentleman and the hon. Lady, as they do so much to improve the health and the well-being of their community day in, day out.
I would like to provide some context to the right hon. Gentleman’s concerns about health services in Trafford. I am sure that he will appreciate that the local NHS, working with commissioners, clinicians and local authorities, needs to determine for itself how best to meet the needs of local people. I am sure that he will accept that it is not for Ministers to intervene at that level. To ensure that all local NHS bodies can do so, we not only protected NHS funding, but actually increased it in real terms, albeit a modest real-terms increase, and that will continue throughout this Parliament. The extra money means better services for patients and, ultimately, healthier communities in the right hon. Gentleman’s constituency and beyond. In his constituency, Trafford primary care trust will receive more than £389 million in the current financial year, which is an increase of £10 million on last year. Manchester PCT will receive more than £1 billion, which is up by more than £29 million on the previous financial year.
Those increases come with a significant challenge, which was referred to by the right hon. Gentleman and the hon. Lady. The NHS as a whole needs to spend its money better. Nationally, it needs to find £20 billion of efficiency savings in the next few years to meet the rising demand for services. The right hon. Gentleman’s party made that commitment when they were in government, and we recognised it as the right thing to do and have adopted what has become known in some circles as the Nicholson challenge.
The hon. Lady asked whether the savings will be reinvested in front-line services. I can give her that commitment: all the quality, innovation, productivity and prevention Nicholson challenge savings will be reinvested in front-line services, not only in Manchester, but throughout the country.
It is to their immense credit that the NHS organisations, teams and individual members of staff are on track to meet that target. In 2011-12, the NHS made £5.8 billion in efficiency savings, which is testimony to the hard work that was put in by staff, managers and administrators throughout the NHS. However, let me be clear that by efficiency savings I do not mean savings that flow straight back to the Treasury, lost to the NHS. Instead, I am talking about efficiency savings where every penny will be reinvested to make care better. Of course, some parts of the NHS therefore face tough decisions, and that is true for the NHS in Trafford.
The right hon. Gentleman is concerned about how service changes in Trafford might affect the quality of services for his constituents. I am sure that he is aware that the NHS in Trafford and Greater Manchester has developed proposals for service changes affecting Trafford general, which are planned for public consultation later this summer. Following the consultation, a final decision about the changes will be made by the end of the year, with plans put into practice by April 2013.
The board of the Greater Manchester PCT cluster approved the proposals at its meeting in June 2012, and they will now be considered by the board of NHS North of England on 12 July 2012. I hope that the right hon. Gentleman understands that I do not want to—it would be wrong to—pre-empt or bias the local process before the consultation. However, I will try to address, as best I can, some of his concerns within that straitjacket.
The former Trafford Healthcare NHS Trust was acquired by Central Manchester University Hospitals NHS Foundation Trust in April 2012, so that the trust could move to foundation trust status, which it could not do independently. The acquisition also ensured that the trust was sustainable, so it could carry on providing health services to the people of Trafford.
Sustainability—the guarantee that the NHS will carry on providing high-quality safe services—is at the root of the right hon. Gentleman’s concerns. Trafford is the birthplace of the NHS, where Nye Bevan famously launched it just 64 years and four days ago. Unfortunately, history is not enough. Every corner of the NHS needs to be on sound financial footing, so that it is a viable service for years to come. That is what we all want, regardless of which side of the House we sit on.
Clinicians and general practitioners across Greater Manchester have developed proposals for a model of care that maintains high standards and improves value for money. Those proposals are called the new health deal for Trafford. Local people and local NHS organisations have been involved. The right hon. Gentleman might be aware that in 2008 the local NHS started work on a new integrated services model that aimed to deliver more care in the community and reduce admissions to hospitals.
The hon. Lady is concerned and wants the proposals for delivering more care in the community to be put in place properly, so that there is no fragmentation or disruption in the delivery of service. I share her concern and agree that such proposals must be part of driving the NHS to a more integrated programme and a policy of delivery and seamless provision of care. That is a challenge for the NHS, as it always is when moving on a part of the delivery of care, but Manchester is acutely aware of that and is working steadfastly to ensure seamless delivery of care and to meet the new challenges of the most appropriate care for patients in Greater Manchester. The right hon. Gentleman is interested in that model.
At the moment, Trafford provider services, which is part of Bridgewater Community Healthcare NHS Trust, delivers community services across Trafford. I understand that Trafford PCT launched a tender exercise for providing community services in Trafford, which should be completed by August 2012.
Clinical commissioners in Trafford are still keen for integrated care to go ahead. For that to happen, clinical services are being redesigned across Trafford, including the secondary care services provided by Trafford general. At the moment, Trafford general provides a full range of acute services, including A and E, as the right hon. Gentleman mentioned. The local NHS worked on several options for services that the hospital might offer in the future, spoke to clinicians, commissioners and public representatives to identify the right model of care and chose the following model. A and E services will be replaced with an urgent care centre, opening between 8 am and midnight, changing to a minor injuries and illness unit within two to three years; acute surgery will not happen there anymore; some parts of acute medicine provision will be removed but some will remain; and in-patient surgery will no longer be provided at Trafford general. The hospital will still provide elective orthopaedic surgery, including the development of an elective orthopaedic centre of excellence, day-case surgery, out-patient services, diagnostics and rehabilitation.
As I mentioned earlier, these proposals were approved by the Greater Manchester PCT cluster in June 2012. I understand that the PCT intends to submit them to the strategic health authority for approval and for a public consultation in which everyone will be able to have their say. I understand that the national clinical advisory team has reviewed the proposals and supports the clinical case for change. I also understand that a series of public events were included in the whole process, so that people could find out more and voice their concerns. There were regular meetings with local health overview and scrutiny committees, and local Members of Parliament have been briefed on what is and was going on.
Paul Goggins
I agree that full and frank public consultation is essential, but people need to have all the information. The Minister promised me earlier that he would write to me with further details that he is not able to cover in his speech. Will he undertake now to look in detail at the case made by UHSM for the additional facilities at the accident and emergency unit and elsewhere, at an estimated cost of £11.5 million, and will he comment on that?
Mr Burns
I will try to do better for the right hon. Gentleman by commenting on that in the remaining three minutes. I have an answer.
The consultation process has to be carried on within the setting of my right hon. Friend the Secretary of State’s four tests. The right hon. Member for Wythenshawe and Sale East is concerned about the impact of the proposed changes at Trafford on other hospitals, particularly Wythenshawe hospital. Local commissioners have assessed the potential impact of the changes in developing their proposals. However, the proposals are still at an early stage and have yet to go to public consultation. I am informed that local commissioners will continue to look at this issue. Ultimately, when the consultation is over and the responses have been considered and a final decision is made locally, if the local authority overview and scrutiny committee does not share the analysis and agree with the decisions that have been taken, it is open to it to write to my right hon. Friend the Secretary of State to request that he refer the decisions to the independent reconfiguration panel.
The right hon. Gentleman mentioned the £11.5 million for expansion of A and E at Wythenshawe hospital. I can give no such guarantees on that, for the following reason. Local commissioners have assessed the impact of the proposed changes at Trafford on other hospitals, including Wythenshawe. However, the plans are still at an early stage and are yet to go fully to public consultation, which will happen shortly. I am informed that local commissioners will continue to review the impact of the changes on other hospitals, including Wythenshawe. In that respect, I can give a commitment, but I cannot go the whole hog, as the right hon. Gentleman would like me to, and commit £11.5 million, or whatever other figure might arise, because that is not in my gift. These are local decisions freed from ministerial interference, which I think the right hon. Gentleman would agree is the right way forward.
The right hon. Gentleman, the hon. Lady and other hon. Members met Trafford PCT on 6 July 2012 to discuss the proposals. I hope that they found the meeting useful and helpful, and I hope that the right hon. Gentleman and other hon. Members in the area affected by the consultation continue to speak to the local NHS. I urge the right hon. Gentleman and his colleagues, constituents and everyone else who is interested in strengthening and improving the local NHS provision of service in Trafford and Greater Manchester to contribute to the consultation process, so that all views and opinions can be considered and that the decision can flow as a result of direct involvement by those people.
Illegally Tethered Horses
(12 years, 5 months ago)
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Julian Sturdy (York Outer) (Con)
It is a pleasure to serve under your chairmanship today, Mr Robertson. I am delighted to have secured a debate this afternoon on an issue of great concern to many of my constituents. The problem of illegally tethered horses, however, is not restricted to York or the wider Yorkshire region but is found throughout the country, predominantly although not exclusively in rural areas.
To some, the problem of illegally tethered horses might seem mundane, but try telling that to the farmer whose crops are being destroyed, to the innocent car driver whose life is endangered by an escaped horse or to the property owner whose land is taken over by tethered horses. At the core of the issue is a simple but profound point of principle: that no one should be above the law. Nor should people have their lives negatively affected by those who have little regard for such laws.
Unfortunately, the illegal tethering of horses is seen as an acceptable and traditional activity among much of the Traveller community. In the vast majority of cases, illegally tethered horses belong to Traveller families or communities who seem to have little respect for the safety or property of others when tethering their animals wherever they like. As the Member of Parliament for York Outer, I have witnessed an increased build-up of horses on the verges of dangerous roads, and I am sure that other Members present have their own examples, which they might bring to bear.
To touch on some examples from my constituency, back in 2009 a local resident in York was driving along the A64 when an illegally tethered horse broke free and collided with her car. The resident suffered a broken wrist and could not work for nine weeks. The horse, sadly, suffered fatal injuries in the accident. York’s The Press, my local paper, quoted the resident involved:
“Had my partner…and I not been in a 4x4 hire car, we would have died instantly...I was off work for nine weeks but the psychological effects lasted much longer and also, what pain must that horse have been in?...They should be removed”.
The wider context of animal welfare is also involved.
Another case highlights the real risk to life faced by innocent bystanders when horses escape from their illegally tethered locations. On 29 March this year, a 39-year-old man was driving on the A166 near York when a horse strayed on to the road and collided with his transit van. Again, the police suggested that, had the gentleman been driving a small car, he would have been killed. To give an idea of the frequency of such incidents, only one day earlier another collision took place, this time on Malton road. Injuries were incurred by the innocent motorist and, once again, the horse suffered fatal injuries. Today I was told that only this weekend, on Sunday, the police were called out to deal with loose horses on Fulford road.
While the case studies of horses tethered on the roadside might involve the most life-threatening incidents, it would be a mistake, as I mentioned, to limit today’s debate to horses on the roadside. Another local case from my postbag highlights the vast damage that illegally tethered horses can cause for farmers. My constituent Mr David Shaw owns land in Osbaldwick, within sight of a Traveller site there. Mr Shaw’s land has been taken over by illegally tethered horses, which have caused a great deal of damage to fences, crops and the land itself.
Likewise, another constituent, who wishes to remain anonymous, frequently encounters horses tethered on local private property, again causing damage and problems. To quote from a recent e-mail to me:
“We live on the outskirts of York and have encountered persistent problems with tethered horses for over 15 years”.
Ian Swales (Redcar) (LD)
I congratulate my hon. Friend on securing this debate on an important issue. May I make him aware that this is not only a problem in rural areas? In the north-east, more and more horses are being tethered on our green spaces in urban areas. In many cases, the horses, too, are illegal. Only a couple of weeks ago, I attended a horse-chipping event organised by the British Horse Society, which was at least trying to bring such horses into legal ownership while still illegally tethered.
Julian Sturdy
I entirely agree with my hon. Friend and, as I said at the beginning, although the problem might seem to be suffered predominantly by rural areas, they are not alone, because I know for certain that urban areas throughout the country suffer as well. He is absolutely right about the chipping of horses, which I will go on to discuss, because I want to direct a few questions at the Minister.
Mrs Madeleine Moon (Bridgend) (Lab)
The hon. Gentleman has talked a lot about illegally tethered horses. Will he also discuss the problem of fly-grazing? In my constituency, and stretching the length of south Wales, we have had tremendous problems with vans appearing, often late at night, and being opened to dump horses in a farmer’s field. The horses are left there, sometimes for days, with many needing medical attention. The local authorities incur huge costs for vets’ bills, passporting and, ultimately, removing and selling the horses, and any sale does not bring in the money spent by the local authority on removing and looking after them.
Julian Sturdy
The hon. Lady is absolutely right about fly-grazing. The problem in my patch is more to do with tethered horses, although I know of local farmers who have suffered from fly-grazing. Overnight, on crops of cereals, horses can suddenly appear and be there for a number of days; it is difficult for the farmers to round up the horses or disperse them. In my constituency, the problem tends to be on areas that are not properly fenced, but I know of other farmers in other areas who have had their fences cut in the middle of night and horses let in, so that the crops are grazed and irreparably damaged beyond the cost of replacing them. She is also right to mention animal welfare, because a lot of the animals that appear on fly-grazing sites suffer from welfare issues, which need to be picked up properly; but that cost does sometimes fall on the local authority.
Mrs Moon
The responsibility for the horse, once it is illegally placed on someone’s land, rests with the landowner unless the local authority helps and supports some of the cost. That financial cost—not to the perpetrator but to the poor victim—is an issue that really needs to be addressed.
Julian Sturdy
I entirely agree with the hon. Lady, who makes a valid point. As I develop the argument, I will proceed to the problem of the landowners bearing the brunt of the cost.
To return to the example of the farmer in my constituency who suffered irreparable damage to hedges and crops, his e-mail continued: “Two elderly farmers” have been intimidated
“by the owners of the tethered horses. These farmers live in fear of those people responsible for the horses and feel they cannot approach them.”
I hope that all Members agree that, whether the illegal tethering of horses is on the roadside, the village green or someone’s private land, it not only causes practical problems and disturbances for local residents but also represents a complete and utter lack of respect for the law and the wider community. Frankly, how some people have the nerve to take over someone else’s land without permission is beyond me. On a simple point of principle, that is fundamentally wrong.
Thus far, of course, I have frequently referred to the law, which it might be helpful to clarify for the purposes of this afternoon’s debate. The law on illegally tethered horses is currently contained in the Animals Act 197l, which gives power to landowners to detain stray livestock, including horses, and to recover expenses incurred when doing so. Similarly, on the specific concern about horses tethered on roadside verges, I am grateful to the Department for Transport for confirming that under section 155—
“Penalties in connection with straying animals”—
the Highways Act 1980 states:
“If any horses, cattle, sheep, goats or swine are at any time found straying or lying on or at the side of a highway their keeper is guilty of an offence”
unless it is
“part of a highway passing over any common, waste or unenclosed ground.”
My reason for outlining the relevant legislation so clearly is to highlight that reasonably clear and robust national legislation exists. In essence, the law is easy to understand. It states unequivocally that the tethering of horses on the highway or private property is a crime, and therefore punishable. The question that lingers is why so little action is taken when such offences are committed. The law exists, but sadly the will to enforce it is lacking. That is particularly the case with the Horse Passport Regulations 2009, which make it an offence for horse owners not to apply for a passport within six months of an animal’s birth.
In response to a written question in November 2011, the Department for Environment, Food and Rural Affairs confirmed that a mere six owners had faced prosecution as a result of not complying with that law. Yet, unsurprisingly, many of the horses involved in collisions with cars seem to be unregistered with DEFRA, thus making it all the more difficult to trace and track their owners. I would be grateful if the Minister outlined how his Department seeks to ensure full compliance with the law, and whether there is a specific plan to deal with horses owned by the Traveller communities to ensure that they are registered under the passport scheme, to which my hon. Friend the Member for Redcar (Ian Swales) also referred.
I return to the problem of enforcement. In response to my parliamentary representations on the matter, the Under-Secretary of State for Transport, the hon. Member for Lewes (Norman Baker), made it clear in a letter that enforcement responsibility lies with local authorities, and stated:
“The local authority could, therefore, detain stray horses found on any local authority owned land”.
On private land, initial responsibility lies with the landowner to request that straying animals be removed, and if that approach fails, the police can be called. However, as we all know and as has been mentioned, the time and cost of the court battles and legal action that often follow falls on the landowner. Nevertheless, it is clear that enforcement responsibility lies with the local agencies of the police and the council.
Having clarified who is responsible, I must raise the issue of my own local authority, City of York council. The council has clearly failed to act decisively on tethered horses. I have long called for the council simply to confiscate any illegally tethered horses and to return them only when the owners have accepted responsibility, faced a fine, and registered the horse in accordance with law. The fines levied would cover the cost of looking after the animals, and the action could be carried out in conjunction with the RSPCA.
To my mind, that is a pretty fair-sounding and simple plan of action. If someone illegally parked their car, the same action would be taken. Yet, a response sent to me by City of York council in June informed me:
“The Council does not have the facilities to remove or stable horses and is therefore not able to remove horses from private land. However, the support workers who visit the”
Travellers’
“site each week continue to work to educate travellers about…caring for their horses. This includes working closely with travellers to try and prevent horses being grazed inappropriately on private land or in places where they can stray onto the road.”
Ian Swales
My hon. Friend is touching on an important point about impounding facilities, and he mentioned cars. Local authorities usually have well-organised dog pounds. Does he believe that local authorities should be required to have facilities, or to buy facilities to be used to impound horses?
Julian Sturdy
I thank my hon. Friend for his intervention, and I agree with him. That must be the way forward if we are to solve the problem logically and fairly for everyone, and at the same time keep the welfare of the animals in mind. I would like local authorities to look at the matter.
Mrs Moon
The hon. Gentleman may find it interesting to know that throughout the length of south Wales we have found that it pays the Traveller community to abandon their horses. When they have done so, the local authority takes the horses into care and pays for veterinary bills and passporting, and then tries to sell them because no owner can be found. The horses may be sold for £200, but the veterinary bills and impounding may have cost £15,000. The matter is much more complicated than simply impounding a horse for the owner to recover. The owner waits until a horse is sold, and then buys it back really cheaply.
Julian Sturdy
I thank the hon. Lady for her intervention. I understand that there are complex arguments in the process, as I will explain. The problem also varies in different regions. In and around York and Yorkshire, the tethered horses seem to be valuable assets to the Traveller community. Whenever bailiffs have been used—there is a bailiff company operating around the country that gives 24-hour notice on a certain site where horses have been illegally put—they remove the horses and store them on a site at a cost to the private landowner, and almost always the fines have been paid and the horses have been returned because the Traveller community see those horses as a valuable asset and want them back. The situation may be different in other areas, and it will depend on different communities, so I understand that the position will vary from region to region.
Nigel Adams (Selby and Ainsty) (Con)
Will my hon. Friend expand on where the market is for those horses? I am at a loss to know what they are used for. They do not look like horses that can be ridden. Does he have any evidence for what happens to them, where the trade is in them, and what the market is for them? That information would be useful.
John Robertson (in the Chair)
Before the hon. Member for York Outer (Julian Sturdy) resumes his speech, I advise him that he needs to give the Minister time to answer his questions.
Julian Sturdy
Thank you, Mr Robertson. I will take no more interventions.
If I am brutally honest, I do not know the answer to my hon. Friend’s questions. He made a good point, and we should investigate it. Again, the answer will vary from region to region, but it is a valid point that needs investigating.
Let me make it clear that I have nothing but the utmost respect for minority and diverse groups and nationalities in our country. Such diversity is what makes this country so great. I would never seek to diminish or insult the traditions of Travellers or their way of life. However, it is outrageous for any section of a society, regardless of the sensitivities involved, regularly to disobey and breach the general law.
As I have outlined in the case studies mentioned earlier, such callous disregard is not only unfair but dangerous. City of York council is simply not willing to enforce the current law in relation to illegally tethered horses. As I said a moment ago, it is merely willing to try to prevent such instances. I am afraid that this is another sorry example of the silent, law-abiding majority being ignored and disregarded while we pander to those who take advantage of politically correct nonsense.
Interestingly, in response to inquiries by a local councillor, Mark Walters, a City of York council solicitor admitted that lack of council action on the matter could lead to the authority being liable both for negligence and for a breach of statutory duty. Therefore, I have a number of questions for the Minister, which I hope he will be able to respond to. First, will he join me in demanding that local authorities apply the laws and rules of this land fairly and equally to all parts of society? Secondly, does he agree with my proposal that, wherever possible, illegally tethered horses should be confiscated by local agencies and returned only after action has been taken against the irresponsible owners?
Thirdly, will the Minister outline the work undertaken by DEFRA to monitor the issue of illegally tethered horses, and say how the Department is working with local authorities to tackle the matter effectively? Finally, does he have any words of encouragement for those farmers and landowners whose lives are being affected by long, drawn-out battles to evict Travellers’ horses, or indeed communities that may have set up illegal activities on their land?
In conclusion, the issue of illegally tethered horses affects a great number of people in a great number of ways. In every case, however, an innocent, law-abiding person is either endangered or taken advantage of. This issue is a cause of deep anger and frustration for many individuals up and down the country who want to see robust action taken. I hope that the Government will encourage such robust action, and that the law in this area will be implemented—as it should be—fairly and universally.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
I congratulate my hon. Friend the Member for York Outer (Julian Sturdy) on securing this debate, and on the enormous amount of work that he has done in understanding the problem and its impact locally. He is right to raise the issue with the House today.
The practice of dumping horses on another person’s land, whether public verge or a farmer’s private property, is abhorrent. If horses are dumped—or fly grazed, as the hon. Member for Bridgend (Mrs Moon) said—or tethered in a way that fails to account for their needs, significant animal welfare issues arise. In the most serious cases, the owner can be prosecuted under the Animal Welfare Act 2006, and if convicted can be fined up to £20,000 and sent to prison for up to six months. That, of course, presupposes that we find and identify the owner of the horse, and I will come on to talk about that problem in response to points raised by my hon. Friend.
The Royal Society for the Prevention of Cruelty to Animals reports that the number of horses in its care has doubled over the past 12 months—it currently looks after more than 600 horses. I congratulate the work of all animal and horse welfare organisations such as the RSPCA, World Horse Welfare and Redwings horse sanctuary. They often find themselves in the front line, picking up the tab and dealing with the issues that arise when a horse is dumped.
Horses are often dumped in places that are clearly visible to the public. Welfare organisations often receive numerous phone calls, and they then have to visit the horse, assess the situation, contact the owner—if that is possible—and explain the legal position. On the Redwings website I found detailed and helpful guidance about what a landowner needs to do if a horse is dumped on their land, which includes the requirement to notify the police at an early stage.
The public assume that charities can simply take the horse, but that is not the case. Unfortunately, in reality the owner of a horse often has a legal right to its return, particularly if there are no significant welfare issues. In some cases it is difficult to identify the horse and its owner, which delays a landowner’s ability to move the horse off their land. Biosecurity can be threatened—that is a major issue in the farming community—and farmers risk losing payments where stewardship land is involved. I understand, however, that Natural England will look carefully at the circumstances of each case that has a stewardship agreement, and I have yet to hear reports of where a flexible approach has not been taken under such circumstances. I am fully aware of the problems caused to farmers, and it is unacceptable that they often need to use their own money to clear up the mess left by others who, as has been said, sometimes threaten and intimidate them.
My hon. Friend asked what DEFRA, and others, are doing about this issue, but there is no simple solution to the problem. On the rare occasions when the owner of a dumped horse can be identified, a relatively simple way forward can be found. In the main, however, that is not the case, which in part has been caused by a reduction in the value of a particular type of horse.
As my hon. Friend said, powers contained in the Animals Act 1971 can be used by any landowner—including local authorities—if animals, including horses, are allowed to stray on to their land. That includes the power to detain straying livestock on private land, and it provides powers for individual landowners to take ownership of the animals. The Highways Act 1980 also allows action to be taken, including the recovery of costs when livestock stray on to the highway. Once again, however, we have the problem of how to recover costs from the owner of an animal if they cannot be identified.
I record again my gratitude for the work of welfare groups in this area. The RSPCA and Redwings work together in troublesome areas to raise management and welfare standards, and they have done extraordinary work. Work undertaken by the National Equine Welfare Council to co-ordinate such initiatives at national and local level has made significant achievements. The work done by the RSPCA with Travellers at the Appleby horse fair is another example of the progress being made.
Ian Swales
May I add the British Horse Society to the Minister’s list of organisations? It is doing fantastic work in north-east England on this issue.
Richard Benyon
Absolutely, and I was coming on to mention other organisations that are doing wonderful work. Rather than the Government creating a requirement on local authorities to have adequate stabling and consider matters of cost—we create many such requirements across the piece—problems of this nature tend to exist in particular localities. During my seven years in the House, I cannot recall receiving a letter on this issue from a single farmer or landowner. Quite a few Travelling communities live in or pass through my constituency, but there are other places—some represented by colleagues present in this debate—where this is a hot-spot issue. Under such circumstances, I wish to ensure that all Government agencies, including my Department but chiefly local authorities and organisations such as those I have listed, work together to focus on the issues involved.
Nigel Adams
Fly-grazing is a huge issue in my constituency, and I met one of the Minister’s colleagues to discuss it. It would be useful for the Minister’s Department to remind local authorities that they have obligations. One Traveller site in my constituency is controlled by the local authority. No animals are supposed to be on that site, but when it was visited a couple of weeks ago, horses were found tethered inside the camp. If local authorities have obligations, surely we should remind them to meet them.
Richard Benyon
I know that my hon. Friend speaks regularly with his local authority, and I suspect that it will have a Traveller liaison or welfare officer, or dedicated staff who should be conveying their concerns on issues of animal welfare to the people involved. I assure him that our Department takes animal welfare extremely seriously; we talk regularly with the Local Government Association and I will happily raise his point to ensure coherence across local authorities, and the development of best practice.
Mrs Moon
One point is that responsible owners will have their horses passported. We are talking mostly about irresponsible owners who do not passport their horses, and it is therefore difficult to track ownership. In the Republic of Ireland, there is a requirement not only to passport a horse but to say where it will be lodged, and that gives people the capacity to track it. We have several passporting schemes, none of which are connected, and therefore it is difficult to track those passports.
Richard Benyon
I understand the hon. Lady’s point, and I will take it back to my colleague, the Minister of State who has particular responsibility for these issues, to see whether we can amend the horse passporting regime in the way she suggests.
I welcome the work done by the National Farmers Union task and finish group to gauge the scale of the problem, ascertain the best remedies under existing law, and identify where amendments to the law would enable the problem to be dealt with more effectively. Many dumped horses, however, are traded by people who tend to operate outside the law, so finding effective remedies will not be easy.
I assure my hon. Friend the Member for York Outer that I will seek more information about initiatives from around the country, and consider whether there is a role for central Government to improve, facilitate and evaluate those schemes to ensure that we understand the benefits of best practice. The aim would be to enable councils and other landowners to take better control of the situation. I also assure my hon. Friend that DEFRA Ministers will, together with colleagues in the Department for Communities and Local Government and the Home Office, consider how we can secure a more joined-up approach to this matter across Whitehall.
Written Ministerial Statements
(12 years, 5 months ago)
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Workplace Rights (Compliance and Enforcement Review)
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)
In October 2010, the Secretary of State for Energy and Climate Change announced to the House that the Government would examine how workplace rights are enforced and identify if Government’s enforcement activities could be streamlined. I am reporting our conclusions to the House.
Our review focused on the recruitment sector, Gangmaster licensing, enforcement of the national minimum wage and Government enforced aspects of the working time regulations. In October 2011 we reported our interim conclusions that there is a diverse range of enforcement powers corresponding to each agency. But, from the perspective of workers this range of powers and approaches has been aligned in a coherent way by the pay and work rights helpline.
In October 2011, we said that we would focus on ensuring that we do not have any unnecessary employment regulations. We also said we would examine if there are benefits to establishing a single Fair Employment Agency to protect the rights of the most vulnerable. Since we last updated the House, the red tape challenge has examined all of the regulations in scope of the review of workplace rights, compliance and enforcement.
Following the red tape challenge, we announced that we would consult on reforming the Conduct of Employment Agencies and Employment Businesses Regulations 2003 and the Employment Agencies Act 1973, legislation which regulates the recruitment sector. This is an important part of our economy that supports the functioning of our flexible labour market. Our consultation will be launched later this autumn. The red tape challenge process also identified improvements to the way in which the Gangmasters Licensing Authority (GLA) operates. I draw the House’s attention to the written ministerial statement of 24 May 2012, Official Report, column 83WS by the Minister of State for Agriculture and Food and Rural Affairs, about the GLA. The Government’s response to the Löfstedt review sets out the work in hand to further improve the effectiveness of the heath and safety regulatory framework.
We have looked at how our current enforcement agencies operate and if establishing a single Fair Employment Agency would benefit workers or reduce the burden on the taxpayer. We have concluded that a single agency would not provide significant benefits to workers. By having enforcement agencies focused on specific areas we have a well functioning, risk based system within the UK. This approach, in conjunction with the pay and work rights helpline, means that workers can easily access any agency through a single number and receive the specialist advice and support they need.
Technology Strategy Board (Triennial Review)
(12 years, 5 months ago)
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The Minister for Universities and Science (Mr David Willetts)
We will shortly commence a triennial review of the Technology Strategy Board.
The coalition Government made a commitment to review public bodies, with the aim of increasing accountability for actions carried out on behalf of the state.
The Technology Strategy Board has been selected by the Department for Business, Innovation and Skills (BIS) as one of the non-departmental public bodies (NDPBs) for which the review will commence during the first year of the programme (2011-12).
The review will be conducted as set out in Cabinet Office guidance, in two stages.
The first stage will:
Identify and examine the key functions of the Technology Strategy Board and assess how these functions contribute to the core business of BIS;
Assess the requirement for these to continue;
If continuing, then assess delivery options and where the conclusion is that a particular function is still needed examine how this function might best be delivered, including a cost and benefits analysis where appropriate;
If one of these options is continuing delivery through Technology Strategy Board, then make an assessment against the Government’s “three tests”: technical function; political impartiality; need for independence from Ministers.
If the outcome of stage 1 is that delivery should continue through Technology Strategy Board then the second stage of the project will be to ensure that it is operating in line with the recognised principles of good corporate governance, using the Cabinet Office “comply or explain” standard approach.
The report of the review will be placed in the Libraries of both Houses.
Low Pay Commission (Triennial Review)
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb)
The coalition Government made a commitment to review public bodies, with the aim of increasing accountability for actions carried out on behalf of the state. The IPC, which advises the Government on national minimum wage issues, has been selected as one of the non-departmental public bodies (NDPBs) for which the review will be commencing during the second year of the programme (2012-13). The review will commence today. This is not a review of the national minimum wage, to which the Government remain committed. The national minimum wage provides much needed protection for low paid workers and encourages those out of work to get back into the labour market.
Triennial reviews will be based on the successful methodology applied during the 2010 public bodies review.
The findings of both stages of the review will be examined by a challenge group with cross-Government representation. The outcome will be announced to Parliament within six months of the review commencing.
Radioactive Waste Management Report
(12 years, 5 months ago)
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The Minister of State, Department of Energy and Climate Change (Charles Hendry)
I am pleased to announce today the publication of the second annual report of the Government’s managing radioactive waste safely programme. The programme is focused on implementing the geological disposal of higher activity radioactive waste.
The report shows that we are continuing to make progress across a number of key areas of work in the implementation of geological disposal, working within the underpinning principles of voluntarism and partnership with local communities. The results of a recent public opinion poll in Cumbria conducted by Ipsos Mori showed that the majority of local people surveyed were in favour of further participation in the managing radioactive waste safely (MRWS) process. This information will be carefully considered by the decision making bodies in Cumbria alongside other responses to the local consultation before a decision about participation is made.
The second annual report can be found at: http://mrws.decc.gov.uk. I have also written to the chairmen of the Energy and Climate Change Select Committee and the House of Lords Science and Technology Committee, and I have made available copies in the Libraries of both Houses.
Draft Water Bill
(12 years, 5 months ago)
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The Secretary of State for Environment, Food and Rural Affairs (Mrs Caroline Spelman)
I am publishing today a draft Water Bill for pre-legislative scrutiny. The draft Bill includes measures to strengthen the water sector’s ability to respond to the challenges of a growing population and less certain water supplies, and improve the deal it offers to its customers by offering more choice, and driving efficiency and innovation. These build upon the vision we set out in the water White Paper, “Water for Life”, for a resilient, affordable and sustainable water supply.
At the heart of our Water Bill are measures to give businesses and other non-household customers in England more choice by enabling them to switch their water and sewerage suppliers and to remove some of the existing regulatory requirements that act as a barrier to entrants wishing to enter the market.
A combination of greater pressure on suppliers from customers entitled to switch and new players will create a more vibrant and competitive market, bring new ways of working to the water sector, improve customer service and help keep the cost of bills down.
The Water Bill will also aid the development of a cross-border retail market for water and sewerage services by reducing burdens for operators that wish to supply services both in Scotland and in England and to eligible water supply customers in Wales. We want to see the market develop so that water suppliers on both sides of the border can work with their businesses and public sector customers to manage their water and sewerage services in the same way that they manage other utilities, increasing choice, providing tailored services, improving efficiency and cutting costs.
Measures in the Bill will further stimulate a market for wholesale water supply services by introducing a more flexible upstream pricing regime, and by allowing new opportunities in the upstream supply sector for new entrants to offer alternative supplies and services on behalf of customers and to other water supply licensees. These reforms will be mirrored in an extension of the licensing regime to sewerage services. This will help unlock new supplies of water and diversify methods of dealing with sewage.
To help these markets run more effectively we will allow Ofwat, other regulators and market participants to establish flexible charging rules and market codes. These changes will help facilitate new transfers of water between water companies—increasing flexibility and resilience in the water supply network, and make the cost of connecting to the water and sewerage networks more transparent for developers.
The Bill will also reform the special merger regime for the water sector to exclude more mergers from automatic referral to the Competition Commission by introducing a two-tier referral system.
In addition to reforming the water supply and sewerage markets, the Water Bill will enable the extension of the scope of the environmental permitting regime from prevention of pollution to include abstraction and impounding licences, flood defence consents and fish pass approvals. This will allow businesses to apply for just one permit covering these and a range of other activities, reducing red tape.
I am confident that measures contained in this Water Bill will increase choice for business customers and public sector bodies, drive innovation, improve customer service, keep bills down, make more flexible use of our water resources to improve resilience to drought over the long term and help secure future investment.
I am inviting the Environment, Food and Rural Affairs Select Committee to scrutinise this draft Bill over the coming months.
Copies of the draft Bill and associated documents will be available in the Vote Office. The documents will also be available on the DEFRA website at: http://www.defra.gov.uk/environment/qualitv/water/legislation/water/
International Whaling Commission
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
I am pleased to have attended part of this year’s meeting of the International Whaling Commission in Panama (IWC64) to demonstrate the UK’s commitment to the conservation work of the IWC and our fundamental support for the moratorium on commercial whaling.
The meeting delivered positive results for the conservation and welfare of whales which should not be overshadowed by the hugely unwelcome proposal by the Republic of Korea on its intention to commence so called “scientific whaling”. The UK Government are firmly against this proposal and will continue to state our opposition at every opportunity.
We maintained our strong line on a number of conservation issues, raising our concern about the critically endangered status of the western gray whale and welcoming the recommendation from the IWC Scientific Committee on ensuring appropriate monitoring and mitigation plans for oil and gas operations and work on entanglement, which pose the greatest threats to this critically endangered species. We also stated our support for a conservation management plan to protect southern right whales and welcomed further work on marine debris and ship strikes. The UK was also pleased to take on the role of vice chair of the IWC’s Conservation Committee.
We made significant progress in gaining consensus on our proposals for strengthening the IWC’s welfare agenda, a major step towards embedding welfare considerations across the work of the IWC. Among the recommendations was a proposal for a UK funded workshop on the euthanasia of stranded whales, with many IWC members expressing an interest in participating. Similarly, recommendations from a UK chaired intersessional group on strengthening IWC financing for whale conservation were adopted.
We are pleased that an EU resolution on the importance of reducing contaminants into the marine environment and the possible effects on human health was passed by consensus. The UK also supported the south Atlantic whale sanctuary, proposed by Brazil and others, which looked to promote the long-term conservation of large whales throughout their habitat. Unfortunately this proposal was defeated in a vote.
The UK supports aboriginal subsistence whaling where it is sustainable and there is a clear and identified “need”. We supported a request from the USA, Russia and St Vincent and the Grenadines for a roll-over of their existing quota for the next six-year period, receiving reassurances following our questions to St Vincent on the provision of data. However, Greenland’s request for an increase in quota was rejected by the IWC as many countries continued to have concerns over the level of commerciality associated with the Greenlandic hunt and whether the increase in quota was appropriate to meet their needs; as a result no quota was agreed for Greenland.
We were pleased by the agreement to increase participation of observers in IWC business, and the UK will also continue to engage in intersessional work seeking to improve governance processes, to ensure that the IWC can operate effectively and in line with international best practice. Finally, with the adoption of a proposal for the IWC to move to biennial meetings we believe it is important that any progress on the conservation of cetaceans is not hindered and will encourage countries to work intersessionally to protect the future of whale populations worldwide.
Departmental Programme Spending
(12 years, 5 months ago)
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The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
In my statement to the House of 1 February 2011, I set out the funding allocations for the FCO’s strategic programmes for the financial year 2011-12. I also undertook to inform the House of our spending plans for future years, together with further information on how we will ensure programme money is spent effectively.
Since my last statement, the FCO has improved the way it manages its programme spending in a number of ways. We have given our heads of post greater responsibility for deciding how best to spend their local budgets. We have established a programme evaluation board to assess the impact of our work, and a cadre of internal reviewers to ensure the money is well spent. These changes have significantly improved our management of FCO funds, ensuring each and every project supports our foreign policy priorities. For the 2012-13 financial year, I have decided to allocate:
£57 million for programmes dedicated to national security, comprising—£36 million on counter-terrorism, £14 million on Afghanistan, £4 million on building stronger international institutions and £3 million on counter-proliferation;
£48.8 million for bilateral and regional programmes, comprising—£5 million for Arab partnership work, £1 million for public diplomacy, £19 million on scholarships and £23.8 million for bilateral programmes;
£21 million for prosperity programmes to support a stable, open global economic environment and a shift to sustainable growth;
£10 million for programmes on human rights and democracy, comprising—£6.5 million for FCO led human rights and democracy work and £3.5 million for the Westminster Foundation for Democracy; and
£7 million for programmes with the overseas territories.
These allocations are fully aligned with the FCO’s priorities. These are to safeguard Britain’s national security, to build British prosperity and to support British nationals around the world. They reflect the increasing importance of our bilateral relations alongside our leading role in international institutions, our commitment to the overseas territories, and our determination to promote human rights and democracy.
Independent Police Complaints Commission
(12 years, 5 months ago)
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The Minister for Policing and Criminal Justice (Nick Herbert)
I am pleased to announce that today my hon. Friend the Exchequer Secretary to the Treasury and I are publishing the annual report of the Independent Police Complaints Commission (IPCC). Copies of the report have been laid before the House and will be available in the Vote Office.
This is the eighth annual report from the IPCC. The report covers the work of the IPCC during 2011-12 and includes a discrete chapter on the discharge of its responsibilities in respect of Her Majesty’s Revenue and Customs.
Animals (Scientific Procedures)
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for the Home Department (Lynne Featherstone)
The “Statistics of Scientific Procedures on Living Animals—Great Britain—2011” (HC 345), was laid before the House today. Copies are available in the Vote office.
This annual statistical report meets the requirement in the Animals (Scientific Procedures) Act 1986 to inform Parliament about the licensed use of animals for experimental or other scientific purposes. It also forms the basis for meeting periodic reporting requirements at EU-level. Supplementary information with additional tables is also available on the Home Office website.
The 2011 statistical report shows that there were just over 3.79 million scientific procedures, which represents an increase of 2% over 2010. An increase in the use of fish accounts for the majority of the overall increase. Breeding of genetically modified (GM) animals and harmful mutants (HM), mainly mice, remained stable, accounting for 1.62 million procedures. A number of factors, such as investment in research and development and strategic funding priorities, determine the overall level of scientific procedures.
The Home Office, as regulatory authority under the 1986 Act, ensures that its provisions are rigorously applied and only authorises work that is scientifically justified and minimises the numbers of animals used and the animal suffering that may be caused.
The statistical report and supplementary information can be found at:
http://www.homeoffice.gov.uk/science-research/research-statistics/.
I am pleased to inform the House that I have also today placed in the Library the annual report of the Home Office Animals in Science Regulation Unit for the year 2011. Publication of the report honours a commitment given in response to a recommendation of the House of Lords Select Committee on Animals in Scientific Procedures in July 2002 that more information should be made available about the implementation of the Animals (Scientific Procedures) Act 1986.
As in previous years, the report explains how the Home Office regulates the use of animals under the 1986 Act. It provides information about cases of non-compliance and infringements of ASPA and the outcomes of those cases. It also records progress with the adoption of European directive 2010/63/EU on the protection of animals used for scientific purposes and with the delivery of the coalition agreement commitments to work to reduce the use of animals in scientific research and to end the testing of household products on animals.
The commitment to work to reduce the use of animals in scientific research is being delivered through a science-led programme headed by the United Kingdom’s National Centre for Replacement, Refinement and Reduction of Animals in Research (NC3Rs). As the annual report explains, the national centre is closely involving many others in this delivery and the programme is focusing on refinement as well as reduction and replacement and is coordinating action to minimise and reduce animal use and suffering. Reducing the use of animals in scientific procedures is an ambitious goal, which requires significant innovation from across the UK’s science, mathematics and engineering base. The NC3Rs has pioneered a first-class science-led programme which not only provides opportunities to replace and reduce animal use but also to refine the welfare of those animals which continue to be used (principles commonly known as the 3Rs).
A key component of the NC3Rs strategy is CRACK IT, the world’s first open innovation programme focusing on the 3Rs, which was launched last September by the NC3Rs to foster a more collaborative approach between scientists in industry, universities and the SME sector. Through CRACK IT, the NC3Rs has already awarded £3.5 million in projects which will reduce reliance on animal models for the safety testing of drugs, chemicals and consumer products and provide novel tools for the discovery of new medicines for serious diseases such as bipolar disorder. This is in addition to the £3.3 million in grants that the NC3Rs has awarded in 2011 to some of the UK’s best scientists to replace, reduce and refine animal use.
The NC3Rs is also committed to supporting the development and training of the research leaders of the future. In December 2011, it announced funding for 15 PhD studentships in areas such as burn injuries and Alzheimer’s disease, and in May 2012 it awarded the first prestigious David Sainsbury fellowships, a new scheme to attract exceptional junior scientists to research which focuses on reducing animal use and improving animal welfare.
These activities are complemented by the NC3Rs’ work with major stakeholders in the bioscience sector including the research funding bodies, industry and regulatory agencies. The NC3Rs continues to review all grant applications for the Medical Research Council, Biotechnology and Biological Sciences Research Council and the Wellcome Trust involving the use of cats, dogs, horses or non-human primates. This enables the NC3Rs to identify further opportunities to reduce animal use.
Importantly, the NC3Rs has continued to provide a forum for pharmaceutical companies to share data to identify new ways to reduce their use of animals. Data sharing facilitated by the NC3Rs has led to reductions in the use of rodents and non-human primates in drug discovery and development, and other areas of safety testing.
Most recently, the NC3Rs has launched its new evaluation framework, the first ever attempt to benchmark systematically the impact of 3Rs programmes. As well as enabling robust evaluation of the centre’s work to replace, reduce and refine animal use, the evaluation framework has the potential to complement the Home Office annual statistics of scientific procedures on living animals and become a barometer of the application of the 3Rs in the UK.
Secure Training Centres and Young Offender Institutions (Physical Restraint)
(12 years, 5 months ago)
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The Lord Chancellor and Secretary of State for Justice (Mr Kenneth Clarke)
Today I am announcing that I have formally approved a new system of restraint for use in secure training centres (STCs) and under-18 young offender institutions (YOIs) in England and Wales, titled “Minimising and Managing Physical Restraint” (MMPR).
The new system is a major step forward in improving the way young people are safeguarded in the under-18 secure estate. A comprehensive programme of work has resulted in a new system of restraint that has been specifically designed for use on young people in custody. This has been independently assessed by the independent Restraint Advisory Board (RAB) chaired by Professor Susan Bailey.
The “Independent Review of Restraint in Juvenile Secure Settings” in 2008 called for a significant cultural change in the way challenging behaviour is managed and this has been the premise on which MMPR has been designed and developed.
The behaviour of some young people in custody is extremely challenging and can put the safety of themselves, other young people and staff at risk. It is important that custody staff are given the necessary skills to ensure the safety of those in the custodial establishments including when restraint needs to be used.
The Government are clear that restraint should only ever be used as a last resort where it is absolutely necessary to do so and where no other form of intervention is possible or appropriate.
The Restraint Advisory Board’s report sets out the comprehensive assessment process the Restraint Advisory Board followed in order to make recommendations on minimising and managing physical restraint. After careful consideration, the Government have accepted all the recommendations. To support the delivery of MMPR, the Youth Justice Board and the National Offender Management Service will introduce a range of improved data collection and monitoring arrangements.
A programme of work will now begin to roll out MMPR in secure training centres and under-18 young offenders institutions. We will publish the full Restraint Advisory Board report, Government response and a version of the MMPR manual.
I am also announcing a replacement for the Restraint Advisory Board whose primary objective of assessing minimising and managing physical restraint has been completed. The Independent Restraint Advisory Panel (IRAP) will retain a similar breadth of expertise to the Restraint Advisory Board and will be chaired by Professor Susan Bailey. The Independent Restraint Advisory Panel’s objectives will be assessing the systems of restraint commissioned for use in secure children’s homes and supporting the implementation of MMPR. Details of the Independent Restraint Advisory Panel will also be available on the Ministry of Justice website, www.justice.gov.uk.
Legal Aid, Sentencing and Punishment of Offenders Act 2012
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
On 24 May 2012, Official Report, column 94WS, I announced the Government’s implementation plans for the provisions under part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 relating to civil litigation funding and costs. The Government have now considered further advice from the Civil Justice Council and I can therefore set out further details of those provisions.
A regime of qualified one way costs shifting (QOCS) is to be introduced in personal injury claims, so that claimants conducting their case properly will not have to pay towards defendants’ costs if the claim fails. Rules will be drafted on the following basis:
i. QOCS will apply to all claimants whatever their means; there is to be no financial test to determine eligibility;
ii. Subject to the provisions below, claimants who lose will not have to contribute towards defendants’ costs (there is to be no minimum payment by a losing claimant);
iii. QOCS protection would be lost if:
(a) the claim is found to be fraudulent on the balance of probabilities;
(b) the claimant has failed to beat a defendant’s “part 36” offer to settle; or
(c) the case has been struck out where the claim discloses no reasonable cause of action or where it is otherwise an abuse of the court’s process (or is otherwise likely to obstruct the just disposal of the proceedings).
iv. The principles set out in part 36 of the civil procedure rules override QOCS, but only up to the level of damages recovered by the claimant;
v. QOCS protection would apply in relation to claims that are discontinued during proceedings (subject to iii(a) above); and
vi. QOCS protection would be allowed for all appeal proceedings as the requirement for permission to appeal controls unmeritorious appeals.
The Ministry of Justice is considering further the practicality of QOCS protection not applying to elements of a claim for personal injury that are pursued for the benefit of a third party (such as a property damage insurer or a credit hire provider) in respect of goods, services or indemnity provided by a third party to the claimant as a consequence of the accident.
The sanctions under part 36 of the civil procedure rules (offers to settle) are to be reformed on the following basis in order to encourage early settlement:
i. There is to be an additional sanction to be paid where judgment for the claimant is more advantageous than a defendant’s part 36 offer. This additional sanction is to be calculated as 10% of damages where damages are in issue, and 10% of costs for non-damages claims;
ii. In mixed (damages and non-damages) claims, the sanction will be calculated as 10% of the damages element of the claim;
iii. However, the sanction under these provisions is to be subject to a tapering system for claims over £500,000 so that the maximum sanction is likely to be £75,000; and
iv. There would only be one sanction applicable for split trials.
The new rule on proportionality has been agreed by the Civil Procedure Rule Committee (CPRC), and the test is intended to control the costs of activity that is clearly disproportionate to the value, complexity and importance of the claim. The senior judiciary are considering revisions to the costs practice direction to give effect to the new rule.
Changes to the civil procedure rules (CPR) will be considered by the CPRC in the autumn, in order for the necessary changes to come into effect for April 2013. The Ministry of Justice will continue to engage with key stakeholders throughout the implementation stage and will also work closely with the senior judiciary on other aspects of Lord Justice Jackson’s reforms, which are due to come into effect at the same time. Updates are provided on the judiciary website at:
http://www.judiciary.gov.uk/publications-and-reports/review-of-civil-litigation-costs
Crossrail (Annual Update)
(12 years, 5 months ago)
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The Minister of State, Department for Transport (Mrs Theresa Villiers)
Crossrail is now moving firmly into its construction phase. A number of significant milestones have been achieved in the last 12 months. The purpose-built tunnelling and underground construction academy was opened in East London last year and welcomed its first students in September 2011. Tunnelling began in May, with the first tunnel boring machine launched at the Royal Oak portal in west London. Construction contracts for Paddington, Farringdon, Whitechapel, Tottenham Court Road and Liverpool Street stations have been awarded. The Canary Wharf station box structure is now complete. The invitation to negotiate for the Crossrail rolling stock and depot contract was launched by Crossrail Ltd on 28 February, with the first round of tenders due to be returned during late summer.
To reduce the number of lorry movements, excavated material from Crossrail’s western tunnels has started to be transported directly from Royal Oak to Northfleet in Kent by rail. A former freight line from the north Kent line has been completely reconstructed to enable freight train movements from London. Two thirds of excavated material generated by tunnel, station and shafts construction will be taken to Northfleet and transferred by ship to create a new 1,500 acre nature reserve at Wallasea Island in Essex.
Network Rail is responsible for delivering improvements on the existing surface sections of the Crossrail route. The overall target price for these works was approved in April 2012 and was within the £2.3 billion funding envelope. Network Rail has also begun construction of the expanded Stockley flyover in west London to enable higher frequency Crossrail trains to operate to Heathrow airport.
Crossrail services are on schedule to be operational from 2018 with full services operating from late 2019. The Crossrail board continues to forecast that the costs of constructing Crossrail will be within the agreed funding limits. We expect Crossrail to cost no more than £14.5 billion.
During the passage of the Crossrail Bill through Parliament, a commitment was given that a statement would be published at least every 12 months until the completion of the construction of Crossrail, setting out information about the project’s funding and finances.
In line with this commitment, this statement comes within 12 months of my last one which was published on 13 July 2011. The relevant information is as follows:
Total funding amounts provided to Crossrail Ltd by the Department for Transport and Transport for London (TfL) in relation to the construction of Crossrail to the end of the period (22 July 2008 to 29 May 2012). | £2,751,624,360 |
Expenditure incurred (including committed land and property spend not yet paid out) by Crossrail Ltd in relation to the construction of Crossrail in the period 30 May 2011 to 29 May 2012 (excluding recoverable VAT on land and property purchases). | £1,044,294,000 |
Total expenditure incurred (including committed land and property spend not yet paid out) by Crossrail Ltd in relation to the construction of Crossrail to the end of the period 22 July 2008 to 29 May 2012 (excluding recoverable VAT on land and property purchases). | £2,928,548,000 |
The amounts realised by the disposal of any land or property for the purposes of the construction of Crossrail by the Secretary of State, TfL or Crossrail Ltd in the period covered by the statement. | £ nil |
The numbers above are drawn from Crossrail Ltd’s books of account and have been prepared on a consistent basis with the update provided last year. The figure for expenditure incurred includes monies already paid out in relevant periods, including committed land and property expenditure where this has not yet been paid. It does not include future expenditure on construction contracts that have been awarded.
Government Shareholding in NATS
(12 years, 5 months ago)
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The Secretary of State for Transport (Justine Greening)
My Department ran a call for evidence last year to explore the options for the future of the Government’s 49% shareholding in the UK’s air traffic control provider, NATS Holdings plc (NATS).
The responses, along with work done by my officials in conjunction with other stakeholders, highlighted the strategic importance of NATS to the UK and the far-reaching implications of a sale at this time. These include the continued development of the single European sky agenda and the ongoing work on the single European sky air traffic management research programme (SESAR).
In parallel, I have considered the potential value that could be realised through a sale of the shares alongside the benefits from receiving dividends from a retained shareholding.
After considering these factors, I have concluded that it is in the best interests of the British taxpayer, the travelling public and the company itself to retain the Government’s shares in NATS at this time.
Driving Tests
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
Last year I asked the Driving Standards Agency (DSA) to consider arrangements for delivering practical car driving tests from premises other than traditional driving test centres such as local authority buildings or leisure centres to provide a more local service for candidates. On 27 March 2012 I announced to the House the next steps of that programme. I also informed the House that we would be seeking public and private organisations to work in partnership with the DSA to identify and provide locations from which the practical car test could be delivered.
I am pleased to report that real progress has been made and there are proposals being developed for partnerships with Halfords Group PLC and Mantra Learning Ltd. Subject to working agreements being finalised and suitable premises with driving test routes being identified, driving tests should be delivered, in the locations I have already announced, from premises of these organisations in the near future. These will be non-exclusive arrangements and DSA may, in future, consider other partnering agreements to provide premises, which meet its criteria. Local agreements with the fire and rescue service, particularly in areas not otherwise covered, are also being explored and there have also been discussions with several universities.
Significantly this use of property will be provided at no cost to DSA. Tests will continue to be conducted by DSA examiners.
DSA will evaluate the success of these arrangements and I will keep the House informed.
Train Punctuality
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State for Transport (Norman Baker)
In line with the Government’s transparency agenda, and the commitments made in the Command Paper “Reforming our Railways: Putting the Customer First”, additional information will from today be made available by the Office of Rail Regulation and Network Rail about the punctuality of train services.
In addition to the existing public performance measure (PPM), which indicates the proportion of train services arriving at their destination within 5 or 10 minutes, for short and long distance services respectively, information will now be published on trains which are “right time” at their final destination—that is, which arrive early or within a minute of the due time.
PPM is and will remain the Government’s and industry’s key measure of rail punctuality and reliability:
it recognises the different passenger expectations and operating practicalities between short and long distance services;
it incentivises the industry to ensure that the vast majority of services—significantly over 90%—get to their destination at or close to time; and
it gives the industry essential flexibility to manage minor operational disruption, which would not be possible with an absolute on time measure.
But the coalition Government recognise that passengers want more information about their services, including whether they are actually on time, and that is why Ministers have asked the industry to develop plans to provide this. We welcome the positive response which it has now made.
As a first step, the Office of Rail Regulation (ORR) is today publishing annual statistics on right time performance at industry sector level—that is; long distance, London and south-east, and regional (including Scotland), going back to 2001-02. Network Rail (NR) will from now on be updating these figures for each industry period, alongside the main PPM measure.
These figures show that, for the network as a whole in 2011-12, 69.8% of trains arrived “right time”, compared with 91.6% meeting the PPM target. This is a high level of performance by historical standards and represents a significant improvement over the last five years, compared with 62.7% right time and 88.1% PPM in 2006-07. Overall, the average delay incurred by passengers is now around two minutes.
Results of the spring 2012 national passenger survey just published by Passenger Focus showed very high levels of satisfaction with rail travel in this country (Great Britain). Nationally the percentage of passengers satisfied with their journey overall was 83%, and for punctuality and reliability it stood at 81%.
Right time information is generated by existing industry signalling systems, but these were not designed for precise monitoring of time-keeping, and there is some uncertainty over the accuracy of the data at individual operator level, so ORR is commissioning an urgent independent study into this.
In the light of that study, it is intended that right time information will be published at operator level from October 2012. In addition, Network Rail announced on 28 June that it was making available real time information on the reliability of individual trains, making it possible to analyse train performance at a far more granular level.
This will put our railway in the forefront of the transparency agenda, providing more information on punctuality and reliability for passengers than any other European country.
A good deal of information is also published on other key transport modes in this country, and the coalition Government are keen to see further progress on transparency over time.
Grand Committee
Local Government Finance Bill
(12 years, 5 months ago)
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The Deputy Chairman of Committees (Lord Haskel)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Amendment 59
Lord Jenkin of Roding
“Changes to national business rate policy
The Secretary of State may not make any changes to national business rate policy which impact on local business rate yields without first consulting all interested parties.”
Lord Jenkin of Roding
My Lords, I am delighted that what we have come to call the enlarged coalition is supporting the amendment.
It addresses a simple point. Under the existing system whereby business rates are pooled and go to central government, a change in the system of relief from business rates is entirely a matter for central government and has no implications for local authorities. However, once the retained business rate scheme is working, then local authorities will of course have a direct interest in such changes. Indeed, there could be circumstances where a change in the way in which business rates and relief from them are assessed could give rise to some considerable difficulties for local authorities in their budgeting and managing their expenditure.
Of course, this is inherent in the change. The Government are indeed transferring some of the risk to local authorities because that seems to be an inevitable consequence. What we are asking for here—it is a simple point—is that the Government should consult local authorities and the local authority organisations before any such changes are made, so that they can at least have a say and perhaps do their best to persuade the Government when a particular change is not appropriate. Those local authorities and organisations will have an argument because the change may well affect their funding. The least we can therefore ask, and it is a modest request, is that the Government accept this new clause and accept that local authorities should be consulted before there are changes in the business rate. I beg to move.
Lord McKenzie of Luton
My Lords, I am happy to confirm that the broad alliance remains intact. We are very happy to support the amendment. The key points have been made. We are in a changed environment where what happens to business rates can have a direct impact on local government and this request is straightforward and honest, as the noble Lord described.
Lord Tope
My Lords, I am not sure now whether I am part of an enlarged coalition or a broad alliance, but whatever it is I am pleased to be part of it. I feel comfortable in such a coalition and alliance. My name and that of my noble friend Lord Palmer of Childs Hill have been added to the amendment and we are pleased to support it. The points have been made.
Perhaps I may add one thing. I suspect that it is unlikely that the Minister will stand up in a moment and say, “No, of course the Government will not consult anyone about this; we will just do it”. I do not think that that is going to happen. I am sure that we will receive reassurance that consultations would take place. I expect that we would have reassurance that the results of the consultation would be taken carefully into account. However, it is the next stage that also concerns many local authorities, and it certainly concerns me. If, as is very likely, there are financial implications from any such policy changes, the reassurance that I should like from the Minister is that the cost and effect of such policy changes will be fully funded by the Government, either anyway or under the new burdens initiative. Frankly, that is one of the key points that we are concerned about—not whether the Government will give us warm words and reassurances about consultation, but whether the effects of any such change will also be fully funded. I look forward to the Minister’s reply.
Lord Beecham
My Lords, I envisage that “all interested parties” will include business. However, for the avoidance of doubt it would be helpful if—assuming that the Minister gives her blessing to the amendment in one form or another—she would confirm that that is the case. Clearly, since the rationale of the proposal in the first place is to incentivise local government and its business development policy, however valid that may be, it would make sense to involve business in any consultation about changes to the policy.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I thank the alliance for its comments on the amendment. In particular I thank my noble friend Lord Jenkin for his explanation of the proposed new clause. I do not suppose that any noble Lord will be surprised to hear me say that I do not consider that such a provision is appropriate or necessary.
I fully understand that in the current system, where business rates are not retained locally, changes to national business rates policy do not affect the level of funding that authorities receive. However, in future such changes could impact on the level of funding available to a local authority. I am sure that Members of the Committee will understand that the Government may need at some stage to make changes to the national business rates policy for a variety of reasons. In the majority of cases it is likely that any changes will have been consulted on, but this may not always be the case. Changes to reliefs are a matter for the Chancellor, and a deferral system that gave businesses the opportunity to defer payment of 60% of the increase in their 2012 business rate bills as a result of the RPI uprating was announced in the autumn Statement. If the Government had consulted on that, businesses would have had to wait at least two or three months longer to receive the benefit, which in some cases could have meant the difference between shutting or remaining open. I use that as an example.
I assure my noble friend that where the Government implement a change to national business rates policy that will involve a net additional cost to local government—a point that was raised by my noble friend Lord Tope—this will be picked up through the new burdens policy. It will be treated as a new burden in line with our commitment to keeping the downward pressure on council tax as far as possible. Given this clear commitment that provides an assurance to local government, I hope that my noble friend will feel able to withdraw his amendment.
Lord Jenkin of Roding
My Lords, I am grateful to my noble friend for that explanation. Of course I understand that the change may work both ways. If local authorities are going to benefit from the change, the argument not to have consultation but to get on and make the payments is much stronger. However, if there is a change that will increase the burdens on a local authority, my noble friend gave an undertaking that there would be consultation—so I cannot understand why this should not go in the Bill. It would be very reassuring to local authorities and would not place an undue burden on central government. If the Government were going to change the policy to the disadvantage of local government, there is no reason why a three-month delay should not be a perfectly satisfactory way of dealing with the statutory obligation to consult. Of course we do not vote in Grand Committee, but there is a stronger argument for this amendment than perhaps my noble friend acknowledged. Perhaps she might like to look at it again.
Baroness Hanham
My Lords, I made the point, which the noble Lord accepted, that there may need to be flexibility on this. I gave the example of changes in the autumn Statement that would have been delayed if there had been consultation. It was a perfectly reasonable point. Without exception, the Government will want to consult where appropriate and where time allows, but there will be occasions when it is not in anybody’s interests to do so for reasons of speed. The proposed new clause would just constrain their ability to do that. Putting it in the Bill would be less than helpful.
Lord Jenkin of Roding
My Lords, I hear what my noble friend says and we would wish to consult those advising us on that. I take the point that this is a wide-ranging amendment but, with different drafting to which we could return on Report, we might be able to write something in on this. Having said that, I beg leave to withdraw the amendment.
The Earl of Lytton
“Non-domestic rating, valuation, appeals, etc.
After the coming into force of this Act, any question as to the person or body liable to a charge to council tax or business rates shall be referred to the Valuation Tribunal and may be determined prior to any hearing by agreement with either the Valuation Office Agency or Billing Authority (or both) or (as the case may be) determined as part of any appeal into the level of banding or assessment as if it were an appeal against a non-domestic assessment.”
The Earl of Lytton
My Lords, we come here to a harlequin selection of amendments, which all primarily concern making the rating system—the tax base and the appeal system—better managed and organised. I can certainly relate to the point that was introduced to our deliberations by the amendment of the noble Lord, Lord Jenkin. Billing authorities should have a stake in and an involvement with the rating appeal system. This is the counterpoint to the fact that they are, by any standards, taking on additional duties and obligations in the collection of business rates.
As I have said, valuation is poorly managed and underresourced, which has implications for the durability of local government finance in terms of budgets and predictability. As I have mentioned, the computer systems need updating and unifying, although that point is not covered by an amendment at this juncture. As certain work migrates from the social services appeal tribunal to the valuation tribunal, there will be additional loads to prevent what is coming in from them and the existing backlog overloading the system.
In prefacing the individual amendments, I say that the Valuation Tribunal Service business plan does not adequately address the backlog, which is not entirely the Valuation Tribunal Service’s fault. The parties—there are always two—are frequently not ready to engage in the appeal. Part of the problem is the Valuation Office Agency’s lack of capacity to deal with the matter at that stage. If both parties could be persuaded to get their ducks in a row—for want of a better term—it would improve the whole situation a great deal. The current situation already throws up the problem of a large number of appeals. It is unfair on billing authorities, interferes with predictability and is unfair on ratepayers generally in this context. It will cause a rise in tensions and growing problems if it is not addressed.
There are abuses by the private sector. A number of firms make blanket appeals, which also clog up the system. I impress on the Committee that I do not see these amendments as either pro-business rate payer or pro-government agency or tribunal matters. It is just a question of getting, I hope, a dispassionate view on making the system better.
Some bad practices have crept in in response to those abuses by the private sector. I still think that the level of struck-out cases is of concern. I hope that it is not a caseload management tool as opposed to a realistic attempt to ensure a reasonable level of procedural compliance. This is about confidence and the objectivity with which rating lists and appeal systems are administered by both the Valuation Office Agency and the Valuation Tribunal Service. I regard this very much as a two-way street.
Earl Attlee
My Lords, I know the noble Earl is speaking to very complex amendments. However, I remind him that the Companion suggests that 20 minutes would be sufficient for moving an amendment. I hope that the noble Earl is coming to the end of his remarks.
The Earl of Lytton
My Lords, I aggregated these amendments together to try to deal with them as quickly as I could. They cover a number of different areas but I felt that it was right not to seek to group them individually or in smaller groups for the very purpose of discharging that obligation. While understanding what the noble Earl said and standing here chastised as appropriate, I am nearly at the end of what I wanted to say.
This particular amendment seeks to restore objectivity and professionalism—not that these individuals are lacking in professionalism but to make sure that the valuation body commands respect and continues to do so in future. That is quite an important point of principle. I have dealt with the question of falls in value following the antecedent valuation date, which just leaves me to deal with Amendments 70 and 95.
Amendment 70 relates to the way in which the Valuation Office Agency appears to be managing the appeals system. There seems to be an inclination to declare incoming proposals for alteration invalid, but not necessarily straight away. It is important that the validity of an appeal is decided at an early stage, in the same way as if a planning application were submitted that had to be decided upon at that juncture. It should not thereafter be possible for the validity to be impugned. Amendment 95 is linked to Amendment 70 and could be an alternative to it. I am going to sit down. I beg to move.
Lord True
My Lords, the noble Earl has raised a number of issues and I know that my noble friend will respond. That will be important because as business rates take the burden over the coming years these issues will become matters of considerable controversy and potentially democratic controversy. Knowing the noble Earl’s expertise and the courtesy of my noble friend, I am sure that these matters will be discussed further over this summer. I hope that in her response she will not necessarily rule out the idea of at least exploring these proposals. It may be that the Government have the necessary powers that the noble Earl is referring to in Amendment 96 to make adjustments in the system. But if that is not the case, it is a matter that we ought to consider further because this area will bear further examination. Indeed, I referred to an incident in my borough, which demonstrated the problems that can arise.
I am not going to tempt the noble Earl to his feet immediately, but perhaps when he replies to the Minister’s response he will say how he envisages in Amendment 70ZC this concept of a decline in market value being a reason, rather than a proximate event, to occasion appeals and change. I am not absolutely certain as to how he envisages that would be triggered. Would it be triggered by each individual land holder? You could have whole series of appeals in the light of a general trend in market decline. The noble Earl nods, so I think that that is the case. If that doctrine is to be imported into law, for some of the reasons that the noble Earl set out, some mechanism might be needed for collective action in those circumstances, otherwise it could be another reason for a proliferation of appeals that might come out of the works.
I listened with great interest to what the noble Earl said and I hope that we can be assured we will have the flexibility to address some of these issues as they arise over the next few years.
Lord McKenzie of Luton
My Lords, the noble Earl has treated us to a veritable manifesto of issues. Like the noble Lord, Lord True, I am grateful to have had the benefit of his expertise on these matters. Perhaps I may also say in the noble Earl’s defence, if he needs it, that I am advised that the 20-minute rule does not apply to legislation—quite apart from the fact that the noble Earl could have degrouped all his amendments.
It also seems that some of the issues raised would impact on local business rate deals. In line with the discussion we have just had and the amendment of the noble Lord, Lord Jenkin, we would expect there to be some consultation on that. I hope that noble Lords will understand if we formally reserve our Front-Bench position on some of these issues, at least until we have heard from the Minister. The list prompted a visit to the Valuation Office Agency website to try and get some briefing. It is worth reflecting that the group of amendments brings home the breadth of responsibilities of the Valuation Office Agency and underlines the importance of the points made in earlier debates by the noble Earl about the significance of maintaining this important service. Its work includes not only the compilation of rateable values for some 1.7 million non-domestic properties in England and 100,000 in Wales, and the list of council tax bands for some 23 million properties in England and 1.5 million in Wales, but determining local housing allowances across 153 broad market rental areas in England. That is a heck of a responsibility and a major task.
The theme of much of the noble Earl’s group of amendments is the fitness for purpose of the current system, with particular issues around appeals. If the noble Baroness is unable to give satisfaction on that this afternoon, it would lend itself to an amendment on Report, saying that there should be, within a period of time—maybe two or three years—a specific report on how the system is coping with the business rate retention scheme. Given where we are, that is probably the best that we can do with the generality of those issues. Have the Government recently assessed the fitness for purpose of the Valuation Office Agency and the system that it supports in driving forward the business rate retention scheme?
Having said that, perhaps I might comment on one or two specific amendments. Amendment 62 requests the paying off in instalments of backdated liabilities. I seem to recollect that we had some heated debates about the backdated liabilities suffered by some ports. They were paid off in instalments. There was a facility to allow that, so I wonder why there is not sufficient in the system to protect that at the moment.
As the noble Earl identified, there are issues not only for rural petrol filling stations but for shops and rural pubs. I am particularly interested in who bears the cost of these reliefs under the current system. How will that break down under the business rate retention scheme? Will there be a switch in the bearing of costs for that? Will 50% now be borne by local government and 50% by central government? What is the change on that?
On Amendment 64, the noble Earl talked about no reallocation of funding coming the way of parish and neighbourhood councils. My understanding is that there is certainly an expectation that the grant for council tax support will be paid to billing authorities and major precepting authorities. The bit attributable to local precepting authorities goes to billing authorities and there is an expectation that they should engage with parish and town councils with the prospect of payment being made. Therefore, to that extent at least, there will be some relief.
In Amendment 65, the noble Earl refers to completion of a single annual return. We are not opposed to this principle, although if the system is creaking at the moment, I am not sure of the benefit of imposing another annual return—even a simple one—if there is no resource to deal with it. There is nothing worse than having a system of returns that simply cannot be coped with; the system is brought into disrepute.
Perhaps the Minister will tell us how central rating lists will work under the business rate retention scheme. The central bit of these rating liabilities deals with hereditaments such as railways, telecoms infrastructure, toll motorways and so on, which straddle multiple billing authorities. These liabilities are collected by the Secretary of State. How is the local share fed back to appropriate billing authorities, if at all?
Amendment 68 seeks to reflect the role of billing authorities in the appeal system, given the changed circumstances that arise where billing authorities have a more direct interest in the outcome of rates collection. That does not seem unreasonable. I shall be particularly interested in the response of the noble Baroness on that. I will not comment further on the specific amendments, but there is a case emerging for having a specific look at the whole system—not to hold things up, but so that we can make a judgment in a relatively short space of time as to whether it is fit for purpose for the new demands that are being imposed upon it.
Earl Attlee
To make a quick comment about my intervention on the noble Earl, I was merely observing that he had been speaking for 20 minutes. I allowed for the fact that he was probably coming to the end of his remarks. Also, this is a self-regulating Committee. If the Committee wants to take a longer speech, the Committee can do so.
Baroness Hanham
My Lords, I am not sure that I can wind this up in 20 minutes, but I will do my best, gracefully, as I go along. I first thank the noble Earl for raising this subject in the way that he has. I am also extremely grateful to him for the discussions that we have had following the previous day, when I pointed out to him that if I had to answer every amendment one by one I would have 30 pages of speaking notes, which might take us longer than 20 minutes.
With the noble Earl’s agreement—and, I now hope, the Committee’s—I propose to tell the Committee what the noble Earl’s four main themes are, and will then write on each of the specific amendments so that the Government’s answer to each is there. That will help the Committee at the next stage. I am manifestly not going to be able to answer all the points today.
The answers are grouped under the noble Earl’s points about the valuation system not being well managed; that it should be independent of the Treasury; that the Valuation Office Agency and the Valuation Tribunal Service have been adopting, as the noble Earl put it, several bad practices; and that there are abuses by a small number of rating advisers. Those are the four themes that I will go through and, following the Committee sitting, we will make sure that every Member of the Committee and the Library has a response to each of the amendments. I thank the noble Earl for grouping them together, as it could have been even longer had he chosen to speak only to two or three at the same time.
First, on the resourcing and management of the rating and appeals system, ratepayers expect their rating assessment to be correct, and for appeals to be resolved quickly. This will always be the case, but under the rates retention system it would become increasingly important that the rating system delivered a good service for both ratepayers and local government. I appreciate the noble Earl’s concerns regarding the backlog of appeals in the rating system. We share those concerns. The Valuation Office Agency is working flat out to clear over 250,000 appeals by the end of March 2013, including the majority of the outstanding appeals against the 2005 rating list. It has recruited additional front-line staff and has transferred staff from other work areas to speed up the clearance times for these outstanding appeals. Around 75% of all appeals on the 2010 list to date have resulted in no change to the rateable value, but we are well aware of how significant business rates are to all businesses and that this makes the fast and efficient processing of appeals vitally important. Likewise, the Valuation Tribunal Service is proactively working to ensure that appeals that cannot be resolved through initial discussions with the Valuation Office Agency are listed and dealt with by the tribunal. In fact, only some 2% of listed cases result in disputes being brought before a tribunal panel, with the rest being settled between the parties.
I hope that I have been able to offer some comfort to the noble Earl that the valuation and appeal system will be able to cope with the rates retention. Let me also assure him that the resourcing and performance of the Valuation Office Agency and valuation tribunal are a matter for regular discussion in the Government, especially now as we move into the rates retention system. As with all public bodies, the Valuation Office Agency and valuation tribunal have to deliver their services in challenging financial circumstances, but we are fully aware of the important role that they will play in the rates retention system and we will ensure that they have the necessary capabilities to meet these objectives.
The second theme of the noble Earl, Lord Lytton, is the Valuation Office Agency’s response to rates retention. An example of those capabilities is the way in which the Valuation Office Agency has responded to the planned introduction of rates retention. Since as early as late last year, the Valuation Office Agency has been working with local government to understand what local authorities will need to budget effectively under rates retention. It recognises that there will be step change in its relationship with local government and it has established a dedicated project team for rates retention. This has already led to several discussions with local government and with the Local Government Association. While I understand the concerns of the noble Earl, I hope that he will agree that to date the Valuation Office Agency has responded well to the rates retention scheme and is working with local government to ensure its smooth implementation.
The Valuation Office Agency is independent. An essential part of any system of tax is that the public have confidence in their tax assessments—not only in the accurate level of those assessments but in the manner in which they have been reached. I agree with the noble Earl that the independence of the Valuation Office Agency is important. That is why valuation officers who perform their statutory functions, such as the assessment of individual rateable values, act independently of Ministers. In this respect they have to answer to the courts rather than to the Government.
We also have to recognise that the Valuation Office Agency is a public sector body, spending public funds, and is part of the delivery system for business rates and council tax. That is why it is right that the Valuation Office Agency should answer to the Government for its overall performance. As such, the Valuation Office Agency forms part of Her Majesty’s Revenue and Customs and reports to Ministers in the Treasury for its work. It also accounts to Parliament—this is the point about the report—in the form of an annual report, and senior officials in the Valuation Office Agency can be called to give evidence to Select Committees.
While I appreciate the noble Earl’s point, in practice we have to strike a balance to preserve both the independence of the Valuation Office Agency’s statutory functions and the need to maintain the accountability of public servants. The noble Earl’s amendment would prevent the Valuation Office Agency from reporting to either the Treasury or the Department for Communities and Local Government, and under those circumstances I do not believe that we could deliver that accountability.
The noble Earl also raised concerns about some of the practices and procedures of the Valuation Office Agency and the valuation tribunal. Having just stressed the importance of the independence of the Valuation Office Agency when exercising its statutory functions, I think that the Committee would be disappointed if I signalled a willingness to interfere in its day-to-day work. I appreciate the concerns that the noble Earl’s amendments have raised in such areas as invalid appeals and the use of a strike-out by the valuation tribunal. We have powers to make regulations on any matter relating to the valuation tribunal and we have made regulations under those powers that describe when a strike-out can be used. However, in line with other tribunals, we do not describe all the necessary procedures in those regulations, but instead allow the valuation tribunal to make directions. Those directions describe the procedures that must be followed in taking an appeal through to a valuation tribunal hearing. The Secretary of State has given the valuation tribunal, in line with other tribunals, the power to strike out appeals where the appellant has failed to follow the directions.
This is not a matter that we take lightly. It is important for the effective operation of a fair judicial system that a valuation tribunal is able to set directions and enforce them through the use of a strike-out. The tribunal will consult its users before it introduces any standard directions, and any parties will be made fully aware of the requirements, by means of practice statements and information leaflets, when they make an appeal. Therefore, while noting the noble Earl’s concerns, I do not believe that we should change the current system. Allowing these matters to be set out in directions rather than regulations will ensure that the tribunal can lay down procedures that reflect the nature of the court and are responsive to changing circumstances. The system would not be improved through our direct intervention or by bringing all the procedures into regulations.
The noble Earl referred also to abuses by some agents. He raised valid points about abuses of the system by ratepayers’ representatives. I know that he works closely with the Royal Institution of Chartered Surveyors and the Institute of Revenues Rating and Valuation. Both organisations have clear professional standards. The Valuation Office Agency includes guidance on its website about employing a rating agent and how to contact these organisations for advice, so it would not be appropriate to regulate in this area. I hope that the noble Earl will agree that by stringently and consistently applying professional standards, the professional bodies and the Valuation Office Agency can address some of the abuses that he mentioned.
I have not addressed every amendment—as I said I would not. However, I thank the noble Earl for the knowledge he brought. I hope that he will feel able not to press his amendments on the basis of the explanations provided and of the assurance that, before Report, he will have a reply to each one.
I was asked by the noble Lord, Lord McKenzie, whether under the current system local government pays all costs of mandatory reliefs. It pays between 0% and 75% of the costs of reliefs for eligible businesses and some not-for-profit agencies. If a local authority chooses to go beyond the existing rate reliefs to grant extra relief using the business rate discount powers in the Localism Act, it can meet the cost locally. If not, the cost will be reimbursed. However, from next April the system of funding business rate reliefs will change as part of wider reforms. We will shortly publish a consultation paper setting out the details of this. The basic principle is that changes in rates income, including changes in relief, will be shared 50:50 with central government. I hope that that answers the noble Lord’s question.
There may be other points that noble Lords wish to pursue with me. I think that I answered the point of my noble friend Lord True about the fact that a number of important issues have been raised, and individual replies will be given on all the amendments so that we can consider them further at a later stage.
Lord McKenzie of Luton
Perhaps the noble Baroness is in a position to answer the question about how a system of central lists would work alongside local and central shares for business rate retention purposes.
Baroness Hanham
I would rather leave that and answer all the questions together, so that there will be a composite answer to all the points raised.
The Earl of Lytton
My Lords, I thank all noble Lords who have spoken to this group of rather technical and impenetrable amendments. I am heartened by the interest that all noble Lords have taken in them. I am afraid that I do not have an answer to the point just raised by the noble Lord, Lord McKenzie, on the central rating list. I just do not know how that applies but I am sure I know a man who does and will endeavour to find an answer.
The noble Lord, Lord True, raised a point about collective action by non-domestic rate payers, so as not to have a plethora of individual cases. There is a tendency to do that anyway because they can, for example, share a surveyor’s or adviser’s fee. There is a valid point—just as with central rating lists, when local authorities might be asked to be grouped together, perhaps ratepayers could be made to group together when they have a common cause. At the moment there is no provision for that to be insisted upon, although it is certainly a point.
The noble Lord, Lord McKenzie, talked about a report on how the system is coping. Indeed that would probably be a helpful outcome of all this and, as the noble Baroness said, there is a lot of dialogue going on and I would not want to underplay that in any way, but perhaps it could be more overt. Part of the message, in so far as there is a message, is not getting through in the way that it might.
Briefly, on the question of petrol filling stations, I will send round a report that I have received from Barber Wadlow, which gives a considerable amount of background information. I have it in electronic form, and will circulate it for the benefit of noble Lords rather than discussing it at this juncture.
On the annual return, an issue raised by the noble Lord, Lord McKenzie, I did use the word “simple” and I hope that it will now allow the box to be ticked with regard to the extent of the premise, never mind issues of valuation. At least that was a common element between the ratepayer and the Valuation Office Agency.
I turn to the points made by the Minister. She condensed this area into four main themes, which was a far more coherent method of answering my rather incoherent raising of these matters than I was able to achieve in doing so. I thank her for that, and particularly for the commitment that she evidently showed towards the critical and pivotal role of the Valuation Office Agency, and for the fact that its resourcing, performance, integrity and impartiality must remain. I know that not many former colleagues of mine are still in post because I have been out for a long time, but many people in that august organisation will very much welcome what the Minister said. I accept that if my proposal stands in the way of reporting to government, it would not be an acceptable outcome. I noted her point about the powers to make regulations, and I am grateful for that. Perhaps that may be a subject for further discussion.
On the question of abuses by agents putting in blanket appeals—and it is a clear abuse—one of the problems is that some of those firms are not recognised members of RICS or the IRRV. That is one of the difficulties about catching up with them. Such firms may employ individuals who are members, but very often the firm itself may not be accredited. Therefore, the opportunities for the professional bodies to bring these people to book are limited. In reality, that is not the subject of one of my amendments, but it was mentioned to me and I am grateful to the noble Baroness for addressing that point. I think the way forward is a further big conversation on this with the noble Baroness and her officials. I hope that I can perhaps get some of the principal professionals along, perhaps to a meeting but at any rate involved in the dialogue which we clearly need. That might help to curtail the amount of paperwork that would otherwise be flying around here, there and everywhere.
These are probing amendments, there to elicit a response. I will certainly think very carefully on what the Minister said and the implications of that. I will not press the amendments at this stage. I just reserve my position: I may need to return to a number of the points later in our proceedings but we will see what the outcome is of our further dialogue outside the formal procedures of the House. With that, I beg leave to withdraw the amendment.
“Council tax benefit
Nothing in this Act shall exclude council tax benefit from inclusion in universal credit.”
Baroness Hollis of Heigham
My Lords, we now move to the second part of the Bill, on council tax benefit. I hope that the noble Earl, Lord Attlee, and the rest of the Committee will forgive me if I am a little fuller on both this amendment and the next group to raise some of the wider issues.
Many of us will remember the poll tax. When it was adopted I was a local authority leader. We were sure that it would not survive because it was essentially unworkable as well as unfair. Within a few years, the selfsame Government that introduced it abolished it—after, however, considerable cost, distress and distraint, 5,000 people in prison and the loss of hundreds of thousands from the electoral register, from which we still suffer today. Many Conservative authorities thought the poll tax was great until they learned that it was not when trying to collect small sums of what was then called community charge from unwilling payers, with bailiffs trying to distrain parents’ goods because adult sons owed £3 or so a week. That was not acceptable. I do not know about other people but I needed Special Branch protection at the time as I sought to impose on my city what was an idiotic law.
The same thing is happening now because many Conservative authorities—though not Labour ones—think that council tax benefit localisation is a good idea, until they start to prepare schemes for consultation when they begin to find out that it is not. As they struggle to balance the claims of vulnerable people against, say, work incentives within a framework of local government cuts of 30%, they are changing their minds. I predict that within 10 years—i.e. two or three years of universal credit fully bedding in—council tax benefit will be absorbed back into universal credit where it firmly belongs. That is the purpose of this probing amendment. I just wish we were not wasting all this time and effort—here in Westminster but above all in local government—which could and should be spent instead on economic development and meeting housing and social care needs.
Why should CTB be within UC, as the original White Paper from the Department for Work and Pensions in 2010 proposed—apart from the fact that DWP lost out in the turf wars to DCLG? There are four main reasons. First, in my view, council tax benefit is a decent benefit because it is demand led within an even-handed, national framework. Now, it genuinely responds to local need because it pays more to councils that have more needy people in them. From April, it will not be a fair benefit. It will be cash-limited, cut and a lottery. What you get will depend on where you live. That may make it a local decision but it does not mean that it therefore better meets local need—quite the opposite.
Pensions are exempt so the more pensioners you have the larger the cut that falls on everyone else. As a result, in Norfolk some districts have a 16% cut on the working-age population and others 30%—nearly twice as much. Equalities legislation then requires that vulnerable groups be protected; to what degree will be explored in some of the amendments tabled by my noble friends Lady Sherlock and Lady Lister. That leaves only the working poor—about a fifth to a quarter of the council tax benefit population—to carry the cuts. Despite David Cameron’s scandalously ignorant assertions about welfare recipients, council tax benefit and housing benefit are in-work benefits as well, as my noble friend Lady Donaghy will show. In future, your council tax discount will depend not on your need but on the accident of everyone else’s need in a particular patch. That is not localism; that is rationing by queue.
Pensioners will be treated the same across the country. Why them and not disabled people, poor children, carers or troubled families—why should these face a postcode lottery? In fact, the Government have got it the wrong way round because in practical terms most pensioners’ circumstances are similar, stable and predictable, and an adequately financed local authority could therefore predict and carry that risk. Instead, a local authority carries the risk of a floating vulnerable population for which previously it could access national council tax benefit.
Give a hostel for ex-offenders planning permission, increasing the number of your vulnerable people, or give a retirement home planning permission, increasing the number of your pensioners, and in future you increase pressure on your discount system. Would you grant that permission? You would certainly have second thoughts. Nor can local authorities sensibly encourage a council tax benefit take-up campaign, as my noble friends Lady Lister and Lady Sherlock will explore, even though council tax benefit has one of the lowest percentages of eligible people claiming it: only around 60% of eligible pensioners and 55% of couples with children. If a local authority has that take-up campaign, it has to pay more or cut payments to existing claimants.
Council tax benefit should be a social security entitlement, not a local authority handout. We accept this for housing benefit, that the cost of renting your home should be supported by national rules for housing benefit, even if they reflect regional costs. Why then should the property tax that that home generates, which runs alongside HB as a housing cost, not be treated similarly? Like HB, council tax benefit should be a national benefit, full stop.
If the first reason is that it produces a demographic lottery, the second reason is simplicity. By bringing all benefits together, universal credit was designed to be simple to understand: one means test, one taper, one benefit form, one set of back-dating rules, one interface point with staff, and one payment. Not any more—a second taper for CTB will now run below the UC taper. It will completely undermine the clarity of UC, especially as UC will have universal rules so people in similar circumstances get the same benefit wherever they live, but the new council tax discount scheme will have 200 to 300 different sets of rules, according to the predilections of the local authority as to the deserving and the undeserving poor. So a simple universal credit is now to be tweaked by 200 to 300 different local CTB schemes. Not only will it not be simple, what you are entitled to get will vary from place to place and, at the boundaries, from street to street. How will any individual know what they are entitled to, especially as funding for welfare advice is being cut by 75%?
Please do not tell me that local authorities are in the best position to assess these local needs. That is a piece of empty rhetorical sophistry. As far as CTB is concerned, there really are no local needs about which the local authority has particular, exclusive local information—not shared by other local authorities, denied to government—that should inform its local decisions. If Ministers believe that, perhaps they could give examples of local needs that are exclusive to one local authority. The example of closing down a factory will not do, because other factories closing down in other places will get the same support. Three examples will be enough: three examples of local need that will justify the localising of council tax benefit, such that it should be built into one council tax discount scheme but not into the next-door neighbour’s scheme because it is so essentially local.
Baroness Sherlock
My Lords, the Institute for Fiscal Studies, in its excellent report, Reforming Council Tax Benefit, states rather drily:
“It is difficult to think of reasons why the government’s original plan to integrate CTB into Universal Credit was inferior to what is now being proposed”.
Later on, the report says:
“There is no simple way that making only minimal changes to CTB will allow the new council tax rebate systems to interact with Universal Credit in a coherent way”.
I and a number of other noble Lords here spent months sitting through the stages of the Welfare Reform Bill, now the Welfare Reform Act 2012. This country is spending billions of pounds to create it, and the Government are now creating a scheme that will not interact in any coherent way with that thing that the whole country has now been told to expect.
A number of questions need addressing, many of which were raised by my noble friend Lady Hollis in her very powerful speech; I will ask just a couple. First, how is universal credit as income to be treated in the new system? Do the Government propose to give any advice to local councils? There is nothing very straightforward about this, and it is one of the many questions that every council will have to address. If universal credit is not treated as income, that would be much simpler, but it means that people facing the withdrawal of universal credit in addition to the withdrawal of council tax support, as well as paying national insurance and tax, would stand to lose at least 90p of every extra £1 earned, as my noble friend Lady Hollis pointed out. The alternative is that councils face putting incredible pressure on those who least can afford to bear the burden.
My noble friend Lady Hollis pointed out very well, I think, why council tax benefit and its successors are not basically local benefits. The only thing different about them is the extent of the liability. The reason why council tax benefit is national is because all of the assessments made are related to the extent to which the individual needs help in paying that liability, and that, of course, is shown out. For example, in working out how much somebody should get in help or council tax benefit, the starting point is the applicable amount, as I am sure the Minister is only too well aware. I recommend to him the Welfare Benefits and Tax Credits Handbook, which shows that the applicable amount is the same for income support, income-based jobseeker’s allowance and income-related employment and support allowance; indeed, it is used as the basis for housing benefit and council tax benefit. The point is that council tax benefit is a national benefit because it is designed on exactly the same basis as all the other elements of a social security system related to the need to assess what help somebody needs to meet their outgoings.
It is also based on a national assessment by central government of the amount of money that somebody needs to live on. Separating that out from the rest of the system creates fractures in what has previously been a coherent system. Ironically, it is going in precisely the opposite direction of the creation of universal credit. The point of universal credit was meant to be to bring all the component parts together in one place in order to simplify it both for the individual and for those administering it. Yet now we have a fairly important part of the system that has been broken off entirely and done in a different way.
On 8 March, welcoming the Royal Assent granted to the then Welfare Reform Bill, the right honourable Iain Duncan Smith, Secretary of State for Work and Pensions, said the following:
“The Universal Credit will mean that work will pay for the first time, helping to lift people out of worklessness and the endless cycle of benefits. Whilst those people who need our help and support will know they will get it without question. Universal Credit will, from October 2013, replace the current complex myriad of means-tested benefits with a single benefit system. It will be simpler for people to navigate and harder for people to defraud, but most importantly it will make work pay. No longer will it be possible to be better off on benefits than in work”.
If I were a council leader, I would be asking the Minister this question: how can I structure my scheme of council tax support to do both of the things that Mr Iain Duncan Smith pledges on 90% of the funding? I can see that I could simply cut support to all but the poorest, but that would have the effect simply of reducing work incentives. I could try to protect work incentives, but that would have an effect on the poorest. That is the choice I have. So the question for the Minister is: how can a council structure it so that it can help the poorest to get the help and support they need “without question” and ensure that people are always,
“better off in benefits than in work”?
Can the Minister explain? I have every confidence that councils all around the country are waiting to hear the answer because those that I have spoken to have not been able to figure it out for themselves. If the Minister cannot answer the question, is she going to break it to Iain Duncan Smith, or shall I do so?
Lord Smith of Leigh
My Lords, I support my colleagues in their contributions, which covered some of the points that I was going to raise. We thought that in Greater Manchester, where we worked together closely, we would try to work out a scheme of council tax benefits covering the 10 authorities. It has proved to be absolutely impossible. The reason is that we all start from different financial positions and we therefore approach the onset of the council tax benefit scheme from very different situations.
The point that my noble friend Lady Hollis raised about the poll tax is something that we should not forget. In the days of the poll tax, the cost of collection took a huge amount of the revenue that was collected. That was the law, we had to encourage people to pay, and if they did not pay we had to go for them in ways that were not as satisfactory as one would have liked, but that was the only way we could go forward. It created the problems that my noble friend mentioned. The unintended consequence was that a whole load of young people disappeared from Wigan and neighbouring authorities. They never registered for the poll tax; they never registered to vote because that would have exposed them as being liable to the tax; and most of them were probably not too bothered about voting. Someone said they had all moved to Spain. Well, not that many Wiganers were moving to Spain at that time. Again we are introducing a system whereby local authorities will be collecting very small bills from people who find it difficult to pay. In her response, the Minister might provide us with a calculation of the estimated extra costs of collection.
On the point about risk, my noble friend Lady Hollis made it clear that for a local authority the situation is very unpredictable as regards council tax benefit. We can devise a scheme for it, as I am doing at the moment, but I can tell noble Lords that that is not an easy task. The outcome of that scheme is unpredictable because we do not know, even when we set it to start on 1 April, how many people will be eligible to claim the benefit during the year. Clearly, treasurers will be advising local authorities that they have to cover that risk with additional balances. They cannot make an assumption. My authority covers 300,000 people and is therefore relatively large compared with other authorities. The noble Lord, Lord Greaves, comes from a smaller authority, but if, as we mentioned last week, one of the factories in his area were to close, the impact upon the scheme in Pendle would be huge. The money would have to be found for that and, at the same time, as noble Lords will remember from last week, the authority would not be receiving the business rate to cover the increase in benefit—so there would be a double impact.
At Second Reading, the Minister suggested that we can pay for this scheme by the new proposal to end discounts on empty properties and second homes. It may come as a surprise to your Lordships but there are not many second homes in Wigan. It is not a preferred choice for people who want to buy second homes. Unfortunately, that is not a source of revenue that I look forward to collecting money from. What about empty properties? We have empty properties and some have been empty for some time. I therefore asked for some information, and the number is less than the Government seem to think it is. Empty homes in Wigan are a reflection of a number of things. One is the state of the housing market, which is in great difficulties and people who need to sell their houses cannot do so. Maybe they want to move away for work, or have done so and left the house empty, and still cannot sell the property because there is no demand; I notice that the noble Earl’s organisation, the Royal Institution of Chartered Surveyors, has today announced that house prices are going down, revealing the state of the housing market. It is not there. They cannot sell the properties that they wish to sell. Many are people who have inherited properties from their parents and, again, cannot sell the property. Many of these properties are on terraces, so not desirable for modern couples. I cannot believe that there will be a huge amount of money there.
Baroness Lister of Burtersett
My Lords, I had not planned to speak to the amendment, but my noble friend Lady Sherlock raised a question about whether universal credit would be treated as income or not for the means test for local schemes. I am one of those sad people who has spent some of my weekend reading House of Commons Hansard Written Answers, and I have the answer for her. Stephen Timms asked the same question, and the answer was:
“Local authorities will be free to design their own scheme for localised support for working age people in their area. This includes being able to design any means test they wish to include, and deciding on what that test should and should not take account of”.—[Official Report, Commons, 2/7/12; col. 414W].
Going back to what my noble friend Lady Hollis of Heigham said, what local factor could possibly make it fair for one area to include universal credit as income and fair for another not to do so? It makes absolutely no sense at all. Every local authority, unless it goes for the default scheme, will be reinventing the wheel over and over again, working out their own means test. People will see absolutely no fairness in it whatsoever. It makes no sense not to have a national scheme.
Lord Tope
My Lords, there are a rather large number of people here who must have been council leaders during the period of the poll tax—as, indeed, I was. I do not want to rehearse much of what has been said about that period except to say that, in my local authority a few years before the poll tax was introduced, we had 47 Conservative councillors and three Liberal Democrat councillors. By the time we had moved to the council tax, we had 47 Liberal Democrat councillors and four Conservatives. The five remaining Labour councillors were astonished to find themselves the principal opposition. So some good did come from the poll tax.
Lord Tope
Only in a localist sense. It is fair to say that this issue has divided opinion throughout the country and, certainly, opinion within local government. When the Government’s proposals were first announced as the localisation of council tax benefit—council tax support, as it now is—many of my colleagues in local government were surprisingly enthusiastically supportive of it, perhaps because of the word “localisation”. That is a seductive word for many of us who would quite rightly describe ourselves as localists; I am very much one of those. I said in the Second Reading debate, and say again, that others including myself have thought throughout this that it properly belongs with universal credit. That is my personal view; it is not shared by all colleagues in my party. To be fair, it is not shared by all colleagues in any party. It divided local government. The Local Government Association still supports the localisation of council tax support in principle, with increasing reservations. On the other hand, London Councils, to which my authority belongs, has always opposed the move. Let us not pretend that there is one universal belief about all of this.
I cannot help feeling that today we are having a Second Reading debate that actually happened last year rather than in relation to this Bill. I know that this was much debated—and others here know much better than me; they experienced it—during the passage of the Welfare Reform Bill. The noble Baroness, Lady Hollis, is almost certainly right to say that it was an argument between the DWP and DCLG, the outcome of which we are here today to discuss. I feel now that we have to move on.
The reality is, whatever our dire predictions may be—and I have to say dire predictions that it will be “just like the poll tax” are exaggerated; I cannot know that, nor can anyone else here, but I do not think it will be that bad—it will pose some real difficulties for local authorities. We have heard mention already of the difficulties experienced under poll tax, and in other situations, by local authorities having to attempt to collect relatively small debts, particularly from people who have not previously been paying council tax, and for whom paying it is not the norm or part of the culture. Whether or not these predictions are exaggerated, only time will tell. I think they possibly are but then I joined the Liberal Party in the 1960s—I am an optimist. We wait to see.
As we say so often, we are where we are. This is what is going to happen, and what we need to do today and in future proceedings on this Bill is to see how we can mitigate the very worst effects of what is proposed in it and the accompanying regulations. It was inevitable that we were going to have this Second Reading-style debate now, but we need to move on and accept that, whether we like it or not, we have to implement what is to come in the best way possible. I hope and believe that we will have a constructive debate on how we are going to achieve that.
One of the worst aspects of all of this is actually calling it the localisation of council tax support. Frankly, I do not believe it is localisation; it is passing a scheme to local administration. It is the worst of all worlds. I am sorry to say this to my noble friends: it is not localisation, it is not moving to local authorities the right to determine the schemes for themselves; it is passing them a very prescribed scheme, together with a £500 million reduction. We will not debate the need for that reduction today; I think there are better ways of achieving that, but again that is what is going to happen and this is the way it is to be done.
There is extremely qualified support from me for what my Government are trying to do. I have to speak honestly about that but I hope that from now on we can discuss how we can make it better—or, if Members opposite prefer, less bad.
Lord Greaves
My Lords, perhaps my noble friend should have spoken after me.
Lord Greaves
My noble friend was looking for some guidance? He might get some. My noble friend said that the role of this Committee is to look for ways of mitigating what I believe is going to be a potentially disastrous situation. He is right, of course, but before we can understand how to mitigate it, we have to understand what some of the problems are going to be and the effect this policy is going to have.
My noble friend is right in saying that it is not going to be as bad as the poll tax. It only causes one of the problems the poll tax caused, not the two main problems—certainly in my part of the world—and it is not going to affect as many people. But for the people it does affect, some of the problems are going to be the same.
The poll tax had two basic problems. As has been discussed, one was that it resulted in local authorities having to collect relatively small amounts of money from a lot of people. This was extremely expensive and not cost-effective. The second problem was that for people in the kind of houses that exist in large parts of the north of England and other areas—that is, relatively cheap terraced houses, which had very low rates in the past—the poll tax resulted in a huge increase in what they had to pay. In our area, it increased overnight by three or four times for people who were moving into a new house or an old house like that. That was one reason why people refused to pay it. Another was that it was a poll tax, not a property tax.
I was leader of the council at the time. I had the pleasure of introducing the first poll tax budget in Pendle. The consequence of that was that my party got booted out at that year’s elections, was kept out for another couple of years and I was no longer leader of the council. However, these things go round in circles. There is a new leader of the council now. That is what happened. We should learn from history but people simply do not. The noble Baroness, Lady Hollis, mentioned the Poor Law of the 1830s and the poll tax. It seems that people simply are not learning the lessons of history here.
The noble Lord, Lord Smith of Leigh, talked about the kind of housing in Wigan, of which we have large amounts in east Lancashire. He is absolutely right. Although we have a relatively high vacancy rate in such properties—perhaps 5% or 6% in some areas—it will be extremely difficult to collect the money from those properties. Again, there is a question of cost-effectiveness. You cannot really send the bailiffs round to an empty house. You have to pursue the owners, who may be in other parts of the country and often are.
I will just put forward one or two facts from my own small district authority that illustrate the problem. All authorities will differ in the proportion of people who fit into different categories and so on, but the basic problems will be similar, certainly in the north of England. At the moment, 10,457 people in total receive council tax benefit. Of those, 42% are pensioners. In some areas the figure is higher—much higher in some—and in some it is lower. In addition, there is the question of identifying vulnerable people, who will also be protected. That in itself will cause a problem to local authorities. There will be different definitions in different authorities, which may be seen as unfair, as the noble Baroness pointed out.
In total, those protected will account for between 40% and 50%. Of the rest who are not pensioners—50% to 58%—the number who are passported claimants of working age is around 64%. That is, of the people of working age who claim council tax benefits, around 64% are passported benefit claimants who get, in most cases, 100%. In other words, around 36% of people—around 2,200 of them—are being means-tested by their local authority. They are the people who are, by and large, being given part-payment. Some get 100% but most get part-payment. That is the sort of scale. They are the people who, between them, will cause problems.
Of those 10,457 people, 8,816 are in properties that are classified as band A for the purposes of council tax. They are mainly terraced houses but some are flats and bungalows and so on. This means that those 58% of people of working age will be lumbered with the whole cost of the 10% reduction if the local authority chooses to pass it on to them by charging them a council tax. If it is all done that way, the council tax benefit reduction under the new scheme will be around 18% for persons of working age. Some of those persons are on benefits. Some are working but, by definition, they are not in a position to pay more tax or to pay tax when they do not at the moment. In any case, if they get housing benefit and so on, they are often already suffering from cuts in what they will receive. So it will not be easy and the collection will be a problem.
Lord True
However, in the early 1990s I worked for Sir John Major at No. 10, where one of our main responsibilities was finding an alternative to the community charge. Therefore, I was in a different place but working on the same issue. In many ways I am also in the same place as other noble Lords who have spoken today. I made a number of points at Second Reading that were taken up by noble Lords. I support to a large degree the intellectual case that was put. My noble friend Lord Tope spoke wise words. The Committee must address practically the issues that have arisen. We have all made our position clear. I said at Second Reading and will say again that I would rather we were not here and that the benefit was part of universal credit. However, given the position that the Government are in, we must try to make this work in the best way possible.
This debate has taken on the tone of that on Amendment 1. I agree with some of the analysis, but if the logic is that the burden will go on a narrower and narrower base, and that base will tend to be lower-income working families, we will have to wrestle with these issues very carefully in Committee. A number of amendments suggest all sorts of other exemptions, some defined, some less defined. Some call for the Government to define who the vulnerable are; that is an interesting concept. The risk is that the Committee could make the work incentive situation worse with a well meaning intent to try to protect broad categories of people who obviously deserve our consideration.
I throw that into the discussion because it will be an interesting tension given that we are also told to take it as read—like my noble friend Lord Tope, I accept the position of my Government—that pensioners are to be excluded. However, as my noble friend Lord Greaves and others have said, that of course narrows the ground. In my authority, too, pensioners make up around 44% of claimants and 43% of council tax benefit spending.
I am not going to claim any credit of prior speaking on this. The point is well made; I made it at Second Reading. However, I hope that as we go forward to look at the amendments in detail we will remember that some well meaning amendments might have the perverse effect of making the work incentive situation even worse. I hope that we can now go on to look at the matters in detail.
Lord Beecham
I suppose that we must be grateful to the noble Lord, Lord True, for the part he played in mitigating, to use the phrase of the day, some of the worst consequences of the poll tax. However, he should be gently reminded that an element of the poll tax remains within the present system. That was a most astute piece of reconstruction of the poll tax, somewhat akin to the three-card trick. I do not blame the noble Lord, Lord True, for that; I think that the Secretary of State of the day, the noble Lord, Lord Heseltine, trod the path rather carefully. It certainly was an improvement but, as we all know, it leaves us even now with a system of local taxation more regressive than it should be.
However, we are not really debating the poll tax; we are debating these proposals. It seems to me that my noble friend Lady Hollis’s amendments are designed to have precisely that mitigating effect that the noble Lord, Lord Tope, cannot discern but which the noble Lord, Lord True, rightly encourages us to find. That is because of the link to universal credit. However, frankly, we should stop talking about a 10% cut. It is much more likely to be a higher figure anyway. The £500 million is widely regarded as a substantial underestimate. Then, as implied or explicitly mentioned by other noble Lords this afternoon and at Second Reading, the impact of the exemption of pensioners from this—which I support, contrary, once again, to the ministrations of the Local Government Association—will obviously increase the burden on everybody else. We have heard the noble Lord, Lord Greaves, refer to an 18% figure. The impact assessment talks of a 16% figure. It is interesting to look at what the impact assessment says about the whole issue. Paragraph 34 of the recently updated impact assessment reads:
“Although the net impact of the policy is simply a transfer from council tax payers to Government”—
a phrase worth thinking about—
“(and therefore a reduction in demands on general taxation, by bringing decisions about local tax reliefs closer to those responsible for raising local taxation), there will be some groups who see a reduction in their income. These groups may be: working age council tax benefit claimants”,
as already referred to,
“council tax payers or any recipients of local services that may be reduced in order to meet any funding shortfall”.
Again, this is implicit but is worth making explicit. Then it says:
“However, an accurate analysis of the reduction in income of these groups is not possible since the design of any council tax support scheme for working age people will be at the discretion of local authorities. In addition, the means by which a local authority recovers any shortfall in funding will be for themselves to decide”.
Once again, the buck is passed but accompanying support is not there.
The Earl of Lytton
My Lords, briefly, I stand guilty as charged in the sense that I made my maiden speech in this House during the passage of the Local Government Finance Act 1988, which introduced the poll tax. I said at the time that it was unfair and unlikely to work, but I was a greenhorn and my comments were probably not well informed.
I will follow on from what the noble Lord, Lord Beecham, said. The constraints that will fall on council tax payers, and in particular on those in receipt of relief, will of necessity enable those who are so advised to mount an appeal against their banding. In circumstances where the bandings are 21 years old, there will be every opportunity for a challenge to be successful on account of the age of the tax base. It was for that reason that I tabled my earlier amendment on the transfer of the loan to the valuation tribunal.
Dealing with the personal circumstances of individual claimants who are partly supported by benefits will not be quick. It will not be easy to dispose of such cases in a short time. The risk is that the system will become clogged by appeals that will take an inherently long time to resolve because they will have to delve into the details of individuals’ financial circumstances. We will debate an amendment tabled by the noble Baroness, Lady Hanham, which will probably assist us. None the less, the policy will produce a significant load on the system unless it is better resourced.
I make no comment on whether the process is destined to work. This goes into areas of local government finance that are beyond my ken. However, I warn against the inevitable transfer and the unforeseen consequence of what may happen in the wider domain of appeals.
Lord McKenzie of Luton
My Lords, the amendments in this group seek to include support for council tax as part of the universal credit. We support them all. My noble friend Lady Hollis made a typically powerful presentation, and the amendments were spoken to in a supportive way by almost every noble Lord, including my noble friends Lady Sherlock, Lady Lister and Lord Smith, and the noble Lord, Lord Greaves. The noble Lord, Lord Tope, expressed a degree of equivocation. The noble Lord, Lord True, issued the caveat that we should be careful about amendments that we had yet to debate.
Including council tax as part of universal credit is not a new position. We argued strenuously during the passage of the Welfare Reform Act that this was where it belonged, and we know that Ministers in the DWP agree. The Government’s arguments in favour of localising council tax support are that it can be varied across the country in accordance with local need; and, because the costs will fall on local councils, there is an incentive to promote employment so that people are floated off benefits. My noble friend Lady Hollis destroyed that argument pretty powerfully. Of course, the Government are pursuing two policies—one of supposed localisation and one of cuts. That is what makes these things particularly challenging. The incentive effect depends on how these cuts are to be applied since means-testing support for council tax more aggressively leads to weaker work incentives than reducing support for all claimants. As the IFS put it:
“Reforms that save the full 10% typically involve reducing support for those currently entitled to maximum CTB—those on the lowest incomes. And those options that do protect the poorest claimants either fail to generate large savings, or significantly weaken work incentives”.
That is why my noble friend Lady Sherlock pointedly asked: how, at one time, do you both help the poor and make people better off in work? That was the commitment made by the Government. How will they do it on this basis? Issues around work incentives for localised schemes are not straightforward and must be considered in the context of universal credit as well.
As my noble friend Lady Hollis made clear, we have supported the concept of universal credit—not every aspect of its proposed implementation, including payment frequency, second earners and wallet-and-purse issues, but the fundamental architecture. It is a structure that, as my noble friend explained, clearly simplifies the benefit system and provides a common taper which, together with income disregards, will make work pay and give clear incentives to work. It encompasses tax credits as well as benefits and is an “in and out of work” benefit. It is the natural home for council tax benefit and it is understood that this was the original intention. However, it would be good to have on the record the point in time at which the Government’s position on this changed and why.
Keeping council tax benefit outside universal credit, with the prospect of dozens if not hundreds of local schemes, undermines that simplification. It potentially undermines the rationalisation of work incentives, with the prospect of overlapping taper rates. These are not just theoretical matters. The Government have promulgated a default scheme that will be imposed on local councils that do not introduce a local scheme by next January. How does this default scheme sit alongside universal credit? In particular, how is universal credit to be treated for the purposes of the default scheme? My noble friend Lady Lister referred to an answer given to my honourable friend Stephen Timms in another place: it is up to local councils to decide how they do this. However, we are dealing here with a scheme that the Government have promulgated and that they will impose on local councils. Therefore, the Government must know how they will treat universal credit in that default scheme—that is the scheme that they are promoting.
At present, tax credits are taken into account as income for council tax benefit. Income-related benefits, such as JSA, IB and ESA, are not and passport individuals on to maximum council tax benefit. Universal credit substitutes for benefits and tax credits, so how will it be treated in the default scheme? Will the Minister also tell us how overlaps in tapers between universal credit and the default scheme are to be avoided, if they are? These are not just points of interest; they are fundamental to the operation of the scheme that the Government will impose in just a few months’ time. The logical route in all this is to follow my noble friend’s prescription and include council tax benefit as part of universal credit from the start. We do not doubt that this is where it will end up eventually.
My noble friend Lady Hollis made the point that the proposition advanced by the Government means that take-up campaigns will be deterred. With a number of noble Lords, she talked about the collection of small amounts and the difficulty that that will create. My noble friend Lord Smith and a number of noble Lords referred back to the poll tax and all that that entailed, particularly the point that young people disappeared from the system. We cannot allow that to happen again. My noble friend and the noble Lord, Lord Greaves, referred to the difficulty in budgeting that the proposed system will bring forward. I understand that there are not many second homes in Wigan and we do not have too many in Luton either.
Earl Attlee
My Lords, I am grateful to the noble Baroness, Lady Hollis, for introducing her amendment. She started by talking about the poll tax years. I well recall them but it was long before I came to your Lordships’ House. I do not believe that this legislation has those weaknesses but I am well aware that I face a formidable adversary. In parliamentary terms, I have admired the noble Baroness for many years. I am delighted at last to start working with her on legislation.
The noble Lord, Lord McKenzie, asked me when the Government decided that council tax benefits would be localised and included in universal credit. That decision was made in the spending review of 2010.
The effect of Amendments 89, 90 and 91 in the name of the noble Baroness, Lady Hollis, and with the support of the noble Baroness, Lady Sherlock, would be to make support for council tax part of universal credit. I know that this is a matter dear to the heart of the noble Baronesses. Amendment 70A seeks to establish that nothing in the Local Government Finance Bill would prevent council tax support from being included in universal credit. The Government have been clear that council tax will be localised and will not form part of universal credit. Council tax is a local tax and it is right that local authorities, which are responsible for setting and administering council tax, are free to decide the level of support to be offered to working-age taxpayers. Nevertheless, I have listened carefully to the concerns expressed in Committee about the working poor. Localisation means that local authorities will be able to align the system of council tax support much more closely with the existing system of council tax discounts and exemptions, and with local decisions on the level of tax.
The noble Baroness, Lady Hollis, and other noble Lords mentioned the effect of protecting pensioners. Of course, all noble Lords will be aware that not all pensioners receive council tax benefits; only those who need the benefit get it. The noble Lord, Lord Smith of Leigh, talked about the problem of the housing market, of which all noble Lords will be aware. However, local authorities will be able to take account of this when devising their scheme. Many noble Lords, including the noble Lord, Lord Greaves, talked about the effect of the 10% cut in CTB from the centre. It is worth remembering that council tax benefit doubled under the previous Administration. The noble Lord, Lord Beecham, asked who will pay the bill. The answer is that the taxpayer will pay the bill because the taxpayer is still paying 90% of the cost of council tax benefit.
This policy is consistent with the drive for greater local financial accountability and decision-making. The noble Baroness, Lady Hollis, suggested that we are just passing the risk on to local government and asked what happens if a local authority runs out of money. The Government intend local schemes to be fully integrated with the council tax system, with support offered in the form of a council tax reduction. Where demand for support increases above or falls below local forecasts, billing authorities will collect less or more council tax than had been estimated at the beginning of the financial year. Provision is made in the Bill to enable billing authorities to pass on any reduction in council tax receipts in a year, allowing cash-flow pressures that would otherwise fall on the billing authority alone to be shared with other local authorities.
Localisation will give local authorities a financial interest in the provision of support for council tax and a bigger stake in the economic future of their local area; I am sure that the Committee accepts that point.
Earl Attlee
My Lords, making councils financially responsible for providing support creates stronger incentives for them to get people back into work. This reinforces the positive benefits of driving economic growth in their areas, provided through the retained business rates system. Furthermore, if the claimant count can be reduced, it may be that the local authority can devise more generous council tax benefit schemes.
Localising support for council tax is intended to deliver a 10% saving on the council tax benefit bill and is an important contribution to the Government’s vital programme of deficit reduction. This saving will need to be delivered. However, localisation gives local authorities a significant degree of control over how the 10% reduction in expenditure is to be achieved, enabling them to balance local priorities and their own financial circumstances as they see fit. After all, not all local authorities have the same mix of claimants, and I am sure that noble Lords are not suggesting that central government should dictate to each local authority how its scheme should work.
Baroness Hollis of Heigham
My Lords, perhaps the Minister will come on to this later, in which case I will shut up, but can he give me three examples of local authority decision-making exclusive to a small district council that would not be shared by its neighbour?
Earl Attlee
My Lords, I may well have to write to the noble Baroness on that point.
Baroness Hollis of Heigham
My Lords, if the Minister cannot give even one example of the core thesis that this is all about localism, it is very clear, if I may say so, that the department has not either consulted properly or done its homework.
Earl Attlee
My Lords, I am quite confident that my department has done its homework, but inspiration may arrive.
Local government has previously expressed concerns about ensuring the ongoing direct payment of council tax support funding to councils if it is integrated with universal credit. Localisation ensures that funding is allocated directly to local authorities. We recognise the importance of helping local authorities to develop and administer schemes that support universal credit. In answer to the noble Baroness, Lady Sherlock, it will not be in the interest of local authorities to establish schemes that fail to provide positive work incentives and which risk locking residents into low aspiration and poverty. Universal credit will not be sabotaged, as was suggested by the noble Baroness, Lady Hollis.
The noble Baroness, Lady Sherlock—and many other noble Lords—asked me how universal credit income will be taken into account in local council tax support. I will respond to this point in more detail in relation to Amendment 79B. It might be helpful, however, if I made a few points now. In relation to its own local share, it will be up to a local authority to decide how, if at all, universal credit income is to be taken into account for working-age claimants. In relation to the default scheme that will come into effect if a local authority fails to adopt a scheme by the deadline of 31 January, universal credit will be taken into account in the following ways: either the income assessed under universal credit, with some adjustments, is less than a defined minimum income amount, in which case the claimant will receive a 100% rebate; or their income exceeds this amount and a means test is applied. In both cases, the assessment will use, with some adjustments, data from the universal credit assessment of the income needed to live on. I will explain these points in more detail when we get to the relevant amendment.
The Government have published guidance on how local schemes can support improved work incentives, and we are working with the Department for Work and Pensions to enable data from universal credit to be shared with local authorities for the administration of local schemes. The noble Baroness, Lady Lister, and the noble Lord, Lord McKenzie, talked about calculations on universal credit. The noble Baroness helpfully read out a Written Answer on whether the calculations can take into account universal credit income. As the noble Baroness will be aware, the second half of that Written Answer explained that the default scheme will take account of universal credit income. We will be publishing draft regulations setting out that approach shortly.
Amendment 83, in the names of the noble Baronesses, Lady Hollis and Lady Sherlock, would extend the requirement for local authorities to consult on schemes under the current benefit structure or universal credit. At present, council tax benefit is centrally prescribed, with very limited local authority discretion, and it is not clear what purpose a requirement to consult would serve. We are clear that council tax will not form part of universal credit in future.
Members of both Houses, and from both sides of the House, have expressed their support for the principle of localisation. We trust local government to administer the key services that make a crucial difference to the lives of the most vulnerable in society. It is right that we trust it to take greater responsibility for the administration of local taxation in relation to those groups. Obviously I have not been able to answer every point asked of me, but I will write and place a copy in the Library.
Baroness Sherlock
My Lords, I thank the Minister for that answer and for his attempt to address some of the questions raised in the debate. I asked how we would advise a council to construct a scheme that would manage to protect both the poorest and work incentives. He answered half that question in the sense that he assured me that a council would not wish to do anything that would damage work incentives. He did not answer the other half, and crucially he did not explain how one might construct a scheme that did both. Perhaps he could elaborate on that.
Earl Attlee
My Lords, I believe it will be possible for a local authority to do both, but of course I will write in greater detail.
Baroness Hollis of Heigham
Will the noble Earl tell us who he would take money from, who currently receives CTB?
Earl Attlee
My Lords, that is a matter of detail for local authorities to work out.
Baroness Sherlock
My Lords, I am very grateful. I look forward to receiving a letter outlining a scheme that might meet those criteria. There will be a lot of interested people waiting to read it. I thank the Minister.
Lord Greaves
My Lords, I am grateful that the Minister specifically responded to some of the points I made. He asked, “Who will pay the bill?”, and answered, “The taxpayer”—by which of course he meant the Government, although clearly most government funds come from taxation of every kind. He pointed out that in future the Government will pay only 90% of the costs, which is, in other words, a 10% cut in the requirement to pay from government funds—taxation in general. What he did not explain was why it was fair to cause what most councils will find themselves doing by imposing that 10% on a small group of people—those of working age who claim council tax benefit. It is a clear transfer of that burden from everyone in the country who pays all different sorts of taxes to a very small number of people. The Minister did not explain why that was fair.
Secondly, he said that it would be an opportunity for councils to align council tax benefit—the new council tax reduction scheme—with existing council tax discounts. I do not understand what “align” means, and perhaps he would like to explain it.
Earl Attlee
My Lords, unfortunately, I did not catch the noble Lord’s final question. In response to his first point, he said that the difficulty with the scheme was that it would hit a small proportion of the population. The local authority will devise a scheme but, more importantly, it could at the same time also reduce its budget a little, if it wanted to. It is at the local authority’s discretion.
Lord Greaves
I wonder if the Minister could write to me on my question about the word “align”? He specifically said, if he checks, it would be possible to align—that was the interesting word—council tax reductions with existing council tax discounts. They seem to be very different things at different levels and I do not know what “align” means at all.
Earl Attlee
My Lords, I can assure the noble Lord that we will be very careful to answer all questions.
Baroness Hollis of Heigham
My Lords, one of the things that struck me about this debate was that we had 10 speakers, apart from the Minister, of whom seven are either current or former local government leaders. Do you know what? Not one of us said that we were a vice-president of the Local Government Association and, given that the LGA has very unfortunately been expressing support for localisation, it may wish to rethink its views. It is clear that those views have no support whatever in the Grand Committee from people who actually know what they are talking about and have been there and done that through all sorts of structures, discounts, rebates, cuts and the like. There is indeed a broad alliance when local authority leaders of all political complexions—from London boroughs, southern districts, northern districts and northern unitaries—all express and share a set of common concerns. I am completely baffled as to why the DCLG, which used to be the DoE—a department that I much loved and respected, particularly when I was sort of fighting it in the 1990s—is not listening to this. It was noticeable that although the noble Earl responded with his usual courtesy and clarity, which we have come to expect from him on the Floor of the House, to the questions being asked, answers came there none.
My noble friends Lady Sherlock and Lady Lister emphasised the problems regarding where the cuts should fall. The Minister was pressed on that. I cannot believe that he came into this debate without a note on his file saying how this issue should be responded to by local government, but apparently he did not have one. He said, “We will have to think about that”, as though it was a brand new question, and that he will write to us. I am slightly dismayed by the quality of support that that may suggest the Minister is experiencing.
Secondly, we also asked him what issues might count as local needs that were distinctive to a particular local authority and not shared. Given that this is a debate about localisation, I should have thought he could have offered us an answer. That question was asked more than an hour and a quarter ago. There has therefore been plenty of time for a note to come over his shoulder from officials responsible for the Bill giving three examples of local need that were so distinctive to each local authority that, as a result, it was appropriate that they should devise a council tax discount scheme. Not one example has come through and been offered in an hour and a quarter. Again, that suggests that there is no evidence for this, and that no thought was given to it by the department. I am taken aback by that. Until recently I rated the department very highly. This is no criticism of the Ministers who do their formidable best on the Floor of the House.
My noble friends commented on the impact on claimants. Former and current council leaders commented on the impact on local authorities, and in particular on the issues of collection and trying to make judgments between pensioners, who are protected, vulnerable people who should be protected, and work incentives that should be protected—and then finding that the totality probably exceeds the money that is available. Again, the Minister gave us no guidance.
The Minister’s main argument—he ran only one—was that because local authorities set council tax, it is appropriate for them to be responsible for the council tax discount scheme as a way of increasing financial accountability. There was of course the odd gesture towards to getting people into work. I will deal with the first argument, which is a complete myth. The noble Earl will be aware—and the noble Baroness, Lady Hanham, will certainly know—that until business rates are more appropriately returned to local authorities, something like 85% of local authorities’ spend will come from central government rather than council tax. Council tax raises just 15% of revenue. After that, two-tier authorities—the local authorities that the noble Lord, Lord Greaves, and I talked about—raise about 15% of that 15%. They are the billing authorities and they raise about 1.5% of the spend. Will the noble Earl explain how being responsible for 1.5% of revenue justifies being responsible for the billing structure of the whole of the two-tier structure? There is no local accountability there. There is no biting down. The most that it will affect is that proportion of local spend that goes to the billing authority—unless they start gaming the system, which many of us will be tempted to do.
The myth that was paraded time and again with the poll tax and then the council tax was that somehow making local authorities responsible for this would press down intelligently on spending. This cannot apply where most local government spending is rightly supported by central government, and billing authorities, particularly in two-tier authorities that cover more than half the country, are responsible for only 15% of that 15%. It does not work. It is simply a myth. It is easily parroted but it does not have any validity.
Secondly, the noble Earl said that this would be an incentive for local authorities to get people into work. I estimate that to do this, the average authority would have to find some £2 million to get people into work. Given that every day the Government see unemployment figures rising, how do they expect a local authority to have the resources or the capacity to make such a difference that it would feed back into its council tax discount scheme and its council tax levy? Talk about Scientology; this belongs to the planet of the Thetans.
Finally, the Minister challenged the idea that UC would be sabotaged by this. He did not answer any of the detailed questions put by my noble friends Lady Lister and Lady Sherlock, and by others on our Front Bench. He merely asserted that UC would not be sabotaged. However, asserting a statement does not make it true. I am sure that the Minister will come back with more in-depth replies when we return to this and similar issues when we debate later amendments.
It would not have been appropriate, but if he had sat in on our debates on welfare reform, he would have seen the hours we spent trying to design a system that would encourage people into work in a supportive and constructive way. Now this has come in like an Exocet and we are left wondering why we spent so much time when the people responsible for this part of the Bill seem to know so little about what went on in the debates on what became the Welfare Reform Act. How can you seek to sabotage, frankly, what should be your flagship scheme for the sake of £500 million in cuts when, on the delay in the fuel levy, Chloe Smith said on “Newsnight” that there were plenty of other savings in the department that she could have used but could not cite any in particular? I am completely baffled.
I will withdraw the amendment. We need to get on to the next group, which is about the cuts. I hope that the Minister asks his staff what questions he can expect to be put to him by Members around this Room today, and gets thoroughly briefed so that he can answer them as we would all expect that he would wish to do. I beg leave to withdraw the amendment.
“Grants: minimum amounts
Any grant payable to a local authority in England in support of a council tax reduction scheme shall not be less than the amount required to meet the costs of a scheme prescribed for the purposes of paragraph 4 of Schedule 1A to the LGFA 1992, or the amount of council tax benefit subsidy for that local authority in respect of the year beginning 1 April 2012.”
Baroness Hollis of Heigham
My Lords, this follows on from the previous amendment and some of the arguments have already been anticipated. There is no point in having localisation unless local schemes seek to differ from the current national scheme. Most authorities, as far as I am aware, would not have touched the existing scheme if it remained demand-led and fully financed. Why would they? To cut CTB locally when it is financed from a demand-led national scheme would simply take money out of your local economy. The first question to the Minister is—again, he has some time to get an answer—what is wrong with the current CTB system? I understand the need to make cuts, but what is wrong with it? Do the Government want a localisation agenda?
I do not support what the Minister could have done, but the he could, for example, simply have frozen the benefit levels for a year and got some of this money back if that was his problem. The reason that schemes were changed was not because they will reflect different local priorities—as we said, the Minister could not find us three examples—but to deliver the 10% cuts.
Local authorities are waking up to the fact that they have been conned. They favour localisation in the sense of more local decision-making, as I do. They do not want the cuts, yet without the cuts there is no point in localising. The Government want all three groups protected: pensioners, vulnerable people on passported benefits and people on work incentives. That is effectively the entire population to be protected, yet we are supposed to make cuts.
The Government’s consultation guidance paper suggests four approaches for local authorities facing the cuts agenda. First, they might make good the shortfall by getting more people into work. As I say, I estimate that there would have to be economic growth of £2 million a year in the average city. “If only they tried hard enough,” the Government seem to think. Well, given the Government’s own experience with the national economy, all I can say to them is, “Get real”.
Secondly, the local authority can cut services in addition to the 30% cuts that they are already experiencing. As if. Thirdly, it can find compensating revenue for removing the discounts on second and empty homes. My noble friend Lord Smith raised this question. This was the answer given by Andrew Stunell to my right honourable friend John Healey in another place: that Rotherham and Barnsley could pay for their cuts by scrapping their discounts.
Let me spend a little time on this, even though it is the subject of Clauses 10 and 11, because it seems to be the Government’s favourite reply. I have spent many happy hours trying to correlate second-home discounts, short-term empty properties, long-term empty properties, CTB claimants, local authority 10% cuts, households below average earnings and the family household survey, and trying to work all those figures across. Leaving aside London, as far as I can see, four sets of local authorities emerge from those correlations as being able to find additional revenue locally. First, there are the wealthy or pretty places with abundant second homes—as my noble friend said, they are not necessarily in Wigan. Cornwall has lots of second homes because it is a pretty place. Chichester, Chester, Wokingham and so on will have abundant supplies of people with wealthy income and low numbers of claimants. The Financial Times ran a piece back in May on what is so special about Wokingham, which has only 4% of its expenditure going on council tax benefits, whereas in places like Wigan the figure is 15% and more of the population are claiming these benefits.
We should remind ourselves that, even where there is a pretty place, in two-tier authorities such as North Norfolk they will only get 15% of the discount. The rest will go to the county council for redistribution elsewhere, possibly 40 miles away, so there is no relationship to localism at all.
The second group of local authorities, other than the pretty and the wealthy, is those that are relatively flourishing as far as I can tell in the southern half of the country. They may or may not have some second homes but they have a buoyant housing market—as illustrated by the fact that they have a high number of properties that sell within six months and very few properties standing empty after 12 months. Two such authorities, as far as I can tell from reading across the stats, are Brighton and Hove, and also Reading. They could presumably remove discounts on all empty properties to perhaps cover their cuts if that was their choice.
Lord Jenkin of Roding
My Lords, for some reason that I am not sure I understand, my Amendment 73A has found itself grouped with the amendment that has just been moved by the noble Baroness, Lady Hollis. I can assure the Committee that I will be a good deal briefer in speaking to this amendment because it has a rather narrow specific intent. It is more of an exploratory amendment, which attempts to link the question of the Government’s support for local authorities in the changing circumstances introduced by this Bill to the now well established new burdens doctrine published some years ago by the previous Government, which, in summary, states that the,
“additional cost of all new burdens placed on local authorities … by central Government must be assessed and fully and properly funded”.
My question to my noble friend is: what assurances can the Government give about the future shape of the arrangements under this Bill, and what are the Government’s intentions about the future funding levels? There is some anxiety on the part of the Local Government Association about the future—I declare my interest as a vice-president of the LGA, like everyone else; it is always good for a laugh, and I think that helps. Amendment 73A simply says that it should be assessed every year, which is intended to link the regular annual support for local authorities with the new burdens that have been imposed upon them as a result of the Bill. I do not know what my noble friend will be able to say about that but certainly the local authorities are seeking reassurance on it.
On the subject of the Local Government Association, it was suggested during the debate on the previous amendment that somehow it is not reflecting the views of its member councils and it should therefore rethink its stance. It has made it clear—and made it clear again to me this morning—that it remains in favour in principle of the localisation of support for council tax. That is the LGA’s view and it is sticking to it. Of course it is looking for assurances of the kind that I have given. There may be others that we will come to later. However, it does not come well from the party opposite to suggest that a thoroughly representative body, which represents virtually every council in the country, is somehow misdirecting itself and does not know what it is saying. I think it was the noble Lord, Lord Beecham, who made that suggestion. He knows a great deal about this—probably much more than I do. However, if I may defend the association, it has worked out its views and has made perfectly clear—to noble Lords on all sides of the Committee, I am sure—what it wants. It is in favour of the localisation of council tax support.
Lord Beecham
My Lords, I must reply to the noble Lord, Lord Jenkin. It is certainly true that that is the association’s position; I did not say that it was not. However, the association’s position is dictated by the two largest parties in it—the Conservative group and the Liberal Democrat group. It is not the consensual view of the association. When I was its chair, that was something that we tried, and usually managed, to achieve. It is the view of the two parties that just happen to support the coalition Government—at least until 10 pm tonight. I do not say that the LGA is misrepresenting the situation; I suppose a majority within the association represents the majority of councils. However, that is not the view of the entire association. Even if it were, it would still be wrong and I would not be backward in criticising my political colleagues in the association if they supported the position that it has taken.
Lord Jenkin of Roding
Perhaps I misheard the noble Lord. I understood that he was asking the LGA to reconsider its view. He is perfectly entitled to do so, but it is against the background that the association has considered its opinions on this extremely carefully and has made its decision. Of course it is not unanimous; no one is suggesting that it is. If there were unanimity, the millennium would have arrived. In matters of local authority finance, there are many different points of view. Perhaps we may leave it at that.
In speaking to this amendment, I am looking for some assurance from the Government on how they see the future of this structure. Local authorities are anxious that, after the next comprehensive spending review, they will find themselves bearing a significantly larger proportion of the total cost than is envisaged at the moment. If my noble friend could give any assurances on that, I know they will be very well received.
Lord Tope
My Lords, I am not a vice-president of the Local Government Association and I certainly do not claim to speak for it. I said in a debate on an earlier amendment that the views of local authorities within the Local Government Association, as most are, have differed on this issue, regardless of political control. There are certainly Labour-majority councils that have supported what they thought was the localisation of council tax. There are some in my own authority. However, as people have come to realise the implications of what we are debating today, that support has become more questioning. I shall put it no more strongly than that. The briefing that I imagine we have all had from the LGA today states:
“The LGA supports the principle of localising responsibility for decisions about the incidence of council tax”.
The question is whether that is what we are getting now but maybe that is for another debate.
I support my noble friend Lord Jenkin. My noble friend Lord Shipley and I have added our names to Amendment 73A, which the noble Lord, Lord Jenkin, explained very well. The concern that we address with this amendment is the expectation that, for a range of reasons, the cost of council tax support will increase. More people are likely to claim it because, sadly, they will fall into that category, perhaps because the change in wording from “benefit” to “support” will—wrongly, maybe—encourage more people to feel able to claim it. Therefore it is highly probable that the costs will increase in years to come. We seek from the Government an indication of how they intend to deal with that and, more particularly, an assurance that it will fit under the new burdens doctrine and that the increased costs, assessed annually by the Government, will be met in full in accordance with the doctrine. That is the purport of the amendment in my name and that of the noble Lord, Lord Jenkin. We seek reassurance from the Government.
Baroness Sherlock
My Lords, unaccountably I have never been invited to become a vice-president of the Local Government Association—
Baroness Sherlock
But I hope that the letter will arrive any day now, despite the fact that I have never served as a councillor.
I do not support the principle of the localisation of council tax benefit—as my earlier speech may have made clear. Even if I did, under these terms I would not be happy about it. I would think that I had been sold a pup. One reason for differing views within local authorities—I hope that the Minister will help me understand this better—is that potentially there will be significant regional differences in the impact of this policy.
I will refer again to the report on council tax benefit of the Institute for Fiscal Studies. The IFS note that the pain of this cut will fall disproportionately on poorer areas. It states that in cash terms, the cut in funding will be larger in areas where council tax benefit spending is highest—the more deprived areas of Britain. The report goes on to point out that almost 90% of local authorities face a funding cut of between £10 and £25 per dwelling. It would seem that the risks described by other noble Lords are all downside. That must be of serious concern to local authorities. What does the Minister envisage happening? Will the Government be able to take account of the different positions?
I will give an example. The OBR forecasts a reduction in the number of people claiming passported benefits as a result of the combined effect of presumed economic growth and welfare reform—an increase, therefore, in the number of low earners. The effect on CTB would be to see fewer people claiming maximum council tax benefit or its successor, and more people claiming partial council tax benefit as a result of moving into work. Has any work been done by the OBR to see how even those cost assumptions would be? The most recent quarterly Northern Economic Summary from IPPR North showed two things that spring to mind. First, the number of young people not in education, employment or training is highest in the north of England, at 19%, compared to an average of 16% in England. Given the trends in youth unemployment, that could see more people moving into the unemployed category rather than out of it.
Secondly, the report found that the amount of time people are spending on jobseeker’s allowance is increasing. Almost half—47%—of those claiming JSA in the north have been doing so for more than six months. The average time people have been claiming benefits is more than double what it was during the previous 2008-09 recession. Here I am trying to tease out an understanding of whether the assumptions underlying the costings of the impact on local authorities, and the extent to which they have been future-proofed, have taken account of north-south divides and differences, and what assumptions have been made about changing patterns.
Finally—I will come back to this when we debate later amendments—the Minister will be aware that 85% of council tax benefit at the moment goes to the lower-income half of households, and that almost half goes to the lowest-income quintile. Inevitably, any cuts are bound to be borne by the poorest households. Given the combination of poor households and poor areas being hit, is the Minister not concerned about what will happen to the economies of those areas? I know from talking to at least one northern authority that such a significant proportion of its households are in receipt of a variety of means-tested benefits that cuts in the Welfare Reform Bill alone will, it is anticipated, produce a reduction of demand in the economy as a whole. Have the Government modelled any of those impacts on a regional basis?
Lord Shipley
My Lords, first, I do not share the concern of the noble Baroness, Lady Hollis, about the capabilities of local government and councillors. Councillors are perfectly able to produce fair and equitable council tax support schemes. However, one problem we have is that timescales are driving the publication of draft schemes very quickly. Inevitably, draft schemes that go out to consultation will be different. After all, lots of things that local government does are different. Council tax rates are different. It would not be surprising, given differences between local authority areas that there may be differences in council tax support schemes. However, timescales are likely to prove too tight. I think that there will be a problem over equalities impact assessments and the timescales that they require. I would prefer a start date of April 2014, but we will come to that in a moment.
The real issues remain financial support, the level of financial support going into those schemes, and the new burdens doctrine. Amendment 73A matters quite profoundly because we are having a debate about the 10% cut and how it should be applied, and I absolutely subscribe to the view that it cannot simply be loaded on to the working poor. I would prefer it, if it is to be applied, to be spread across council tax payers generally.
Secondly, it has become clear to me that 10% is at the low end of what the reality will be. It will be significantly higher than that and, for the reasons that my noble friend Lord Tope outlined, demand is likely to rise and the change of title from “council tax benefit” to “council tax support” is likely to produce more people applying for it. Economic conditions remain difficult and will continue being difficult for the next two to three years; therefore, more people are likely to be applying.
Thirdly, the fixed-grant system that the Government are likely to introduce seems dubious in terms of who will actually decide on which data the government estimates are based. I fear that the estimates of demand over the first two years of the scheme will prove to be understatement. Therefore, the Government should manage the risk. In the context of 28% front-loaded cuts in the current and previous financial years, which have had a great impact on councils’ ability to meet all their obligations, there is a major principle at stake. If we have a new burdens doctrine, it ought to be applied; otherwise there is no point in the Government having a new burdens doctrine. Given the sum of money involved—£500 million, 10% of the £5 billion annual commitment to council tax benefit—this is an acid test of whether the new burdens doctrine has a future.
I sincerely hope that the Government will look again at this whole issue. I have subscribed, in my role as vice president of the Local Government Association, to the view that if you are going to localise—we are trying to devolve and localise—it is entirely appropriate for local government to take responsibility for this. They are the ones who set council tax. Therefore, they are the ones who are capable and should be responsible for setting the level of council tax support, but they have to be able to do it in the context of knowing that that cash will be available and the risk will be managed against rising demand by a Government that is supportive of them.
Lord Smith of Leigh
My Lords, in principle I support the localisation of council tax benefit, but I do not support this scheme at all. It will have impacts, and my noble friend Lady Hollis has raised them clearly. She talked about the regional in-fighting that we will have. Certainly, we believe that it will be worse in the area that I represent and many other parts of the country—worse, even than the poll tax. When the poll tax was in place, it was relatively easy for me; I was only chairman of finance. When somebody came to me and complained about the poll tax, I could always say, “The Tories have introduced the poll tax”. We swept all the Tories off the council; it was very easy. But now, when they say, “What are you doing with my council tax benefit support?”, at the end of the day I will have to devise a scheme. That will be down to me.
Lord Smith of Leigh
It has been done to me. What options would we have in designing such a scheme? I have shared with my colleagues some of the initial thoughts that we have had in Wigan; we have not got quite as far as announcing what they will be. We will unfortunately not raise the money from the empty homes thing, so we will have to make some anticipation of where the costs will come from. Will they come from council taxpayers? I do not think so. I agree entirely with the noble Lord, Lord Greaves, we are not going to ask for an increase in council tax above the minimum amount that the Government will allow us to have in order to put money into council tax benefit. A referendum on that is certainly doomed to defeat. We will never try that. Will we make cuts in services to put more money into the council tax support scheme? That is an option but as my noble friend Lady Hollis mentioned, the impact of such a policy will be on the same group of individuals who should benefit. They are the people who need and rely on many of the council’s services that are already facing £66 million of cuts over the next few years. Where am I going to find the extra £2 million or so to pay for this? Or we could have to have a scheme that pays lowers benefits than the current scheme. That is very difficult because the people upon whom this will impact are the working poor. They are the ones who will really suffer from this—if we discount some of the vulnerable groups we will talk about in future amendments. I fear for some of the political consequences. The noble Lord, Lord Greaves, and I know of the kind of campaigning done by certain political parties, including the BNP, about people who are downtrodden. They say, “No one thinks about you. Here you are, you are poor and you live in these difficult communities”. Such parties could campaign on those issues.
Lord McKenzie of Luton
My Lords, we support the thrust of these amendments. I will start with Amendment 73A, spoken to by the noble Lord, Lord Jenkin, and supported by the noble Lords, Lord Shipley and Lord Tope, about the new burdens doctrine. I was broadly going to support this anyway. A new burden in this context would be if there were increased take-up of the benefits system in a subsequent year, so on that basis it is doubly worth supporting. It is not as though we are dealing with a new service or something of that nature, but if we are including in that definition the fact that there will be changes in the volume of take-up, it is certainly right to push back at the Government on that.
My noble friend Lady Hollis’s amendment gave a devastating critique of what the proposals will actually mean for individual local authorities and the people who will be hurt. My noble friend talked about adjoining authorities, one that included DLA in the computation of income and one that did not. What a nonsense when people are being forced into those sorts of judgments.
The noble Lord, Lord Shipley, said that one of the problems is that the timescale is too tight. I hope that we will be able to have common cause in an amendment that is coming up—I hope shortly; if not, next week—to address that specific issue.
My noble friend Lord Smith asked what local authority would not want to find jobs for young people. Part of the problem for some local authorities is that their economic regeneration departments are under pressure from the cuts that are already there, so it is not lack of desire to do that; the capacity to do it is becoming increasingly constrained.
Issues were raised about who is going to do the forecasting for the council tax benefit expenditure for the year in question, not only for 2013-14 but for subsequent years. The fear has been expressed here—and I share it—that 90% of forecast subsidised council tax benefit expenditure in reality will be an underestimate for what actually comes to fruition.
Perhaps I can press the Minister on a couple of techie points. I would guess that at the moment the reimbursement to local authorities for council tax benefit is on subsidised council tax benefit expenditure, and I think that is because there is not a full subsidy where a benefit is paid incorrectly or late. How is that going to work under a supposed localised system? Who is going to make the judgments, under various schemes that do not have the same parameters, whether a benefit is paid incorrectly or late? Is that what we mean by the reference to subsidised council tax expenditure?
Can the noble Earl also deal with the fact that this is going to be funded by way of the business rate retention scheme? What does that actually mean in practice? Are we saying that part of the central share is going to be used to fund this? Will it be deducted from the total business rates collected in the first instance and then split on a local and central basis? Precisely what does that mean?
On the specific issue of having to forecast subsidised council tax benefit expenditure, if that means making a judgment about that which is paid properly, correctly and in accordance with the scheme, it is clearly going to be much more difficult with a whole raft of different local schemes. The fundamental point that noble Lords have made is that is that the 10% cut—or whatever it turns out to be—is going to impose impossible conditions on local authorities having to make the judgment of Solomon. It is deeply uncomfortable and deeply unfair.
Earl Attlee
My Lords, I thank the noble Baroness, Lady Hollis, for the explanation of her amendments. The noble Baroness first asked me what was wrong with the CTB scheme. The answer is that there is no incentive on the local authority to reduce the claimant count.
Earl Attlee
There is no incentive on the local authority to reduce the claimant count because, as their claimant count and the CTB goes up, they get the money from the DWP.
Lord Greaves
It has been said that the existing claimant count is about 60% of people entitled to it. Is the Minister saying that it is wrong for local authorities to encourage those people who are entitled under the present or new system to actually claim? Under the new system, there would be a real incentive for local authorities to discourage people from claiming. Effectively, because it is a discount, the more people that claim, the lower the council tax base will be in that authority.
Earl Attlee
No, my Lords, I am not saying that. People should claim the benefits to which they are entitled. I am saying that the system is designed to encourage local authorities to go for local growth in order to reduce the claimant count. I fully accept the noble Lord’s point that people should claim the benefits to which they are entitled. The local authority may—
Baroness Sherlock
I just want to check that I have not misunderstood the Minister. Since council tax benefit is payable to people in work as well as people not in work, economic growth could still lead to people in work claiming benefits. Is he saying that an objective of localisation is to reduce the number of people who claim the successor to council tax benefit?
Earl Attlee
Not quite, my Lords. One of the objectives is to encourage better quality work, with better quality employers in higher technology businesses using a more skilled and higher-paid workforce, to still reduce the cost of the council tax benefit.
Baroness Sherlock
This scheme was designed to encourage the creation of high-tech work? Could the Minister explain that? I am sorry but maybe I have not understood the connection between those two things.
Earl Attlee
My Lords, there is an incentive for local authorities to encourage businesses which tend to pay higher salaries into their area. One of the complaints about the localisation of business rates is that it encourages retail outlets which tend not to pay very high wages. If a local authority can encourage higher paying businesses into its area, it will be able to reduce the expenditure on council tax benefits.
Baroness Hollis of Heigham
I then have two questions, if the Minister will allow me. First, why does he think that local authorities are not doing that now? Has he any evidence that local authorities are not seeking to encourage high-paying employers with high-tech skills into their patch? Secondly, that will almost always mean poaching them from somewhere else. As the Government knows, there is very little opportunity nationally for fresh economic growth beyond that. What advice would he give to local authorities to poach businesses from other areas?
Baroness Lister of Burtersett
The Minister will of course be aware of the House of Commons’ Communities and Local Government Committee report on localisation issues and welfare reform. It said:
“We have seen little evidence to support the hope that new and better-paying jobs for individuals, immediately sufficient to off-set the 10% reduction in the benefit budget, will inevitably follow from”—
the incentives that have been discussed; and,
“the means of economic growth are never solely in the gift of individual local authorities”.
What evidence did the Government have that the Committee did not to support the Minister’s contention?
Earl Attlee
My Lords, on the activities of local authorities to encourage businesses to come to their areas, of course local authorities do that now—I fully accept that—but they will do even more because they have a greater incentive. The noble Baroness quite properly made the point about poaching. It was a good point. Actually, we need to encourage businesses to locate in the UK and not in either another European state or further afield. It is not a question of poaching from next door necessarily, but if the local authority adjacent to you is less business friendly, you might find that businesses will locate in your area.
Baroness Hollis of Heigham
My Lords, are we saying that a district council will have the resources to send someone to Brussels to seek the relocation from Europe of a firm that may be willing to move a branch to a rural district in Norfolk? Forgive me, but get real.
Lord Beecham
I take it that we have finished that little discourse. I shall just revert to the question of the noble Lord, Lord Greaves, about what happens if more people claim benefits. What would happen if councils, or indeed the Government, went so far as to encourage people—particularly pensioners, 60% of whom do not claim—to do so? There is, I believe, £1.8 billion of unclaimed council tax benefit. What happens if those people start to claim? That would presumably take us beyond the £500 million. Who pays for the benefit for those people? Will the Government pay 90% of it or will it all fall on the local authority?
Earl Attlee
My Lords, it is clear that a local authority could devise a scheme that would increase the number of claimants. It would then have to take account of that in its budget. Whether local authorities choose to do that is a matter for them.
Lord Greaves
Let us assume that a local authority does not devise a scheme that encourages more claimants, but the number of claimants in that area goes up for whatever reason; and that the local authority runs a scheme to means-test people for housing benefit. My authority will probably do that in the first year, although it will be put out to consultation. What if the 60% of people who claim at the moment goes up to 80%? At the moment, it is a national benefit and the Government would automatically pay the cost of the extra 20 percentage points. Under the new scheme, the cost would fall on the local authority because it is a discount, not a national benefit. Increasing the number of people claiming by 20 percentage points would effectively reduce the council tax base of that authority. It is not money that is paid out to people; it is simply deducted from their bill.
We all, I hope, want people to claim benefits to which they are entitled. However, if the local authority, local campaigners for welfare and benefits, or local councillors with the interests of their residents at heart organised a campaign to increase the number of people claiming under the new system, it would reduce the amount of money coming into that authority. Will the Government adjust the grants to that specific authority over a period to take account of that, and how would that be done?
Earl Attlee
My Lords, I accept the noble Lord’s analysis of what would happen but the question is: why does it not happen now? Why do we not suddenly see a 20% increase in claimants? The noble Lord is describing a hypothetical situation.
Lord McKenzie of Luton
The Minister may wish to cast his mind back to the Pensions Bill, which we debated a couple of yours ago, and the representations that were made by the Royal British Legion, for example. It wanted a change to the name of council tax benefit because it believed that elderly people in particular were dissuaded from taking it up. They saw it as a benefit and that was something with which they were uncomfortable.
Baroness Hollis of Heigham
They wanted it to be called a council tax rebate.
Lord McKenzie of Luton
The nature of this arrangement could cause more people to claim without a campaign for take-up. Why on earth would we want to build any problem into the scheme that would dissuade councils or anyone else from encouraging people to take up their rights?
Lord Tope
My Lords, I said in the previous debate that simply changing the name from council tax benefit to council tax support is likely to increase the number of people who feel able to claim support, having, for whatever reason, felt uncomfortable about claiming benefit. That change alone, which was not produced by local authorities, in intended to increase take-up.
My advice to the Minister is that when in a hole, one should stop digging. We are getting a bit stuck here. I have heard it said by Ministers—although never in this House—that it is necessary to give local authorities an incentive to get more people back to work. I find that both patronising and deeply offensive. Some local authorities are better able to do it and have better circumstances in which to do it. However, I cannot believe that there is a local authority anywhere in the country that would say it has no incentive and does not want to get its local people back into work. Performance may differ greatly but I am sure that the intention is the same. Therefore, we are a bit stuck on this. It is an unanswerable question—as the noble Baroness well knew when she asked it. Perhaps we should spare the Minister his suffering and move on with the rest of the debate.
Earl Attlee
My Lords, on this point, not all eligible pensioners take up their council tax benefit. A number of factors affect the take-up rate. One is the stigma attached to the word “benefit”. That is why the Royal British Legion campaigned for a change in 2009. However, it is just one factor affecting take-up. There are many others, including the complexity of making a claim, people’s confusion about whether they are entitled to it and their aversion to disclosing information in answer to questions that they feel are intrusive. The noble Baroness, Lady Hollis, is nodding in agreement. In estimating future demand, local authorities will want to consider all these factors together.
Lord Greaves
I agree that the Minister needs to make progress, but will he reflect on this with his officials and write a clear letter about what will happen and who will pay the extra cost if the take-up rises? That is the issue that worries us. It is clear that we will not resolve it today, but reflection by the Minister and some information in writing would be extremely helpful.
Earl Attlee
My Lords, I will cover that in my concluding remarks. The noble Baroness, Lady Hollis, suggested that schemes would be determined on the basis of councillors’ prejudices. I refute this, as does my noble friend Lord Shipley. Schemes will have to be constructed by the council, not on the basis of individual councillors’ prejudices. They will not be in a position to take decisions on individuals but will agree to the best system after considering any changes they think they need to make to the current scheme—or they can use the default scheme which, as noble Lords know, is more or less the current scheme.
The noble Lord, Lord Smith of Leigh, made an interesting observation. He said that he supported the localisation of council tax benefits, but not this scheme. If that is so, what scheme would the noble Lord support?
Lord Smith of Leigh
One that is fully funded, so we do not have to make local authority cuts.
Earl Attlee
My Lords, we would all love to have a fully funded council tax benefit scheme.
Earl Attlee
But unfortunately we have to make savings.
The noble Baroness, Lady Hollis, suggested that this reform does not support local financial accountability. I disagree. Currently, local authorities can put up council tax without any regard for the impact on the cost of council tax benefit. This reform changes that by ending the subsidising of council tax increases from the benefits bill. There have been previous attempts to address this acknowledged problem. The recent report by the Institute for Fiscal Studies, to which the noble Baroness Lady Sherlock referred, noted that this reform restored the link between council tax increases and the benefits bill.
I was asked who should not get CTB. It is not black and white. The point of localisation is that councils will have the option to continue with the current scheme and find savings elsewhere, or to reduce some awards a little and raise money on empty homes. Localisation will mean that councillors will have choices about how they manage the cuts. There may be different schemes across the country. We trust local government to choose how to deliver local services to vulnerable groups. We trust them to deliver this scheme to support local people with their council tax bills. This is local accountability in action.
Speaking to Amendment 73A, my noble friend Lord Jenkin asked what happens once the spending review period ends and whether there are any guarantees for local government. Funding for the first two years of localised schemes is derived from the Office for Budget Responsibility forecast for spending on council tax benefit, which reflects existing spending and therefore assumptions about underlying demographic changes and council tax increases. Thereafter, decisions about overall levels of funding will be taken as part of the spending review process, which will provide an opportunity to consider cost pressures. Funding will be allocated via the retained business rate system, and the recent consultation set out provisional allocations.
Lord McKenzie of Luton
I am sorry to interrupt the Minister; I know he is trying to make progress. Assuming the first year is 2013-14, if the forecast by the OBR proves to be inadequate, will there be a basis for revision for the subsequent year within the spending review? Can the Minister say precisely what funding being provided by the business rate retention scheme means in practice?
Earl Attlee
My Lords, that is one of those matters of detail that the noble Lord will have to look forward to in my letter.
The noble Lord, Lord Jenkin, asked whether this policy reform was a new burden. This reform is not a new burden. Local authorities will have a significant degree of control over how a 10% reduction in expenditure on the current council tax benefit is achieved, enabling them to benefit local priorities and their own financial circumstances as they see fit. The Government are committed to carrying out a new burdens assessment regarding the administration of the schemes, and are gathering data on administrative costs to support this assessment.
I was asked whether the Government would be able to adjust allocations. As I said, the spending review provides an opportunity to review overall funding levels. Funding is allocated through the retained business rates. Baseline allocations will be set for 2013. Councils will have the flexibility and responsibility to design schemes that match local circumstances. Adjusting allocations would undermine the key principle at the heart of our reforms to local government finance, since funding will be within the retained business rate system. As we discussed in previous debates, it is essential that there is a sufficiently long period between resets to incentivise growth. Frequent adjustments to funding allocations would undermine this wider principle. Local authorities will have a range of flexibilities enabling them to manage costs in the mean time, including making adjustments to their own organisations and costs.
Increasing local financial accountability is a key objective of the localism agenda. Localising support for council tax gives local authorities an increased stake in the economic future of their local area, strengthening the incentive to support people back into employment. It also increases financial accountability by helping to make local authorities accountable for decisions over council tax levels, putting an end to the central subsidy of council tax increases.
There is widespread recognition of the need to reduce welfare spending. As I mentioned, spending on council tax benefit doubled under the previous Administration and it is essential that we take steps to bring it back under control. The saving from localisation announced in the spending review is a crucial contribution to the vital task of tackling the deficit.
Localisation gives local authorities significant control over how to manage the reduction in funding. Authorities will be able to offer council tax reductions that reflect local circumstances and priorities. They can decide whether to pass the reduction on to council tax payers, use flexibility over council tax or manage the reduction within their budgets. The noble Baroness, Lady Hollis, talked about the difficulty of collecting relatively small amounts of money and I will have to weary the Committee by repeating that it is up to local authorities to devise their schemes and take account of that difficulty.
Amendment 71 makes delivering the savings impossible and would in fact encourage local authorities to plan for that. The intention behind it is not realistic. The 10% saving has to be delivered, and we have given local authorities the freedom to decide how best to do this in their local area.
I do not deny that we are in hard times. The noble Baroness went into government in 1997 in a period of steady economic growth. The present Government are faced with truly dreadful financial circumstances.
Lord McKenzie of Luton
Does the Minister accept that when the coalition Government came into office they were experiencing a period of economic growth?
Earl Attlee
My Lords, I will accept that, but we also know why we have gone into a double-dip recession, which is not our responsibility.
The default scheme is intended as a legal back-stop, a safety net to ensure that those in financial need can continue to receive support. To fund a default scheme fully, as Amendment 71 would require, would send a message that local authorities do not need to take responsibility for developing a local scheme. It would make delivering the saving—which was called for in the spending review—impossible. Local authorities do not need to wait for the default scheme. Pragmatic councils are pushing ahead with the job at hand. Local authorities are starting to think through how to manage the reduction to best reflect local priorities: Harrow, Brent and Chiltern councils are already consulting on the design of their schemes.
Amendment 75 seems to be intended to prevent local authorities from designing a scheme to help deliver a saving. This does not seem responsible. It is right that local authorities have the flexibility to decide how to manage a reduction in funding, reflecting the circumstances of their area. Constraining their ability to do this prevents them from taking sensible local decisions about their priorities and what is affordable.
At the end of our debate on the last group of amendments the noble Baroness, Lady Hollis, accused me of not answering some of her more technical questions—questions that, I suggest, even my noble friend Lady Hanham would find taxing, so it is not surprising that I cannot answer them. Of course I listen to the Committee’s concerns very carefully and I will discuss the technical points with my excellent team of officials. I do not accept that there is any weakness in the team behind me. Any weakness lies with me because I am not an expert in local government. However, I will try to serve the Committee as best I can.
Baroness Hollis of Heigham
My Lords, I thank the Minister for that reply. No criticism is made ad hominem of either the officials or the Ministers. However, when we are talking about localisation and cuts and we ask on whom the cuts should fall, it is not unreasonable to expect an answer other than merely, “That is for the local authority to decide”. When we ask who is getting too much council tax benefit, it is not unreasonable for us to expect the Minister to be able to tell us. When we ask which three needs might be genuinely local and not shared by other authorities, it is not unreasonable to expect an answer. They are pretty obvious questions on policy, and not technical at all.
A number of people have intervened on the Minister and we have engaged in the arguments. I simply cannot engage with his basic position that it is all right to increase the cuts that will fall on poor people in poorer areas, and to call this increasing local accountability. However, at this time of night, I beg leave to withdraw the amendment.
The Earl of Lytton
“Electronic communication
The Secretary of State shall by regulation provide for the use of electronic means to communicate information regarding the level of a council tax demand.”
The Earl of Lytton
My Lords, I beg for a little light relief in moving this amendment. I assure the Minister that I will not tax his patience by bringing a bit of speed-dating to our deliberations.
My understanding is that regulations currently provide for all information relating to a demand for council tax to be in hard copy. In these electronic times it seems to me that at least some council tax payers would welcome an e-mail version and the provision of certain supporting data on a website, for which a link can be supplied. Speaking for myself, with all manner of legally important documents being served electronically these days, I would welcome the reduction in paperwork. I realise that there may be legal issues relating to electronic service of certain types of document, but where possible and convenient to the council tax payer, I should have thought that an electronic option would be desirable. That is all that my amendment seeks to provide. Coincidentally, it may reduce the weight of postmen’s bags in March. I simply ask that noble Lords indicate their agreement in the customary manner by saying, “Hear, hear!”. I beg to move.
Earl Attlee
My Lords, I thank the noble Earl for the explanation of his amendment. It would require the Secretary of State to create regulations providing for the use of electronic council tax billing. However, billing authorities already have powers under Regulation 2 of the Council Tax (Administration and Enforcement) Regulations 1992 to serve council tax bills electronically, as long as it is by agreement with individual council tax payers. The Government believe that this is a sensible arrangement.
Clause 14 makes provision for the costly supporting information that goes with council tax bills to be provided electronically. However, regulations will state that hard copy must be provided if a bill payer requests it. The Government consulted on this measure and it was strongly supported by respondents. Relieving authorities of the duty to provide the information in hard copy may encourage the take-up of electronic billing, because all parts of the process can be paperless, if the taxpayer so chooses.
However, given that billing authorities already have the powers to send bills electronically, I do not see any need for the amendment and invite the noble Earl to withdraw it.
The Earl of Lytton
My Lords, I thank the Minister for that. I did not know that there was already a power and I am surprised to hear it, given that there appears to be a rather small uptake. I am heartened by what he had to say. I entirely agree with his sentiments. If the powers are there, let them be used, and perhaps his department could encourage greater use of them among billing authorities in the interests of economy and speed. I happily beg leave to withdraw the amendment.
Baroness Hanham
My Lords, this may be a convenient moment to adjourn the Committee until 3.30 pm on 16 July.
The Deputy Chairman of Committees (Viscount Ullswater)
The Committee stands adjourned until 3.30 pm on 16 July.
House of Lords
Diabetes
(12 years, 5 months ago)
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Lord Sharkey
To ask Her Majesty’s Government what data they have on, or what best estimate they can give of, the extent to which the consumption of sugar will contribute to the substantial increase predicted in the incidence of diabetes in England and Wales.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the Government currently cannot provide an estimate of the extent to which sugar intake will lead to future incidence of diabetes in England and Wales, because, on balance, there is no clear evidence that sugar intake alone specifically causes diabetes. Obesity increases the risk of type 2 diabetes. The habitual consumption of calories in excess of needs for a healthy body weight results in weight gain, irrespective of whether these are from sugar or fat.
Lord Sharkey
My Lords, by 2050, on current trends, at least half of adults and a quarter of children are predicted to be obese, which will cause a huge epidemic of diabetes. Many experts agree that the excessive consumption of sugar is a factor in obesity and in diabetes. In fact, US scientists have concluded that sugar consumption levels are now so harmful that sugar should be controlled and taxed in the same way as alcohol and tobacco. Will the Minister give urgent consideration to taxing sugar in processed foods to help avert an imminent public health disaster?
Earl Howe
My Lords, we keep the question of taxation under review in the light of emerging international evidence on its impact. That will include looking at the experience of the recently introduced tax on saturated fat in Denmark and what effect it has had on diet and health. With any fiscal measure, there is always a risk of unintended consequences, so we would have to look at this particularly carefully.
Lord Alton of Liverpool
My Lords, did the Minister have a chance to see the report from the London School of Tropical Medicine and Hygiene, published earlier this month, which suggested that if obesity levels could be reduced, there would be sufficient food for 1 billion people worldwide. The report pointed particularly to the United States of America and at western Europe. Does this not both justify the Government’s campaign to reduce obesity and illustrate the truth of Gandhi’s remark that there is sufficient in this world for people’s needs but not for their greeds?
Earl Howe
I agree fully with the noble Lord. In this area, the message has to be that a healthy balanced diet is what we should all aspire to. As I mentioned in my initial Answer, obesity is one of the prime drivers for diabetes. If people can moderate their calorie intake to match their energy consumption, the world will be a healthier place.
Baroness King of Bow
My Lords, the Minister will be aware that increased sugar consumption leads to obesity and, in my view, diabetes. Is he also aware of the many studies, including one from Princeton University, which show that sugar is potentially addictive and activates endorphins in the brain in a way similar to heroin—I could hardly put down my Jaffa Cake long enough to come and ask this question. Does he not agree that it is important to look at research that shows that scientists have made rats sugar-addicted in just one month by feeding them sugared drinks? Will he revisit the nutritional standards for schools, because 62% of British schools currently do not have tough nutritional guidelines that would reduce sugar consumption among British children?
Earl Howe
My Lords, I am aware of that research, which my department is looking at very carefully, but I should put a health warning on it in that we do not yet accept the conclusion that sugar is addictive, although clearly in the case of young children those who get into the habit of consuming sugar are likely to continue doing so, so the noble Baroness is quite right that it is a risk factor in the young. The advice from the School Food Trust is of course to have a healthy diet at school. Many schools are adhering to that, and we are doing our best to promote that with our colleagues in the Department for Education.
The Countess of Mar
My Lords, the Minister mentioned unexpected consequences. Does he agree that people who are afraid of eating too much sugar because they might get fat will turn to sugar substitutes such as aspartame? Is he aware that aspartame contains 10% methanol, which, uniquely in the human body, is turned into formaldehyde and has its own neurological hazards? Would he recommend having sugar or sweeteners?
Earl Howe
My Lords, the Department of Health recognises that artificially sweetened or low-calorie drinks can play a role in helping people to reduce the number of calories they consume and offer a wide choice of low-calorie options. As for the safety of artificial sweeteners, all food additives, including sweeteners, are thoroughly tested for safety prior to approval and are subject to review by independent expert bodies. The Food Standards Agency considers that all approved sweeteners can be safely consumed at current permitted levels.
Baroness Trumpington
My Lords, this morning I was in a Waitrose and I looked at all the packets of cereals. Each one had a different sugar-based flavour, such as chocolate and apricot, and all the cereals contained sugar of different kinds. What is the Minister’s reaction to that?
Earl Howe
My noble friend draws attention to an area of concern. Cereals of that kind are particularly attractive to children, although I would say that the good news here is that added sugar consumption among children has fallen during the past few years, which is perhaps a sign that the messages on the levels of sugar that children can safely consume is getting through to parents.
Lord Collins of Highbury
My Lords, I am grateful to the noble Earl for reminding us that a small reduction in weight maintained over time can reduce the risk of developing type 2 diabetes. I must admit that I wish that I knew that when I stopped smoking and piled on the weight. As a consequence, I am type 2 diabetic. It is true that small improvements in eating and drinking habits can reduce the risk. I ask the noble Earl, as I asked him last November, whether the Government will take this threat seriously and undertake to lead a major awareness programme about what to do to avoid type 2 diabetes.
Earl Howe
My Lords, there is a great deal going on in this extremely important area. I am grateful to the noble Lord for emphasising its importance. There is a ring-fenced budget for public health, and weight gain is one of the key indicators in the public health outcomes framework. There is the Change for Life campaign, which has, I think, gained enormous credibility among the public and professionals. We are engaging with the food industry through the public health responsibility deal to take forward the calorie reduction pledge. There are NHS health check programmes, which are being rolled out throughout the country, and at GP level there are the nine tests which GPs are advised to undertake with diabetic patients. The rate at which those tests are being done has gone up very encouragingly over the past few years.
Club and Institute Union: 150th Anniversary
Lord Bilston
To ask Her Majesty’s Government what plans they have to mark the 150th anniversary of the Club and Institute Union.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, the Government would, first of all, like to congratulate the Club and Institute Union on reaching its 150th anniversary. The Government themselves have no plans to commemorate this anniversary since these are private institutions. However, we are aware that the All-Party Group for Non-Profit Making Members’ Clubs, of which I believe the noble Lord is the secretary, has organised a commemorative event in Parliament on 11 July—tomorrow.
Lord Bilston
My Lords, I thank the Minister for that very positive reply. My heart fills with pride in appreciation of the vital and outstanding service that the Club and Institute Union has contributed to the cultural, social, educational and creative life of working- class communities throughout the length and breadth of Great Britain over these past 150 years, which we are joyfully celebrating this week. Will the Minister kindly draw the attention of all government departments to the present burdens borne by the CIU—and not just the CIU but also by Conservative, Labour, Liberal and British Legion clubs and many others—through years of pernicious legislation, and offer them some respite in these very harsh and difficult economic and social times?
Baroness Hanham
My Lords, I am very aware of the traditional nature of the clubs involved—the work they have done for so long, the people they represent, those to whom they give a good time and those whom they support. I will of course draw the attention of other departments to the nature of these organisations as requested by the noble Lord.
Lord Davies of Coity
My Lords, I wonder if the Minister can advise the House as to the number of clubs that have been forced to close in recent years as a result of government legislation?
Baroness Hanham
My Lords, we are talking about private clubs, and I have no idea why private clubs close. The Government are doing their best to support small businesses such as clubs, and have already granted them rate relief from £6,000 to £12,000 until March 2013. They are also ensuring that rural rate relief is available to public houses in particular, not all of which will have the club connections that the noble Lord refers to. The Government are doing what they can to support small business, particularly in the country, and they do not have a role in the closure of the clubs that he mentioned.
Lord Lexden
My Lords, does my noble friend agree that a number of clubs affiliated to the CIU contributed significantly in their early days to advancing political education throughout our country? Thanks in part to them, by the 1880s 100 towns had their own local House of Commons modelled on Westminster. Of those for which information survives, 33 had Liberal majorities and 26 had Tory majorities—33 Liberal against 26 Tory. I offer this on a day when my Liberal coalition colleagues might need a little consolation.
Baroness Hanham
My Lords, I strongly suspect that an answer is not required from the Front Bench.
Lord Grocott
My Lords, it is very welcome that the Government have acknowledged this 150th anniversary and the tremendous work that has been done during that period—particularly the work, although he is too modest to point it out, done by my very good noble friend Lord Bilston both in his own area of Bilston, in Wolverhampton, and here in Parliament in the all-party group. The only thing on which I would like any elaboration is the Minister’s referral to this, I think, as a small business initiative. These are much more than small businesses. As has already been pointed out from her own Benches, these clubs have provided much broader services to their communities over the years. In fact, I would almost suggest to the Minister that she might place them in the category of government business headed “the big society”, because we invented it long before anyone else did.
Baroness Hanham
My Lords, it is always dangerous to align anything with anything. I was trying to suggest that there was an opportunity for small business rate relief for these clubs—I drew attention to that. If I inadvertently said that they were small businesses, clearly that is not what they are; they are private clubs that do a good job for their members and have all the attributes that noble Lords have suggested. They have a valuable history and have seen a lot of people through some very difficult times, as well as through some enjoyable times. As my noble friend behind me suggested, they also have some political involvement.
Prisons: Mothers and Infants
(12 years, 5 months ago)
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Baroness Benjamin
To ask Her Majesty’s Government what action they have taken to reduce the number of mothers imprisoned with their infants in England and Wales.
Baroness Northover
My Lords, sentencing in individual cases is a matter for the independent judiciary. Where a judge or a magistrate sentences a mother to custody, mother and baby units are made available to ensure that the best interests of the child are met, enabling the mother and child relationship to develop and to safeguard and promote the child’s welfare. The number of women imprisoned with babies has remained broadly stable at around 50 over the past two years.
Baroness Benjamin
I thank my noble friend for that answer. Essential, emotional attachments are made between mother and baby during the first 18 months of a child’s life, but imprisoned mothers with babies are often denied these necessary bonding opportunities because of the restricted environments they are placed in—even within the mother and baby units, which are often far away from the women’s homes. Will the Government encourage the courts to consider the welfare of the baby before sentencing the mothers to custody and can we please have more smaller, baby-friendly secure community units as an alternative?
Baroness Northover
My Lords, the Government are fully committed to reducing the number of women in custody, and that is already happening. Recent sentencing changes should help that further. If a woman or a man is a sole or primary carer, that should be considered as a mitigating factor in sentencing. Recent guidelines from the Sentencing Guidelines Council have reiterated this. There are seven small mother and baby units, the largest having 13 spaces, which support the development of mother and baby relationships. In deciding whether a mother and baby should be referred to one of these units, the interest of the child is paramount.
The Lord Bishop of Chester
My Lords, bishops see the inside of prisons rather more than most Members of your Lordships’ House do. There is no more depressing aspect of a visit than to go to one of these mother and baby units. Can the Minister tell the House what proportion of these mothers are there for drug-related offences, when they are often not the prime movers in the trafficking?
Baroness Northover
The right reverend Prelate is right that prisons of any description can be very depressing places, as is seeing the situation of people within them. However, I have visited the mother and baby unit within Holloway prison. If mothers are sentenced to prison, they need to be extremely well supported, and I thought that the support being given in that mother and baby unit was very good. Within the prison, too, the support in terms of mental health, tackling drug addiction and other problems was being approached. It is extremely important that we do what we can to try to keep women out of custody. The legal changes made in the last Bill help to move us in that direction and that is one of our aims, because the right reverend Prelate is right that many people in this situation are themselves very vulnerable.
Baroness Corston
My Lords, given that most of these women are imprisoned for offences for which no male would be locked up, and given that, as the Minister said, there are seven mother and baby units in this country, would she acknowledge that that small number indicates that, for many of these women, if they have other children, they have to make the stark choice between applying for a place at a unit and keeping their baby but losing contact with their other children, or giving the baby up at a time when they are probably breastfeeding so that they can remain in contact with their other children? Finally, will she acknowledge that there is overwhelming public support in this country for the proposition that women who commit non-violent offences and who are mothers of small children should not be locked up at all?
Baroness Northover
I pay tribute to the noble Baroness for all her work in this area, which shifted the last Labour Government enormously in terms of what they did. We are building on that work. As I mentioned, one of the changes in the last justice Bill, LASPO, says, for example, that if it is unlikely that somebody is going to have a custodial sentence, they are not remanded in prison. That should help women who find themselves in that situation. Similarly, there has been a turning around of what happens if somebody breaches their community order. It was mandatory before that that should be escalated, which often meant that women in that circumstance ended up in prison. What is suggested now is that there should be a fine—and that, too, should divert women away from prison. There are a number of ways in which it is extremely important to approach this to try to ensure that women are kept out of prison when that is appropriate, but to ensure that they are well supported if they are in prison.
Baroness Symons of Vernham Dean
My Lords, can the Minister tell us at what age babies or very young children leave the mother and baby unit, and what arrangements are made to lessen the emotional trauma of a very young child being taken out of its mother’s care on a daily basis? What arrangements are put into place to lessen the anxiety for the mother and the child?
Baroness Northover
Babies stay in the mother and baby unit until about the age of 18 months, so that can vary. It is therefore part of the way that the best needs of the baby are assessed to look at the length of the mother’s sentence and whether in due course it is necessary to remove a baby because the mother’s sentence is longer than the baby unit would enable them to stay together. Looking at the best interests of the baby is what underpins whether a mother and baby are referred to a mother and baby unit.
Lord Dholakia
My Lords, could my noble friend the Minister look at the international dimension of good practice, and could she invite the Children’s Commissioner to look at this particular issue, with the sole objective that the welfare of the child is of paramount importance?
Baroness Northover
The Ministry of Justice is always interested in international practice. Recently the Howard League sent through some interesting information about the situation in South Africa. Noting that, I would point out that the current policy in relation to mother and baby units is absolutely based on the needs of the child being paramount. It is surely right that that is the case.
Governor of the Bank of England
(12 years, 5 months ago)
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Lord Davidson of Glen Clova
To ask Her Majesty’s Government, in the light of current concerns over the supervision of financial markets, what qualities are required in the successor to the current Governor of the Bank of England.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Financial Services Bill makes provision to strengthen the UK’s financial regulatory structure. The proposals will establish a new system of focused financial services regulation with the Bank of England at its heart. The current governor still has almost a year of his term to serve. My right honourable friend the Chancellor of the Exchequer has confirmed that the process of appointing a successor will not begin before the autumn. The new governor’s qualities will of course reflect the Bank’s new mandate.
Lord Davidson of Glen Clova
I thank the Minister for his Answer. It is essential that the next governor is a man of unimpeachable integrity, or a woman of unimpeachable integrity—certainly a person who in all jurisdictions will command respect through their understanding of financial markets. Surely they will be required to be a person who has an intimate understanding of markets. The UK’s future problems are likely to have a substantial international context. Does the Minister agree that the next governor must have a character and position that enable him to have a strong, effective relationship with central bank governors in other jurisdictions, particularly the Middle East, China and the United States? If Her Majesty’s Treasury agrees with this, will it ensure that the next governor has these qualities?
Lord Sassoon
First, my Lords, for the clarity of the noble and learned Lord, the Chancellor has said:
“When the time comes, the best person for the job will be appointed, whoever she or he may be”,
so he is very clear on that point. The noble and learned Lord goes on to make an interesting suggestion about one of the possible dimensions of the job, and I listen carefully to what he has to say on that point.
Lord Barnett
My Lords, under the Financial Services Bill that we have been debating, the new governor would need to be chair of, or to manage, the FPC, the FCA, the PRA and the Court of the Bank of England. That involves, of course, threats to financial stability, the removal or reduction of risks, enhancing the resilience of the financial system, educating the public and, above all, co-operating with the Treasury, which is quite a job as I am not sure it knows what all these things are. Does the Minister think that a man or woman exists who is capable of doing that job, or is he thinking of applying himself?
Lord Sassoon
My Lords, the Bank of England is going to have a very large new mandate, and the points that the noble Lord makes are rather important to this. Whether on the MPC, the FPC or the PRA, the governor is going to be very well supported, not only by deputy governors but by a range of internal and external experts. Just for clarification, the governor no longer chairs the court; that is chaired by a non-executive chairman. I do not know how it was in the noble Lord’s day, but I am sure that co-operation with the Treasury is going to be the least of the new governor’s difficulties.
Baroness Kramer
My Lords, I regret that in the Financial Services Bill we have not established a mechanism whereby Parliament can have a say in confirming the new superwoman or superman to take up this role. Will the Minister at least give us an assurance that the Chancellor will look for someone who breaks away from the mould of groupthink, which contributed so much to the financial crisis in 2008, and who, while having all the necessary financial and economic background, perhaps comes with some other, different experience so that we can burst the bubble that has been a real problem in financial regulation?
Lord Sassoon
To be clear, Parliament will have a role in that the Treasury Committee will, I am sure, hold a pre-commencement hearing if it so wishes. Again, as I said to the noble and learned Lord, I take on board the suggestions that are coming this afternoon.
Lord Kinnock
My Lords, does the Minister agree that the qualities required will include patience?
Lord Tomlinson
My Lords, does the Minister agree that the next Governor of the Bank of England, besides having the proven competence that has clearly grabbed the Minister’s attention, should also be a person of honour and integrity—the sort of person who, should he or she wrongly impugn anyone’s integrity, would at least have the grace and courage to stand up, admit it and apologise?
Lord Sassoon
My Lords, if that is an oblique reference to my right honourable friend the Chancellor, I do not believe that an apology is needed. I agree with the noble Lord, Lord Tomlinson, that honour and integrity will be among the qualities needed by a future governor.
Lord Cormack
My Lords, if we are looking for such a paragon, should not the runner-up in the Canterbury stakes be considered?
Lord Sassoon
My Lords, I am not going to be drawn into a discussion of particular candidates, but the Bishops’ Bench is making some very notable contributions to the deliberations on the Financial Services Bill.
Lord Davies of Stamford
My Lords, Mervyn King has been a very distinguished governor and has made a major contribution to the science and art of inflation targeting, which is internationally recognised. Is it not desirable that in choosing his successor we choose someone not only of absolute integrity with great familiarity of the financial markets, and not just in the British amateur tradition, but someone who is a genuine monetary economist, is internationally respected in the field, and can hold his or her head high and deal on equal terms with Mario Draghi and Ben Bernanke, who are certainly in that category?
Lord Sassoon
My Lords, I am sure that whoever is selected and whoever is recommended by the Chancellor and the Prime Minister to the Queen, whose appointment it is, will be of the very highest quality.
Equality Act 2010 (Age Exceptions) Order 2012
(12 years, 5 months ago)
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Assets of Community Value (England) Regulations 2012
Baroness Hanham
That the draft regulations be referred to a Grand Committee.
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2012
(12 years, 5 months ago)
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Financial Services Bill
(12 years, 5 months ago)
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Baroness Hayter of Kentish Town
My Lords, Amendment 46 stands in my name and in the name of my noble friend Lord Eatwell. I shall speak also to Amendments 49, 52 and 67, which similarly stand in our names.
These amendments seek to ensure that when the Financial Policy Committee gives directions to the Financial Conduct Authority in the interests of financial stability, it does so in ways that do not conflict with the FCA’s duty to uphold consumer protection, that the Financial Policy Committee must take note of any representations from the consumer panel, and that where such directions, or indeed recommendations, are given, the FCA reports back to the Financial Services Consumer Panel as well as to the FPC.
If we did not know before last week about the detriment that can affect consumers where their interests are ignored, we must surely know now. Consumer trust in this industry has taken a body blow, and it is really important that regulators never for a moment forget the end-user—the saver, the borrower, the lender. The Financial Policy Committee is clearly not a consumer-focused body. It will take decisions that have a huge impact on consumers but it will not have the expertise to do it well. The FCA’s consumer panel is meant to represent the consumer interest. Without these amendments, we are allowing the panel to be ignored. We know what happens when the interests of clients are not placed centre stage.
I argued at Second Reading that our regulation must be consumer focused or it will never do the job. These amendments would help to achieve that. The FPC will take decisions that impact on consumers. The Minister knows this. In Committee last week, he said that a direction or recommendation from the FPC,
“could have a serious negative implication for the safety and soundness of individual firms or for consumers”.
He went on to say:
“The FPC will not necessarily be aware of those negative implications on … consumers”.—[Official Report, 3/7/12; col. 675.]
Quite so. There will be no consumer input into or consumer voice in the FPC.
The Minister seemed to think that the FCA would be aware of possible impacts on consumers, but the chief executive officer of the Financial Conduct Authority is from the industry. He knows the industry and understands its interests and perspective, but that is not the same as voicing consumer protection issues. Let us consider a possible FPC direction, such as a cap on loan-to-value at 90%. That would trap an existing 95% loan-to-value mortgage customer with a particular bank. That is hardly consumer choice or competition. Just this time last week, at the annual public meeting of the Financial Services Authority, Adam Phillips, chair of the Financial Services Consumer Panel, said:
“We remain concerned about the predicament facing so called ‘mortgage prisoners’—those with interest only mortgages and those trapped on the standard variable rate because they are unable to meet the affordability criteria—and have urged the FSA to act quickly to mitigate this situation. We also hope that the lessons learned in this process will be considered by the Financial Policy Committee when developing its strategy for dealing with asset bubbles”.
But who will be there to bring such lessons to the FPC if the consumer panel has no access? Similarly, any increased capital requirements decided by the FPC could be passed on to consumers in an opaque way by increasing rates and/or fees. Sometimes, I can almost hear some people in the City saying to us consumers, “Now don’t you worry your pretty little heads about this. It’s really just for us big boys”. Those big boys are exactly the people who have created so many problems for savers and investors.
When the FPC is considering big issues, how will the voice of the consumer be heard against the grain of the industry’s interests? Perhaps “grain” is not the correct term. We have learnt this morning that, at the cost of £90 million, there are some 800 lobbyists—one for each Member of your Lordships’ House—working to ensure that the financial industry’s case is heard at the highest echelons, be they the Bank, the Treasury, this House or another place. Is it any surprise that the still, small voice of the user—whose savings fund this industry, we should remember—are rarely accorded much precedence?
By contrast, these modest amendments are to ensure that not for one moment should the overall regulatory architecture ignore consumer protection. They hard-wire the consumer panel into consideration of the FPC’s biggest weapon—direction. Do we really need reminding that unless consumer confidence and trust return, unless the interests of consumers are centre-stage, no amount of shifting deckchairs on the regulatory deck will make a blind bit of difference? These modest amendments will simply help to keep consumers in every decision-maker’s eye. I beg to move.
Lord Peston
My Lords, I support my noble friend’s amendments. I was particularly struck by her parting remark, which concerns a point that has bothered me a great deal during our deliberations up to now. The voices of the financial institutions are being heard loudly and at great length in your Lordships’ House on this matter. I do not criticise them for that—they have interests that they wish to see served—but we have interests of a different kind; namely, that we must be dispassionate. In particular, therefore, if the voices of consumers—which means ordinary people—are not heard at all, then something has seriously gone wrong with why we are bothering to try to reform the financial system anyway. If I were asked why we would take the Adam Smith view of everything, I would say that, ultimately, the whole economy exists for the sake of the consumer, and not for the sake of businesses. Businesses exist for the sake of the consumer. To have any doubt of the absolute necessity that the consumer’s voice is heard is to be mistaken. I therefore rise strongly to say that that voice should be heard mandatorily, and not if it just suits the body that takes the decisions.
Lord De Mauley
My Lords, this group of amendments, which go to the issue of consumer protection, deals with the Financial Policy Committee’s use of its powers of direction and recommendation in relation to the Financial Conduct Authority. These powers are the key means by which the FPC will seek to implement macroprudential policy. I should say at the outset that we wholeheartedly agree with the noble Baroness about the importance of consumer protection, which indeed is why we are creating a dedicated consumer protection regulator in the FCA.
In the case of directions, noble Lords will be aware that the scope of the FPC’s power will be determined by the Treasury. Under new Sections 9G and 9K of the Bank of England Act 1998, as set out in Clause 3 of this Bill, the FPC will be able to direct the PRA, the FCA, or both, to implement “macro-prudential measures” that have been prescribed by the Treasury by order, subject to parliamentary scrutiny.
Amendment 46 seeks to limit the FPC’s ability to make such a direction if it would conflict with the FCA’s consumer protection objective. I understand the general motivation behind this amendment. Indeed, it would not be appropriate for the FPC to issue directions to the regulators without regard for whether they conflict with the statutory objectives of those regulators.
However, let me assure noble Lords that safeguards are built into the Bill to prevent this. Specifically, new Section 9E, as set out in Clause 3 of this Bill, provides that the FPC must, in exercising its functions in relation to the FCA, seek to avoid doing so in a way that would prejudice the advancement of the FCA’s operational objectives, including consumer protection.
This provision is contingent on the FPC being able to achieve its own objective for financial stability. That is right, given that financial stability must necessarily take precedence if the new regulatory system is to address the flaws revealed by the crisis. However, this places a clear obligation on the FPC to take into consideration the FCA’s objectives before acting, and, in subsection (2), to find a way to minimise any possible conflict. In addition, of course, the presence of the chief executive of the FCA as a voting member of the FPC means that the views of the FCA—and therefore of consumers—will be represented and taken into account.
More generally, I suggest that such conflicts are unlikely to arise often. In practice, it is likely that most of the FPC’s directions will be directed at the PRA, so there will not be significant potential for conflict to arise between stability and consumer protection. It is also worth saying that what really is in the interest of consumers is financial stability. If the FPC were to be given a tool, implemented through the FCA, the Treasury would take care to design it in such a way as to minimise the potential for conflict between financial stability and consumer protection.
Amendments 49 and 52 deal with the role of the Financial Services Consumer Panel in relation to directions made by the FPC to the FCA. Amendment 49 would require the FPC to take account of representations from the panel before issuing a direction to the FCA. The FCA will already be required to consider representations from the consumer panel with regard to its general policies and their compliance with its objectives under new Section 1R of FiSMA in Clause 5 of this Bill. This duty will continue to apply when the FCA is acting under direction from the FPC, so the panel will have ample opportunity to make its views known.
Amendment 52, which would require FCA-specific directions to be reported to the consumer panel, is rendered unnecessary by the Bill’s general provisions for openness. For example, under new Section 9J, to be inserted in the Bank of England Act 1998 under Clause 3, directions must be reported to the Treasury and, where appropriate, laid before Parliament. Under new Section 9R, the record of FPC meetings must specify decisions taken, including the decision to give a direction or to make a recommendation.
Likewise, the inclusion of recommendations within new Section 9R means that Amendment 67 is not necessary either. The amendment would require recommendations made by the FPC to the FCA to be reported to the consumer panel, but the general reporting requirement is already in place under new Section 9R. Even without these provisions, we would expect the FCA to keep the consumer panel—indeed all the statutory panels—aware of relevant decisions made by the FPC. However, the provisions that are already in the Bill provide a guarantee of openness. I therefore hope that the noble Baroness will feel able to withdraw her amendment.
Lord Barnett
Before my noble friend replies, perhaps I may add my support. The Minister’s reply enhances my concern about the depth of work being given to the Bank of England under this Bill. The Minister referred to the FPC, the FCA, the PRA and the MPC. I suggest that the Government look at all the initials that they are using in these clauses. They are somewhat confusing and might even confuse the new governor. The Minister’s reply briefly exposes the extent and breadth of this Bill. The reply to one modest group of amendments is, to say the least, somewhat comprehensive. I am sure that it might not be easily understood by many Members, let alone by people outside this House.
We are told now that consumer protection is to be decided by the Treasury and not by the Bank of England, which is being given powers under all those initials. It will be decided by the Treasury. Has it nothing else to do? Will the Bank of England have nothing else to do? The whole Bill needs to be looked at afresh, and I would not be at all surprised if, before we get to the end of it, it is not all withdrawn and started again.
Lord Peston
Just to supplement my noble friend’s intervention, am I right that the Minister is trying to tell us in a nutshell that there is no problem whatever with consumer protection in connection with these amendments and that everything will be all right, as Dr Pangloss might put it?
Lord De Mauley
My Lords, I am saying that the concerns to which the noble Baroness’s amendments relate are addressed as the Bill stands.
Baroness Hayter of Kentish Town
My Lords, I thank my noble friends Lord Peston and Lord Barnett, who between them have been teaching me economics for 40 years. It is very nice to have their support now. I also thank the Minister for his response. Unfortunately, he does not answer the major question. He says that they will mitigate problems from any decisions. Under this amendment, we were trying to say that consumers should influence those decisions. We keep putting things right when they have gone wrong and we want a voice in those decisions. I do not think that those questions have been answered by the noble Lord; nor has he taken up the point that the chief executive of the FCA, who does not come from the consumer movement, does not have the feel of it. That is fine; it is a different job. I think that we will want to return to this matter, because clearly it is key to the Bill. For the moment, I beg leave to withdraw the amendment.
Lord Flight
“( ) An order under subsection (2) may only exclude or modify procedural requirements under FSMA 2000 where the Committee believe that this is necessary due to the urgency of the situation, and where this occurs the order must include an explanation of the reasons for excluding or modifying the procedural requirements of FSMA 2000.”
Lord Peston
My Lords, I was hoping that the noble Lord, Lord Flight, would speak at much greater length on this matter, because I find this whole section of the Bill very difficult to understand. The notes on clauses—I do not know whether noble Lords have bothered to take a copy—are about the worst I have seen in my life. They simply repeat the clauses, with no explanation whatever. Therefore, I would like to ask, via the Minister—I am not sure how one does this in Committee —whether the central point here is to deal with an emergency where the emergency is such that you cannot wait? The noble Lord, Lord Flight, has not given us an example. I have had great difficulty thinking of one. Perhaps he could tell me later what particular sort of emergency he has in mind. The great stock market crash of 1929 is a relevant event from the point of view of financial instability. I am sure the noble Lord, Lord Flight, knows that Irving Fisher, then the world’s greatest economist, said at the time that there was no danger whatever of the stock market crashing, it would go on rising considerably.
If that situation repeats itself, our intervention would be too late. That is the problem. The real point is, technically, whether we could ever be early enough. Therefore, I just want to make sure that I fully understand what the noble Lord, Lord Flight, is saying, when he recommends this amendment, which otherwise sounds fairly sensible to me.
Lord Stewartby
My Lords, I would like to add a word to what the noble Lord, Lord Peston, has said, in particular to ask my noble friend Lord Flight about the frequency with which this situation is likely to happen. Would it be an exceptionally rare event, because that may affect the way in which one approaches it?
Lord Flight
My Lords, I was simply making the point that if this power is used, and as a check against its improper use, there should be the requirement to explain why.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, I will see if I can help a bit here. Amendment 47A seeks to prohibit the modification or exclusion of procedural requirements—that is, the requirement to consult—except for reasons of urgency. The reasons for the exclusion or the modification would also need to be included in the order. I should briefly explain why the Treasury has the ability to switch off or modify procedural requirements—the requirement to consult—which apply to action taken by the PRA and FCA on a tool-by-tool basis.
As the Government made clear in their February 2011 consultation document, in the case of some macroprudential tools, directions from the FPC will be very specific, requiring no discretion at all on the part of the regulator to implement them. Noble Lords asked for examples. In these cases—for instance, where the FPC is simply changing the level of a particular lever—consultation or cost-benefit analysis undertaken by the regulator would have little value and would introduce unnecessary delay into the process.
The Government believe that in these cases the FPC’s policy statement for the tool and its explanation of how the action is compatible with its objectives will provide much more valuable information about the action and its impact than any consultation by the regulators. However, I reassure the Committee that the Government do not expect to modify or exclude procedural requirements for most tools.
The Government will in due course publish a consultation document with proposals for the composition of the FPC’s initial toolkit, which will set out whether procedural requirements will be amended for any tools. In that case, there will be complete transparency regarding whether there has been any proposal by the Government to cut out the normal full consultation processes, and, if so, the reason will be clear. On the other hand, taking the question of urgent cases, if a delay in implementing an FPC direction could pose a risk to financial stability, both the PRA and the FCA already have, under their existing powers, the ability to waive consultation requirements in order to take action urgently.
Therefore, I hope I can assure my noble friend that on the one hand it will not be, in his words, at all common for consultation not to take place and it will be transparently set out; on the other hand, the power in new Section 9H(2) will not be needed in cases of urgency because that is already covered. On the basis of that explanation, I ask my noble friend to withdraw his amendment.
Lord Flight
My Lords, I think I am happy that the fundamental point is covered, and what the Minister has just stated effectively puts that on the record. I beg leave to withdraw the amendment.
Future of Specialist Disability Employment
(12 years, 5 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, with the leave of the House, I will now repeat a Statement made in the House of Commons by my honourable friend the Parliamentary Under-Secretary of State for Work and Pensions. The Statement is as follows:
“I would like to make a Statement on Remploy and I am sure honourable Members will agree that Remploy employees must be first and foremost in our minds today. That is why they have been notified first of the decisions of the Remploy board in advance of this Statement today.
In her independent review published last year, disability expert Liz Sayce made it clear that segregated employment is not consistent with equality for disabled people. The Sayce review sets out that money should support individual disabled people, not segregated institutions, as well as recommending that Remploy factories should be set free from government control.
It cannot be right that the Government continue to subsidise segregated employment, which can lead to the isolation of disabled people. This is no alternative to promoting and supporting disabled people in mainstream jobs, the same as everyone else.
I have been absolutely clear that the £320 million budget for disability employment services has been protected, but by spending it more effectively we can get thousands more disabled people into work. It is important that this money is spent in a way that is consistent with what disabled people want, consistent with this Government’s commitment to disability equality, and consistent with helping more disabled people live an independent life.
When Labour put in place the Remploy modernisation plan in 2008, it started a process with £555 million to put factories on to a proper financial footing. It closed 29 factories as part of this process. What is clear is that the performance targets it set were not realistic, the reduction in costs could not be achieved and the modernisation plan has failed. In 2010-11, factories made almost £70 million of losses—money that could have been used to support thousands more disabled people into work. That is why the Government took the decision to implement Liz Sayce’s recommendations in March to stop funding Remploy factories that have been losing millions of pounds, year after year, but committed to doing everything possible to minimise the number of redundancies.
Today I can inform the House that the Remploy board has considered in detail 65 proposals to take factories out of government control as part of a commercial process. These proposals have been scrutinised by a panel, independent of Remploy, established by the department. The Remploy board and the Government have done all we can to support bids and safeguard jobs. This includes a wage subsidy for disabled members of staff totalling £6,400 and professional advice and support worth up to £10,000 for employee-led bids.
On this basis, nine sites have had business plans accepted and will now move forward to the “best and final offer” stage, where detailed bids will be considered. Back in 2008, when the right honourable Member for Hodge Hill, then Chief Secretary to the Treasury, started this modernisation process and closed 29 factories, there was no such offer. No factories were given the opportunity to continue outside of government control. Remploy is hopeful that these negotiations may lead to the transfer of business and retention of jobs. At the current time, this does mean that 27 Remploy sites will no longer be operating. Details of these sites will be placed in the Library of the House. Remploy employees have been informed of the board’s decision this afternoon. The Remploy board will now move into a period of individual consultation with employees.
Undoubtedly, for those employees who have been told that their factories are closing, this is difficult news. But let me make one point absolutely clear. We are doing everything we can to ensure that Remploy workers who are affected will receive a comprehensive package of support and guidance to make the transition from government-funded sheltered employment into mainstream jobs.
We have put in place £8 million to guarantee tailored support for every single disabled person affected for up to 18 months, including a personal case worker to help individuals with their future choices, as well as access to a personal budget for additional support. We are using the expertise of Remploy Employment Services, which, despite difficult economic times over the last two years, has found jobs for 35,000 disabled and disadvantaged people, many with similar disabilities to those working in Remploy factories. We are working with the Employers Forum on Disability to offer targeted work opportunities for disabled people through the First Shot, including guaranteed interviews, job trials, work experience and training. We have set up a community support fund to provide grants to local voluntary sector and user-led organisations. We have protected the budget for specialist disability employment services of £320 million on average for every year of the spending review period, and we have added £15 million specifically to Access to Work. This means that 8,000 more disabled people will be able to be supported into work as a result of today’s announcements.
This is an ongoing process. Over the Summer Recess, I commit to keeping right honourable and honourable Members—and noble Lords—updated on the status of the business plans going through to the next stage. I will provide a further update on progress when the House of Commons returns in September. Our approach has been led by disabled people’s organisations and disabled people themselves, many of whom have welcomed the move to end the pre-war practice of segregated employment. I believe that it should be welcomed by all sides of the House. By spending these protected government funds more effectively we can support thousands more disabled people in work. What is more, we can spend it in a way that fits the needs and aspirations of disabled people in the 21st century by promoting disability equality and supporting disabled people in leading full and independent lives”.
My Lords, that concludes the Statement.
Lord Collins of Highbury
My Lords, I hear what the Minister said about the worthy objective of ending what I used to call “sheltered employment” and moving towards more integrated employment, but the Government on this occasion have a duty as an employer to employees who are incredibly vulnerable. There are already 515,400 disabled workers out of work in the UK, as well as 1.9 million people who are not disabled looking for work. I fear that unless there is a U-turn by the Government on closing the Remploy factories, the 2,800 disabled employees will be put on the scrap heap and most of them will never work again.
Quite simply, this is the wrong plan at the wrong time. To use another phrase: it is too fast and too deep. I am afraid that the Government have not understood all the implications of Liz Sayce’s report. She understood the need for change, but in making that change she also understood the need to involve the employees and the people who work hard in Remploy in ensuring that they have the possibility of a future. The Government have ignored those recommendations—in particular, about the time and speed of the implementation of these changes.
Why do the Government not honour the recommendations of Liz Sayce that they have chosen to ignore? Why do they not give factories six months to develop a business plan and two years before the subsidy is fully withdrawn? Why is there not a proper plan for transition that gives hope to people in work to remain in work? The viability of the Remploy factories could be decided not by a panel appointed by the department but by one that genuinely involves business and enterprise experts, as well as trade unions, rather than a simple unilateral action by the department. Will the Minister consider restarting the process on a proper basis that will enable businesses to examine whether they have a proper viable future? The public sector in each local authority area could be involved so that we can properly understand how government and local purchasing and employment policies impact on the viability of these factories.
I welcome the commitment in Liz Sayce’s report. The Government need to take a more flexible approach to transitional funding. Some of these factories—beyond those that the Minister has referred to—may need more time, particularly in areas with the highest unemployment. As we have heard today, some may need less. We are talking about the future of nearly 3,000 workers, and it is time for the Government to put the emphasis on ensuring the success of enterprises rather than saying there is no hope. I urge the Minister to look at this issue. It is not impossible to look at the tender process and to work in a way that meets the timeframe set down by Liz Sayce’s review. It is simply not credible to suggest that potential bidders can be drawn up at such short notice. With the number that we have got in the report and in today’s Statement, it is the clear position of the Opposition that not enough time has been given to the future prospects of these factories. I urge the Minister to consider these points and look at the whole picture and the impact of the proposals, which will mean thousands of workers having no future.
Lord Freud
Let me clarify one or two points on the numbers. The noble Lord, Lord Collins, talked about 2,800 workers on the scrap heap. The actual figure for the 27 sites we are talking about today is 1,422, of which 1,212 are the disabled group. There is a second process starting in the autumn with the next 18 factories. Those are the numbers that we are talking about.
There were two questions on process. The length of time taken to get this through, end to end, is just over five and a half months from the commercial process launched by Remploy on 20 March, not including the time for locking down the approved bids. We have had 65 bids, which we have boiled down to bids for nine particular factories. There has been an open process during which we have also put in support to provide subsidy for the first two years of £6,400 in the first year, tapering down to £1,000 in the second year. We have tried to find ways for local groups to take part in this process, including finding funds to support employee-led bids. We have run a process which, within the context of commercial and legal obligation, has been transparent and open.
It would not be appropriate or necessary to restart the process as the noble Lord said. We need to remove uncertainty and get on and finish this process in a satisfactory way so that people can work out their futures and take advantage of the very considerable package of support that we are putting behind getting people into alternative work.
Baroness Turner of Camden
My Lords, the Minister will not be surprised that I protest about the decisions which have been made in relation to Remploy, because I have raised the issue previously in debate in this House. He will be aware, of course, that the unions representing their members in Remploy have already protested very strongly against the decisions that have been taken.
Although I understand what the Minister says about it being much better for workers to work with other people and not to be segregated, for many people segregated employment is the only work available and appropriate for them, particularly in the neighbourhoods in which they live. The local siting of Remploy factories is very important.
I believe that the decision has been taken on a number of grounds, not necessarily in favour of the individual workers. There is an ideological attitude here on the part of the Government, who prefer privatisation to publicly owned enterprises. This was a publicly owned enterprise, a government enterprise, which everyone felt for many years was entirely successful. Many of the workers do not seem to have the organisation to effectively protest, although apparently they all belong to unions.
There is also the question of the people who supervise these workers. Supervising disabled people often requires a great deal more skill than supervising in ordinary circumstances, and the people concerned are trained to deal with the disabled people for whom they are responsible.
This is an entirely bad decision. I challenged it when I understood that it was in the process of consultation, and the unions protested at the time. I very much regret that the Government have taken this decision. As my noble friend on the Front Bench said, I hope there will be an opportunity for reconsideration, because there should be reconsideration. This is an important matter to the people who are directly involved, and I would like to protest on their behalf.
Lord Freud
My Lords, the first claim of the noble Baroness, Lady Turner, about segregated employment being the only employment available, is undermined somewhat by the fact that many of the jobs provided by Remploy Employment Services are in the areas where the factories are situated. Indeed it is having a great deal of success in getting jobs for disabled people in non-segregated employment—I think that the figure is roughly 12,000 jobs in those areas in the past few years. Clearly it is tough to get jobs for disabled people but Remploy Employment Services’ remarkable performance shows how, with the right strategies and policies, one can be successful in getting people into non-segregated employment—which is, of course, our central strategy.
I do not think that the noble Baroness really believes that this is an ideological public/private issue. It is about segregated and non-segregated employment and trying to spread money as efficiently as possible among the disabled community. When you compare an operation which lost £70 million in 2010-11 and cost £25,000 year-on-year for each worker supported with Access to Work’s one-off investment, in many cases, of just under £3,000 to help people into non-segregated employment, you have to take these basic value-for-money considerations into account. I therefore commend this approach, which is being done with great concern and care for the individual workers involved, as a far better way of spending our budget for disabled people in work.
Baroness Browning
I share my noble friend’s aspiration for getting the people currently with Remploy into integrated, paid employment. However, this proposal, by any other definition, is something of an experiment by putting so many people into the jobs market at this particular time. I think that he mentioned that each worker would have a mentor and assistance in getting back into work for 18 months. However, I wonder if he would agree that the House should receive a full report from him in 18 months’ time telling us how many people are in contracted paid employment and how many are not. I must say to him that, in evaluating value for money, it is not only the public money that his department spends that would come into the equation. For those who might not be in paid employment at the end of the 18 months we would have to take into account not only the money that they had perhaps drawn in unemployment benefit but also a much wider expenditure which might include things such as mental health costs, physical health costs and costs associated with family breakdown. Those sorts of things—the therapeutic values and costs associated with this group in terms of their stability in the workplace—are not only important to them personally, although that is the most important part, but also involve a cost to the public purse. I really feel that the House should be able to access that information in 18 months so that we can make a judgment on just how successful this experiment has been.
Lord Freud
My Lords, the monitoring of what happened in the 2008-09 closures was not very good—I appreciate my noble friend’s point, and I will look into the nature of the reporting back. There will be information and, if I may, I will specify the nature and timing of the feedback in a letter. I appreciate the point. On value for money, the assessment is that, over the current and the next spending review periods, this move will be worth just over £200 million. That is the context in which we are talking.
Viscount Tenby
My Lords, very briefly, perhaps I may press the Minister on what steps the Government are taking to overcome the reservations that employers might have in taking on disability labour.
Lord Freud
My Lords, we are undertaking quite a major exercise around Access to Work, and one of the areas that we are working on is exactly the noble Viscount’s point about making employers feel comfortable. When Remploy began after the war, manufacturing was a major part of our economy. It is quite hard to be full steam in a steelworks, for instance, if you have a physical disability. As the economy has moved over to the service sector, it is very different, and the idea that many disabled people—certainly physically disabled people, around whom the concept of Remploy was developed—cannot do a whole stream of mainstream jobs is incongruous today. That is what we are talking about in the modernisation process. As I said, there is an issue about mental health. There, we are trying to push Access to Work so that people with mental health issues are pulled in and involved. We have a lot of work still to do about stigma. The Mind campaign has been extraordinary in starting to turn attitudes, and we need to get right behind it. That is a big and important issue to get employers behind.
Lord Addington
My Lords, I shall make a couple of points. First, the point made by my noble friend Lady Browning about reporting back is vital. This is probably the final public step of the process of looking at those with disabilities as individuals as opposed to people who are put away in blocs. I have always felt that the Remploy factories were on a time limit, and the previous Government accepted that. It is never the right time to make that change, and it is particularly unfortunate that it has to be done now, at a time of high unemployment. Can my noble friend assure me that in this process, those who are placing people outwith the specialist teams—normal job centres and secondary support services—are given greater briefing, particularly in the areas where people are being made unemployed? This may well be a useful test case for those who are providing better services overall. Unless we get that process right across the board, we will have merely pockets of good practice, not good practice overall.
Lord Freud
I thank my noble friend for that point. As I said, I will outline exactly how we will report back and timings. The more important point is the level of support we are providing in this case, where we have the personal help and support package, which is considerably tailored with consultation at every stage with, most interestingly, a specific caseworker per person, so people’s individual requirements are analysed and taken into account, plus a fund to help people in. In this case, there is a lot of tailored support. One lesson may well be how important individual caseworkers are in helping people.
Lord Kirkwood of Kirkhope
I have been following the development of this policy area, and it is very difficult. I understand the comments of the noble Lord, Lord Collins, about timing, but I disagree with him. I also disagree with him on his interpretation of the Sayce report. Liz Sayce, who did sterling service to this House and others by writing her report, is looking much more long term and I think that her long-term principles are absolutely correct. We have to get the implementation right to look after the individuals who will be directly and, in some cases, starkly affected by this change. I want an assurance from my noble friend that there will be a comprehensive package of support for the individuals affected.
In particular, as it affects these workers that we are all so concerned about this afternoon, transport access through the Access to Work programme is vital, because a lot of these factories and establishments are in very hard labour market areas. They may have to look further afield to find employment opportunities that are appropriate for their special circumstances.
I am reassured to hear my noble friend mention the individual personalised package. I am also reassured by his undertaking to report back. It seems strange to me that we spend £320 million or £330 million on disability specialist employment services but £7,000 million on disability unemployment services. As the architect of the famous DEL-AME switch I will be looking to him in the longer term—and I hope that these short-term problems are sorted out—to use his ingenuity to try to lever some of the money out of disability unemployment support to employment support in the future.
I support what is being suggested. I just hope we get the individual support packages correct.
Lord Freud
My Lords, I thank my noble friend, who understands this area as well as anyone in the House.
This is not easy—it is a change in direction. However, it does reflect a world which is moving on, away from the physical disability area, into the mental health disability area. There is a lot of work to be done there. We need the money to be used very efficiently. In terms of efficiency, roughly half of the money spent on Access to Work is in achieving things that would not have happened otherwise. In other words, there is, in the jargon, not too much dead weight. Clearly one of the objectives of any Government must be to ramp up the level of efficiency and reduce the level of dead weight as we direct the money to help people who particularly need it. As noble Lords will know, that is something I am trying to push hard, in every direction that I possibly can.
Financial Services Bill
(12 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Eatwell
Lord Eatwell
My Lords, I shall address Amendment 54, in my name and that of my noble friend Lady Hayter. I will also speak to Amendments 55, 57, 58 and 61. I apologise to the Committee if there is some confusion over the grouping with respect to these amendments. We asked this morning for this amendment to be degrouped from the amendment tabled by the noble Lord, Lord Flight, which deals with something rather different.
I will preface my remarks by saying that over the next several groups we will examine the exceptionalism of the Financial Policy Committee. This committee is an experiment, and it has powers transferred from persons who have the authority of election behind them and are part of the executive, to an administrative function. These powers are substantial: they manage the supply of credit, and possibly, if particular measures were handed over to the FPC, they will manage the demand for credit. Hence, it will have a major impact on the overall macroperformance of the economy.
There is also the potential for the FPC to be in conflict with the Monetary Policy Committee—the MPC—which controls the price of credit. That contradiction could be a serious element in the overall operation and management of the economy. The exceptionalism of the FPC, in our view, requires exceptional scrutiny and consultation as this experiment unfolds. I call it an experiment because we do not as yet know how effective these administrative measures are going to be. We do not as yet know even what they will be in content, so a degree of extra scrutiny and consultation is required at every stage to ensure that major mistakes are not made and that we design effective procedures and secure public acceptance for the role of the Financial Policy Committee.
Amendment 54 introduces a minor element, which has wider significance than might at first appear. It simply introduces the expression “and the public” into those who must be consulted with respect to the makings of an order. The public here is a term of art, meaning those who have a direct interest in this area. It would essentially involve the industry and perhaps a few specialist academics or others who have a particular interest in the field. Amendment 54 seeks, as does Amendment 55, to introduce the possibility of that wider consultation, which I believe is vital if this experiment—and it is an experiment—is to succeed.
Amendment 57 simply adds to the requirements for consultation by providing a back-up. When there is some failure to consult, perhaps because of the urgency of a particular measure, that failure should be,
“subject to scrutiny by the Treasury Select Committee”,
in a way which has been recognised in other parts of the Bill. Amendment 61 adds to the conditions associated with urgency that there should be a statement published within 10 days of an urgent measure on which consultation has not taken place. Those four amendments provide a wider framework of consultation for this experiment than is provided in the Bill. It seems to me that they are entirely unexceptional and would be widely welcomed throughout the financial services industry, and indeed the policy community.
Amendment 58 is a little different and really should have been degrouped, but we feel we should not go too far in our enthusiasm for degrouping. Here we have a slightly different element that focuses, however, on the exceptionalism of the Financial Policy Committee because that committee has a particular responsibility for measures that are specific macroeconomic controls. I simply do not see how that responsibility can be in any way transferred to the FCA or the PRA, which do not have such a responsibility in their objectives or their specification of roles. This seems to be a major mistake in the drafting of the Bill. It is also unnecessary with respect to the directions by the FPC, since the ability of the FPC to authorise the exercise of discretion is covered in proposed new Section 9G(5). This part is therefore going too far, as the necessary role for the FPC is already covered.
This is a dangerous amendment—no, it is a dangerous position, not a dangerous amendment. It is a very beneficial amendment, which would remove a potential danger in the sense that the provision, as drafted, takes these experimental powers which we are handing to the FPC and allows them to be generalised outwith that very special framework that we are creating in the Bill. I urge the Government to accept Amendment 58. All the powers that the committee needs are covered by proposed new Section 9G(5) and this position is entirely unnecessary.
In dealing with the exceptionalism of the Financial Policy Committee, therefore, the amendments I am discussing in this group enhance the underpinning of consultation that will provide validity and acceptance to the powers of the FPC and remove what was perhaps an unwitting extension of those powers, which might undermine the entire project. I beg to move.
Lord Barnett
Apart from the slight slip, I agree with everything my noble friend said. Indeed, I would say that it is not the only major mistake in this Bill. There are lots of major mistakes; indeed, there is total confusion. My noble friend has referred to only part of it. The plain fact is that when he talked about the FCA or the FPC, I was not quite sure which one we were talking about. There is also the PRA, which I forgot to mention. The macroprudential is also very important. I do not know where it fits into all this and where the responsibility will lie. To say that it is confusing is to put it mildly. As I have said before, this Bill is a dog’s breakfast—I think that is the phrase. This Joint Committee that is being set up—perhaps the noble Lord can tell us when—was supposed to deal with everything very quickly. However, we are rising in a couple of weeks’ time, and if the Joint Committee is not set up soon it will be October before it is. Perhaps the noble Lord knows, because he knows everything about this Bill.
The plain fact is that responsibility ultimately rests with the Treasury. On the previous group of amendments, we were told that the Treasury will issue another document. The one thing we are not short of on this Bill is documents. We have two huge volumes, one with the schedules and one with the clauses, plus Treasury amendments and all kinds of working papers. Frankly, if my noble friend is confused, anyone involved with this Bill is bound to be confused because it is totally confusing. I hope that the Minister will be able to reply comprehensively about how the whole thing will work and where the responsibility lies. I assume that ultimately it will lie with the Treasury, not with the FCA or the PRA or whoever. Who else will be responsible for financial stability? It must be the Treasury. No doubt, the Minister will be able to tell us. I strongly support my noble friend.
Lord Peston
My Lords, first, I support my noble friend Lord Barnett in his remarks about this Joint Committee of both Houses, about which we had a great row last week and were even divided on. We would certainly like to know when it will be set up and when it will appear in detail in the business statement. Having said that, I have two or three questions.
My noble friend is quite right to use the word “experiment”, but I hope he will agree that the whole Bill is an experiment. We have not had anything like this placed before us in this form, certainly in my quarter of a century here. That does not mean that it is an experiment that should not take place, but it does mean that we must be immensely careful when it comes to implementation. In particular, the one thing that we do not want to do is what I am afraid all Governments do: look at the past and then repeat the errors of the past willy-nilly. This is not a party political point; it is part of the nature of our political system. We need to make absolutely certain that we do not repeat the errors of the past.
One slight point which my noble friend knows I will disagree on is the phrase,
“subject to scrutiny by the Treasury Select Committee”.
I would always want to add “and the Economic Affairs Committee of your Lordships’ House”, but again we have had that argument before, and the cliché “flogging dead horses” is not my stock in trade.
What troubles me much more is that I cannot see how what is said in the Bill does not lead to clashes with the MPC and what it seeks to do. There is an enormous blurred area of who is responsible for what. After all, if one knows any monetary economics, one knows that the MPC’s role is certainly to produce financial stability. That is the whole point of a correct monetary framework, yet there are these other bodies doing the same thing. I know that we went through this again last week and were told that the governor of the Bank—I add the now mandatory remark, “whoever he or she may be”—will be chairing both committees, but it is still a Herculean task for the governor to ensure that two different committees do not have a decision-making process that leads to conflict.
My last question is due to my ignorance of parliamentary procedure. Could the Minister say a bit more about what the phrase “by order” means? Does it mean putting an order before both Houses that is not amendable by us, or not? Apart from that, as I say, my support is strong.
Baroness Noakes
I may be able to help the noble Lord, Lord Peston, with his last question. In two groups’ time, we will be discussing precisely the nature of the procedure that will accompany these new tools. The noble Lord might like to wait until then.
The Commercial Secretary to the Treasury (Lord Sassoon)
I am always grateful to my noble friend or anyone else who wants to take the heat on challenging questions. We will come back to the nature of orders.
On the question of what the experiment is here, the experiment that has failed is that of creating the FSA, and we now need to go back to putting the Bank of England at the heart of matters, which is what this is all about. I rather preferred the noble Lord, Lord Eatwell, referring to a “project”, which he did at the end of his speech, rather than an “experiment”. It is indeed a major project.
To dispose of the not entirely relevant question about the Joint Committee on banking ethics and standards, the procedural Motion to set up that committee will be before us very shortly. There is not much more that I can usefully add. I do not think it is directly relevant to these amendments, but I am sure that that Motion will come forward very soon.
Lord Peston
It is directly relevant because the Minister has argued constantly that these are times of crisis and that we need to act quickly. He keeps arguing that and blaming the previous Government for the crisis rather than his own Government’s continued mistakes. It is therefore very relevant for us to know when this committee is going to be set up and who will be on it.
Lord Sassoon
I am sure that we will not have to wait for very long. I shall address what is more directly the subject of these amendments and the question about possible conflicts between the FPC and the MPC. While it is conceivable that the two committees might seemingly appear to be taking conflicting action, I do not actually believe that that is likely to be the case as each committee’s actions will be designed to address very different aspects of the economy and the financial system. That said, there are mechanisms in place to ensure that conflict does not arise. The committees will share information and briefing in order to aid co-ordination, and the Bill makes provision for joint meetings of the two policy committees if at any time that is required. The Bank has also said that it agrees with the Treasury Committee’s recommendation on this question and that the governor should consult the chairman of court if a conflict arises. It is unlikely, but the Bill makes provision through joint meetings and the consultation with the chairman of court.
I turn to the specifics of Amendments 54 and 55. These amendments seek to require the Treasury to consult the public before making any order which makes macroprudential tools available to the FPC. I agree with the noble Lord, Lord Eatwell, that effective consultation on macroprudential tools is essential, but this amendment is not the best way to achieve it. The practice of public consultation on important matters of policy and legislation is now well established and is engrained in good government practice. My honourable friend the Financial Secretary said in another place:
“As a matter of course and as part of the usual statutory instrument process, I expect that the Treasury will consult on macro-prudential tools”.—[Official Report, Commons, 28/2/12; col.46.]
The Government have already committed to a consultation on their proposals for the FPC’s initial toolkit and will produce a draft statutory instrument as a part of that consultation. The Bill as currently drafted does not prevent the Treasury from consulting the public. The Government have already shown their willingness to consult on macroprudential tools and demonstrated their commitment to transparency by asking the interim FPC to make public recommendations regarding its tools.
I do not quibble with the term “public”. From what the noble Lord said, I suspect that he might have been expecting me to come back and say that this is not for the public, but for consultation with the industry. I accept the context in which he uses the word “public”. That is not my objection. It is good practice to do it. We are doing it. The FPC has been asked to make public its recommendations regarding tools. However, it may not always be appropriate to consult the public, which is why this requirement should not be in the legislation. Not all macroprudential orders will make large changes to the FPC’s direction powers. It is possible that some orders will contain only minor and technical changes and in this instance a three-month public consultation would be unnecessary. The previous Government rightly recognised the risks of undertaking full public consultation in cases where it is not necessary. Their own code of consultation listed seven criteria, one of which stated:
“Keeping the burden of consultation to a minimum is essential if consultations are to be effective and if consultees’ buy-in to the process is to be obtained”.
The Government have stated that they will, in compliance with the principles of good government, consult the public when material changes to the FPC’s direction powers are proposed and in non-urgent cases. I hope that that provides reassurance which the Committee seeks.
Lord Eatwell
My Lords, while we are on this point and before the noble Lord, Lord Sassoon, moves on to other elements, I am grateful for his clarification on this issue of consultation. I heard that we expect the Treasury to consult and there is nothing to prevent it consulting. I was seeking that the Treasury be required to consult.
Turning to the point which the noble Lord has just raised about the consultation criteria, which is enormously helpful, would it not be appropriate to write the criteria in to the conditionality with respect to when the Treasury should consult? Then we will not have simply an expectation or a desire and we will not be saying that there is nothing to prevent consultation. We will be saying that the Treasury should consult in all circumstances other than those specified under the consultation criteria. Would that not be helpful?
Lord Sassoon
My Lords, of course that could be done, but I make the point again that it is now engrained in the principles of good government that there should normally be three months’ public consultation. There is a code of consultation that the previous Government put out. It sets it all out very clearly, including the point about burdens and so on that I read out. In its full richness, it cannot easily be drafted in legislation. Indeed, if we were going to do it in this Bill, I imagine there could be hundreds of other Bills in which it could be spelled out. I suggest that the Committee should not only take comfort from the standard governmental practice but from the fact that we have already indicated what we are going to do with the FPC toolkit. I believe we have covered it all and do not need to burden this Bill with a lot of detail any more than other Bills are burdened with it.
Amendment 57 seeks to provide that the reasons for making an order without consulting the FPC or the public be subject to scrutiny by the Treasury Select Committee. While I agree that accountability to Parliament will be important and the provisions within the Bill reflect that, I believe, as I have said on other occasions, that it is for parliamentary committees themselves to decide what they will scrutinise. I would expect the Treasury Committee to take a great interest in any circumstances where the Treasury felt it necessary to create a new macroprudential tool on an urgent and therefore possibly not-consulted basis.
I suggest to the Committee that it would be inappropriate for the Government to use primary legislation to force the Treasury Select Committee to scrutinise something. It must be a decision for the committee itself. The committee has already taken great interest in the interim FPC and I hope that this will continue. For those reasons I believe that Amendment 57 is neither appropriate nor necessary.
We then get to Amendment 58—I was going to say “the dangerous amendment”. It seeks to deal with what the noble Lord says is a potentially dangerous situation. He was entirely clear in his reasoning. The amendment seeks to remove the FPC’s ability to confer discretion on the PRA and the FCA as part of a direction.
Lord Sassoon
The noble Lord says that it is the Treasury’s ability to confer discretion. Whoever’s ability to confer discretion it is—I am just turning back to the drafting of the amendment, which really means looking at the clause as well. I will do that as I speak. I believe it is the FPC’s ability to confer discretion, but whether it is the FPC or the Treasury, the purpose of the provision is to allow the direction-making entity to take advantage of the expertise of the PRA and the FCA. Indeed, the noble Lord is completely right. I have now checked the text and it is the Treasury. However, the point is the same. We need to take advantage of the expertise of the PRA and the FCA which hold the expert knowledge relating to the supervision of individual firms. This provision allows the Treasury to take advantage of that expertise in its directions. For example, if the direction required the PRA to require firms with large exposures to hold additional capital, it would be for the PRA to decide which firms had large exposures. That would be something for the supervisor—the regulator—to do. Therefore, I believe that the amendment would unnecessarily hamper the ability of the direction to have proper effect.
Lord Eatwell
Shall we deal with it as I go along? It would be easier for the Committee if we deal with Amendment 58.
There is a mistake here. The text of the Bill says that the Treasury may make an order which,
“may confer a discretion on … the FCA or the PRA”.
In other words, the Treasury has direct macroprudential tool access to the FCA or PRA, not via the FPC. Proposed new Section 9G(5) describes the correct procedure, in that a discretion that could be given to the PRA or the FCA comes via the FPC. In other words, it comes via the macroprudential authority—the institution that is responsible for macroprudential measures. The example given by the noble Lord is particularly pertinent in this case. If there were a requirement to increase the capital that is relative, let us say, to large exposures or to other risk-weighted measures, then that must be a decision of the FPC. I do not see how the Treasury could give that macroprudential role in any shape or form directly to the FCA or the PRA.
If the provision’s wording was that an order may confer a discretion on the Financial Policy Committee, which may then be transferred to the FCA or the PRA at the will of the Financial Policy Committee, the point that the noble Lord has just made about expertise would be entirely well taken. However, if we are to maintain the integrity of this experiment, or indeed project, then we must maintain the FPC as the focus for macroprudential regulatory management. That is why I referred to this element as dangerous, in the sense that it undermines that clear structure within the Bill.
Lord Sassoon
My Lords, according to these provisions, when the Treasury specifies what macroprudential measures the FPC may exercise, the Treasury may, in relation to those macroprudential measures, confer functions on the regulator. It is intended that this is likely to be used for minor matters such as definitions. For example, the Treasury could provide that the FPC may impose additional capital requirements on exposures to residential property, and that the PRA, as the microregulator, would define the meaning of “residential property”.
There is, therefore, a web of interlocking provisions here, which I fear I did not do justice to in my first attempt to cut through this. Would it help the noble Lord if I take this one away, write to him and copy it to the other Members of the Committee who are here, to try to explain how these provisions will work together? I do not believe that there is any gap here, because it is ancillary to the basic directions that will come via the macroprudentials of the FPC. But there may be some ancillary matters, particularly definitional ones, where the expertise of the PRA or the FCA would be operative and for which we need therefore to keep this element and not to close this off in the way that Amendment 58 seeks to do. I will write to try to set that out more clearly. I am grateful to the noble Lord for that.
Amendment 61 would require the FPC to publish a policy statement within 10 days of a direction being made in relation to a measure made before the FPC had been able to issue a statement of policy under new Section 9L to be inserted into the Bank of England Act 1998 under Clause 3. Again, the Government agree that transparency and openness will be vital to ensure sufficient accountability for the FPC and the use of its tools. However, I believe that this amendment is not appropriate.
The Bill already provides that a policy statement is produced and maintained for each of the Bank’s macroprudential tools. This would also apply to those measures granted using the emergency procedure. However, if a situation were urgent, it would be counterproductive to require the FPC to wait until it has drafted and published a statement of policy before it could use that tool.
We would expect the FPC to produce a statement of policy for the tool as soon as reasonably practical afterwards, assuming that the tool remains in the FPC’s toolkit. I suggest that the requirement in Amendment 61 would be excessively restrictive.
Lord Peston
I am very puzzled by the Minister’s answer. That may be because I do not understand what a macroprudential measure is. Macro normally means economy-wide: it does not mean dealing with a specific bank in trouble or anything like that. I would take it to mean that the whole financial intermediation process was in danger of going wrong. I am finding it very hard to believe that, as a matter of urgency if the FPC was acting to deal with that, it would not immediately draft a statement. The idea that it will take time to say, “We have got a crisis on our hands and we are acting” is preposterous. It rather takes us back to the amendment tabled by the noble Lord, Lord Flight, which carried the same kind of message. Surely, the point for the Minister to emphasise is that he wishes to make it clear that all of us take it for granted that the relevant decision-making body should do exactly what my noble friend says.
Lord Sassoon
My Lords, the requirement is there for the statement to be made. Indeed, it would be the full expectation that a statement would be made. We believe that the Bill does not need any extra amendment in relation to statements that relate to macroprudential measures where they are exercised as a matter of urgency. The statement has to be made in any case.
Lord Eatwell
Perhaps I may help the noble Lord. I think that there was a slight misunderstanding in what he said in his initial answer on this amendment. He said that if there were an urgent situation, it would be inappropriate to wait for a statement to be made. That is not what this amendment says. It in no way prevents urgent measures being taken immediately. It simply says that if that is the case—as the noble Lord said, as soon as possible, and as I say, within 10 days—a statement should be produced. Surely, it is appropriate to give confidence and comfort to the markets that they can have some degree of expectation that a measure taken in urgency would be subject to a statement within a timeframe which is known to the markets and therefore provides them with appropriate comfort.
Lord Sassoon
My Lords, I do not believe that any additional requirement needs to be put in. The FPC already has transparency requirements at the heart of what it does. I completely agree that in certain cases, if it was an urgent matter, 10 days would not be the answer. It would make a statement based on the merits of the case either immediately, or on some other timescale. The Treasury would need to lay secondary legislation on an urgent basis to create the new tools required. Regardless of this provision, the laying of this secondary legislation would involve a public statement about the need for the tool and how it would be used. There is another backstop. If the new tool was required to be created, Parliament would immediately have a statement in front of it to back up the secondary legislation.
For a variety of reasons, Amendment 61 is redundant. On the basis of some partial explanations, and my commitment to write to him—particularly to explain in more detail how I believe the matters around Amendment 58 will operate—I ask if the noble Lord will withdraw his amendment.
Lord Eatwell
I am grateful to the noble Lord. Having a committee process where we go backwards and forwards on each particular amendment is helpful and removes the need for me to make a long summing-up speech. I will simply focus on Amendment 58, which has been the main matter of substance within this group which has exercised us, especially after the noble Lord clarified the issues of the consultations so well. Amendment 58 is still a serious problem, and I look forward to the noble Lord writing to me about it. Once I have his views in writing, perhaps we can consult further to find an appropriate way of sustaining the position of the FPC in the way that I have described. In the mean time, I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
And now, my Lords, for something completely different. One of the objects relating to the governance of the Bank of England which we discussed in the first two days in Committee, and which is now coming up again, is to increase the collegiality of decision-making within the Bank, particularly with respect to this project. It seems that the deputy governor for financial stability is going to have an important role in the development of the FPC, the development of its activities and, indeed, its overall credibility and acceptance. It therefore seems entirely appropriate in these circumstances that the deputy governor for financial stability should be given a special status within the legislation, both in respect to consultation with the Treasury when an emergency order is introduced, and with respect to the discussions with the Chancellor of the Exchequer after the publication of the Financial Stability Report.
Amendment 56 seeks to place the deputy governor for financial stability within the framework of consultation when there is an emergency order. Overall responsibility rests with the governor. However, surely the deputy governor, who has the prime responsibility, should be consulted when there is likely to be an emergency order. Moreover, when the Treasury and the Bank have their formal discussions, which are required by the Bill, following the publication of the Financial Stability Report, it is surely appropriate that the person responsible for that report—the deputy governor for financial stability is the acting element in this respect—should be part of those conversations, as we require in Amendment 79.
If the Government accepted these amendments, we would feel much more comfortable about the overall governance structure of the Bank. It would acquire a more collegial framework, which we strongly feel is very appropriate to the development of these new measures. I beg to move.
Lord Sassoon
My Lords, these amendments reprise an argument that was raised by the shadow Chancellor during the Bill’s Second Reading in another place.
As the noble Lord, Lord Eatwell, said, Amendment 56 would require the Treasury to inform not only the governor but the deputy governor for financial stability when it considers that there is insufficient time for the FPC to be consulted on the introduction of a new macroprudential tool.
Amendment 79 would place in the Bill a requirement for the deputy governor for financial stability to attend the biannual meetings between the Chancellor and the governor following the publication of the FPC’s annual stability report.
Clearly the Bank plays a crucial role not only in relation to the management of the UK’s economy but specifically, under the Bill, in relation to macroprudential and microprudential regulation. In fulfilling these very important responsibilities, we expect the Bank to act as the serious and respected organisation that it is. This means that the senior executives of the Bank will work as a team to determine the best course of action to achieve the Bank’s objectives and comply with the legal obligations placed upon it. The governor is the leader of that team and, working closely with his senior executives, will ultimately take the key decisions within the Bank.
It is clear that the success of the new regulatory structure, which, rightly, we are spending so much time debating, relies heavily on the relationship between the Treasury and the Bank of England, and I believe that the Bill provides the necessary clarity of responsibilities. However, it also depends on the personal relationships at play here, particularly between the most senior leaders of the two bodies—the Chancellor of the Exchequer and the Governor of the Bank of England. One of the major problems leading up to the financial crisis was that the tripartite committee did not meet at principals level during the previous decade.
Therefore, there are clearly things that need to be legislated for, and this is not what the noble Lord is in any way seeking to argue against, but it is important background to this discussion. The Chancellor and the governor must meet regularly to discuss financial stability. That is why the Bill and the regulatory structure that it establishes place at the heart of the matter the institutional relationship between the Treasury and the Bank, and the personal relationship between the Chancellor and the governor.
I do not see any reason to attempt to insert into that relationship a further statutory channel of communication. First, I just do not believe that it is needed. The Treasury ministerial team regularly meets the current deputy governor for financial stability and the chief executive of the FSA. There is also a constant dialogue between the deputy governor and senior Treasury officials via meetings, phone calls and e-mails. The same was true under the previous Government, as I know, since I was part of it for three years, and it was very effective at working level. That has not changed and it will not change under the new structure. In practice, the deputy governor may well attend the biannual meetings between the two principals. If the Treasury notified the governor that a new macroprudential instrument needed to be introduced on an urgent basis, the deputy governor would be well aware of that.
I will just point out one slight correction that is relevant to this, which is that the FPC is responsible for the financial stability report to the deputy governor. That is relevant to the discussion of this amendment because it shows that we should not excessively personalise the relationships or draw attention to particular individuals if that risks, as it may do in this instance, causing confusion about who is responsible for what. I agree that the relationship with the two leaders of the bodies, the Treasury and the Bank of England, should be hard-wired in, as we have done. In practice, the deputy governor is, and will be, very much involved in all the relevant discussions. Amendments 79 and 56 are not necessary and go too far.
There is a strong argument here that such a provision could be positively unhelpful by opening the door to the possibility that the Bank may be divided and encouraged to speak with more than one voice. There is a risk of recreating elements of dysfunctionality that were in the system as it used to exist. I do not want to overplay this, since the main argument is the earlier one. However, I do see a slight but secondary danger that this provision could be built on in the wrong circumstances. On the basis of the earlier explanations, I hope the noble Lord, Lord Eatwell, will withdraw this amendment.
Lord Eatwell
My Lords, the noble Lord’s comments have been very valuable. The Government have continuously argued that the tripartite system set out by the previous Government did not work because of its structure. He has now admitted that it did not work because the principals did not work it and did not meet. That is a very different issue. The fact that the principals did not meet, and that we now find the need for them to meet in primary legislation, illustrates that it was not the structure that was wrong but the people working in it that went wrong.
I agree with the noble Lord that the Bank should work as a team. I am very much in favour of that. However, we have to distinguish between the captain of the team and those who take the penalty kicks. We may want Martin Johnson to be the captain but we want Jonny Wilkinson to take the kicks. In those circumstances, the particular specialist role of the deputy governor for financial stability seems to be an important element in effective communication between the Treasury and the Bank. Moreover, the noble Lord expressed, in a careful way, that this might expose differences in the Bank’s position and suggested that this might create dysfunctionality. There are differences in this Committee, but this Committee is not dysfunctional. It is making progress. The differences between us are highlighting, as it is their role to highlight, some problems in the Bill that can make it a better Bill, which is our entire objective. I do not accept that differences within a reasonably run organisation necessarily lead to dysfunctionality. That seems to be Sir Humphrey rampant, determined that there is a singular position.
The whole issue of governance of the Bank is still somewhat in the air. This is one element that we wished to put in the Bill and felt would be enormously helpful. Now the noble Lord has recognised that the tripartite system did not fail because of its structure, but because of the personalities who failed to work it, I hope that he will consider the value of these amendments when we return to them on Report.
Lord Barnett
I was confused before we started and my noble friend and the Minister have confused me even more. They talk about teams; apparently there is a Treasury team and a team from the PRA, MPC or FCA—I am not sure which it is. There are various teams who will be meeting to solve a crisis if it arises. The Chancellor of the Exchequer, of course, would know nothing about all of this. The people who know something about it might be here with us, including the noble Lord, Lord Sassoon, who is a member of the team, apparently. Maybe he will take the penalty kicks.
Lord Barnett
We are talking about possible serious financial crises and stability. At the end of the day, the Chancellor will be held responsible if something goes wrong with financial stability. There could be as many teams as we liked, but the Chancellor would ultimately have to accept responsibility, even if he knew nothing about it. I am sure that any Chancellor—I am looking at one now—would know everything that was going on in his team.
I am confused about what the clause or the Bill will do to help us in this matter. My noble friend’s amendment might help, although we are told by the Minister that it could “excessively personalise”. I am blessed if I know what that is supposed to mean, but no doubt the Minister will tell us. At the moment, I am more confused than ever. I thought that I understood a few things about financial matters but, listening to the exchange between my noble friend and the Minister, I am confused more than ever.
Lord Eatwell
Perhaps before I sit down I can help my noble friend. We are discussing what is perceived to be an essential failure of the previous system. The failure was that the people responsible for working it did not take advantage of the tools that were provided. Here in the Bill, as the Minister pointed out, the Government have rightly insisted that the Treasury and the Bank convey information to each other, consult each other and act collectively when necessary. That is appropriate, and I commend the Government in that respect. I simply think that they have not gone far enough.
Lord Peston
If my noble friend were to ask himself who would know most about a macroprudential measure in the Bank, surely that would be the deputy governor, because that is his job. My noble friend is saying that the Treasury should consult. I would argue that the Treasury is sensible enough to know that it should consult the one person who would know what was going on.
Lord Eatwell
Just to reinforce what I said, neither the Government nor this side have entire confidence in the consultation procedure between the Bank and Treasury as it has taken place in the past. The Government are seeking to reinforce that confidence, and I wanted to reinforce it further. But at this stage I beg leave to withdraw the amendment.
Baroness Noakes
“(1A) If the Treasury considers it appropriate to proceed with the making of an order under section 9K, the Treasury may lay before Parliament—
(a) a draft order, and(b) an explanatory document.(1B) The explanatory document laid under subsection (1A) must—
(a) introduce and give reasons for the order,(b) explain why the Treasury considers that the order serves the purpose in section 9K, and(c) be accompanied by a copy of any representations received from the FPC or the Governor.(1C) The Treasury may not act under subsection (1A) before the end of the period of 12 weeks beginning with the day on which the consultation began, unless the order is made in accordance with section 9K(2)(b).
(1D) Subject as follows, if after the expiry of the 40-day period the draft order laid under subsection (1A) is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
(1E) The procedure in subsections (1F) to (1J) shall apply to the draft order instead of the procedure in subsection (1D) if—
(a) either House of Parliament so resolves within the 30-day period, or(b) a committee of either House charged with reporting on the draft order so recommends within the 30-day period and the House to which the recommendation is made does not by resolution reject the recommendation within the period.(1F) The Minister must have regard to—
(a) any representations,(b) any resolution of either House of Parliament, and(c) any recommendation of a committee of either House of Parliament charged with reporting on the draft order, made during the 60-day period with regard to the draft order.(1G) If after the expiry of the 60-day period the draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.
(1H) If after the expiry of the 60-day period the Minister wishes to proceed with the draft order but with the material changes, the Minister may lay before Parliament—
(a) a revised draft order, and(b) a statement giving a summary of the changes proposed.(1J) If the revised draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the revised draft order.
(1K) For the purposes of this section, an order is made in the terms of a draft order or revised draft order if it contains no material changes to its provisions.
(1L) In this section, references to the “30-day”, “40-day” and “60-day” periods in relation to any draft order are to the periods of 30, 40 and 60 days beginning with the day on which the draft order was laid before Parliament.
(1M) For the purposes of subsection (1L), no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.”
Baroness Noakes
My Lords, the noble Lord, Lord McFall, is unable to be with us this afternoon because he is en route to receiving an honorary degree tomorrow, which I am sure the Committee will agree is well deserved.
This is another amendment that the noble Lord, Lord McFall, and I have tabled to ensure that the issues covered in the first report in this Session of the Treasury Select Committee in another place are properly debated. I am pleased to see that the noble Lord, Lord Eatwell, has added his name to the amendment. The noble Lord, Lord Eatwell, has already emphasised the importance of the macroprudential tools which are covered by new Sections 9G to 9M. I am sure that the thrust behind these new sections will command general support, but the detail of the new tools must be approached with very great care. My noble friend does not like the term “experiment”, but most of us think that if something looks like an experiment and sounds like an experiment, it is an experiment. We cannot get away from the fact that, because these macroprudential tools have not been used before in this country, nor is there much international experience to go by, we are talking about something very new which should receive very considerable scrutiny. Not even the Bank of England claims a monopoly of wisdom on what these macro- prudential matters should be.
This experimental phase will run for some time. The measures that are initially specified will almost certainly vary over time, as the focus of risks to financial stability changes and as experience is gained of working with the measures. We have something that is very new and, as the noble Lord, Lord Eatwell, has also pointed out, these are very powerful tools to be placed into the hands of the FPC. We have already seen the FPC’s first shot at what it believes those macroprudential tools should be. It has suggested a countercyclical capital buffer, sectoral capital requirements and a leverage ratio. At that time the FPC said that some other measures, such as loan-to-value ratios and loan-to-income ratios, would need public support before they were introduced. I would like to suggest that all the potential measures need public support and therefore there has to be proper debate before it would be wise to introduce them. The Government have, correctly, decided that the new measures cannot simply be set by the FPC or the Bank. They have to be prescribed by the Treasury by order, and that order is subject to parliamentary approval. That meets the point which troubled the noble Lord, Lord Peston, a little while ago.
So far, so good. The measures are to be initially specified by the Treasury, not left to the Bank and the FPC, and they have to be approved by Parliament. The problem is that new Section 9M prescribes the draft affirmative procedure. This procedure is, of course, better than the ordinary affirmative procedure which is, in turn, better than the negative procedure. However, none of these procedures is, in truth, more than a rubber stamp. Oppositions know this only too well, but that knowledge seems somehow to evaporate when they find themselves on the government Benches. Some of us still remember.
The importance of the macroprudential measures lies not in their technical specification and potential impact on financial stability, though those are very important issues. The equally important issues are the consequences of using the measures and their impact on the wider economy. These matters need proper scrutiny and debate both in Parliament and, as we discussed earlier, outside. Once the FPC has been granted these measures they will be able to use them without any further parliamentary intervention. The price for getting these wrong could be very high and so Parliament needs to be very sure that it understands the potential impact of the powers and that it has an opportunity to amend or circumscribe them if that is appropriate. The only way we can get a proper debate in these terms is through the use of the super-affirmative procedure, and that is what the amendment proposes.
The Treasury Select Committee in another place believes that the super-affirmative procedure is appropriate and fully in accordance with Erskine May, which describes the procedure as used,”
“in enactments where an exceptionally high degree of scrutiny is appropriate”.
It is inescapable that these measures fall into that category. It is generally the case that Governments never start out thinking that the super-affirmative procedure is the right one. However, the will of Parliament does sometimes prevail over the Executive in this area.
The Government recently accepted in the Public Bodies Act 2011 that their powers to wind up such hugely important bodies as the Home Grown Timber Advisory Committee or the Railway Heritage Committee should be subject to the super-affirmative procedure, but it appears that they have yet to be convinced that granting these massive new powers to the FPC is of that importance. It is a no-brainer that the super-affirmative procedure should be used and I hope that my noble friend will be prepared to accept that that is the case.
I am aware that the Delegated Powers Committee, which I hold in the highest regard, has not raised objections to the affirmative procedure in the Bill. That is interesting but not conclusive. The final arbiter on these matters is Parliament. The Delegated Powers Committee acts as an early warning system of problems for Parliament to address. The committee does not act on behalf of Parliament to approve particular procedures.
In responding to the Treasury Select Committee, the Government have raised concerns about timing and, in particular, the impact of recesses. This is a red herring. We are not generally dealing with matters which need to be introduced immediately. However, if the FPC woke up one morning with an urgent need to acquire a new macroprudential tool, one’s first reaction would be that that was surprising. However, if that were genuinely the case and the Treasury were committed, my Amendment 62 does not remove the ability to act with urgency. The powers set out in new Section 9M for the made affirmative procedure can be used when the Treasury is convinced of the urgency of the matter.
When the Governor of the Bank of England came to talk to a number of us last week, he rightly emphasised the accountability of the Bank and the FPC to Parliament. Accountability is an ex post concept: Parliament also has to have the ability to be involved fully ex ante in the formulation of important matters such as the macroprudential measures, and the super-affirmative procedure is the only proper way to proceed. I beg to move.
Lord Northbrook
My Lords, I support my noble friend Lady Noakes in her Amendment 162. Like my noble friend, I believe that there should be stronger parliamentary scrutiny of the macroprudential tools.
While I accept that there must be flexibility to grant the FPC new tools quickly in rare and urgent circumstances, I still agree with the Treasury Select Committee’s report on the accountability of the Bank of England. As the legislation stands, approval by the House of Commons requires only a 90-minute debate in a general committee and a decision without debate in the House. Like the Select Committee, I recommend that the Government amend the draft legislation to require debates on orders prescribing macroprudential measures to be held on the Floor of the House and not be subject to the 90-minute restriction. The House would benefit from prior scrutiny of such orders by the committee. This view is supported by the Joint Committee on the draft Financial Services Bill, which agrees that there should be a system of enhanced parliamentary scrutiny of these important tools. Like my noble friend Lady Noakes, I was disappointed. Although I respect enormously the Delegated Powers Committee, I felt that its arguments for not wishing this were not as substantial as I would have liked.
Lord Eatwell
My Lords, I, too, support the noble Baroness, Lady Noakes, in her amendment. I also commend the Treasury Select Committee on having done such a good job in presenting the arguments for appropriate scrutiny of elements in the Bill.
As the noble Baroness, Lady Noakes, pointed out, the measures which the Financial Policy Committee is to have in its hands are extremely powerful. Let us consider introducing a leverage ratio in British banking. That notion has not existed within the structure or organisation of British banking. It would change entirely the relationship between the liability side and the asset side of the balance sheet of British banks. It is a major measure which thereby deserves appropriate consideration of the sort set out in the amendment.
Let us consider also the other tool which the FPC is claiming as appropriate for itself: pro-cyclical provisioning. Pro-cyclical provisioning involves enormously complicated decisions, both in the banking sector and in accountancy. Accountants tend to be very hostile to the notion of provisioning since it can be used to hide profits. It is a standard procedure which was common in the Enron case. If we are going to formulate a structure of pro-cyclical provisioning which not only achieves the goals that the FPC and all of us want but satisfies the complex needs of appropriate accounting—we have seen recently how accounting can be misused in the banking sector—these measures require very careful scrutiny. As the noble Baroness said so clearly, a 90-minute debate, which is then a rubber stamp, is entirely inappropriate. The procedure set out in the amendment would not only provide that level of scrutiny but contribute to the public confidence in these procedures which is vital if we are to achieve the goals which we have set out for the FPC.
Lord Peston
My Lords, I remind the Committee by way of background that we are discussing adverse, exogenous shocks to the financial intermediation process. Those shocks are impossible to forecast and extremely hard to recognise even when they hit the system. My understanding of why we require macroprudential measures is that it improves the way in which the system works so as to be able to cope with those shocks. It is partly to protect the system of financial intermediation and partly to improve its effectiveness and efficiency—so we have no difficulty about that.
However, if we need these instruments, it follows that in a democracy—and I still include your Lordships’ House as part of our democracy—Parliament must be able to scrutinise them appropriately. As the noble Baroness, Lady Noakes, is well aware, I am not an expert on all the different kinds of orders, and she simply lost me on them, but I ask her whether the measures set out in her amendment give Parliament, including your Lordships' House, a full right to scrutinise the introduction of the macroprudential measures and—here I got a bit lost—to amend them in the sense of saying to the Government, “We think that what you are doing is right, but you can do it in a rather better way.”? If that is what the amendment says, and I see the noble Baroness nodding, the Minister has a duty to the House to say, at the very least, that he will take it away and think it through.
Lord Barnett
My Lords, I support the noble Baroness, Lady Noakes, in a way, although the amendment would add even more confusion to the Bill than is already there. My noble friend Lord Peston referred to the fact that it is about shocks. I hope it is not an urgent shock, because the amendment would give time for draft orders to be laid for a period of up to 60 days or before the end of a period of 12 weeks. Then there must be orders in both Houses. I assume that both Houses would also take advice from their Select Committees. All that will be going on while urgency is required. I find the whole thing as confusing as my noble friend does. We are told at the end of the amendment that if this shock arises when the House is not sitting, all kinds of other things happen. As my noble friend said, if the noble Lord, Lord Sassoon, cannot clarify the whole thing for us in asking for the amendment to be withdrawn, we should be glad if he would take it away to think about it further and let us know what he or someone else thinks about it.
Baroness Kramer
My Lords, I am very much in favour of scrutiny by this House. I cannot pretend to be an expert either on the different varieties of orders or on the different measurements and tools that the FPC might introduce, but I would be concerned about a mechanism in this House that enabled tools to be amended. Although we have some experts, the capacity to understand the internal workings of a tool with sufficient precision to be able to introduce an amendment to a ratio strikes me as not the particular skill of a legislature or this House. We can raise questions about it or require that it be dismissed because the Government have not sufficiently made their case, but to amend it is not a skill with which we are particularly equipped.
For that reason, and with great respect to the House, it seems to me that the capacity for amendment is inappropriate in this case. The capacity to force the Government to make their case and to judge on that case is entirely appropriate, but not the capacity to substitute; that worries me.
Lord Myners
My Lords, I have considerable sympathy with the amendment. I declare my interest as a former member of the court from 2004 to 2008. I fully support the creation of the Financial Policy Committee—I think that it will become the most important committee in the Bank—but I am deeply anxious about the governance of the Bank and the lack of appropriate oversight from the court, the oversight committee as envisaged or, indeed, Parliament.
The Minister is in many ways the architect of this restructuring of regulation, as part of a project which he led for the Opposition, having ceased to work in the Treasury. I understand his thinking in evolving the proposals, but events have moved on. In the light of what we now know about the Bank of England, we must ask whether it is still right to put so much authority in the hands of the Bank without appropriate accountability.
When I was a member of the court, I sat in on a meeting of the Financial Stability Committee. That would have been in 2006 or 2007. At that meeting, one of the governors proposed that as a mechanism to cope with the crisis, the Bank should buy half a dozen or a dozen bicycles in order that members of the Bank could move swiftly and anonymously around the City. That tells us a huge amount about where the Bank sits in terms of its understanding of the complexity of financial markets. Some of the things that we have seen over the past few weeks have simply raised more questions about the wisdom of putting so much power in the hands of the Bank.
We are also about to have a piece of legislation to implement the recommendations of the Independent Commission on Banking. Having been intimately involved in the Government’s response to the banking crisis from 2008 onwards, I would point out that the losses incurred in the British banking system—at HBOS, Lloyds and Royal Bank of Scotland—largely occurred within the ring-fence. The losses of $5 billion which we have seen recently reported in London from JP Morgan took place within the ring-fence as envisaged by the Vickers report. The noble Baroness, Lady Kramer, looks somewhat sceptical about that. Those losses occurred within the treasury operations, or the investment office, of JP Morgan, and as such lay within the ring-fence rather than outside it. In being sympathetic to this amendment, and hoping that at the very least the Minister will go away and reflect on that, I think that the Minister will have to rethink some of the fundamental building blocks of this legislation—in particular the great powers and responsibilities that we are placing in the hands of the Bank of England—before we reach its next stage. These are powers and responsibilities that the Bank of England has historically not had and, in my judgment, is still not equipped to exercise.
If we are to do this then, at the very minimum, we must ensure that the Bank and its various agencies, including the Financial Policy Committee, are properly accountable to a court which is clear about its functions and clear about who it reports to. As a former member of the court I know that it was never clear who we reported to. It must also be clear about its parliamentary accountability.
Lord Sassoon
It is always entertaining to have one of the Second Reading speeches of the noble Lord, Lord Myners. I am not sure what it had to do with this particular amendment—which is to do with super-affirmative procedures in respect of orders made by the Treasury—but, anyway, we did talk extensively about governance of the Bank of England over the last couple of sessions, and there will no doubt be other opportunities to talk about them. Here we are talking about an amendment that seeks to require macroprudential orders to be subject to the so-called super-affirmative procedure. Although I was not going to question the competence of Parliament to get into the detail of the macroprudential tools, my noble friend Lady Kramer did make a powerful point about the level of scrutiny that is appropriate to tools that are—yes—very important but also highly technical.
I say that in the context of believing that proper parliamentary scrutiny of these tools will be important to the overall accountability. That is why the Bill, as has been noted, requires the macroprudential orders to be subject to the affirmative procedure. As the Committee would expect, the Government maintain that that strikes the right balance between accountability and timeliness. Orders cannot be made unless a draft is laid before and approved by resolution of each House of Parliament.
I will of course draw attention to what the Delegated Powers and Regulatory Reform Committee had to say, although my noble friend Lady Noakes dismisses its remarks as “interesting but not conclusive”. As a statement of fact, it is clear that its remarks are not conclusive. However, I take issue with her when she dismisses its remarks as “interesting”, because I think that we should take the consideration of the DPRRC very seriously on matters such as this. For the help of the Committee I shall quote the relevant paragraph, because I think that it shows that the DPRRC has thought about this matter in detail. It states:
“The importance of the power is recognised by the application of the draft affirmative procedure or, in urgent cases, the 28-day ‘made affirmative’ procedure … The Joint Committee on the Draft Bill and the House of Commons Treasury Select Committee have recommended an enhanced affirmative procedure for the non-urgent orders, based on that in the Public Bodies Act 2011. But the affirmative procedure provided for in the Bill should be a sufficient safeguard against inappropriate use of these powers.”
I really do not think that we should dismiss what the committee has said.
Lord Peston
My Lords, one of our difficulties in discussing this matter is that no one has mentioned a specific macroprudential measure. We are discussing them totally in the abstract, so perhaps I might mention a couple and say why the positive approach might well be relevant. If we look back to the corrupt practices of the past on the part of financial intermediaries, I suppose the worst of them was the mixing up of a package of toxic and non-toxic assets and then marketing them as if they were non-toxic. I would assume that for the relevant body here, if it was confronted with this, it would be relevant to introduce a macroprudential measure to say that that is simply not going to happen. It would describe the measure and intervene. The Minister shakes his head. Is he saying that that is not an example of a macroprudential measure?
Lord Sassoon
I would say that examples of macroprudential measures are things such as leveraged ratios. If we are talking about the mis-selling of products, that is generally not going to be a question of macroprudential tools but a conduct matter that the FCA would deal with. They would not be the sorts of things covered in the macro toolkit of the Financial Policy Committee, as the noble Lord describes it.
Lord Peston
Speaking as an economist, that sounds complete nonsense to me. I point out to the Minister that the measure I have just described was at the centre of the collapse of both the British and American financial systems in the post-2007 era. This is precisely what these financial intermediaries were up to and precisely what led to the enormous damage that all the economies have suffered. How the Minister can possibly say that that is not a relevant tool is completely beyond me. I could give him some more examples, but let us leave it at that one.
The only question then is whether the noble Baroness, Lady Kramer, is right that if it were introduced as an order we could not debate it in a way to be able to say that the Government’s method of dealing with this problem could be bettered. That is the only point at issue here. I would not like us to do this all the time. I would simply like us—and I mean the other place at least as much as us—to have the power to be able to say, “We can see that you’ve identified the problem and that you’ve got a solution, which you’re introducing by this order, but we think you could do it better this way”. That is all I am arguing and I cannot see what is unreasonable about it.
Baroness Kramer
I thank the noble Lord, Lord Peston, for giving way on that because I am again working in murky waters here. The Minister may correct me but I think the example that he referred to was of a leverage ratio, in which the assets had to be weighted in some way for their riskiness or toxicity. There would be an argument for using those weights within a leveraged ratio, would there not? You can use risk weights on anything, I say, having used them. However, that is not the kind of detail we would want to get into on the Floor of this House. My argument is that it would become so highly technical. If there is an amending capacity, that is exactly where we will take ourselves—and without a series of blackboards and three academics to lead us through it, I am not sure we could manage, frankly.
Baroness Noakes
Perhaps I might intervene on whether there is the power to amend or not. Debating under super-affirmative procedure is not like considering a Bill. There are no amendments tabled and voted on but there is the ability of either House to pass a resolution saying what it thinks. Much as the noble Lord, Lord Peston, articulated, either House would be able to consider whether it thought that the tools were up to the job. More importantly, as I tried to explain in my opening remarks, Parliament could consider the potential impact of using those tools and say to the Government whether it thought the tools appropriate in the context of the wider impact, not simply the narrow impact, on the regulation of financial institutions. The super-affirmative procedure does not allow a specific amendment process but it allows Parliament to say, “Government, we think you have got this wrong”. It is in contradistinction to any of the other procedures where we have the nuclear option: we either accept the order or we do not accept it. It is a more deliberative and amenable process, in particular for considering these very new tools which are being talked about. I hope that helps the Committee.
Lord Sassoon
My Lords, this has been a helpful additional go-round of the tracks because it illustrates, I suggest, that with the procedures already in the Bill and the commitment that my right honourable friend the Chancellor has made to debate the toolkit on the Floor in another place—the same could apply here, clearly, subject to the usual channels agreeing it—we have in substance exactly what my noble friend wants to achieve. We have that without locking ourselves into the difficulty that goes with the 124 days, plus Recess time, which we can get locked into in cases that may be either minor ones where none of this is warranted or, more particularly, ones that started off not being urgent but then became more so. Having had this useful go-round and with the reassurance I have given of what the Chancellor has committed to, I ask my noble friend if she will withdraw her amendment.
Baroness Noakes
My Lords, the Minister has not appreciated the difference between the affirmative procedure and the super-affirmative procedure. Simply having a debate can have only one outcome, of approving or not approving the order, and that is the fundamental flaw. It is the thing that we all learn in opposition and that all Governments forget. Whether or not additional time is allowed or whether a different procedure is adopted in the other place may well improve the quality of debate but it cannot change its outcome. In your Lordships’ House, it is always open to us to have a debate on a draft order on the Floor of the House by the simple mechanism of any noble Lord tabling some kind of Motion disagreeing with it. That will automatically bring it into the Chamber. That is not the problem; the issue is the outcome.
The super-affirmative procedure is a more deliberative procedure; it allows views to be expressed without going so far as to say, “We are not having it”—the outcome of which is usually described as very harmful. That is why the House has a general practice of not voting orders down, because it is such a dangerous thing to do. That is why this super-affirmative procedure gives each House of Parliament more opportunity to debate all the issues contained within the order. It may be that we need a greater range of ways of handling this; however, all the methods of handling an order other than the super-affirmative can allow only acceptance or rejection of the whole. That is a difficult thing for the House to do—to put itself in the position of disagreeing with the whole.
The other issue is delay, although I do not see an issue here. The issue is about whether we take the right amount of time to get the thing right. The Government have available in the Bill, unaffected by my amendment, the ability to put something through on an urgent basis. Nobody would dream of circumscribing that power, because it may well be necessary. Even in the middle of the process to get a new measure through, if it was suddenly decided that it was so important that it had to come in urgently, the Government could default to that procedure. As I said earlier, the timing issue is therefore a red herring. The issue is about whether government can give the proper amount of time and consideration to these important new measures.
I will consider carefully what my noble friend has said, but my first instincts are that he has not said enough to convince me that the super-affirmative procedure is not the appropriate procedure for these new measures. I beg leave to withdraw the amendment.
Lord De Mauley
“Explanation9QA Duty to prepare explanation
(1) In connection with the exercise of any of the specified powers, the Financial Policy Committee must prepare an explanation of—
(a) the reasons for the Committee’s decision to exercise the power, in the way in which it is being exercised, and(b) the Committee’s reasons for believing that the exercise of the power, in the way in which it is being exercised, is compatible with the duties of the Committee under the following provisions—(i) section 9C(1) (as read with section 9C(4)), and(ii) section 9E.(2) The specified powers are—
(a) the power to give a direction under section 9G;(b) the power to make recommendations under section 9N, so far as relating to the exercise of the Bank’s functions in relation to payment systems, settlement systems and clearing houses;(c) the power to make recommendations under section 9O, so far as relating to the exercise by the Treasury of their power to make orders under any of the provisions mentioned in subsection (2) of that section;(d) the power to make recommendations under section 9P.(3) The explanation required by subsection (1) in relation to the duty in section 9E(3)(a) must include an estimate of the costs and an estimate of the benefits that would arise from compliance with the direction or recommendation in question, unless in the opinion of the Committee it is not reasonably practicable to include such an estimate.”
Lord De Mauley
My Lords, this group of government Amendments 69A, 69B, 76A, 76B and 76D seeks to strengthen the transparency and openness of the decision-making procedures of the FPC. We have already debated the government amendments providing the FPC with a secondary objective for economic growth. The Government are making the changes to this group of amendments in response to those who have argued that the FPC should be required more explicitly to balance the demands of financial stability and economic growth.
Amendment 69A supplements this important addition by requiring the FPC to prepare an explanatory statement when exercising its powers of direction and recommendation in relation to the PRA, FCA, the Treasury or the Bank in relation to the Bank’s regulatory functions. Such statements must clearly explain how the FPC considers the exercise of its powers to be consistent with its objectives, including both its primary stability objective and its secondary objective for economic growth—the “brake” which prevents the FPC taking any action that would seriously damage long-term growth. The statement must also explain the FPC’s view of the compatibility of its actions with its duties under new Section 9E, which require it to have regard to the Bank’s financial stability strategy; to the need to avoid, as far as possible, requiring the PRA or FCA to act in a manner prejudicial to their own objectives; and to the important principles in regulation of proportionality, transparency and international co-operation and co-ordination. Amendment 76A requires the statement to be published in the next financial stability report.
The effect of these amendments will be to ensure that all interested parties—Parliament, the financial services industry and members of the public—will be able to examine, and indeed challenge, the balance that the FPC seeks to strike between stability and growth. I hope that noble Lords will agree that these are important additions to the FPC, increasing its transparency and accountability, and that they will therefore agree to them.
However, the Government are going further than this. Once the FPC has taken action, through its powers of direction and recommendation, Amendment 69B requires it to keep any open action under regular review. In the case of extant directions—that is, directions which have not been revoked—the FPC must review them at least annually. In the case of recommendations, the FPC must make arrangements to keep under review those recommendations it considers to be of continuing relevance. This will ensure that, once it has taken a specific action, the FPC will from time to time consider whether that action remains necessary and proportionate.
Amendment 76B requires the FPC to publish summaries of such reviews in the financial stability report, once again providing for improved openness and accountability. These are important procedural additions which underline the Government’s commitment to establishing the FPC as a balanced and proportionate macroprudential regulator. I beg to move.
Lord Myners
As I listened to the Minister, it seemed to me that he was implying that there may be times when the FPC has no recommendations outstanding. Surely, however, the FPC will always have recommendations outstanding. It will always have a preferred leverage ratio or a gearing ratio or a deposit to loan or some other of the macroeconomic tools that it has to apply to the banking sector. I am not sure how keeping recommendations under review and reporting on them actually works in a situation in which there will always be recommendations in place. I cannot envisage a situation in which the FPC will say, “We have no views on anything, and therefore there is nothing that we need to be reporting and monitoring”. I may have misunderstood the point; if I have, I apologise, but I would appreciate some guidance from the Minister.
Lord Eatwell
My Lords, we broadly welcome these amendments, in the sense that they are adding to the overall scrutiny and assessment of the activities of the FPC and thereby reinforcing, we believe, its general acceptability and strength of purpose. However, I want to raise a warning flag with respect to new Section 9QA(3), in which it is argued that the FPC will have to prepare,
“an estimate of the costs and an estimate of the benefits that would arise from … the direction or recommendation in question”.
These are macroeconomic measures. It is virtually impossible to provide a simple numerical estimate of the cost or benefit of a macro measure. There will be either a tendency to overestimate the costs, or a tendency to overestimate the benefit, in this particular case. Presenting an assessment in quantitative terms will give spurious precision and, indeed, spurious credibility to a particular measure. I assure the Minister that for any macro measure, I could write an entirely credible report saying that the costs exceeded the benefits and an equally credible report saying that the benefits exceeded the costs. This is simply extending the whole notion of cost-benefit analysis beyond the range in which it can effectively operate. It would be valuable to take account of an attempt to describe in broad qualitative terms the costs and benefits. However, please let us not have the spurious precision of numerical calculations of variables which, by their very nature, cannot be expressed in precise terms.
Lord De Mauley
My Lords, I am grateful to noble Lords for those questions. The noble Lord, Lord Myners, says that effectively there will always be a recommendation that is extant. He is probably right about that. The requirement is to review regularly any recommendations that have a continuing effect, and that includes any recommendations to set or maintain any particular level of leverage or capital, as the noble Lord suggests. I broadly agree with him, actually.
The noble Lord, Lord Eatwell, is right to say that a cost-benefit analysis is a difficult thing to do. That does not mean that the committee should not attempt it, so that at least interested parties have an opportunity to review it and make their comments.
Lord Sassoon
“Review9QB Duty to review directions and recommendations
(1) The Financial Policy Committee must—
(a) before the end of each review period, review each direction given by it under section 9G, other than a direction revoked before the end of the review period, and(b) prepare a summary of its conclusions.(2) A review period is—
(a) in relation to the first review, the period of 12 months beginning with the day on which the direction was given, and(b) in relation to subsequent reviews, the period of 12 months beginning with the day on which the previous review was completed.(3) The Financial Policy Committee must maintain arrangements for the review at regular intervals of any recommendations that it has made under any of sections 9N to 9Q and are of continuing relevance.”
Lord Sassoon
Lord Sassoon
“(4A) If during the reporting period the Committee has made any decision in relation to which section 9QA requires the preparation of an explanation, the financial stability report must include the required explanation.”
“(4B) If during the reporting period the Committee has completed the review of a direction or recommendation, the financial stability report must include a summary of the review.”
Lord Eatwell
“9WA Financial Stability Advisory Panel
(1) There will be a Financial Stability Advisory Panel.
(2) The membership of the Panel will be—
(a) the Deputy Governor for Financial Stability;(b) 6 members appointed by the Treasury, subject to approval by the Treasury Committee of the House of Commons;and the members appointed under paragraph (b) will be academics, members of staff of international organisations, practitioners, or others with particular skills in the analysis of systemic risk. (3) The Financial Stability Advisory Panel will—
(a) provide written advice to the Financial Policy Committee concerning the analysis of systemic risk;(b) once a year prepare a report assessing the analysis of systemic risk by the Financial Policy Committee over the preceding 12 months (the first report to be twelve months after this section comes into force);(c) assess the effectiveness of measures prescribed under section 9K in the attainment of the financial stability objective of the Bank;(d) assess the effectiveness of directions and recommendations of the Financial Policy Committee under sections 9G and 9N in the attainment of the financial stability objective of the Bank;(e) prepare an annual report on matters referred to in section 9WA(3) to be presented by the Supervisory Board of the Bank, and subsequently published on the Bank website.”
Lord Eatwell
My Lords, the development of macroprudential regulators, the instruments for introducing macroprudential regulation, is a common theme in the UK, the European Union and the United States. Different models have been developed for the institution that is to be responsible for macroprudential regulation. In our own model, the Financial Policy Committee, we see what could be called a “central bank model”, where the alternative voices being brought to the table are to be represented by the independent members of the FPC. It will fall to them to challenge Bank of England house thinking and provide alternative perspectives. There is only a very small number of external members on the FPC and finding members with the experience and skills necessary to perform the role that we demand of them is, as has already been seen, very difficult, although at the moment we have an excellent group in the shadow FPC. An alternative model, which has been adopted by the United States Financial Stability Oversight Council, pursues a more stakeholder-oriented approach in which the appropriate voices from stakeholders actually have a direct role in the organisation of macroprudential measures within the United States.
Both the central bank model that we have pursued, which also applies to the European systemic risk board, and the stakeholder model have disadvantages. The key disadvantage of our central bank model is that we do not have enough diversity of opinion or access to new research and critical assessments of FPC measures that the stakeholder model might have. The problem with the stakeholder model is that the United States may find that its Financial Stability Oversight Council becomes mired in differences of opinion from different stakeholder interests and has difficulty in pursuing the coherent macroprudential policy that is required of it.
As we know, this whole area is, as I said earlier, an experiment—or, if the Minister prefers, a project. We are dealing with areas and matters that at present are uncertain. There is little agreed analysis or clear empirical assessment of how some of these tools will actually work. We will find out. We are going to experiment. We therefore need to harvest the widest possible spectrum of analysis. The amendment proposes that there should be a financial stability advisory panel, not a panel that is intimately involved in designing and implementing the measures. Those independent voices are provided by the independent members of the FPC but they are necessarily compromised by their role in dealing with very sensitive matters as they might have conflicts of interest if they have a wider role in the financial services industry. The financial stability advisory panel could contain individuals with such conflicts of interest because they would not have a role in actually managing the macroprudential organisation of the FPC.
The amendment suggests that we have this financial stability advisory panel providing that diversity of view from academics, perhaps from members of staff of international organisations such as the Bank for International Settlements, which is making a lot of the running in the development of macroprudential tools, and potentially from others who have particular skills in the analysis of systemic risk. It will be their responsibility to provide written advice to the FPC, prepare an annual assessment of the FPC’s performance, look at the effectiveness of individual measures and assess the effectiveness of particular directions and recommendations in the context of an annual report or assessment. This cannot do anything but good. It is simply an institutionalisation of the detailed examination, the variety of voices and the consideration of effectiveness that are so necessary in providing both coherence to the FPC and its general acceptance. A panel of this sort, given the responsibilities that are set out in the amendment, would add significantly to the effectiveness of the Financial Policy Committee. I beg to move.
Lord Stewartby
My Lords, I was interested to hear the comments from the noble Lord, Lord Eatwell, on the nature of the work that will face the panel. It sounds like something that overlaps considerably with the Board of Banking Supervision in the late 1980s. Obviously that was working in different circumstances, but each of the bodies require, or required, people of an unusual stripe who combine a practical experience of banking, and the difficult areas that it brings with it, with a particular canniness in identifying areas where they think that things are not as they should be, particularly in cases where that is not always evident until later when events have already taken place.
Are the would-be members of the panel now shadowing the work that will be theirs in statutory form as a result of the Bill? It is terribly important to get the people involved carrying a great deal of weight and clout but at the same time having inquiring minds—something that will help us to ferret out areas that have been unsatisfactorily dealt with. I will not say more now, but I am pleased that some of the reasons for having a panel such as this—20 years ago or more it was called the Board of Banking Supervision, or the BoBS—have been recognised as important in today’s different but difficult circumstances.
Lord Davies of Stamford
My Lords, I have considered carefully over the last 24 hours whether I should say what I am now about to say to the House, but I have decided that it is right to. My noble friend’s amendment, which I support in principle, says in proposed new Section 9WA(2)(a):
“The membership of the Panel will be … the Deputy Governor for Financial Stability”.
In light of his answers yesterday to the Treasury Select Committee, it is completely wrong that the present deputy governor for financial stability should be given these responsibilities on this financial advisory panel, or any other responsibilities for financial stability. In the course of the performance yesterday, during which I assume that his answers were entirely honest and frank, he effectively made a plea of guilty to incompetence and complacency at a quite heroic level. He admitted having chaired a meeting at which several people said that there had been discrepancies between the LIBOR rate and the rate at which banks had been paying for deposits on the interbank market. In his defence yesterday, he said he thought that some of those discrepancies might have been due to transactions intermediated through brokers, but he did not ask what the position was. He did not pursue it. He did not make an attempt to discover what the real facts were. That was astonishingly negligent, to put it mildly.
The other incident, the conversation that he had with Mr Diamond of Barclays, which has been so much in the public mind in the last week or so, also casts a strange light on his actions in carrying out his responsibilities in the Bank of England. He said that he was under great pressure at the time and that there was a great financial crisis, so much so that he was not able to make a note of even very important telephone conversations. I assume that the conversation was not a casual one, but that it was deliberate and designed to achieve a particular purpose. The only purpose that it could have achieved, and the only effect that it could have had, would have been to have persuaded or encouraged Barclays to understate the cost that it was paying for deposits on the interbank market. Clearly, Barclays could not do anything about the actual cost that it was paying. It would have been taking on deposits at as low an interest rate as possible. There have been some strange things going on. I have little confidence in the personality of the present deputy governor of the Bank responsible for financial stability.
There is a defence of his actions which noble Lords might have seen in yesterday’s Financial Times. It was the first letter in the paper, with the heading going something like “Tucker and Barclays saved the British financial system”. The argument was that it was correct in difficult circumstances, when banks were being squeezed on the interbank market or the interbank market was drying up, to give a false impression of what was going on by recording and publishing false LIBOR statistics. I do not accept that defence. First, it is not a defence that either Mr Diamond or Mr Tucker is making. Secondly, even if it were their defence it would be wrong. It is important that no financial stability organisation or anyone concerned with financial stability should be tempted to believe that by falsifying statistics in a difficult situation that is contributing to a solution. That risks undermining not merely the credibility of the index that you are falsifying, but every announcement and index. If the Bank of England was prepared to collude with a clearing bank to falsify the LIBOR statistics, the markets would immediately assume that collusion might take place if it was convenient in other circumstances, and that perhaps regulators and banks would collude to understate their provisions. As soon as that rumour or suggestion got about, there really would be a crisis.
That is a road down which no one should go. I do not accept that defence of Mr Tucker’s actions. It is not of course the defence that he has been making. He has no defence because he has confessed to an extraordinary act of negligence. Had he not undertaken it, had he not let that meeting go past—and yesterday there were suggestions that at the time he had other evidence that the LIBOR market was not as straight and transparent as it ought to have been—the crisis that we have experienced recently would not have occurred. I am sorry to have to make these harsh comments about a man whom I have not met and whom I had not heard until I listened to his evidence yesterday. However, in present circumstances, it seemed to me important that if one felt sufficiently strongly about such a matter one should raise it in the House.
Lord Myners
My Lords, I take note of my noble friend’s comments, but I feel compelled to say a few words in response. Without drawing the ire of the Minister, I can link it back to the subject of the amendment.
I worked with Mr Tucker, the deputy governor, during the banking crisis. We should wait for the outcome of the Treasury Select Committee’s report and the Joint Committee report. It is wrong to say that if the manipulation of the LIBOR-setting process had not occurred we would not have had the global financial crisis. It was undoubtedly bad and reprehensible, in the words of Mr Diamond, but it did not itself cause the crisis. Listening to Mr Tucker yesterday and reflecting back on the extraordinary circumstances of October 2007, I sympathised with him. The banking system was on the verge of complete collapse. It is still not fully appreciated how close we came to the edge of the cliff. In those circumstances, when one seemed constantly to be in meetings and constantly to be on the telephone, not taking notes of meetings is pretty forgivable. I was delighted that Mr Tucker was able to settle the issues arising from Mr Diamond’s file note about the senior Whitehall figures. I look forward to the Chancellor of the Exchequer responding to the clarity that Mr Tucker has brought there.
Reflecting on my noble friend’s amendment, I ask whether we are creating positions in the Bank of England and in the architecture which are simply beyond the talents of any one person to fulfil? Mr Tucker is one of the outstanding candidates to be the next governor. He is not the only one, but it is not a long list and it has got decidedly shorter in the past seven days. Two people previously spoken about as candidates, Mr Varley and the noble Lord, Lord Green, have probably dropped off in the past few days, so it is not a strong list.
Looking then at the FPC and its oversight, where are we going to find the people with the necessary talents to do this job? We are on the horns of a dilemma. On the one hand, you want knowledgeable people—people who do not have to be taken through everything step by step, but come to the issues with a good and clear knowledge and the ability to spot where the critical questions lie. On the other hand, you do not want to start these committees with people who in some way are conflicted by their current employment, their past employment, their pension arrangements and so forth.
I do not have a view about whether the shadow FPC is doing a good job. I think one or two of its members appear to be. Mr Robert Jenkins, in particular, appears to be an independent spirit who is not in any way caught up in the groupthink and consensus that I associate with much of the heart of the Bank. The simple fact is that most members of the FPC have a career background in investment banking. They have a career background in the very activity which was associated with the global financial crisis. I think we have a problem here. How do we get the right people into the right committees and the right courts and the offices of governor and deputy governor? No architecture makes sense if we are creating it on the presumption that we can find people of integrity, raw talent and understanding to fill the jobs when that is not a realistic assumption. I think the heart of the matter raised by my noble friend in his amendment is: how can we be satisfied that the people sitting on the FPC are appropriately competent and are managing conflicts of interests, as they probably will always have conflicts as a prerequisite for qualification to sit on these various committees?
Lord Liddle
My Lords, that was a very interesting exchange between my noble friends Lord Davies and Lord Myners on the crucial question of how these matters should operate. I would like to add a point in favour of my noble friend’s amendment on the basis of work I have done on how the new European system is operating. I had a conversation in Brussels recently with André Sapir, who is on the board of the European Systemic Risk Board, about the role of independent economic expertise in assessing systemic risk. On that board, the independent economists have made a decision that they will not rely on the internal expertise of the European Central Bank, precisely for the reason that the noble Lord, Lord Eatwell, said. We are operating in a very uncertain world and no one really knows what the right road map is. What we need is the maximum amount of well informed, independent expertise on these matters. I feel very strongly that this amendment should be supported.
Lord De Mauley
My Lords, before I start on the amendment, I shall say in response to the noble Lord, Lord Davies of Stamford, that the deputy governor for financial stability is a very fine and highly respected deputy governor. As the noble Lord, Lord Myners, said, it is for the Treasury Select Committee to assess what he said yesterday.
Turning to Amendment 89, it would create an advisory panel with a two-fold brief: first, to advise the FPC on systemic risks to financial stability; and, secondly, to assess and report upon the effectiveness of the FPC in assessing systemic risks to financial stability, the macroprudential tools provided by the Treasury to the FPC and the actions taken by the FPC. The membership of the panel would include the deputy governor for financial stability and a number of external members appointed by the Treasury, drawn from a range of relevant professions, including academia.
The Bill already creates, in the FPC, a committee on which the deputy governor for financial stability sits, together with external members, some of whom may indeed be academics. The noble Lord, Lord Eatwell, was good enough to compliment the external members of the interim FPC. Let me give some details of the specific expertise of the current external members to give a flavour. Alastair Clark has, in addition to extensive real-life experience, degrees from Cambridge and the LSE and is an honorary visiting professor at the Cass Business School. Robert Jenkins, who the noble Lord, Lord Myners, referred to, not only has extensive experience of trading and asset management but is also an adjunct professor at the London Business School. Donald Kohn, in addition to extensive experience in financial regulation in the US also has academic experience. Michael Cohrs has experience at senior level in the private sector in investment banking but is also a Harvard MBA and an adjunct professor at Beijing University. We want, and we have, multifaceted people. We agree with the noble Lord regarding the need for extensive broad experience, including academic experience, but we do not think this needs to be set down in legislation.
Lord Myners
The Minister used the word “independent” on several occasions relating to oversight. Noble Lords will remember that when the Monetary Policy Committee was established, there was quite a brouhaha about whether the independent members of that committee should have access to independent advice. The Bank resisted that so the independent members had to rely upon the Bank’s own economists. It was only after a threat of resignation by one of the independent members of the MPC that they were granted the ability to appoint, I believe, a single researcher.
The culture of the Bank does not foster independence. It is a very hierarchical organisation. The view of the Bank is the view of the governor. The court has recently announced three independent reviews into aspects of the Bank’s conduct. They are all quite interesting because they date from October 2008. None of them will actually look at the real errors that were made by the Bank, which were pre-2008. We really want to ask what the Bank was doing in 2006 and 2007. These reviews exclude any examination of Northern Rock, and I think one could argue that if it had been handled in a different way, it might have had some impact on how the UK was impacted by the global financial crisis.
I put down a Question on these independent reviews. The independent reviewers were appointed through a process led by the governor. The independent reviewers do not have their own secretariat. They are reliant upon the Bank’s staff for support, so I put it to the Minister that for this approach to operate, it is important that the FPC has access to truly independent advice. In my view, advice that comes from career employees of the Bank can never have that element of total independence that is necessary in order to achieve the objective that I believe the Government have for the FPC and which my noble friend has at heart when proposing this amendment.
Lord De Mauley
I will, if I may, respond on that point. The noble Lord, Lord Myners, is right, and my noble friend Lord Sassoon acknowledged earlier, that previously the Bank was slow to recognise the MPC external members’ need to have access to dedicated support. The Bank has learnt its lesson.
Lord Eatwell
Gosh, that is a bold statement. In replying to the comments made by the noble Lord, Lord De Mauley, I would point out that he has overlooked two crucial elements that underpin the logic of this amendment. First, there are indeed highly skilled and independent members of the Financial Policy Committee, but they are involved in making the decisions and the recommendations. They are the organised part of the organisation which will in due course be responsible for what happens. They are not in any sense an evaluative mechanism. They are adding grist to the mill of a decision-making mechanism; an evaluative mechanism is a different thing altogether.
Secondly, the noble Lord referred to the role of the new oversight committee. I would remind Members of the Committee that the oversight committee will be composed of members of the court; it will not be anybody outwith the internal structure of the Bank. I am enormously disappointed—the most disappointed I have been with anything I have done in relation to this organisation—that the Government have not taken this on board. We are trying to formalise a continuous process of debate, review and assessment by people who have high levels of skill in this area but who are not otherwise involved. That is what a truly effective advisory panel should do. I was struck by my noble friend Lord Liddle’s comments on what is happening at the European Systemic Risk Board. As the noble Lord, Lord Stewartby, said, we want people with the right sort of skills doing this sort of assessment. He is absolutely right.
I ask the Government to think again on this issue. This area can contribute significantly to the overall success of the FPC. I assure the Government that I will return to this matter at later stages, but for now I beg leave to withdraw the amendment.
Lord Sassoon
“( ) Within a year of commencement of this Act, the Bank of England shall publish a review of the effectiveness of coordination by the regulators of the exercise of their functions relating to membership of, and their relations with, the European Supervisory Authorities (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority), and their relations with other regulatory bodies outside the United Kingdom.”
Baroness Hayter of Kentish Town
My Lords, Amendment 96A stands in my name and that of my noble friend Lord Eatwell. Despite the increasing importance and powers of the new European Systemic Risk Board and its three ESAs—including, on occasion, the power to override our own regulators—the Bill’s new architecture does not map with theirs. So while Europe cuts by area—with a committee for banking, one for securities and markets and one for insurance and occupational pensions—the Bill divides between prudential and conduct. As AXA warns,
“There is a significant danger that the new structure will diminish the UK’s capacity to influence European regulators as”,
our,
“new ... bodies will be organised along different lines to the European Supervisory Authorities”.
London First, which represents over 200 of London’s leading employers, including many in the financial world, expresses similar concerns about the new framework not mapping onto that of Europe. While it welcomes the establishment of an international co-ordinating committee, it remains worried about the committee’s effectiveness unless it is appropriately resourced and staffed.
We have ceded powers to the EU on many areas of financial services regulation, but there are areas where we may want to retain powers; for example, to impose higher capital requirements on banks. There are also areas for future negotiation where it is imperative that we give leadership and have a good negotiating stance and team in order to have a good outcome. That depends on good preparation within domestic regulators—and that will require considerable co-ordination, which we will rely on a committee to produce.
Our own European Union Committee warned about the mismatch between our new structure and that of the ESAs last July, but the Government did not appear to take much heed of the potential problem. Perhaps the Government are right, and whichever way one cuts and divides, there will not be a brilliant fit. However, given the Government’s commitment to,
“ensuring that the UK authorities … take a leadership role in the ESAs”,
and given the importance of Europe in regulating, in standard setting and in influencing our financial regulators, it might be wise to have a built-in review to check whether we have got it as good as it could be, and to give this House and the other place a chance to see whether any adjustments are called for in the light of experience.
The Governor of the Bank of England has said that the new architecture is,
“a bit by way of an experiment”.
He went on to say that we,
“need to experiment and see how it evolves”
in regard to the whole schema, which he thought should be revisited after five years. In the case of our relations with the European bodies, however, we cannot wait that long. Decisions are being taken even as we meet.
These overlaps—or underlaps—are not theoretical. We know that Michel Barnier, the EU Commissioner overseeing financial services, is to amend EU market abuse rules in the light of the LIBOR scandal. Much of this work will overlap with the probe led by Martin Wheatley of the FCA which is examining almost the same issues. While the EU initiative is likely to complement Mr Wheatley’s conclusions on whether to apply criminal penalties to the manipulation of LIBOR or any other indices, there is potential for a clash over whether to regulate this or other indices.
Clear, focused input into EU thinking is therefore essential for the UK markets. We must ensure that we have the processes and structures right to make sure that those decisions suit our needs. This amendment seeks the information needed to help us assess what adjustments might have to be made to ensure that the decisions taken both here and in Europe really are as good as they can be. I beg to move.
Baroness Noakes
My Lords, I completely take the main thrust of the noble Baroness’s amendment, which is that the lack of mapping of our structure onto the European regulatory structure potentially creates problems. We have certainly heard from bodies in the City that they also are concerned that the particular issues that arise in their areas might not be well represented. There is a particular concern about the FCA and ESMA, given the FCA’s inevitable consumer centre-of-gravity and the perceived problem of issues relating to proper representation of the markets in Europe. So I completely buy the need to keep this under review. I question, however, whether the Bank of England is the right body to do that. If we need to hard-bake some kind of review process into the Bill, the review ought to be done by the Treasury, because it is the Treasury that could do something about it if it is not working well.
Lord Flight
My Lords, it strikes me that this amendment points an important finger at a number of territories. In some ways the mismatch concerns me less; there are always likely to be mismatch problems. For starters, I was disappointed that the previous Government, as it were, gave away power in the territory of financial regulation to Europe. Substantial things are happening: we have MiFID 2; the banking supervision proposals; and, following on from those, the recent proposals arising from greater European economic and financial union. First, I would like to know that the UK parties batting for the UK are doing a good job and have raised all the issues. Secondly, I agree with the noble Baroness, Lady Noakes. I am not certain whether this is a Treasury or a PRA matter but the PRA at least has the lead for the regulators in negotiating with the EU bodies. I should like to know how the Bank of England thinks it has done in dealing with the issues and protecting British interests.
The MiFID 2 proposals are coming up and I think that they could be extremely damaging to the UK if they went through as presently proposed. A lot of work needs to be done for them to be workable. If there were no public review or airing of what has been going on and the issues, it would perhaps be—in a fast-changing territory—somewhat undesirable. However, I am not quite sure what the right mechanism is for achieving what I seek to achieve.
Lord Liddle
My Lords, I rise briefly to support my noble friend Lady Hayter’s amendment. She has drawn attention to a crucial issue for the United Kingdom. The fact is that we benefit greatly from the existence of the European single financial market. I believe that one of the reasons why so many overseas banks base themselves in London is that we are part of a single regulated market. There are grave dangers for us in going down the road of separating ourselves from that single market.
It is important that we keep very closely in touch with European developments at all times. It is a very fast-moving scene. As we understand the results of the last European Council, banking supervision within the eurozone will be put under the European Central Bank by the end of this year. I noted with interest the Governor’s comment, as reported in the Financial Times at any rate, that this would make it easier for the Bank of England to deal with regulatory issues because there would be, as it were, a single telephone number to ring in the European Central Bank. It is also the case that the UK has a critically important influence in the European Systemic Risk Board. It is vital that we play a crucial role in that board, of which the Governor of the Bank of England is the deputy chair.
Lord Liddle
Britain’s position is given a special status given that we are the financial centre of the European single market. The governors of the central banks who make up that body are alive to London’s concerns at all times. It is very important that we play a major role there. It is therefore crucial that we keep these issues under review. I do not think that the way in which the Government have handled the proposals for a banking union is in the UK national interest. It is a bit rich to say, “It is none of our business because this is to do with the eurozone”, but then to complain that the creation of this thing might mean that there was an inbuilt majority against Britain on all financial regulatory decision-making. It is rather contradictory.
The position we have to adopt is that although we are not in the eurozone and will not be in the eurozone, we have to sustain the single financial market. That involves us having the closest possible relationship with the relevant European bodies and keeping abreast, in terms of our own arrangements, with developments there. For those reasons, I strongly support my noble friend’s amendment.
Lord Davies of Stamford
I also strongly support my noble friend’s amendment, which was very well conceived and—if I may say so—very persuasively moved. I also agree very much with my noble friend Lord Liddle in the way that he approaches this problem. I think that there are four major issues on which the House needs to ponder carefully. The first is the emerging mismatch between the evolving structures in financial regulation on both sides of the channel. Something has already been said about that so I will not go into it any further.
The second issue is subjective, but I fear that it is very difficult to deny. It is our declining influence in matters of financial regulation and supervision around the world. Many of us can remember a time when the British were regarded as great experts in these things. We obviously were brilliant because we had such a successful financial services industry. Therefore, when we said something about financial regulation, supervision or the right way of creating a framework for a thriving financial services industry, whether it was said in Washington, New York, Brussels or Frankfurt, it was listened to with great attention. We naturally had a very strong influence. I am sorry to say that a combination of the Euroscepticism of this new coalition Government and our recent failings in financial regulation and supervision—one thinks of the failings of the FSA in matters of RBS and so forth, and now the terrible and very upsetting scandal of LIBOR fixing, which I will not go into any further—inevitably will, and is, undermining the influence that we used to have. That is a very worrying situation.
There is, thirdly, the competitive issue, which we will come on to in later amendments. It is quite clear that as the framework for financial regulation diverges between this country and the continent, there is always a danger of competitive advantages changing, and possibly not in our favour. One of the obvious examples of which people are well aware is the possibility of lower capital-adequacy ratios on the continent. Presumably, particularly in the light of the crisis that we have all been through, they will always be set at a fairly sensible prudential level. However, there may be significant differences—for example, in retail deposit insurance schemes—which would lead people to want to hold their accounts on the continent rather than here. All kinds of things could emerge from regulatory and supervisory initiatives that would change the competitive balance. We need to be very alert to that.
Finally, the jury is out on whether or not it is in the national interest for us to be part of the emerging European banking union. I can see a great many theoretical reasons why it might be very strongly in our interest to join, but I do not have the slightest hope of persuading colleagues in the House today of that. Indeed, I am happy to wait and see, but we need to keep the matter under review. The regular review which my noble friend proposes in this amendment is exactly the kind of procedure and discipline that we want.
All British institutions involved should be aware that they are being reviewed in this matter; that their collaboration and effective participation in European structures is being watched; that they are expected to use their influence as effectively as they can on our behalf; and that they should be very conscious of the role they are playing. All that is very important and we need to monitor the results. We need, a few years after it comes, to be able to look back over the record as revealed by these reviews and otherwise—quite pragmatically and open-mindedly, without dogmatism or emotionalism—and to take a rational decision on the best way of achieving the national interest going forward.
Baroness Cohen of Pimlico
I support the amendment proposed by my noble friend Lady Hayter. Not only are we poorly mapped on to the new European financial regulators, but we are poorly represented in relation to our weight in financial services in Europe. We are under-represented, in fact. We are where we are, but this is one of the areas on which, in a year’s time, it would be useful to have a review and to see how best we might change or adjust our position, either by adjusting our own institutions, or by hoping to make greater progress in Europe. However, financial services are key to this country. Immense amounts of regulation being debated in Europe at the moment, and we are not quite in the best position to be doing all this. I very much welcome the idea of a review in a year.
Lord Neill of Bladen
My Lords, I have one comment to make on the text of the amendment. Just to have a report for one year seems such a limited objective. If it is worth doing at all, I do not understand why there is no language allowing for continuity. It was said that the noble Baroness, Lady Hayter, was providing for that. However, the actual language is:
“Within a year of commencement… the Bank of England shall publish a review”,
et cetera. It is to be a one-off. The idea is a good one. Have a regular review, and you can see whether things change. Whether it is going to be embarrassing for the governor, representing the Bank, to say what his relations are with all the other regulatory bodies outside the UK, I do not know. A case could be made for an independent body to produce this. However, the governor and the Bank probably have the information that is needed.
I add as a footnote that we need to keep in mind the terrible damage that has been done by the LIBOR scandal. There was an article in the Independent last week deploring the damage that it will do to the good name of the financial industry in this country. They are the sort of factors that are rather important.
Lord Sassoon
My Lords, we have had an interesting run-around this issue. There have been quite a few divergent voices about the way of handling the challenge that is the subject of this amendment.
First, I certainly did not read this amendment as relating to the mapping of the UK structure as it will be against the European structure, because the start of this amendment talks about,
“a review of the effectiveness of coordination… and their relations with, the European Supervisory Authorities”.
This seems to go very much with the responsibilities under the co-ordination memorandum. I have a bit of trouble in my mind matching this up with the substantive concern of the noble Baroness, Lady Hayter of Kentish Town, which I understand.
I start with the question as to whether the UK architecture does or should adequately map against the new European supervisory authorities. I do not believe it is necessary for the responsibilities of domestic regulators to exactly map on to the corresponding ESA for engagement with them to be effective and well co-ordinated. The regulatory systems of other EU member states do not match up with the activities-based structure of the ESAs. Of course, as has been discussed already, the European architecture is itself likely to be moving around, so that we are probably not going to be aiming at a fixed target. Although it has been stated that the City has had some concerns about the mapping, the broad consensus in the evidence given to the Joint Committee was that having a different regulatory structure to that of the ESAs, will not present any issues for the UK authorities in representing the UK’s interests. The Government have accepted the recommendation of the Joint Committee, and the Bill requires that the international organisations’ MOU establishes an international co-ordination committee, so we have fully responded to the concerns of the Joint Committee in this area.
Baroness Hayter of Kentish Town
First, I thank those who have contributed to the debate and have spoken very much, I think, in support of what I have been saying. I thank the noble Baroness, Lady Noakes, the noble Lords, Lord Flight and Lord Neill of Bladen, and my noble friends Lord Liddle, Lord Davies and Lady Cohen.
I am surprised that the Minister did not quite know what was coming. I said all this in my Second Reading speech, which I thought would be a little clue to what this was going to be about. However, I think that there is wide acceptance of the mismatch between the new architecture and what exists across the water. The Minister said that there were divergent voices. I do not agree. I think everyone is saying that we need to look at this issue. The noble Lord, Lord Flight, may be right that it would be better for Her Majesty’s Treasury to do it rather than the Bank of England, but that is quite a small point compared with the thrust of the amendment, which is that this matter needs to be reviewed.
This issue raises quite important questions, as I saw when I helped to regulate actuaries. Many of the rules were written down in Europe through CEIOPS, as it was called at the time. We did not have direct access to CEIOPS; we had to go to the FSA, which was our representative on it, and that made the negotiation much more difficult. Therefore, this is not an easy matter and it will be very important to review how the international co-ordination committee is coping, how effective our input is, whether what we are doing really is sustaining and enhancing the single financial market and whether we are properly, adequately and well represented on it.
The noble Lord, Lord Neill of Bladen, may well be right that a regular review is needed. We proposed a one-off review because our domestic architecture is new and it may need some adjustment. However, the Minister is right: it is an EU moving target, so it may well be that a review will be required more often.
I hear what the Minister says about the NAO looking at this and the possibility of reviews by the Treasury Select Committee. However, it seems to me that the commitment to produce the evidence should come from the Treasury rather than the Bank of England, and any of those bodies could then take a view on the information. In particular, it needs to be automatically brought before Parliament so that this House and the other place are able to opine on whether adjustments should be made.
I am very happy to withdraw the amendment at this stage but I hope that we will be able to come back to this matter to look for an appropriate way of building in a review. I beg leave to withdraw the amendment.
Lord Sassoon
“(8A) After paragraph 12 insert—
“Publication of record of meetings12A (1) The Bank must publish a record of each meeting of the court—
(a) before the end of the period of 6 weeks beginning with the day of the meeting, or(b) if no meeting of the court is subsequently held during that period, before the end of the period of 2 weeks beginning with the day of the next meeting.(2) The record must specify any decisions taken at the meeting (including decisions to take no action) and must set out, in relation to each decision, a summary of the court’s deliberations.
(3) Sub-paragraphs (1) and (2) do not require the publication of information whose publication within the time required by sub-paragraph (1) would in the opinion of the court be against the public interest.
(4) Publication under this section is to be in such manner as the Bank thinks fit.””
“(8B) In paragraph 14(1), for “it” substitute “the Oversight Committee”.”
Baroness Kramer
“( ) In paragraph 13, for sub-paragraph (3)(a) substitute—
“(a) a director of the Bank to chair its meetings (“the chair of the Court”), and”.”
Baroness Kramer
My Lords, I think that I can be very brief in moving this amendment. Its purpose is to close a gap between the Government’s clearly stated intent and the language in the Bill. I am sympathetic to those who have drafted the language, because the complexities of the Bank of England Act 1998, as amended by the Banking Act 2009, make it quite hard to follow through a single train of thought, and I suspect that that is what has caused a trip-up in the language in this instance.
On the first day in Committee on this Bill on 26 June, the Minister was absolutely clear that the oversight committee—whose existence and procedures he put forward and the Committee accepted—should be made up of non-executive members of the Court of the Bank of England, and that its chair should also be a non-executive member. However, the language in the Bill does not allow that train of thought to follow through. It would permit the Chancellor to appoint the governor or deputy governor to the role of chair of the court and hence see that individual put into the position of chair of the oversight committee. I shall not bore the Committee at this point by trying to track through that but I assure noble Lords that that is the consequence of the current language. I simply say to the Government that I hope that someone can go away and fix this more elegantly than I have been able to do and, on that basis, I shall not be pressing the amendment.
Lord Sassoon
My Lords, I do not know whether anyone else wants to come in on this but it may be helpful if I speak now. This amendment in the name of my noble friend Lady Kramer returns us, as she says, to the territory of not only Bank of England governance but nomenclature, which we discussed at some length two weeks ago. As my noble friend says, one of the changes made in the Banking Act 2009 was intended to amend the Bank of England Act to require the court to be chaired by a director, which, as we established two weeks ago, means a non-executive member—again, as my noble friend pointed out. However, she has gone further because it is only my noble friend, with her razor-sharp eye, who has noticed that the relevant provision inserted into the Bank of England Act 1998, while allowing the court to be chaired by a director, does not require that it be so. That is clearly not correct.
Therefore, although I cannot accept the amendment as drafted because it does not cover all the necessary ground to give full effect to this change, I assure my noble friend and the Committee that we will go away and draft the necessary changes. I thank my noble friend for bringing this to the Committee’s attention.
More generally, I am aware from the discussion that we had two weeks ago that there are some irregularities in the terminology in the Bank of England Act which I certainly had difficulties with and I think that other Members of the Committee did too. A prime example of this is that the so-called Court of Directors includes the executive members of the court who are not, and cannot be, directors. This is plainly absurd. To say that this is all justified because the Bank has been in existence for 300 years so we just have to live with it is not the right approach. As I think I wrote following the first day in Committee, I will consider further whether any other changes might be made to the 1998 Act to clarify these terms, making them more consistent with current usage. We cannot proof the legislation against further changes over 300 years but we can at least try to update a few things.
With thanks to my noble friend, I ask her to withdraw her amendment, as she has already indicated she will do.
Lord Sassoon
“(b) for sub-paragraph (2) substitute—“(2) The terms and conditions on which a person holds office as a member of the Committee appointed under section 13(2)(c) are to be such as the Oversight Committee may determine.”, and(c) omit sub-paragraph (3).”
“(7A) In paragraph 9—
(a) in sub-paragraph (1)—(i) for “Bank” substitute “Oversight Committee”, and(ii) in paragraph (a), for “the Committee’s meetings” and “the Committee’s consent” substitute “meetings of the Monetary Policy Committee” and “that Committee’s consent”, and(b) omit sub-paragraph (2).”
Lord Sassoon
Lord Sassoon
My Lords, this is a large group of minor and technical government amendments that I hope we can dispatch very quickly. The amendments address a number of technical issues such as updating the Bill to accommodate changes in European law made since the Bill was introduced, amending some rogue references to the FSA in FiSMA, making consequential amendments to enactments that have been passed since the Bill was introduced and making other technical improvements. I am happy to discuss them, or write in more detail, if any Member of the Committee would like to discuss them. I beg to move.
Baroness Hayter of Kentish Town
I will just say that I am very happy to accept the assurances from the Minister that, first, these are technical amendments and, secondly, that he would be very brief in what he said today. I have tried to see whether I could speak for longer than he did. I have not been through every amendment but did look at a sample. Each one I sampled was, indeed, technical and minor.
Lord Sassoon
(d) a qualifying EU provision that is specified, or of a description specified, for the purposes of this subsection by the Treasury by order.”
Baroness Noakes
Baroness Noakes
My Lords, I am standing in again for the noble Lord, Lord McFall, in respect of the amendments that are in our joint names. In moving Amendment 101ZD, I shall speak also to Amendments 101B and 118B, which continue on from the concerns of the Treasury Select Committee in another place as expressed in its first report in this Session.
These amendments concern the FCA’s strategic objective, which was the subject of debate on our first day in Committee when, unfortunately, I was not able to be here. The effect of the amendments is to remove the strategic objective set out for the FCA and leave it with its so-called “operational objectives”. The FCA would then have simply objectives.
The FCA’s objectives have been amended quite considerably since they first saw the light of day in a draft nearly two years ago, but it seems to have been a case of two steps forward and one step back. The Treasury Select Committee believes that the Government should aim at simplicity and clarity when framing statutory objectives and that the existence of a separate strategic objective adds confusion. When the Government responded to the Treasury Select Committee’s earlier recommendation in this regard, they said both that the strategic objective,
“has a valuable role in supplementing the operational objectives”,
and that,
“it operates as a check and balance on the operational objectives”.
As the Treasury Select Committee has noted, that is rather contradictory and the Government appear confused. It is difficult to disagree with that conclusion.
The Government also said that the strategic objective acted as a mission statement for the FCA. The Minister repeated that two weeks ago when he responded to the group of amendments led by Amendment 42. The Treasury Select Committee’s view, as set out in paragraph 4 of the 28th report of the 2010-12 Session, is that:
“A ‘mission statement’ has no place in primary legislation. At best”,
it,
“adds nothing. It may be harmful. Multiple tiers of objective risk adding to complexity and diffusing the focus within the FCA”.
Under new Section 1A, the FCA has not only this mission statement-cum-strategic objective but also has three operational objectives, a requirement to promote competition in the interests of consumers, two “have regards” and four functions. As the Treasury Select Committee has pointed out, this really is not clear and simple. I might have understood why the Government had used this contorted formulation if it had been repeated for the PRA or the FPC. However, the Bill does not take this multiple-levels-of-objective route for those bodies, nor was it the route taken for the FSA under FiSMA. I regard it as an unusual formulation for bodies created by statute.
The Minister said last week that there were precedents for this framework but he did not cite them. Perhaps he will do so today so that we can judge whether they are good precedents. The noble Lord also did not explain why this formula is good for the FCA but not for the other bodies in the new financial stability universe. Again, perhaps he will do so today.
When the Minister replies, can he also explain what,
“so far as is reasonably possible”,
means in the opening words to new Section 1B(1)? Surely, the FCA should always act in accordance with its objectives, strategic or otherwise. What do the words mean? How could the FCA possibly act in a way that was not compatible with its objectives? I do not have a specific amendment on this point for Committee and the drafting of the Bill does not permit any sensible stand part debates, but I hope that the Minister can explain this when he responds. I beg to move.
Lord Eatwell
My Lords, I have an amendment in this group of a slightly different variety but I have enormous sympathy with what the noble Baroness, Lady Noakes, has said about the strategic objective. When I first read the Bill, my note in the margin said “vacuous”. This notion that “relevant markets … function well” really is gamma minus stuff. It is pathetic and does not mean anything at all. One immediately asks for a definition of “function well”. We find that the objectives for competition, integrity and consumer protection are all defined, but there is no definition of what “function well” might mean.
Moreover, not only is this expression vacuous but it has no separate life. Whenever the FCA’s objectives are referred to in the Bill, it is the other objectives—the consumer objective, the integrity objective, the competition objective and the operational objectives—that are referred to. This strategic objective only has coherent life in other references in the Bill in so far as it lives through these more concrete proposals. If it is to be left as it is, it adds nothing other than spurious solidity and real complexity to the structure of objectives for the FCA. I have tried to give it some life. In our Amendment 101D in this group, my noble friend Lady Hayter and I have added the phrase,
“in the best interests of society as a whole”,
to the term “functions well”. That phrase captures the concept of the social optimum as defined in classical welfare economics. One does not want the technicalities of welfare economics within the definition of the Bill, but serving the best interests of society as a whole is the sort of expression that is used by Professor Amartya Sen in his discussions of evaluations of philosophical propositions relative to the social good. By adding,
“in the best interests of society as a whole”,
I would hope to provide this previously vacuous statement with some structure that could be referred to as a mission statement. Although I take on board the objections of the noble Baroness, Lady Noakes, to mission statements, I must say that I tend to agree with them. A mission statement could provide some framework within which the other operational objectives could be seen. For example, on the competition objective, one would look at the objective of stimulating competition in terms of the best interests of society as a whole. There may be circumstances in which the stimulation of competition is not in the best interests of society as a whole perhaps because it causes some distortion to the operation of the market, but, more generally, we would expect the encouragement of competition to act in the best interests of society as a whole.
We have a simple binary choice. Either we must give this vacuous statement some substance or we should remove it from the Bill, as proposed by the noble Baroness, Lady Noakes. What we should not do is leave this statement, which can do no good other than cause a bit of innocent amusement about how silly some clauses in the Bill might be.
Lord Sassoon
My Lords, I was not quick in getting to my feet because I am not sure whether Amendment 101D was moved, taken separately, or where we are.
Lord Sassoon
I wanted to be clear whether that amendment had been spoken to and on whether we should have something with substance in the provision or take it out all together.
It will not surprise the Committee if I say at the outset that, unlike my previous responses when I have been very accommodating or have tidied things up, I cannot support this group of amendments to delete the FCA’s strategic objective. The Government recognise the importance of getting the objectives of the FCA right. As my noble friend Lady Noakes said, there has now been a considerable period in which we have made substantial changes on the objective question since the first proposal, so we are, and have been, listening. It is perhaps worth going over where the suggestions for improvement have come from.
The Government took note of calls from the Independent Commission on Banking and others on the objective proposed in the draft Bill that,
“protecting and enhancing confidence in the UK’s financial system”,
needed to be changed. The Bill now provides that the FCA’s strategic objective, as has been noted, is,
“ensuring that the relevant markets function well”.
That change has been broadly welcomed, by the Independent Commission on Banking, and by consumer and industry stakeholders alike. Even the Treasury Committee considers that the revised drafting is,
“a significant improvement on the proposal in the draft Bill”,
as in its report of 31 May this year.
Let me attempt to reprise the argument, without delving into classical welfare economics and areas that are a bit beyond me. The Treasury Committee may assert that a mission statement has no place in primary legislation but the Government believe that it is right to enshrine something as important as the FCA’s overall purpose in primary legislation, whether or not we call it a mission statement. It is the FCA’s overall purpose.
Lord Eatwell
Will the noble Lord indulge me? What does function well mean? “Function well” for whom? Does it mean functioning well for a consumer? Does it mean functioning well for a trader? Does it mean functioning well in terms of working smoothly without any hiccups but not allocating resources terribly well? Does it mean allocating resources efficiently? All those things come under the term “function well” but contradict one another. What does it mean, and for whom?
Lord Sassoon
My Lords, in giving those four examples the noble Lord knows very well that the first and fourth of his examples very much fit the bill, and the second and third very much do not. This is all about markets that work essentially to assist the end user of those markets. It has nothing within it to do with working well for a trader or something superficial that all looks smooth on the surface but does not provide the end result of liquidity, price discovery or choice for consumers. The noble Lord knows very well that it would be impossible within the compass of such a piece of legislation to try to define the well working of a market, but the Bill spells out the main ways in which the FCA will seek to promote the well functioning of markets—those operational objectives that I touched on.
Those operational objectives give clues and pointers to the FCA. It will be for the FCA’s board to consider if and when it needs to consider these questions of well functioning markets. I believe that it will be well equipped with its expertise to consider market by market what well functioning means. I see absolutely no problem with this. However, there needs to be something that brings together the FCA’s very diverse and individual functions, roles and responsibilities.
That relates to one of the questions asked by my noble friend Lady Noakes, who asked why the FPC and the PRA do not have strategic objectives. It is precisely because they have much more narrowly focused objectives that they do not need the overall strategic objectives that the FCA needs because of the breadth of its responsibilities. I agree with my noble friend and others that we have not provided this strategic objective for the FCA on some whim. We have not put it in for the FPC and the PRA because it is not necessary. It is precisely because of the diversity and the potentially conflicting nature of the objectives of the other bodies that we believe it is right to have it in the case of the FCA.
By the same logic, the strategic objective will act as a check and balance. If, say, the FCA seeks to advance its consumer protection objective by placing detailed requirements on firms, we want it always to ask itself whether what it is doing contributes to the ultimate end goal of ensuring that markets function well. What functioning well means will be determined with some commonality across all markets, but some of it will be market-specific, particularly depending on whether it is a consumer or a wholesale market. This is no afterthought. It reflects the Government’s desire to enshrine regulation which seeks to ensure that markets can do their job.
My noble friend also asked a question about how the FCA could act in a way that was not compatible with its objectives. There are examples which we need to take into account, one of which might be a short-selling ban which is, arguably, in the interests of end-consumers but is a measure which is not normally thought to be compatible with a well functioning market.
Baroness Noakes
I thank my noble friend for that example, in which a short-selling ban could be introduced because it was compatible with one of the operational objectives yet was incompatible with the strategic objective. What, then, is the point of having the strategic objective sitting in this Bill?
Lord Sassoon
My Lords, I have explained why a strategic objective is necessary in order to tie together the very disparate responsibilities of the FCA. Nevertheless, in answer to my noble friend’s question about the “in as far as reasonably possible” carve-out, I give her an example of why there will be circumstances where those words are necessary. It is entirely compatible with the need for the general, overarching statement to admit and allow for the possibility that there will occasionally be instances of conflict with that overarching objective. We have done that in the Bill and this does not in any way invalidate it.
I turn briefly to Amendment 101D in the name of the noble Lord, Lord Eatwell. This seeks to extend the FCA’s strategic objective to ensure that markets function in the best interests of society as a whole. Consistent with what I have already said about the well functioning of markets, I support the sentiment underpinning the amendment. We want markets which serve the wider economy, underpin growth and contribute to a more prosperous society as a whole. We are not talking about markets that are working exclusively for those who are operating in them. This sentiment is very much part of what drives this whole programme of financial services reform.
Having said that, I am conscious about the amendment for two reasons. First, it is not the FCA’s job to decide what is ultimately in the best interests of society. The FCA is being set up as a focused, tough and proactive conduct-of-business regulator. If its new style of conduct regulation contributes to ensuring that the financial sector serves the wider economy, that is good and what we want to see. However, I suggest that deciding what benefits society as a whole cannot be the role of a financial services regulator.
Secondly, and linked to that, is an important question of expectations. The FCA will have some important powers but it is questionable whether we could argue that it has all the powers to deliver a market that benefits all of society all of the time.
There are difficult judgments to be made here, not least because there will always be trade-offs between policy choices. It is my strong belief that these societal choices are, ultimately, for the governor and not the regulator. I cannot, therefore, support Amendment 101D. I may be proved wrong in just a moment, but I sense that I have not completely won over my noble friend—no, I will not be proved wrong. However, she is always very reasonable about these things and she recognises the very considerable way that the Government have moved on the FCA’s strategic objective. I ask her to withdraw her amendment.
Lord Eatwell
Before the Minister sits down, did I hear him correctly when he said that the choice of the benefit to society as a whole was not a matter for the regulator but a matter for the governor? Or did he say Government? I did not quite hear him properly.
Lord Sassoon
I said the Government. I hope he would agree that it was for the Government, not the governor. Good.
Baroness Noakes
My Lords, I am glad that my noble friend has cleared that up because I heard him say “governor” too. Perhaps there was a small slip, but Hansard will doubtless make sure that what he intended to say is recorded as having been said.
I thank the noble Lord, Lord Eatwell, for his support for my amendments and I agree with him that the current drafting is not much more than a vacuous statement. The Minister said that this is going to be an overarching goal, that it is going to be a check and balance but the first example he gave me, of short-selling, means that it can be ignored. This seems to be some form of window dressing. It is trying to appear that the Government agree with as many people as possible. It probably has no meaning whatever and it is therefore possibly something that we do not need to get overexcited about. It certainly does not add to clarity in the Bill. I shall think further on what my noble friend has said before we return to this on Report. For now, I beg leave to withdraw the amendment.
Alcohol Strategy: Role of Drinks Industry
(12 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Coussins
To ask Her Majesty’s Government what they consider to be the role of the drinks industry in helping to prevent alcohol misuse and anti-social behaviour, and in promoting responsible drinking, in line with the Government’s alcohol strategy.
Baroness Coussins
My Lords, I begin by declaring my interests. I am a former chief executive of the Portman Group and the Drinkaware Trust, and a former member of the Alcohol Education and Research Council and the Advertising Standards Authority. Currently I am a paid consultant to two drinks producers, Brown-Forman and Heineken, but I emphasise that neither company has asked or suggested that I table this debate, nor have they had any discussions with me about it.
Despite these connections, I would be the first to say that when it comes to irresponsible behaviour the industry has certainly not been blameless. I joined the Portman Group in 1996 at the time alcopops burst onto the market and I saw some dreadful examples of products and marketing campaigns that were inexcusable and that would now breach every rule in the book of the codes of practice that were subsequently developed and which apply today. However, I believe the industry has come a long way and is now genuine in its intentions to promote responsible drinking and prevent misuse. I also believe the industry is effective in its actions and, indeed, has been a helpful model to other sectors.
Promoting responsible drinking and being a successful, profit-making business are not conflicting, mutually exclusive objectives. I am pleased that the latest alcohol strategy and the responsibility deal acknowledge the industry as a key partner and press exactly the right buttons to stimulate innovation and link the industry ever more closely into the community partnerships which are, frankly, the only way in which we will ever make a lasting impact on the drinking culture in this country.
The situation is not altogether negative. Latest figures from the Office for National Statistics show that the vast majority of people—78%—are drinking within government guidelines. Per capita consumption fell from 9.5 to 8.3 litres between 2004 and 2011, putting the UK a fraction above the European average and lower than France, Spain and Austria. According to the ONS, young people’s binge-drinking is at its lowest ever recorded level, and fewer children aged 11 to 15 are trying alcohol than ever before. Drinking at harmful levels is falling and drink/drive fatalities have fallen by 85% since 1979.
Yet there is still a significant minority who do drink to excess and cost the UK economy a staggering £21 billion every year. Alcohol-related hospital admissions are up and alcohol-related deaths have doubled since the early 1990s. Alcohol-related violent crime has fallen significantly but still accounts for nearly 1 million incidents every year. Individuals, families, communities and businesses are being damaged.
To tackle these problems, the Government are right to treat the industry as a key stakeholder who can have a significant positive impact. This is partly about demanding strict standards of commercial behaviour which prohibit the industry from doing things such as targeting its marketing to under 18s and linking alcohol with sexual success, and a host of other strict and detailed rules which are policed by the Portman Group, the ASA and Ofcom.
However, it is also about what the industry can do proactively. For example, 61 companies fund the Drinkaware Trust, now a charity under independent governance with trustees from many sectors, including health professionals. Almost all ads for alcoholic drinks now carry the Drinkaware website address and that attracts 300,000 people a month. In-kind media support from industry totals £26.5 million, significantly exceeding the Government’s target of £15 million. This also compares positively with the Government’s spend on alcohol campaigns of only £4.65 million for the past two years. Perhaps the Minister will tell us whether this is likely to go up.
However, it is the Responsibility Deal that demonstrates the most imaginative and transformative potential of corporate responsibility. Nowhere else in Europe has achieved anything like it—and all without red tape.
It has four key commitments. First, to take 1 billion units of alcohol out of the market by 2015 by reformulating existing brands to contain less alcohol and by innovating to bring new, lower-strength brands on to the market, helping more people to drink within the guidelines by providing a wider choice of lower alcohol products. This is significant because it shapes the drive to reduce consumption in a consumer friendly way: the issue becomes one of drinks, not of alcohol.
Secondly, the industry will help consumers understand units better and it has pledged that by December 2013 over 80% of the products on the shelves will carry clear unit content, the Chief Medical Officer’s guidelines and a warning about drinking while pregnant. It is well on track to fulfil this commitment, with over 60% of labels and containers already complying with 18 months still to go. Mandatory labelling would almost certainly need EU legislation and take years to achieve, so the UK industry is leading the way by doing this voluntarily.
The third pledge is to provide more support for communities to develop local schemes such as Best Bar None, Purple Flag, community alcohol partnerships and business improvement districts. This is vital because alcohol harms in the UK vary hugely across different regions. For example, data from the North-West Regional Health Authority show rates of alcohol specific mortality and liver disease in Blackpool at nearly three times the national average; hospital admissions in Liverpool, nearly 2.5 times the national average; and binge drinking in north Tyneside, 1.5 times the national average.
One of the reasons these community schemes work is because they offer a win-win outcome. For example, in Durham there has been a 75% increase in trade in pubs which run the Best Bar None scheme because it makes the pub a safer and more attractive place to go. At the same time, figures suggest an 87% decrease in violent crime.
Finally, under the responsibility deal, producers have committed continued support to Drinkaware, not only by paying their dues and sitting back but by using their brand marketing to promote the charity’s campaigns and government guidelines. During the last FA Cup competition, for example, more than 50 million football fans saw Drinkaware branding through a beer sponsorship which featured Drinkaware on the stadium perimeter. Every sixth ad shown at the matches carried the Drinkaware message. We know that it had a positive effect because during the two semi-final matches in April there was a 30% increase in direct traffic to the Drinkaware home page.
Being a partner in the alcohol strategy of course means, by definition, that there are other groups involved too. The industry should not be the scapegoats for all the blame when something goes wrong. Pubs often get it in the neck for offering so-called 24 hour drinking when in fact only a minute percentage of the UK’s licensed premises have a 24-hour licence, and most of those are in airports or hotels. The fact is that we have seen a reduction in consumption since we have had a relaxation in the licensing regime.
Producers often get it in the neck, too, for their advertising but, as I said earlier, there are stringent restrictions on the content, placement and timing of alcohol ads and the new strategy has given a clear mandate to the ASA and the Portman Group to review the rules further.
Supermarkets often get it in the neck for selling alcohol too cheaply—I find some of their discounting practices very worrying—but even price is not a straightforward issue. There is certainly a proven link between price and consumption but I am not so sure that there is a proven link between price and harm. After all, alcohol is even cheaper in France and yet alcohol harms there are falling. Our real target should be the drinking culture and harmful patterns of drinking, whatever the price of the stuff.
Other partners include parents, and one might ask why, according to Drinkaware, most parents do not plan to talk to their children about alcohol until well past the age when they are likely to have had their first drink.
Law enforcement, too, has a role. One might ask why you can count on one hand the number of prosecutions of licensees for selling drink to customers who are already drunk, when this has been against the law for years. Voluntary initiatives on the part of the industry should be a complement to, and not a substitute for, proper law enforcement. I would be grateful for the Minister’s comments on that point.
The drinks industry will always and rightly come under close scrutiny and deserve even tighter regulation if it falls short of the standards which it has set for itself and which others expect of it. It must make sense to harness business skills, marketing expertise and product innovation to the effort to reduce alcohol harm, where, self-evidently, the traditional health education approach alone has failed.
Lord Brooke of Alverthorpe
My Lords, I am grateful to the noble Baroness, Lady Coussins, for promoting the debate this evening. I commence, too, by declaring an interest: as trustee of Action on Addiction and several other charities which are in the business of trying to help people who have suffered the consequences of alcohol abuse.
I shall not go through the usual litany of problems which arise from the continuing massive overconsumption of alcohol in this country and its widespread abuse. It is true that the level of drinking has declined marginally in recent times, but, compared to 15 or 20 years ago, it is still extraordinarily high and the price of alcohol in this country is still quite low. As the noble Baroness concedes, 1.2 million alcohol-related hospital admissions were recorded in 2010-11 alone. The level of binge-drinking among young people, particularly among 15 and 16 year-olds, is still very high compared with what we find in other European countries. My first question to the Minister is: when will the Government not only review advertising targeted particularly at the young but ask the drinks industry also to stop doing it, especially through increasing use of social media? Social media are heavily populated by the young these days and that is an area where the drinks industry feels that it can make the biggest impact. If we are truly to bring about a change in culture, it should come from the young, from targeting them positively and from not encouraging them to drink.
I congratulate the Government on the steps that they have taken to try to tackle the problem. The noble Baroness did not mention the Government’s announcement to tackle the issue of minimum pricing. I congratulate the Government on the bold steps that they have taken there. I know that they are consulting at the moment, but I hope that they will stick to their guns and not be persuaded by those who will come with counter-arguments to shift their policy.
I thank the Government for the changes which they have made to local licensing laws, on which we had some extensive debates last year. One of the factors which many of us believe lead to excessive drinking is our easy access to alcohol these days compared with 20 or 30 years ago. While the Government are working through the changes in licensing arrangements, I hope that they will continue to keep them under close review. I hope, too, that they will review the possibility of a change being made to the criteria used in granting licences locally to take into account the effects on public health of excessive drinking in particular areas and locations. They should use localism to benefit people who are suffering from some of the adverse consequences of abusive drinking in their areas.
It would be churlish on my part if I did not concede that some substantial changes have been made by the drinks industry in recent years. Drinkaware is making good headway in certain areas, but its communication with the wider public is in many respects fairly limited. The number of people who visit its website is fairly small by comparison with the millions of people communicated with, for example, by wide-scale Carlsberg adverts shown during preparations for the Olympics.
It is important that we do not disregard the position which the BMA has taken on Drinkaware and the joint initiative taken by the Government in the form of the Responsibility Deal. It felt inclined in the light of the way that conversations were going to withdraw from that. I hope that the Minister will say whether the Government are taking any steps to try to bring the medical profession back into partnership. The report produced 12 months ago by this House’s Science and Technology Select Committee on behaviour change raised very serious questions about the extent to which the Responsibility Deal could work.
I recognise that I am running out of time. I wanted to press the Minister on why there has been no movement on changing drink labelling to give coverage of the calorie levels and contents of alcoholic drinks. I have done a blog today, so if the Minister is kind enough, he can go away afterwards and read it, because the Government need to take action. Regardless of what is happening in Europe, we could move on that front. That would be a way of communicating on a mass scale with many drinkers.
Lord Clement-Jones
My Lords, I congratulate the noble Baroness, Lady Coussins, both on securing this short debate and on her outstanding work in this area. I believe that this is the first debate that we have had on this subject since the Government published their alcohol strategy in March.
I declare a very historic interest as a former employee of Grand Metropolitan plc, as it then was, in the 1980s, but, as a result, I am a firm believer in government and local government working with the industry—both the on and off-trade and the manufacturers—in implementing an alcohol strategy.
It partly depends on having clear common understanding of the facts, but these are sometimes not straightforward—the noble Baroness set out the facts very clearly. It seems that the prevalence of binge-drinking has fallen over time, but there are many conflicting statistics and it is not always easy to draw conclusions. Nevertheless, the key factor for me is that, as Drinkaware says, binge-drinking remains a social norm. We are fighting a huge cultural battle. Many would say that binge-drinking—the inability to take in alcohol in a civilised way—has sadly been an English cultural characteristic for hundreds of years. Depressingly, it may be spreading more widely abroad.
This is a culture we have to change. Some say that social responsibility initiatives and education are not enough. They are probably right on this, but they often go further and say that it is wrong that industry should be involved in public health initiatives. This is too purist a line. I believe strongly in the value of the Responsibility Deal launched in March 2011, as agreed between the Department of Health and the industry, in a number of areas which, again, the noble Baroness set out. They include: alcohol labelling; awareness of alcohol units in the on and off-trade; tackling underage alcohol sales; support for Drinkaware; advertising and marketing of alcohol; and community action to tackle alcohol harm.
Under this umbrella and otherwise, there are a great many community schemes where the industry is working with local government to minimise alcohol abuse and the problems flowing from it. They include Best Bar None, Purple Flag; community alcohol partnerships, of which there are now some 36; Pubwatch; and Challenge 25, designed to tackle underage drinking —to name but a few.
There is clearly no single magic bullet, as all policy makers recognise, but we need to keep trying different approaches. I broadly support the Government's alcohol strategy, published in March this year. The Minister may be aware that I was sceptical about Government’s so-called rebalancing approach to the licensing regime in the Police Reform and Social Responsibility Act, in particular as regards the evidential test being changed both for the new EMROs and for licence conditions and the removal of the vicinity test, not to mention the blanket nature of the late-night levy. Time will tell, but there are many other areas of government strategy to support.
In particular, there is the question of minimum alcohol pricing. A Home Office paper was published in March 2011 which, albeit tentatively, suggests that there is enough evidence to say that the minimum pricing of units of alcohol would have an impact on behaviour. Of course, that is not popular with the industry, but, along with many who run pubs and clubs, I believe that one of the key components of binge drinking is preloading—drinking cheap alcohol purchased from supermarkets and off-licences before going out. The Government paper says that there is evidence of a link between alcohol pricing and violence and that pricing could have an impact on young people and binge-drinking.
What progress is being made on the consultation? What concrete proposals are being put forward? Are the pricing proposals that the cost price should be no less than the cost price of a unit, or a figure, such as 40p or 50p? Those are important issues and I hope that firm proposals are being prepared.
I am not yet convinced—I think that the Government have the same approach—that a more draconian approach to advertising is in order. We have the guidelines laid down by the ASA and the marketing code of practice of the Portman Group, designed principally to prevent alcohol advertising being directed at children. As a result of the latter, more than 80 irresponsible products have been banned in co-operation with retailers. We should have clear evidence of abuse before plunging into further regulation.
All of us would acknowledge that this is an important industry. Let us not demonise it but work with it.
Lord Bilimoria
My Lords, I declare my interest as the founder and chairman of Cobra Beer and the chairman of two joint ventures with Molson Coors: the Cobra Beer partnership here in the UK and Molson Coors Cobra in India.
Sadly, I have seen the terrible effects of “country liquor”, which is still widely consumed in India. Country liquor is usually about 50% alcohol by volume, if not more. It causes huge health and social problems, destroying families and communities.
Prohibition has never worked anywhere in the world. If people are going to drink, I would prefer that they drink beer, a drink with far lower ABV than country liquor, even if that means drinking the higher ABV beers commonly found in India. I hope that one day country liquor, a scourge in India, will be eradicated and that most Indians who choose to drink will choose to buy a beer as a lifestyle choice and for refreshment.
I thank the noble Baroness, Lady Coussins, who is a real expert in this field, for initiating the debate in this crucial area. Not to be ignored in this debate is the fact that, for us in the UK, VAT and duties have a strong impact on what British consumers choose to drink. Unfortunately, the Treasury has not kept up with an evolving drinks market. Over the past 30 years, spirit consumption has been flat, but beer consumption has fallen 1% year on year, while during the same period cider and wine consumption have grown by 5% year on year. Despite that, cider and wine, which are stronger drinks, now account for 41% of all alcohol consumed but only 37% of government alcohol revenues.
If the duty framework is not adapted to the current market environment, it will have serious negative consequences, including people switching to stronger drinks. For example, the average ABV of cider is more than 5%, while the average ABV of beer is 20% lower at 4%. It is a lose-lose situation for the Government, with people drinking stronger products and the Government getting less revenue. Does the Minister agree that a balanced duty framework will increase revenue and should be part of a co-ordinated wider government policy to address alcohol harm by reducing units consumed?
In this country, as the noble Baroness, Lady Coussins, outlined, the Portman Group has done tremendous work in promoting responsible drinking. The truth is that the vast majority of adults in the UK drink socially, and 78% of them keep within the government-advertised consumption limits. Social patterns around drinking are improving. The drinks industry is promoting responsible drinking, supporting a number of programmes and working with local and national government bodies that really make a difference in tackling the various facets of alcohol issues.
Molson Coors supports two of the best alcohol responsibility programmes for its customers. First, there is Best Bar None, which has been referred to, for the on-trade. That programme celebrates the running of responsible venues, including how alcohol is marketed responsibly. It has been running for 10 years and there are more than 100 BBN programmes across the country, with more than 3,000 venues involved, so there is still scope to expand enormously. It has been very effective. For example, Doncaster’s BBN scheme reported a 36% drop in alcohol-related crime with 70% fewer police call-ups. Not only that, the night-time economy for towns and cities benefits. As the noble Baroness, Lady Coussins, said, Durham licensees reported a 75% cumulative increase in trade. The night-time economy is worth £66 billion and employs 1.3 million people. Programmes such as Best Bar None help to ensure that the industry is sustainable in the long term.
Secondly, there are community alcohol partnerships for the off-trade. That is about tackling under-18 drinking in local communities, with supermarkets and licensees getting together with local NGOs and working to engage and support local areas. It has been highly successful and there are great examples of cross-collaboration working. Molson Coors funds both those schemes alongside other drinks companies.
The Government can and must do everything that they can to encourage the development and take-up of those initiatives. Will the Minister assure us that the Government will support them?
Other successful programmes are Street Partners and Street Angels. They involve church groups getting together and being good Samaritans, giving up their time on late nights and early mornings to ensure that people on nights out are safe and helping them avoid getting into bad situations. Areas have reported an up to 60% reduction in crime because of those schemes.
That is why, when the Prime Minister speaks of the big society, I think of those people working late at night or early into the morning, engaging with their local communities. They are true heroes. As the noble Lord, Lord Clement-Jones, said, there are other schemes, such as PubWatch and Purple Flag. Can the Government help those schemes to work more closely together?
I conclude that the common theme of those schemes is businesses and communities coming together on the ground to resolve local issues. That is where the Government, despite their cuts, must not be penny wise and pound foolish. Can the Minister confirm that the Government must find the funds to work with the drinks industry to support those schemes, which so greatly improve our communities in terms of the health and general well-being of their citizens?
Lord Roberts of Llandudno
My Lords, first, I welcome the opportunity that the noble Baroness, Lady Coussins, gives us to discuss this problem. The question of drink is one that you attack with great reluctance or a flak jacket—one of the two—because that is not popular. We might be called fuddy-duddies, or I might be called a wild Welsh Wesleyan Methodist teetotaller. I am, and I make no apology for it.
How seriously do we treat this issue? Today, the Chief Medical Officer for Wales, Doctor Jewell, issued his report. He states that across Wales, life expectancy has been increasing for the past two decades. For men, it is now 77.6 years; for women, it is 81.8 years; but in the most deprived areas, deaths from alcohol are three and a half times higher for men and twice as high for women. For instance, we can contrast the inner-city Grangetown area in Cardiff with Dinas Powys in the Vale of Glamorgan. In Grangetown, the life expectancy for men is 71.5 years. Four miles away in Dinas Powys, it is 81.8 years. There is a 10-year difference according to the area and culture in which you live.
In a previous report, Russell Davies said that the real opiate of the Welsh was alcohol. The hopelessness of destitution demanded a shortcut to oblivion; a short route out of their misery. That will be the reason for many people drinking excessive alcohol. Today in Wales, 15% of hospital admissions are because of alcohol, at a cost of between £70 million and £85 million per year. Imagine what we could do with that in the health service in Wales.
Other parts of the UK have similar, if not worse problems, but there are 1,000 alcohol-related deaths in Wales every year. Is it possible to tackle this problem effectively? There are many suggestions. Scotland has introduced the 50p per unit minimum price for alcohol. It could well be introduced in the rest of the United Kingdom to halt youth binge drinking. I support it, but I wonder whether it affects those older people who just want an evening of relaxation, which then costs them more.
Responsible licensees are the best friends of responsible drinking, because they had to safeguard not only their reputation but their licences. The problem of the supermarkets—not only big supermarkets, but the so-called booze shops—is that drinks are far cheaper than in pubs. Minimum pricing could help, and for health’s sake, as has already been mentioned, we need to get rid of special offers. It used to be said in the old days that the notice in a pub would read, “Drunk for a penny, dead drunk for tuppence.” That was a special offer. Could we end these completely? That would not be a popular move. But one street in Cardiff, St Mary’s Street, was recorded by an American journalist as being like the night of the living dead. Do we need stronger regulation?
The drinks industry also has a responsibility when it comes to pricing soft drinks. I know friends who are trying to ease up on their drinking, but a drink of Coca-Cola will cost as much sometimes as a pint of beer. Somehow we need to ask the drinks industry to co-operate by pricing soft drinks far more responsibly and reasonably. Is it also time to bestow star ratings on pubs, clubs and supermarkets?
Finally, I was at the funeral of a friend of mine two weeks ago. She had five children. They had moved to a house in mid-Wales with a dangerous running stream at the bottom of the garden. People said to her, “You know, we should fence off that stream.” Instead she said, “No. I should teach the children to swim.” It is from the example given by their parents that children learn to drink moderately—if drinking at all—but it is a big responsibility.
I do not think anyone knows the full answer, but at least this evening’s debate will contribute something to that thinking.
Baroness Finlay of Llandaff
My Lords, I am most grateful to my noble friend Lady Coussins for instigating this important debate. It goes to the heart of where the line is drawn in the relationship between government, all the public health concerns of government, and the drinks industry. There is a fundamental conflict of interest here. The Government pick up the costs, particularly the healthcare and social care costs, of the victims of alcohol abuse. You only have to go into an A&E department at night to see the large numbers there or visit a liver transplant unit.
The other side of this divide—and it is a divide—is that those who work in the drinks industry have a duty to their shareholders to maintain their profits. Therefore, however they work with Government, they are certainly not there to put themselves out of business.
There are some things which the drinks industry can do, and is uniquely placed to do. For instance, training bar staff properly to challenge those who are underaged or who are already intoxicated and wanting to buy more alcohol. That has improved greatly.
The labelling commitments, however, are lagging far behind. Some of us wonder, where are these clear labels? Where are the labels unified on a voluntary basis? There was an attempt to bring in legislation in this House during the term of the previous Government, but that has not come to fruition. The responsibility deal has yet to prove its worth. As has already been said, the BMA felt that it could not carry on. Neither could the Royal College of Physicians, for the same reason. It felt that the voice of the drinks industry was disproportionately strong in the way that the forward path for alcohol control and strategy was being developed.
There has been talk already about unit pricing, but I would ask the Government, what has happened to the question that I raised previously about such pricing being index-linked? As soon as we begin to have inflation the price per unit will become almost insignificant, unless that is priced as a proportion and index-linked as a percentage cost rather than an absolute cost. Indeed, it is worth noting that Scotland has already put up its so-called minimum price.
Some of the advertising we see is very clever. A phrase such as “Why let good times go bad?” has a subtle message behind it: that you have a good time by drinking. There is not a message there that you can have a good time on sparkling water. I am from Wales, and we have some wonderful sparkling water. It comes in blue bottles, called Ty Nant. It is extremely fashionable in Wales.
There is a message that you can have a good time without even having to have a drink. But there is a subtlety behind some of this advertising that is worrying, particularly in the use of social media.
While I applaud the Government for the action that they are taking, I would ask them to take a long hard look at the conflicts of interest that lie inherently in having too close a relationship with the industry, and in not having a high enough profile for the voices of those in public health; in particular, working with local authorities and others to make sure that alcohol control measures are effectively implemented.
We hear a lot about education strategies; I am afraid that the evidence that those have actually altered behaviour is very weak, although there is certainly evidence that they have increased awareness. I am afraid I cannot say that all is going perfectly well. I would like to see a little more separation—not to stop any of the moves, but to try to get clearer labelling in place, and index-linked prices.
Lord Shipley
My Lords, I am grateful to the noble Baroness, Lady Coussins, for initiating this debate and for enabling us to scrutinise the performance of the drinks industry. Here I declare my interest as a patron of Street Pastors in Newcastle upon Tyne.
Since the Portman Group was founded in 1989, the affordability of alcohol has increased by 32%. The number of alcohol-related deaths in England has doubled from 3,157 to 6,669, and the number of alcohol-related hospital admissions in England has doubled in the 10 years since 2002 from 510,000 to 1.173 million. Today half of violent crime and domestic abuse is linked to alcohol, some 1 million cases in 2010-11.
Industry bodies such as the Portman Group and Drinkaware promote education, but the evidence says that on its own, education does not change behaviour. In fact the World Health Organisation document, Alcohol in the European Union states:
“There is evidence that social responsibility messages … benefit the reputation of the sponsor more than they do public health.”
I question why the Portman Group has attacked independent reports that support minimum unit pricing despite independent evidence that says that reducing the affordability of alcohol is critical. Why does the Portman Group do this? The industry blames a small minority of people for drinking irresponsibly, but all the evidence tells us that it is no longer a small minority. Specifically, we should note that the industry spends some £800 million a year on alcohol marketing, and that the industry is not protecting children. In the UK we have some of the laxest alcohol advertising regulations in Europe. Why is alcohol advertising allowed in cinemas showing 12 and 15 certificate films? The regulations allow alcohol advertising to be shown as long as the under-18 audience does not exceed 25%. Yet the proportion of the UK population made up of under-18s is actually only 21%. Worryingly, the industry is moving its marketing spend online, where children are particularly vulnerable. Some 34% of Facebook users are under the age of 18. With regard to television, Alcohol Concern estimated that 5.2 million children could have been exposed to alcohol advertising during TV coverage of the 2010 World Cup.
Crucially, there is a fundamental conflict of interest. The alcohol industry has a legal duty to maximise its return for its stakeholders, and yet reducing harm relies on reducing consumption levels across the population. That can be done only by minimum pricing. Evidence from Professor Petra Meier from the University of Sheffield has estimated that if everyone drank within recommended guidelines, industry profits would fall by 40%.
The industry has, in my view, presided over the destruction of our traditional drinking culture. Most people now drink at home; most alcohol is purchased in supermarkets; alcohol has, until recently, been getting stronger; measures have been getting larger; alcohol has been sold as a loss leader and can be cheaper than water; and traditional neighbourhood pubs cannot compete and are closing. I have concluded that the alcohol industry has become part of the problem. Self-regulation and voluntarism does not work, and the industry should not be permitted to have a role in influencing the making of policy on alcohol when it has such a clear financial interest in the outcome. It should now, and in future, implement decisions made by others.
Lord Rosser
My Lords, I add my thanks to the noble Baroness, Lady Coussins, for initiating this debate about the role of the drinks industry in helping to prevent alcohol misuse and in promoting what is described as responsible drinking. Presumably, though, not drinking alcohol is also responsible and socially acceptable. Other speakers have already referred to the nature and extent of the issue we face, with almost 1 million alcohol-related violent crimes and well over 1 million alcohol-related hospital admissions in a year. The industry—whether retailers, producers, pubs, bars, restaurants or shops—recognises the problem and the major producers have established the Portman Group as a self-regulator. I do not know whether the driving force behind the creation of a self-regulator was an ethical or moral one in this case or whether it was concern among the producers at the potential consequences for the industry if they were not seen to be taking action themselves. Perhaps it was both.
In 2009, the Commons Health Select Committee heard evidence that industry profits would fall by 40% if everyone drank within recommended guidelines, a point which I think the noble Lord, Lord Shipley, just made. I am told that over 10 million people currently drink regularly over the guidelines, so we are not talking about a problem affecting a small minority. Self-regulation can work but does not necessarily work, particularly if the objective is to do the minimum needed to try to keep the wolves from the door, as we have seen with the ineffectual Press Complaints Commission.
The drinks industry—that is, retailers, producers and the on-trade and off-trade—must make it clear, and be seen by its actions to be making it clear, that it will take whatever steps it can to eliminate the irresponsible sale and promotion of alcohol in order to make it easier for, and help encourage, those who wish to drink alcohol to do so both in an acceptable manner to society as a whole and in a less risky and dangerous way to their own health. However, to take those steps means looking at the issues of price, availability and marketing, which the Government’s responsibility deal with the industry did not really do. That was why key organisations, as has already been said, declined to become involved. The Government’s responsibility deal did not really address vital issues, despite their saying that too much of the industry still supports and encourages irresponsible behaviour through poor product location, underage sales, excessively cheap drinks and the encouragement of excessive drinking.
It is right that the industry should set out what action it has taken. The noble Baroness, Lady Coussins, referred to a number of such actions but at the moment it does not look as if it is enough. The industry is a source of pleasure to many and of jobs and revenue to the Exchequer, just like other industries, but the impact of its product when misused—as it is all too frequently—is also a source of expenditure for the taxpayer and of loss to other industries and the economy in general through resultant absenteeism and illness, leaving aside the social effects of excessive drinking. I hope that the industry will direct more expenditure and effort into self-regulation, publicity, public relations and campaigning towards actions and developments to reduce drinking and will not be tempted, as appears to have happened in at least one other industry, towards any actions behind the scenes to dilute efforts to address the problem that we all recognise exists.
The Minister of State, Home Office (Lord Henley)
My Lords, I join other speakers in offering my congratulations to the noble Baroness, Lady Coussins, on securing this debate and on the contributions that we have heard during it from other speakers. We have had a range of views and I think we could say that we are all agreed on one thing: the damage that alcohol can cause. However, as to the solutions, I think it was the noble Lord, Lord Roberts of Llandudno, who said that he did not know what they were and that there might be a whole range of them. The solutions seemed to vary from more regulation to self-regulation and a bit of both. I want to set out roughly where the Government are in relation to these matters.
We believe, and I think the House is in agreement with this, that drinking alcohol to excess is a key cause of societal harm, including crime, family breakdown and poverty, as well as being a leading cause of health harm. At odds with the trends across Europe, alcohol consumption in the United Kingdom has increased quite dramatically over the past 50 years, although there has been a positive reduction in overall alcohol consumption over the past few years. That is a good thing but we believe that it is still too high and that it causes misery and pain to individuals, destroys families and undermines communities. Binge drinking accounts for half of all the alcohol consumed in this country and the crime and violence that causes generates mayhem on the streets, spreads fear in our communities and drains hospital resources. I was grateful to the noble Baroness, Lady Finlay, for reminding noble Lords just what A and E can look like on a Friday or Saturday night.
The Government are therefore convinced that tackling the problems of alcohol is a priority, which is why we launched our alcohol strategy in March. We have witnessed a dramatic change in people’s attitude to alcohol over the past decade. We have seen a culture grow where it has become acceptable to be excessively drunk in public and for people to cause nuisance and harm to themselves and, equally importantly, to others. A combination of ignorance, irresponsibility and poor habits have led to alcohol-related harm across crime, health and all other areas costing society an estimated £21 billion per year, which I think was the figure that the noble Baroness, Lady Coussins, quoted. Some 44% of all violent crime is carried out by individuals under the influence of alcohol. There were almost 1 million alcohol-related violent crimes in 2010-11 alone, and alcohol is one of the three biggest lifestyle risk factors for disease and death in the United Kingdom, after smoking and obesity.
I assure the noble Lord, Lord Brooke of Alverthorpe, that we take the health side of this very seriously. The alcohol strategy that we published in March might have emanated from the Home Office, but it had input from all other departments. The Department of Health takes these matters very seriously. In his foreword to the alcohol strategy, my right honourable friend the Prime Minister made it very clear that we will not tolerate this level of alcohol-related harm.
The Government’s alcohol strategy therefore sends out a strong message that we will crack down on the binge-drinking culture in our country; cut the alcohol-fuelled violence and disorder that still affects many of our communities; and cut the number of people drinking irresponsibly. If I take that original figure I gave, £21 billion per year, for all the costs of alcohol-related harm, the cost of crime alone is estimated to be in the order of £11 billion per year. That is simply unsustainable.
The strategy sets out a wide range of actions to tackle the excessive consumption of alcohol, including the introduction of minimum unit pricing. I remind the noble Lord, Lord Roberts, and the noble Baroness, Lady Finlay, that although Scotland has announced its intention to bring in minimum unit pricing, it has not been brought in yet. In our strategy for England and Wales we announced that we will bring in a consultation on the level of minimum unit pricing, not on whether we should have it. We will be doing that in the autumn; we shall put forward a range of options as to what would be appropriate. There will also be a commitment to consult on a ban on multi-buy promotions. I assure the noble Lord, Lord Brooke of Alverthorpe, that we have rebalanced the Licensing Act to enable local agencies to take the right action, including giving local councils the power to use early morning alcohol restriction orders and charge a levy for late-night licences to contribute to the cost of extra policing. Last week we published our response to the consultation, Dealing with the Problems of Late Night Drinking, and I commend that to noble Lords.
I am grateful, again, to the noble Lord, Lord Brooke of Alverthorpe, that he offered praise for the changes we have made in licensing. I imagine that he was one of those, along with the noble Baroness, Lady Coussins, who took part in the Police Reform and Social Responsibility Act that my noble friend, my predecessor, took through this House last year, which dealt with some of these matters.
The noble Baroness, Lady Coussins, also asked about the Government’s spending on alcohol awareness, and claimed that it was comparatively low compared to what the industry itself was spending. The strategy sets out how the Government and industry will work together to tackle alcohol-related harms and will help to give individuals the information that they need to drink responsibly. We launched a fully-integrated Change for Life campaign in February this year, communicating the health harms of drinking. Our intention is to extend this social marketing campaign if the evidence shows that it improves health outcomes and is good value for money. We all know that advertising does not always work; one remembers the story of the late Lord Leverhulme, who said he knew that half his advertising worked and half did not but that the trouble was that he did not know which half worked. We want to look at our advertising, therefore, and see what works and what does not.
On the subject of advertising, again there have been differing views from noble Lords. I appreciate what my noble friend Lord Clement-Jones said about there possibly not being a case for further regulation in this field, whereas others—I think it was the noble Lord, Lord Rosser—would prefer a greater degree of regulation. Extensive regulatory regimes are already in place to control advertising and marketing of alcohol products, which are pretty robust, despite what has been said, especially in relation to the protection of young people and vulnerable groups. Obviously, as I said, we will have to look at the evidence on that and at the evidence of the effect of that advertising. We would prefer to continue down a route of self-regulation but, obviously, if we find that advertising is causing problems, we might have to consider that as an area for regulation in future. My gut instinct would be not to go for further regulation at this stage, when we have a pretty robust regulatory regime as it is, with a great deal of self-regulation and co-regulation.
It is also acknowledged, and I think that most noble Lords would agree with this, that alcohol consumption in moderation can have a positive impact on adults’ well-being, especially where this encourages sociability. Well run community pubs and other businesses form a key part of the fabric of neighbourhoods, providing employment and social opportunities in our local communities. At a time of austerity and global economic pressures, the alcohol industry and the wider retail and hospitality sectors play a key role in our economy, contributing some £29 billion each year and playing an important part in our exports. In total it is estimated that some 1.8 million jobs in the UK are related to the alcohol industry, so a profitable alcohol industry enhances the UK economy.
The strategy puts a strong focus on a responsible industry that has a direct and powerful influence on consumer behaviours. It is the responsibility of the entire industry, alcohol producers and retailers in both the on-trade and the off-trade, to promote, market, advertise and sell their products responsibly, and that is what we want. We know that growth and responsibility can exist well together. The Government welcome self- regulation and active initiatives, driven by the licensing trade in partnership with the police and local authorities. I was very glad that both the noble Baroness, Lady Coussins, my noble friend Lord Clement-Jones and others mentioned Best Bar None, Purple Flag and businesses joining together to form business improvement districts.
The noble Baroness also mentioned Durham. I have visited the project in Durham; I did so partly because I had been at university there many years ago, and things have changed somewhat now. I was taken around by the Chief Constable of the Durham constabulary and I was very impressed with what they were doing. We have seen in Durham that a thriving and growing night-time economy can operate where excessive drinking is tackled consistently and robustly by business, the police and local authorities. As the noble Lord, Lord Bilimoria, said, over the three-year period of taking part in a Best Bar None scheme in Durham, licensees reported an estimated 75% cumulative increase in trade; a 50% increase in town-centre footfall and an expected 87% reduction in violent crime, and we should all note that last figure. As well as sending out clear messages that crime and disorder will not be tolerated in pubs, clubs and wider locations, such schemes have been proven to increase footfall and stimulate other businesses, whether cinemas, restaurants or whatever.
The Portman Group, which the noble Baroness knows well from her past—I believe that she was chief executive—introduced a Code of Practice on the Naming, Packaging and Promotion of Alcoholic Drinks in 1996. All alcohol products sold or marketed in the UK are subject to the rules of the code, which prevent alcohol being marketed to children in a way that would encourage excessive or irresponsible consumption. We are working with the Portman Group to ensure that, where unacceptable marketing occurs, it results in the removal of offending brands from retailers.
The Government’s Public Health Responsibility Deal also taps into the potential for businesses to work with the Government and public health organisations to improve public health through their influence over food, physical activity, alcohol and health in the workplace. The responsibility deal recognises that there are areas where doing nothing simply is not an option, but the something to be done is not always necessarily best done by the Government.
I see that my time is coming to an end. We are beginning to make progress in this area: the fall in alcohol consumption over the past few years is something that we should welcome, as we should the further progress that we hope to make as a result of the alcohol strategy. While progress continues to be made, there is still more to be done. That is why the strategy sets a new challenge to industry on product labelling, unit content, actions on advertising and product placement. We all agree, as I think my noble friend Lord Roberts of Llandudno said, that there are no simple solutions. However, we accept that we should rightly be challenged on our policies, and there is no better place for that than this House.
Baroness Stowell of Beeston
My Lords, I am sorry that my timing is a bit wrong tonight. I beg to move that the House adjourn during pleasure until 8.30 pm.
Financial Services Bill
(12 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Flight
“(c) does not harm the competitive position of the United Kingdom in the markets for the provision of domestic and international financial services.”
Lord Flight
My Lords, I am extremely happy with the domestic competitive objective of the FCA, where it is straightforward that a healthy competitive market is clearly in the interests of consumers. My amendment relates to international competitiveness. I well appreciate that the Treasury is sensitive to that being linked to the concept of easy and relaxed regulation which is being partly blamed for the problems that have occurred. This is why my amendment is in a negative form, reading “does not harm” competition rather than “actively promotes international competitiveness”.
In the context of this Bill the FCA is perceived primarily as looking after the interests of consumers, but it continues from the FSA to regulate in a wide range of territories. The balance sheets of life insurance companies and overall banking supervision go to the Bank of England. Left with the FCA is the investment management industry, retail and institutional. I should declare my interests, as in the register, in a number of investment management companies. What makes that industry stay and succeed in the UK is a mixture of a competitive tax regime, good regulation and a good supply of able people. I cast my mind back 30 years. On a largely fiscal issue I pleaded with the Treasury to enable the UK to compete with Luxembourg, but this did not happen for 20 years and more. As a result a huge investment management industry grew up in Luxembourg which London could easily have had. For institutional business in the various areas which the FCA regulates, it is important that it is at least mindful not to create situations that make the UK less competitive than it need be. There is a warning for the investment management industry that partly for fiscal reasons there has been an exodus from the UK over the past year or so by about 30% of the hedge fund industry and of other more straightforward investment management operations.
This is a practical matter. There is nothing to be ashamed of in having a requirement that what the FCA does should not harm the competitive position of the UK in the world at large. I beg to move.
Baroness Noakes
My Lords, I have two Amendments in this group, Amendment 104, which is in my name, and Amendment 139A, which stands in my name and in the names of the noble Lord, Lord McFall of Alcluith, and the noble Baronesses, Lady Cohen and Lady Kramer. Therefore, Amendment 139A has a pretty solid set of supporters. I shall come to that amendment in due course.
In different ways, both these amendments and the others in this group address the position of the UK’s financial services sector. This is a difficult time to be defending the financial services sector in the UK because it is far easier to be in attack mode, as we have seen in both Houses of Parliament and in the media. I thought long and hard about whether it would be appropriate to speak to these amendments at this time, but whatever the current difficulties, which are huge for the banking sector and individual institutions within it—I remind the Committee that I am a director of the Royal Bank of Scotland—we need to be dispassionate about this legislation. We cannot solve all the problems of the sector in this Bill and, thankfully, another Bill will be coming along soon if we need to respond in legislative terms to the latest issues. However, this Bill could, inadvertently or otherwise, damage the broader financial services sector, which is and has been a major contributor to the UK economy. We have a duty to ensure that when this Bill leaves your Lordships’ House we have taken a balanced view of the risks and threats to the UK and have responded in a measured way.
I will start with Amendment 104A. It is very similar to Amendment 101A which my noble friend Lord Flight has already moved. My noble friend’s amendment places lack of harm to the competitiveness of the UK’s financial services sector as a general duty in new Section 1B. My Amendment 104A adds to subsection (5) of new Section 1B a “have regard” item in respect of the international competitiveness of the financial services sector. My amendment merely reinstates the law as it currently applies to the FSA and makes the FCA have regard to the desirability of maintaining the international competitiveness of the UK.
My concern has been that the loss of the FSA’s specific duty to have regard to international competitiveness may be taken as a green light to have no regard whatever to the issue. That would be a mistake for the UK. I do not need to remind noble Lords of the size of the financial services sector. It amounts to very much more than the global banks and it is important for employment, tax revenues and its contribution to GDP.
At Second Reading my noble friend said that the Government’s view was that having high standards of regulation was all that was necessary to establish,
“the attractiveness and competitiveness of London”.—[Official Report, 11/6/12; col. 1262.]
I hope that he meant more than London because the financial services sector is important to many parts of the UK and is not confined to London. More importantly, high standards of regulation can never be enough on their own. We can have the highest possible standards, but they could be operated in such a way that they actually drive business away. There is a very real danger that in response to the financial crisis and more recent revelations the regulatory pendulum will swing to a place which, to use the phrase of my right honourable friend the Chancellor, achieves the “stability of the graveyard”. If there is no reference in this legislation to the wider context of the financial services sector, there is a very big risk that it will be ignored entirely, and that is a risk which I suggest that we ought not to take with this legislation.
I should say that I tabled Amendment 104A in respect of the FCA but did not table a similar amendment in respect of the PRA. At that point, my primary focus was on the fact that the FCA’s objectives are very consumer-focused. That is clear from the Bill and is also clear from what Mr Wheatley, the chief executive designate, has said in public. However, the FCA has a very broad scope in wholesale financial markets, including the recognised exchanges, where issues go way beyond consumer protection in a narrow sense. Wholesale markets are important, both internationally and as part of the infrastructure which supports the financing of British business. There may be other ways of ensuring that the FCA does not forget the wider picture, but my amendment is just one way of achieving it.
I should probably have tabled a similar amendment in respect of the PRA. The two bodies have different functions but they both have the capacity to do harm or good to our financial services sector. I am therefore supportive of Amendment 129 tabled by my noble friend Lord Flight.
Both the PRA and the FCA should have something about the success of the financial services sector hardwired into their framework, so I have also tabled Amendment 139A, which was suggested by the London Stock Exchange. Amendment 139A is slightly different. It amends the regulatory principles, which will apply to both the FCA and the PRA through new Section 3B of FiSMA. Under subsection (1)(b) of new Section 3B, the regulatory principles include the principle of proportionality—that is, that burdens should be proportionate to costs. I am sure that we will look at this in more detail later in our Committee, but for present purposes my amendment states that in considering benefits and burdens, the regulators should consider,
“the capacity of the financial sector to contribute to the growth of the United Kingdom economy in the medium or long term”.
The point is that regulators need to think about the impacts of their regulatory actions in the broader context of the financial services sector and its impact on the UK economy. There could be direct impacts, as in the direct contribution of the sector to GDP or employment; or there could be indirect impacts; for example, through the ability of the financial services sector to support the real economy.
I am not wedded to the precise formulation of this amendment, or indeed the other amendment in my name, but I would simply note that it is drawn from wording that applies to the way in which the FPC is required to go about its business as set out in new Section 9C(4) under Clause 2 of the Bill.
When my noble friend the Minister wrote to noble Lords after Second Reading on the issue of proportionality, he urged us to examine the FSA’s compatibility statements, which are used to evaluate proportionality. My noble friend misses the point, which is that the FSA currently has the “have regard” obligation in respect of international competitiveness and so of course it includes the financial sector’s position in the compatibility statements. If we take the “have regard” out of the legislation or indeed any other similar reference to the wider context, it will follow, as night follows day, that such issues will drop out of the compatibility statements. We cannot assume that these issues will remain anywhere in the minds of the regulators.
The substance of these amendments is crucially important and much more important than the exact form of the amendments in this group. I hope that my noble friend will give them serious consideration.
Baroness Cohen of Pimlico
I support Amendment 139A, also tabled in my name, along with the noble Baronesses, Lady Noakes and Lady Kramer, and my noble friend Lord McFall, who is not in his usual place. I remind the House that I am a director of the London Stock Exchange. The words are carefully chosen, and I would not disagree radically with the other amendments proposed. I believe that we are all seeking a regulatory regime, which, while preserving stability, leaves room for one of our most successful industries to grow and prosper. It can only do that if regulators are able, as the amendment suggests, to include consideration of the capacity of the financial sector to contribute to the growth of the United Kingdom’s economy in the medium or long term. It remains vital—even in hard times like this, when much of our financial services industry is under criticism —not to forget the long term and not to handicap the regulator, enabling the industry to grow as it should while retaining stability.
Baroness Kramer
My Lords, I was delighted to add my name to Amendment 139A. The excellent speeches which precede me really laid out the case, so I have just a couple of comments. Although the financial services industry is currently the target of very much justified anger, I hope that this legislation sets a regulator in place which will last more than a decade. I think that the previous legislation lasted pretty much for 12 years. We have to take the long-term view and make sure that it is fit for purpose for the long term and when the period of correction within the industry has passed.
It also seems that the language is carefully crafted in such a way that it did not in any way encourage the regulator to look at this as an opportunity to take more risk but as an opportunity to make sure that there was healthy and sustainable growth within the financial services sector. Perhaps I may give a simple example: in a few later amendments we will look at social investment, which is one of the new fields that are beginning to gather some momentum. That is an aspect of the financial services industry which has initially gone to Luxembourg.
The City now is expressing serious interest in the opportunities. Many institutions in the UK could use those kinds of instruments. But the regulator has not been aware of the differences between that sector and other sectors and, therefore, the sensitivity of regulation necessary to support the growth in a new area. I think most people would agree that we are not talking about unethical behaviour or the kind of risk that might be involved in some aspects of the more casino side of investment banking.
There are many areas where there is huge potential going forward. It will be absolutely essential that the regulator takes that on board and is a supporter of the healthy and sustainable growth of this industry, both to support the real economy and the many direct jobs involved with the sector.
Lord Hodgson of Astley Abbotts
My Lords, I support Amendment 101A in the name of my noble friend Lord Flight about the importance of maintaining the competitive position and that that needs to be uppermost in our minds. But I am also attracted by Amendment 139A which has drawn in the regulatory principles that are to be followed by both regulators. It seems to me that here we will be starting to set the culture. It is the culture of the regulator that will have such an important impact on the way our financial services develop and the way the people who work in them behave. As my noble friend Lady Noakes said, it is important not just to see this through the prism of City eyes but to realise that there are a wide range of financial services in Edinburgh and the provinces of this country which require the appropriate regulatory framework.
Competition, by its nature, introduces novelty—novelty being something that the regulators tend to fear. It carries risk, but of course what is old and familiar is much easier to deal with. In a way, that is liked. But, particularly when established firms tend to draw attention to the risks of novelty, the regulator tends to back down. I am not suggesting that we should not take risks. We need to be risk aware but we must not be risk averse. There is a danger that in the pendulum within the Financial Services Authority and, no doubt, driven by the criticism that it has faced, we have gone to the end of the risk-averse scale. There is a great deal we still need to do in this Bill to provide the right framework and culture. I shall look forward to returning to this in amendments to which we will come shortly. For the time being, I am delighted to support my noble friends’ two amendments.
Baroness Hayter of Kentish Town
My Lords, this side of the House has already acknowledged the role of competition in serving the consumer. Indeed, we could do with rather more of it in the retail banking sector. A rather more creative vision of competition could address some of our concerns in that regard. For example, Age UK has suggested shared branches which offer a perfectly competitive environment, ease of comparison, and switching from one customer to another within the same location. We are wholly in favour of a competitive environment for the benefit of consumers.
That being so, I obviously support most of the amendments in this group. However, I ask the noble Lord, Lord Flight, why the first amendment is needed, given that it seems to put competition as a brake on the FCA. I worry what the driver is behind this. I hope it is not to protect bankers’ bonuses, given there are still some in the City who seem to believe that high wages and bonuses are a vital aspect of what makes the UK competitive in this sector. I would instead call on the coalition programme, which says the Government will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector. Amen to that, although I am rather sad that—I think it is today—the Chancellor of the Exchequer is in Brussels voting against such an amendment.
Or is the amendment drafted because there is a feeling that regulation is too burdensome? I hope it is not for that reason, but the Prime Minister has form in this regard. In 2008, he said he thought that the problem of the past decade was too much regulation. The current Chancellor also said, in 2006, that financial regulation was,
“burdensome, complex and makes cross-border market penetration more difficult … and it threatens the global competitiveness of the City of London”.
I hope that the Prime Minister and the Chancellor of the Exchequer are now grown up enough to accept that it was too little rather than too much regulation from which we suffered.
I hope it is not—maybe we can get some assurance on this—the idea that international competitiveness should trump consumer protection. The noble Baroness, Lady Noakes, was much more concerned about the wholesale market. I think she will also understand the concern of consumers that this might trump the consumer protection aspects. Although we very much want this to be an internationally competitive industry, we do not want it at any price. We do not want a race to the bottom for moving wherever regulation is cheapest or less obvious.
In respect of Amendment 104A in the name of the noble Baroness, Lady Noakes, I know that Martin Wheatley, the CEO designate of the FCA, is very unkeen to have this duty. He does not think that in its intervention it is the function of a regulator to have to have regard to that as well as to consumer protection, and is concerned that it would create a set of conflicts. He said that,
“to have a specific UK competitiveness competition point can only lead to compromises in regulation”.
Perhaps the Minister can indicate whether the Government have the same concerns. Perhaps the “no regard” comment of the noble Baroness, Lady Noakes, is a better way of describing this, rather than making it trump some of the other aspects. I imagine the Minister will say something similar, because I know the Government, in responding to the Treasury Select Committee on this issue, while recognising the importance of a competitive sector, do not feel that these words would add much to the Bill.
Amendment 129 in the name of the noble Lord, Lord Flight, is rather easier. It requires the PRA to consider the desirability of promoting the UK’s competitive position within financial services. We have no argument with that. London First I know is particularly supportive of this, stressing also the stability of regulation in financial services, which means no more change after this.
Amendment 110 in the name of my noble friend Lord McFall refines the FCA’s objective so that the integrity of the UK’s financial system includes the confidence that it generates within the UK, as well as in foreign financial markets. This would encompass consumer confidence, which would clearly be vital in rebuilding trust in savings and investment, so we are happy to support this amendment.
Finally, Amendment 139A in the names of the noble Baroness, Lady Noakes, and my noble friends Lord McFall and Lady Cohen of Pimlico provides that the objectives of both the PRA and the FCA should include consideration of the capacity of the sector to contribute to the UK’s economic growth, also supported by the CBI. As the coalition programme said:
“We want the banking system to serve business, not the other way round. We will bring forward detailed proposals to … create a more competitive banking industry”.
I am pleased to say that this is one element of the coalition programme that, again, we are very happy to endorse. Given that, sadly, growth continues to flatline under this Government, if ever there was a time to ensure that these new and powerful institutions focused on job creation, this surely is it, and we happily support that.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, this group of amendments seeks to ensure that the FCA and the PRA consider the impact that their actions could have on the competitiveness of the UK financial services sector or on the growth of the wider economy. We clearly all recognise the importance of a thriving financial services sector to the wider UK economy. Equally, we all agree that the financial services sector needs an appropriate level of regulation, and I recognise that this is a difficult balance to achieve. I hope we would all agree that in the run-up to the financial crisis this balance was wrong.
In resolving the balance, I listened very carefully to the concerns raised at Second Reading and I have also carefully considered the representations from the industry, including from the London Stock Exchange. I am going to explain why I feel that these amendments go too far, but I want to make it clear to the Committee that we are looking at alternative options to address noble Lords’ concerns that excessive regulatory action may unduly impact on the ability of the financial services sector to contribute towards the prosperity of the wider economy, and we will conclude on this ahead of Report. I see one puzzled face. I always try to be helpful to the Committee, and we brought forward some major concessions on each of the first two days. This is a very difficult area. I cannot accommodate all the concerns but I say up front that we want to see what we can do on this ahead of Report.
As these are important amendments, I shall try to do justice to them by talking through each of them relatively briefly. First, Amendment 104A, in the name of my noble friend Lady Noakes, would require the FCA to have regard to the same competitiveness principle as the FSA is currently required to do. The FSA’s report into the failure of the Royal Bank of Scotland made it clear that this competitiveness principle severely impacted on its ability appropriately to regulate the financial services sector. I have said this before but I hope that the Committee will understand why we cannot similarly constrain the FCA, and for this principal reason I am unable to accept this amendment.
Amendment 101A, tabled by my noble friend Lord Flight, would go further by requiring the FCA to carry out its general functions in a way that did not harm the competitive position of the UK financial services markets. As identified by the noble Baroness, Lady Hayter of Kentish Town, this would operate as a brake on the FCA’s actions—along similar lines to the economic growth brake on the FPC, which we have already discussed. It would prevent the FCA from taking any action if that action could be seen as damaging to the UK’s competitiveness. I have already raised the negative impact of the FSA’s competitiveness “have regard”, so it would be impossible to accept an amendment that went even further in preventing the FCA from taking regulatory action to protect consumers, enhance competition and ensure integrity.
Baroness Hayter of Kentish Town
I think the noble Lord, Lord Turner, and other noble Lords have made the point about how often this particular definition of risk and reward did not align with the interests of consumers, or, indeed, often with employing organisations. There is nothing wrong with rewarding risk, but when that is not aligned to other people’s interests, that is to the detriment.
Lord Sassoon
I completely agree, which is why we only very recently brought forward proposals including mandatory shareholder votes on board pay. There is, and will continue to be, a big agenda here on which this Government have been working very actively but which the European Parliament proposal would, I suggest, work against. That is why we are fighting hard in Europe, as we do on all matters, to get a result that is more desirable for the health of our industry.
I will just say a few words about Amendment 139A, which is another very important one. It would require both the PRA and FCA to consider the impact on the financial sector’s ability to contribute to the UK economy in the medium or long term, having regard to the principle of proportionality. The PRA and FCA must consider whether their actions are proportionate. That will act as a check on the FCA acting in a way that is excessively burdensome, which would prevent a subsequent negative impact on economic growth if there was not a greater benefit from taking the action. Similarly, if the PRA is being proportionate, it would be difficult to envisage a situation where the firms that it supervises could be required to be too safe or too sound.
I have listened to the valid points made by my noble friends Lady Noakes and Lady Kramer, and the noble Baroness, Lady Cohen of Pimlico, and I understand their concerns. It is essential that the UK financial services sector is not excessively constrained in its ability to contribute to economic growth. As I said at the beginning, in advance of Report, I will consider whether a more explicit consideration of the wider economic impact of the actions of the regulators should be included in the Bill. I should stress that in making changes there must be nothing that would seriously encroach on the regulators’ ability to take the action that may be necessary in furtherance of their objectives. Particularly in the light of that assurance I ask my noble friend to withdraw his amendment.
Lord Flight
For the sake of clarity I thought the point that I was making regarding the FCA was that domestic competition is what matters for the consumer. The international institutional aspects which the FCA regulates are quite substantial.
The area that has been the real problem in the PRA and which has brought disgrace on the UK has been the banking sector, which has been largely the result of a cartel. That cartel was the result of regulation. Following Barings, it was made clear that the lender of last resort facilities were available only for banks judged otherwise too big to fail. Lots of lesser banks, such as Hambros, found that they were uncompetitive, so they closed and went away. We were left with a cartel, and when you have a cartel bad things always happen. In terms of the PRA’s ability to regulate and oversee the banking system satisfactorily, it is blindingly obvious that the UK needs a great deal more competition. It is not the sole cure of everything but it is very necessary.
The Government have taken the point and there is no point in putting the amendment to a vote. I hope that they will take note particularly of the need for greater competition in the banking industry as part of the vehicle by which the PRA can regulate better. I beg leave to withdraw the amendment.
Lord Sharkey
“(d) the deprived communities objective (see section 1F).”
Lord Sharkey
My Lords, in moving Amendment 102, I shall speak to Amendments 118AA and 121. They are aimed at addressing three financial problems in our deprived communities. The problems are significant and so is the size of our deprived communities. The last indices of deprivation report published by the Government notes that more than 5 million people in England lived in the most deprived areas in 2008; 56% of local authorities contained at least one area among the most deprived; and 88% of the most deprived areas in 2008 were also among those most deprived in 2007.
The first problem that the amendment seeks to address is that many individuals in these communities face very great difficulty with financial services. In August 2010 a report to the Treasury called Realising Banking Inclusion: The Achievements and Challenges summarised the situation. The report concluded:
“Efforts on banking inclusion have moved 1.1 million into banking but the benefits appear to be unevenly distributed and barriers to banking remain”.
The report found that penalty charges had been a harsh reality of the banking experience for many. Around half of the newly banked had been hit by penalty fees and individuals who incurred these charges tended to be charged multiple times, averaging nearly six times per year each. Although there had been savings gains for some, the tendency to cash management and the impact of penalty charges had undermined overall gains. Worse, there had been a significant increase in debt among the newly banked, resulting in an overall increase in spending on debt servicing. Perhaps not surprisingly, in view of all this, there has been a relatively high degree of account failure. Net account failures are close to one in five. The report concluded that there is a case to be made that a penalty charge system constitutes an effective market failure in the provision of banking services to those on low incomes. This market failure is the first problem which the amendments seek to address.
The second financial problem in our deprived communities relates to the funding of SMEs. It is generally accepted that the health and supply of SMEs is critical to the health of our economy, but there is even more to it than that. Data from the Kauffman Foundation study published in July 2010, The Importance of Startups in Job Creation and Job Destruction, suggest that the role of start-ups is absolutely critical among SMEs. The study found that, on average, and for all but seven of the 28 years between 1997 and 2005, in the USA, existing firms were net job destroyers. All net new jobs came from start-ups and job creation in start-ups during recessionary years remained stable while net job losses in existing firms were highly sensitive to the business cycle. This is probably true for the UK too, and is undoubtedly why the Government announced its start-up loan scheme, four weeks ago, offering loans of £2,500 to people aged between 18 and 24. It is a clear indication of both an unmet need and a failure of the banks to supply this need.
This is all very small-scale stuff and marginal. The fact is that the SME sector as a whole has significant funding difficulty. The Breedon report of March this year estimates that, by 2016, there will be a shortfall of between £26 billion and £59 billion in finance needed by SMEs for working capital and growth. As the latest quarterly report from the Federation of Small Businesses shows, the situation is not improving. It is not just that the banks are not helping; they may actually have made the situation worse. We now know that they have mis-sold hedging products to around 28,000 small businesses. Andrew Tyrie said that the FSA’s investigation into this mis-selling is a damning indictment of the banks’ behaviour, that such products took advantage of small businesses and that this behaviour is completely unacceptable. This is just the national picture: it would conceal areas where there are more significant problems. The deprived communities will suffer more. According to a 2012 report by the Centre for Responsible Credit, only 4% of all lending goes to businesses in deprived areas. It is clear that the banks are failing in this area and this is the second problem the amendments address.
The third problem addressed by the amendments is related to the other two. It is not possible, at the moment, to have an accurate picture of what the banks are actually up to in our deprived communities. The data provided by the largest banks concerning their lending to SMEs are provided on an aggregated basis. This means that there is no information to allow local economic development agencies, including local enterprise partnerships and community development finance initiatives, to enter into an effective dialogue with the banks. There is no way of assessing performance, suggesting improvement, or of knowing which banks are performing better than others; there is no way of telling the terms on which credit is being made available in these deprived areas or of telling the extent, if any, to which banks are supporting the third sector to take advantage of their new rights under the Localism Act. We need access to disaggregated data and postcode level data so we can see clearly which banks are doing what in the deprived areas. This is what our amendment proposes.
Lord Flight
My Lords, I shall speak briefly to Amendments 108A and 117A, which essentially cover the same territory. They seek legislation which explicitly encourages the FCA to extend consumer access to financial services that meet their needs.
To that end, it is desirable that the FCA should assess the impact on markets and consumers when making regulatory decisions. For example—we have yet to see the result—the RDR reforms, though from many aspects fully justified, run the risk of having the reverse effect of reducing substantially the access to financial services and products for the great majority of people. In the absence of a requirement there is the risk that the FCA will always be steered towards risk-averse regulation, preferring to see markets restricted for large groups of consumers in order to avoid any individual consumer getting sub-optimal products.
The issue also arises in the context of the Government’s welcome initiative to encourage the development of simple financial products. If it is to succeed, it will need a regulator which is working with the grain of that policy rather than in the other direction, and which has a clear brief to act in a way to help extend consumer access to financial services that meet their needs, and not the reverse.
Baroness Kramer
My Lords, Amendments 102, 118 and 121 are very dear to my heart. They are perhaps some of the most important amendments to the Bill that have been brought forward. I have been interested in financial services for deprived communities for more than 20 years, partly from living in Chicago and seeing the impact that community development banking had on the revival and regeneration of Chicago’s south side. It was an area once written off because it was both black and impoverished and, in the end, it was only action by the banking regulator, under legislation, that drove forward change which was, and continues to be, dramatic.
The noble Lord, Lord McFall, who is not in his place today, will remember the visits that the Treasury Select Committee made to community banks in the United States in 2006—I take some credit for nagging the committee into making some of those visits—which made clear how much we are missing in this country. Both individuals and small and new businesses in the United States have a degree of access to financial services and credit that we cannot rely on in the UK.
The changes in the United States came through a piece of civil rights legislation, the Community Reinvestment Act. This amendment is not a copy of that Act, but it attempts to repeat its achievements. The data that the Act forced banks to publish exposed vacuums in lending across the United States and, to no one’s surprise, they matched very much with the boundaries of deprived communities and—I hope that we would not see the same thing here—the boundaries of communities of ethnic minorities. The regulator then stepped in and required those banks to meet the target of serving those communities, or to fund someone else who would, before allowing them to engage in mergers and acquisitions. It was an extremely effective strategy and continues to be so to this day.
The amendment is also a read-over from the banking reform White Paper, because it would allow the regulator to play a significant role that is described in paragraph 4.4 of that White Paper as,
“a more diverse banking sector”.
Surely the areas where banks are failing to play a role should be at the top of the list for new and diverse participants.
On our previous day in Committee, I said that the role of the regulator nowhere seems to touch on a responsibility to make sure that financial services are available all across our complex communities. Competition is focused on making sure that there is multiplicity of products, not that there is coverage of the full range of demand. Surely if we wish all our citizens to be able to participate in the economic growth of the country and want small businesses to become established, to grow and to build our economic future, we have to pay attention to that access and coverage issue as well. The requirements set out in these amendments get us to that point.
Baroness Hayter of Kentish Town
My Lords, I rise to support the amendment moved by the noble Lord, Lord Sharkey, and to speak on other amendments in this group. I believe that the Minister received a letter from the Community Development Finance Association which specifically supports the amendment. It is a powerful case and I trust that he will respond positively at the end of this debate.
Although the Bill grants the FCA significant powers, it makes little mention of consumer access to financial services and products. Access to such services is essential in a 21st-century society, but the Bill makes no mention of it. It would be extraordinary for a competition authority, as the FCA will be, to be required to judge the effectiveness of competition in the markets which it regulates without taking into account whether the market is delivering products and services that are good value for money.
There is not much point talking about a fairer, more competitive market if consumers are unable to access the services on offer, yet uncertainty as to whether the FCA can have regard to affordability might make it reluctant to take action on a fundamental aspect of competition for fear of being challenged. Amendment 104AA, in my name and that of my noble friend Lord Eatwell, is about access by consumers to financial service products and the need for good value for money, including for the financially excluded in society.
In many parts of the country, there are individuals who struggle even to open basic banking facilities or to gain access to small levels of credit, yet credit is a necessity of life for many people, bridging the gap, as we know, between when one has to spend and when paydays arrive. I know that in another place Mark Hoban has said he fully agrees that consumers should have access to financial services that meet their needs, but he prayed in aid the FCA’s new competition objective, which he said would give it an explicit mandate to consider the needs of consumers and to act to improve competition. However, that does not necessarily bring people into the market; it is probably only competition for those who are already there.
Amendment 104AA would remove any uncertainty by spelling out accessibility and affordability. Amendment 102 offers a way forward for financial institutions which reflects a decent, responsible approach to the needs and ambitions of communities in a way that would benefit not just them but the economy as a whole. The amendment would promote an appropriate level of services in deprived communities, as we have heard, and ensure that the FCA plays its role in that by its interventions in affordable loans, savings and insurance products. As we have heard, that is crucial for small businesses and social ventures as much as for individual consumers. It is estimated that more than 4.5 million small businesses and social ventures and more than 3 million households are unable to access the fair and responsible finance that they require. It is particularly apposite in the context of the current revulsion—one has to use that word—felt about some parts of the banking community. This is the chance for them to rise to the challenge and show what the good side of banking can be.
All of us have heard of small shops or service providers going to the wall thanks to the inappropriate policies of banks. It is not simply about mis-selling of interest rate swaps, important though those were; it is also about the unavailability of financial products for small entrepreneurs or, sometimes, for larger ventures that want to locate in some more deprived areas. There needs to be a proper investment strategy for social enterprise and small businesses, especially where they work in those difficult areas.
In the past, I thought that encouragement alone would work in making banks be socially responsible in such a way as to help consumers and potential consumers in difficult areas. I no longer think that. When the previous Government were trying to set up basic bank accounts, we tried very hard, along with the FSA, but people were still denied access. People need a bank account and insurance these days; they have become essentials rather than nice- to-haves.
Amendment 104AA would make the FCA have regard to consumer access to affordable and appropriate financial services, and Amendment 118A requires an access and choice code to make clear what the FSA expects of those it regulates. I hope that the Minister will be able to accept the amendments and enable the FCA to play a role not just in promoting competition for existing consumers but for those whom we all want to be consumers.
Lord Sassoon
My Lords, I share many of the concerns raised in this debate. Access to financial services and access to lending for individuals and businesses are vital to our society. The question we have to ask is: who should be charged with tackling access issues? The FCA will be a conduct of business regulator with a clear objective concerned with creating the right conditions in which well functioning markets can meet the needs of consumers. Ultimately, the menu of products and services they offer to whom and at what price is a decision for firms themselves. The FCA is there to regulate the market, not to ensure that the market delivers a particular set of services or products.
Where the market fails to provide the services that consumers need, there may well be a case for intervention in the market to promote consumers’ access to financial services. The noble Baroness mentioned that issue in connection with the previous Government’s drive on basic bank accounts. That is rightly the province of government and action needs to be taken. However, I do believe that it is not a matter of regulation. It is a matter of social policy and it is therefore the responsibility of the Government. It is not the job of the FCA to prescribe that there should be universal provision and who should be required to deliver it. That is for the Government.
I will not detain the Committee with the great detail that I could go into of the actions we are taking to promote and extend access to financial services: to boost lending, particularly to small businesses; to nurture and encourage the mutual sector; and to help increase consumers’ capabilities and work with industry to make access to simple products possible. We have touched on some of these issues in considerable detail in the past. There are some areas which my noble friend Lord Sharkey specifically raised, such as bank charges. I draw his attention to the agreement we announced with the banks last November, under which the major personal customer account providers came forward with a new agreement to send text alerts when balances fall below a certain level, and to provide buffer zones and so on. The action there has been significant.
The provision of data is another area which has needed and continues to need attention. It has had some attention. Information is already regularly published concerning lending and the provision of loans and other services in deprived communities. For example, the banks that are members of the British lending task force have publicly committed to continue to publish subregional lending data on an annual basis through the BBA. I could point to a significant number of initiatives. These are things that the Government will continue to work on but they are outside the ambit of the Bill.
Baroness Kramer
Is the Minister aware of the mechanism that has been successful in the United States and how much that is tied to action by the regulator under the Community Reinvestment Act? It is the regulator that has driven that process forward, because only when conditions are met does it give permission for the banks to act in ways for which they need the regulator’s permission. Is he abandoning a tool that we know has been successful?
Lord Sassoon
No, we are not abandoning a tool; partly because in this country, of course, we do not have the tool. However, I think it would be perfectly feasible for the Government, essentially as a matter of social policy, to decide on any number of actions that might require the regulators to play a part in implementing them. I do not believe that anything in the Bill would rule that out. That is quite different.
The American example shows that the right way to go is through a focused decision by the Government or a specific piece of legislation that tackles this issue, which may then impose responsibilities on the regulator. That is quite a different matter from giving the FCA a very general power to take on itself a responsibility that is rightly the responsibility of the Government.
It will not surprise the Committee if I say, in respect of Amendments 102, 118AA and 121, which seek to give the FCA this new deprived communities objective, that for the reasons I have given I do not think they are appropriate and I cannot support them.
Amendment 104AA also seeks to ensure that the FCA has regard to the issue of consumers’ ability to access affordable and appropriate products that meet their needs. It does that by seeking to add access to the list of matters to which the FCA must have regard in discharging its general functions. The “have regard” provisions that are currently listed there include only financial crime and the regulatory principles. That is why I cannot support the amendment. I cannot agree that the FCA should be required to have regard to something that it is not responsible for. This is the important distinction between financial crime, for which the FCA is responsible and which is listed in proposed new Section 1B, and access, which is not.
Amendments 108A and 108B seek to ensure that the FCA considers access when advancing its consumer protection objective by adding,
“the ease with which consumers can access regulated financial services that meet their needs”,
to the list of matters to which it must have regard in assessing what constitutes,
“an appropriate degree of protection for consumers”.
I have already set out why I cannot support these amendments, which seek to give the FCA a formal role in promoting access, but I will remind the Committee of the kind of considerations that the FCA will take into account when advancing its consumer protection objective to help consumers. The FCA must have regard to consumers’ differing experience and expertise and to their needs for timely, accurate and fit-for-purpose information. The FCA must therefore consider whether vulnerable or marginalised consumers engaging with financial services may need additional information, protection or support. The FCA’s consumer protection operational objective provides the mandate for the regulator to design a regulatory regime that delivers this.
Amendment 117A seeks to make sure that the FCA takes into account consumers’ ability to access financial services in advancing its effective competition objective. Again, I cannot accept this as I am absolutely clear that it is neither necessary nor appropriate for such a have regard provision to be added to the competition objective.
I turn to Amendment 118A. I have explained why I do not think it right to give the FCA an access mandate. Where there may be a case for action beyond the FCA’s objectives, this is a matter for government, but that does not mean that the Treasury should be able to direct the regulator on how it should interpret and indeed advance its objectives, as Amendment 118A seeks to provide. This would fundamentally go against the Government’s intention that the FCA should be an independent regulator and would, I suggest, blur the boundaries between regulatory and social policies. I also do not think it would be appropriate to have a power in statute, as proposed here, to allow the Treasury to give the FCA greater powers to act in an area that is rightly a matter for the Government to deliver, or indeed to give the Treasury the power to impose requirements directly on industry. We would be blurring the lines of responsibility. As I have explained, there is a lot we can do and are doing to advance some of these important social policy issues. If it came to legislation that impinged on the regulator’s prerogative, it is right that any powers in this area should be considered as part of that legislation and Parliament should consider the consequences for the regulator at that time.
Finally, Amendment 112A seeks to add “and products” to the regulated financial services for which the FCA will promote effective competition. I will briefly try to reassure the Committee that this amendment is not necessary. We agree that products are important. In fact, the focus on the design and governance of products will be one of the key ways in which the FCA will be different from the FSA. The Bill contains enhanced powers for the FCA to regulate products and I look forward to discussing in due course the new product intervention power, which is provided for in Clause 22. However, the outcome which this amendment seeks to deliver is already reflected in the Bill. A product in the context of financial services is ultimately an agreement under which one person agrees to provide a service of some kind to another person, so products are captured in the definition of “regulated financial services” as used in the Bill.
In summary, we are sympathetic to the aims of my noble friend’s amendment and to a wide range of the concerns that have come up in this debate. We are taking action on a significant number of fronts in this area. However, these are not matters for the financial regulator in the way that they have been drafted and I ask my noble friend to consider withdrawing his amendment.
Lord Sharkey
I thank all those who have spoken in support of the amendments in my name or in support of their general intent. At the beginning of his response the Minister said that the FCA is a conduct of business regulator. I say to him that it is precisely the inadequate conduct of the banking businesses that we want the FCA to regulate. I note that in the Bill the FCA is already required to take account of the needs of different consumers. All the amendments do is make this more explicit and more directed. I am disappointed by what seems to me to be a very narrow perspective in the Minister’s response. I do not agree that responsibility for helping funding into deprived areas is not a matter for this Bill. I will withdraw my amendment but I will return to the matter on Report. I beg leave to withdraw the amendment.
Lord Phillips of Sudbury
Lord Phillips of Sudbury
My Lords, seven amendments in this group of nine are in my name and that of my noble friend Lady Kramer. All the amendments have support from other quarters: from the noble Lord, Lord Hodgson of Astley Abbotts, who supports several; from the noble Baroness, Lady Meacher, who apologises to the House that she has had to make a compassionate visit this evening; and from the right reverend Prelate the Bishop of Durham.
There is a vast constituency outside the House that is listening to our every word tonight. That may surprise some; however, the not-for-profit world, if I can call it that, or the social investment sector, to use another phrase, is fair and square behind these amendments. My noble friend the Minister will have already received a letter on 25 June, signed by 16 bodies. Your Lordships may be interested to know that they include Charity Bank, the Community Development Finance Association, the National Council for Voluntary Organisations, the Charities Aid Foundation, the Social Stock Exchange Association, Co-operatives UK, Social Finance and, no less in support of recognition of the social investment sector in this Bill, Big Society Capital, which was set up by the previous Government under the Dormant Bank and Building Societies Accounts Act 2008. There were also CFG—the Charity Finance Group—Triodos Bank and ACEVO. There are very many others. They all have one plea, and this group of amendments has one central aim—to distinguish in regulation between a Barclays Bank on one hand and at the other end of the scale, a small not-for-profit local organisation. I thought your Lordships would be interested in an unsolicited communication I had in the last week from the Perth and District YMCA, which is an exemplar of this not-for-profit sector. The development manager there wrote this:
“Just today I was at the official launch of the Living Balance Programme in Perth and District YMCA which is supported by the Department for Work and Pensions Innovation Fund and is structured as a Social Impact Bond. This project will provide a unique project for 300 young people over the next three years to progress towards a stable independent life style in their local community. Nearly two thirds of the investors in this Social Impact Bond were local private individuals who invested sums ranging from £5,000-£30,000 of their own money … I am convinced that we need to … create the opportunity for this kind of investment to occur in a way which is not so over burdened with prohibitive legislative barriers that the immense potential value of these opportunities is lost”.
That message is repeated from end to end of the not-for-profit sector. It wants the regulators to have a sensible discretion to distinguish, as I say, between these very different animals.
The Minister in the Commons made a plea that we must have a level playing field, with no distinction between massive international banks and a little local social endeavour. To the sector, and indeed to me, that is not a level playing field; it is a level killing field. One size does not fit all. What we need, and with the Bill we have a chance to do this, is to regulate proportionately, appropriately, sensibly and sensitively and to avoid stifling the very initiatives that were referred to in the previous set of amendments and which are vital for the success and advance of power in our embattled society.
I use the word “proportionately” because that is one of the six regulatory principles enunciated in the Bill, and it is classically needed in this instance. I am sure that I do not need to elaborate or enlarge on our present circumstance, but we in this country are now in a critical situation vis-à-vis the financial sector as a whole. This is not just because of the economic and financial crisis over the past three years; it is because we have had a really dispiriting series of revelations about the motives and modes according to which far too big a part of the financial sector has run, and continues to run, its affairs—a monolithic, obsessive preoccupation with profit and profit alone.
One of the beauties of the not-for-profit sector is that it contrasts almost wholly with that rather grey and demoralising picture of the financial sector. By contrast, it is made up of charities, mutual organisations, community interest companies, co-ops, friendly societies and so on, and all of them, not just as a matter of policy but as a matter of constitutional centrality—they have no choice in this—have a public benefit purpose, a social purpose, a not-for-profit purpose. By dint of this wholly different set of values and motives, they are able to reach the parts that the conventional financial sector has not reached, is not interested in reaching and will never reach. The answer to the maiden’s prayer for them is to allow them to go on growing dynamically, rootedly, accountably, socially and morally, vibrant as they are.
In case anyone thinks that this is not a sector worth worrying about, it might be worth repeating the statistics that the Young Foundation and the Boston Consulting Group researched: in 2010-11 the amount of investment by the sector was £165 million and, more importantly, if the regulation barriers could be lowered for it, the investment level would be expected to rise to £750 million. A report in 2011 by Social Enterprise UK shows that 57% of social enterprises predicted growth for this year. That is a 40% higher rate than for small and medium-sized enterprises, which, as noble Lords will know, are themselves much more dynamic in terms of development than the large companies. These small, socially innovative organisations have an infectious enthusiasm. They want to grow; they want to help; they want to do more.
I received a letter from the parliamentary affairs counsel to the City Corporation, which realises that it ought to get involved. He refers to the fact that big society capital will invest £50 million by the end of this year in these social bodies. It is in that context that Deutsche Bank is apparently launching a fund of £10 million and HSBC a fund of £4 million—small amounts, but, I believe, indicators of much more to come. Through its Bridge House Estates the City has allocated £20 million for social investment.
There are many other examples which will cheer us all. Peterborough prison has issued a social impact bond—a rather unlikely development. Bonds have recently been issued by the charity Scope. There is fast growth in what are called crowd funding and peer-to-peer lending, such as Buzz Bank and Zopa. Oxfam is engaged with a microfund to be used in the developing world. We have the prospective launch in London next year of the Social Stock Exchange. And so it goes on.
New Section 137R on page 89, to be inserted into the Financial Services and Markets Act 2000, stipulates under general supplementary powers that the rules by either of the regulators, the FCA or the PRA,
“may make different provision for different cases and may, in particular, make different provision in respect of different descriptions of authorised persons, activity or investment”.
My noble friend Lord Sharkey referred to that in what he just said.
These amendments will give a clear and essential steer to the regulators to enable them to use with imagination and flexibility the powers that they have under new Section 137R. They will offer a realisation of what great profit there is to this country and our society by liberating some of these small, non-profit organisations from heavy-handed regulation. Everybody accepts that such regulation may be necessary for huge financial entities that can cope with it and, by dint of what has happened recently, need it. We cannot pretend that one size fits all.
Lastly, we in the coalition—and I appeal to the Minister—must walk our own talk. The country is a little anxious about the extent to which we are doing that. If ever we have talked up the importance of social investment and the not-for-profit sector in finance, it is in this area. The big society idea is at the root of it. I have already referred to Big Society Capital. We had a paper from the Government in February last year, Growing the Social Investment Market. What was that about? It was about encouraging and not stifling the market that this Bill, unamended, will indeed stifle. We had the Red Tape Challenge and the task force in pursuit of it. My noble friend Lord Hodgson is involved in that. We had another paper in May this year called Unshackling Good Neighbours. What was that about? It was about promoting investment in social ventures. In the autumn the Cabinet Office is producing a response to Unshackling Good Neighbours, in particular to that bit of it which says that,
“regulation barriers make it difficult for social ventures and investment in them”.
Francis Maude and Nicholas Herbert have gone on record again and again extolling the need for social investment. I appeal to the Minister. Although it may be difficult in some ways, we must put something in this Bill. I ask him not to say, as he said to the previous group of amendments, that we will have to have a separate Bill. That will not wash. It is not good enough.
I end by saying that this vital sector needs the chance to grow and to do what nobody else is doing or can do. It is bottom up, it is rooted, it is ethically vigorous, it is public spirited and, above all, it is grounded in fellowship. With that introduction, I hope very much that, although there are only 14 of us here at this time, there may be some support for this group of amendments. I beg to move.
Lord Hodgson of Astley Abbotts
My Lords, my name is down to four amendments, Amendments 104, 120, 137 and 139, and I support very strongly what my noble friend Lord Phillips has just said. I take issue with him on only one technicality. He talked about “not for profit”. I think the words should be “not for profit distribution” because these small organisations must be able to accumulate reserves for the bad times, for the contracts that do not go quite as well as—
Lord Phillips of Sudbury
I am grateful to my noble friend for making the point. He is absolutely correct.
Lord Hodgson of Astley Abbotts
Apart from that, I agree with the thrust of his remarks.
I chaired the task force that produced Unshackling Good Neighbours, and I am glad to be able to tell my noble friend that we have already had the Government’s response and are meeting on 26 July to produce our follow up. The problem with this is not making the recommendations but making sure that they are followed through. As I have told the House before, I am completing the review of the Charities Act 2006 for the Government and will be publishing a report on that next week. The terms of reference for that review required me to consider the barriers to the growth of social investment.
This is a very interesting area. The market is immature and therefore carries with it some dangers, such as overexpansion, perhaps of too much money being raised before there are projects sufficiently ready to absorb that money, and of overoptimism. There is a weight of expectation about what can be done that we have to make sure is not disappointed. As my noble friend made clear, this idea has the capacity to transform the financing structures in the charity and voluntary sector and so radically increase the amount of funding and the number of people who will give support to those sorts of endeavours. As I have said elsewhere, how do we persuade someone who would give £50 to invest or lend £500? How do we turn this social investment chrysalis into a butterfly?
There are lots of regulatory challenges, and not all of them are in my noble friend’s department. Not all of them are actually for the Government; they are also for the professions and the sector. As my noble friend said, we need to send signals from this area because this is the keystone that will set in train other serious changes. Therefore, the enabling provisions contained in Amendments 104, 120, 137 and 139 are important because they recognise, and ask the regulator to recognise, the distinctive features of social investment and regulate appropriately in an even-handed way. The hour is late. I could go on for a lot longer, but this is important, and I very much support what my noble friend said.
Amendment 104ZA is tabled in the name of the noble Baroness, Lady Hayter. That amendment is not suitable, because it requires the FCA to promote the growth and development of social finance and social investment. The role of a regulator is not to promote but to enable. It can promote good behaviour and good approaches, but it should not promote a particular form of finance, because that could lead to the disillusionment that I have referred to. I quite understand her good intentions, but they do not help us. Nevertheless, I very much support Amendments 104, 120, 137 and 139, and I hope that my noble friend will be receptive to this important part of the big society and localism, on which we as a party and a Government have placed such stress.
Baroness Kramer
My Lords, I will add only a few words, because of the powerful speeches that have preceded me. After hearing the noble Lords, Lord Phillips and Lord Hodgson, who have spoken with such enthusiasm, the Minister may have the wrong impression that this sector is taking off with great and roaring strength, so why on earth should we worry about the role of the regulator? However, if he looks back at the numbers that have been quoted to him, the amounts of money that are being raised or proposed are extremely small compared to the demand and the need. The regulator needs to act in order to release the energy of this whole sector.
I know that the Government are constantly concerned that no one sector should be favoured above the other, but it is important to recognise that this sector is distinctively different. I draw his attention to one example that may help clarify the matter—and which I have raised with the regulator, which acknowledges that it is clearly a problem. This is based on a communication that I received from someone involved as a financial adviser, who directed me towards a report done by Nesta in collaboration with Worthstone called Financial Planners as Catalysts for Social Investment. The response that they got back in the course of this work made it clear that the regulatory environment is not yet appropriate for this sector. The report contains quotes such as:
“The social investment asset class, due to its early-stage of development lacks the regulatory clarity of other markets”.
That lack of clarity is turning into a real problem. It is not clear, for example, that an independent financial adviser can advise a client on a social investment because the return is a combination of some sort of more traditional manner of financial return, but also of a social benefit—and how is that to be measured? More to the point, how is it to be set within the suitability requirements that financial planners have to observe when they advise clients? The report states:
“Ultimately, there is a need for the FSA”—
which I suppose is the FCA now—
“to establish clear guidelines around suitability to provide financial planners with a frame of reference. Consistency is required, together with a set of understood and agreed practices and procedures”.
That is one small example. Rather than tackle this issue by issue and try to hoe the ground in the most difficult kind of way, we should make sure that the regulator clearly understands that they need to act in a way that would enable this industry to develop to its full potential. That would accelerate the flow of funding, and I believe that as an economy we would only benefit from that.
Baroness Hayter of Kentish Town
My Lords, I first apologise to the Committee, because I would like to degroup Amendment 128AA, which is in this group. I know that the Minister has had minutes’ notice of this, but I apologise to others. It is an important issue, and clearly we will return to that.
I support the amendment moved by the noble Lord, Lord Phillips, and I will also speak to Amendment 104ZA. As we have heard, social enterprises are businesses that trade to tackle social problems and improve communities, people’s life chances, or the environment. They make their money from selling goods and services in the open market, but they reinvest their profits back into the business or the local community. So when they make profits, society profits. They do not make profits for the shareholders. In future, perhaps we should adopt the words of the noble Lord, Lord Hodgson, and call them not-for-profit distribution, NFPDs, which may be the new word for them.
Funding is certainly needed to start up enterprises but, just as critical is the need to scale up and sustain them. That means getting access to modest and responsible sources of finance which will grow profits and jobs in this case, and make the local and national economy work. Appropriately funded social enterprises can lead an economic fight-back in the most deprived communities. The more deprived the community, the more likely you are to find social enterprises working there. They reinvest in the community. Indeed, 39% work in the 20% most deprived communities. They employ more people relative to turnover than mainstream small business and are outstripping other SMEs in terms of growth and sustainability. Just as access to funding can unlock the social enterprise sector’s potential, so it is the single largest barrier to the sustainability of this sector. Last year, 44% of respondents to a survey said that they were hampered by the availability and affordability of finance.
I make no apology that our Amendment 104ZA asks the FCA to discharge its general functions in a way that promotes growth and development of social finance and social investment. We ask that it should promote competition. This is, if you like, an emerging market, which needs a little help at the moment. I think that the word “promote” is not too dangerous but if the Minister would accept “enable”, I would settle for that. There is a distinctive difference to this sector. I hope that our regulatory system is big enough to engage with it.
Lord Lucas
My Lords, one of the reasons why the likes of Wonga charges high rates of interest is that its formula for doing business is mechanical. What is required in order to be able to offer proper rates of interest on small amounts of money to people who are not well off is trust, knowledge and community. That is what this sector sets out to provide. Armed with that, it is capable of giving a much better deal to borrowers without imperilling those who are lending money. It is a thoroughly worthwhile sector of the financial industry.
We need to ask the FCA not to promote it but, as the noble Baroness, Lady Hayter, says in her late revision, to enable it. The Government and regulation stand in the way. They give the big banks privileges which are not extended to small lenders. Some of them probably cannot be. I do not know that there is any way in which the £85,000 guarantee can be got down to these sorts of institutions. But they impose immense tax differentials so that you can end up not being able to offset losses if you have made them in community lending. As the noble Baroness, Lady Kramer, says, you can end up not knowing as a financial adviser whether you are allowed to mention these sorts of investments. We need a financial regulatory structure that gets out of the way, levels the playing field and gives these businesses a fair opportunity.
Lord Sassoon
My Lords, let me begin by saying that, as with the previous group, I wholeheartedly support the sentiment underpinning these amendments. The Government want markets which serve the wider economy, underpin growth and contribute to a more prosperous society as a whole. We want more proactive and judgment-based regulation, and we want the FCA to be tough and decisive in identifying and acting on bad practice in the financial services sector.
The Government have been very clear that they want social ventures to create positive change in our society and that to achieve this we need to make it easier for them to access the capital and advice they need. There is a growing social investment market which seeks to combine financial return with social impact. Investors are often willing to accept higher risk and a lower financial return because of the social value that their investment can make. However, as has also been noticed, the market is embryonic and needs support. The Government are committed to providing that support. In a moment, I will describe how we seek to do that. Before I do so, I will turn to some of the specific amendments to which noble Lords have spoken.
There are a number of reasons why I cannot support Amendments 104, 104ZA, 120, 137, and 139. First, where their intention is to promote social investment, that is simply not an appropriate role for the regulator. Although I agree with my noble friend Lord Phillips of Sudbury that the Government need to act in support of the social investment sector, we will not create a healthy UK financial services market, including for social financial services, by giving the FCA the job of taking forward what should be and is part of the Government’s wider social policy agenda. Let me be clear: the FCA’s job should be to administer a regulatory regime, policing it so that consumers are appropriately protected, regardless of what they invest in, that there is effective competition, and that markets are clean and operate with integrity.
Secondly, where the intention behind the amendments is to—
Lord Phillips of Sudbury
I am sorry to interrupt my noble friend, but he did make a provocative remark just now, I suspect without realising it. He said that I was asking in these amendments for the FCA to “take forward” the social investment market. That is not the case. These amendments are couched extremely carefully, and not in any proactive way. To take Amendment 104, they merely ask the FCA,
“so far as is compatible with acting”,
in accordance with “its operational objectives”, to take,
“account of the distinctive features of social investment”,
and not to inhibit the development of it. On no basis can that be characterised as asking the FCA to “take forward”. It is merely asking the FCA to note the particularities of this sector and not to impede it.
Lord Sassoon
My Lords, we will have to disagree on the construction of some of the words here. Taking some of the amendments in the group, I appreciate that some of them are couched in the way in which my noble friend has just elaborated. However, for example, Amendment 103 inserts into new Section 1B(4) the words “and society” at the end of a very critical recital of what the FCA must do. It says it must,
“discharge its general functions in a way which promotes effective competition in the interests of consumers and society”.
I accept that it is all driven with an override,
“so far as is compatible with acting”,
in a way that advances the consumer protection objective, but it would add something which is tantamount to asking the FCA to be proactive in driving forward the social objective.
Lord Hodgson of Astley Abbotts
I am sorry. The hour is late, but that simply cannot be the construction. As I explained in my remarks, I could not support the amendments of the noble Baroness, Lady Hayter, because it said “promote”. The four that I have signed up to, and the only four, are the ones which are entirely neutral, and all they are is enabling. With the greatest respect to my noble friend, who has dealt with us with courtesy and kept smiling despite the most enormous amount of provocation, the fact of the matter is that a lot of what he is saying is about investor protection in conventional investments. We are not talking about conventional investments here; we are talking about social investments, where the parameters are entirely different. The Treasury will persist in seeing it as a profit-making type of investment, as opposed to a profit and a social return. It simply cannot get it into its head that this is a different type of investment. It keeps writing for my noble friend speaking notes that do not recognise that difference.
Lord Sassoon
My Lords, one of the problems is that I am speaking here to a group of amendments. If we had longer or they were all degrouped, we could tease out one from another in more detail. I appreciate that some are more directive than others. However, perhaps I may move on to my second area of difficulty here. It probably will not help but I have a number of difficulties with this group of amendments.
Where the intention behind the amendments is to ensure proportionate regulation of this budding social investment sector, I reassure the Committee that the FCA will indeed take a proportionate and risk-based approach. Both regulators must take a proportionate approach to the regulation of small or socially orientated firms, particularly in comparison with large and complex banks.
My noble friend Lord Phillips of Sudbury referred to new Section 137R, which enables different rules to be made in relation to different authorised persons. I could also draw the Committee’s attention to new Section 1C(2)(a), which requires the FCA to have regard to the differing degrees of risk involved in different transactions. Another is new Section 3B(1)(b), which requires the FCA to have regard to the principle of proportionality. Therefore, I believe that there are appropriate layers of protection there without this series of amendments highlighting the social investment sector in the way that they seek to do.
Lord Sassoon
Perhaps I may finish this part of the argument and then of course I will let my noble friend come in again. I believe that this proportionate approach that I have described will be vital in supporting effective competition, as well as helping the social sector, and the requirement to make regulation proportionately has to be an important tool in delivering that. However, equally, consumers have to be reassured that if they deposit money with, or buy financial products from, socially oriented financial institutions, they will be subject to the same level of protection and security as would be the case with any other institution. My noble friend may come back and say that that is not what the words actually say. He compared the activity of the big banks with the very well meaning institutions—which I accept they are—in this budding sector. Nevertheless, we have to be very clear and careful in making sure that those who deposit money are subject to the protection that they would expect, regardless of whom they transact with. I believe that in this area the Bill as currently drafted will deliver a proportionate balance for both regulated firms and consumers. I will continue to listen to the full range of arguments on this important issue and we will continue with important strands of work.
My noble friend Lady Kramer referred to the ability of financial advisers to advise on social investments as an asset class. I agree that this is a concern. That is why it is one of several regulatory issues that are currently being considered by the Cabinet Office review. Therefore, there are other avenues through which these issues are being actively considered, as they should be.
Lord Phillips of Sudbury
I am grateful to my noble friend for giving way. I am sorry to detain the Committee at this time of night but this is an important group. My noble friend Lord Hodgson of Astley Abbotts made one extremely telling intervention. I recognise what a difficult task my noble friend the Minister has in piloting this incredibly complicated measure through this place. He called in aid—reasonably, because I myself referred to it—new Section 137R, which is headed “General supplementary powers”. I quoted from the first part of that new section in what I said. My point, which I do not think my noble friend has taken account of, was, and remains, that unless there are some indicators in the first part of the Bill as to the considerations that are legitimate for the regulator to take into account, being naturally conservative, it will not take them into account. It will not differentiate. The wording in Amendment 103 therefore adds “and society” to the part of the new section that instructs FCA as to what it must do. That section says:
“The FCA must, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, discharge its general functions in a way which promotes effective competition in the interests of consumers”.
The Minister objects to the addition of the words “and society”. Surely we have learnt over the past three years that the objectives of consumer protection, integrity and competition depend on a financial sector that, in promoting competition, does not just take into account the interests of its customers but also of society at large. Society is what social investment is about. It slightly gives the Government’s game away for the Minister to argue as he did. I repeat that this important section that he referred to, which gives the FCA and the PRA the power to make rules, seems to cut off the prospect that he afterwards says is there; namely, the power to differentiate between different types of financial organisation, including the social financial organisations.
I am sure this is a discussion we perhaps had better have outside the Committee. It is late at night. I am only registering—I think I have some support in this—disappointment that the Government are not construing their own provisions in a way that seems consistent with how my noble friend started when he said they were wholly behind the development of the social finance sector.
Lord Sassoon
I will keep saying it and no doubt we will have to disagree on this. On the narrow point of new Section 137R, that is a power to make different provisions. However, the other relevant provisions that sit with it are duties. There is a duty to act proportionately and a duty to have regard to different degrees of risk. When it sets rules, the FCA will have to explain and justify those matters in the consultation processes it goes though. It cannot simply escape from this.
I will again directly address the points made my noble friend Lord Phillips of Sudbury on Amendment 103. The same thing applies to Amendment 111. There are certain things that we can expect of the FCA and there are other things that would place entirely unrealistic expectations on it. When the FCA is assessing whether there is effective competition in a market, we can expect it to consider the needs of consumers and act on its assessment. However, the needs of society as a whole are another matter entirely. It is not, and cannot be, the responsibility of the FCA to consider, even in a passive way—which I agree is different here from the way that it is formulated in some of the other amendments—what the best outcome for society is at any given point. It simply does not have the mandate to do that. It would not have the expertise or the powers fully to act on its findings. This is not in any way to say that these are not important matters. It is simply that I contend, as with the previous group of amendments, that these are judgments not for the FCA but the Government. The Government will not shirk these judgments.
I have referred to a number of the initiatives that are going on and there are others that I could mention, such as the Treasury’s current review of financial barriers to social enterprise. Recommendations from that review will sit along with the community interest tax relief revisions that were announced at the Budget. There are multiple strands of work at the Treasury and the Cabinet Office that are aimed, among other things, at making it easier for investors to invest in community development finance institutions. Those must go on. They are not the proper province of the FCA.
Baroness Kramer
I am sorry and recognise the late hour, but if we let this opportunity go we will not get it back again. I wonder whether the Minister will—even if it is afterwards—sit back and think through this issue. I am a simple person. I come from a banking background where you look at outputs. We know that investors are seriously interested in these kinds of products. We know that there is a need on the far side, whether individuals, small start-up businesses, charities, social enterprises and whatever else. In the middle we have a regulatory pattern of behaviour. If the regulation was not acting as a barrier, surely the outputs we would have would be a thriving community development banking sector, a thriving social investment sector, and a thriving social bond market. We can look at other countries and see these things in far more advanced states of development than we have. The conclusion has to be that the regulator is playing a significant role as a barrier in this process. If we cannot tackle that in this legislation, how on earth can we tackle it?
Lord Hodgson of Astley Abbotts
The FSA currently has responsibility for one particular sector of the social enterprise movement—the industrial and provident societies. I suggest that the Minister asks his officials in the morning to ring the FSA and ask how many people are working in the industrial and provident society section. The answer is half.
Lord Sassoon
I am not quite sure what happens to the other half of this unfortunate person.
Lord Sassoon
I understand. I will check on that but I hear what my noble friend says. The FSA is under pressure in a lot of areas. I stress again that I do not mean to say that there are no barriers. I have explained the ways in which we are looking at them but this is a Bill about the regulatory structure. There are other avenues through which the structure of the industry is being looked at, not least through the Bill that will enact the Vickers reform. In the most fundamental ways we are prepared to take on the structure of the industry. It is just that we want to keep this Bill and this architecture to what it is intended to be, which is about financial regulation and not about wider social issues, however important they are, even though there is great interlinkage with what we are talking about in the Bill.
I should do justice to Amendment 109, which is the last one that I have not directly touched on. It is another amendment over which I have some concerns. It seeks to ensure that the FCA considers social responsibility in advancing its market integrity objective. Social responsibility sits rather oddly alongside the other matters listed in new Section 1D that elaborate on what is meant by integrity. All the matters in the non-exhaustive definition of integrity in that section have a clear expectation of action associated with them. The FCA will act to prevent or root out and punish activities such as insider dealing or other market misconduct and abuse as well as money laundering, terrorist finance and corruption; it will test the reliability and robustness of computers and wider systems and controls to see whether it can guarantee the operational soundness, stability and resilience of the system, its orderly operation and the transparency of the price-formation process. These are all concrete actions, critical to ensuring that the financial system is effective in meeting the needs of people who use it and is, I suggest, rather different from social responsibility which very much stands out from that list.
Before I let my noble friend come in again, I want to repeat that determining what social responsibility is and how it should be delivered is a matter for the Government.
Lord Phillips of Sudbury
I am grateful to my noble friend for giving way and hope this will be my last intervention. In new Section 1D, the integrity of the UK financial system—which is of course crucial, because it is one of the FCA’s operational objectives—is said to include soundness, stability and resilience. In Amendment 109, I have suggested adding “and social responsibility”. The Minister asks what on earth social responsibility has to do with the FCA which is all about banking things such as stability and soundness and so on. My point is that we are dealing here with a financial sector that marches to a completely different drum. It is about social responsibility: that is its purpose. For that not to be an element in the section of the Bill which, in effect, defines integrity, first, does not face that reality, and, secondly, demeans it. Thirdly, I hark back to the matters which the two regulators have the duty to have regard to when making rules and so on. Lastly, I put it to the Minister that if we had social responsibility in this list, it would mean that in future the regulator could and indeed should look at, for example, mis-selling. Mis-selling is not a crime, it does not impact on the soundness, stability or resilience of the bank, but it is none the less a practice which I am sure he will agree has been powerfully damaging to all concerned. That phrase in this part of this section would, I believe, put the regulator on its mettle to look beyond the conventional issues and take account of the social impact of some of the practices of the banks.
Lord Sassoon
My Lords, I cannot agree with that construction of what is intended here. Mis-selling very clearly comes under new Section 1C, the consumer protection objective. We have, perhaps, teased out of this discussion that if we are talking about social responsibility in the sense that my noble friend intends and in the way he has described it, it is more linked to the consumer protection objective, rather than the integrity of the UK financial system. The difficulty may partly be in the different uses of “integrity”. We are not talking in new Section 1D about integrity in the direct sense of the behaviour of the individuals in the system. We are talking about the wholeness and stability and soundness of the financial system, which is why these particular factors are listed in Section 1D(2). They are linked to concrete actions that would be expected of the FCA, examples of which I have just given. We may be partly mixing up apples and pears here because I do not think that social responsibility fits into this clause of the Bill.
If my noble friend came back and tried to attach it to proposed new Section 1C, I would still argue that social responsibility is a matter for government. Social responsibility in the sense that he is talking about will go to the heart of what the Joint Committee will look at in response to the LIBOR scandal. The responsibility of the participants in the sector will be tackled in different ways.
I have tried to reassure the Committee—I can see that I may have given only partial reassurance—that the Government firmly believe that the financial industry should serve society. There is a big unfinished agenda and the Government will not shy away from driving it forward. The right way to do so is through different avenues but not through expecting the FCA to be responsible for these particular areas. I ask my noble friend to consider withdrawing his amendment.
Lord Lucas
My Lords, while my noble friend is doing that, perhaps he will say something about the effect that Amendment 103 would have in a practical sense. If faced with the words “and society” at the end of the subsection, how would the FCA’s decisions be different? Under what kind of practical circumstances would it make a difference?
Lord Phillips of Sudbury
My Lords, that is a strictly out-of-court request at the moment. However, if the Committee will indulge the noble Lord, Lord Lucas, and myself, I will give him a short answer.
I am concerned, and those who have supported the amendment and the whole of the social investment sector are deeply concerned, that there is no single recognition in 168 pages of its special nature—not one single indication. I agree with them—others have made the point—that that is a profound omission given where we are, the financial sector we have got and the innovative drive and importance—potentially more than actually—of this new social sector.
Lord Hodgson of Astley Abbotts
Does the noble Lord not accept that we have a very immature sector still? We have not got the right corporate forms that will combine the different streams of investor, whether it be a Government, a charity which is running the scheme, a grant-giving charity or private investors, who may be corporate or private individuals. We must be very careful not to put too much weight on the structure too early because if we arouse expectations about what it can deliver and it crumbles away, not only will the sector be disappointed but—dare I say it with my noble friend on the Front Bench?—the regulator will say, “I told you so”. We need to be very careful about that.
Lord Phillips of Sudbury
I wholly agree. That consideration is not at all incompatible with the intent of this group of amendments—indeed, my noble friend has strongly supported the group. It is partly because I share his concern about the immaturity of this new branch of the financial sector that I want it to be incorporated within the regime that will follow on from this massive piece of legislation.
At this time of night and with this tiny number of people present, the Minister can be safe in the expectation of there not being a vote called, but I say to him that we must, by hook or by crook, have included in the Bill by Report some form of words which recognises this new sector and gives it proper allowance and scope to develop and thrive, because, as everybody agrees, including the Government, it has the potential to be hugely important in the future. If the Minister will agree to meet between now and Report, which I hope will be after the Summer Recess, we may be able to concoct something which satisfies the new financial sector and those of us who supported the amendment. I do not think that that is beyond the wit of man. I beg leave to withdraw the amendment.